Cash-Flow and Profitability (AQA A-Level Business): Flashcards
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Profitability definition
Profitability definition
Measure comparing profits against sales revenue/other indicators
4 methods to improve profitability
4 methods to improve profitability
Raise prices, cut costs, max capacity, increase efficiency
Price elasticity of demand
Price elasticity of demand
How sensitive customers are to price changes
Main risk of increasing prices
Main risk of increasing prices
Customers may buy less, sales volume falls
Main benefit of cutting costs
Main benefit of cutting costs
Increases profit margins
Main risk of cutting costs
Main risk of cutting costs
Can damage quality, harm reputation, reduce sales
Factoring definition
Factoring definition
Selling unpaid invoices to factoring co. for immediate cash
Factoring drawback
Factoring drawback
Reduces profit margin due to factoring company fees
Sale and lease back definition
Sale and lease back definition
Selling asset then renting it back for immediate cash
Benefit of using capacity fully
Benefit of using capacity fully
Generates more revenue from underutilised equipment/staff