Business > 3.7 > Flashcards

3.7 Flashcards

(63 cards)

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1
Q

Mission

A

The fundamental purpose or reason for the existence of an organisation, defending its core values and guiding principles

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2
Q

Objectives

A

Specific, measurable goals set by an organisation to achieve its mission

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3
Q

Corporate objectives

A

The goals of the business as a whole

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4
Q

Functional objectives

A

The objectives of each department or function

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5
Q

What to consider when setting objectives

A
  • Ownership
  • Short-termism
  • Internal environment
  • External environment
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6
Q

Internal influences on marketing objectives

A
  • Corporate objectives
  • Finance
  • HR
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7
Q

External influences on marketing objectives

A
  • Market
  • Technology
  • Competitors
  • Ethics and environment
  • Law
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8
Q

Internal influences on operational objectives

A
  • Product nature
  • Availability of resources
  • Other departments
  • Corporate objectives
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9
Q

External influences on operational objectives

A
  • Competitor performance
  • Market conditions
  • Demand
  • Changing customer needs
  • New technology
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10
Q

Internal influences on financial objectives

A
  • Corporate objectives
  • Business status
  • Other departments
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11
Q

External influences on financial objectives

A
  • Availability of finance
  • Competitors
  • Economy
  • Shareholders
  • Ethics and environment
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12
Q

Internal influences on HR objectives

A
  • Business culture
  • Other departments
  • Availability of finance
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13
Q

External influences on HR objectives

A
  • Economy
  • Employment laws
  • Ethics
  • Technology
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14
Q

Strategy

A

A plan or course of action designed to achieve long-term goals or objectives

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15
Q

Strategic decisions

A

Long-term decisions that determine the overall direction of the organisation

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16
Q

Functional decisions

A

Short-term departmental decisions

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17
Q

Tactics

A

Specific actions implemented to achieve short-term objectives within the framework of a strategy

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18
Q

SWOT

A

Strengths, weaknesses, opportunities and threats

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19
Q

Advantages of SWOT

A
  • Internal and external classification
  • Quick guidance for areas of improvement
  • Helps identify ignored areas
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20
Q

Disadvantages of SWOT

A
  • Vulnerable to internal bias
  • Overly simple
  • Hard to identify the relative significance of areas
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21
Q

Balance sheet

A

A snapshot of a firm’s finances at a fixed point in time

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22
Q

Balance sheet contents

A
  • Current and non-current assets
  • Current and non-current liabilities
  • Net assets
  • Equity
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23
Q

Net current assets / working capital formula

A

Current assets - current liabilities

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24
Q

Net assets formula

A

Current assets + non-current assets - current liabilities - non-current liabilities

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25
Two figures that balance on a balance sheet
Net assets and total equity
26
Depreciation
Non-current assets losing value overtime
27
Bad debts
Debts which are not paid
28
Working capital purpose
Shows how much cash the business has available to pay its day-to-day debts (how liquid it is)
29
Fixed capital
Money used to buy non-current assets
30
Net realisable value
The amount the business would get by selling stock in its current state
31
Advantages of balance sheets
- Can be shown to investors and lenders - Assessment of financial health and position - Aids decision-making
32
Disadvantages of balance sheets
- Snapshot in time - Relies on estimates - Omits some intangible assets
33
Income statement
A summary of how much has been coming into and going out of a company
34
Assessment of gross profit
If low, reduce the unit cost of products or increase their selling price
35
Assessment of operating profit
If significantly lower than gross profit, reduce operating expenses
36
Assessment of profit before tax
When compared to operating profit, shows income and expenses coming from other activities
37
Assessment of profit after tax
Shows shareholders and investors if the business is profitable
38
Assessment of retained profit
Shows how much internal finance a business has and thus its growth potential
39
Advantages of financial analysis
- Comparison to competitor's performance - Helps decision-making - Encourages potential investors or lenders
40
Disadvantages of financial analysis
- Ignores qualitative data - External factors are not reflected - Based on past performance
41
Liquidity
The ease and cost with which assets can be turned into cash and used immediately as a means on exchange
42
Insolvency
A business being unable to pay its debts when they are due
43
Liquidation
The process of bringing a business to an end and distributing its assets to claimants
44
Current ratio formula
Current assets / current liabilities
45
Current ratio analysis
- 1.5 - 2 is ideal - < 1.5 suggests a liquidity problem
46
Return on capital employed formula
Operating profit / total equity + non-current liabilities x 100
47
Analysis of return on capital employed
- The higher the better - Should be higher than the interest rate
48
Inventory turnover formula
Cost of sales / cost of average stock held
49
Payables days ratio
Payable / cost of sales x 365
50
Analysis of payables days
- High days may damage supplier relations - Low days damage cash flow and working capital
51
Receivables days ratio
Receivables / sales revenue x 100
52
Analysis of receivables days
- High days damage cash flow and working capital - Low days may put off customers
53
Gearing formula
Non-current liabilities / (total equity + non-current liabilities) x 100
54
Gearing analysis
- > 50% is high geared: Funds for expansion but at risk of interest rate changes - 25% - 50% is standard - < 25% is low geared: Not at as much risk of interest rate changes but little funds for expansion
55
Ratio analysis advantages
- Performance over a period of time - Helps decision-making - Encourages potential investors - Comparison with other businesses
56
Ratio analysis disadvantages
- No internal strengths - No external factors - Future changes cannot be predicted - Only information about the past and present
57
Non-financial data
- Market share, market growth, sales growth - Labour productivity, labour turnover, employee costs as a percentage of turnover - Staff skills and qualifications - Capacity utilisation, unit costs
58
Advantages of comparing data to other businesses
- Can see where they need to improve - Puts data in context - Applying their strengths (benchmarking)
59
Elkington's Triple Bottom Line
A model that can be used to judged overall overall business performance based on: - Profit - Impact on people - Impact on planet
60
Advantages of Elkington's Triple Bottom Line
- Holistic view - Enhanced brand reputation - Long-term sustainability - Considers multiple stakeholder groups
61
Disadvantages of Elkington's Triple Bottom Line
- Hard to assess and calculate - Higher costs
62
Core competences
Unique capabilities or strengths that differentiate a business from its competitors and contribute to its competitive advantage
63
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