Theme 2
Quiz yourself by thinking what should be in
each of the black spaces below before clicking
on it to display the answer.
Help!
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| What are the internal causes of Business Failure? | show 🗑
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| What are the external causes of Business Failure? | show 🗑
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| What are profits? | show 🗑
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| What is the formula for profit? | show 🗑
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| show | A formal financial document that summarises a business’ trading activities and expenses to show whether it has made a profit or loss
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| show | Costs directly linked to the production of the goods or services sold e.g. raw materials
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| show | Sales revenue – cost of sales
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| What is the formula for Operating profit? | show 🗑
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| show | Any unusually large or infrequent transaction
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| What is the formula for profit for the year? | show 🗑
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| What is Gross Profit Margin? | show 🗑
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| What is the formula for Gross Profit Margin? | show 🗑
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| What is Operating Profit Margin? | show 🗑
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| show | Operating profit x 100/Sales revenue
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| What is Profit for the End of Year? | show 🗑
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| What is the formula for Profit for the Year Margin? | show 🗑
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| show | That a firm is not managing its cost of sales effectively e.g. are the cost of raw materials increasing?
Sales are in decline
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| If OPM is low or falling what may this indicate? | show 🗑
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| If the profit for the year margin is low or falling what may this indicate? | show 🗑
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| How can a business improve profitability? | show 🗑
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| show | Will you lose customers?
What price do competitors charge?
How loyal are your customers?
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| What are the problems of increasing profitability by raising the selling price? | show 🗑
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| show | Will quality be affected?
Will image be tarnished?
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| Why might cash and profit be different? | show 🗑
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| What is the statement of financial position (balance sheet)? | show 🗑
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| show | Likely to be kept by the business for more than one year e.g. Vehicles/Premises/Machinery
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| show | Likely to be turned into cash within a year e.g. Inventories/Accounts Receivable (Debtors)/Cash and Cash Equivalents
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| What are assets? | show 🗑
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| show | Liabilities are the money a business owes i.e. debts
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| show | Debts that the business has more than one year to repay e.g. Bank loans/Mortgages
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| show | Debts that the business may have to repay within one year
Overdrafts
Accounts Payable (Creditors)
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| show | All assets (Non current assets + Current assets) - All liabilities (Non current liabilities + Current Liabilities)
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| What is the formula for Total Equity? | show 🗑
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| show | A measure of a firms short term survival i.e. its ability to meet short term debts and day to day expenses
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| show | Current assets/current liabilities
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| What is the formula for Acid Test Ratio? | show 🗑
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| show | Inventory is not included in current assets as it is deemed the hardest to turn into cash quickly
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| show | For every £1 of Current Liabilities the firm owes it owns £0.716 in Current Assets
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| show | Sell assets that are no longer being used i.e. turn them from a non-current assets to a current asset (cash)
Switch to long term sources of finance
Monitor debtors to avoid bad debts
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| show | A measure of a firm’s liquidity / ability to meet day to day expenses
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| What is the formula for Working Capital? | show 🗑
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| show | Working capital answers the basic question if the firm had to pay off all its short term debts could it do so out of its short term cash resources i.e. inventories, payables and cash.
If not then it will have to sell non-current assets to pay its debts.
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| show | With a fast stock turn, the ratio can be less than one e.g. a supermarket will have a fast stock turnover and a acid test ratio of less than one
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| An acceptable Current Ratio result is in between 1.5. and 2:1. However, recently it has begun to fall. Why? | show 🗑
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| show | Large firms may be able to survive with low liquidity because they may be able to pressurise suppliers and delay payments
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You may also shuffle the rows of the table by clicking on the "Shuffle" button.
Or sort by any of the columns using the down arrow next to any column heading.
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Created by:
durquhart1
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