Business Topic 3

All of finance

Gearing ratio

Measures percent of capital employed that is financed by long-term loans

Stock turnover

How well a company converts its stock into sales

Debtor days

Measures the number of days it takes for a business to collect debt from its customers

Creditor days

Measures the number of days it takes for a business to pay the debt it owes to other businesses

Insolvency

Is when a business is unable to pay its debts on time, some business recover from this by liquidating their assets to pay creditors.

Current ratio

Wether or not the firm has enough resources to pay its debt over the fiscal year.

Acid test

Measures a company's short-term liquidity by determining if it can cover its current liabilities without relying on inventory.

Straight line depreciation

original cost minus residual value divided by useful life of asset.

Units of production rate

cost of asset minus salvage value divided by estimated units of production

Bankruptcy

Is a legal process where a business states that they can no longer pay their debts, this is then decided by the courts.

Cash flow forecast

It shows the expected inflows and outflows of cash over a specific period, helping businesses manage liquidity and plan for future expenses.

Gross profit margin

Takes into account how much money a business made from selling its good when direct costs are taken into account

Profit margin

Takes into account how much the business made after deducing direct an indirect costs

Return on capital employed

Shows how well the business is able to convert investments into the business profit

Net book value

Cost-accumulated depreciation

Cost centers

Is a division of a business that has responsibility for its own operational costs.

Payback period

Length of time it takes for the net cash inflows to pay back the original cost of the investments.

Average rate of return

Measures how profitable an investment is in relation to its orignal cost.

Payback Period (formula)

Amount of investments unpaid divided by revenue generated in the next year times 12

Residual value

The value of a non-current asset at the end of its useful life before it is replaced.

Depreciation expense

Units of production rate times actual units produced

Target profit output

fixed cost plus target price divided by CPU

Break-even target price

total cost divided by max output

Target profit

output times contribution per unit minus fixed costs

Target price

Average fixed cost plus average variable cost