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Summary BTEC Business Unit 7 Business Decision Making notes £5.49   Add to cart

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Summary BTEC Business Unit 7 Business Decision Making notes

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BTEC Business Unit 7 Business Decision Making notes for exam

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  • October 27, 2022
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By: k-groenendijk • 2 year ago

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charliep22
Ratio analysis
Comparison between different pieces of data

Liquidity ratio
How liquid (profitable) a business is.

Shows for every £1 that a business owes and how much liquid stock does it have.

£50,000 owed but have liquid stock £10,000, not good

Liquidity ratio – current ratio = current assets/current liabilities add up all current assets and
liabilities and then you have a liquidity ratio. How solvent is the business?

Liquidity ratio – acid test = current assets – inventory / current liabilities

Current assets = buildings etc. Inventory = stock. Current liabilities = things have to pay off right now




Number is lower than one, the company is not in a good place, above 1 then good.

(Applies to all ratios)

Gross profit margin = profitability ratio

= Net sales – cost of goods sold / net sales

Performance ratio – measures how well a business turns its assets
into revenue
Fixed asset turnover = revenue/value of property, plant, and equipment (fixed assets)

Sales revenue per employee = total sales revenue / total number of employees

Interpreting ratios
Some are compared against a pound (below one bad, above one good)

Some are compared against themselves and just give a clearer interpretation of data (ratio of size of
business vs staff) Sq. M of space / member of staff to see how much space for each member of staff.

Threats and “what if” scenarios
- SWOT
- What if? – what if something goes wrong?
- PESTLE

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