Chapter 10: Management Operations Part 2 Flashcards Preview

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Flashcards in Chapter 10: Management Operations Part 2 Deck (12)
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1
Q

Inventory Management

definition

A
  • Management of inventory and stock

- Encompasses the control of three types of inventory: materials, work in process, finished goods

2
Q

JIT

A
  • Business does not maintain an inventory of goods and services
  • Orders for materials when customers places orders
3
Q

JIT:

Advantages

A

Reduction in inventory cost
- No employees, utility cost, storage space

Allow greater customisation in the production process
- Customers are able to customise it to their taste

4
Q

JIT:

Disadvantages

A

High reliance on supplier
- Failure in delivery of materials can lead to expensive production delays and stock-out

Does not allow the same level of purchasing of economies of scale
- Unlike buying in bulk, frequent small deliveries are likely to be expensive

5
Q

JIC

definition

A
  • A business stores and maintain a large amount of inventory

- Business avoid running out of stock

6
Q

JIC:

Advantages

A

Reduce fixed cost
- Fixed cost can be averaged out more when ordering in bulk and transporting large amount of inventory

No production set back

  • Raw material supply hold-up will not lead to production delay
  • Does not rely on suppliers
7
Q

JIC:

Disadvantages

A

Higher cost for inventory storage
- Employees, utility cost, storage space

Risk of goods being damaged or outdated

  • Damaged in warehouse
  • Outdated trend will lead to waste of production
8
Q

JIT vs JIC

A
  • Product (does it expire fast)
  • Location (of supplier)
  • Supplier (how fast does are they at supplying)
  • Sales forecasting (festive seasons with surges in demand)
  • Inventory control system (how sophisticated or simple the machineries are)
9
Q

Financial Ratios

A
  • A tool used for measuring a firm’s liquidity, profitability and reliance on debt financing, as well as effectiveness of management’s resource utilisation
  • Allows comparison with other companies and with the company’s own past performance
10
Q

Liquidity Ratio

A
  • How much short term funds the business has to meet its short term debts

Current Ratio
- Measures a business’s ability to pay its debts as they mature

11
Q

Profitability Ratio

A
  • The capacity of a business to make profit and provide a return on investment

Gross profit ratio
- Used to measure a business’s profitability before expenses and how profitable a company sells its inventory

Net profit ratio
- Measure a business profitability after all expenses have been paid

Expense ratio

  • Measure the amount of expense in each dollar of income earned
  • Reflect the efficiency of the operation from one period to the next

Return on equity ratio
- Measure the percentage return on the owner’s investment in the business

12
Q

Stability Ratio

A
  • Indicates how reliant on debt a business is for its operating funds

Debt to equity ratio
- How much debt can be supported by the company and whether its debt and equity are balanced