3.7: strategic position

• What does SWOT stand for in SWOT analysis?

  Strengths, Weaknesses, Opportunities, and Threats
• What is the purpose of SWOT analysis in business?

  To identify and analyze the Strengths, Weaknesses, Opportunities, and Threats of an organization
• What are some examples of Strengths in a SWOT analysis?


  Strong brand recognition, skilled workforce, unique product features, efficient production processes
• What are some examples of Weaknesses in a SWOT analysis?

  Limited financial resources, outdated technology, poor location, high employee turnover
• What are Threats in a SWOT analysis?

  External factors that could potentially harm the business
• What are Opportunities in a SWOT analysis?

  Positive external factors that a business could potentially exploit to its advantage
• What do balance sheets provide?

  A snapshot of assets and liabilities
• What are balance sheets also referred to as?

  Financial statements
• What is an asset?

  What the business owns
• What are liabilities?

  What the business owes
• What are non-current assets (fixed assets)?

  Assets that provide long-term benefits
• Give 2 examples of fixed assets (non-current assets).

  Buildings and machinery
• What is a current asset?

  Assets used up or sold in short term
• Give 3 examples of current assets.

  Stocks, Debtors and cash
• What are current liabilities?

  What the business owes in the short term
• Give 2 examples of current liabilities.

  Creditors and bank overdraft
• What are non-current liabilities?

  What the business owes in the long term
• Give 3 examples of non-current liabilities.

  Loans, mortgage and car finance
• What is working capital?

  The money for day-to-day operations
• What is the working capital formula?

  Current assets - current liabilities
• What is the net assets formula?

  Net current assets + non-current assets - long term liabilities
• What is capital employed always equal to?

  Net assets = capital employed
• What is the capital employed formula?

  Non-current liabilities + total equity
• What is a creditor?

  An individual or business owed money
• Define income statement.

  A statement showing revenues and costs
• What are the 6 types of financial ratios?

  Current ratio, Gearing, ROCE, Payables days, Receivables days, Inventory turnover
• What is the current ratio?

  Current assets : current liabilities
• What is the gearing formula?

  [Non-current liabilities / (total equity + non-current liabilities)] X 100
• What does ROCE stand for?

  Return on capital employed
• What is the ROCE formula?

  [Operating profit / (total equity + non-current liabilities)] X 100
• What is the payback period formula?

  (Income required / net cash flow from next year) X 12
• What is the average rate of return formula?

  (Average annual profit / initial cost of investment) X 100
• What is the net present value formula?

  Sum of (Net cash flow X discount factor) = Net present value
• Give three benefits to financial analysis.

  1. Compare performance to competitors 2) Helps managers make decisions 3) Investors can assess business
• What is the biggest disadvantage to financial analysis?

  It doesn’t cover qualitative aspects
• What are the two things that gearing shows?

  Capital sources and vulnerability to interest changes
• What are core competences?

  Unique capabilities giving competitive advantage
• What are the 2 models used to measure overall performance?

  Kaplan and Norton’s Balanced Scorecard, Elkington triple bottom line
• What are the four perspectives of the balanced scorecard?

  Financial, Customer, Internal processes, Learning and growth
• What does KPI stand for?

  Key performance indicator