2.3

Question 1

what is a statement of comprehensive income?

Answer 1

companies publish their accounts to show their profits and losses

Question 2

gross profit calculation

Answer 2

sales revenue - cost of sales (VC)

Question 3

operating profit calculation

Answer 3

gross profit - expenses (FC)

Question 4

net profit calculation

Answer 4

operating profit - interest

Question 5

gross profit margin calculation

Answer 5

operating profit / revenue x100

Question 6

net profit margin calculation

Answer 6

net profit / revenue x100

Question 7

ways to improve profitability

Answer 7

have a sale, increase advertisement, reduce costs, automating production

Question 8

liquidity definition

Answer 8

the ability of a business to turn its assets into cash to pay its current liabilities

Question 9

what is a statement of financial position (balance sheet)

Answer 9

shows the assets and liabilities of a business

Question 10

current ratio test

Answer 10

current assets/current liabilities

Question 11

acid ratio test

Answer 11

current assets - inventory / current liabilities

Question 12

how to improve liquidity

Answer 12

reduce amount of held stock, pay suppliers later, use retained profit

Question 13

what is working capital

Answer 13

day to day finance needed in a business

Question 14

working capital calculation

Answer 14

current assets - current liabilities

Question 15

how to improve working capital cycle

Answer 15

reduce credit terms, hold less stock, increase credit terms with suppliers

Question 16

what are the 4 internal factors of business failure

Answer 16

failure to innovate, poor efficiency, poor marketing, mad management of working capital

Question 17

what are the 2 external causes of business failure

Answer 17

economic recession, decline in GDP