Unit 7 Flashcards
(36 cards)
Distinguish strategy and tactics
Strategic decisions - long term choices that significantly shape the overall direction of a business - require research to be effective
Tactical decisions - short-medium term decisions that support strategic decisions e.g. inventory management
What is SWOT analysis?
A method of strategic analysis where internal and external environments are considered through
S. Strengths
W. Weaknesses
O. Opportunities
T. Threats
in order to provide data and planning which can help improve strategy going forward
What is a balance sheet?
A financial statement that shows a businesses assets, liabilities and equity
What is the formula for assets?
Liabilities + Equity
What is the formula for net assets?
Total assets - Total liabilities
What are current and non-current assets?
Current - Assets expected to be turned into cash or used up within a year
Non-current - Assets business plan to keep to make money off of for a longer period
What are current liabilities?
Debt owed in the next year
What is equity?
The owners claim on the business assets after all liabilities are paid
What is working capital?
Money available for expenditure
Current assets - Current liabilities
What is the formula for gross profit?
Revenue - cost of sales
What is the formula for operating profit?
Gross profit - operating costs
What is the formula for net profit?
Operating profit - finance costs
What is gearing?
Aims to determine the optimal capital structure for a business with regards to non current liabilities and equity as a % of capital employed
( Non-current liabilities / capital employed ) x 100
Low gearing - 25% - limited growth potential
High gearing - >50% - risky
What is the formula for capital employed?
non-current liabilities + equity
What is the formula for return on capital employed?
( operating profit / capital employed ) x 100
What is the formula for current ratio?
Current assets / Current liabilities
a good ratio for a business is in the 1.5:1 - 1.2:1 range
What is the formula for payables days?
payables x 365 / cost of sales
What is the formula for receivables days?
Receivables x 365 / revenue
What is the ratio for inventory turnover?
Cost of sales / average inventory held
What are core competencies?
Unique strengths or capabilities that give a business a competitive advantage
What is Elkington’s triple bottom line?
A framework for businesses to assess their social impacts through its ‘3ps’
People - How socially responsible is the business
Planet - Optimising environmental friendliness
Profit - profits will help sustain the broader community in which the business operates
What is competition policy?
It consists of laws/regulations that promote fair competition, prevent monopolies and protect consumers from anti-competitive practices
What is GDP?
The total value of goods and services produced in a country over a specific time period
List the stages of the business cycle?
Recovery - The economy recovers from a slump, production, demand, employment all increasing - business confidence grows in parallel
Boom - follows recovery with high levels of economic growth in all aspects. Can cause its own end if economic growth and demand exceed business capabilities
Recession - Can come next; Happens when incomes and output fall continuously for 6+ months - the government may decrease interest rates
Slump - May follow a recession with negative prolonged but less severe indicators
