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55 Cards in this Set
- Front
- Back
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What is equity? |
Money the company owes shareholders/owners. |
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Who is interested in a business. |
Investors Workers Lenders/Banks Suppliers Customers Government/HMRC General Public |
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What does solvency mean? |
Being able to pay debts |
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How do you work out profit? |
Revenue-Expenses |
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What is included on a statement of profit or loss? |
Revenue Expenses Profit |
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What is shown on a balance sheet |
Assets Equity Liabilities |
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What is shown on a statement of cash flows? |
Cash from operating activities Cash from investing activities Cash from financing activities Net increase/decrease in cash |
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What is included in operating activities on a cash flow statement? |
Everyday trade |
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What is included in the investing activities section of a cash flow |
Buying and selling of assest |
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What is included in the financing activities section of a cashflow |
Cash that has been raised |
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What are the two types of assets and liabilities? |
Non-current Current |
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What is a non-current asset and give an example? |
A assets you hold for at least a year. Land Buildings Equipment Fixture and fittings Vehicles |
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What is a current asset and give an example? |
An asset you hold for less than a year. Inventories Trade Receivables Cash |
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What is a trade receivable? |
Customers that owe us money. |
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What is a trade payable? |
Money the company owes. |
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What is profit from operations? |
Gross profit - distribution costs -admin costs |
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What is the calculation for net profit? |
Profit before tax - Tax |
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Where is profit added to on a statement of financial position? |
Equity |
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What is materiality? |
Buying a small item, just show them as expenses. |
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What is comparability? |
Using the same method to make comparing accounts easier. |
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What is business entity? |
The owner is separate to the business. |
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What is historical cost? |
Recording items by the price paid. |
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What is prudence? |
Not over stating assets and not understating the liabilities. |
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What is going concern? |
If the business will not last more than a year. |
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What is money measurement? |
Only putting something that has a monetary value into the accounts. |
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What is accruals? |
Writing expenses that happen in that year. |
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What is a prepayment? |
Something you paid for now but will use it in the future. |
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Calculation for return on assets? |
(Profit from operations/total assets)x100 |
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What does ROA show. Is it better to be higher or lower? What effects it? |
How much profit you make from £1 of assets. Better to be higher. Assets are more efficient. Sales per assets. Profit margins are failing. |
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Calculation for asset turnover |
Revenue/total assets |
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What does asset turnover show? Is it better to be higher? Causes? |
How much money an asset generates. Better to be higher. Revenue. Assets. |
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Calculation for operating profit % |
(Profit from operations/revenue) x 100 |
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What does operating profit % show? Is it better to be higher or lower? Causes? |
How much profit is made from each sale. Better to be higher. Selling price. Purchase costs. Expenses. |
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Calculation for gross profit % |
Gross profit/sales x 100 |
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What does gross profit % show? Is it better higher or lower? Causes? |
How much profit you make from each £1 of sales not including expenses. Higher is better. Selling price. Purchase cost. Different product mix. |
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Calculation for expense to revenue? |
Expense/revenue x 100 |
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What does expense to revenue show? Is it better higher or lower? |
How much of the revenue is used by expenses. Lower. Expenses. Revenue. |
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Calculation for earnings per share? |
(Profit after tax/number of shares) x100 |
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What is shown by earnings per share? Is it better higher or lower? Causes? |
How much money is earned per share. Higher. Profits. No. of shares. |
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Calculation for current ratio? |
Current assets/current liabilities. |
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What does current ratio show? Is it better higher or lower? Causes? |
Does a company have enough current assets to pay off debts. Higher. Current assets. Current liabilities. |
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Calculation for acid test? |
(Current assets-inventories)/current liabilities. |
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What does acid test show? Is it better higher or lower? |
Does a company have enough current assets to pay off debts without inventories. Higher. Current assets. Current liabilities.
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Calculation for inventory holding period? |
(Inventories/cost of sales) x 365 |
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What does inventory holding period show? Is it better higher or lower? Causes |
How long it takes to sell stock. Lower. Marketing Stock control. Selling price. |
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Calculation for receivables collection? |
(Trade receivables/revenue) x 365 |
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What does receivables collection show? Is it better higher or lower? Causes? |
How quickly debt is collected. Lower. Credit control. Deliberate to get sales. Settlement discounts- (only when lower). |
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Calculation for trade payables payment period? |
(Trade payable/cost of sales) x 365 |
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What does trade payables payment period show? Is it better higher or lower? Causes? |
How long to pay suppliers. Higher for cash flow. Lower for suppliers relationship. Cash. Negotiated good terms. Discounts (lower). |
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Calculation for working capital cycle? |
Inventory days + receivable days - payable days. |
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What does working capital cycle show? Is it better higher or lower? Causes? |
How long to turn assets into cash. Lower. Inventories. Receivables. Payables. |
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Calculation for gearing? |
(Non-current liabilities/(non-current liabilities+equity)) x100 |
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What does gearing show? Is it better higher or lower? Causes? |
How much debt of the company funded by. Lower. Debts. Equity. |
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Calculation for interest cover? |
Profit from operations/Finance costs or interest. |
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What does interest cover show? Is it better higher or lower? Causes? |
How many times you can pay interest. Higher. Profits. Interest. |
