BTF Flashcards
What are the five rights of procurement?
Right quality, quantity, price, place, time
Who are upstream supply members?
those who provide the materials and production of goods and services
Who are downstream supply members?
Those involved after the product has been manufactured e.g. marketing and customers
Hard approach to human resource management
Maximise employee effectiveness and control staff cost
Soft approach to HRM
Emphasises human element, concerned with employee relations
The four Cs model of HRM
Commitment, competence, congruence, cost-effectiveness
Organisational iceberg: over the waterline (overt)
Customers Technology Facilities Organisational design Rules and regulations Surface competencies/skills
Organisational iceberg: below the waterline (covert = covered)
Attitudes Communication patterns Informal processes Personality Conflict Politics Underlying competencies/skills
McGregor’s model: Theory X
Individuals dislike work
Individuals lack ambition, dislike responsibility and prefer to be led
System of coercion, control and punishment
Individual desires security
McGregor’s model: Theory Y
Commitment is driven by rewards
Self-actualisation is important
Self control and direction are important
Y managers are more nurturing
Maslow’s hierarchy of needs
Self actualisation Status/ego Social Safety/security Basic/physiological
Stages of group development
Forming
Storming
Norming
Performing
Team roles
Leader
Shaper - aggressive and challenging, promotes activity
Plant - thoughtful and thought provoking
Evaluator - analytically criticises others’ ideas
Resource investigator - picks up on others’ ideas and adds to them, social
Company worker - general ideas into specifics, practical and efficient, handles scheduling
Team worker - concerned with team relationships
Finished - unpopular, ensuring timetables are met
Likert four basic leadership styles
Exploitative authoritative
Benevolent authoritative
Consultative
Participative
What are the six building blocks?
Operating core Middle line Strategic apex Support staff Technostructure Ideology
Types of organisational structure
Simple structure - strategic apex Machine bureaucracy - technostructure Professional bureaucracy - operating core Divisionalised - Middle line Innovative/adhocracy - operating core
Mechanistic businesses or bureaucracies
Stable, efficient and suitable for slow changing operating environments
Organic businesses
Flexible, adaptive and suitable for fast changing or dynamic operating environments
Types of strategic external analysis
PESTEL
Competitor analysis
Porter’s five forces analysis
Types of strategic internal analysis
Porter’s value chain
The product life cycle
BCG matrix
Analysis of distinctive competencies
PESTEL analysis
Political factors Economic factors Social,demographic factors Technological factors Ecological factors Legal factors
Porter’s five forces analysis
Threat of new entrants Bargaining power of customers Bargaining power of suppliers Threat of substitutes Rivalry among existing competitors
9 Ms model reviewed in a resource audit
Machinery Make-up Management Management information Markets Materials Men and women Methods Money
Porter’s value chain - Primary activities
Inbound logistics Operations Outbound logistics Marketing and sales Service
Porter’s value chain - Support activities
Procurement
Human Resources
Infrastructure
Technology development
The BCG matrix
Stars - build (high market share and high growth)
Cash cows - hold or harvest (high share and low growth)
Question marks - build or invest (low share but high growth)
Dogs - divest or hold (low share and low growth)
SAF analysis
Suitability
Acceptability
Feasibility
Types of information
Planning
Operational - day to day activities
Tactical - short term issues and opportunities (monthly variance reports)
Strategic - long-term decision making
Good information
Accurate Complete Cost-beneficial User targeted Relevant authoritative Timely Easy to use
Effective information processing
Completeness Accuracy Timeliness Inalterability Verifiability Accessibility
Secure information
Availability Confidentiality Integrity Authenticity Non-repudiation Authorisation
Data validation - ensuring data is not incomplete or unreasonable
Check digits Control total Hash totals Range checks Limit checks
Fundamental characteristics of financial statements
Relevance
Faithful representation
Enhancing characteristics of financial statements
Understandability
Comparability
Verifiability
Timeliness
Global Reporting Initiative
Triple bottom line accounting
Social
Environmental
Economic
Task force in climate-related financial disclosures
International organisation of central banks and regulatory bodies
Recommendations: Governance Strategy Risk management Metrics and targets
Balanced scorecard
Customer
Innovation and learning
Internal business process
Financial
Effective internal control
Control environment Risk management Control activities Information and communication Monitoring activities
Debt holders
Debt holders rank higher than equity holders to receive their capital back
Lower risk, lower returns
Monetary policy committee
Selects its base rate in order to meet its inflation target set by the chancellor of the exchequer
Financial policy committee
Ensure stability by removing systematic risks in the uk financial system
Bank/customer fiduciary relationship
Bank is expected to act in good faith in its relationship with the customer
Money market - short term
Treasury bills Deposits Certificates of deposits Gilts Bonds Commercial paper
Capital market - more long term finance
National stock exchange: Main market and AIM Banking system Bond market Leasing Debt factoring International markets
Preference shares
Entitled to dividends before ordinary shareholders
Carry less risk
Return is fixed
Loan stocks and debentures
Fixed interest rate borrowings with set repayment date
Secured on assets
Lenders are protected
Trading risk
Physical risk - risk of goods being lost or stolen in transit
Credit risk - payment default by the customer
Trade risk - customer refusing to accept goods in delivery or cancellation of order in transit
Liquidity risk - inability to finance the credit given to customers
To continue ICAEW membership, professional accountants must…
Obey rules and regulations
Pay the annual subscription fee
Continuing professional development
ICAEW members engaged in public practice must also….
Hold a practising certificate
Implement the code of ethics
Be covered by professional indemnity insurance
Reserved areas of accounting practice
Statutory audit
Investment
Insolvency
Probate
Consultative Committee of Accounting Bodies (CCAB)
Has 5 members
A member deon each body sits in the CCAB, where they discuss matters that affect the profession as a whole enabling the profession to speak with a unified voice
International Federation of Accountants
175 members
Aims is to protect the public interest
Encourages accountants to adhere to the fundamental principles
What does the Financial Reporting Council (FRC) conduct division do?
Professional oversight - regulation
Professional discipline
Corporate reporting review - make enquiries into departure from requirements for financial statements
Audit quality review
What does the Financial Reporting Council (FRC) codes and standards division do?
Actuarial policy
Audit and assurance standards
Accounting and reporting policy
Corporate governance code and stewardship code
Prudential Regulation Authority And Financial conduct authority
Only affects investment firms
FCA advises of listing rules that FTSE 350 companies are required to comply with
ICAEW Complaints
Breaching regulation
Departing from guidance
Bringing discredit
(Breach bye-laws)
ICAEW complaints and disciplinary procedure
Conciliation
Investigation
Disciplinary proceedings
Appeal
Disciplinary committee
Tribunal of 3 people - two chartered accountants and one non-accountant
Objectives of corporate governance
Public policy perspective
Stakeholder perspective
Corporate perspective - achieve long term sustained value for shareholders
Stewardship perspective - act in the best interest of the company
Who are institutional shareholders?
Insurance companies
Pension funds
Investment trusts
Two tier board consist of…
Management board
Supervisory board
Ethical values - Nolan Principles
Integrity Objectivity Accountability Openness Honesty
Institute of Business Ethics
Respect Transparency Openness Fairness Trust
Attributes and behaviours of ethical leaders
Openness Courage Ability to listen Honest Fair mindedness
What is an ethical audit?
A process which measures the internal and external consistency of a company’s value base
UK Corporate governance provisions
At least half the board should be NEDs
At least 5 years since member was employee
NEDs can remove and appoint executive directors
NEDs should scrutinise and hold to account the performance of management
Full time executive directors should not take on more than one non executive directorship
All directors should be subject to annual re-election
Chair should not remain in post beyond 9 years
Audit committee provisions
3 independent NEDs
Or 2 in the case of smaller companies
One member to have recent and relevant financial experience
Make recommendations on reappointment and removal of external auditors
Remuneration provisions
Remuneration committee of at least 3 independent NEDs, or 2 for smaller companies
Chair of the board can only be a member if they were independent on appointment and cannot chair the committee
Remuneration should reflect time commitment and responsibilities of the role
Only basic salary should be pensionable
Notice or contact periods should be one year or less
4 factors of production and return
Land - rent
Labour - wages
Capital - interest
Entrepreneurship - profit
Business/trade cycle
- Recession - demand, production, employment fall
- Depression
- Recovery - output, employment and income begin to rise, more investment, demand increase
- Boom - capacity and labour will become fully utilised, price increase, level of investment high
Monetary policy
Government policy on money supply, monetary system, interest rates, exchange rates and credit availability
Fiscal policy
Government policy on taxation, public borrowing and spending
Governments fiscal stance
Expansionary = increased borrowing and spending
Contractionary = increased taxation, no increase in spending
Broadly neutral = increased taxation and spending
Expanding demand
Lowering the price
Contracting demand
Raising the price
Price elasticity of demand
Less than 1 - inelastic
Greater than 1 - elastic
Vertical straight line, PED=0 -> perfectly inelastic
Increase in price, Total expenditure rises
Horizontal line, PED=infinity -> perfectly elastic
Increase in price, Total expenditure will fall
Income elasticity of demand
Greater than 1 = income elastic = luxury goods
Between 0 and 1 = Income inelastic = normal goods
Negative = inferior good
Price elasticity of supply
Closer to 0, the more inelastic, fixed supply
More elastic, fixed price
Perfect competition
Many small buyers and sellers No barriers to entry/exit Perfect information Homogeneous products No collusion between buyers or sellers
Suppliers are price takers - sell at market demanded price
All suppliers only earn normal profits
Pure, actual, government franchise and natural monopoly
Pure = only one supplier in the market
Actual = one supplier with a dominant market share
Government franchise = pure that has arisen by virtue of government deciding to operate in that way
Natural = market has high levels of fixed costs and low marginal costs
Monopolistic competition
Many buyers and sellers Some differentiation Branding Some customer loyalty Few barriers to entry Significant advertising
Oligopoly
A few large sellers but many buyers
Product differentiation
Mutual interdependency
Allocative efficiency
Goods/services produced in optimum quantities
Productive efficiency
Economy produces its goods and services at the lowest factor cost
Public goods display 2 key characteristics
Non-excludability
Non-dimishability
Factors of market failure
Market imperfection
Externalities
The existence of public goods
Economies of scale
Business response to regulation
Non-response
Mere compliance: met by passing on cost of compliance to clients and consumers
Full compliance: behaviour is changed to comply with regulations
Innovation: behaviour exceeds regulations
Competition act 1998
Prohibits agreements, business practices and conduct that damage competition
Penalties of up to 10% of annual worldwide revenues
Chapter 1 - collusive behaviour
Chapter 2 of competition act
Business impose unfair purchase or selling prices
Limiting production
Applying different trading conditions
Attaching supplementary conditions to contracts
Business has more than 40% of market
Competition and Markets Authority
CMA officials can enter premises and demand relevant documents
CMA impose a fine for failure to comply with interim measure of up to 5% of annual revenue
Competition disqualification orders may be made against the directors
They will look into competition, regulation and market issues
Barriers to free international trade
Tariffs or custom duties: raise the price paid for the imported goods, supplier is paid the same. Difference is transferred to the government sector
Import quotas: restrictions on quantity
Both domestic and foreign suppliers enjoy a higher price
Risk and uncertainty
Risk: possible variation in a outcome
Uncertainty: inability to predict the outcome due to lack of information
Business risk
Strategy risk
Product risk
Enterprise risk
Financial risk
Liquidity risk: shortage of cash
Gearing risk: risk of high borrowing compared to share capital
Credit risk
Market risk: adverse movement in share price
Operational risk
Process risk
People risk: retention of staff and their behaviour
Systems risk: data loss etc
Event risk: key event that has material impact
Long-term disaster recovery plan
Standby procedures
Recovery procedures
Personnel management policies
Four metrics to measure business resilience
Compliance
Completeness
Value
Capability
