Unit 7 Flashcards
What are objectives?
Statements of specific outcomes that are to be achieved.
What is the hierarchy of objectives?
Mission, corporate, functional, team, individual
What are the 3 main purposes of corporate objectives?
Strategic focus, measure performance, decision making
What are SMART objectives
Specific, measurable, achievable, relevant, time-bound
What is short-termism?
Prioritisation of short term goals
What is a strategy?
Long term plan based on the business vision
What are tactics?
Short terms decisions responding to threats and opportunities.
What is a mission statement?
The overriding purpose of the business
What is SWOT analysis?
Strengths/Weaknesses (Internal) Opportunities/Threats (External)
What do liquidity ratios assess?
If a business has sufficient cash/current assets to pay debts.
What is the current ratio?
Current assets/Current liabilities
What is the ideal current ratio?
1.5 - 2.5
What 2 things should be considered when assessing liquidity?
Inventory held, competitor liquidity
What is gearing?
% of a firm’s capital that is debt
What is the gearing ratio?
(Non-current liabilities / Total Equity+Non-current liabilities)
What is the capital structure?
The mix of debt and equity used to finance a business.
What are 2 reasons for high debt?
Low-interest rates, strong cash flow
What is an ideal gearing ratio?
25% - 50%
What is inventory turnover?
How often each year a business sells and replaces its inventory
What is the inventory turnover formula?
Cost of sales / Avg. Inventory Held
What are payables?
Amount owed by a business.
What is the payable days formula?
(Payables/Cost of sales) x 365
What are receivables?
Amount owed to a business
What is the receivable days formula?
(Receivables/Revenue) x 365
What is return on capital employed?
Profit gained from capital employed
What is the return on capital employed formula?
(Operating profit/Total equity + Non-current liabilities) x 100
What is a core competency?
Something unique that a business has, or can do.
What are the 3 conditions for a core competency?
Provides consumer benefit, hard to imitate, leveraged widely
What do Prahalad and Hamel suggest?
Focus on core competencies and outsource non-core competencies
What does Kaplan and Norton’s Balanced Scorecard assess?
Achievement of financial and non-financial objectives
What are the 3 goals of the scorecard?
Align activities of vision, improve communication, monitor performance
What does it identify?
4 performance indicators
What does Elkington’s Triple Bottom Line Assess?
Performance-based on profit, people, planet.
What does it measure?
Financial, social and environmental performance.
What are 3 roles of business legislation?
Regulate rights, protect customers, prevent anti-comp practices.
What are the aims of competition policy?
Promote comp, improve efficiency, encourage R+D
What is price fixing?
Firms collude to set market prices.
