Evaluating Financial Performance Flashcards

All 6 cards in this deck

Give two comparisons a business can make to judge its financial performance.

Against its own figures from previous years (to spot trends) and against competitors' figures.

Why are employees interested in a business's financial performance?

Large profits may mean pay rises or a share of profits, while consistent losses threaten their job security.

Why are suppliers interested in a business's financial performance?

To be sure they will be paid; they may adjust prices or credit terms depending on how profitable the business is.

A graph shows a business's number of sales falling each year. How does this help it forecast profit?

The sales trend may continue downwards, so lower sales mean less revenue, which will reduce profits.

True or false? When choosing between two options, a business should always pick the one with the higher gross profit margin.

False. A higher gross profit margin is only one piece of evidence — expenses, net profit margin and non-financial factors may point the other way.

Give two pieces of non-financial evidence a business could weigh alongside profit margins when deciding between two options.

Any two of: effect on staff motivation, brand image/reputation, customer satisfaction, the business's aims and objectives.