theme 2- Making Financial Decisons Flashcards
How can businesses improve profit, and what problems does this cause
They could lower costs or increase revenue
Problem 1- increasing revenue means that method used can also increase costs
Problem 2- lowering costs means that doing so can detract from the value of the product/service, reducing businesses ability to make revenue
What is profit margin
Ratio of profit compared to sales revenue. Indicate a products profitability
What is gross profit
Profit business makes on its trading activity before any indirect costs have been deduced
What is net profit
Profit that a business is able to return to shareholders or re invest back into business
What is gross profit margin
Indicates the proportion of sales revenue turned into gross profit
What is net profit margin
Indicates the proportion of sales revue turned into net profit
What is average rate of return
Used to compare different investment opportunities to identify which is most profitable. Calculates average return it will receive on an investment over the investments life span as a % of the initial cost of investment
Uses of quantitative data
Monitor business performance
Compare performance with competitors
Set aims and objectives
How can graphs and carts be used with quantitative data
Demonstrate correlation between 2 sets of data
Represent proportions (%)
Show trends over times and make predictions
Types of data that businesses use to make decision
Marketing data
Financial data
Market data
Marketing data examples (qualitative)
Customer opinions
Customer visits
Customer satisfaction ratings
Financial data examples
Financial accounts
Costs
Sales figures/revenue
Tax rates
Market data examples
Demographics
Number of competitors
Size of market
Growth of market
Limitations of financial data
It is historical
Stats can be manipulated
Business performance isn’t solely numerical based
