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business > unit 5 > Flashcards

unit 5 Flashcards

1
Q

how do you calculate return on investment?

A

(profit from investment / investment cost) x 100

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2
Q

examples of financial objectives

A

revenue, cashflow, return on investment

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3
Q

what is gross profit?

A

sales revenue - cost of sales

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4
Q

how do you calculate operating / net profit

A

gross profit - operating expenses

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5
Q

examples of operating expenses

A

rent, equipment, inventory costs, payroll

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6
Q

what is cash flow

A

the movement of money into and out of the business which is required to meet the short term objective of survival

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7
Q

what is return on investment

A

the profit you make as a result of your investments

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8
Q

what is operating profit and how is it calculated?

A

the money left after paying all business costs, but before paying tax - operating profit/capital invested x 100

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9
Q

what is capital structure?

A

the way the business raises capital to purchase assets.

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10
Q

what is long term funding?

A

the amount of capital invested in a business that will stay for over a year

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11
Q

what are internal influences on financial objectives?

A

the size of the business-eg small business may focus on survival whereas a larger business focuses on profit
Business ownership

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12
Q

what are external factors on financial objectives?

A

competitors - the business will keep an eye on competitors when establishing financial objectives
technological environment - tech changes rapidly and can influence financial objectives

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13
Q

advantages of budgeting?

A

allows you to monitor performance
improves decision making

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14
Q

disadvantages of budgeting?

A

doesn’t take into account unforeseen circumstances
time consuming

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15
Q

disadvantages of budgeting?

A

doesn’t take into account unforeseen circumstances
time consuming

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16
Q

advantages and disadvantages of dept factoring

A

ad-recieves a large amount of the debt immediately
disad- may damage the business reputations they are seen to need short term finance

17
Q

advantages and disadvantages of overdraft

A

ad-only pay for the money borrowed
disad-the bank can callout in anytime

18
Q

advantage and disadvantage of retained profit

A

ad-avoids interest payments
disad-only available if sufficient retained profits exists within the business

19
Q

advantages and disadvantages of share capital

A

ad-only need to pay dividends if a profit is being made and its not a fixed price
disad- loss of ownership as shareholders are part owners

20
Q

advantages and disadvantages of loans

A

ad-quick and easy to set up
disad-interest must be paid

21
Q

advantages and disadvantages of venture capital

A

ad-expertise to help the business
disad- long and complex process

22
Q

what is venture capital?

A

investment from an established business into another business for a percentage equity in the business

23
Q

what is retained profit?

A

profit kept within a business from profit for the year to help finance future activities

24
Q

what are receivables?

A

money owed to the business by customers

25
Q

what are payables?

A

money owed to the business by suppliers & others

26
Q

what can happen to a business with cashflow problems?

A

they may go bankrupt as they are not able to pay short term debts for example toys r us had a decline in sales due to competitors giving them cash flow problems

27
Q

how can a business improve cash flow problems?

A

they can ask for a longer trade credit to reduce how quickly they have to pay their payables

28
Q

how do you calculate net cash flow?

A

total inflow-total outflow

29
Q

what is an expenditure budget?

A

forecasted costs of a business, a higher cost than this is an adverse and something below is favourable

30
Q

how do you calculate contribution per unit?

A

selling price per unit - variable cost per unit

31
Q

how do you calculate total contribution?

A

total revenue - total variable costs

32
Q

how do you calculate gross profit margin?

A

gross profit / sales revenue x 100

33
Q

how do you calculate operating profit margin?

A

operating profit / sales revenue x 100

34
Q

how do you calculate profit of the year?

A

profit of the year / sales revenue x 100

35
Q

ways to improve profit

A

increase selling price
reducing expenditure - for example Morrisons delayered their business in 2015 which reduced costs

36
Q

problems of improving profit

A

increasing selling prices may lead customers to go to competitors with cheaper prices reducing sales revenue
trying to reduce expenditure may reduce quality which may reduce sales

business (11 decks)

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