Synoptic Flashcards
Gross Profit Margin
Gross Profit / Revenue X 100
= %
For every £1 of sales, the % converted to gross profit
ONLY SALES & COST OF SALES
Operating Profit Margin
Operating Profit / Revenue X 100
= %
For every £1 of sales, the % converted to operating profit
DISTRIBUTION & ADMIN EXPENSES
Net Profit Margin
Net Profit / Revenue X 100
= %
For every £1 of sales, the % converted to net profit
TAX
Specified Expense Ratio
Specified Expense / Revenue X 100
=%
For every £1 of sales, the % spent on a specific expense
Return On Capital Employed
Profit From Operations / Capital Employed X 100
= %
Shows profit made from long term funding / investment
Capital Employed = Total Equity + NCL
OR
Total Assets - CL
Return On Net Assets OR Shareholders Funds
Net Profit / Equity X 100
= %
Showing the profit made (goes to retained earnings) from equity only
Asset Turnover
Revenue / Capital Employed
= no of times
The amount of times the long term funding is converted to revenue
Capital Employed = Total Equity + NCL
OR
Total Assets - CL
Non Current Asset Turnover
Revenue / NBV of Non Current Assets
Shows how much revenue is generated from assets
Total Asset Turnover
Revenue / Total Assets
Shows how much revenue is generated from assets
Current Ratio
Current Assets / Current Liabilities
= X:1
How the many times the Current Assets would cover Current Liabilities
Ideal 2:1
Measure of liquidity
Quick Ratio (Acid Test)
Current Assets - Inventory / Current Liabilities
= X:1
How the many times the Current Assets, without inventory, would cover Current Liabilities
Inventory is the least liquid / slowest moving asset
Ideal 1:1
Measure of liquidity
Inventory Holding Period (Inventory Days)
Closing Inventory / Cost of Sales X 365
= X Days
Average days inventory is held in the stock room
Inventory Turnover
Cost of Sales / Closing Inventory
How many times the stock room has been refilled
Trade Receivables Collection Period (Receivable Days)
Trade Receivables / Credit Sales X 365
= X days
The average time to collect money from credit customers
Puts pressure on credit control
Trade Payables Collection Period (Payable Days)
Trade Payables / Cost of Sales X 365
= X days
Average time to pay credit suppliers
Working Capital Cycle
Inventory Days + Receivable Days - Payable Days
The days the company has to fund itself
Interest Cover
Profit From Operations / Finance Costs
The amount of times the profit can cover the finance costs
Gearing Ratio
Non Current Liabilities / Equity + Non Current Liabilities X 100
= %
The % of the company that is funded by debt
High gearing = High risk
8 Control Activities
Supervision
Personnel
Authorisation & Approval
Management
Segregation of Duties
Organisational Structure
Accounting & Mathematical checks
Physical
Control Activities: Supervision
Supervisors
CCTV
Remote computer access
Control Activities: Personnel
Getting right people for the right job
Qualifications
DBS
References
Criminal conviction check
Control Activities: Authorisation & Approval
Who can approve?
Credit limits
Method of approval
Number of people to authorise
Control Activities: Management
Different levels and responsibilities of managers
Control Activities: Segregation of Duties
Break down a task to have more people involved
Reduces error / fraud
Potential of collusion - 2 or more people working together to commit fraud
Control Activities: Accounting & Mathematical Checks
Bank reconciliation
Debtors / Credits rec
Auto calc for VAT
Software with date checks, duplicate checks, credit limit checks
Control Activities: Physical
Locked doors
FOB access
Passwords
Safe
Photo ID
Strategic Level of Organisation
Senior Management
Tactical Level of Organisation
The people who make senior management plans happen
Operational Level of Organisation
Day to day operations staff
Wide / Flat Structure
Less layers
More responsibility at each layer
Quicker decisions made
Thin / Tall Structure
Lots of layers
Longer for decision to make
Longer ‘scaler’ chain
Centralised Organisation
All power and decisions are at head office
Decentralised Organisation
The power is delegated to divisional heads
Done from local branch
Scalar Chain
Steps between lowest and highest in organisation
Tangible Cost
Something you can give a value to
PESTLE
Political
Economic
Social
Technology
Legal
Environment
Balanced Scorecard
4 PERSPECTIVES
Financial
Customer
Internal
innovation & Learning
Sunk Cost
Past cost, already paid for - NOT RELEVANT
Committed Cost
Cost already committed to regardless - NOT RELEVANT
Non Cash Cost
Not real money, e.g depreciation - NOT RELEVANT
Avoidable Cost
Only occurs based on the decision made - RELEVANT
Factors To Consider When Outsourcing
Financial - money
Non-Financial - quality, availability, location, reputation, ethical principles, inside knowledge, staff redundancies
Positive - removes responsibility
