Business extra info
3 key areas of financial conduct authority
1. Authorisation
2. Supervision
3. Enforcement
Equation for Net Profit
Gross Profit -- Total Expenses
How is a statement of comprehensive income used to analyse?
1. Compare figures e.g assets & liabilities
2. Compare years e.g more money made
3. Compare performance to competitors
Types of Profitability Ratios
1. Gross Profit Margin
2. Net Profit
3. Mark up
4. Return on capital employed
What is Sales in Value?
Total amount of sales made expressed as '£'
What is Sales in Volume?
Amount of sales expressed as a quantity.
Problems in a cashflow forecast
1. Outflows greater than Inflows
2. Inconsistent cashflow throughout the year
Solutions to a cashflow forecast
1. Overdraft arrangements
2. Reviewing & changing outflows
3. Negoitating terms with creditors
How to calculate Average Inventory
Inventory opening + Inventory closing
2
Negatives of Ratio Analysis
1. Data is historic
2. Does not take into account external factors
3. Easy to manipulate
2 equations for total variable costs.
1. Variable cost per unit x Quantity
2. Contribution per unit x Number of units sold
Equation for Total Contribution
Sales Revenue - Total variable costs
Advantages of contribution per unit
1. Easy to calculate
2. Helps calculate break-even
3. Can be used to make decisions
Disadvantages of contribution per unit
1. Does not take into account fixed cost
2. Does not take into account unexpected costs
equation for Fixed Costs
Total cost of production - Number of units made x variable . cost per unit