internal analysis

Question 1

what is a balance sheet

Answer 1

a balance sheet is a screenshot of a firms assets and liabilties

Question 2

what is an asset

Answer 2

an asset is something the business owns

Question 3

what is a liability

Answer 3

liabilities are depts that the business owes to others

Question 4

what is a current / non-current asset - give examples

Answer 4

a current asset is something the business has for less than a year -cash in the till, recivables (things owed to the business from others ) ,inventories

a non-currrent asset is something the business will have for more than one year. For example matchines veacles or offices

Question 5

what is a current / non-current liability - give examples

Answer 5

a current liabilty is a dept that the business owes for under a year - tax dividends payables
the non- current liabilty is a dept that a business owes that will take much longer to pay off - for example loans or morgages

Question 6

what is working capital

Answer 6

working capital is the finance that a business has avalabe for day to day spending

Question 7

how is working capital calculated

Answer 7

current asset - current liabilities = working capital/ net assets

Question 8

what can other people judge from a firms balance sheet

Answer 8

by comparing balance sheets a firm could find trends in the data and make judgements accordingly - for example a sharp increase in non-current assets could indicate an enediour to grow
or low liabilites could show that the business isn’t willing to take risks

Question 9

what does an imcome statement show ?

Answer 9

An income statement shows the revenue and expenses of a company

Question 10

why are income statements especially important for PLC’s ?

Answer 10

A PLC has to publish their income statement publically, it can then be viewed by shareholders, potential shareholder as well as competitors

Question 11

what measurements of profit does an income statement display

Answer 11

gross profit
operating profit
profit beofre tax
profit after tax
retained profit

Question 12

what is everything displayed on an income statement

Answer 12

revenue
cost of sales
gross profit
operating expenses
operating profit
other expenses
proft before tax
tax
profit after tax
dividends
retained profit

Question 13

what can a business do with their profits

Answer 13

• pay dividends to shareholders
  -reinvents (assets)
  both ?

Question 14

why are financial ratios useful to a business

Answer 14

Ratios are useful because they turn data from the balance sheet and income statement in to simple to understand numerical form

Question 15

what does return on capital employed show (not the calculation the meaning instead)

Answer 15

return on capital employed shows how much money the business has made in comparison to how much money has been put into the business

Question 16

what is the formula for calculating ROCE

Answer 16

operating profit / total equity + non-current liabilities

Question 17

what does the current ratio show (not the calculation the meaning instead)

Answer 17

the current ratio presents the amount of assets for every liability

Question 18

how is current ratio calculated

Answer 18

current asset / current liabilities

Question 19

what does inventory turn over show (not the calculation the meaning instead)

Answer 19

inventory turn over presents how much a company replaces inventory relative to its cost of sales.

Question 20

how is inventory turnover calculated

Answer 20

cost of sales / cost of average stock held

Question 21

what is payable days (not the calculation the meaning instead)

Answer 21

payable days shows the amount the business owes to other creditors to the cost of sales a business makes over a year.

Question 22

what is the calculation for payable days

Answer 22

payable days = payables / cost of sales x 365

Question 23

what is the receivable days

Answer 23

this is like the opposite of payable days and displays the amount of money owed to the business (receivables) to the amount of sales revenue generated by the people who owe them money

Question 24

so how is receivable days calculated

Answer 24

receivables/ sales revenue x 365

Question 25

what is gearing (not the calculation the meaning instead)

Answer 25

gearing shows what proportion of a business’s finance comes from non-current liabilities and how much comes from reserves

Question 26

what is the calculation for gearing

Answer 26

non-current liabilities / total equity + non-current liabilities x 100

Question 27

what would it mean if a business’s gearing was over 50%

Answer 27

if a business’s gearing was over 50% then this shows that the business is highly geared and the majority of their finances come from non-current liabilities

Question 28

what would it mean if a business’s gearing is below 25%

Answer 28

this means that the business has very little finance coming from long term dept. - possibly not taking enough risk - wont grow

Question 29

how does gearing show if a business is venerable to interest rates

Answer 29

if a business is highly geared and then interest rates go up then they would suffer - paying more

Question 30

describe kaplan and nortons balance scorecard

Answer 30

Kaplan and Nortons balance score card looks at four different aspects of a business
-financial perspective - e.g looking at areas of ratios or balance sht ect

• the internal business process perspective - e.g capacity of efficiency

-the customer perspective - e.g improving customer loyalty

-the learning growth perspective- improve labour retention or staff dev

Question 31

describe elkingtons triple bottom line

Answer 31

profit

people

planet