Managing Finance Flashcards
How to work out current ratio
Current assets divided by current liabilities
How to work out acid test ratio
Market securities plus market accounts divided by current liabilities
what is cost of sales?
the direct costs of a business
what the definition of by gross profit?
gross profit expressed as a percentage of revenue/turnover
What is operating profit
the difference between gross profit and business overheads, such as selling and administrative expenses
what is the definition of by operating profit margins?
operating profit expressed as a percentage of revenue/turnover
What is meant by statement of comprehensive income.
a financial document showing or company’s income and expenditure over a particular time period, usually one year
What is meant by revenue or turnover?
the total income of a business resulting from sales of goods or services
What is gross profit?
gross profit is the measure of how efficiently the business sells it goods and service
you want this to be as high as possible
calculation is : gross profit = revenue (turnover) - lost of sales
What is meant by net profit?
net profit measures the businesses final profit, before any taxes is calculated or dividend paid to shareholders
calculation:
Net Profit = Operating profit - interest and exceptional costs
What is operating profit?
-operating profit measures how much profit a business makes after all the business’s costs have been deducted
calculation: Operating profit = Gross Profit - Operating Expenses
what the definition of by gross profit?
the difference between revenue/turnover and cost of sales
what is the definition of by gross profit margin?
gross profit expressed as a percentage of revenue/turnover
What is the distinction between cash and profit?
its important that you understand the difference between cash and profit .
Profit figures and bank balances are rarely the same
How to reduce costs
Cheaper costs –> reduce quality, negotiate better pricing with original supplier
Less waste suppliers –> efficiency, buying in bulk may still have extra waste
Reducing packaging –> better for environment, PR, R+D–> new design increases cost
Reduce Storage –> JIT –> not have enough, cant impulse buy, cant handle demand spikes
reduce labour –> reduce morale
reduce wages –> reduces morale
