One handout per topic, in plain English. Read the handout before the textbook, not after it — each one takes about five minutes and is designed to make the idea land first, so the formal version has somewhere to stick.
10 handoutsCambridge AS & A LevelPrintableFree to copy and share
A business exists to satisfy a want at a profit, and everything about how it is owned, sized and regulated flows from that.
Picture itTwo shops on the same street selling the same thing. One is owned by a sole trader whose house is at risk if it fails; the other by a company whose shareholders can only lose what they put in. Nothing about the product differs. Everything about the risk does.
Adding value and enterprise
A business converts inputs into outputs worth more than the inputs cost. Entrepreneurs take the risk of doing so, combining land, labour and capital. Most new businesses fail — usually from poor cash flow, weak market research or over-optimistic forecasting, not from a bad idea.
Legal structures
Sole trader and partnership: easy to form, unlimited liability. Private limited company: limited liability, shares not publicly traded. Public limited company: shares on the stock exchange, huge capital, but dilution of control and heavy disclosure. Social enterprises pursue a social objective alongside financial sustainability.
Stakeholders and their conflicts
Shareholders want returns, employees want pay and security, customers want quality and low prices, suppliers want prompt payment, communities want responsible behaviour, government wants tax and compliance. These conflict, and management is largely the job of trading them off.
Business objectives
Survival, profit, growth, market share, and increasingly social and environmental goals. SMART objectives are specific, measurable, achievable, realistic and time-bound — and vague objectives are one of the most common weaknesses in case study material.
The external environment
PEST analysis: political, economic, social and technological factors. Changes here are outside the firm's control, which is why the appropriate response is adaptation and contingency planning rather than resistance.
The bit that catches people outLimited liability limits what the owners lose, not what the business loses. A company can still fail owing large sums; the shareholders simply cannot be pursued for them beyond their investment.
Why might a growing family business resist converting to a plc?
Selling shares publicly dilutes ownership and can mean losing control, plus it brings disclosure requirements, shareholder pressure for short-term results and takeover risk.
Give one stakeholder conflict a business might face when automating production.
Shareholders want lower costs and higher profit; employees face redundancy and the local community loses jobs and spending — the same decision helps one group and harms another.
Edvia Free Resources · Business 9609 · Topic 1 — free to copy and share
Topic 2
Human resource management (AS)
People are the only resource that can choose how hard to work, which is why managing them is different from managing anything else.
Picture itA machine produces the same output whether you thank it or not. A person does not. That single asymmetry is why motivation theory exists, and why an organisation's structure and leadership style matter to its output rather than just its tidiness.
The HR cycle
Workforce planning, recruitment, selection, induction, training, appraisal, and — when necessary — redundancy or dismissal. Internal recruitment is cheaper and the candidate is known; external brings new ideas and a wider pool.
Organisational structure
Span of control is how many report to one manager; chain of command is the line of authority. Tall structures have narrow spans and many layers — close supervision, slow communication. Flat structures have wide spans — faster communication, more delegation, less supervision. Delayering removes levels to cut cost and speed decisions.
Motivation theories
Taylor: money motivates, so use piece rates. Mayo: social factors and attention matter (the Hawthorne effect). Maslow: a hierarchy from physiological to self-actualisation. Herzberg: hygiene factors prevent dissatisfaction but only motivators create satisfaction. Each explains part of the picture.
Financial and non-financial motivators
Financial: piece rate, commission, bonus, profit sharing, fringe benefits. Non-financial: job enrichment, job rotation, empowerment, teamworking, quality circles. Which works depends on the workforce, the job and the country's income level.
Leadership styles
Autocratic decides alone — fast, effective in a crisis, demotivating over time. Democratic consults — better decisions and commitment, slower. Laissez-faire delegates fully — works with expert, self-directed staff, poorly otherwise. The right style depends on the situation, not on the leader's preference.
The bit that catches people outHerzberg's key insight is that pay is a hygiene factor: too little causes dissatisfaction, but more of it does not create satisfaction. That is why pay rises produce a short-lived improvement in morale and then nothing.
The grown-up words
What it means
What it is called
Note
Number of subordinates reporting to a manager
span of control
Wide in flat structures
Line of authority through the organisation
chain of command
Long in tall structures
Removing layers of management
delayering
Cuts cost, widens spans
Factors preventing dissatisfaction but not motivating
hygiene factors
Herzberg: pay, conditions
Giving employees more challenging work
job enrichment
A non-financial motivator
Giving employees authority over their work
empowerment
Increases commitment
Leader who decides alone
autocratic leadership
Fast but demotivating
Check you have got it
Why might a piece-rate system reduce quality?
Workers are paid for quantity, so they have an incentive to work fast rather than carefully. Unless quality is separately checked and penalised, output volume rises at quality's expense.
Give one advantage and one disadvantage of a flat organisational structure.
Advantage: communication is faster and staff are more empowered, because there are fewer layers. Disadvantage: each manager supervises more people, so support and monitoring per employee is reduced.
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Topic 3
Marketing (AS)
Marketing is not selling — it is finding out what people will buy before you build it.
Picture itA firm spends two years perfecting a product nobody asked for, then hires a brilliant sales team to shift it. That is selling. Marketing would have asked first, and possibly built something different. The order of operations is the whole discipline.
Market research
Primary research is new data collected for your purpose — surveys, interviews, focus groups, observation, test marketing. Secondary is existing data — government statistics, trade reports, internal records. Primary is specific but expensive; secondary is cheap but may be out of date or collected for another purpose.
Sampling and reliability
Random, stratified, quota and cluster sampling each trade cost against representativeness. A small or badly chosen sample gives confident-looking numbers that mean nothing, which is why sample size and method are worth commenting on in any data question.
Segmentation, targeting and positioning
Markets are segmented by demographics, geography, psychographics or behaviour. A firm targets chosen segments and positions its product relative to competitors. Niche marketing serves a small specific segment with less competition; mass marketing serves a large one with economies of scale.
The marketing mix
Product, price, place, promotion — extended for services with people, process and physical evidence. The elements must be consistent: premium pricing with cheap packaging and discount-store distribution sends contradictory signals.
Pricing strategies and the product life cycle
Penetration pricing buys market share; skimming extracts profit from early adopters; cost-plus is simple but ignores the market; competitive and psychological pricing respond to perception. The life cycle — introduction, growth, maturity, decline — suggests different strategies at each stage, with extension strategies prolonging maturity.
The bit that catches people outMarket research reduces risk; it does not eliminate it. Respondents misreport what they will actually do, samples are imperfect, and markets change between the research and the launch. Treating research findings as certainty is a classic case-study error.
The grown-up words
What it means
What it is called
Note
New data collected for a specific purpose
primary research
Expensive but relevant
Existing data collected by others
secondary research
Cheap but may be dated
Dividing a market into groups of similar buyers
segmentation
By age, income, behaviour
Serving a small specialised market
niche marketing
Less competition, smaller volume
Product, price, place, promotion
marketing mix
Must be consistent
Low initial price to gain market share
penetration pricing
Common for new entrants
High initial price falling over time
skimming
Recovers development cost
Introduction, growth, maturity, decline
product life cycle
Extended by extension strategies
Check you have got it
Why might a firm launching a new smartphone use skimming rather than penetration pricing?
Early adopters will pay a premium, which recovers high development costs quickly, and a high price signals quality. The price can be lowered later to reach the mass market.
Give one reason a marketing mix might fail even with a good product.
If the elements are inconsistent — for example a luxury product sold through discount retailers — the positioning is confused and the target customers do not recognise it as being for them.
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Topic 4
Operations management (AS)
Operations is where the product actually gets made, and its central question is how to get quality up and cost down at the same time.
Picture itTwo bakeries. One bakes to order and never has waste but sometimes keeps customers waiting. The other bakes ahead and always has bread but throws some away. Neither is wrong — they have made different choices about inventory, and each choice has a cost.
Production methods
Job production makes one unique item — high skill, high cost, full customisation. Batch makes groups — some flexibility, some downtime for changeover. Flow production is continuous — very low unit cost, very inflexible, high setup capital. Mass customisation attempts flow economics with job variety.
Productivity and efficiency
Labour productivity = output ÷ number of workers. Raising it through training, better equipment or improved motivation lowers unit cost. Capacity utilisation = actual output ÷ maximum output × 100; running near 100% spreads fixed costs but leaves no room for maintenance or surges.
Inventory management
Just-in-time holds almost no stock, cutting storage costs and waste, but leaves no buffer against supply disruption. Just-in-case holds buffer stock — secure but expensive. The reorder level, lead time and buffer stock together determine when to order and how much.
Quality
Quality control inspects finished output — catches defects late, after cost has been incurred. Quality assurance builds quality into every stage — prevention rather than detection. TQM makes every employee responsible for quality, with kaizen as continuous small improvement.
Location and scale
Location decisions weigh proximity to market, labour cost and availability, transport links, government incentives and land cost. Growing brings economies of scale (purchasing, technical, financial, managerial) but eventually diseconomies from communication and coordination difficulty.
The bit that catches people outJust-in-time cuts cost and increases fragility at the same time — you cannot have one without the other. A firm that adopts JIT and then suffers a supplier failure has not been unlucky; it has taken a known risk in exchange for a known saving.
The grown-up words
What it means
What it is called
Note
Making one unique item at a time
job production
High skill, high cost
Continuous production of identical items
flow production
Low unit cost, inflexible
Output per worker
labour productivity
Raised by training and equipment
Actual output as a % of maximum
capacity utilisation
High spreads fixed costs
Holding minimal stock
just-in-time
Cheap but fragile
Stock held against disruption
buffer stock
Costs money to hold
Building quality in at every stage
quality assurance
Prevention not detection
Continuous small improvements
kaizen
Part of TQM
Check you have got it
A firm operates at 98% capacity utilisation. Give one problem this creates.
There is no slack for machine maintenance, staff training, unexpected orders or absence, so any disruption immediately causes missed deliveries and staff are under sustained pressure.
Why is quality assurance generally preferred to quality control?
Quality control detects defects after production, when the cost has already been incurred and materials wasted. Quality assurance prevents defects arising, reducing waste and building employee responsibility.
Edvia Free Resources · Business 9609 · Topic 4 — free to copy and share
Topic 5
Finance and accounting (AS)
A profitable business can still go bankrupt, because profit and cash are not the same thing.
Picture itYou sell 10 million rupees of goods on 90-day credit and your wages are due on Friday. Your income statement looks excellent. Your bank balance is empty. More businesses fail from running out of cash than from being unprofitable, and that is the distinction this topic exists to teach.
Sources of finance
Internal: retained profit, sale of assets, working capital management. External short-term: overdraft, trade credit, debt factoring. External long-term: bank loan, share issue, debentures, leasing, venture capital. Match the term of the finance to the term of the need — never fund a factory with an overdraft.
Cash flow forecasting
A cash flow forecast lists expected receipts and payments, giving the net cash flow and closing balance each month. It reveals when the business will need finance before the crisis arrives, which is its entire value. Improving cash flow: chase receivables, negotiate longer payables, delay non-essential spending, sell surplus assets.
Costs and break-even
Fixed costs do not vary with output; variable costs do. Contribution per unit = selling price − variable cost. Break-even output = fixed costs ÷ contribution per unit. The margin of safety is how far current output exceeds break-even — a direct measure of how much room the business has.
The financial statements
The income statement shows revenue, cost of sales, gross profit, expenses and profit for the year. The statement of financial position shows assets, liabilities and equity at one date. Together they answer 'did we make money?' and 'what are we worth?'
Ratio analysis
Gross margin and profit margin test profitability; ROCE tests how hard capital works; current and acid test ratios test liquidity. A ratio means nothing alone — it must be compared with last year, with a competitor, or with an industry norm.
The bit that catches people outBreak-even analysis assumes selling price and variable cost per unit stay constant at every output level, and that everything produced is sold. Neither is usually true, so it is a planning tool with real limits — worth stating when you use it.
The grown-up words
What it means
What it is called
Note
Profit kept in the business rather than distributed
retained profit
Internal, no interest
Selling receivables to raise cash quickly
debt factoring
Fast but costly
Selling price minus variable cost per unit
contribution
Goes towards fixed costs
Output where total revenue equals total cost
break-even output
Fixed costs / contribution
How far output exceeds break-even
margin of safety
Measures cushion
Profit as a percentage of capital employed
ROCE
Key profitability ratio
Current assets minus inventory over current liabilities
acid test ratio
Stricter liquidity test
Check you have got it
Fixed costs are 60 000, price is 25 and variable cost is 15. What is break-even output?
Profit is recorded when a sale is made, but the cash may arrive months later. If payments to suppliers and staff fall due before customers pay, the business has profit on paper and no cash to meet its obligations.
Edvia Free Resources · Business 9609 · Topic 5 — free to copy and share
Topic 6
Business and its environment (A2)
At A2 the question moves from what a business is to how it should decide — under uncertainty, with limited information and consequences it cannot fully predict.
Picture itA firm considering expansion has three plausible futures and no way to know which will happen. It cannot wait for certainty, because the opportunity closes. Strategic management is the discipline of making that call defensibly rather than confidently.
Strategic management
Strategy is long-term direction; tactics are short-term actions. Strategic analysis uses SWOT (internal strengths and weaknesses, external opportunities and threats), PEST, Porter's five forces and core competence analysis before any choice is made.
Business planning and forecasting
A business plan states objectives, market analysis, operations, finance and risk. Forecasts use extrapolation, moving averages and correlation, and every one of them assumes the past predicts the future — which fails precisely when it matters most.
Corporate social responsibility
Beyond legal compliance: environmental impact, ethical sourcing, employee welfare, community involvement. The business case is reputation, staff retention and customer loyalty; the criticism is greenwashing and cost. The triple bottom line measures profit, people and planet together.
Change management
Resistance to change comes from fear of the unknown, loss of status, inconvenience and distrust. Lewin's force field analysis weighs driving against restraining forces. Managing change well means communication, participation, training and visible support from the top.
Contingency planning and crisis management
Identify risks, assess probability and impact, plan responses, and rehearse them. A crisis handled well can strengthen a reputation; handled badly, it can end a business regardless of who was at fault.
The bit that catches people outCorporate social responsibility is not automatically a cost. Reduced waste saves money, better employee treatment cuts turnover, and reputation affects sales. Treating CSR purely as a sacrifice of profit is a weak analysis — but so is assuming it always pays.
The grown-up words
What it means
What it is called
Note
Long-term direction of the business
strategy
Tactics are short-term
Strengths, weaknesses, opportunities, threats
SWOT analysis
Internal and external
Rivalry, entrants, substitutes, buyers, suppliers
Porter's five forces
Industry attractiveness
Measuring profit, people and planet
triple bottom line
Broader than profit
Weighing driving against restraining forces
force field analysis
Lewin's change model
Preparing responses to possible crises
contingency planning
Rehearsed in advance
What the firm does better than rivals
core competence
Basis of advantage
Check you have got it
Why does resistance to change often come from middle managers rather than junior staff?
Change frequently reduces their span of control, alters their status, or makes their accumulated expertise less relevant — so they have more to lose from it than staff whose day-to-day work simply changes shape.
Give one limitation of extrapolating past sales data to forecast next year.
It assumes conditions continue unchanged. A new competitor, a technology shift or a recession breaks the trend, and extrapolation gives no warning because it only looks backwards.
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Topic 7
Human resource management (A2)
At A2, HR stops being about processes and starts being about how the organisation's culture shapes what people actually do.
Picture itTwo firms with identical policies and completely different atmospheres. In one, mistakes are reported and fixed. In the other, they are hidden. Nothing in the handbook explains the difference. Culture is the set of assumptions people act on when nobody is telling them what to do.
Organisational culture
Handy's four types: power culture (a central figure decides), role culture (rules and hierarchy), task culture (project teams), person culture (the organisation serves the individuals). Culture is very hard to change deliberately, which is why mergers so often struggle.
Management by objectives
Corporate objectives cascade into departmental and individual ones, so everyone knows how their work connects to the whole. It aligns effort and makes appraisal objective — but it can encourage focus on what is measured at the expense of what matters.
Employer–employee relations
Collective bargaining, trade unions, works councils, arbitration and conciliation. Industrial action is a symptom of failed communication as much as of conflicting interests. Employee participation tends to reduce disputes because people accept decisions they helped shape.
Workforce planning strategy
Forecasting future skill needs, auditing current capability, and closing the gap through recruitment, training, redeployment or redundancy. Hard HRM treats labour as a cost to minimise; soft HRM treats it as an asset to develop. Most firms sit somewhere between, sometimes inconsistently.
Measuring HR performance
Labour turnover = leavers ÷ average staff × 100. Absenteeism rate, productivity per employee, and training days per employee. High turnover is expensive in recruitment and lost knowledge, and is usually a symptom of something else.
The bit that catches people outHigh labour turnover is not always bad, and low turnover is not always good. Some turnover brings in new ideas and removes poor performers; very low turnover can mean stagnation. What matters is who is leaving and why.
The grown-up words
What it means
What it is called
Note
Shared assumptions guiding behaviour
organisational culture
Hard to change deliberately
Culture built on rules and hierarchy
role culture
Handy's classification
Cascading objectives through the organisation
management by objectives
Aligns effort
Negotiating terms for a group of workers
collective bargaining
Usually via a union
Treating labour as a cost to minimise
hard HRM
Soft HRM treats it as an asset
Leavers as a percentage of average staff
labour turnover
Expensive when high
Neutral third party imposing a settlement
arbitration
Conciliation only assists
Check you have got it
Why do mergers frequently fail on cultural grounds?
The two organisations have different unwritten assumptions about how decisions are made and what behaviour is rewarded. These are not visible in the due diligence and cannot be changed by announcement, so staff continue behaving as before and coordination breaks down.
Give one drawback of management by objectives.
People optimise what is measured. Objectives that are easy to quantify get pursued and important but unmeasured work — mentoring, quality, cooperation — is neglected.
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Topic 8
Marketing (A2)
At A2 marketing becomes strategic: choosing which markets to compete in and how, not just how to promote what you already make.
Picture itA firm can grow four ways: sell more of what it has to who it already serves, find new customers for it, make new things for existing customers, or do something entirely new. Each is riskier than the last. Ansoff's matrix is that sentence drawn as a grid.
Marketing strategy and Ansoff's matrix
Market penetration (existing product, existing market) is the lowest risk. Market development and product development are moderate. Diversification is the highest risk because both the product and the market are unfamiliar.
Sales forecasting techniques
Time series analysis separates trend, seasonal, cyclical and random variation. Moving averages smooth data to reveal a trend. Correlation and lines of best fit relate sales to another variable. All extrapolate, and all assume the underlying relationship persists.
Elasticity in pricing decisions
Price elasticity determines whether a price cut raises or lowers revenue. Income elasticity indicates whether sales will grow or shrink in a recession. Cross elasticity shows how exposed the firm is to a competitor's pricing. These are AS ideas applied to actual decisions.
Globalisation of marketing
Standardisation gives economies of scale and a consistent brand; adaptation respects local tastes, regulation and culture. Most firms use a 'glocal' approach — a global brand with local adjustments to product, promotion and price.
Digital and data-driven marketing
Social media, search advertising, influencer marketing and customer data analytics allow precise targeting and rapid feedback. The trade-offs are privacy concerns, reputational risk from viral criticism, and dependence on platforms whose rules can change overnight.
The bit that catches people outDiversification is not simply 'growth'. It puts the firm in an unfamiliar market with an unfamiliar product, so both sources of expertise are absent at once. That is why it has the highest failure rate of Ansoff's four strategies, and why it is usually done by acquisition.
The grown-up words
What it means
What it is called
Note
Grid of product and market growth options
Ansoff's matrix
Risk rises across it
Selling more of an existing product to existing customers
market penetration
Lowest risk
New product in a new market
diversification
Highest risk
Separating trend from seasonal variation
time series analysis
Used in forecasting
Smoothing data to reveal a trend
moving average
Removes short-term noise
Same marketing worldwide
standardisation
Economies of scale
Adjusting marketing to local markets
adaptation
Respects local tastes
Check you have got it
Why is market penetration usually the lowest-risk growth strategy?
The firm already understands both the product and the customers, so it is building on existing knowledge, brand and distribution rather than acquiring new capabilities.
Give one reason a global brand might adapt its product for a specific country.
Local tastes, regulations, income levels or religious and cultural norms may make the standard product unsuitable — so adaptation is necessary for the product to sell at all.
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Topic 9
Operations management (A2)
A2 operations is about deciding between options with numbers attached, and being honest about how much those numbers can be trusted.
Picture itA firm choosing between two machines can calculate the payback period, the average rate of return and the net present value of each. All three are arithmetic. None tells it whether the sales forecast underlying them is right — and that is where the actual risk sits.
Investment appraisal
Payback period — how long to recover the outlay; simple, ignores everything after payback. Average rate of return — average annual profit as a % of investment; uses all the data, ignores timing. Net present value — discounts future cash flows to today's value; the most complete, but depends entirely on the discount rate chosen.
Discounting and why it matters
Money in five years is worth less than money today, because of interest, inflation and risk. NPV applies a discount factor to each year's cash flow. A positive NPV means the project earns more than the required return — which is why the choice of discount rate can decide the answer.
Critical path analysis
A network of activities with durations, showing earliest and latest start and finish times. Float is spare time on an activity; the critical path is the chain with zero float, which sets the minimum project duration. Delay any critical activity and the whole project slips.
Lean production
Eliminating the seven wastes — overproduction, waiting, transport, over-processing, inventory, motion, defects. Tools: JIT, kaizen, cell production, total productive maintenance. Lean cuts cost and improves quality, but reduces slack and can leave the operation exposed to disruption.
Capacity and operational flexibility
Capacity can be adjusted by subcontracting, overtime, temporary staff, shift patterns or outsourcing. Each buys flexibility at a price — in cost, quality control or the loss of internal capability.
The bit that catches people outA positive NPV depends completely on the forecast cash flows and the discount rate. Change the discount rate by two points and a project can flip from accept to reject. Quoting NPV without commenting on the assumptions is presenting a guess as a fact.
The grown-up words
What it means
What it is called
Note
Time to recover the initial investment
payback period
Ignores later cash flows
Average annual profit over investment
average rate of return
Ignores timing
Discounted future cash flows minus outlay
net present value
Depends on the discount rate
Reducing future money to today's value
discounting
Reflects interest and risk
Sequence of activities with no spare time
critical path
Sets project duration
Spare time available on an activity
float
Zero on the critical path
Eliminating all forms of waste
lean production
Cuts cost, reduces slack
Check you have got it
Why can two appraisal methods rank the same two projects differently?
Payback favours projects with early cash returns and ignores everything after; NPV accounts for the full life and the timing of all flows. A project with slow but large later returns can win on NPV and lose on payback.
An activity has a float of 4 days. What does that mean?
It can be delayed by up to 4 days without delaying the overall project. It is not on the critical path.
Edvia Free Resources · Business 9609 · Topic 9 — free to copy and share
Topic 10
Finance and accounting (A2)
At A2 you interpret the accounts rather than just prepare them, and the interpretation depends on who is asking.
Picture itThe same set of accounts tells a lender one story and a potential buyer another. The lender wants to know whether the loan will be repaid; the buyer wants to know what the business will earn. Ratios do not have inherent meanings — they have meanings relative to a question.
Published accounts and their users
Shareholders, lenders, suppliers, employees, government and potential investors each read the same statements for different purposes. Published accounts are historic, can be presented favourably within the rules, and omit much that matters — brand value, staff quality, the order book.
High gearing means heavy reliance on debt: interest must be paid regardless of profit, so profits and losses are both amplified. It is not automatically bad — cheap debt raises returns to shareholders when trading is good — but it reduces resilience in a downturn.
Budgets and variance analysis
A variance is the difference between budgeted and actual figures — favourable or adverse. Variance analysis identifies where performance departed from plan so managers can investigate. The value is in asking why, not in calculating the number.
Costing methods
Absorption costing allocates all overheads to units, useful for pricing but with an arbitrary allocation basis. Marginal costing uses only variable costs and is better for short-run decisions such as accepting a special order. Activity-based costing assigns overheads by what actually drives them — more accurate, more work.
The bit that catches people outRatios are only meaningful in comparison — with previous years, with competitors, or with an industry norm. A current ratio of 1.4 is healthy in a supermarket and alarming in a manufacturer. Quoting a ratio without a benchmark says nothing.
The grown-up words
What it means
What it is called
Note
Long-term debt as a proportion of capital
gearing
High gearing amplifies returns and risk
Profit after tax divided by number of shares
earnings per share
An investor ratio
Share price divided by earnings per share
price/earnings ratio
Reflects expected growth
Difference between budgeted and actual
variance
Favourable or adverse
Charging all overheads to units of output
absorption costing
Allocation can be arbitrary
Using only variable costs for a decision
marginal costing
Good for special orders
Assigning overheads to their actual drivers
activity-based costing
Accurate but demanding
Check you have got it
Why might a highly geared firm struggle in a recession?
Interest payments are fixed and must be met whether or not the firm is profitable. With falling revenue, interest consumes a growing share of a shrinking profit, and lenders may refuse to refinance.
A firm has an adverse labour cost variance. Give two possible causes.
Wage rates were higher than budgeted (perhaps overtime or a pay rise), or more hours were worked than planned because of inefficiency, poor quality requiring rework, or higher output than budgeted.
Edvia Free Resources · Business 9609 · Topic 10 — free to copy and share
Like how this is taught?
Every handout starts with the idea in plain English and only then the formal version. That is how every class at Edvia College works — for two full years of Cambridge A Levels.