Save
Intro to accounting
Semester 1
Lesson 8
Save
Share
Learn
Content
Leaderboard
Share
Learn
Created by
Matezik Sebestak
Visit profile
Cards (54)
What should you be able to explain after completing the topic on Performance Appraisal: Operating Profitability?
How
revenue
should be analysed.
View source
What does the gross margin ratio compare?
A company's
gross profit
to its
revenue
.
View source
What is the cost-income ratio?
The percentage of
gross profits
that go on running the business.
View source
What is ROCE an abbreviation for?
Return on capital employed
.
View source
Why is ROCE considered an important profitability measure?
It indicates how effectively a firm generates revenue from its
operating assets
.
View source
What is the tension between asset turnover and operating margin?
Higher asset turnover may lead to lower operating margins and vice versa.
View source
What does the term 'working capital' refer to?
A firm's
trading assets
and liabilities.
View source
What is the significance of headline figures in revenue analysis?
They provide an overview but require deeper analysis for understanding
underlying factors
.
View source
How would you calculate the gross margin ratio?
Gross Margin Ratio = Gross Profit / Revenue.
View source
What can cause differences in operating margins among companies in the same industry?
Differences in operating efficiency and economies of scale.
View source
What is the formula for calculating operating margin?
Operating Margin = Operating Profit / Revenue.
View source
What does a higher cost-income ratio indicate?
A larger percentage of
gross profits
is used for running the business.
View source
If a company has a gross profit of £200,000 and revenue of £1,000,000, what is its gross margin?
20%
View source
How do economic conditions affect cost-income ratios?
Economic conditions like inflation and exchange rates can impact cost-income ratios.
View source
What are the key components of the Statement of Profit and Loss?
Revenue
Cost of Sales
Gross Profit
Operating Profit
Net Profit/Loss
View source
What are the average gross margins for supermarkets and car industries?
Tesco: 6.6%
Sainsbury: 7.9%
Asda: 2.14%
Tesla: 22%
Ford: 17%
Ferrari: 50%
View source
What calculations should be performed for Greggs in the classroom exercise?
Calculate gross margins and percentage change.
Calculate operating margin and explain changes.
Calculate cost-income ratios and assess management of gross profits.
View source
What are the intended learning outcomes for the topic on Performance Appraisal?
Explain
revenue analysis
.
Define and interpret
ratios
from
financial statements
.
Explain the importance of
ROCE
.
Discuss the tension between
asset turnover
and
operating margin
.
View source
What are the challenges analysts face with revenue disclosures?
Lack of
standardisation
.
Variability in disclosures by
product type
,
customer
,
location
, and
channel
.
Difficulty in direct
company
comparisons.
View source
What factors can influence a firm's cost-income ratio?
Business models (e.g., technology, automation).
Scale economies.
Economic conditions (e.g., inflation, exchange rates).
View source
What was Tesla's gross profit margin in 2022?
25.6%
View source
What was Tesla's gross profit margin in 2023?
18.2%
View source
What does a decrease in Tesla's operating margin from 2022 to 2023 indicate?
It indicates a decline in profitability.
View source
What was the change in Tesla's operating margin from 2022 to 2023?
28.9%
View source
What is the cost-income ratio for Tesla in 2023?
49.6%
View source
What was the revenue for Greggs in 2022?
£1,229.7 million
View source
What was the revenue for Greggs in 2023?
£1,512.8 million
View source
What was the total cost of sales for Greggs in 2022?
£1,030.3 million
View source
What was the gross profit for Greggs in 2023?
£225.1 million
View source
How did Greggs' operating expenses change from 2022 to 2023?
They increased from £61.2 million to £70.7 million.
View source
What is the formula for calculating working capital?
Working capital =
current assets
- current liabilities
View source
What are considered current assets?
Cash, trade receivables, inventory, and prepayments.
View source
What does the term "operating assets" refer to?
Assets used in
core business
operations to generate revenue.
View source
How is asset turnover calculated?
Asset turnover =
Revenue
/
Operating Assets
View source
What was the asset turnover for Greggs in 2022?
68
View source
What was the asset turnover for Greggs in 2023?
94
View source
What does a higher asset turnover indicate?
It indicates better
efficiency
in generating revenue from assets.
View source
What is the formula for Return on Capital Employed (ROCE)?
ROCE =
Operating Profit
/ Capital Employed
View source
What was the ROCE for Greggs in 2022?
19%
View source
What was the ROCE for Greggs in 2023?
20%
View source
See all 54 cards
See similar decks
AQA A-Level Accounting
2542 cards
4.4 Accounting for Limited Companies
Edexcel A-Level Accounting > 4. Financial Accounting
222 cards
7. Emerging Issues in Accounting
Edexcel A-Level Accounting
459 cards
5. Accounting for Special Transactions
Edexcel A-Level Accounting
182 cards
5.1 Fundamental accounting concepts
AQA A-Level Accounting > 5. Accounting concepts used in the preparation of accounting records
52 cards
7.3 International Accounting Standards
Edexcel A-Level Accounting > 7. Emerging Issues in Accounting
29 cards
4.2 Regulatory Framework
Edexcel A-Level Accounting > 4. Financial Accounting
14 cards
7.4 Ethical Considerations in Modern Accounting
Edexcel A-Level Accounting > 7. Emerging Issues in Accounting
144 cards
4. Verification of accounting records
AQA A-Level Accounting
141 cards
7.2 Sustainability and Environmental Accounting
Edexcel A-Level Accounting > 7. Emerging Issues in Accounting
180 cards
16. Accounting for limited companies
AQA A-Level Accounting
171 cards
5.3 Accounting for Non-Profit Organizations
Edexcel A-Level Accounting > 5. Accounting for Special Transactions
75 cards
17. Interpretation, analysis, and communication of accounting information
AQA A-Level Accounting
203 cards
1. The Accounting System and Costing
Edexcel A-Level Accounting
115 cards
4. Financial Accounting
Edexcel A-Level Accounting
419 cards
5. Accounting concepts used in the preparation of accounting records
AQA A-Level Accounting
95 cards
16.1 Share capital transactions
AQA A-Level Accounting > 16. Accounting for limited companies
55 cards
2.2 Budgeting
Edexcel A-Level Accounting > 2. Corporate and Management Accounting
58 cards
14. Accounting for organizations with incomplete records
AQA A-Level Accounting
173 cards
4.3 Suspense accounts
AQA A-Level Accounting > 4. Verification of accounting records
62 cards
4.2 Control accounts
AQA A-Level Accounting > 4. Verification of accounting records
31 cards