Theme 2: Section 8 Managing Finance Flashcards

1
Q

Percentage Increase/Decrease

A

Profits from year to year, compare if doing well or not.

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2
Q

Percentage change in Profit

A

Current year profit - Previous year Profit/Previous year profit x 100

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3
Q

Gross Profit and Formula

A

Amount left over when the Cost of Sales (cost of product) subtracted from Total Revenue.
Total Revenue - Cost of sales

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4
Q

Operating profit and Formula

A

Cost of Sales and operating expenses.
Gross Profit - Other Operating expenses.

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5
Q

Net Profit (Profit for the year) and Formula

A

Interest the business has to pay for borrowing money.
Operating Profit - Interest.

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6
Q

Comprehensive Income statement ( Profit/Loss account)

A

Shows money coming in (Revenue) and out (Expenses).
Previous years, useful trends overtime.

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7
Q

Profit Margins

A

Measure relationship between profit made and revenue, percentage of selling price of product is profit.

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8
Q

Gross Profit Margin and Formula

A

Percentage of Revenue.
Gross Profit/Revenue x 100.

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9
Q

Operating Profit Margin and formula

A

Costs of regular trading.
Operating Profit/Revenue x 100.

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10
Q

Net Profit Margin (Profit of the year) and Formula

A

Measures Profit for the year as percentage of Revenue.
Profit for the year/Revenue x 100.

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11
Q

Increasing Profit Margins

A

Reducing Cost of Sales, cheaper supplier. May lead to lower quality, reduce sales volume and Revenue.

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12
Q

Interpret Profit Margins

A

Compare with previous years

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13
Q

Profit

A

money left from Revenue once costs paid.

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14
Q

Cash

A

Constantly flowing in and out, bills.

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15
Q

Financial Position Statement/ Balance Sheet

A

Value of Assets (own), liabilities (owe), Capital (retained profit).

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16
Q

Total Equity

A

Total of money ever put into the business.

17
Q

Non-Current Assets

A

keep for more than a year, property, technology.

18
Q

Total Non-Current Assets

A

Financial Position combined of all businesses Non-Current Assets.

19
Q

Current Assets

A

Exchange for cash before next financial position made, money owed, products.

20
Q

Total Current Assets

A

All Current Assets added together

21
Q

Net Assets

A

Current and Non-Current Assets added together, Current and Non-Current liabilities deducted.

22
Q

Current liability Debts

A

Debts paid off within a year, overdrafts, taxes.

23
Q

Non-Curent liability Debts

A

Debts paid over several years, mortgages, loans.

24
Q

Liquidity of an Asset

A

How easily it an be turned into cash, for new things.
Improved by speeding up collection of debts to business.

25
Q

Current Ratio (Working Capital Ratio) and Formula

A

Compares Current Assets to Current Liabilities.
Current Assets/Current Liabilities.

26
Q

Acid Test Ratio (Liquid Capital Ratio) and Formula

A

Tougher measure of liquidity than the current ratio as it accounts for inventory.
Current Assets - Inventory/Current liabilities.

27
Q

Inventory

A

Takes long time to sell or may not at all, removing from Current Assets, Acid Test Ratio, more accurate measure of the ability of a firm to pay Current Liabilities.

28
Q

Working Capital and Formula

A

Amount of cash, pay day-to-day debts.
Current Assets - Current Liabilities.

29
Q

Working Capital Cycle

A

Cash, Production Costs (Wages,Raw Materials), Finished Stock ,Sales (Receivables).

30
Q

Business Failure

A

No longer open, not making enough money to cover Costs.
Not enough Cash to pay Current Liabilities.

31
Q

Business Failure Internal Financial Factors

A

Bad Management, not enough Cash
Poor Efficiency, Costs aren’t as low as they can be.
Bad Decisions, expensive finance, overdrafts high costs.

32
Q

Business Failure Internal Non-Financial Factors

A

Poor Communication, departments not working well.
Inadequate MR and Analysis, fails to monitor change.
Failure to Innovate, consumer preferences, lack new products.

33
Q

Business Failure External Financial Factors

A

Economic Recession, consumers have less money to spend.
Exchange Rates, close if lost too many overseas customers.

34
Q

Business Failure External Non-Financial Factors

A

Competitors, similar products at lower price, sales fall.
Consumer Trends, stop wanting a product, drop revenue.
Poor Communication, lose suppliers, lose production.

35
Q

Dynamic Market

A

Technology, lack of innovation declines sales.

36
Q
A