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a level business > UNIT 7 > Flashcards

UNIT 7 Flashcards

1
Q

whats a mission statement

A

a business’ statement of its purpose, and why it exists

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2
Q

what are 3 questions a mission statement should answer

A
  1. what does your company do?
  2. why does your company do this?
  3. how does your business do this
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3
Q

name 5 places mission statements come from

A
  • culture of a business
  • founders values
  • societys views
  • industry it operates in
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4
Q

whats a corporate objective

A

shareholders values, growth etc
quantify the mission to make it measurable
CEO’S SET THIS

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5
Q

5 internal influences on a corporate objective

A

poor performance
new leadership
business ownership
business growth
short-terism

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6
Q

name 5 external influences on corporate objective

A

economy performance
competitors actions
global price
social desires
technological prices

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7
Q

whats the difference between a strategy and a tactic

A

a strategy is the end goal, however a tactic is the choices a business makes to help achieve their objectives

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8
Q

whats a SWOT analysis

A

a tool that identifies the strengths, weakness’, threats and opportunities of a business

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9
Q

name 3 advantages of a SWOT analysis

A

-allows a business to focus on strategy
- improves weakness to inc sales
- can combine SWOT and PESTLE

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10
Q

whats a ratio analysis

A

tool to assess performance, profitability and liquidity if a business

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11
Q

whats liquidity

A

converting assets into cash

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12
Q

what does return on capital employed show

A

how much profit has been made compared to how much money put into the business

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13
Q

how to calculate return on capital employed

A

profit/ capital employed X100

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14
Q

whats an income statement

A

profit and losses in last 12 months

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15
Q

whats a balance sheet

A

shows what the business has spent money on and where money invested has come from

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16
Q

what are current assets

A

assets owned for less than a year

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17
Q

what are non current liabilities

A

owned for over 1 year and depreciates in value

18
Q

what are current liabilities

A

debts repaid within 1 year

19
Q

what are non current liabilities

A

long term debt, taking more than 1 year to repay

20
Q

how to calcaulte equity

A

assets- liabilities

21
Q

how to calculate current ratio

A

current assets/ current liabilities

22
Q

whats the ideal current ratio

A

2:1

23
Q

what does current ratio and acid test show

A

can a business pay short term debts back when due

24
Q

how to calculate acid test

A

current assets - inventory
current liabilities

25
Q

ideal acid test

A

1:1

26
Q

5 ways to improve liquidity

A
  • use overdraft
  • delay payments
  • longer credit times
  • encourage cash sales
  • destocking
27
Q

whats gearing

A

shows how much of a business is financed by debt

28
Q

how to calculate gearing

A

non current liabilities
total equity + NCL X100

29
Q

whats considered high gearing

A

over 50%

30
Q

3 characteristics of a low geared business

A

shareholders money
no big risks
can take a fall in profits better

31
Q

3 characteristics of a high geared business

A

loans
need to be paid back regardless of performance
they take risks as they could loose assets secured

32
Q

4 advantages of ratios

A

-allows comparison from previous years
-locate weakness and spot trends
-assess performance
-decision for stakeholders

33
Q

6 disadvantages of ratios

A
  • no qualitative data
  • historical data
  • no full picture
  • external factors
  • has to be compared
  • no account of economic climate
34
Q

define trade payable days

A

calculates time taken for a business to pay back creditors

35
Q

how to calculate trade payable days

A

payables/ cost of sales X365

36
Q

advantages ( 1) and disadvantages (3) of delaying payment

A

working capital ✅
X loss of discounts
X supplier goodwill loss
X withdrawl

37
Q

define trade receivable days

A

calculates time taken for a business to collect debts that is OWED

38
Q

trade receivable days aim

A

to convert debt into cash asap

39
Q

ideal trade receivables days

A

30-45 days

40
Q

why might a business increase credit terms

A

to attract and increase sales/ customers.
we can compare to past months or years to look for trends and progress

41
Q

define inventory turnover

A

measures a company’s success at converting inventory into revenue

42
Q

calculate inventory turnover

A

cost of goods sold/
average inventory
ALL DIVIDED BY 365

a level business (7 decks)

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