Chapter 1 - Financial objectives

Question 1

What is generally considered the primary objective for all profit striving companies?

Answer 1

Maximise shareholder wealth

Question 2

What are the two ways to increase the wealth of shareholders?

Answer 2

• Pay dividends

- Increase share price

Question 3

Does making a profit always increase the wealth of a shareholder?

Answer 3

No

i.e
Might be a result of accounting policies

Question 4

What is a stakeholder?

Answer 4

“those persons and entities that have an interest in the strategy of an entity”

Question 5

What are the three E’s?

Answer 5

Economy
Efficiency
Effectiveness

Question 6

Which of the three E’s is…

Minimizing the costs of inputs required to achieve a defined level of output.

Answer 6

Economy

Question 7

Which of the three E’s is…

Ratio of outputs to inputs

Answer 7

Efficiency

Question 8

Which of the three E’s is…

Whether outputs are achieved that match the predetermined objectives.

Answer 8

Effectiveness

Question 9

What is the difference between objectives and strategy?

Answer 9

Objectives are what the organisation is trying to achieve.

Strategy is how they are going to go about it.

Question 10

What is an agency relationship?

Answer 10

Where one party, the principal employs and agent to perform tasks on their behalf.

Question 11

How can Value for money be described?

Answer 11

Achieving the desired level and quality of service at the most economical cost.