Lecture 1 Flashcards

1
Q

Roles of management

A

Strategic
Operations
Risk

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2
Q

What is strategic management

A

Develop objectives and formulate strategy (long-term plan) to achieve the objectives

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3
Q

What is operations management

A

Day-today control over the various business functions

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4
Q

What is risk management

A

Identify and properly manage risks faced by a business

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5
Q

Key finance functions

A

Financial planning
Financial control
Investment project appraisal
Financing and capital market operations

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6
Q

What is Financial planning

A

Evaluate the viability of proposed courses of business action (financial statements)

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7
Q

What is Investment project appraisal

A

Assessing the profitability and riskiness of proposed investment projects

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8
Q

What is Financing Decisions

A

Identify and assess possible sources of finance.

Aim to achieve appropriate balance between long-term and short-term finance

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9
Q

What are internally generated funds

A

Retentions from profits

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10
Q

What are externally generated funds

A

Debt plus equity

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11
Q

What is capital market operations

A

Issues such as raising finances from financial markets

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12
Q

What is financial control

A

Monitoring plans that are put into action

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13
Q

What is the primary objective of the firm

A

Value maximisation (shareholders’ wealth maximisation)

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14
Q

What do shareholders expect

A

The maximum possible increase in wealth for the level of risk they bear

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15
Q

Problems with profit maximisation concept

A

Lack of objectivity
Time period
Risk is ignored in calculation
Opportunity cost

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16
Q

What is the Stakeholder approach

A

Business should serve all who it impacts

Conflicts with Shareholders Wealth Maximisation

17
Q

What is corporate governance

A

System in which businesses are directed and controlled

18
Q

What is the agency problem

A

Managers may pursue their own interests which conflict with shareholders’ interests

19
Q

How to protect shareholders’ interests

A

Disclosure
Accountability
Fairness

20
Q

What is Disclosure

A

Producing info about performance

21
Q

What is Accountability (protecting shareholders’ interests)

A

Defining the roles and duties of directors to ensure they act in shareholders’ interests

22
Q

What is fairness (protecting shareholders’ interests)

A

Rules prohibiting gaining benefit from access to ‘inside’ information which is not available to shareholders

23
Q

What are steps in the planning process

A

Setting aims and objectives of the business
Considering available options
Select option and develop long-term plans
Develop plans

24
Q

What is the difference between strategic plans and tactical plans

A
Strategic = Long term
Tactical = Short term
25
What are the main financial statements
Income statement Cash flow statement Balance sheet
26
What are external financial variables
Corporate tax rate Interest rate for borrowing Inflation
27
What are internal financial variables
Involve policies and business agreements - Capital expenditure commitments - Financing agreements - Payment, accounting and dividend policies