Secondary 6 Business, Accounting and Financial Studies

The method of dividing related items in the financial statements to form ratios for evaluating performance.

Gross profit divided by net sales times 100, showing the margin left after deducting cost of sales.

Net profit divided by net sales times 100, showing the final margin after all expenses.

How efficiently capital generates returns; the higher the ratio, the more efficient the use of capital.

Current assets divided by current liabilities, measuring the ability to meet short-term debts; around 2 is conventionally sound.

Also called the acid-test ratio: (current assets less inventory) divided by current liabilities — stricter than the current ratio.

Cost of sales divided by average inventory; faster turnover ties up less capital in stock.

The share of debt in the capital structure; the higher the ratio, the greater the financial risk.

Net profit divided by the number of ordinary shares issued — a key return measure for shareholders.

Arranging transactions just before the year end to flatter the statements and distort ratios.

The branch of accounting that classifies, records and analyses costs to inform pricing and decisions.

A cost traceable directly to a product or department, such as direct materials and direct labour.

Also overheads: costs that cannot be traced directly to individual products, such as factory rent and machine depreciation.

A cost whose total stays constant within the relevant range, such as monthly rent and supervisors' salaries.

A cost whose total moves in proportion to output, such as raw materials and piece-rate wages.

Sales revenue minus variable costs; contribution absorbs fixed costs, and whatever remains is profit.

The technique analysing how changes in cost, price and volume affect profit, yielding break-even and target-profit volumes.

The volume or sales value at which contribution exactly covers fixed costs and profit is zero.

A cost already paid and unrecoverable; irrelevant to future decisions and to be ignored.

The return forgone from the best alternative when a choice is made — a relevant cost for decisions.

The management function of planning, raising and deploying a firm's funds to support operations and growth.

Meeting funding needs from within the firm, such as retained profits or selling idle assets.

Obtaining funds from outside the firm, such as bank loans, bond issues or share issues.

Borrowing funds with a promise to repay principal and interest, such as bank loans and bonds; interest is generally tax-deductible.

Raising funds by issuing new shares; investors become shareholders, sharing profit and control.

Profits accumulated and not distributed — the main source of internal financing.

Current assets minus current liabilities — the funds available for day-to-day operations.

A short-term facility to draw more than the balance in a current account — flexible but relatively costly.

Buying from suppliers on deferred payment — a common short-term source of funds.

The gap between actual figures and budget, used to review performance and control spending.

The decision to acquire long-term assets such as plant and machinery — large, long-lived and far-reaching.

The years of cumulative net cash inflows needed to recover the investment; the shorter, the lower the liquidity risk.

Average annual profit divided by average investment, expressed as a percentage.

The present value of future net cash inflows minus the investment cost; a positive figure marks a project worth considering.

A sum today is worth more than the same sum later, because it can be invested at once to earn returns.

The process of converting a future amount into present value at a discount rate.

The value today of an amount receivable in the future.

The coefficient derived from the discount rate; multiply a future amount by it to obtain present value.

The discount rate at which NPV equals zero; useful for comparing the returns of projects.

Higher expected returns usually come with higher risk; decisions must balance the two.

The assessment run by the Hong Kong Examinations and Assessment Authority; all BAFS marks come from it.

The part every candidate studies, tested in Paper 1 and worth 25% of the subject.

The in-depth study of the accounting or business management module, tested in Paper 2 and worth 75%.

Questions answered by choosing from options, covering the whole syllabus broadly.

Brief questions testing basic knowledge and key concepts.

Questions on preparing accounts, statements and computations, where format and method earn marks.

Questions supplying business scenarios to test application and analysis.

Long questions demanding in-depth discussion of open-ended issues.

Reporting candidates against preset standards on levels 1 to 5.

Official descriptions of what typical students at each level can do — useful for calibrating revision.

The four functions — planning, organising, leading and controlling — the spine of management introduction.

An elective module covering financial analysis, financing, investment appraisal and working capital management.

The elective module covering manpower planning, recruitment, training, appraisal and remuneration.

The elective module covering market research, customer behaviour and marketing strategies.

A question type supplying firm data to test application and analysis; answers must cite case details.

A long question demanding two-sided argument and in-depth discussion of an open issue.

Combining compulsory and elective concepts within a context — the hallmark of high-grade answers.

Words such as 'explain', 'compare', 'evaluate' and 'recommend' that signal what the answer must do.

The HKEAA's reference answers and marking criteria — check your work against them after practice.

The examination strategy of sharing time in proportion to the marks each question carries.