Topic 4 - Building a Profit Plan Flashcards

1
Q

A principal tool that managers use to (1) evaluate different courses of action, (2) set goals, and (3) evaluate business performance.

A

Profit plan

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2
Q

The resource plan of an organizational unit generating or consuming resources.

A

Budget

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3
Q

summarizes the expected revenue inflows and expense outflows for a specified future accounting period. Typically, one year.

A

Profit wheel

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4
Q

Current Assets - Current Liabilities = ?

A

Working capital

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5
Q

Tangible assets, like buildings, machinery and equipment.

A

Long-term depreciable assets

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6
Q

a tool used to forecast whether the company has enough cash to operate the profit plan.

A

Cash wheel

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7
Q

An accounting method that records revenues and expenses when they are earned or incurred, regardless of when the actual cash is received or paid. This method matches the revenues recognized in that period with the expenses that has incurred.

A

Accrual accounting

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8
Q

A method for forecasting cash flow using the actual cash inflows and cash outflows.
Operating cash needed during a period =
Cash received from customers - Cash paid to suppliers and operating expenses

A

The direct method

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9
Q

Method for forecasting cash flows. This method starts with net income and adjust for non-cash expenses like depreciation and changes in the working capital.

A

The indirect method

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10
Q

Net income + interests + tax + depreciations + A = ?

A

EBITDA

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11
Q

accounts payable, short-term debt, and other obligations that are due within a year. Current Assets include cash, accounts receivable, inventory, and other assets expected to be converted into cash within a year

A

Current liabilities

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12
Q

Formula for working capital

A

Working capital = Current Assets - Current Liabilities

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13
Q

Formula for net working capital

A

Net working capital = Current Assets (minus cash) - Current liabilities (minus debt)

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14
Q

Formula for Operating working capital

A

Operating working capital = Current Assets - Non-operating Current Assets

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14
Q

includes cash and marketable securities that are not directly tied to daily operations.

A

Non-operating current assets

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15
Q

Formula for ROI

A

Return on Investment (ROI)=(Net Income)/(Total Investment)

16
Q

Formula for ROA

A

Return on Asset (ROA)=(Net Income)/Assets

17
Q

Formula for ROE

A

Return on Equity (ROA)=(Net Income)/Shareholder’s Equity

18
Q

Formula for ROCE

A

Return on Capital Employed (ROCE)=(Net Income)/(Capital Employed)%

19
Q

3 formulas for Capital employed

A

Capital employed = Non-current Liabilities + Equity = Total Assets - Current Liabilities = Working Capital + Non-current Assets

20
Q

Formula for ROE calculated with three elements

A

= (Net Income/Sales) * (Sales / Assets) * (Assets / Shareholder’s Equity) = Profitability ratio * Assets turnover ratio * Financial Leverage ratio

21
Q

Formula for Fixed Assets Turnover

A

Fixed Assets Turnover = Sales / PPE (Property,Plant & Equipment)

22
Q

This ratio evaluates how efficiently a company is using its fixed assets (e.g., machinery, buildings, and equipment) to generate sales.

A

Fixed Assets Turnover

23
Q

This ratio shows how often a company sells and replaces its inventory over a specific period.

A

Inventory turnover

24
Q

Formula Inventory turnover

A

Inventory Turnover=(Cost of Goods Sold (COGS))/Average Inventory

25
Q

This ratio shows how efficiently a company collects money owed by its customers from credit sales.

A

Accounts Receivable Turnover

26
Q

Formula for Accounts Receivable Turnover

A

Accounts Receivable Turnover=(Net Sales on Credit)/(Average Net Receivables)

27
Q

formula for Working Capital Turnover

A

Working Capital Turnover=Sales/(Current Assets-Current Liabilities)

28
Q

This ratio shows how effectively a company is using its working capital (the difference between current assets and current liabilities) to generate sales.

A

Working Capital Turnover