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1
Q

What are the 4 things Strategy is concerned with?

A

1) Long term Direction
2) The environment
3) The resources it has
4) The return it makes to Shareholders

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2
Q

What are Mintzbergs 5 Ps of Strategy?

A

1) Plan
2) Ploy
3) Pattern
4) Position
5) Perspecitve

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3
Q

What are the 3 levels of strategy?

A

1) Corporate strategy
2) Business strategy
3) Functional (operational) strategy

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4
Q

What 3 things does strategic management involve?

A

1) Decisions about the scope of a businesses activities
2) Long term direction
3) Allocation of resources

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5
Q

What are the 4 key stages to the rational approach to strategic planning?

A

1) Strategic analysis
2) Strategic Choice
3) Implementation of chosen strategies
4) Review and Control

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6
Q

What is bounded rationality?

A

The idea that managers do the best they can within the limits of their circumstances, knowledge and experience

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7
Q

What are the 2 disadvantages of Formal Strategic Planning?

A

1) Bounded rationality

2) Prescriptive solutions for the long term

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8
Q

How does the emergent approach address the 2 problems of formal strategic planning?

A

1) Accepting the final goal is unclear
2) Adapting to human needs
3) Evolving continously

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9
Q

What are the 3 stages of the emergent approach?

A

1) Strategic analysis
2) Strategic choice and implementation
3) review and control

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10
Q

What are the 7 key characteristics of Strategic Decision as per Johnson and Scholes?

A

1) They concern the scope of the businesses activities
2) They match a businesses activities to its capabilities and the environment in which it operates
3) They revolve around the allocation of resources
4) They set off a chain of lesser operational decisions
5) Based on the values and expectations of senior management
6) They dictate the long term direction the business takes
7) They lead to change in the business

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11
Q

What are the 2 fundamental views of strategic planning?

A

1) Positioning based view

2) Resource based view

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12
Q

What 4 models relate to the external analysis?

A

1) PESTEL
2) Industry life cycle
3) Porters 5 forces
4) Competitor analysis

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13
Q

What 6 models relate to the internal analysis?

A

1) Resource Audit
2) Distinctive Competencies
3) Value Chain
4) Supply Chain
5) Product life cycle
6) BCG Matrix

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14
Q

What model/technique relates to the corporate appraisal stage?

A

The SWOT Technique

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15
Q

What are the 5 stages of Strategic analysis?

A

1) External Analysis
2) Internal Analysis
3) Corporate Appraisal
4) Missions, goals and objectives
5) Gap analysis

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16
Q

What helps with strategic options generation?

A

1) Resource Based Strategies

2) Positioning based Strategies (Porters Generic and Ansoff)

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17
Q

What does strategic options generation involve?

A

Coming up with new ideas on how to compete

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18
Q

What are the 4 stages of Strategic planning?

A

1) Strategic Analysis
2) Strategic Choice
3) Strategic Implementation
4) Review and Control

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19
Q

What are the 3 parts of Strategic Choice?

A

1) Strategic options generation
2) Strategic options evaluation
3) Strategy Selection

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20
Q

What are the 3 types of strategy that a business will end up with after undertaking strategic choice?

A

1) Competitive Strategy (how it will compete)
2) Product market Strategy (where it will compete)
3) Institutional Strategy (method of growth)

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21
Q

What are the 3 types of environment?

A

1) Physical
2) General (PESTEL)
3) Task (e.g. competitors, suppliers and customers.)

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22
Q

What are the 4 S’s used to describe a static environment?

A

1) Static (slow environmental change)
2) Single (product/market)
3) Simple (technology)
4) Safe

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23
Q

What are the 4 Ds of a Dynamic environment?

A

1) Dynamic (fast environmental change)
2) Diverse (many products/ many markets)
3) Difficult (due to the above)
4) Dangerous (ignoring the environment can be this)

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24
Q

What are the 6 constituent parts of PESTEL?

A

1) Political
2) Economic
3) Social
4) technology
5) Ecology
6) Legal

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25
Q

What are the 4 stages of the industry life cycle?

A

1) Introduction
2) Growth
3) Maturity
4) Decline

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26
Q

What are the 4 types of competitor?

A

1) Brand Competitor
2) Industry Competitor
3) Generic Competitor (completely different product)
4) Form Competitor (e.g matches vs lighter)

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27
Q

What are the 4 competitor reaction profiles?

A

1) Laid back
2) Tiger
3) Selective
4) Stochastic

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28
Q

What is a position (resource) audit?

A

Part of the planning process which examines the current state of the entity. The 9m model are the relevant factors.

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29
Q

What are the 4 support activities in the supply chain?

A

1) Firm infrastructure (planning, finance and QC)
2) Technology Development
3) Human resource management
4) Procurement (resource input acquisition)

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30
Q

What are the 5 primary activities in the value chain?

A

1) Inbound Logistics
2) Operations
3) Outbound Logistics
4) Marketing and Sales
5) Service

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31
Q

What do linkages, in relation to the value chain do?

A

They connect the activities of the value chain

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32
Q

What is a star (BCG)?

A

High market growth and high market share

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33
Q

What is a Question mark (BCG)?

A

Low market share, but high market growth

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34
Q

What is a dog (BCG)?

A

Low market share and Low market growth

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35
Q

What is a cash cow (BCG)?

A

High market share, but low market growth

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36
Q

In relation to BCG, what does HOLD mean?

A

Maintain the market position

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37
Q

In relation to BCG, what does HARVEST mean?

A

Take maximum earning in the short term at the expense of long term development

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38
Q

In relation to BCG, what does DIVEST mean?

A

Release resources for use elsewhere

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39
Q

In relation to BCG, what does BUILD mean?

A

Invest to build market share

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40
Q

What model deals with Stakeholder analysis?

A

Mendelow’s Power/Interest Matrix

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41
Q

What are Porters 4 Generic competitive strategies?

A

1) Cost leadership
2) Differentiation
3) Cost-focus
4) Differentiation focus

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42
Q

What are the 4 parts of Ansoffs Matrix?

A

1) Market Penetration
2) Product development
3) Market Development
4) Diversification

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43
Q

In Ansoff, a new product in a new market requires…

A

Diversification

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44
Q

In Ansoff, a new product in a current market requires…

A

Product development

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45
Q

In Ansoff, a current product in an existing market requires…

A

Market penetration

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46
Q

In Ansoff, an existing product in a new market requires…

A

Market development

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47
Q

What are Johnson and Scholes 3 criteria for a strategy?

A

1) Suitability (does it fit the firms operational circumstances)
2) Feasibility (can they actually do it?)
3) Acceptability (to stakeholders)

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48
Q

What are the 8 qualities of Good Information?

A

1) Accurate
2) Complete
3) Cost beneficial
4) User targeted
5) Relevant
6) Authoratative
7) Timely
8) Easy to use

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49
Q

What is the difference between data and information?

A

Information is data that is processed.

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50
Q

What are the 6 Criteria for effective information processing?

A

1) Complete
2) Accurate
3) Timely
4) Inalterability
5) Verifiability
6) Assessability

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51
Q

What is upside risk?

A

The risk that something will go right

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52
Q

What is the downside risk?

A

The risk that something will go wrong

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53
Q

What is pure risk?

A

Describes the possibility that something will go wrong

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54
Q

What is speculative risk?

A

Describes the possibility that something will go better than expected

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55
Q

What is risk appetite?

A

The extent to which a business is prepared to take on risks to achieve its objectives

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56
Q

What are the 3 types of attitude to risk?

A

1) A risk averse attitide
2) Risk Neutral
3) Risk seeking

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57
Q

Risk can be categorized in 2 fundamental ways. What are they?

A

Business and non business risk

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58
Q

What does business risk consist of?

A

1) Strategy
2) Enterprise
3) Product
4) Economic
5) technology
6) Property

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59
Q

What does financial risk consist of?

A

Credit and Market risk

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60
Q

What does operational risk consist of?

A

1) Process
2) People
3) Systems
4) Legal
5) Event risk

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61
Q

What is the difference between operational and business risks?

A

Operational risks face ALL businesses, whilst business risks are specific to that business.

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62
Q

What is risk exposure?

A

Exposure is the measure of the way in which a business is faced by risks.

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63
Q

What is risk volatility?

A

Volatility is how the factor to which a business is exposed is likely to alter.

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64
Q

What is risk impact?

A

Impact (or consequence) refers to measures of the amount of the loss if the
undesired outcome occurs.

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65
Q

What is risk probability?

A

Probability (or likelihood) means how likely it is that a particular outcome will
occur.

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66
Q

What is the formula for gross risk?

A

Gross risk = probability x impact.

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67
Q

What is risk management?

A

The identification, analysis and economic control of risks which threaten the assets or earning capacity of a business.

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68
Q

What are the 4 stages of the risk management process?

A

1) Awareness and identification
2) Analysis (assessment and measurement)
3) Response and control
4) Monitoring and reporting

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69
Q

What are the 4 responses to risk?

A

1) Avoidance
2) Reduction
3) Sharing
4) Acceptance

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70
Q

If you have a low risk impact and a low probability…

A

Accept the risk

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71
Q

If you have a high risk impact and a low probability…

A

Reduce the risk

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72
Q

If you have a low risk impact and a high probability…

A

Share the risk

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73
Q

If you have a high risk impact and a high probability…

A

Avoid the risk

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74
Q

What are the 3 main types of crisis?

A

1) Financial crisis (e.g. liquidity)
2) Public relations crisis
3) Strategic crisis (e.g. changes in the business environment)

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75
Q

In a disaster recovery plan, what is a standby procedure?

A

Some operations can be performed while normal

services are disrupted.

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76
Q

In a disaster recovery plan, what is a recovery procedure?

A

Once the cause of the breakdown has been discovered or

corrected.

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77
Q

In a disaster recovery plan, what is a personnel management procedure?

A

Policies to ensure that the recovery and standby procedures are implemented
properly.

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78
Q

Which type of company does not have perpetual succession?

A

Sole Trader

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79
Q

What is the difference between a joint venture and a strategic alliance?

A

A strategic alliance is informal

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80
Q

What are the limits of financial statements?

A

1) Conventionalised representation
2) Backward looking
3) Omission of non financial information

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81
Q

What is the difference between Information systems and Information technology?

A

Information systems is software, whilst Technology is hardware

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82
Q

What are the 7 types of Information Systems?

A

1) Transaction processing system (TPS)
2) Management information system (MIS)
3) Executive support system (ESS)
4) Decision support system (DSS)
5) Expert system
6) Knowledge work systems (KWS)
7) Office automation systems (OAS)

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83
Q

Its staff regularly use Word Processing software to help productivity.

A

Office automation system

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84
Q

Customers can fill out an online form that asks detailed questions depending on the make, model and age of their car. This allows them to create a report on the
car’s safety and estimated value.

A

Expert System

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85
Q

When a customer buys a product from DA the details of what they’ve bought and how much it cost are captured in the invoicing system.

A

Transaction processing system (TPS)

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86
Q

Board members can examine yearly sales by product line in a dashboard of high level graphs and figures

A

Executive support system (ESS)

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87
Q

Staff use video-conferencing software to help share knowledge when they’re on the road.

A

Knowledge work systems (KWS)

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88
Q

Middle management can see monthly sales by location and product using the
reporting software.

A

Management information system (MIS)

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89
Q

Finance uses spreadsheets to model what will happen to cash flows if sales
decrease by 10%.

A

Decision support system (DSS)

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90
Q

What are the 6 qualities of a secure information system?

A

1) Availability
2) Confidentiality
3) Integrity
4) Authenticity
5) Non-repudiation
6) Authorisation

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91
Q

What are the 6 controls for security information?

A

1) Prevention
2) Detection
3) Deterrance
4) Recovery procedures
5) Correction procedures
6) Threat avoidance

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92
Q

What is Data verification, as an integrity control?

A

Data verification involves ensuring data entered matches source
documents.

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93
Q

What is Data validation, as an integrity control?

A

Data validation involves ensuring that data entered is not incomplete or
unreasonable

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94
Q

What are the 5 checks for data validation?

A

1) Check digits
2) Control totals (Does the number of documents entered total match the number of documents the user has?)
3) Hash totals
4) Range Checks
5) Limit Checks

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95
Q

What is a logical access system?

A

Use of passwords

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96
Q

What are the 4 finance functions?

A

1) Recording financial transactions
2) Management accounting:
3) Financial reporting
4) Treasury management

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97
Q

What are the 2 fundamental qualitative characteristics of financial statements?

A

1) Relevance

2) Faithfulness of representation

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98
Q

What are the 4 types of information?

A

1) Planning Information
2) Operational information
3) Tactical information
4) Strategic information

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99
Q

What does planning information do?

A

it helps people involved in the planning process

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100
Q

What does operational information do?

A

It helps people carry out their day to day activities (e.g. how many operatives needed on one shift)

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101
Q

What does tactical information do?

A

It helps people deal with short term issues and opportunities

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102
Q

What does strategic information do?

A

Supports major long term decision making

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103
Q

What 6 things are management accounting responsible for?

A

1) Cost accounting
2) Budgeting
3) Management decision making
4) Performance measurement
5) Capital budgeting and decision making
6) Pricing

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104
Q

What 6 things are treasury management responsible for?

A

1) Cash budgets
2) Long term finance decisions
3) Managing Financial risk
4) Raising Investment finance
5) Managing of cash (includes FX)
6) Management of working capital

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105
Q

What 3 things are financial reporting responsible for?

A

1) Preparation of financial statements
2) Tax
3) Provision of information to external regulators

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106
Q

What 3 things do NFPs use to measure performance?

A

1) Economy (reduction of costs)
2) Effectiveness (measure of achievement)
3) Efficiency ( effective and minimum cost)

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107
Q

What is a critical success factor?

A

The products/features that are particularly valued by customers and thus what the firm needs to really excel at

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108
Q

What are the performance standards that are used to measure the achievement of the CSF?

A

Key Performance Indicators

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109
Q

Who issues the sustainability reporting guidelines?

A

The Global Reporting Initiative

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110
Q

What 3 categories does a GRI report have?

A

Economic, Social and Environmental

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111
Q

What are the 4 categories of a balanced scorecard?

A

1) Customer (how do they see us?)
2) Internal business processes (what are we good at?)
3) Innovation and learning (long term success factors)
4) FInancial

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112
Q

What are the 6 types of money market financial instruments?

A

1) Treasury Bills
2) Deposits
3) Certificates of deposits
4) Gilts
5) Bonds
6) Commerical Paper

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113
Q

What is the difference between equity and debt?

A

Equity is from shareholders, debt is from loans

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114
Q

In terms of risk and return, what do debt holders face?

A

Debt holders face lower risk, but lower returns.

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115
Q

In terms of risk and return, what do equity holders face?

A

Equity holders face higher risk, but higher returns.

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116
Q

What is working capital?

A

Working capital are all the current assets and liabilities that are used for trading (e.g. inventories)

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117
Q

What is the aggressive method of financing current assets?

A

Short term finance (e.g. overdrafts) being used to pay for all of the fluctuating current assets and some of the permanent assets.

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118
Q

What is the defensive method of financing current assets?

A

Short term finance only covers a small part of the fluctuating current assets. Long term finance covers all of the permanent assets and some of the fluctuating assets.

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119
Q

Why is short term finance cheaper than long term finance?

A

1) Long term finance is more risky, so higher interest rates

2) Long term finance may not allow early repayment

120
Q

What are the 2 risks of short term finance?

A

1) Renewal risk (bank could refuse)

2) Interest rate risk

121
Q

What are the 4 motives that a business would want to hold onto cash?

A

1) Transactions motive (e.g. paying wages)
2) FInance motive (e.g. interest payments)
3) Precautionary motive (rainy day fund)
4) Investment motive

122
Q

What are the 4 benefits of financial intermediation?

A

1) Small amounts deposited by savers can be pooled to provide larger loan packages to businesses
2) Short term savings can be transferred to long term borrowing
3) Search costs for firms seeking loan reduced
4) Risk is reduced for customers as their money not tied up to one borrower.

123
Q

What is the clearing mechanism?

A

This is the mechanism which determines the interval between when money is paid into the bank and when it is usable.

124
Q

What are the 5 clearing mechanisms?

A

1) General clearing (slow)
2) Electronic fund transfer (e.g.card readers)
3) BACS (quick-usually used for salaries)
4) Clearing House Automated Payment System (CHAPS-for large amounts. Quick).
5) SWIFT (international, quick)

125
Q

What are the 2 types of banks?

A

Primary and secondary banks

126
Q

What is monetary stability?

A

To do with macroeconomics

127
Q

What is financial stability?

A

To do with reducing systemic risk

128
Q

What are the 2 entities that monitor financial stability?

A

1) Financial Policy Commitee (concerned with large scale)

2) Prudential Regulation Authority (concerned with individual entities)

129
Q

What are the 4 relationships between customer and bank?

A

1) Receivable / Payable
2) Bailor / Bailee
3) Principal / Agent
4) Mortgagor / Mortgagee

130
Q

What are marketable securities?

A

Short term, highly liquid investments that can be easily converted into cash.

131
Q

What are the 6 main types of financial instruments?

A

1) Treasury Bills
2) Deposits
3) Certificates of deposit
4) Gilts
5) Bonds
6) Commerical Paper

132
Q

What are the main points regarding treasury bills?

A

1) Government backed debt
2) Large (50k +)
3) Run for 3 months
4) Low risk

133
Q

What are the main points regarding deposits?

A

1) Money customers have given to banks

2) Higher risk/ return (than T-bills)

134
Q

What are the main points regarding CDs?

A

Same as deposits but large (50k+), fixed term and they are also tradeable. Deposits are not.

135
Q

What are the main points regarding Gilts?

A

Very similar to T-bills, but they are longer term. Still low risk and return.

136
Q

What are the main points regarding Bonds?

A

Company debt. High risk/return

137
Q

What are the main points regarding Commercial Paper?

A

Same as bonds, but only issued by large companies

138
Q

What are the 6 main Capital markets?

A

1) Stock Market
2) Banking System
3) Bond Markets
4) Leasing
5) Debt factoring
6) International markets

139
Q

What are the 3 sources of equity finance?

A

1) Retained Earnings
2) Rights issue
3) New Issue of shares

140
Q

What are the 4 factors to consider when making rights issue?

A

1) Issue costs (admin)
2) Shareholder reactions
3) Control
4) Unlisted companies (can’t easily trade shares)

141
Q

What are the 4 main sources of debt finance?

A

1) Overdrafts
2) Debt factoring
3) Loan stock (loans)
4) Leasing

142
Q

What is the coupon rate?

A

Interest rate

143
Q

What is the redemption value of a loan

A

Extra value. If a loan is issued at 10k, but the borrower has to repay 15k

144
Q

What is the redemption date of the loan?

A

When the loan is repayable

145
Q

What are the 2 types of lease?

A

FInance Lease and Operating Lease

146
Q

What are the 3 ways a small business can get money?

A

1) Through Business Angels
2) Venture Capitalists
3) Through AIM

147
Q

What are the 3 ways in which exporters can reduce their risk?

A

1) Bill of Exchange
2) Letters of Credit
3) Export Credit Insurance

148
Q

What 3 things do professional accountants do?

A

1) They measure (e.g. asset value)
2) They make disclosures
3) They help stakeholders make decisions

149
Q

What are the 2 major areas of work for an accountant?

A

1) FInancial reporting

2) Assurance

150
Q

Who sets the international accounting standards?

A

The IASB (International Accounting Standards Board)

151
Q

In addition to the standard requirements, what extra requirements do public practice accountants need?

A

1) Practicing Certificate
2) Code of Ethics
3) Professional Indemnity Insurance

152
Q

What are the 4 reserved areas of practice?

A

1) Statutory Audit
2) Investment business
3) Insolvency
4) Probate (dealing with wills)

153
Q

What are the 2 approaches to ethical principles?

A

1) Compliance based (rules based)

2) Ethics based (principle based)

154
Q

What are the 5 fundamental ethical principles of the ICAEW?

A

1) Confidentiality
2) Objectivity
3) Professional competence and due care
4) Integrity
5) Professional behaviour

155
Q

Which body establishes a code of ethics?

A

International Federation of Accountants (IFAC)

156
Q

Which body is the highest in the UK?

A

The Consultative Committee of Accountancy Bodies (CCAB).

157
Q

Which are the 5 members of the CCAB?

A

1) ICAEW
2) ICAS
3) ICAI (Ireland)
4) ACCA
5) CIPFA

158
Q

What does the ICAEW stand for?

A

Institute of Chartered accountants in England and Wales

159
Q

What does ICAS stand for?

A

Institute of Chartered accountants of England and Wales

160
Q

What does ICAI stand for?

A

Institute of Chartered accountants of Ireland

161
Q

What does ACCA stand for?

A

Association of chartered certified accountants

162
Q

What does CIPFA stand for?

A

Chartered Institute of public finance and accountancy

163
Q

What is the aim of IFAC?

A

IFAC’s aim is to protect the public interest. It does this by providing best practice guidance for professional accountants.

164
Q

What 4 things should the accountancy regulation NOT do?

A

1) Protect vested interests from competition
2) Be for personal gain
3) Be disproportionate to the benefit gained
4) Distort competition

165
Q

What are the 4 methods of regulation?

A

1) Government legislation
2) Delegated legislation (via regulators)
3) Self regulation
4) A mix of the above

166
Q

Who are the key competitors of an effective oversight mechanism?

A

1) Government
2) Regulators
3) Members of the profession
4) The public

167
Q

Who is the head of the Oversight mechanism?

A

The Professional Oversight Board. This is an organ of the FRC

168
Q

What are the 3 main roles of the Professional Oversight Board?

A

1) Independent oversight
2) Statutory oversight of the supervision of the auditing profession
3) Statutory monitoring of the quality of the auditing

169
Q

Where does the POB not have statutory powers?

A

In non audit areas

170
Q

For non audit areas, how do the CCAB bodies need to respond to the POB’s recommendations?

A

They need to consider them carefully, and either implement them in a reasonable time, or give a reason in writing why they wont.

171
Q

For audit areas, how do the CCAB bodies need to respond to the POB’s recommendations?

A

They need to do what they are told. Here, the POB has statutory powers. It can refer matters to the Professional Discipline and CRR.

172
Q

What 5 things does the FRC do?

A

1) Setting standards (Corporate governance, financial reporting etc.)
2) Monitor and review the quality of audit and financial reporting
3) Regulation of the audit profession
4) Overseeing self regulation in the accountancy/audit/actuarial profession
5) Act as the ultimate disciplinary body

173
Q

What are the 2 main divisions under the FRC?

A

The Conduct Committee and the Codes and Standards Committee

174
Q

Which divisions are under the FRC’s Conduct Committee?

A

1) Professional Oversight
2) Professional Discipline
3) Corporate reporting review
4) Audit Quality review

175
Q

Which divisions are under the FRC’s Codes and Standards Committee?

A

1) Actuarial Policy
2) Audit and Assurance
3) Accounting and reporting policy
4) Corporate governance

176
Q

What does the Accounting and Reporting Policy (ARP) do?

A

Make changes to the Accounting Standards

177
Q

What does the Audit and Assurance (AA) under the FRC do?

A

They deal with standards for audit

178
Q

What does the Corporate Reporting Review (CRR) under the FRC do?

A

Looks at situations where big firms have not followed the requirements of the companies act.

179
Q

What does the Professional Discipline (PD) under the FRC do?

A

Investigate any allegations of misconduct, where it is considered to be a public interest.

180
Q

What does the UKLA stand for?

A

The UK Listing Authority

181
Q

What is the role of the Financial Ombudsmen?

A

They settle disputes between providers of financial services and their customers

182
Q

The ICAEW have their own disciplinary/complaints procedures. Who is responsible for this?

A

The Professional Standards Department (PSD)

183
Q

What are the 3 bye laws which if broken mean you can bring a claim to the ICAEW?

A

1) Breaching a regulation
2) Departing from guidance
3) Bringing discredit to the ICAEW

184
Q

What is the procedure for the ICAEW complaints?

A

1) Conciliation (try and mediate things)
2) Investigation (if conciliation doesn’t work)
3) Disciplinary proceedings (if the investigation reveals something)

185
Q

What is the agency problem?

A

The idea that the actions of the agent may not be congruent with the goals of the principal. The agent would be the managers of the company. The principal would be the shareholders.

186
Q

What does corporate governance seek to do?

A

Corporate governance seeks to protect the stakeholders of a company against some of the actions of that company

187
Q

What are the 4 broad perspectives on Corporate governance?

A

1) The Corporate Perspective
2) The Public Policy Perspective
3) The Stakeholder Perspective
4) The Stewardship Perspective

188
Q

With regards to the Corporate Perspective on Corporate governance, how can you identify them?

A

This perspective cares about the shareholders. It seeks to maximise wealth

189
Q

With regards to the Public Policy Perspective on Corporate governance, how can you identify them?

A

This perspective cares about everyone, especially the public at large.

190
Q

With regards to the Stakeholder Perspective on Corporate governance, how can you identify them?

A

It cares about Stakeholders of the company only

191
Q

With regards to the Stewardship Perspective on Corporate governance, how can you identify them?

A

It only cares about the company (as a separate legal entity) itself.

192
Q

What are the 2 broad types of financial systems?

A

1) Bank based systems

2) Market based systems

193
Q

What is a bank based financial system?

A

This is where households put their money into banks, rather than physical investments. This means that the banks have a lot of power (and are heavily regulated). Most businesses are financed by banks and there is heavy integration. Markets are VOLATILE as businesses are financed by debt from the bank, and thus interest payments need to be paid regardless of profit fluctuations. It is therefore more risky.

194
Q

What is a market based financial system?

A

Households bear more risk than in the bank based system. Therefore there is more of a market for physical assets, which means ultimately that people put less money in the bank, making banks less important. Equity finance is more important than bank debt finance.

195
Q

Is the UK Corporate governance code based in law?

A

No, purely guidance

196
Q

With regards to the UK Corporate governance code, what is the comply or explain feature?

A

A company must make a disclosure in its financial statements with regards to if they have complied with the code. If they haven’t they must explain why, and then it is up to the shareholders to decide if they agree.

197
Q

What are the 5 main principles for companies according to the UK Corporate governance code?

A

1) Leadership
2) Board effectiveness
3) Accountability/Audit
4) Renumeration
5) Investor relationships

198
Q

What is the board of a company made up of?

A

1) Executive directors

2) Non executive directors

199
Q

What proportion of the board should NEDs make up?

A

50% at least.

200
Q

For a FTSE 350 company, how often do members of the board need to be re-elected?

A

Every year

201
Q

For non FTSE 350 companies, when should members of the board be re-elected?

A

The first AGM after their appointment, and every 3 years after that.

202
Q

When should NEDs be re-elected?

A

Every year, if they have served for more than 9 years.

203
Q

What are the 3 committees supporting corporate governance?

A

1) Audit committee
2) Renumeration committee
3) Nomination committee

204
Q

What is the audit committee?

A

Responsible for the review of the financial statements. Made up of 3 NEDs (2 in smaller firms). These guys deal with the external auditors (e.g. reviewing their independence)

205
Q

What is the remuneration committee?

A

Responsible for how much the directors should get paid. Usually consists of 3 NEDs (2 for smaller firms)

206
Q

What is the nomination committee?

A

Responsible for recommending the appointment of NEDs and EDs. Must have at least 3 members, the majority of which should be NEDs

207
Q

What are the 2 types of board structures?

A

1) Unitary Board

2) Dual Board

208
Q

What are the 2 components of a dual board?

A

1) Management board (EDs)

2) Supervisory Board (NEDs)

209
Q

What is the key difference between the unitary board system and the dual board system?

A

Dual board system is split into 2 components, and the NEDs are elected by both the shareholders AND employees.

210
Q

What is the goal of internal controls?

A

To help a company achieve its objectives

211
Q

In what 3 ways does Internal controls help a company achieve its objectives?

A

1) Effective and efficient operations
2) Reliable Financial reporting
3) Compliance with applicable laws and regulation

212
Q

In order to maintain a sound system of internal control, what does the Governance code recommend?

A

Use of the Turnbull Guidance

213
Q

What 6 things does an internal control system help a company do?

A

1) Operate effectively and efficiently
2) Respond appropriately to RISKS
3) Safeguard assets
4) Liabilities are identified and managed
5) Ensure the quality of internal and external reporting
6) Compliance with applicable laws and regulation

214
Q

What is the stewardship code?

A

This applies to institutional investors (e.g. pension funds).

215
Q

What are the 7 principles of the stewardship code?

A

1) Publicly disclose how they are going to do their job
2) How they will manage their conflicts of interest
3) Monitor the companies they invest in
4) Guidelines on escalation
5) Working collectively with other investors
6) Clear policy on voting
7) Periodic reporting on their stewardship

216
Q

What are the 5 Nolan Principles?

A

IOOAH

1) Integrity
2) Objectivity
3) Openness
4) Accountability
5) Honesty

217
Q

What are Phillipa Foster Back’s 5 business values?

A

FRTTT

1) Fairness
2) Responsibility
3) Trust
4) Transparency
5) Truth

218
Q

What are Phillipa Foster Back’s 5 attributes and behaviors of ethical leaders?

A

FACHO

1) Fair mindedness
2) Ability to listen
3) Courage
4) Honesty
5) Openness

219
Q

What is the EMS?

A

EMS stands for the environmental management systems. It consists of a set of procedures for compliance with environmental policy objectives.

220
Q

What are Neil Cowans 4 key aspects of business ethics?

A

TROT

1) Transparency
2) Real acceptance of responsibility
3) Openness
4) Trust

221
Q

Which act protects whistleblowers?

A

The Public Interest Disclosure Act

222
Q

What 5 factors determine demand?

A

1) Price
2) Inter-related goods (e.g. substitutes and complements)
3) Income levels
4) Fashion and expectation
5) Income distribution

223
Q

What 5 factors determine supply?

A

1) Price (that they can get for the goods)
2) Prices of other goods
3) Prices of related goods
4) Costs of making the goods
5) Changes in technology

224
Q

What is equilibrium price?

A

The price of a good at which the volume demanded by consumers and the volume businesses are willing to supply are the same.

225
Q

What is the formula for the price elasticity of demand?

A

Change in Quantity (%) / Change in Price (%)

226
Q

When PED is less than 1, what does this mean?

A

Inelastic demand

227
Q

When PED is more than 1, what does this mean?

A

Elastic demand

228
Q

When PED is 1, what does this mean?

A

Unit elasticity

229
Q

What are the 6 factors influencing PED for a good?

A

1) Availability of substitutes
2) Time horizon
3) Competitors pricing
4) Luxuries and necessities
5) % of income spent on a good
6) Habit forming goods

230
Q

What is positive price elasticity of demand?

A

Where increasing price, actually increases demand.

231
Q

What 2 types of goods reflect a positive PED?

A

1) Giffen good

2) Veblen good

232
Q

What is income elasticity of demand?

A

How much demand changes when income rises

233
Q

What is the equation for income elasticity of demand?

A

% Change in Quantity demanded / % Change in household income

234
Q

What is cross elasticity of demand?

A

How much the demand for one good changes in response to a change in price of another good

235
Q

What is the equation for cross elasticity of demand?

A

% change in quantity of good A demanded / % change in the price of good B

236
Q

What is Price elasticity of supply?

A

A measure of the responsiveness of supply to a change in price

237
Q

What is the equation for Price elasticity of supply?

A

% change in quantity supplied / % change in price

238
Q

If income elasticity is greater than 1, what type of good is this?

A

Luxury good

239
Q

If income elasticity is between 1 and 0, what type of good is this?

A

Normal good

240
Q

If income elasticity is lower than 1, what type of good is this?

A

Inferior good

241
Q

When cross elasticity is positive, two goods are…

A

Substitutes

242
Q

When cross elasticity is negative, two goods are…

A

Complements

243
Q

When cross elasticity is 0, two goods are…

A

Unrelated

244
Q

What are the 5 types of market structure?

A

1) Perfect competition
2) Monopoly
3) Monopolistic competition
4) Oligopoly
5) Duopoly

245
Q

What are the 5 characteristics of Perfect competition?

A

1) Many small buyers and sellers
2) Low barriers to entry
3) Perfect information
4) Homogenous products
5) No collusion

246
Q

What kind of profit does perfect competition result in?

A

Normal profit only

247
Q

In regards to price, what are suppliers in a Perfect Competition market?

A

Price takers-they cannot change the price.

248
Q

What are the 3 characteristics of Monopoly structure?

A

1) One (main) supplier
2) Many buyers
3) High Barriers to entry

249
Q

What kind of profit does a monopoly structure result in?

A

Supernormal profits

250
Q

What are the 6 characteristics of Monopoly competition?

A

1) Many buyers and sellers
2) Some product differenitation
3) Branding (in order to achieve differentiation)
4) Some customer loyalty
5) Low barriers to entry
6) Significant advertising

251
Q

What kind of profit does a monopoly competition result in?

A

Normal profits in the long run

252
Q

What are the 3 arguments in favour of the free market (perfect competition)?

A

1) Efficient
2) Free markets are impersonal (rational)
3) Efficient allocation of economic resources (more efficient than the gvt)

253
Q

What 4 factors can cause market failure?

A

1) Market imperfection
2) Externality
3) Public goods
4) Economies of scale (leads to monopolies)

254
Q

What are the 4 factors of production?

A

1) Land
2) Labour
3) Capital
4) Entrepreneurship

255
Q

What are the 4 roles the government has in the national economy?

A

1) Produces certain goods (public goods)
2) Purchases certain goods
3) Invests by purchasing capital goods
4) Makes transfer payments from one section to the economy from another

256
Q

In a recession, what is the government likely to do?

A

Boost overall demand

257
Q

In a boom, what is the government likely to do?

A

Dampen overall demand

258
Q

What are the two types of inflation?

A

Demand pull Inflation and Cost Push Inflation

259
Q

What are the 2 types of macroeconomic policies?

A

1) Demand side

2) Supply side

260
Q

What does demand side macroeconomic policy include?

A

1) Monetary Policy (interest rates)

2) Fiscal Policy (tax and spending)

261
Q

What are the 2 main reasons regulation is put in place?

A

1) Address market failure

2) Deal with the problem of irreversibility (sustainability)

262
Q

What are the 4 responses businesses can have to regulation?

A

1) Entrenchment (no response)
2) Mere compliance
3) Full compliance
4) Innovation (Porter hypothesis)

263
Q

Which act directly regulates the amount of competition in a market?

A

Competition Act 1998

264
Q

Which chapter of the act deals with anti competitive agreements?

A

Chapter 1, Article 81

265
Q

Which chapter of the act deals with abuse of a dominant position?

A

Chapter 2, Article 82

266
Q

Which act made Cartel Activity a criminal act?

A

Enterprise Act 2002

267
Q

Which government body investigates breaches of the Competition Act/ Enterprise Act?

A

The Office of Fair Trading (OFT)

268
Q

Which government body promotes competition?

A

Competition and Markets Authority (CMA)

269
Q

What are the 5 personal qualities of accountants?

A

1) Reliability
2) Responsibility
3) Timeliness
4) Courtesy
5) Respect

270
Q

The FRCs UK corporate governing code forms part of the…

A

UKLA disclosure rules and transparency rules. Formely the Listing rules

271
Q

What are the 4 types of manager?

A

1) Line Manager
2) Functional Manager
3) Staff Manager
4) Project Manager

272
Q

According to Mintzberg, what are the 3 managerial roles?

A

1) Informational
2) Interpersonal
3) Decisional

273
Q

What does the managerial informational role involve?

A

The informational role (checking data received and passing it on to relevant people, as well as acting as the ‘spokesperson’ for his or her team).

274
Q

What does the managerial interpersonal role involve?

A

The interpersonal role (acting as leader for his or her own team, and linking with the managers of other teams).

275
Q

What does the managerial decisional role involve?

A

It is in this role that managers actually ‘do’ what we perceive as managing ie: allocate resources, negotiate, solve problems and act as an
entrepreneur.

276
Q

Likerts authoritative – participative continuum identified 4 leadership styles. What are they?

A

1) Exploitative-Authoratative
2) Benevelent-Authoratitive
3) Consultative
4) Participative

277
Q

What are Morgans 8 organisational metaphors?

A

1) Machine
2) Organism
3) Brain
4) Culture
5) Political System
6) Psychic prison
7) Flux and transformation
8) An instrument of domination

278
Q

What are Taylors three basic assumptions about human behaviour at work?

A

1) People are rational economic animals concerned with maximising their economic gain
2) People respond as individuals, not groups
3) People can be treated in a standardised fashion, like machines

279
Q

What is McGregors model?

A

Theory X and Theory Y

280
Q

In McGregors model, what does Theory X mean?

A

1) Individuals dislike work and avoid it where possible

2) Coercion, control and punishment are therefore needed

281
Q

In McGregors model, what does Theory Y mean?

A

1) Physical and mental effort in work is as natural as rest or play
2) Commitment to the objective is driven by rewards

282
Q

What are the 5 characteristics of a group?

A

1) Common sense of identity
2) Common aim or purpose
3) Existence of group norms (ie expected/accepted standards of behaviour)
4) Communication within the group
5) The presence of a leader

283
Q

What are Tuckmans 4 stages of group development?

A

1) Forming
2) Storming
3) Norming
4) Performing

284
Q

What are Belbin’s 8 team roles?

A

1) Leader
2) Shaper
3) The Plant
4) The Evaluator
5) The resource-investigator
6) Company worker
7) Team worker
8) Finisher

285
Q

What is the difference between the hard and soft approach to HRM?

A

The hard approach emphasises the resources element of HRM. The soft approach emphasises the human element of HRM.

286
Q

What are Harvard ‘Four Cs’ model of HRM?

A
  1. Commitment
  2. Competence
  3. Congruence
  4. Cost-effectiveness
287
Q

What are the 4 orientations?

A

1) Marketing orientation
2) Sales Orientation
3) Production Orientation
4) Product Orientation

288
Q

What is an FMCG?

A

Fast moving consumer good

289
Q

What are the 4P’s of the marketing mix?

A

1) Product
2) Price
3) Promotion
4) Place

290
Q

What are the 3 elements of a product?

A

1) Basic (or core) product – a car
2) Actual product – a Ford Focus
3) Augmented product – Ford Focus with 0% finance or extended warranty.

291
Q

What are the four main types of promotion (‘the communication mix’)?

A

1) Sales promotion (such as ‘buy one, get one free’ offers)
2) Advertising
3) Public relations
4) Personal selling

292
Q

What are the key variables that operation management is concerned with?

A

1) Demand for goods and services
2) Resources
3) Capacity of eg machinery and people
4) Inventory levels
5) Performance of the process which creates the goods or services

293
Q

What are the 4 elements of a procurement mix?

A

1) Quantity
2) Quality
3) Price
4) ‘Lead time’:

294
Q

What are the 5 types of business structure?

A

1) Simple structure
2) Machine bureaucracy
3) Professional bureaucracy
4) Divisionalised
5) Adhocracy

295
Q

What are the main influences on a business’s pricing? are

A

1) Costs
2) Competitors
3) Customers
4) Corporate objectives

Business and Finance (1 decks)

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