Key term
WJEC A-Level Business 601-5238-2
Enterprise and Starting a Business
Markets and Market Research
Topic overviewTypes of marketMarket size, market share and market trendsMarket segmentationThe degree of competition in a marketPerfect competition and monopolistic competitionOligopoly and monopolyConsumer protectionDemand and the demand curveSupply and the supply curveMarket equilibrium and changes in price and quantityPrice and income elasticity of demandInferior, normal and luxury goodsThe value of market researchPrimary market researchSecondary market researchQualitative and quantitative dataSampling and avoiding bias
Marketing
Topic overviewMarket orientation, product orientation and asset-led marketingThe marketing mixProduct and the product portfolioBranding, USP and differentiationThe product life cycleExtension strategiesThe product life cycle and cash flowThe Boston matrixPricing strategiesChoosing the right pricing strategyPromotion: above the line and below the linePlace and distribution channelsThe marketing mix in different contexts and global marketingNew technology in marketing
People in Business
Topic overviewThe flexible workforceNew technology and changing working practicesWorkforce planningThe recruitment process, job analysis and job descriptionsInternal and external recruitmentMethods of selectionTrainingAppraisalLabour productivity, absenteeism and labour turnoverOrganisational design and structuresDelegation, empowerment and delayeringMotivation theoriesFinancial and non-financial methods of motivationManagement and management by objectivesLeadership styles and theoriesEmployment rights, duties and equal opportunitiesTrade unions, conflict and dispute resolution
Operations Management
Topic overviewAdded valueJob, batch and flow productionChoosing the right method of productionProductivityCapacity utilisationNew technology in operationsLean production and kaizenJust-in-time and cell productionQuality control and quality assuranceTotal quality managementStock control and stock control diagramsPurchasing and working with suppliersInnovation, research and developmentInternal economies of scaleExternal economies of scaleDiseconomies of scale and the survival of small firms
Business Finance and Accounts
Topic overviewInternal sources of financeLoans, overdrafts and trade creditShare capital and venture capitalLeasing and debt factoringChoosing an appropriate source of financeFinance for entrepreneurs and SMEs in WalesRevenue, costs and profitTypes of costContribution and break-evenBreak-even charts and the margin of safetyBudgets and budgetingCash flow forecastingImproving cash flowThe income statementGross and net profit margins
Business Analysis and Decision-Making
Topic overviewPrice and income elasticity of demandSales forecasting and its reliabilityMoving averages and time-series analysisCorrelation, scatter graphs and extrapolationPresenting and interpreting data: pie charts, histograms and index numbersQualitative forecasting techniquesBudgets and budget variancesThe balance sheetWorking capital, capital employed and depreciationLiquidity ratios: the current ratio and the acid testReturn on capital employed and gearingInterpreting and comparing company accountsNon-financial measures and vision statementsDecision treesCritical path analysisCost benefit analysis and scientific decision-makingPayback period and average rate of returnNet present value and discounted cash flowSpecial orders and contribution
Strategy and Implementation
Topic overviewAims and objectivesSMART objectivesMission and vision statementsCorporate, divisional and functional strategyStrategy, tactics and corporate plansSWOT analysisPorter's Five ForcesThe Ansoff matrixOrganic growthMergers and takeoversHorizontal and vertical integrationFranchising as a method of growthLocation and relocation decisionsRationalisation and outsourcing production
Managing Change and Risk
Topic overviewInternal and external causes of changePlanned and unplanned changeThe effects of change on a businessManaging change effectivelyStorey's four approaches to managing changeResistance to changeLewin's three step processOrganisational culture and leadership in changeEvaluating the management of changeThe risks a business facesRisk assessment and preventative actionInsurable and uninsurable risksContingency planning and crisis management
The External Environment
Business Analysis and Decision-Making
Liquidity ratios: the current ratio and the acid test
- 3 things to know
- A2 Unit 3
Overview
Formula for the current ratio, formula for the acid test ratio and why inventory is removed from the acid test ratio.
What you need to know
Answer each one before you reveal it.
Your recallNot started
Numbers
State the formula for the current ratio.
Key term
State the range in which a current ratio is often said to be comfortable.
Questions from this subtopic
Each one with the model answer underneath.
- 1
Define liquidity.
Model answer
Liquidity is the ability of a business to meet its short-term debts as they fall due, by holding cash or assets that can quickly be turned into cash.
- 2
State the formula for the current ratio.
Model answer
Current ratio = current assets ÷ current liabilities, expressed as a ratio to one.
- 3
A business has current assets of £180,000 and current liabilities of £120,000. Calculate its current ratio.
Model answer
Its current ratio is 1.5:1.
- 4
Explain what a current ratio of 0.5:1 tells you about a business.
Model answer
It holds only 50p of current assets for every £1 it owes within the year, so it is very likely to struggle to pay its short-term debts.
- 5
State the range in which a current ratio is often said to be comfortable.
Model answer
A current ratio of roughly 1.5:1 to 2:1 is usually regarded as comfortable, though it varies a great deal by industry.
- 6
Explain why a very high current ratio can be a sign of poor management.
Model answer
It suggests too much money is tied up in stock, unpaid invoices or idle cash, none of which is earning a return for the business.
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