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15 Cards in this Set
- Front
- Back
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+ ratios eliminate the problem of _______ |
Scale |
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+ ratios are useful for _________ decisions |
Planning, control, and management |
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+ ratios are easy to ________ |
Calculate |
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+ ratios ________ areas to _______ |
Highlight areas to further investigate |
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+ ratios overcome the problem of _____________ changes |
Year to year |
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- 5 negative aspects of ratios |
historic and not current does not account for external factors can be manipulated dependent on the quality of financial statement can lose track of the figures |
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+ 5 positives of ratio analysis |
Eliminates the problem of scale Useful for the planning process Easy to calculate Consistent measure which overcomes year to year changes Highlight areas to further investigate |
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Cash Conversion cycle = |
Average inventory days + trade debtors - trade creditors |
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4 Strengths of Break Even Analysis |
Good for giving a short term plan Measures profit and loss at different levels of sales and productions Analyses the relationship between fixed and variable costs Predict the effect of cost and efficiency changes on profitability |
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Limitations of break even analysis |
Only useful in the short run (relevant range is often only very small) Sales line not linear in real life - selling price changes due to discounts Variable costs often fall per unit due to higher efficiency savings, bulk discounts Fixed costs can change over time so my really need to rise in steps |
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Contribution per unit = |
Selling price - Variable cost |
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Break even volume = |
Fixed costs / Contribution |
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Break even value = |
Break Even volume * Selling Price |
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Margin of Saftey = |
real sale - break even volume OR profit / contribuition |
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Proft = |
MOS * Contribution |
