3.3 - 3.6

• Gross Profit = Revenue - Cost Of Sales
• Operating Profit = Gross Profit - Expenses
• Non current assets - Owned by a business for long-term use
• Current Assets - Converted to cash within 12 months
• Current Liabilities - Money a business owes and is due to be settled soon
• Non-Current Assets - Money a business owes and that isnt paid short term
• Net assets = capital employed
• Gearing Ratio = Non-Current Liabilities/Capital Employed x100
• Return On Capital Employed = Net Profit / Total Capital Employed x 100
• Current Ratio = Current Assets / Current Liabilities
• Acid Test Ratio = (Current Assets - Stock) / Current Liabilities
• Statment Of Financial Position - Shows how the net assets of a business are being funded.
• Profit And Loss Account - A statement of the financial position of a business at a particular date and the profit or loss for that period

  
  

  
  

  Consists:

  • Revenue
  • Cost of sales
  • Gross Profit
  • Operating Profit
  • Net Profit
• Labour Turnover = Number of staff leaving/Average number of staff x100
• Labour Productivity = total output / number of employees
• Net Profit Margin = Net Profit / Sales Revenue x 100
• Gross Profit Margin = Gross Profit / Sales Revenue x 100
• Net Profit = Operating Profit - (interest and costs)
• ARR - Average Anual Return / Initial investment x 100
• Payback = initial investment / net cash flow per period
• CSR - Corporate Social Responsibility

  Benefits

  • enhance the business image/reputation
  • attractive to stakeholders
  • can be very protiable - adds value
  • improve motivation and productivity within employees.
• Above 20% is reasonable on ROCE
• High gear means

  • more loans than shareholder capital
  • less dividens as more interest payments
  • Above 50% on Gearing Ratio
• Power Culture - Decision-Making carried out by one or a small number of individuals

  • Few rules exist for decision making
  • Competitive work atmosphere for workers
• Role Culture - Key decisions are made by those with specific roles

  • Usually a clear hierarchial structure
  • Businesses with role cultures may find difficult to adapt to rapid market conditions
• Task culture - Decisions are made by teams of employees with specific skills

  • There is an emphasis on adaptibility and team working
  • Teams are created and dessolved as projects are started and completed
• Pearson Culture - Individuals with extensive experience and skills are loosley brought together
• Creditors - people who have a claim on the assets of a business.
• Debtors - People who owe money to a business, usually in the form of a loan.
• Balance Sheet - An overview of the assets, equity, and liabilities of the company.

  Consists:

  • Current Assets
  • Current Liabilities
  • Inventory
  • Trade Recievables
  • Trade Payables
  • Long-Term Liabilities
  • Capital & Reserves