3.7 Internal analysis

Question 1

Balance sheets are

Answer 1

lists of assets and liabilities.
§ Balance sheets are a snapshot of a firms finances at a fixed point in time.
§ They show the value of all the business’ assets (the things that belong to the business, including cash in the bank)
and liabilities (the money business owes). They also show the value of all the capital (money invested in the business)
and the source of that capital (loans, shares or retained profits) – so they show where the money’s come from as well
as whats being done with it
§ The net assets value (total fixed assets- total current and non-current (long term) liabilities is always the same as
‘total equity’ value- the total of all the money that’s been put into the business- balance sheets- they balance

Question 2

(non)current assets / liabilities and examples

Answer 2

Current assets:
Short term thing you own
§ Cash
§ Stock. Debtors/
receivables

Non- current asset (fixed
asset) – l/t thing you own
§ Property/ factory
§ Land/ vehicles

Current liability- s/t thing
you owe
§ Creditors (trade credit,
bills, rent, overdraft)

Non- current liability- l/t
thing you owe
§ Bank loan
§ Mortgage

Question 3

Assets are
- why businesses by assets
-types of assets and examples
-what happens to non current assets over time

Answer 3

the things the business owns:
Businesses can use capital to buy assets that will generate more revenue in the future- investment

§ Assets (machinery and stock) provide a financial benefit to the business, given a monetary value on the balance
sheet. Can be classified as non- current assets (fixed assets) or current assets
§ Non- current assets are assets that the business is likely to keep for more than one year e.g. property, land,
production equipment, desks and computers. The ‘total non – current assets’ value on the BS is the combined value
of all the business’ non-current assets. often lose value over time, so they’re worth less every year= depreciation.
Businesses should factor in depreciation to give a realistic value of their non – current assets on the balance sheet.
§ Current assets are assets that the business is likely to exchange for cash within the accounting year, before the next
balance sheet is made. All the current assets are added together to give the ‘total current assets’ value on the
balance sheet
§ Current assets include receivables (money owed to the business) and inventories or materials that will be used to
make products , that will be sold to customers)
§ The business’ current and non- current assets are added together then current and non-current liabilities are
deducted to give the figure for ‘net assets’ on the balance sheet

Question 4

Liabilities are

-what are bad debts and what happens to them

Answer 4

debts the business owes
§ Current liabilities are debts which need to be paid off within a year. They include overdrafts, taxes due to be paid,
payables, and dividends due to be paid to shareholders. Total current liabilities are deducted from total fixed and
current assets to give the value of assets employed
§ Non- current liabilities are debts that the business will pay off over several years e.g. mortgages and loans
Bad debts are debts that debtors won’t ever pay
§ Sometimes debtors default on their payments- debts which don’t get paid are ‘’bad debts’’-
§ Bad debts can’t be included on the balance sheet as an asset- as they don’t get money for them
§ Puts these as an expense on the profit and loss account- shows the business has lost money

Question 5

Intangible assets:

Answer 5

§ Patents, trademarks, copyrights, intellectual property
§ Brand name = intangible assets

Question 6

Tangible fixed assets=

Answer 6

total fixed assets- intangible assets

Question 7

Working capital is
- day to day
- what is it also equal to
- what shouldn’t it be and why
- why do business need cash but not too much
-which businesses need more cahs
- when will firms need more cash
- what should a buisiness avoid when expanding (cash)

Answer 7

the finance available for day to day spending

§ It’s the amount of cash that the business has available to pay tis day to day debts. The more working capital – the
more liquid
§ Working capital= net current assets

§ Working capital shouldn’t be tied up in inventories or receivables- cant use these pay their current liabilities until
they’re turned into cash
§ Businesses need enough cash to pay s/t debts- shouldn’t have too much cash- opportunities
§ Businesses with a long cash flow cycle need more cash as they have to wait for money to come in
§ Firms need more cash when inflation is high
§ When a business expands, in needs more cash to avoid overtrading- expanding too quickly that the business
can’t afford to pay its suppliers until it gets paid by customers

Question 8

Liquidity ratio shows

Answer 8

shows how much money is available to pay the bills
§ Business that doesn’t have enough current assets to pay its liabilities when they are due is insolvent. It either has
to quickly find money to pay them, cease trading or go into liquidation
§ Liquidity can be improved by decreasing stock level, speeding up collection of debts, or slowing down payments
to creditors
§ A liquidity ratio shows how solvent a business is

§ 1.5 – 2= good, healthy
§ >2, unused cash reserved that could productively be invested to increase profitability or given to
shareholders as dividends

Question 9

Low liquidity ratios Suggest

• what will be needed
• what should happen

Answer 9

business may have difficulty in paying its s/t debts, bills especially If stock cannot be sold
quickly
§ More working capital may be needed
§ Risks should be assessed and action taken

Question 10

High liquidity ratios:
§ Suggest

Answer 10

business Is liquid
§ Cash could be invested to produce a return

Question 11

how must debtors and stock be controlled

Answer 11

RTN

Question 12

Businesses need finance for capital expenditure

-what is capital expenditure aka (2 things)
-what must businesses set aside enuogh for
-what is capital employed
what are share holder funds
-

Answer 12

§ Fixed capital (capital expenditure) means money used to buy non- current assets. These are thing used over and
over again to product goods – factories, equipment
§ Businesses need capital expenditure to start up, grow and replace worn out equipment. Must set aside enough
money to stop non- current assets from wearing out and then decide how much money to invest in growth=
allocating capital expenditure
§ Capital expenditure= non -current assets
§ Capital employed: All l/t liabilities that don’t have to be paid back by a certain time e.g. shareholder/ investor
funds, retained profit

Shareholder funds:
§ Includes money involved in buying shares
§ Liability as the business is a separate legal entity, owes money to shareholders

Question 13

Stock is valued at

Answer 13

cost or at net realisable value- whichevers lower

§ Accounting conventions say that stock values must be realisable. The net realisable value is the amount the company
could get by selling the stock right now in its current state (raw materials or finished products)
§ The realisable value might be lower than cost value or may be higher
§ Company must record stock value in its account as the lower value out of cost or net realisable value

Question 14

Accounts reflect the

Answer 14

depreciation of assets:
§ Businesses calculate depreciation each year to make sure that an assets value on the balance sheet is a true reflection
of what the business would get from selling it
§ Building depreciation into each year’s account avoids the fall in value hitting all at once when the business sells the
asset-. Spreading out the cost of the depreciation over several years is a truer reflection of the situation and allows the
business to make comparisons between financial years more easily
§ The amount lost through depreciate is recorded on the income statement- expense.

Question 15

Balance sheet shows the s/t

why are suppliers interested in working capital and liquidity

what does this ST info help asses
why should bus. compare banlance sheets
what does an increase in non current assets indicate
what does increase in reserves suggest

Answer 15

financial status of the company
§ Suppliers are interested in working capital and liquidity -= look at balance sheet to see how liquid assets- better at
paying bills more liquid they are. Helps to decide whether to offer the business supplies on credit and how much
credit to offer
§ s/t information helps assets internal strengths, weaknesses.
Comparing balance sheets= long term trends
§ A quick increase in non- current assets indicates that the company has invested in property or machinery- investing in
a growth strategy- increase profits – useful for shareholders and potential
§ Increases in reserves – suggest increase in profits
§ Identify strength and weaknesses.

Question 16

Income statements:
what is inclueded and examp. of them
what is a sign that company is healthy
who has to publish

Answer 16

a way or reporting profit or loss over a certain period of time- a summary that shareholders and
potential investors can use to assess the company’s performance
§ Revenues is sales incomes, cash and credit
§ Expenses = raw materials, production costs, marketing costs, wages
§ These figures can be used in assessing a company’s financial performance- if revenue has increase by more than
rate of inflation – Sign Company is healthy
§ PLCs have to publish their account so that they’re available to anyone who wants to look at them- shareholders,
potential shareholders, competitors. Can be published by sole trader, Private limited company

Question 17

Income statements cover a period of time:

Answer 17

§ Should cover one whole accounting year
§ Can also contain previous years data- easy comparison, trends

Question 18

Companies must disclose in income statement:

Answer 18

§ Exceptional items- one off financial transactions arising from normal trading activities (e.g. opening of a new
store)
§ Extraordinary items- large transaction outside normal trading activities of a business e.g. (closure of a factory
might result in redundancy pay and any loans

Question 19

Income statements show:

Answer 19

§ Finance income- any interest paid to the company of money spent or saved
§ Financial expenses- any payments of interest on loans
§ Public and private that have gone through legal incorporation process to gain limited liability will be charged
corporation tax

RTN!!!!!

Question 20

These measures can be used to assess financial performance: (types of profit and what they show)

what does operating profit < gross profit suggest (plus steps to solve)

Answer 20

§ Gross profit shows the money being made from actually making and selling products. If gross profit is low
managers need to look at ways of reducing the cost, or increasing the selling price

§ Operating profit shows the money made from normal business operation. If operating profit is significantly lower
than gross profit- shows that the company’s operating expenses are a weak area. Managers should take steps to
reduce these expenses e.g. By reducing marketing costs. However the operating profit could reflect a big
investment in people, premises. Bank s and investor will look at this to assess risk

§ Comparing profit before tax to operating profit shows if income or expenses are coming from other activities rather
than normal activities - which may not continue in the future

§ Profit after tax tells you if the company is profitable- shareholders, investors

§ Retained profit- shows how much internal finance the company has available to invest, how strong its growth
potential is

Question 21

Profit quality:
high qual profit vs low qual

Answer 21

refers to whether a
source of profit is sustainable in
the long term
High quality profift: source of
profit that’s likely to continue in
the future
Low quality profit- a result of
actions that are likely to occur
again

Question 22

Income statements: profit margins +VE -VE

Answer 22

Benefits
§ Simple to calculate
§ Gives an overview of where most costs are incurred
§ Can be used to spot trends in profit/ costs
§ Can be used to compare similar businesses
§ Useful for assessing performance
Limitations:
§ Ratios aren’t enough to explain why costs are incurred
§ Shouldn’t base business decisions on ratio alone
§ Doesn’t include any info about external factors; market
demand which would be useful in forecasting future
revenue and profit
§ Doesn’t include any info about internal factors e.g. staff
morale- useful in determining productivity thus
profitability
§ In times of inflation, income statement isn’t so useful as
inflationary rises in price distort the true value of
revenue
§ Can be deliberately distorted by bringing forwards
sales from the next trading period and including them as
part of this trading period

Question 23

Financial analysis doesn’t cover anything non-
numerical

Answer 23

§ Ignores qualitative data that investors should
consider
§ Internal factors that don’t appear in the analysis
include quality, market share, productivity levels,
environmental impact, customer satisfaction
§ External factors- economic or market environment
aren’t reflected. Competitor action unknown

Question 24

Return on capital employed (ROCE) – profitability ratio

what is it importnt. to compare roce to
how can it be improved
what is it also a measue of

Answer 24

A profitability ratio shows profit margin. ROCE best way of analysing profitability and is expressed as a percentage

§ Capital employed- all l/t liabilities that don’t have to be paid back by a certain time (shareholder investor fund,
retained profit)
§ Tells you how much money is made by the business compared to how much moneys been put into the business. The
higher the ROCE, the better
§ Important to compare the ROCE with the bank of England interest rate at the time, because this tells investors
whether they’d be better off putting their money in the bank
§ Can be improved by paying off debt to reduce non-current liabilities or by making the business more efficient to
increase OP.
§ ROCE- measure of return on investment

Question 25

Uses of ROCE

Answer 25

§ Identify whether a business can repay loan
interest
§ Used by existing and potential investors to
compare returns in investment in the business
to alternative investments
§ Used to show trends over time – is the
business generating more or less profit for £1
invested.

Question 26

Limitations OF ROCE:

Answer 26

§ Best analysed as a trend than an isolated figure
§ One of events (e.g. takeovers) can reduce ROCE so must
be explained

Question 27

How to improve ROCE:

Answer 27

1. Increase operating/ net profit
2. Reduce amount of capital employed
3. Increase OPM
4. Increase stock turnover (selling stock more quickly)

Question 28

Efficiency ratios:

what does inventory ratio show

Answer 28

show managers and shareholders how well the business is using its resources
§ Show how efficiently the business is using its assets and how well managers are controlling stock, creditors and
debtors
§ Inventory turnover ratio compares the cost of all sale a business make over the year to the cost of the average
stock held. Measures how often each year a business sells and replaces its inventory( raw mat, work in pro,
finished good)

Question 29

LOW AND HIGH TURNOVER INDUSTRIES

Answer 29

Low turnover industries-
construction, engineering, industrial

distribution
High inv turnover = supermarkets,
motor vehicle production, fast food

Question 30

Inventory turnover=
formula
analysing ratio
what is ideal
what does aged stock analysis do

Answer 30

cost of sales/ inventories
Tells you how many times during the year the business sold all its stock. A business operating JIT production will have
a very high ratio
§ Analysing the ratio- judge if the business has enough stock to fulfil orders, but not too much stock to be efficient
§ Ideal turnover ratio depends upon the type of the business

§ Aged stock analysis lets managers make sure that old stock gets sold before it becomes obsolete and unsaleable.
Lists all stock in age order- manager can discount stock and cut down orders for slow selling stock

Question 31

How to increase Inventory turnover

Answer 31

§ Sell-off or dispose of slow-moving or obsolete inventory
§ Introduce lean production techniques to reduce amounts of inventory held
§ Rationalise the product range made or sold
§ Negotiate sale or return arrangements with suppliers – so inventory can be returned if it does not sell

Question 32

Evaluating inventory turnover:

Answer 32

§ Inventory turnover varies from industry to industry
§ Holding more inventory may improve customer service & allow the business to meet demand
§ Seasonal fluctuations in demand during the year may not be reflected in the calculations
§ Inventory turnover is not relevant to most service businesses

Question 33

Payable days ratio-

what is ideal
what can bus. maximise with this ratio
what can busi. analyse with this

Answer 33

compares the amount the business owes to its creditors to the cost of all the sales a business makes
over the year. The average length of time taken by a business to pay amounts it owes

§ Number of days the firm takes to pay for goods it buys on credit from suppliers
§ Establish a trend – use this to analyse efficiency/. F the trend is upwards may suggest the firms is getting into
difficulties paying its suppliers
§ Can use this to maximise its cash flow, if the business had an agreed credit period of 30 days, it could take up 2 weeks
longer to pay its debts
§ Ideally, payable days is higher than receivable days Be careful: a high figure may suggest liquidity problems
(stretching supplier goodwill)
Look out for:
§ Evidence from the current ratio or acid test ratio that business has problems paying creditors
§ Window-dressing: this is easiest figure to manipulate

Question 34

Receivables days ratio- compares

what is ideal and why
differnces in of receiv. days in diff industries
what does trends sugges
value of aged recievables analysis

Answer 34

the amounts owed to a business by its debtors to the total sales revenue for year

§ The number of days that the business has to wait to be paid for goods it supplies on credit
§ Low receivable days- goods for cash flow, working capital
§ Retailers get paid straight away, medium size businesses 70-90 days
§ Compare with previous months. An upwards trend may be because the business had offered longer credit terms to
attract more customer. If not monitored- cash flow problem
§ Aged receivables analysis lets managers control receivables days. Unpaid accounts are listed in order of how long
they’ve been unpaid- one’s overdue are targeted first for repayment
§ Inventory turnover and receivables days are measures of activity- they tell how effectively a business is using its resources to generate revenue

Question 35

Gearing shows
formula
what does it focus on
what does it show ptential ivestors

what happeds to gearing and ROCE if business take out a loan

what is low, high and accepetable

Answer 35

where a business gets its capital from = long term loans/ capital employed *100
§ Measures the proportion of assets invested in a business that are financed by long-term borrowing.
§ Gearing focuses on the capital structure of the business – that means the proportion of finance that is provided by
debt relative to the finance provided by equity (or shareholders).
§ It shows potential investors where a business’s finance has come from i.e. what proportion of its finance comes
from non-current liabilities (long term debts) rather than share capital or reserves (equity)

§ If a business takes out a loan the gearing and ROCE will change (ROCE will fall and gearing will increase)
§ A gearing above 50% shows that more than half of a business’s finance comes from long term debt- business is
high geared. 50%= acceptable.>50%= risky
§ A gearing of 25%-50% Is fairly standard – some of its finance comes from long term debt, but not too much.
§ A gearing below 25% shows it is low geared, less than a quarter of the finance comes from long term debt

Question 36

Gearing shows how vulnerable
value of gearign to investors

Answer 36

a business is to changes in interest rates:
§ The more the business is borrowing, the harder they’ll be hit by a rise in interest rates.
§ The amount of borrowing depends on its profitability, value of assets- the more they can offer as collateral, more
they can borrow
§ Gearing is a crude risk assessment that an investor can user to help decided whether to buy shares in the
company. The more the firm borrows, the more interest it will have to pay- this may affect profits, and the dividend
paid to shareholders. The more the firm borrows the more risk there is that the investor won’t get much dividend

Question 37

Rewards of high gearing

Answer 37

§ Extra funds for expansion. Ideally loan
is invested in projects or tech- increase
profits. high gearing can be attractive
growth phase. firm that’s trying to
become market leader & growing
profits, strong product portfolio may
decide to borrow heavily- fund
expansion and gain comp adv. –
increase firms gearing
§ During periods of growth- plenty of
profit even after paid loan, interest
and repayments- high gearing can be
good
§ When interest rates are very low, high
gearing is less risky because interest
payments are lower

Question 38

Risk of high gearing:

Answer 38

§ May not be able to afford repayments- might not make enough
profit to cover loan and interest
§ Taking out loans when i/r low = risky, might go up later and
business is still committed to making repayments

Question 39

High gearing had risks and rewards for investors too:

Answer 39

§ The reward for the lender or shareholder is interest for lenders or share dividend for shareholders. Shareholders
might expect to see large dividends and a big increase in share price compared to a low geared company
§ Risk to the shareholder of high gearing is that the business may fail if it can’t afford to keep up with loan
repayments. When a business goes into liquidation, lenders will probably get the money they’re owed but the
shareholders could lose most or all they’ve invested the money

Question 40

Ratio analysis +VE

Answer 40

§ Good way of looking at a business’s performance over a period of time- can spot trends, identify financial
strengths and weaknesses of the business
§ However, these trends need to take account of variable factors, inflation, accounting procedures, business
activities
§ Managers can use ratio analysis to help with decision making- if their payables days ratio is low they might
negotiate a longer credit period which will improve cash flow
§ Potential investors can use the ration to help them decide if they want to invest in the business- may choose not
to invest in a high geared business
§ Its also useful to compare rations with other businesses, provide a more meaningful comparison when looking
at different sized businesses

Question 41

RATIO ANAL -VE

Answer 41

Limitations
§ All financial ratios compare figures from balance sheet or income statement and give you a raw number as an
answer
§ Ratios don’t take account of any non-numerical data so don’t provide an absolute means of assessing a
company’s financial heath
§ Internal strengths, quality of staff doesn’t appear
§ External factors- economic or market environment aren’t reflected in figures, when in a downturn it’s okay for
ratios to fall
§ Future changes- tech advances or changes in interest rates can’t be predicated- won’t be represented in ratios
§ Ratios only contain info on past and present- a business which has just started investing for growth will have
lousy ratios until investment pays off

Question 42

Analysing overall performance:

Answer 42

§ Non- financial data shows strength and weaknesses in other area
§ SWOT analysis is key to a company knowing its strengths and weaknesses
§ Analysing non- financial data allows a company to consider other internal factors that can combine to give them a
competitive advantage
§ Data is collected from each department e.g. marketing, human resources and operations

Question 43

Analysing overall performance: Marketing:

Answer 43

§ Calculations of market share, market growth and sales growth
§ Portfolio analysis- the products a company has, what stage in product life cycle and their perceived and actual
quality

Question 44

Analysing overall performance: Human resources:

Answer 44

§ Calculations of labour productivity, turnover
§ An assessment of staff skills and qualification as well as HR plans for training and recruitment- see if these are
matched to the needs of the business

Question 45

Analysing overall performance: Operations:

Answer 45

§ Calculation of capacity and capacity utilisation
§ Age and condition of machinery
§ When analysing data, managers need to ask questions and make judgements

Question 46

Businesses can compare their data to other businesses

-context
-benchmarking
- requ. for bench marking

Answer 46

§ Businesses compare their data with data from similar businesses- this allows to compare their performance with
that of their competitors and see where they need to improve
§ Making comparisons puts a businesses data in context, if a business’s sales growth is low but a competitor’s sales
growth is similarly low managers would be less concerns
§ Benchmarking means looking at successful businesses and identifying what they do well, then trying to apply their
strengths to your business.
§ If a rival’s productivity is much higher – look at what the rival does differently and try to adopt their methods.
benchmark business needs to be comparable so methods will be relevant. Companies -similar enough to compare

Question 47

Businesses can look at their data over time

when should data analysis occur
what eos analysing over time allw
what should business do with trends

Answer 47

§ Data analysis needs to be repeated at regular intervals to allow a business to see how things are changing
§ Analysis of both financial and non- financial data can be helpful to show trends in performance

§ Analysing over time allows the business to assess its long term performances as well as its short term performance-
needs to consider whether the data shows a permanent trend- helps develop strategy

§ A business should prefect trends – extrapolating. see how likely it is that it will meet objectives

§ difficult to forecast future trends -lots of external factors that are out of the businesses control-

Question 48

Core competencies:

exampls
what does it allow
when and why should busines. be able to chang e CC
when will businesses focus on cC
when may CC be sacrificed

Answer 48

capabilities of a business that are unique to that business and give it a CA- capabilities rivals
don’t have
§ Any feature that makes a business different- tech, specialist staff training, innovative production process
§ Core competencies, fundamental to success of the business, should allow business to compete in different area
§ CC are difficult for competitors to copy, makes the business more competitive
§ Business should be able to change its CC - meet changing demands of its market- to grow, maintain comp adv
§ A business will focus on core competencies when developing strategy
§ Short termism- excessive focus on s/t results at the expense of l/t Interests- focusing heavily on the s/t -satisfy
demanding shareholders.

Question 49

Kaplan and Norton’s balances scorecard

Answer 49

§ The balanced scorecard model gives a balanced view
§ Used to assess business performance and in developing, implementing and monitoring strategy
§ Financial and non- financial data, measures of efficiency, effectiveness- links them to overall strategy/vision o
§ 4 dimensions need to be measured, analysed and improved together, business loses its balance, fails to thrive
§ Attempts to achieve a balance between financial and other measures of performance that can lead to sustained,
long term performance. The model looks at 4 perspectives. For each one managers need to consider the objectives,
measures, targets and initiatives that are key to the success of their strategy
§ Managers need to be able to balance these different perspectives- improvements in one area cannot be made at
the expense of improvements in another. However improvements in one area, often have a positive impact on
another

Question 50

Strengths:

Answer 50

§ The model is valuable, treats the business as a number of dependent, rather than independent- all departments
need to consider how their actions will impact on others
§ Gives a clearer idea to whether business is achieving its target
§ Managers find current position –find where to improve
§ Used to create targets- quantifiable
§ Provides a broad view that allows businesses to detect weaknesses easy
§ It’s a balance between the needs of different stakeholders, both internal and external

Question 51

Weaknesses:

Answer 51

§ Possibility of information overload, potential conflict if one target contradicts another and difficulty putting the
initiatives into place
§ It is complete- areas can be difficult to quantify and achieving the right balance difficult, dependent on
companies perspective

Question 52

KAP SCORECARD

Answer 52

rtnnnnnn!!!!!!

Question 53

Elkingtons Triple bottom line-

what is traditional bottome line

explain the three bottome lines

what should be doen with info
what is the main idea behind this

Answer 53

measures a business’s performance in relation to 3 overlapping areas: profit, people
and planet
A businesses objectives and strategy should me more than just the bottom line (profit). It should be planet and people
(social)
The traditional bottom line:
§ Businesses assumed to be profit maximisers
§ Traditional measure of business success
§ Close linked with business value (share price)
§ Often the basis for financial incentives (bonuses)
Profit- traditional financial or economic value created by the company
Planet- a company’s environmental values and impact on the environment
People- A company’s social values - the way it treats its employees and local community. Difficult to compare and
calculate

§ Performance in each of these areas is assessed and reported back to stakeholders. – Triple bottom line reporting
§ The idea is that businesses are responsible to all their stakeholders and to the planet. A business can only be
sustainable if it balances financial performance with its impact on people and the planet

Question 54

TBL Strengths:

Answer 54

§ Encourages business to think beyond narrow measure of performance (profit)
§ Encourages CSR reporting § Model can help to achieve CSR objectives

§ The values of these measures can be judged against pre- set targets or by comparing them to the values for other
businesses

§ Supports measurement of environmental impact and extent of sustainability
§ Business is more likely to consider its actions in each area and alter its behaviour or culture

Question 55

TBL -VE

Answer 55

§ Not very useful as an overall measure of business performance
§ Not useful if businesses manipulate data. Difficulty in measuring
§ More difficult to measure the impact on people or planet than financial performance
§ Hard to reliably and consistently measure people and planet bottom lines
§ No legal requirement to report it- so take up has been poor

Question 56

Businesses set objectives linked to each of the three areas:

Answer 56

§ To implement the triple bottom line model, a business sets objectives for performance in each three areas e.g. aim
to reduce its carbon footprint by 20% or to pay all its staff the living wage
§ These objectives can be used by managers to guide strategic planning and monitor the strategy’s effectiveness

Question 57

what type of business has to legaly publish balance sheet

Answer 57

LTD & PLC – legally publish