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Business Studies > Managing Finance > Flashcards

Managing Finance Flashcards

1
Q

What is profit?

A

The financial gain of a business through trading

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2
Q

What is gross profit?

A

the selling price of your product minus the cost of producing it

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3
Q

What is operating profit?

A

the money left after paying all business costs, but before paying tax

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4
Q

What is net profit?

A

the sales income minus all the business costs

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5
Q

What is the gross profit formula?

A

GP = SR - Cost of sales

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6
Q

What is the operating profit formula?

A

OP = GP - Expenses

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7
Q

What is the Net Profit Formula?

A

NP = OP - Interest

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8
Q

What is the Gross Profit Margin formula?

A

GP Margin = Gross profit
——————— X100
Sales Revenue

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9
Q

What is the operating profit margin formula %?

A

OP Margin = Operating Profit
__________________ X100
Sales Revenue

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10
Q

What is the Net profit margin formula %?

A

NP Margin = Net Profit
__________________ X100
Sales Revenue

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11
Q

What are the differences between Profit and Cash?

A
  • Profit is recorded straight away
  • A business can trade for many years without profit
  • Cash will not be recorded until it is paid out or received which could be in a different trading year
  • A profitable business may go bust if it runs out of cash to pay a supplier or wages of staff
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12
Q

What are non-current (fixed) assets?

A

Item/assets that the business buy in order to run the business eg. equipment and Buildings

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13
Q

What are current assets?

A

Items which are bought to be turned into cash within a year eg. Stock

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14
Q

What are liabilities?

A

Assets or money owed to others

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15
Q

What are examples of non-current (long-term) liabilities?

A

Mortgage, loans, lease

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16
Q

What are current liabilities?

A

Things that are payable within a year

17
Q

What is equity/Shareholder funds?

A
18
Q

What is the current ratio formula?

A

Current assets
———————
Current liabilities

19
Q

What is the acid test ratio formula?

A

Current assets - inventory
————————————-
Current liability

20
Q

What is business failure?

A

When a business ceases to trade or when a business does not trade in a profitable way or when a business makes a terrible decision

21
Q

What are the internal causes of business failure?

A
  • Poor efficiency
  • Poor marketing
  • Failure to innovate
  • Bad management of working capital
22
Q

What are the external causes of business failure?

A
  • Economic recession
  • Strong pound

Business Studies (16 decks)

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