Unit 7

Question 1

What are objectives?

Answer 1

Statements of specific outcomes that are to be achieved.

Question 2

What is the hierarchy of objectives?

Answer 2

Mission, corporate, functional, team, individual

Question 3

What are the 3 main purposes of corporate objectives?

Answer 3

Strategic focus, measure performance, decision making

Question 4

What are SMART objectives

Answer 4

Specific, measurable, achievable, relevant, time-bound

Question 5

What is short-termism?

Answer 5

Prioritisation of short term goals

Question 6

What is a strategy?

Answer 6

Long term plan based on the business vision

Question 7

What are tactics?

Answer 7

Short terms decisions responding to threats and opportunities.

Question 8

What is a mission statement?

Answer 8

The overriding purpose of the business

Question 9

What is SWOT analysis?

Answer 9

Strengths/Weaknesses (Internal) Opportunities/Threats (External)

Question 10

What do liquidity ratios assess?

Answer 10

If a business has sufficient cash/current assets to pay debts.

Question 11

What is the current ratio?

Answer 11

Current assets/Current liabilities

Question 12

What is the ideal current ratio?

Answer 12

1.5 - 2.5

Question 13

What 2 things should be considered when assessing liquidity?

Answer 13

Inventory held, competitor liquidity

Question 14

What is gearing?

Answer 14

% of a firm’s capital that is debt

Question 15

What is the gearing ratio?

Answer 15

(Non-current liabilities / Total Equity+Non-current liabilities)

Question 16

What is the capital structure?

Answer 16

The mix of debt and equity used to finance a business.

Question 17

What are 2 reasons for high debt?

Answer 17

Low-interest rates, strong cash flow

Question 18

What is an ideal gearing ratio?

Answer 18

25% - 50%

Question 19

What is inventory turnover?

Answer 19

How often each year a business sells and replaces its inventory

Question 20

What is the inventory turnover formula?

Answer 20

Cost of sales / Avg. Inventory Held

Question 21

What are payables?

Answer 21

Amount owed by a business.

Question 22

What is the payable days formula?

Answer 22

(Payables/Cost of sales) x 365

Question 23

What are receivables?

Answer 23

Amount owed to a business

Question 24

What is the receivable days formula?

Answer 24

(Receivables/Revenue) x 365

Question 25

What is return on capital employed?

Answer 25

Profit gained from capital employed

Question 26

What is the return on capital employed formula?

Answer 26

(Operating profit/Total equity + Non-current liabilities) x 100

Question 27

What is a core competency?

Answer 27

Something unique that a business has, or can do.

Question 28

What are the 3 conditions for a core competency?

Answer 28

Provides consumer benefit, hard to imitate, leveraged widely

Question 29

What do Prahalad and Hamel suggest?

Answer 29

Focus on core competencies and outsource non-core competencies

Question 30

What does Kaplan and Norton's Balanced Scorecard assess?

Answer 30

Achievement of financial and non-financial objectives

Question 31

What are the 3 goals of the scorecard?

Answer 31

Align activities of vision, improve communication, monitor performance

Question 32

What does it identify?

Answer 32

4 performance indicators

Question 33

What does Elkington's Triple Bottom Line Assess?

Answer 33

Performance-based on profit, people, planet.

Question 34

What does it measure?

Answer 34

Financial, social and environmental performance.

Question 35

What are 3 roles of business legislation?

Answer 35

Regulate rights, protect customers, prevent anti-comp practices.

Question 36

What are the aims of competition policy?

Answer 36

Promote comp, improve efficiency, encourage R+D

Question 37

What is price fixing?

Answer 37

Firms collude to set market prices.