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Assessing Comp 3.5
Theme 3
| Question | Answer |
|---|---|
| What is Sales Revenue? | Money coming in from sales Quantity sold x selling price |
| What is Cost of Sales? | Costs directly linked to the production of the goods or services sold e.g. raw materials |
| What are operating costs? | All other costs associated with the trading of the business e.g. salaries and marketing expenditure |
| What is an exceptional item? | Any unusually large or infrequent transaction |
| What is profit for the year (net profit)? | Operating profit - interest and taxation and taking account of exceptional item |
| What is the net current assets (working capital) formula? | Total current assets minus Current liabilities |
| What is the net assets formula? | All assets - All liabilities |
| What is the formula for total equity (capital employed)? | Retained profit + Shareholders funds - Drawings |
| What is Human Resource Data? | Quantifiable information that can be used to measure workforce performance |
| How does Human Resource Data help a Business? | This will help inform decision making e.g. is corrective action needed, should bonuses be paid, are staff motivated? |
| What is Labour Productivity? | A measure of workforce performance that looks at output per worker |
| What is the Labour Productivity formula? | Total output/Number of workers Labour productivity is normally shown over a period of 1 year |
| What is Labour Turnover? | Labour turnover is the rate of change in a firm’s labour force |
| What is the formula for Labour Turnover? | Number of staff leaving x 100 / Average number of staff |
| What are Retention Rates? | A measure of a firm’s ability to keep its workforce within the business normally for more than one year |
| How are Retention Rates calculated? | number of employees serving for more than 1 year x 100/average number of staff |
| Why are low retention rates bad for a Business? | 1.High recruitment, selection and training costs 2.Risk of loss of important information (secrets) 3.Loss of talent |
| What is absenteeism? | The number of staff who miss work as a proportion of the total number of staff |
| How is absenteeism calculated? | Number of staff absent per time period x 100 /Total number of staff days worked per time period |
| What Human Resource strategies can a Business use to improve productivity/retention and reduce turnover and absenteeism? | Financial rewards are the variety of methods that have a money value and are used to reward the workforce and influence their behaviours at work e.g. Performance Related Pay, Piece Rate, Commission and Profit Share. |
| What is Employee Share Ownership? | Giving employees shares or the option to buy shares in the company |
| How do employees benefit from Employee Share Ownership? | 1.Dividends received 2. Increased share value |
| How can Consultation Strategies improve productivity/retention and reduce turnover and absenteeism? | 1.Seeking the thoughts and opinions of employees/Involves employees in decision making 2.Easier to implement change/staff feel involved 3.Employees have valuable input as they understand key issues e.g. production problems of customer service |
| What does Gearing measure? | Measures what proportion of a business’ capital is funded through long term loans |
| What is the Gearing Ratio formula? | Non-current liabilities x 100/Total equity + non-current liabilities |
| What does Return on Capital Employed measure? | A measure of how efficiently a business is using capital employed to generate profits |
| What is the formula for Return on Capital Employed? | Operating profit x 100/Total equity + non-current liabilities |
| What is Capital Employed made up of? | Share capital Reserves Long term loans Drawings |
| How can Gearing be used to make business decisions? | 1. How to finance future strategies 2. See the risk of rising interest rates 3. Negotiating credit terms with suppliers |
| How can Return on Capital Employed be used to make business decisions? | 1. Managers’ financial rewards 2. Efficiency targets - identify training needs 3. Future investments 4. Disposal or purchase of non-current assets |
| What are the benefits of Ratio Analysis? | 1.Provides a tool for the interpretation of accounts 2.Structure from which comparisons can be made with other businesses 3. Aids decision making both Internally and externally by investors |
| What are the limitations of Ratio Analysis? | 1. Possibility that accounts have been window dressed 2. Quantitative information only |
| What is the formula for the Current Ratio? | Current Assets/Current Liabilities |
| What is the formula for the Acid Test/Liquid/Quick Ratio? | Current Assets – Stock/Current Liabilities |
| What is the formula for Gross Profit Ratio? | Gross Profit X 100/Sales |
| State the formula for the Net Profit Ratio? | Net Profit X 100/Sales |
| What is the formula for the Retained Profit Ratio? | Retained Profit x 100/Sales |
| What is the formula for the Return on Capital Employed Ratio? | Net Profit x 100/Capital Employed |
| What is the formula for the Creditor Days Ratio (Trade Payables)? | Creditors X 365/Purchases (or costs of sales if purchases is not available) |
| What is the formula for the Debtor Days (Trade receivables)? | Debtors X 365/Credit Sales |
| What is the formula for the Stock Turnover (Inventory Turnover)? | Cost of Sales/Average Stock (Opening Stock + Closing Stock/2) |
Created by:
durquhart1
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