2.3 keywords

Question 1

profit

Answer 1

Sales Revenue - Total Costs

Question 2

gross profit

Answer 2

Sales Revenue - Cost of Sales

Question 3

operating profit

Answer 3

Gross Profit - Other Operating Expenses

Question 4

net profit

Answer 4

Operating Profit - Interest and Tax

Question 5

cost of sales

Answer 5

Costs directly linked to the production of the goods/services sold, e.g. raw materials.

Question 6

exceptional items

Answer 6

Any unusually large or infrequent transactions.

Question 7

income statements

Answer 7

A formal financial document that summarises a business’ trading activities and expenses to show whether the business has made a profit or loss.

Question 8

profitability

Answer 8

Measures the efficiency of a business in generating profit. They can be measured through profit margins.

Question 9

gross profit margin

Answer 9

Gross Profit / Revenue x 100

Question 10

operating profit margin

Answer 10

Operating Profit / Revenue x 100

Question 11

net profit margin

Answer 11

Net Profit / Revenue x 100

Question 12

balance sheet

Answer 12

A financial statement that shows the assets, liabilities and capital of a business on a particular date.

Question 13

liquidity

Answer 13

The proportion of a business’ assets that are held in a form easily converted to cash.

Question 14

current ratio

Answer 14

Current Assets / Current Liabilities : 1

Question 15

acid test ratio

Answer 15

Current Assets - Inventory / Current Liabilities : 1

Question 16

working capital

Answer 16

The amount of money available for the day to day running of a business.

Question 17

assets

Answer 17

Owned by a business or owed to the business.

Question 18

liabilities

Answer 18

A business that owes money to an individual. It shows the source of capital the business has raised in order to purchase its assets.

Question 19

non current assets

Answer 19

Assets that is expected to be retained for more than one year.

Question 20

current assets

Answer 20

Assets that are likely to be converted into cash by the next balance sheet, e.g. cash inventories (stock)

Question 21

non current liabilities

Answer 21

Debts that will take longer than one year to pay e.g. bank loan, mortgages

Question 22

current liabilities

Answer 22

Debts that will be paid off within a year or less e.g. trade credit.

Question 23

total equity

Answer 23

This is the assets (usually cash) received from the shareholders plus nay profits made by the business through trading that remains undistributed. This should be equal to Net Assets.