Edexcel A-Level Business Theme 3.5 Assessing competitiveness overview quiz quiz

The assets and liabilities the firm holds at a single point in time, as a snapshot

Only the firm's cash balance, showing how much money it holds in the bank right now

The firm's share of the total market, set against the shares held by its competitors

Financial performance over a period, from revenue to profit for the year

Assets equal liabilities plus equity

Revenue equals costs

Profit equals cash

Current assets equal non-current assets

$20\%$

$50\%$

$200\%$

$30\%$

A low reliance on debt, with most of the firm's capital raised from shareholders' equity

Strong liquidity, meaning the firm can easily meet its short-term debts as they fall due

Heavy reliance on debt finance and higher financial risk

A high level of customer satisfaction, built on good quality and reliable service

The current ratio, a measure of liquidity

The gearing ratio, a measure of debt finance

Gross profit margin, a profitability ratio

Inventory (stock) turnover

$15\%$

$10\%$

$30\%$

$6.7\%$

It always cuts costs, since every member of staff who leaves saves the firm their wages

It can bring fresh ideas and new skills, and a low level is normal

It has no effect at all on a business, whatever level the turnover happens to reach

It directly increases absenteeism among the staff who remain working at the firm

Setting prices below the cost of production in order to drive competitors out of the market

Calculating the gearing ratio to see how far the firm depends on long-term debt finance

Comparing a firm's performance against the best in the industry to find gaps

Forecasting future sales by projecting past trends forward over the coming periods

It means that the firm's profit for the year is effectively guaranteed in the future

Market share never changes over time, so any movement at all must be a recording error

It indicates strong liquidity, since a large market share means plenty of cash coming in

The trend shows the firm is losing ground to rivals

Cutting costs, raising quality, innovating, building the brand and improving service

Ignoring rivals completely and paying no attention to what competitors are doing

Reducing all investment in the business in order to protect short-term cash flow

Deliberately raising labour turnover so that staffing stays fresh and wage costs fall