Assessing Business Performance: Marketing and Finance Data (AQA A Level Business): Revision Note

• Which products or services sell best and overall revenue trends

• Weekly till roll reports reveal a brand's eco-range brings in 30% of total sales revenue

• Repeat purchase rates, average order value and lifetime spending

• An online fashion store discovers 40% of customers buy more than once, signalling strong loyalty

• Website traffic, click-through rates, bounce rates, conversion rates and email metrics

• Google Analytics shows a high bounce rate on a business's mobile site, indicating poor usability

• Return on investment and promotional cost per sale

• Facebook advert reports show a £5 cost per new subscriber

• Customer needs, brand awareness and satisfaction

• A soft-drink focus group finds 70% of teenagers prefer fruity flavours

• Competitors’ pricing, promotions, product ranges and market positioning

• Mystery-shopper visits reveal rival cafés offer loyalty cards

• Public opinion and emerging trends through online mentions, particularly on social media

• Brandwatch data shows a spike in negative product mentions after a change of packaging

• Overall market size, growth rates and market share against key rivals

• A report from Nielsen indicates a snack bar has only 5% market share in the health foods sector

• Provides data-driven insights

  • It shows exactly which products, channels or campaigns are working well

  • Decisions can then be made, e.g. which products to redesign or withdraw

• Data quality issues

  • Errors or gaps in data entry or sampling bias can give a false picture of performance

  • Skilled data analysts that may reduce this can be expensive to employ or consult

• Identifies strengths and weaknesses:

  • Highlights top-performing market segments and underperforming ones

  • This can help a business decide where to focus promotional activities

• Lacks context

  • Data alone do not explain customer motivations, brand perception or wider market forces behind the numbers

  • Further research and consultation of other data (e.g. operations) may be needed

• Enables benchmarking and trend-spotting

  • It allows comparison over time or against competitors to spot emerging opportunities or threats

  • Businesses can then take action to protect market share

• Resource intensive

  • Collecting, organising and analysing data requires time

  • Specialist marketing reports can be very expensive to purchase

  • Insights may be outdated by the time they’re ready, especially in fast-moving markets

$\frac{\mathrm{Gross}\mathrm{profit}}{\mathrm{Revenue}}\times 100$

• The proportion of revenue remaining after direct costs of production have been deducted

$\frac{\mathrm{Operating}\mathrm{profit}}{\mathrm{Revenue}}\times 100$

• The proportion of revenue remaining after both direct and operating costs have been deducted

$\frac{\mathrm{Profit}\mathrm{for}\mathrm{the}\mathrm{year}}{\mathrm{Revenue}}\times 100$

• The proportion of revenue remaining as profit after all costs, interest and tax have been deducted

$\frac{\mathrm{Current}\mathrm{assets}}{\mathrm{Current}\mathrm{liabilities}}$

• The ability of a business to pay its short-term debts using its short-term assets

$\frac{\mathrm{Current}\mathrm{assets}-\mathrm{Inventory}}{\mathrm{Current}\mathrm{liabilities}}$

• A stricter test of short-term liquidity, excluding inventory in case it cannot be sold quickly

$\frac{\mathrm{Non}-\mathrm{current}\mathrm{liabilities}}{\mathrm{Total}\mathrm{equity}+\mathrm{Non}-\mathrm{current}\mathrm{liabilities}}\times 100$

• The proportion of a business's capital that comes from long-term borrowing rather than shareholders' funds

$\frac{\mathrm{Operating}\mathrm{profit}}{\mathrm{Total}\mathrm{equity}+\mathrm{Non}-\mathrm{current}\mathrm{liabilities}}\times 100$

• How efficiently a business generates profit from the total capital invested in it

• Objective and comparable

  • Figures can be compared over time, against competitors, and against industry benchmarks

• Historic

  • Financial statements reflect what has already happened, so problems may already be well underway before they show up in the data

• Reveals financial risk early

  • Falling liquidity or rising gearing can identify danger before a business runs out of cash

• Can be manipulated

  • Window dressing, such as delaying payments or changing accounting policies, can flatter the figures

• Supports investment and strategic decisions

  • Measures such as RoCE help managers judge whether capital is being used efficiently

• Lacks context

• Ratios alone do not explain customer or staff attitudes, or wider market conditions behind the numbers

• Reassures external stakeholders

  • Lenders, investors and suppliers rely on financial ratios to decide whether to offer credit or invest

• Costly to prepare and analyse

  • Producing accurate financial data and interpreting it properly often requires qualified accountants