3.5

Question 1

profit and loss account - stakeholder interest

Answer 1

shareholders - profits, growth, dividends
employees - profits, wage increase, job stability
suppliers - success, trade credit

Question 2

statement of financial position

Answer 2

contains financial information required to draw conclusions on the liquidity of the business

Question 3

ratio analysis

Answer 3

extracting information from financial accounts to assess business performance and answer key questions
- evidence based decision making

Question 4

gearing ratio

Answer 4

• shows long term financial structure of the business
• shows how reliant a business is on borrowed money
• high geared = more than 50% of CE are long term loans
• low geared = less than 50 are long term loans

Question 5

return on capital employed

Answer 5

• compares profit with capital invested in the business
• measures how effectively a business uses the capital invested
• key performance indicator
• higher the better, indicates profitability

Question 6

limitations of ratio analysis

Answer 6

• making comparisons, only meaningful when there are significant similarities
• quality of accounts, need to be careful they havent been manipulated
• balance sheets, only provide snapshot
• qualititative info, ratios only numerical

Question 7

uses of ratio analysis

Answer 7

• venture capitalists use to support analysis when considering investing or loaning
• banks use to determine level of risk a business presents

Question 8

labour productivity

Answer 8

• measure of output per employee
• higher = better

Question 9

labour turnover

Answer 9

• proportion of employees leaving a business
• indicates poor HR issues if high
• can be affected by external factors
• can impact costs and productivity levels
• can introduce new ideas

Question 10

absenteeism

Answer 10

• proportion of staff absent from work in a time period
• higher costs (sick pay), temporary staff, reduced output
• demotivation

Question 11

strategies to improve employee performance

Answer 11

• financial rewards, increased comitment and higher productivity
• offer company shares, harder work and take less time off
• consultation, workers feel involved and less likely to take time off
• empowerment, feel valued and experience better training