All calculations Flashcards

Question

What are + and - of Payback period?

Answer 1

+Simple and easy to calculate & easy to understand the results +Focuses on cash flows ( good for businesses where cash is scarce) +Easy to compare with other projects - Doesn't look at the overall project return - May encourage short term thinking - Ignores qualitative aspects - Doesn't actually create a decision for the business

Answer 2

A methods that measures the net return each year as a percentage of the capital cost of the investment ARR(%) = ( Net Return (Profit) pa / Capital Outlay (Cost) ) * 100

Answer 3

A series of techniques designed to assist businesses in judging the desirability of investing in particular projects - Payback period - Average Rate of Return - Discounted Cash Flow

Answer 4

+Shows clearly the profitability of an investment +Easy to compare +Easier to identify opportunity cost of investments -Ignores the effects of time on the value of money

Answer 5

+Considers the value of money over time + - Complex to calculate - If the rate of discount is high, it may seem that no project will ever be profitable

Answer 6

Understanding what profit/ cash inflows in the the future is worth at its present value.

Answer 7

Efficiency - it shows the tasks that can take place concurrently and highlights those which are crucial to prevent an overall delay Ensures deadlines are met to save costs and protect reputation. Penalty clauses are often written into contracts for projects. Bonuses can be awarded for meeting/beating deadlines. It sets targets and minimises time spent on each task. Experience will help a business calculate the time needed for each task. Working capital control - identifying when resources will be needed so capital isn’t tied up in raw materials and equipment eg hiring a digger or buying bricks. JIT.

Answer 8

- Difficult to estimate the completion of an activity | - Can be difficult when it comes to bigger projects

Answer 9

Output per period / Number of employers per period

Answer 10

+Drives down costs +increases competitiveness - business can charge lower prices +Makes better use of capital resource - +Makes optimum use of Human Resources - -May Compromise on quality

Answer 11

( Staff leaving per year / Average number of staff ) * 100

Answer 12

Low pay Lack of training and development opportunities Poor working conditions Poor recruitment and selection processes Economic boom

Answer 13

( Staff not leaving per year / Average no of staff ) * 100

Answer 14

Financial Rewards - more money can lead to employees working harder

Answer 15

Lower requirement and selection cost Better continuity Stable workforce Better experience and skill sets of workers

Answer 16

( Days absent per year / Total number of working days ) * 100

Answer 17

Consultation strategies - employees are more likely to motivated if they are involved in the decision making process

Answer 18

Business has to pay sick pay Temporary staff have to be paid for Existing staff have to be paid overtime Output suffers - temp staff are less productive Absence can delay / prevent big projects Production delays / quality decrease could prevent customers Demotivating for remaining staff Cultural shift - is it ok to call in sick

Answer 19

It tell you what proportion the business value is financed by long term debt

Answer 20

(non-current liabilities/ Capital Employed) x 100 Gearing > 50% -vulnerable to increases to interest rates Gearing < 50% - May be able to borrow more - Business isn’t taking enough risk

Answer 21

It tells us the Return on capital employed. Relates profit to the size of the business

Answer 22

(Operating Profit/ Capital employed) x 100 - The higher the percentage the better - Identify trends - Low quality profit (eg selling random assets or benefiting from a trend) might boost ROCE and be miss leading - Needs to compared to interest rates (would saving in the back be more profitable than investing in a business)

Answer 23

The basis for comparison - less reliable over times when comparing The quality of financial accounts - eg when inflation is high are asset values inflated accordingly Limitations of the balance sheet Qualitative information is ignored - eg change in leader ship Other differences - eg different accounting methods or accounting methods can be misleading for investors Window dressing - Making the ratio analysis look better than it is

Answer 24

Fixed Assets + Net Current assets Or TA - TL

Answer 25

Exports - Imports

Answer 26

Binging good and services from another country to the home county Eg Foods: apples

Answer 27

Selling goods and services from the home country to other countries Eg tourism: London

Answer 28

+fulfils the demand of goods and services that are lacking or not available in the home country + -Excessive import can have a negative impact on the home country -

Answer 29

+creates more foreign income from the selling of home country products and increases the global presence of home country products and services +benefits the home country since it increases the foreign income to the home country - -

Answer 30

- Countries have specific natural recourses and lack others - Countries need foreign currency in order to grow - Countries access wealth from customers in other countries - Firms can get cheaper costs by importing raw materials - Increases sales potential (first mover advantage)