defintion and formula Flashcards
(32 cards)
net assets
what it owns, without the owes
total assets - total liabilities
working capital
can a business pay its CURRENT working day to day expenses
current assets - current liabilities
high working capital is good
shareholder funds
money that shareholders invest into the business, also includes retained profit
capital employed
capital invested into a business for long term
shareholder funds + long term liabilities
scooby finds lotsa lunch
ROCE
return on the capital that is invested into the business
net profit / shareholder funds + long term liabilities
high is good
current ratio
does the business have the ability to pay its debts
current assets / current liabilities : 1
course alison can lie currently
between 1.5 and 3 is optimum
below 1 is bad and will stuggle to pay debts
too high is bad as that means capital is tied up in the business, eg in excess stocks
compare current ration to past years
compare to competitiors too
acid test ratio
current assets (not including stock) / current liabitlities :1
does not inculde stock as hard to quickly turn them into cash
less than 1 is bad
not useful for a business that has high stock turnover and sells stock quickly , like Tesco
gearing ratio
long term liabilities / capital emplyoed x 100
gearing up to laugh loads over scooby finding lotsa lunch
debt that is used to finance operations
low gearing is less than 25%, this is good as doesnt relied on borrowed money to pay debts BUT it might mean not taking adavnatge of the borrowed money
over 50% is highly geared
between 25 and 50 is optimum
depreciation
og cost - residual value/ life span
estimate of a fall in value of an asset over time
non financial measures of performance
- measure sales , use of boston matrix too
- customer attitudes
- employee atitudes
- market share
- quality
fixed asset
Assets expected to be retained in the business for more than a year/long
term (1), and are used to produce the output of the business. (1)
defintion of and why do depreciation?
-Depreciation is the decrease in value of fixed assets overtime.
so
- profits are not overestimated
- when to purcahse and replace the fixed asset
strategic descioons
- long term
- made by managers
- made infrrequently
- high resources
example- entering a new market
tactical descions
- medium term
- made by middle managers
- made ocasionally
- less resources than strategic
example - selecting a new supplier
operational decsions
- short term
- few resources
- juniour management
- made regularly
example - employee rotas
corperate strategy
- is concerned with the strategic
decisions a business makes that affect the entire business. - decided by senior managers and leaders
strategic direction
- how the corperate strategy will be achieved , outlines the aims it will take to reach the objective
divisional stratgey
specific goals in certain divisions/ units of a business
functional stargey
stragtegy a specific part of the production will take , for example hr
decisions
strategic, tactial , operational
STO
strategies
corperate- strategic - divisioinal - functional
What is Organic Growth and evaluate?
Organic growth is when a business expands internally, using its own resources rather than merging with or acquiring another company.
advanatges
new products
new markets
new machinery to increase production
disadvanategs
missed opportunity for merger/takeover and to get new ideas
slow growth and competitiors may grow quicker
external/aquisition growth
advantages
- quick access to market
- new ideas
- rapid growth
disadvanatges
- disagreements between two sides of buinesses
- risk of poor communication
- high costs
what to consider with special orders
- does it have the capacity and materials
- enough labour
- if sold at cheaper price would other customers be hurt
- positive contribution
