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BUSINESS- Unit 3 > Business Analysis > Flashcards

Flashcards in Business Analysis Deck (19)
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1

suggest 3 reasons why preparing and keeping accurate accounts are essential

future predictions
see if their are any problems
amend any problems

2

how do you work out gross profit?

gross profit/turnover x 100

3

how do you work our net profit?

net profit/turnover x 100

4

what is the difference between gross profit and net profit?

gross profit is before tax and expenses

5

how do you work out net profit margin?

gross profit-expenses/turnover x 100

6

what is return of capital employed?

the efficiency of funds invested in the business, so for every £1 invested, how many % profit it makes

7

how do you work out current ratio?

current assets/current liabilities

8

what is current ratio?

it measure the liquidity of a company i.e. the rate of assets to liabilities ( how well can the company pay its debts)

9

how do you work out acid test ratio?

current assets-stock/current liability

10

what is the difference between current and acid test ratio?

current includes stock

11

what is a gearing ratio?

looks at the long term financial stability of a company- how much do they rely on long term borrowing to fund day to day activities

12

how do you work out return of capital employed?

net profit/ total capital employed x100

13

how do you work out gearing?

long term loans/capital employed x100

14

what does total capital employed include?

ordinary share capital
preference shares
reserves
debentures
long-term loans

15

what are 4 limitations of financial analysis?

it is just a snapshot
window dress
creative accounts-postpone withdrawal
sale lease back

16

why do companies window dress? 4

please shareholders
impress competitors
stop takeovers
to get a loan

17

what are debtors?

they owe you

18

what are creditors?

you owe them

19

What is gearing?

how heavily you rely on loans