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Business A Level > Unit 5 > Flashcards

Unit 5 Flashcards

1
Q

What is the return on investment?

A

The % of profit made based on the original investment.

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2
Q

What is the formula for return on investment?

A

(Net profit/Capital invested) x 100

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3
Q

What is long-term funding?

A

Financial aid in order to achieve/sustain long term goals.

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4
Q

What is the profit formula?

A

Total revenue - total costs

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5
Q

What is the gross profit formula?

A

Total revenue - cost of sales

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6
Q

What is the operating profit formula?

A

Gross profit - expenses

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7
Q

What is the profit for year profit formula?

A

Operating profit - tax

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8
Q

What does cash flow measure?

A

The finances leaving and entering a business.

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9
Q

What is the cash flow formula?

A

Cash inflows - cash outflows

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10
Q

What are 3 cash flow objectives?

A

Minimise invoice time, build buffer balance, minimise interest charges

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11
Q

What are payables?

A

Money owed to a 3rd party.

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12
Q

What are receivables?

A

Money someone owes to the business.

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13
Q

What is the capital structure?

A

The balance of a business’s finance in terms of equity and debt.

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14
Q

What is the targeted gearing ratio?

A

25-50%

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15
Q

What is the targeted debt to equity ratio?

A

Between 1 - 1.5

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16
Q

What is a budget?

A

Financial plans that forecast revenue, costs and profits.

17
Q

What is historical budgeting?

A

Using previous figures to assess how much to budget

18
Q

What is zero budgeting?

A

All expenses must be justified + approved by management.

19
Q

What do cash flow forecasts identify and prevent?

A

Where additional injections are needed, delayed payments.

20
Q

What is a variance?

A

Difference between a budgeted figure and an actual figure.

21
Q

What is considered favourable?

A

Costs lower than budgeted, revenue higher than budgeted.

22
Q

What is considered adverse?

A

Costs higher than budgeted, revenues lower than budgeted.

23
Q

What is the contribution per unit formula?

A

Selling Price - Variable cost

24
Q

What is the break-even formula?

A

Fixed costs / contribution per unit

25
Q

What is debt factoring? Long term or short term?

A

Sale of invoices to a 3rd party at a discounted price. Short term.

26
Q

Are bank overdrafts long term or short term?

A

Short term

27
Q

Are bank loans long term or short term?

A

Long term

28
Q

What is share capital? Long term or short term?

A

Equity raised through the sale of shares. Short term.

29
Q

What is venture capital? Long term or short term?

A

Capital invested into a business by a 3rd party to aid expansion. Long term.

Business A Level (10 decks)

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