1. FM - Objectives Flashcards
What is strategy?
Strategy is concerned with the LT direction of the bus and how the obj of the business are achieved
What are the 2 types of strategy?
Business strategy
Financial strategy
What is business strategy?
Focuses on ensuring objectives are achieved by taking account of
- Fitting with the env
- Resources available
- Stakeholder concerns covered in BS
What is financial strategy?
Focuses on the financial decisions required achieve the business strategy
- Investment decisions
- Financial decisions
- Risk management decisions covered in FM
Give some examples of what investment decisions are concerned with
Concerned with spending money
such as buying plant and equip
Introducing new products
Give some examples of what financing decisions are concerned with
Concerned with raising money
- Whether finance should be equity, debt or combination
- If a combination is used, what proportion of each is best
- If dividends should be paid
Give some examples of what risk management decisions are concerned with
Concerned with managing the risks involved in investment and financing
- Interest rates
- Foreign exchange rates
What are stakeholders?
Stakeholders are individuals or groups with an interest in the performance of an organisation
Give some examples of some stakeholders and what they would typically include
- Shareholders interested in wealth
- Lenders interested in financial stability
- Directors/e’ees interested in career and job security
- Customers interested in quality and stable supply
- Suppliers interested in LT relationships
- Government interested in taxation and job creation
- Society at large interested in wealth creation and social and env welfare
Do all stakeholders naturally fit together?
No, inevitably the objectives of some stakeholder groups will conflict
What is the overriding objective of a company?
In order to provide clear direction, a single objective is usually prioritised. E.g. maximising the wealth of SH
The company may then satisfice
What does it mean if a company satisfices?
They take decisions which allow for the partial satisfaction of other stakeholders’ objectives
When does an agency relationship occur and what does it involve?
Occurs when one party (principal) employs another party (agent) to perform a task on their behalf
What is they key agency relationship in FM?
That between the shareholders and directors
Shareholders appoint directors (agents) who then
- Employ staff
- Deal with customers and suppliers
- Make strategic decisions
How does the SH and director agency relationship work?
Shareholders appoint directors (agents) who then
- Employ staff
- Deal with customers and suppliers
- Make strategic decisions
