Sources of Finance & Break-even
P&L Account
Balance Sheet
3.5
3.6 HL
100
What are the three main internal sources of finance?
Personal Savings, Retained Profit, Sale of Unused Assets
100
These are a firm’s indirect costs of production
What are expenses?
100
Items owned by a business with the intention of using these up within one year of the balance sheet date
Current Assets
100
A short-term liquidity ratio used to calculate the ability of an organization to meet its short-term debts (within the next twelve months of the balance sheet date).
Current Ratio
100
What does a decrease in the creditor days ratio indicate?
A worsening of payment terms with a major supplier, or the business may be paying too soon. A high creditor days ratio is preferable as it enables a business to use available cash to fulfil its short-term obligations.
200
This refers to business spending on fixed assets or capital equipment of a business.
What is capital expenditures?
200
These are the payments from a company’s net profit (after interest and tax) paid to the owners of the business.
What are Dividends?
200
What is the calculation for working capital?
Current Assets - Current Liabilities
200
The ____ profit margin ratio measures a firm’s overall profit (after all costs have been deducted) as a percentage of its sales ______ .
Fill in the blanks
Net
Revenue
200
Which financial ratio calculates the time taken by a business to collect money from customers who buy items on credit?
Debtor Days ratio
300
This is also known as debt capital, refers to borrowed funds from financial lenders, such as commercial banks.
What is Loan Capital?
300
Any funds left over from net profits (after interest and tax) that is not paid to shareholders, a vital source of internal finance
What is Retained Profit
300
A type of current asset, referring to individual or business customers that owe money to the organization because they have bought goods or services on trade credit.
What are Debtors?
300
This is a short-term liquidity ratio used to measure an organization’s ability to pay its short-term debts (within the next 12 months of the balance sheet date), without the need to sell any stock (inventories)
Acid test (or Quick ratio)
300
The efficiency ratio that measures the number of days it takes a business to sell its inventory.
Stock turnover ratio
400
A small-biz selling ice cream bars has a variable cost of $0.25 and sells each unit for $1.50. Its fixed costs are $10,000. How many bars of ice cream need to be sold each month in order to break-even?
$8,000
400
Ella's Boutique reported total USA sales of $31,000,000 for the year ended. Overhead expenses are $7,000,000. The direct costs, such as raw materials, were $13,000,000. Dividends are paid of $1,000,000.
Calculate the Net Profit Before Interest & Tax
$11,000,000
400
Equity is comprised of.......
Both share capital and accumulated retained profit.
400
How is the gross profit margin (GPM) calculated?
(Gross profit ÷ Sales revenue) × 100
Where gross profit = Sales Revenue - COGS
400
What is the correct formula for calculating the gearing ratio?
What is the correct formula for calculating the gearing ratio?
500
A surfboard producer has fixed costs of $12,000 per month, and the contribution per surfboard is $80. If the target profit is $20,000, how many surfboards must the firm sell each month?
400 surfboards
500
The Profit & Loss Account is also referred to as "The _______ _______.
The Income Statement
500
How does “accumulated depreciation” impact the value of the organization’s fixed assets?
The value of most fixed assets fall in value over time due to depreciation. Depreciation decreases the "book value" to a true market value of the fixed assts.
500
How is the return on capital employed (ROCE) ratio calculated?
Hence, the formula for calculating the ROCE ratio is:
(where NPBIT = net profit before interest and tax).
500
What is included in capital employed?
Loan Capital + Share Capital + Accumulated Retained Profit