KPI's and Analysing Performance Flashcards Preview

Accounting U4 AOS3 > KPI's and Analysing Performance > Flashcards

Flashcards in KPI's and Analysing Performance Deck (8)
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1

Define Profitability

The ABILITY of the business to earn a PROFIT when MEASURED against a base such as NET SALES, AVG TA OR OE

2

Define Efficiency

The ABILITY of the business to MANAGE its ASSETS and LIABILITIES

3

Define Liquidity

The ABILITY of the firm to MEET its SHORT TERM DEBTS AS they FALL DUE

4

Define Stability

The ABILITY of the business to MEET its DEBTS and continue to OPERATE in the LONG TERM

5

Define Analysis

The PROCESS of EXAMINING financial REPORTS to IDENTIFY CHANGES or differences IN PERFORMANCE

6

Why should the business review and analyse performance (3 reasons)

1. Enables management to understand and compare the information easily
2. Allows performance of different periods to be compared
3. Ratio's give figures a common base

7

What are the two different types of analysis

1. Vertical (Comparing up and down the report with percentages)
2. Horizontal (Comparing the report with other periods)

8

What are 4 different limitations of analysis

1. Size and age of the business
2. Based on averages
3. Accounting methods used
4. Frequency of reporting