Unit 7-analysing the strategic position of a business Flashcards Preview

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Flashcards in Unit 7-analysing the strategic position of a business Deck (62):
1

What is an income statement?

An accounting statement showing a firm's revenues, costs and profits over a given year

2

What does the layout of an income statement look like?

Revenue
Cost of sales

Gross profit
Overheads/expenses
Exceptional items

Operating profit
Finance costs

Pre tax profit
Corporation tax

Profit for the year

Retained profit
Dividends

3

WhT is an income statement helpful for?

Judge performance
Inform future strategic decisions
Profit quality
See profit utilisation
Help get loans
Legal requirement for PLCs

4

What is a balance sheet?

Shows à firms assets and liabilities on a given day

5

How does the layout of a balance sheet look?

Non current assets
Depreciation

Current assets
Current liabilities

Net current assets

Non current liabilities

Net assets

Equity

6

Why is the balance sheet useful?

To assess liquidity
To inform strategic decision making
To see how investment has been raised
To see the value of the firm
To help raise finance

7

What is return on capital employed?this measures profit made as a % of the money invested in the firm

this measures profit made as a % of the money invested in the firm

8

How do you calculate ROCE?

Operating profit/total capital employed. X100

9

What is current ratio?

Measures how many current assets a firm has compared to current liabilities

10

What is gearing?

Shows how much of a firm's investment has come from borrowing

11

How do you calculate gearing?

Non current liabilities/ total capital employed. X100

12

What is inventory turnover?

Shows how often in one year a business sold its average stock of goods

13

How do you measure inventory turnover?

Cost of goods sold(or sales revenue) /average inventories

14

What is receviables days?

This shows how long on average it takes a firm to collect debts owed by customers

15

How do you calculate receivables days?

Receviables/sales revenue. X365

16

How do you calculate payables days?

Payables/cost of sales. X365

17

How do you answer a big question using these financial ratios?

Do calculations
Explain what the figures show
Judge whether good or bad for firm in Q
Say what you would also need to make a fuller judgement

18

What is a core competence?

A unique quality

19

What did prahalad and Hamal say about core competencies?

To be one it must be:
Significant for consumers
Allow firm access to variety of markets
Be hard to replicate

20

How can long term performance be measured?

Brand image
Financial data
R and D spending
Spending on training
Profit quality
Customer satisfaction and brand loyalty

21

What is Kapton and Norton's balanced scorecard?

A method of assessing a firm's performance

22

What are the 4 categories of the balanced scorecard?

Financial
Customer value
Process performance
Learning and growth performance

23

What is Elkington's Triple bottom line?

It looks at 3 areas of assessing long term performance

Profit
People
Planet

24

What are the positives of the methods of assessing overall long term performance?

Gives a fuller picture than just assessing financially
Can keep stakeholders happy as it shows an interest in them
Can develop methods of tracking performance in future

25

What are the negatives of the methods of assessing overall long term performance?

Can't measure everthing
Some judgements are subjective, e.g. Planet
Can be seen as purely a PR exercise
Opportunity costs

26

Reasons for government intervention?

Prevents unethical behaviour
Reduces environmental issues
Keeps a 'level playing field' for businesses

27

Reasons against government intervention?

Protects, helps less efficient firms
Increases 'red tape' and costs for U.K. Firms
May argue business owners know best

28

What are the 3 key areas for laws?

Competition
The labour market
The environment

29

Give an example of a law for each of the different types of law areas

Competition act, e.g. Forbids cartel activity
National minimum wage act
The environmental protection act

30

What are the 4 main areas for government policy?

Towards entreprise - encouraging start ups, e.g. Enterprise finance guarantee
Regulation - rules regarding how firms can operate in a market
Infrastructure - improving transport, communication, energy supplies etc
International trade - U.K. Government tries to promote free international trade

31

What is GDP?

Measures the value of a country's total output of good and services over a period of time, normally one year.

32

What is protectionism?

Government policy to prevent the free import of goods into a county

33

What is the exchange rate?

The value of one currency against another

34

Why do uk businesses generally want a weaker pound?

It makes it easier to export and more expensive for foreign imports

35

What is inflation?

The general rise in prices

36

Why do businesses generally prefer low inflation?

Helps maintain demand (especially if wages are rising by just as much)
Stops their costs rising too quickly

37

What are interest rates?

Show the cost of borrowing

38

What is monetary policy?

Using interest rates and the supply of money to influence demand in the economy

39

Why is fiscal policy?

Using taxation and public spending to influence the economy

40

What is an emerging market?

Economies/ countries that are undergoing rapid industrialisation and economic growth

41

What are some benefits to the UK of emerging markets?

Huge new potential markets and sales
Chance to offshore
Spread of risk
Access to cheaper raw materials

42

What are some drawbacks to the UK of emerging markets?

Competition from cheap imports
IP theft
China is now moving up the value chain
Bad image from using cheap labour

43

On what will it depends pas to whether a firm can benefit or not from emerging markets?

Can they get an understanding of what consumers in these countries want
Can they adapt marketing mixes
Can they get through the red tape
Do they have the liquidity
Can they manage the potential diseconomies of scale of growing in a different country

44

what are the main current changes in the social environment?

Demographic changes - ageing population, increase in migration, increase in urbanisation e.g. China

Consumer changes - increased use of tech worldwide, increased focus on healthiness, increase in online shopping

45

What is CSR?

The duties a business has towards its stakeholders

46

How does Carroll's CSR pyramid look?

Bottom - economics responsibilities, i.e. Being profitable
- legal responsibilities
- ethical responsibilities
Top - philanthropic responsibilities responsibilities, i.e. Be a good corporate citizen

47

What are some of the potential long term benefits of taking a stakeholder approach?

Lower costs - happier staff, less wastefulness process TQM, avoid bad PR
Increased demand - happy customers, marketing benefits e.g. Differentiation from rivals

48

On what does it depend as to whether a firm will benefit or not from a stakeholder approach?

Whether, financially, looking at the short or long term
The firm's strategy, e.g. Cost minimisation means shareholder approach more likely
The type of firm, e.g. An oil company could cause enormous problems if it didn't take a stakeholder approach

49

WHat are some possible outcomes benefits of embracing technology?

Increased short term costs, e.g. Buying it, redundancies
Hopefully long term benefits, e.g. More competitive, more sales, increased efficient, decreased costs

50

GIve some possible examples of change for the marketing department

Use of loyalty card for data
Use of social media and relationships marketing
Online selling and advertising
Opens new distribution channels

51

GIve some possible examples of change for the operations department

Computer aided design CAD
Computer aided manufacturing CAM
Communications
More efficient transportation

52

GIve some possible examples of change for the HR department

New methods of communication with staff
Different ways of recruiting
Workforce planning for fewer staff

53

GIve some possible examples of change for the finance department

Contactless/online payments
Record keeping - cloud

54

WHat are porter's five forces related to?

The competitive environment

55

What's are porter's five forces?

Bargaining power of suppliers
Bargaining power of buyer
Threat of new entrants
Threat of substitute products
Competitive rivalry

56

What is predator pricing?

Dropping prices to undercut rivals

57

What Is payback?

Shows how long it will take to recoup the investment money

58

How do you calculate payback?

See how many years of net cash flows it will take to recoup the original investment

59

What is ARR

Average annual rate of return - it shows the profit the investment should make as a yearly % of the amount invested

60

How do you calculate ARR?

(Total profit / number of years of returns)
/
Original investment
X100

61

What is NPV?

Shows if the investment will give a positive return in real terms i.e. After inflation

62

How do you calculate NPV?

Net cash flow x discount factor

All NPVs (from years of investment added)
- original investment

= actual NPV