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Business Studies EDEXCEL IGSCE > Business Finance :Unit 29 - 32 > Flashcards

Business Finance :Unit 29 - 32 Flashcards

1
Q
  1. What is a statement of comprehensive income?
A

financial document showing a firm’s income-expenditure in a particular time period.

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2
Q
  1. What is profit?
A
  • money left over after all costs have been subtracted from revenue.
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3
Q
  1. What is gross profit?
A
  • Gross profit sales revenue less cost of sales.
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4
Q
  1. What is operating profit?
A
  • gross profit less expenses.
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5
Q
  1. What is distributed profit?
A
  • profit that is returned to the owners of a business.
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6
Q
  1. What is retained profit?
A
  • profit held by a business rather than returning it to the owners and which may be used in the future.
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7
Q
  1. What is dividend?
A

share of the profit paid to shareholders in a company.

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8
Q
  1. What is the information contained in the statement of comprehensive income? in order?
A
  • revenue
  • the cost of sales
  • gross profit
  • administrative expenses
  • other operating expenses
  • selling expenses
  • operating profit
  • finance costs
  • Profit for the year
  • Profit for the year after tax.
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9
Q
  1. How can a statement of comprehensive income be used in decision-making?(4)
A
  • investment decisions
  • cost analysis
  • the basis for future forecasts
  • making comparisons
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10
Q
  1. What is normal profit?
A
  • minimum profit a business needs to make to retain the interest of the owners.
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11
Q
  1. What are adjustments?
A
  • includes adjustments for the profits made on the disposal of assets.
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12
Q
  1. What is statement of financial position?
A

summary at a point in time of business assets, liabilities and capital(often called balance sheet)

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13
Q

12.5 What is finance cost? finance income?

A

finance cost is interest paid on loans
finance income is interest received by businesses on deposit accounts.

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14
Q
  1. What is assets?
A
  • resources used or owned by a business.
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15
Q
  1. What is liabilities?
A
  • debts of the business, which provide a source of funds.
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16
Q
  1. What is capital?
A
  • finance provided by the owners of the business.
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17
Q
  1. What is non current assets?
A
  • asset that last for more than one year,
18
Q
  1. What are current assets?
A
  • assets that are likely to be changed into cash within a year.
19
Q
  1. What is liquidity?
A
  • ease or speed with which assets can be sold for cash.
20
Q
  1. What is trade receivables?
A
  • amounts of money that are owed to a company by its customers.
21
Q
  1. What is current liabilities?
A
  • debts that have to be repaid within a year.
22
Q
  1. What is net current assets/ working capital?
A
  • current assets minus current liabilities,(
23
Q
  1. What are current assets? non-current liabilities?
A
  • current assets that are likely to be changed into cash within a year.
  • non-current liabilities debts that are payable after 12 months.
24
Q
  1. What is net assets?
A
  • the value of all assets less the value of all liabilities.
25
Q
  1. What is goodwill?
A
  • value that a company has because it has a good relationship with its customers and suppliers.
26
Q
  1. What is ratio analysis? what are the 2 types?
A
  • mathematical approach to investigating accounts by comparing two related figures.
    • profitability ratio
    • Liquidity ratio
27
Q

What are the 4 types of profitability ratios?

A
  • Gross profit margin
  • Operating profit margin
  • Mark up
  • ROCE(return on capital employed)
28
Q
  1. What is the gross profit margin?
    how to calculate it.
A
  • gross profit expressed as a percentage of turnover.
    Gross profit = Gross Profit
    ———————– X 100
    Revenue
29
Q
  1. What is the operating profit margin?
    how to calculate it,
A
  • operating profit expressed as a percentage of turnover.
  • Operating profit
    ————————— X 100
    Revenue
30
Q
  1. What is markup?
    how to calculate it.
A
  • is used to calculate profit made per item.
  • Profit per item
    ————————– X 100
    Cost per item
31
Q
  1. What are the two types of liquidity ratios?
A
  • Current ratio
  • Acid test ratio
32
Q
  1. What is current ratio? How to calculate it?
A
  • assess the firm’s liquidity by dividing current liabilities into current assets.
    Current assets
    ————————-
    Current liabilities
33
Q
  1. What is the acid test ratio? How to calculate it?
A
  • assesses firm’s severe liquidity by dividing current assets from current liabilities by excluding stocks from current assets.
    (current assets - inventory)/ current liabilities
34
Q
  1. What is the return on capital employed?(ROCE). how to calculate it.
A
  • profit of a business as a percentage of the total amount of money used to generate it.

Operating profit
————————– X 100
Capital employed

35
Q

34, What are the benefits of using ratios in a business? (3)

A
  • helps to monitor progress over time.
  • can be used to make comparisons between businesses.
    -Proves effective in gauging the short-term financial standing of a firm
  • Enables to identify of future trends of business and subsequently helps formulate an effective budget.
36
Q
  1. Who are the 2 internal stakeholders of a business?
A
  • Employees and managers.
  • owners and shareholders.
37
Q
  1. Who are the 4 external stakeholders of a business?
A
  • competitors
  • customers
  • government
  • suppliers
38
Q
  1. What are the 4 ways financial documents help businesses to make better-informed decisions?
A
  • Funding decisions - help to predict when money is needed.
  • Reducing costs - can asses whether costs are under control.
  • increasing profitability - could try to increase profit margins by increasing prices or reducing the cost of production.
  • Investment decisions - assess the the company’s financial state,
39
Q
  1. What are the other 6 usages of financial documents?
A
  • government
  • competitors
  • the media
  • tax authorities
  • auditors
  • registrar of companies
40
Q
  1. What is auditing?
A
  • accounting procedure that checks thoroughly the accuracy of a company’s accounts.

Business Studies EDEXCEL IGSCE (13 decks)

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