Edexcel A Level Business - Advanced Information Paper 2

Edexcel A Level Business - Advanced Information Paper 2 Ratio Analysis A series of ratios allowing a business to assess their profitability and liquidity Ratio Analysis - Gross profit margin (Gross profit / Revenue) x 100 A profitability ratio showing what percentage of the revenue is gross profit Ratio Analysis - Operating profit margin (Operating profit / Revenue) x 100 A profitability ratio showing what percentage of the revenue is operating profit Ratio Analysis - Net profit margin (Net profit / Revenue) x 100 A profitability ratio showing what percentage of the revenue is net profit Ratio Analysis - Current ratio Current assets : Current liabilities A liquidity ratio calculated by dividing current assets by current liabilities Ratio Analysis - Acid test ratio Current ratio - Inventories : Current liabilities A liquidity ratio calculated by dividing current assets (minus stock) by current liabilities Ratio Analysis - ROCE (Return on Capital Employed) (Operating profit / Capital employed) x 100 A profitability ratio calculating the percentage of capital invested that is operating profit Portfolio analysis Where a business uses tools to identify strengths and weaknesses among their range of products Strength Features within the control of a business that are a source of competitive advantage. Weakness Features within the control of a business that are a source of competitive disadvantage. Opportunity Features of the external environment that create opportunities for a business to leverage its strengths towards. Threat Features of the external environment that threaten the performance and position of a business if not addressed. External influence Influences from outside the business Political factor Government policy and its administration that has the potential to change or influence a business. e.g. competition policy Economic factor Changes such as costs and prices of goods, interest rates, wage rates, exchange rates and the rate of inflation that have the potential to change or influence a business. Social factor Changes that affect lifestyle, such as religion, wealth or family. It is important for businesses to be aware of these factors as they are very important for marketing purposes. E.g changes in taste and fashion Technological factor Changes in technology available to businesses or consumers that have an impact on either a business or consumers. This could be to change the way consumers and businesses interact, or a change in production technology available to a business, for example. Legal factor Law and changes in law that have an impact on either businesses or consumers. E.g. the minimum wage act. Environmental Changes in the way businesses or consumers look at and care for the environment, or changes to the environment that have an impact on business. Quantitative Something numeric / based on statistics Sales forecast A prediction of future revenues