What is the statement of comprehensive income ?

The statement of comprehensive income shows the income and expenditure of a business over a period of time, usually a year, and calculates the amount of profit made.

What is the statement of financial position ?

The statement of financial position shows the financial structure of a business at a specific point in time , identifies the business's assets and liabilities , and specifies the capital used to fund the business.

What is meant by the term liquidity ?

Liquidity is the ability of a business to meet its short-term commitments , such as payments to creditors, with its available assets.

True or False? The statement of comprehensive income is used to determine how much tax is payable.

True . Net profit, calculated in the statement of comprehensive income, can be used to determine how much tax is payable.

What is the difference between operating profit and profit for the year ?

Operating profit is revenue minus the cost of sales and expenses. Profit for the year also deducts interest and exceptional costs.

Define the term trade payables .

Trade payables are amounts owed to suppliers for goods or services received but not yet paid for.

Define the term non-current assets .

Non-current assets are long-term assets of a business, such as property, plant, and equipment.

What is the meaning of the term capital employed ?

Capital employed is the total amount of capital invested in a business. It is calculated by subtracting the current liabilities from the total assets.

State the meaning of trade receivables .

Trade receivables are amounts owed by customers for goods or services provided but not yet paid for.

True or False? Creditors use the statement of financial decision to judge the solvency of a business to determine the risk when offering firms trade credit.

True . Creditors use the statement of financial decision to judge the solvency of a business to determine the risk when offering firms trade credit.

What is ratio analysis ?

Ratio analysis involves extracting information from financial accounts to assess business performance.

What is the gearing ratio ?

The gearing ratio measures the proportion of a company's capital that is funded by debt (non current liabilities such as loans).

What is meant by return on capital employed ?

Return on capital employed is a measure of how effectively a business uses capital invested to generate profit .

True or False? A highly-geared business has more than 50% of its capital employed from long-term loans.

True . A highly-geared business has more than 50% of its capital employed from long-term loans.

State two ways a business could reduce its level of gearing .

Gearing can be reduced by : Issuing more ordinary shares to create further share capital Retaining more profits to avoid further borrowing Repaying loans

Define the term capital employed .

Capital employed is the total amount of capital invested in a business , calculated by subtracting current liabilities from total assets.

True or False? Highly-geared businesses may be missing out on the opportunity to access finance without the need to dilute existing shareholders' control.

False . Low-geared businesses may be missing out on the opportunity to access finance without the need to dilute existing shareholders' control.

State two ways a business can increase the return on capital employed (ROCE).

The return on capital employed (ROCE) can be increased by: Increasing the level of profit generated without introducing new capital into the business Maintaining the level of profit generated whilst reducing the amount of capital in the business

What is meant by the term window dressing ?

Window dressing is the manipulation of financial data to present a particular performance picture. Examples of window dressing may include writing off bad debts or the revaluation of property.

True or False? Journalists use ratio analysis to report business performance in the media in easy-to-digest terms.

True . Journalists use ratio analysis to report business performance in the media in easy-to-digest terms.

What is labour productivity ?

Labour productivity is a measure of output per employee .

Define labour turnover .

Labour turnover is the proportion of employees leaving a business during a specific time period, expressed as a percentage.

What is labour retention ?

Labour retention is the proportion of employees remaining with a business during a specific time period, expressed as a percentage.

Define absenteeism rate .

The absenteeism rate is the proportion of staff who were absent from work during a specific period of time, expressed as a percentage.

True or False? A buoyant local economy can increase labour turnover.

True . A buoyant local economy can increase labour turnover as workers have lots of choice.

True or False? Empowerment involves providing employees with autonomy and responsibility to make their own decisions and work independently.

True . Empowerment involves providing employees with autonomy and responsibility to make their own decisions and work independently.

What is the meaning of the term consultation ?

Consultation involves managers informing workers of decisions and obtaining the views of employees when making those decisions.

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3.5 Assessing Competitiveness (Edexcel A Level Business)

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Front3.5.1 Interpretation of Financial Statements
What is the statement of comprehensive income?

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What is the statement of comprehensive income?
The statement of comprehensive income shows the income and expenditure of a business over a period of time, usually a year, and calculates the amount of profit made.
What is the statement of financial position?
The statement of financial position shows the financial structure of a business at a specific point in time, identifies the business's assets and liabilities, and specifies the capital used to fund the business.
What is meant by the term liquidity?
Liquidity is the ability of a business to meet its short-term commitments, such as payments to creditors, with its available assets.
True or False?
The statement of comprehensive income is used to determine how much tax is payable.
True.
Net profit, calculated in the statement of comprehensive income, can be used to determine how much tax is payable.
What is the difference between operating profit and profit for the year?
Operating profit is revenue minus the cost of sales and expenses.
Profit for the year also deducts interest and exceptional costs.
Define the term trade payables.
Trade payables are amounts owed to suppliers for goods or services received but not yet paid for.
Define the term non-current assets.
Non-current assets are long-term assets of a business, such as property, plant, and equipment.
What is the meaning of the term capital employed?
Capital employed is the total amount of capital invested in a business. It is calculated by subtracting the current liabilities from the total assets.
State the meaning of trade receivables.
Trade receivables are amounts owed by customers for goods or services provided but not yet paid for.
True or False?
Creditors use the statement of financial decision to judge the solvency of a business to determine the risk when offering firms trade credit.
True.
Creditors use the statement of financial decision to judge the solvency of a business to determine the risk when offering firms trade credit.
What is ratio analysis?
Ratio analysis involves extracting information from financial accounts to assess business performance.
What is the gearing ratio?
The gearing ratio measures the proportion of a company's capital that is funded by debt (non current liabilities such as loans).
State the formula used to calculate gearing.
Formula.
$Gearing = \frac{Non - current liabilities}{Capital employed} \times 100$
What is meant by return on capital employed?
Return on capital employed is a measure of how effectively a business uses capital invested to generate profit.
State the formula to calculate the return on capital employed (RoCE).
Formula.
$Return on capital employed = \frac{Operating profit}{Capital employed} \times 100$
True or False?
A highly-geared business has more than 50% of its capital employed from long-term loans.
True.
A highly-geared business has more than 50% of its capital employed from long-term loans.
State two ways a business could reduce its level of gearing.
Gearing can be reduced by:
- Issuing more ordinary shares to create further share capital
- Retaining more profits to avoid further borrowing
- Repaying loans
Define the term capital employed.
Capital employed is the total amount of capital invested in a business, calculated by subtracting current liabilities from total assets.
True or False?
Highly-geared businesses may be missing out on the opportunity to access finance without the need to dilute existing shareholders' control.
False.
Low-geared businesses may be missing out on the opportunity to access finance without the need to dilute existing shareholders' control.
State two ways a business can increase the return on capital employed (ROCE).
The return on capital employed (ROCE) can be increased by:
- Increasing the level of profit generated without introducing new capital into the business
- Maintaining the level of profit generated whilst reducing the amount of capital in the business
What is meant by the term window dressing?
Window dressing is the manipulation of financial data to present a particular performance picture. Examples of window dressing may include writing off bad debts or the revaluation of property.
True or False?
Journalists use ratio analysis to report business performance in the media in easy-to-digest terms.
True.
Journalists use ratio analysis to report business performance in the media in easy-to-digest terms.
What is labour productivity?
Labour productivity is a measure of output per employee.
What is the formula used to calculate labour productivity?
Formula.
$Labour productivity = \frac{Total output}{Average number of employees}$
Define labour turnover.
Labour turnover is the proportion of employees leaving a business during a specific time period, expressed as a percentage.
What is labour retention?
Labour retention is the proportion of employees remaining with a business during a specific time period, expressed as a percentage.
What is the formula to calculate labour retention?
Formula.
$Labour retention = \frac{Numer of staff remaining}{Average number of staff} \times 100$
Define absenteeism rate.
The absenteeism rate is the proportion of staff who were absent from work during a specific period of time, expressed as a percentage.
State the formula used to calculate the absenteeism rate.
Formula.
$Absenteeism rate = \frac{Number of staff absent}{Number of staff employed} \times 100$
True or False?
A buoyant local economy can increase labour turnover.
True.
A buoyant local economy can increase labour turnover as workers have lots of choice.
True or False?
Empowerment involves providing employees with autonomy and responsibility to make their own decisions and work independently.
True.
Empowerment involves providing employees with autonomy and responsibility to make their own decisions and work independently.
What is the meaning of the term consultation?
Consultation involves managers informing workers of decisions and obtaining the views of employees when making those decisions.