Unit 7 - Strategy Flashcards
Equity
capital employed - NCL
Assets
Items owned by the business (cash in bank, capital)
liabilities
money owed by the business to individuals, suppliers, banks, shareholders
current assets
assets sold within 12 months (stock)
Non current assets
Assets not sold within 12 months (capital, machinery)
current liabilities
liabilities paid within 12 months (suppliers)
non current liabilities
liabilities not paid within 12 months (LT loans, mortgage)
net current assets
current assets - current liabilities
net assets
non current assets + current assets - current liabilites - non current liabilites
gearing + calculation
% of a business that is financed by LT loans (non current liabilities)
non current liabilities/capital employed x100
capital employed calculation
total assets - current liabilities
- Total assets = non current assets + current assets.
capital
money invested into the business into machinery, inventory
inventory
raw materials + other items needed for production to take place (includes part finished goods)
receivables
money that the business is owed (buyer has received goods from business but hasnt paid yet)
- cash inflow
payables
money that the business owes (received supplies but havent paid yet)
- cash outflow
debtors
people that owe the business money (will receive receivables from them)
creditor
people that the business owes money to (will pay them payables)
working capital definition + ratio
AMOUNT of cash the business is able to pay day to day expenses (suppliers)
- cash inflows for day to day expenses
ratio of working capital = current assets/current liabilities
gross profit
sales rev - cost of sales
operating profit
GP - operating expenses (rent, marketing, salaries, fixed costs)
gross profit margin
GP/sales rev x100
GP = sales rev - costs of sales
operating profit margin
OP/sales rev x100
net profit margin (%)
PBIT / Sales Revenue x 100
Return on capital employed (ROCE) + definition
a measure of how efficiently a business is using capital employed to generate profit
OP/ capital employed (total equity+non current liabilities) x 100
liquidity + calculation
a measure of a business’ ability to survive in the SR (pay day to day expenses)
current assets/current liabilities
liquidity of an asset
how easily an asset can be turned into cash
efficiency ratio
asses the internal management of a business.
- looks at management of cash + inventory (receivables/payables + inventory turnover)
receivables days + calculation
compares amount owed to business by debtors to the total sales rev per year
- a measure of how long on average for customers to pay business
receivables/sales rev x365
payables days + calculation
compares amount a business owes to creditors to total costs
- measure of average time a business takes to pay suppliers
payables/costs of sales x365
Contribution per unit
Selling price - variable cost per unit.
- The amount to cover fixed costs and then to profit.
Break even in units
Fixed costs/contribution per unit
margin of safety
difference between break even point and the actual/budgeted sales.
- expressed in units or %
total contribution
total sales - total variable costs
