Analysing the financial performance of business (AQA GCSE Business): Flashcards
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Practise the cards
12 cards from this deck
Key purpose of interpreting financial statements
Key purpose of interpreting financial statements
Assess if business doing well & identify areas for improvement
First method of analysing business performance
First method of analysing business performance
Analysing trends over time across multiple years
Second method of analysing business performance
Second method of analysing business performance
Comparing against competitors & industry standards (benchmarking)
What profitability ratios measure
What profitability ratios measure
How profitable a business is by comparing profit to revenue
What gross profit margin measures
What gross profit margin measures
How much gross profit earned relative to total revenue
Gross profit margin formula
Gross profit margin formula
(Gross Profit / Revenue) × 100
What is net profit
What is net profit
What remains after all expenses are deducted from revenue
What net profit margin measures
What net profit margin measures
Final profit compared to total revenue (overall efficiency)
Net profit margin formula
Net profit margin formula
(Net Profit / Revenue) × 100
Most successful businesses typically have
Most successful businesses typically have
Higher profit margins combined with strong sales volumes
Key consideration when using financial ratios
Key consideration when using financial ratios
They're tools to support decisions, not make them alone
Why use both comparison methods together
Why use both comparison methods together
Using only one can lead to misleading conclusions