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4P Framework Accounting Liquidity Accrual Basis Activity Balance

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4P Framework Accounting Liquidity Accrual Basis Activity Balance TU-A1300 TERMS 4P Framework Bankruptcy Divides the competitive means in marketing Treatment of a debtor’s all debts where the into four categories: product, place, debtor’s assets move into the control of the promotion and price. creditor. The assets are used to cover the debts of the debtor to the creditor. The Accounting Liquidity owners of the company receive that A company’s ability to pay its debt before proportion of the assets that was not used to they become due. Accounting liquidity cover the debts parameters, such as Current Ratio, compare a company’s current assets to its current Batch Production liabilities (liabilities which become due in the A form of production which enables the next 12 months). production of different products simultaneously in a production system. At the workstations, the products are worked on as Accrual Basis consecutive batches that move into the next An accounting principle in an income workstation through an intermediate storage. statement. Expenses are marked in the Whilst managing a batch production system, income statement as a factor of production is scheduling and the time associated with the received - not when it is paid for. Similarly, change in the product which is being worked an earning is marked in the income on are central. Batch production has an statement when the source of income has intermediate volume and it makes a been delivered to the customer – not when moderate variation in products possible. the customer pays for it. Earnings in a financial period are based on expenses and income on an accrual basis. Bottleneck That part in a production system that has the lowest maximum capacity, thus defining the Activity maximum capacity of the whole production A set of work which consumes time and system. The bottleneck might change resources and must be done in a project. according to which product is being produced Activities can be determined a duration, expenses and resource needs. Activities can often be divided into sub-activities. An Break-Even Point activity can be finished, unfinished or it might A point determined in break-even analysis. It not have started yet. is the amount of production so that the revenue covers both the variable and fixed Balance Sheet costs. A document that describes the financial state Bullwhip Effect of a company at the end of a financial period. Even small changes in demand in the The balance sheet specifies the value of the downstream of a supply chain multiply as the assets of a company as well as the amount change in demand spreads upstream in the of liabilities and equity used to finance the chain. company. A general principle is that the assets must always equal the sum of equity and liabilities. TU-A1300 TERMS Business Environment Cash Basis Consists of the external factors affecting a An accounting principle where business company. Usually, this refers to customers, transactions and the costs and revenue industry and the immediate players and associated with them are marked into books interest groups in an industry. In a broader when payments have been done, i.e., a sense, business environment covers also the company has received a payment from a more extensive and indirect societal aspects good it has delivered to its customer or a which can be mapped by conducting a company has paid for a factor of production. PESTEL-analysis. Cash flow calculations are made on a payment basis. Business Model Describes the key factors in creating and Cash Flow from Financing distributing value for customers. Business Activities model also shows the interlinkages between these factors. Business model can be used The cash flows from financing the company’s in the process of creating a strategy and a activities by the means of either equity or business plan. liabilities. These include the cash flows acquired by selling new shares, dividend payments as well as taken and paid off Business Model Canvas loans. Notice, that paid interests do not A model consisting of nine parts. Describes belong to cash flows from financing activities. the business a company is in. Instead, they are taken into account in the cash flow from operating activities. Cash flow Business Risks from financing activities is one of the three major cash flows presented in a financial Risks regarding business and its statement. management: for instance, project management risks which can be. Business risks cannot typically be insured (at least at a Cash Flow from Investing reasonable price) whereas operational risks (such as accidents and fires) can be. This is Activities because operational risks can be calculated Consists of the payments given and received more easily on a statistical basis. as fixed assets have been bought or sold. Cash flow from investing activities is one of the three major cash flows presented in a Capacity financial statement. Describes the production capability of a production system (or a part of it) in quantitative terms. Is typically expressed in Cash Flow from Operating the following form: amount of production / a Activities unit of time. The more expensive the A company’s income subtracted by the acquiring of capacity has been, the more company’s expenses. Both are accounted in essential it is to enhance the said capacity’s a payment basis. However, income and utilization. expenses concerning fixed asset acquirement or selling fixed assets are not Cash and Cash Equivalents taken into account in this cash flow. Cash Cash, receivables and other financial assets flow from operating activities is one of the that might temporarily be in a different form three major cash flows presented in a (but are nevertheless easily transformed into financial statement. cash). Financial assets are marked into the current assets section on the assets side of a balance sheet. TU-A1300 TERMS Continuous Process Production Deprecation A production process type where the Fixed assets typically generate incomes for production system has been designed to several years until they wear out. Therefore, produce efficiently with great volume and their investment costs are also distributed for remarkably low variety (for instance, an several years into the income statement. electric power plant, oil refinery). The flow These subtractions in the income statement units are not discrete. Rather the flow unit is are called deprecations. Deprecation lowers an amount of continuous material (often in a the book value of a fixed asset but causes no form a liquid). Process control and utilization cash flow. rate enhancement are key focus areas. Discounting Core Competency A calculating method which makes it possible A skill, capability or (a) piece(s) of knowledge to compare the values of cash flows which which is important to the customer. In order have been generated at different times. for a company to call something its core Discounting is used, for instance, when the competency, it should be better at it than its net present value (NPV) is calculated. competitors. A core competency should not be outsourced. Distribution Channel A path through which products or services Critical Activity are marketed and distributed from producers Is an activity that is on the critical path in a to end-users. project network. Therefore, critical activities determine the total duration of a project. The EBIT float of a critical activity is nonexistent and if a critical activity is delayed the whole project Business incomes subtracted with business will be delayed. expenses. It is an essential subtotal in an income statement that can be found in financial reports. In an income statement, Critical Path interest and taxes are subtracted from this A chain of critical activities in a project figure. Earnings Before Interest and Taxes network. It determines the earliest possible moment of time when the project can be Economies of Scale finished. If even one part of the critical path is delayed, the whole project will be delayed. A phenomenon, where the increase in volume leads to decreasing average costs. This is due to the fact that as volume Customer Value increases, fixed costs are distributed to a The value a customer experiences while greater number of units produced. using and acquiring a product or service Economies of scale is especially relevant in a contrasted with the costs and sacrifices of situation where fixed costs are substantially acquiring and using the product or service large in contrast with variable costs. Cycle Time The time it takes to produce a product. TU-A1300 TERMS Enterprise Value (EV) Fixed Assets The market value of business operations in a Types of property defined in the Business company. If a company is listed in a stock Tax Act. Fixed assets consist of buildings, market, its enterprise value can be calculated equipment, machinery, estate, patents and as the product of share price and the number securities. Fixed assets are in practice the shares, summed up with interest-bearing same as non-current assets in the balance debt. As the last step, cash and equivalents sheet. (liquid assets) are subtracted from this sum. Another method is to evaluate the future Fixed Costs cash flows of a company and to discount those cash flows into their present value. The Expenses which are, in a certain decision- sum of these cash flows in their present making situation, assumed to remain value is then the enterprise value. constant irrespective of the volume produced or the value of the said volume. Fixed costs is a central concept in a break-even analysis Equity which is often used for planning. The total assets of a company subtracted with its liabilities. Equity describes the Float proportion of the total value of the company which belongs to the owners of the company.
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