Small Business Evaluation

Question 1

Effectiveness

Answer 1

Is the degree to which a business has achieved its objectives.

Question 2

Efficiency

Answer 2

Refers to how well a business uses resources to achieve objectives.

Question 3

Performance indicators

Answer 3

Are measurable statements which businesses use to evaluate performance.

Question 4

Financial indicators

Answer 4

Are found in the accounting records and are expressed in dollar terms.

Question 5

Non-financial indicators

Answer 5

Are commonly expressed in real terms and often make use of qualitative data.

Question 6

Financial statements

Answer 6

Summarise the activities of a business over a period of time.

Question 7

Net profit

Answer 7

Is the difference between revenue earned from the operations of the business and any expenses incurred in earning that revenue.

Question 8

Expenses

Answer 8

Are what it has cost the business to provide it services or sell it’s products.

Question 9

Revenue

Answer 9

Is what the business receives in the normal course of trading or operating, including sales, fees, interest, dividends, royalties and rent.

Question 10

Profitability

Answer 10

Measures the earning performance of the business’s and indicates the business’s ability to maximise profits.

Question 11

Cost of goods sold

Answer 11

Includes the cost of the materials used to produce the goods and any direct labour costs involved in producing the goods. It does not include indirect costs such as sales staff wages or distribution costs.

Question 12

Balance sheet

Answer 12

Shows a businesses assets and liabilities at a point in time using the heading as at to pinpoint when it was created.

Question 13

Assets

Answer 13

Are items of value owned or controlled by the business and that can business owes.

Question 14

Liabilities

Answer 14

Are items of debt that the business owes.

Question 15

Owners equity

Answer 15

Refers to money given to the business by the owner for the purchase of resources and for undertaking operations. An owner’s equity in a successful business will increase in value over time.

Question 16

Liquidity

Answer 16

Is the extent to which the business can meet its financial commitments in the short term ( less than 12 months ).

Question 17

Credit terms

Answer 17

In business are the terms and conditions of sale between a customer and a business, including the amount of time provided for making final payment.

Question 18

Solvency

Answer 18

Is the extent to which the business can meet its financial commitments in the longer term ( more the 12 months ).

Question 19

Gearing

Answer 19

Measures the percentage of the assets of the business which are funded by external sources.

Question 20

Gross profit margin

Answer 20

Shows the amount of revenue that results in gross profit.

Question 21

Net profit margin

Answer 21

Shows the amount of revenue that results in net profit.

Question 22

Working capital ratio

Answer 22

Measures the level of current assets available to meet a businesses current liabilities-that is, the ability of the business to meet its short-term debts.

Question 23

Customer satisfaction

Answer 23

Is the degree to which the businesses perceived performance meets a customers expectations.

Question 24

Bench marking

Answer 24

Compares to the strengths and weaknesses of a business against those of other successful businesses, with the aim of reforming those processes that are not achieving the business’s objectives.

Question 25

Market share

Answer 25

Is the share of the total market that a business has, expressed as a percentage.

Question 26

Triple bottom line

Answer 26

Refers to the economic, environmental and social performance of a business.

Question 27

Sustainability report

Answer 27

Publishes information about the financial, environmental and social performance of a business.

Question 28

Evaluation

Answer 28

Is the process of assessing whether the business has achieved stated objectives.