Some Key Content Flashcards

Question

Fill in the blank: Break even output is calculated as _______.

Answer 1

Fixed costs / Contribution per unit.

Answer 2

A document that records all a firm's revenues and costs within a past trading period, usually produced once a year ## Footnote This statement helps assess financial performance over a specific period.

Answer 3

Areas of high spending to then make adjustments e.g. cost of sales or overheads ## Footnote Identifying high spending areas allows for potential cost-cutting measures.

Answer 4

Margins and markup ## Footnote These ratios help in understanding profitability relative to sales.

Answer 5

By identifying positive trends ## Footnote Positive trends can enhance credibility and attract investors or lenders.

Answer 6

It takes time to calculate/analyze ## Footnote The complexity and time required can hinder timely decision-making.

Answer 7

A comparison to make it valuable e.g. previous years / competitors ## Footnote Contextual comparisons provide insight into performance trends.

Answer 8

Inflation ## Footnote Inflation affects costs and revenue, influencing overall profitability.

Answer 9

Increase sales revenue / Lower cost of sales / Lower overheads ## Footnote These strategies focus on enhancing income and reducing expenses.

Answer 10

Revenue - Cost of sales ## Footnote Gross profit reflects the profitability before overheads and other expenses.

Answer 11

Gross profit - Overheads ## Footnote Operating profit indicates profitability from core business operations.

Answer 12

Operating profit +/ - Interest/Tax/One off costs ## Footnote Net profit provides a complete picture of a firm's profitability after all expenses.

Answer 13

A document that records all a firm's revenues and costs within a past trading period, usually produced once a year ## Footnote This statement helps assess financial performance over a specific period.

Answer 14

Areas of high spending to then make adjustments e.g. cost of sales or overheads ## Footnote Identifying high spending areas allows for potential cost-cutting measures.

Answer 15

Margins and markup ## Footnote These ratios help in understanding profitability relative to sales.

Answer 16

By identifying positive trends ## Footnote Positive trends can enhance credibility and attract investors or lenders.

Answer 17

It takes time to calculate/analyze ## Footnote The complexity and time required can hinder timely decision-making.

Answer 18

A comparison to make it valuable e.g. previous years / competitors ## Footnote Contextual comparisons provide insight into performance trends.

Answer 19

Inflation ## Footnote Inflation affects costs and revenue, influencing overall profitability.

Answer 20

Increase sales revenue / Lower cost of sales / Lower overheads ## Footnote These strategies focus on enhancing income and reducing expenses.

Answer 21

Revenue - Cost of sales ## Footnote Gross profit reflects the profitability before overheads and other expenses.

Answer 22

Gross profit - Overheads ## Footnote Operating profit indicates profitability from core business operations.

Answer 23

Operating profit +/ - Interest/Tax/One off costs ## Footnote Net profit provides a complete picture of a firm's profitability after all expenses.

Answer 24

Records all a firm's revenues and costs within a past trading period

Answer 25

Once a year

Answer 26

The actual worth of the business

Answer 27

Useful when obtaining finance and for other stakeholders

Answer 28

Current/liquid capital

Answer 29

If the business is vulnerable to interest rate changes

Answer 30

Takes time to calculate/analyse

Answer 31

Needs a comparison to make it valuable e.g. previous years / competitors

Answer 32

Only shows quantitative information

Answer 33

Total assets - Total liabilities

Answer 34

Current assets - Current liabilities

Answer 35

Non-current liabilities + Total equity

Answer 36

A technique for analysing financial performance by comparing two pieces of information ## Footnote Ratio analysis helps stakeholders assess the performance and success of a business.

Answer 37

Measures the success of the business ## Footnote Profitability ratios are key indicators of financial health.

Answer 38

Gross profit margin = Gross profit / Revenue × 100 ## Footnote This ratio indicates how much profit a company makes after deducting the cost of goods sold.

Answer 39

Operating profit margin = Operating profit / Revenue × 100 ## Footnote This ratio reflects the efficiency of a company's core business operations.

Answer 40

Net profit margin = Net profit / Revenue × 100 ## Footnote This ratio shows the percentage of revenue that remains as profit after all expenses are paid.

Answer 41

ROCE = Operating profit / Capital employed × 100 ## Footnote ROCE measures a company's profitability and the efficiency with which its capital is employed.

Answer 42

Assesses the ability to pay immediate debts ## Footnote Liquidity ratios are crucial for understanding short-term financial stability.

Answer 43

Current ratio = Current assets / Current liabilities ## Footnote This ratio indicates the company's ability to cover its short-term obligations.

Answer 44

Acid Test ratio = (Current assets - Inventory) / Current liabilities ## Footnote This ratio provides a more stringent measure of liquidity by excluding inventory.

Answer 45

* Stakeholders can judge performance/success of the business * Helps with planning and monitoring * Helps to obtain finance by including in a business plan * Helps to keep financial control ## Footnote These benefits make ratio analysis a valuable tool for businesses.

Answer 46

* Highlights problems but doesn't explain them * Could be outdated * Needs a comparison to make it valuable (e.g., previous years, competitors) * Only shows quantitative information * Doesn't account for market or economic conditions or other factors * Can be distorted, meaning figures could be misleading ## Footnote Understanding these drawbacks is crucial for interpreting ratio analysis accurately.

Answer 47

A technique for analysing financial performance by comparing two pieces of information.

Answer 48

The success of the business.

Answer 49

Gross profit / Revenue x 100

Answer 50

Operating profit / Revenue x 100

Answer 51

Net profit / Revenue x 100

Answer 52

Operating profit / Capital employed x 100

Answer 53

The ability to pay immediate debts.

Answer 54

Current assets / Current liabilities

Answer 55

Current assets - Inventory / Current liabilities

Answer 56

* Stakeholders can judge performance/success of the business * Helps with planning and monitoring * Helps to obtain finance by including in a business plan * Helps to keep financial control

Answer 57

* Highlights problems but doesn't explain them * Could be outdated * Needs a comparison to make it valuable (e.g., previous years / competitors) * Only shows quantitative information - doesn't account for market or economic conditions or other factors * Can be distorted, meaning figures could be misleading

Answer 58

The long term financial position of the business and where their funding comes from ## Footnote Gearing indicates the proportion of a company's funding that comes from debt versus equity.

Answer 59

Non current liabilities / Capital employed x 100 ## Footnote Capital employed is calculated as Non current liabilities ÷ Total equity.

Answer 60

Long term debts, e.g., bank loans ## Footnote These liabilities are obligations that are not due within the next year.

Answer 61

Money from other sources, e.g., shareholder investment ## Footnote Total equity represents the ownership interest in the company.

Answer 62

It is 'High geared', meaning most money comes from loans, which is very risky ## Footnote High gearing indicates vulnerability to interest rate changes.

Answer 63

Less than 25% gearing, meaning most money comes from the owners ## Footnote Low gearing suggests a lower risk profile.

Answer 64

Owner risk aversion, interest rates, state of the economy ## Footnote These factors can determine the appropriateness of a company's gearing strategy.

Answer 65

Profit with the amount of money invested in the business ## Footnote ROCE is an indicator of how efficiently a company uses its capital to generate profits.

Answer 66

Operating profit / Capital employed × 100 ## Footnote Capital employed is the sum of Non current liabilities and Total equity.

Answer 67

Higher is generally better ## Footnote However, ROCE should be analyzed alongside other information, such as competitor performance.

Answer 68

Other information, e.g., rivals' performance ## Footnote ROCE alone may not provide a complete picture of financial performance.

Answer 69

The long term financial position of the business and where their funding comes from ## Footnote Gearing indicates the proportion of a company's funding that comes from debt versus equity.

Answer 70

Non current liabilities / Capital employed x 100 ## Footnote Capital employed is calculated as Non current liabilities ÷ Total equity.

Answer 71

Long term debts, e.g., bank loans ## Footnote These liabilities are obligations that are not due within the next year.

Answer 72

Money from other sources, e.g., shareholder investment ## Footnote Total equity represents the ownership interest in the company.

Answer 73

It is 'High geared', meaning most money comes from loans, which is very risky ## Footnote High gearing indicates vulnerability to interest rate changes.

Answer 74

Less than 25% gearing, meaning most money comes from the owners ## Footnote Low gearing suggests a lower risk profile.

Answer 75

Owner risk aversion, interest rates, state of the economy ## Footnote These factors can determine the appropriateness of a company's gearing strategy.

Answer 76

Profit with the amount of money invested in the business ## Footnote ROCE is an indicator of how efficiently a company uses its capital to generate profits.

Answer 77

Operating profit / Capital employed × 100 ## Footnote Capital employed is the sum of Non current liabilities and Total equity.

Answer 78

Higher is generally better ## Footnote However, ROCE should be analyzed alongside other information, such as competitor performance.

Answer 79

Other information, e.g., rivals' performance ## Footnote ROCE alone may not provide a complete picture of financial performance.

Answer 80

It shows whether the business has enough resources to meet any short-term debts ## Footnote Current Ratio = Current assets / Current liabilities

Answer 81

Things the business owns for less than a year, e.g. stock, cash ## Footnote Current assets include assets that are expected to be converted to cash or used within one year.

Answer 82

A debt that has to be paid within a year, e.g. overdraft, trade payables ## Footnote Current liabilities are obligations that a company needs to settle within one year.

Answer 83

Around 1.5:1 ## Footnote A ratio lower than this means not enough to meet debts, while higher indicates underutilization of assets.

Answer 84

A more severe test of liquidity that excludes stock from the equation ## Footnote Acid Test Ratio = (Current assets - Stock) / Current liabilities

Answer 85

Because stock is not guaranteed to be sold ## Footnote This ratio focuses on more liquid assets to determine if liabilities can be covered.

Answer 86

Around 1:1 ## Footnote A ratio less than 1:1 means there are not enough current assets to cover current liabilities.

Answer 87

Materials and finished goods, sometimes called stock ## Footnote Inventory refers to the goods and materials a business holds for the purpose of resale.

Answer 88

Helps with cash flow ## Footnote Benefris aids in forecasting cash flow, which is essential for effective financial management.

Answer 89

By knowing start dates ## Footnote Having clear start dates allows for better planning and resource allocation.

Answer 90

Systematic approach ## Footnote This approach encourages managers to consider all activities involved in a project.

Answer 91

Able to share info with stakeholders ## Footnote This includes updates on new launches and project progress.

Answer 92

The critical path ## Footnote Identifying the critical path allows for close supervision of key project activities.

Answer 93

A diagram showing the minimum time needed to complete a project ## Footnote CPA is a vital project management tool for scheduling and resource allocation.

Answer 94

Could be inaccurate ## Footnote Relying on past data may not accurately reflect current project conditions.

Answer 95

Could be too complex to put into CPA ## Footnote Complexity can make it difficult to accurately represent all project elements in CPA.

Answer 96

Could compromise quality ## Footnote Pressuring teams to meet deadlines may lead to rushed work and lower quality outcomes.

Answer 97

External factors could disrupt ## Footnote These factors can include market changes, resource availability, and regulatory issues.

Answer 98

Can take a lot of planning and time ## Footnote Proper planning is essential to ensure all components are accurately represented.

Answer 99

Add together working left to right ## Footnote This calculation helps determine when a task can earliest begin.

Answer 100

Minus off working right to left ## Footnote This calculation helps determine the latest a task can be completed.

Answer 101

Latest Finish Time - Duration - Earliest Start Time ## Footnote Total float time indicates how much flexibility there is in scheduling a task.

Answer 102

Helps with cash flow

Answer 103

Know start dates

Answer 104

Systematic approach, forcing managers to think of all activities

Answer 105

Stakeholders e.g. new launches

Answer 106

The critical path which can be closely supervised

Answer 107

The minimum time needed to complete a project

Answer 108

Could be inaccurate

Answer 109

Could be too complex to put into CPA

Answer 110

Could compromise quality

Answer 111

External factors could disrupt

Answer 112

Can take a lot of planning and time

Answer 113

Latest Finish Time - Duration - Earliest Start Time

Answer 114

Places numerical values on decisions for objectivity

Answer 115

Familiar situations where estimates are more accurate

Answer 116

Decision trees

Answer 117

Based on probabilities

Answer 118

Can be subjective based on the person making the tree

Answer 119

Limited in use as success vs failure rather than short term/long term

Answer 120

Doesn't look at external factors

Answer 121

Only based on quantitative data

Answer 122

[Financial outcome]

Answer 123

Add up the Expected Values for each option

Answer 124

Net gain = Total Expected Value - Cost of option

Answer 125

81 million

Answer 126

61.5 million

Answer 127

Expected value = 0.6 x £22 million

Answer 128

Expected value = 0.4 x £30 million

Answer 129

Helps spot underlying patterns in data ## Footnote This benefit allows businesses to identify trends that may not be immediately apparent.

Answer 130

Doesn't look at external factors ## Footnote External factors can significantly influence sales outcomes.

Answer 131

Predict future sales based on historical data ## Footnote This method relies on past sales data to forecast future performance.

Answer 132

Dynamic market ## Footnote Changes in consumer behavior or market conditions can render historical data less relevant.

Answer 133

False ## Footnote Historical data may not indicate future trends due to changing circumstances.

Answer 134

A method to smooth out fluctuations in data ## Footnote It is commonly used in sales forecasting to identify trends over time.

Answer 135

Find the average of the 3 bits of data ## Footnote This technique helps to reduce the noise from random fluctuations.

Answer 136

Add together four pieces of data, then divide by 8 ## Footnote This method helps in analyzing quarterly sales data over time.

Answer 137

It can be time-consuming and complex ## Footnote The intricacies of data collection and analysis can require significant resources.

Answer 138

Looking at general trends ## Footnote This approach provides insights into overall sales patterns rather than specific predictions.

Answer 139

Checking and reviewing work that has already been done ## Footnote Quality control ensures that no defective item leaves the factory.

Answer 140

Helps guarantee that no defective item leaves the factory ## Footnote This is crucial for maintaining standards in production.

Answer 141

Can mean poor quality is built into the product ## Footnote Quality control relies on inspecting finished products rather than preventing defects.

Answer 142

Organising every process to get the product right first time ## Footnote Quality assurance focuses on preventing defects rather than identifying them after production.

Answer 143

Ensures products are not faulty as checked at each stage ## Footnote This proactive approach helps in maintaining high quality throughout the production process.

Answer 144

Time consuming to conduct ## Footnote Quality assurance requires thorough checks at each stage, which can slow down production.

Answer 145

[Staff training]

Answer 146

Stops complaints as better customer satisfaction ## Footnote Higher quality products lead to improved customer experiences.

Answer 147

Need motivated staff ## Footnote Employee engagement is crucial for the success of quality assurance processes.

Answer 148

Requires little staff training so good for low skilled/temp workers ## Footnote This allows for easier implementation in production environments.

Answer 149

True ## Footnote This reliance on complete inspection highlights a significant limitation of quality control.

Answer 150

A strategic planning method designed to explore uncertainties, protect the business from worst consequences, and prepare to exploit opportunities ## Footnote Scenario planning is essential for businesses to anticipate future challenges and opportunities.

Answer 151

Identifies risks and opportunities and prepares for them ## Footnote It teaches managers how events can develop and affect the business.

Answer 152

How events can develop and affect the business ## Footnote It helps in understanding the causes and effects of change in business and how to manage it.

Answer 153

A process used to look at possible scenarios for the future ## Footnote It helps comply with health and safety and ensures that workers and customers are kept safe.

Answer 154

Hazards, who might be harmed, and estimated probability of events happening ## Footnote It often marks the first stage in scenario planning where possible issues are spotted.

Answer 155

Natural disasters, such as flooding in the UK ## Footnote Other examples include IT system failures and loss of key staff.

Answer 156

Identify possible trends and issues ## Footnote PESTLE analysis could help in this step.

Answer 157

Build possible scenarios ## Footnote This involves imagining a range of relevant issues, such as a supermarket IT failure.

Answer 158

Plan response ## Footnote This involves thinking of the impact and developing how to deal with the identified scenarios.

Answer 159

Identify the most likely scenarios ## Footnote Prioritize the most likely scenarios to consider in detail.

Answer 160

Capitalize on scenarios ## Footnote This involves considering any positive scenarios that may occur, such as competitors going bankrupt.

Answer 161

Plans that identify, assess, and prioritize risks and plan responses to deal with the impact of these risks. ## Footnote Risk mitigation planning is essential for effective risk management in organizations.

Answer 162

* Set up in a location that isn't vulnerable to flooding, earthquakes, drought, etc. * Ensure all buildings meet health and safety protocol when being built. * Take out relevant insurances (e.g., fire/theft). * Ensure data is stored securely on computers and backed up regularly. * Organize generators for backup power to ensure machinery can continue to be used. * Ensure that valuable assets (e.g., machinery, equipment) are protected as much as possible. * Have access to emergency funding. * Ensure communication channels are set up to deal with emergencies. * Produce a business continuity plan to deal with crises. ## Footnote These strategies help minimize the impact of potential risks on a business.

Answer 163

When an incident occurs, businesses will want to minimize disruption, so they create business continuity plans that show how a business will operate after an incident and how to return to normal as quickly as possible. ## Footnote Business continuity is critical for maintaining operations during and after emergencies.

Answer 164

* Carry out an impact analysis. * Formulate recovery strategies. * Plan development. * Testing and training. ## Footnote These stages help ensure that a business can effectively respond to and recover from incidents.

Answer 165

Work out what is essential and what isn't by looking at consequences (e.g., financial). ## Footnote Impact analysis helps prioritize recovery efforts based on the significance of various business functions.

Answer 166

Determine what resources are needed (e.g., IT, power) and how to work around issues (e.g., move production elsewhere, restrict orders, keep more stock). ## Footnote Recovery strategies are crucial for maintaining operations when disruptions occur.

Answer 167

Ensure strategies are carried out in an organized way and liaise with key staff. ## Footnote Effective plan development ensures that all stakeholders are aware of their roles during a crisis.

Answer 168

Ensure that staff know what is expected and practice and update the plan accordingly. ## Footnote Regular testing and training help reinforce the business continuity plan and prepare staff for actual emergencies.

Answer 169

Looking at current employees and working out who has the potential to occupy key roles in the future. ## Footnote Succession planning is essential for maintaining leadership continuity within an organization.

Answer 170

Job description and person specification. ## Footnote Identifying the right characteristics helps ensure that successors are well-suited for key roles.

Answer 171

Decide whether to look internally or externally ('headhunt'). ## Footnote The choice of sourcing candidates can impact the organization's culture and continuity.

Answer 172

Scrutinized by key staff and making a decision. ## Footnote A thorough selection process helps ensure that the best candidates are chosen for key roles.

Answer 173

Check on the motivation of internal candidates and make everyone aware. ## Footnote Effective communication helps maintain morale and clarity within the organization.

Answer 174

Could involve shadowing or going on specialist courses. ## Footnote Training and preparation are crucial for ensuring that successors are ready for their new roles.

Answer 175

A central source of power makes all decisions and few rules exist. ## Footnote Often found in young, small to medium-sized businesses.

Answer 176

They are over-ridden by those in power to suit themselves. ## Footnote This creates a competitive political atmosphere among individuals.

Answer 177

Decisions are made through well-established rules and procedures. ## Footnote Power is associated with specific roles like director or supervisor.

Answer 178

It has a tall hierarchy with a long chain of command, i.e., bureaucratic. ## Footnote An example includes the Civil Service.

Answer 179

Power is in the hands of those who can accomplish tasks, emphasizing skills. ## Footnote Team working is common, with teams created and dissolved as work changes.

Answer 180

Adaptability and dynamism are important. ## Footnote Teams often form and disband based on project needs.

Answer 181

It consists of individuals with expertise who do not work closely together. ## Footnote The organization supports the individuals rather than the other way around.

Answer 182

* Accountants * Lawyers * Doctors * Architects ## Footnote These firms typically have individuals with similar backgrounds and skill sets.

Answer 183

There are 4 main types of organizational culture. ## Footnote These include Power Culture, Role Culture, Task Culture, and Person Culture.

Answer 184

Motivation is likely to be greater ## Footnote A respectful culture fosters a positive environment that encourages individuals to perform at their best.

Answer 185

It can be motivating for some and demotivating for others ## Footnote Competitive environments can drive high performers but may alienate those who prefer collaboration.

Answer 186

Staff will be motivated as they feel part of the success ## Footnote Success creates a sense of belonging and achievement among employees.

Answer 187

Flat hierarchy where key workers share senior management roles ## Footnote Common in professions like medical practices where collaboration is vital.

Answer 188

Larger businesses have more layers in hierarchy ## Footnote Multinational businesses often require regional and divisional managers, resulting in a tall hierarchy.

Answer 189

It will lead to change ## Footnote New leadership often brings new strategies and cultural shifts.

Answer 190

The greater the change needed, the more likely the existing organisational culture will need to be confronted ## Footnote Significant changes often challenge the status quo and require addressing cultural norms.

Answer 191

Each business is likely to have a different organisational culture ## Footnote Merging requires creating a unified culture, which can be challenging.

Answer 192

Redundancy of senior management of the company being taken over ## Footnote This method can swiftly alter the leadership style and direction.

Answer 193

Corporate culture can be a brand asset ## Footnote A strong, positive culture can attract talent and enhance customer loyalty.

Answer 194

Four main types ## Footnote Understanding these types helps in assessing organisational dynamics.

Answer 195

Reduction in profit ## Footnote Poor efficiency can cause a lack of working capital.

Answer 196

Lack of working capital ## Footnote This can prevent the business from paying current liabilities.

Answer 197

Causing the business to fail ## Footnote This failure is often linked to financial inefficiencies.

Answer 198

Shortage of working capital ## Footnote This shortage can contribute to business failure.

Answer 199

* Poor efficiency * Failure to innovate ## Footnote Both factors can severely impact a business's financial health.

Answer 200

Lack of cash, inability to pay current liabilities ## Footnote Effective management of working capital is crucial for maintaining liquidity.

Answer 201

Through cash flow forecasts ## Footnote Cash flow forecasts help identify potential cash flow issues in advance.

Answer 202

Entering a market with a lack of demand for goods/services ## Footnote This can severely impact a business's revenue and profitability.

Answer 203

Lack of revenue, business not profitable, potential failure ## Footnote Understanding market demand is essential for business success.

Answer 204

A lack of cash, leading to an inability to pay current liabilities ## Footnote Poor management of working capital can severely impact a business's liquidity.

Answer 205

Through cash flow forecasts ## Footnote Cash flow forecasts help identify potential months with cash shortages.

Answer 206

Entering a market with a lack of demand for goods/services ## Footnote This can lead to reduced revenue and profitability.

Answer 207

The business may fail ## Footnote Profitability is crucial for the sustainability of a business.

Answer 208

demand ## Footnote Effective marketing is essential to generate demand for a product or service.

Answer 209

True ## Footnote Cash flow issues directly impact a company's financial obligations.

Answer 210

A significant reduction in demand ## Footnote This can result in some businesses struggling to remain profitable and potentially closing.

Answer 211

It increases the price of domestic exports ## Footnote This can reduce the competitiveness of domestic goods/services sold abroad.

Answer 212

A decrease in demand for goods/services from exporting businesses ## Footnote This can lead to a reduction in revenue and possible business failure.

Answer 213

Economic recession ## Footnote A prolonged recession can lead to decreased consumer demand.

Answer 214

A significant reduction in demand ## Footnote This can result in some businesses struggling to remain profitable and potentially closing.

Answer 215

It increases the price of domestic exports ## Footnote This can reduce the competitiveness of domestic goods/services sold abroad.

Answer 216

A decrease in demand for goods/services from exporting businesses ## Footnote This can lead to a reduction in revenue and possible business failure.

Answer 217

Economic recession ## Footnote A prolonged recession can lead to decreased consumer demand.

Some Key Content Flashcards

(245 cards)