Unit 7

Question 1

what is a SWOT analysis

Answer 1

a situational analysis used to aids decision making
helps corporate objectives and strategies

Question 2

what does SWOT stand for

Answer 2

strengths, weakness, opportunities and threats
strengths and weaknesses are internal
opportunities and threats are external

Question 3

what is a customer centric approach

Answer 3

always thinking of what customers want in every approach

Question 4

what are the pros of SWOT

Answer 4

provides comprehensive analysis of market
highlights what business is good at and its weaknesses

Question 5

what are the cons of SWOT

Answer 5

doesn’t provide clear choice
data can be inaccurate
can generate too much data and can be conflicting

Question 6

what are assets

Answer 6

things that a business owns

Question 7

what are liabilities

Answer 7

money business owes

Question 8

what is liquidity

Answer 8

ability to turn assets into cash

Question 9

what is bad debt

Answer 9

when debtors wont ever pay

Question 10

what is capital employed

Answer 10

all money borrowed by business

Question 11

what is working capital

Answer 11

cash business has available for day to day

Question 12

what is appreciation

Answer 12

assets increase in value over time

Question 13

what is depreciation

Answer 13

when assets decrease in value over time

Question 14

what are receivables

Answer 14

money paid to business

Question 15

what are reserves

Answer 15

figure that notes depreciation value

Question 16

what is equity

Answer 16

total shareholder funding that should match net assets of the business

Question 17

what is the equation for Return On Capital Employed

Answer 17

operating profit / total equity+non currrent liabilities x 100

Question 18

what is equation for capital employed

Answer 18

total assets - current liabilities

Question 19

what is ROCE

Answer 19

measures the return a business makes from capital it has been invested

Question 20

what must ROCE and profit margins be compared with

Answer 20

previous years data to look for trends
other similar business figures to change

Question 21

what is the formula for current ratio

Answer 21

current assets / current liabilities

Question 22

what can current assets include

Answer 22

cash, receivables and inventory

Question 23

what are liabilities

Answer 23

money to be paid in short term e.g payables and overdraft

Question 24

what is an ideal ratio

Answer 24

between 1 : 5 : 1 and 2: 1

Question 25

what is the gearing ratio

Answer 25

the gearing ratio measures the % change of borrowing coming from long term debts ( loans)

Question 26

what is the formula for gearing ratio

Answer 26

non current liabilities (long term loans) / total equity add nonc L X 100

Question 27

what is financial efficiency

Answer 27

how well assets are used and controlled

Question 28

what is inventory turnover

Answer 28

the result will tell you how much inventory is sold in a time period usually a year

Question 29

what does inventory turnover measure

Answer 29

measures how quickly stock is converted into sales

Question 30

what is the formula for inventory turnover

Answer 30

cost of sales / average stock held

Question 31

what is the formula for receivable days

Answer 31

trade receivables / revenue X365

Question 32

what is the unit for receivable days

Answer 32

days

Question 33

what do payable days measure

Answer 33

how long it takes to pay its suppliers

Question 34

what is the formula for trade payable day formula

Answer 34

trade payables / cost of sales X 365

Question 35

what does economic changes mean

Answer 35

change in levels of consumption, spending by customers and production of goods and services in an economy

Question 36

what does economic growth mean

Answer 36

means goods and services are produced and purchased. customer earns more so spends more

Question 37

what does economic recession mean

Answer 37

means a reduction in level of goods and services produced and consumption

Question 38

what is economic activity measured in

Answer 38

Gross domestic product GDP

Question 39

what does GDP measure

Answer 39

measures the value of goods and services produced within a country

Question 40

what is a recession

Answer 40

a period of two consecutive quarters ( 6 months in a row of negative growth or negative % change in GDP

Question 41

what is financial efficiency

Answer 41

how well assets are used and controlled

Question 42

what is the formula for inventory turnover

Answer 42

cost of sales/average stock sold

Question 43

what is the formula for receivable days

Answer 43

trade receivables/Revenue X 100

Question 44

what is the formula for trade payable days formula

Answer 44

trade payables/cost of sales X 365

Question 45

what does economic change mean

Answer 45

change in levels of consumption , spending by customers, production of goods and services in an economy

Question 46

what are the 4 key phases of the business cycle

Answer 46

boom, slump, recession, recovery

Question 47

what is inflation

Answer 47

increase in price of goods and services as a %

Question 48

how is infaltion measured

Answer 48

by checking the average price of around 650 products and services

Question 49

what is interest rates

Answer 49

interest is the cost of borrowing and the reward of saving money (expressed as a %)

Question 50

what are the impacts on customers of rising interest rates

Answer 50

cost of credit increases making large purchases less affordable reward for saving increases making saving more attractive customers likely to spend less leading to a fall in demand

Question 51

what are the impacts on businesses of rising interest rates

Answer 51

debts on variable rates e.g overdraft would be more expensive customers spending less means lower revenue lower revenue and higher financial costs

Question 52

what are the impacts of decreasing interest rates

Answer 52

cost of credit and reward of saving decrease leading to more spending and sales higher revenue and lower financial costs