2.3- managing finance content Flashcards
(33 cards)
What is cash?
It is tangible, meaning the business owns it and can use it straight away
What is profit?
It is intangible, meaning the business can’t use it until the end of the year
What are some ways a business would use cash?
-Buying stock
-Paying costs and bills
-Loan repayments
-Paying rent
What are ways to increase revenue?
-Have a USP
-Increase how much you advertise
-Increase/decrease prices
-More accessible location
What are ways to lower costs?
-Terms with suppliers
-Decrease wages
-Find a cheaper supplier
-Economies of scale
What is an advantage and disadvantage of raising prices?
Adv: increased revenue
Disadv: customer decrease
What is an advantage and disadvantage of lowering prices?
Adv: potential customer increase
Disadv: decreased revenue
What is an advantage and disadvantage of adding value?
Adv: USP
Disadv: can be expensive
What is an advantage and disadvantage of using cheaper suppliers?
Adv: save costs
Disadv: lower quality materials
What is an advantage and disadvantage of having economies of scale?
Adv: cost efficiency per unit
Disadv: lack of flexibility
What is an advantage and disadvantage of using e-commerce?
Adv: 24/7 service
Disadv: very competitive
What is liquidity?
How easily a business can turn assets into cash
What is a statement of financial position?
Shows a business their assets and liabilities
What are non-current assets?
Resources a business cannot easily convert to cash (eg land, buildings, vehicles)
What are current assets?
A resource a company could use, turn into cash or sell (eg cash, inventory, supplies)
What are non-current liabilities?
Debts a business owes but aren’t due to pay for at least 12 months (eg loans, leases, debentures
What are current liabilities?
A company’s short-term financial obligations that are due within a year (eg short term debts, wages, sales taxes)
What is the current ratio formula?
Current ratio= current assets/current liabilities
What is a good current ratio?
2:1
What is the formula for acid test ratio?
Acid test ratio= (current assets-inventories)/current liabilities
What is a good acid test ratio?
2:1
How can a business improve liquidity?
-Pricing strategies
-Advertising
-Have a USP
-Improve quality
-Sell assets
What is an overdraft?
Financial arrangement that allows a business or individual to withdraw more money from their bank account than is available
What is an advantage of using an overdraft?
No fixed repayments
