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A2 Business > Definitons > Flashcards

Flashcards in Definitons Deck (68):
1

Ansoff's Matrix

An analytical tool that considers risk and the potential reward from strategic options.

2

Acid Test

Liquid Assets / Current Liabilities

3

Asset Turnover

Revenue / Net Assets

4

Average Rate of Return

1. Net cash flow / N.O years = Average Annual Profit
2. (Annual profit / initial investment) x 100

5

Current Ratio

Current Assets / Current Liabilities, expressed as x:1

6

Dividend per Share

Total Dividends / Number issued, expressed in pence per share

7

Dividend Yield

(Ordinary Share Dividend (in pence) / Current Market Price) x 100

8

Gearing

(Non Current Liabilities / (Total equity + non current liabilities)) x 100

9

Gross Profit

Sales Revenue - Cost of sales

10

Inventory Turnover

Cost of Sales / Average inventory held

11

Market Share

(Sales of a Firm / Total Market Sales) x 100

12

Moving Averages (3 point moving average)

Add 1,2,3 divide by 3
Add 2,3,4 divide by 3
Add 3,4,5 deivide by 3
Continue until the last number is included in a set of 3

13

Net Assets

Non-Current Assets + Current Assets - Current Liabilities - Non current Liabilities

14

Net Current Assets/Liabilities

Current Assets - Current Liabilities.

15

Net Present Value

-Net Cash flow Table
-Multiply each years net cash flow by the discount factor year 0 is multiplies by 1
-Add all the net values including the negative for year 0

16

Net Profit Margin

(Operating profit (net profit) / Sales Revenue) x 100

17

Payable Day's

Payable x 365 / Cost of Goods Sold

18

Payback

1. Net cash flow Table
2. Cumulative to identify when investment is covered
3. ÷ amount paid in last year by net cash flow same year
4. Times figure in step 3 by 12 to get monthly.

19

Receivables

Receivables x 365 / Revenue (in days)

20

ROCE

Operating Profit / Total equity + Non Current Liabilities.

21

Working Capital

Current Assets - Current Liabilities

22

Asset Turnover Def

Measures how the assets of the business are being utilise to generate revenue.

23

Acid Test Def

A measure of a firm's short term survival i.e its ability to meet short term debts and day to day expenses.

24

Average Rate of Return Def

An investment appraisal technique that calculates average profit as a percentage of the total cost of the initial investment.

25

Current Ratio Def

A measure of a firm's liquidity and short term survival i.e its ability to meet short term debts and day to day expenses

26

Dividend per Share Def

The return paid to the shareholders for each unit of their investment.

27

Dividend Yield Def

Measures the return on a shareholder's investment as a percentage of the current market price.

28

Float Time Def

The amount of extra time available to complete a non critical activity without delaying the project.

29

Gearing Def

A measure of the proportion of a business's capital that is funded through long term loans.

30

Gross Profit Def

Profit after cost of sales has been deducted and before expenses.

31

Inventory Turnover Def

Measures how efficiently a business replaces its stock in a year and hence whether stock is being used efficiently to generate sales.

32

Moving Averages Def

A method of market analysis which shows whether a trend is significant by smoothing out fluctuations.

33

Net Assets Def

The net worth of a business by the balancing of assets against liabilities.

34

Net Current Assets/Liabilities Def

The difference between Current Assets and Current Liabilities.

35

Net Present Value Def

An investment appraisal technique that calculates the total return on an investment taking into account the time value of money.

36

Net Profit Margin Def

A measure of Profitability that looks at operating profit as a percentage of sales revenue.

37

Payable Day's Def

Measures how long on average it takes a business to pay its suppliers it has purchased on credit.

38

Payback Def

An investment appraisal technique that measures how long it would take to pay back the cost of the initial investment.

39

Receivable Days Def

A measure of how long it takes a customer to pay for credit purchases.

40

ROCE Def

A measure of how efficiently a business is using its capital employed to generate profit.

41

Working Capital Def

A measure of a firms liquidity / ability to meet day to day expenses.

42

Centralisation

The responsibility of decision making it made by the few individuals at the top of the hierarchy.

43

Corporate Objective

Long term goals of a business which determines its guiding principles.

44

Cost Centre

A financial strategy where costs are attributed to different sections of the business.

45

CPA

A process which decides which tasks can be completed simultaneously and the order in which they need to be completed.

46

Decentralisation

The responsibility of decision making is delegated to middle managers in the hierarchy.

47

Delayering

A cost saving strategy that removes levels in the hierarchy.

48

Differentiation (Porter)

The ability to provide a product or service that stands out from the competition.

49

Diseconomies of Scale

Increasing the scale of production that leads to increasing unit costs.

50

Diversification

Where companies aim to provide :
NEW PRODUCT
NEW MARKET

51

Dividend

A share of profit paid to the shareholder as a reward for their investment.

52

Economies of Scale

Increasing the scale of production that leads to falling unit costs.

53

Functional Objectives

Medium to Long term goals of departments e.g Marketing/Finance which help achieve the corporate objective.

54

Hard HR

Employees are treated as a resource that need to be managed to control costs and output.

55

Investment Appraisal

Techniques that analyse the predicted financial outcomes of potential investments.

56

J-I-T

Ordering materials just before they are needed. Lower storage / wastage costs. Suppliers are nearby and are flexibility / reliability. Late delivery could be costly.

57

Kaizen

Continuous improvement - employees make suggestions for small-scale improvements. Provides motivation for employees given power / opportunity to increase efficiency

58

Low Cost Strategy (Porter)

When businesses provide goods/services at lower costs than their competitors.

59

Market Development (Porter)

Where the businesses puts existing products into new markets.

60

Product Development (Porter)

Where the businesses puts new products in existing markets.

61

Market Penetration (Porter)

Where the businesses puts existing products into existing markets.

62

Operational Objectives

Targets of which help the business to produce goods/services in the most effective way.

63

Porters Generic Strategy

Marketing Strategies that a business can adopt in order to achieve a comparative advantage.

64

Soft HR

Employees are regarded as an asset and can help the business achieve its long term targets.

65

TQM

An approach where each employee in the chain puts quality first and treats the next link like an external customer.

66

Lean Production

Working practices that focus on removing waste, whilst maintaining or improving quality.

67

Stakeholders

A group or individual that has a vested interest in a firm

68

Operation Management

The attempt to ensure that the right goods/services are produced at the right time at the right cost at the right quality.