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AFM 182 Final exam > Chapter 4 > Flashcards

Chapter 4 Flashcards

1
Q

What is Corporate governance

A

Its a set of
- rules
- practices
- Process
By which a company is directed + controlled

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2
Q

What should the corporate governance aim to do?

A
  • encourage employees to comply with these rules
  • Act ethically and with integrity
  • Be mindful of the planet
  • try to positively contribute to the community company in
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3
Q

What are the board of directors

A

these are group of individuals that

  1. Highly qualified
  2. Much experience

They serve as advisors and provide oversight for public companies

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4
Q

What is the COB

A

This is the chair of the board

  • They hold most power and authority within the BOD
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5
Q

What is a big difference for private and public companies

A

Private - Not requried to have a bod but would try to have an advisory board in place

Public companies have have a formal bod which are independent

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6
Q

What is the responsiblity of BOD

A

To make sure the senior management team makes decisions that maximize the value of shares purchased by the company’s investors,

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7
Q

What is senior management

A

these are indivuals that lead companies day to day oeprations

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8
Q

What does senior management do when decisions need to be made?

A

They bring recommendations to the board and they vote to accept or reject decisions. As they make sure they make decisions that benefit shareholders

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9
Q

What is a board committee

A

They are a smaller group of directors in charge of ‘sub-components’ of the overall boards responsibilities

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10
Q

What are examples of board committees

A
  1. Compensation committee
  2. Audit committee
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11
Q

What is the audit committee

A

These individuals oversee financial reporting and disclosure

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12
Q

What is a compensation committee?

A

They oversee how much the company should pay ‘senior management’

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13
Q

What are the 3 key groups in the system for ‘corporate governance’?

A
  1. BOD
  2. External shareholders
  3. Senior Management
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14
Q

How is the BOD selected?

A

They are selected by shareholders to represent them in company decision making.

They are selected through an AGM (annual general meeting)

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15
Q

what is one key thing BOD for?

A

They hire or fire the CEO to lead and drive the company

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16
Q

Purpose of CEO

A

They hire senior management to help them lead the company

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17
Q

What is the senior management teams purpose?

A

They set the
- Corporate stragety
- They also are responsible for the company day to day operations

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18
Q

what are external stakeholders purpose?

A

They buy shares in a company that helps grow the company with the capital

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19
Q

What do they expect from the company (‘external shareholders’)

A

They expect accurate and transparent financial reporting quarterly or yearly to see company performance + operations

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20
Q

What else does a ‘senior management’ need to provide for external shareholders?

A

They must also provide financial statements and management’s discussion and analysis (MD&A) for investors to understand the company’s performance.

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21
Q

what is an ‘MD&A’?

A

It explains a companies performance in greater detail

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22
Q

what is an AIF

A

Its a document that discusses the companies operations and future plans

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23
Q

what are the differences in corporate governance between public and private companies

A

Compliance with Securities Regulations
Annual General Shareholder’s Meeting (AGM)
Management’s Discussion & Analysis (MD&A) & Annual Information Form (AIF)
Board of Directors (BOD)
Independent Board Members
Chair of the Board (COB)
Audit Committee
Compensation Committee
Investor Relations (IR) Team

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24
Q

what are the difference in compliance with securities regulations between public and private companies

A

private: NOT REQUIRED; not listed in stock exchanges
public: MUST comply with regulations

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25
Q

what are the difference in annual general shareholder’s meeting (AGM) between public and private companies

A

private: NOT REQUIRED
public: REQUIRED

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26
Q

Q
what are the difference in management’s discussion & analysis (MD&A) and Annual information form (AIF) between public and private companies

A

private: NOT REQUIRED, but sometimes done for external stakeholders
public: REQUIRED

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27
Q

what are the difference in BOD between public and private companies

A

private: NOT REQUIRED, but often have advisory board of formal BOD
public: REQUIRED

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28
Q

Q
what are the difference in independent board members between public and private companies

A

private: NOT REQUIRED, unless getting ready for an IPO
public: REQUIRED; majority must be independen

29
Q

what are the difference in COB between public and private companies

A

private: NOT REQUIRED, but some have them
public: REQUIRED, recommended they are independent

30
Q

what are the difference in audit committees between public and private companies

A

private: NOT REQUIRED, unless getting ready for an IPO
public: REQUIRED; at least 3 independent & are financially literate

31
Q

what are the difference in compensation committees between public and private companies

A

private: NOT REQUIRED
public: RECOMMENDED, to ensure senior management is fairly compensated and retained

32
Q

what are the difference in investor relations (IR) teams between public and private companies

A

private: NOT COMMON; they manage relationships with public investor groups
public: RECOMMENDED, to attract public investments

33
Q

What are security regulators

A

These are individuals responsible for designing the policies that public companies comply wit to protect investors in capital markets that purchase securities

34
Q

what does it entail for BOD to be independent?

A

(1) do not have a material relationship with the company
(2) is not part of the company’s executive team
(3) is not involved with the day-to-day operations of the company”.

35
Q

Whata re the requirements for an audit committee?

A
  1. They are financially literate
  2. 3 must be independent and financially literate at a minium
  3. Do not have any maternal relationship with the comany
36
Q

What are investor relations?

A

They are responsible for building strong relatonships with investor groups to attract more investors tp the company

37
Q

What is an ‘organizational structure’?

A

It a system that outlines how certain activities are directed ti achieve goals of the company.

Such as rules, roles, resposbilities

38
Q

What is a ‘functional structure’?

A

Its a strucures that organizes the company by its department

ex: Resoucr, finance, marketing

39
Q

For a functional structure what is a given?

A

–> There is a leader in each function who are experienced in the specific function + has many years of experience

40
Q

What companies work best for this functional structure?

A

small or medium-sized companies with a simple and relatively predictable type of business.

41
Q

What are the advantages of having a ‘functional’ structure?

A
  1. Build a team that are experts in their respective field
  2. There is easy communication within each functional area
  3. There’s a reduction in function duplication
42
Q

What are the disadvantages of having a ‘functional’ structure?

A
  1. Limited perspective with the risk of operating in functional silos
  2. Focus on routine tasks instead of the long-term strategy
43
Q

What is a product/service structure?

A

The company organizes itself by various products or services it offers.

44
Q

What companies work best for this product/service structure?

A

Works well with large companies with distinct product/or services

45
Q

What are the advantages of having a ‘Product/Service’ structure?

A
  1. Creates experts for the specfic product or service segment
  2. Each executive has full automonomy to make decisions about product/service line
  3. Clear accountability exist by product or service lie
46
Q

What are the disadvantages of having a ‘Product/Service’ structure?

A
  1. May create compeition between products or service
  2. Might be challenging to coordinate between different p/s t
  3. Could be duplication and increase I costs
47
Q

What is a customer structure?

A

its a structure where a company organizes itself by customer segments

48
Q

what king of company does the customer segment have to be In order for it to do well?

A

It must have distinct customer needs

49
Q

Advantages of a customer segment

A

1.Exectucives are able to make decision for customer segment in full atunomoy.

  1. Clear accountability
  2. Able to specialize to customer needs and expectations
50
Q

DisAdvantages of a customer segment

A
  1. Increase in comeptition for customer segments
  2. Challenges in coordination
  3. Cost duplications
51
Q

What is a ‘geographical structure”?

A

Organizes itself on geographical location

52
Q

what king of company does the geographic segment have to be In order for it to do well?

A

Works well with companies in various locations

53
Q

Advantages of Geographic Structure?

A
  1. Clear accountability by geography
  2. Creates a team specialized in geographical markets
  3. They have a better ability to react to changes in specific geographic market
54
Q

DisAdvantages of Geographic Structure?

A
  1. Geographic locations might not want to work with each other
  2. Causes duplication and increase in costs
  3. Lack of focus and control on products/customers
55
Q

What is a matrix structure?

A

Combine two structures (product/service + customer)

56
Q

whp might it work better for?

A

Large companies

57
Q

Advanatges for Matrix

A
  1. Improve organizational collobaration + flexibility
  2. Opportunties to learn new skills
  3. efficient way to use its human resources + costs
58
Q

Disadvantages

A
  1. More complex in reporting
  2. Additonal time to coordinate activities
  3. Can create accountability issues if roles and responsibilities are not identified
59
Q

What is segmented financial reporting?

A

is when each segment prepares their own financial reports

60
Q

What is CM

A

Difference between revnue and variable costs (how much we have left to cover fixed expenses)

61
Q

What is traceble fixed expenses

A
  1. Costs thata are directy related to a specific segment

Costs would not incur if segment did not exist

62
Q

Common fixed expenses

A

Costs that are incurred to supprt all segments and are not traceble to any specific segments.

63
Q

How does a segment CM IS look?

A

revenue

les

variable expenses

=
CM
- tracebale fixed expenses

= operating income

64
Q

At a company level CM IS

A

total revenue - total expenses = total cm - total traceble fixed expenses = total operaitng income minus common fixed expenses = EBIT - inrest adn tax = net income

65
Q
A
66
Q
A
67
Q
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68
Q
A
69
Q
A

AFM 182 Final exam (11 decks)

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