M2: Intro to Accounting & Finance Flashcards
What are some examples of careers in accounting inside an organization?
- Controller,
2. Accounting clerk/ technician, etc.
What are some examples of careers in finance inside an organization?
- CFO,
- Treasurer,
- Finance analyst,
- Director of finance, etc.
What are some examples of careers in finance outside an organization?
- Investment banker,
- Financial advisor,
- Portfolio manager,
- Investment analyst,
- Traders, etc.
What are some examples of careers in accounting outside an organization?
- Auditor,
- Forensic accountant,
- Tax accountant, etc.
What is an example of the hierarchy of a typical medium/large organization?
- Board of Directors
- Chief executive officer oversees: 2a. Vice Presidents
2b. Chief Financial Officer oversees: i. Controller ii. Treasurer iii. Internal auditor - i. Controller oversees Managerial accountants, financial accountants, etc.
Will smaller organizations have a need for the same roles and organizational structure as bigger organizations?
No.
Ex: they wouldn’t need internal auditors or a board of directors.
What positions are referred to as financial managers?
- CFO
- Controller
- Treasurer
What is a CFO responsible for?
- Strategic management of accounting and finance functions
- Deciding accounting policies and internal controls
- Protecting the company’s financial information & collaborating on technology decisions (upgrading systems, network security, etc.)
- Managing relationships with auditors and investors
- CFO’s typically have several years of management and a professional background in finance, economics, etc.
What are accounting policies?
The ways we report income on our financial statements.
What are internal controls?
Controls to keep the company’s information safe and make sure people are doing things in the company’s best interest.
Ex: Need boss password to access smt.
What is a controller typically responsible for?
- Preparing financial statements (main responsibility)
- Supervising the accounting team
- Providing management team with information relevant to the decision making process
- Ensuring timely filling of corporate tax returns
- Controllers typically have a Bcom in accounting/finance, along with a CPA or MBA, and will often have experience as an auditor.
Why is it the controller’s responsibility to provide management team with information relevant to the decision making process?
Because a controller has a lot of access to info bc they have access to the whole accounting system. Controller can gather this info and organize it to provide it to a person who’s making a decision.
What is a treasurer typically responsible for?
- Cash management (makes sure there is enough money to pay people and deciding who to pay first) and contributes budget planning (how much money do we need for next year and how much are we going to make)
- Researching and analyzing alternative sources of financing (borrowing from banks, or companies, or shareholders…)
- Establishing/maintaining relationships with banks
- Treasurers typically have a Bcom in accounting/finance, along with a CFA or MBA, and may have experience as an auditor
What are the decisions the financial managers make?
- Financing decisions
- Investment decisions
- Product pricing
What are financing decisions?
Where/how should the organization obtain financing? For example, should we borrow money from the bank or issue new shares?
What are investment decisions?
- How should the organization invest their cash? For example, should we buy a new building to expand operating capacity or purchase technology to upgrade an existing building?
- How many units need to be sold before breaking even on an investment? Is it reasonable?
What is product pricing?
How should products be priced to ensure the organization earns a sufficient profit? For example, should we increase the price of our products?
What are the 2 forms of organization of a business?
- Sole Proprietorship
2. Corporation
What is a sole proprietorship?
An individual who opens a business and owns assets personally and earns business income directly so pays tax on income as it’s earned. Anything that happens to the business falls under the responsibility of the individual.
What is a Corporation?
A corporation is its own legal entity separate from the individual who owns it. The owners can be shareholders of the corporation. The corporation itself earns business income and owns assets. Corporation pays dividends to shareholders, so individual only receives cash/pays tax when a dividend is distributed
What is a public corporation?
In order to buy a share of a company, the company has to be public. A public corporation is one where its shares are traded in public markets (such as the Toronto Stock Exchange in Canada and the New York Stock Exchange in the US).
Who represents the shareholders in large public corporations?
Large public corporations may have hundreds of thousands of shareholders, who are represented by a board of directors.
What are the 2 types of corporayions?
- Public corporations
2. Private corporations
What is a private corporation?
A private corporation is one who’s shares are not traded on a stock exchange. Typically the shares of the company will be owned by a few people (managers, investors, employees, etc.) – so referred to as closely held.
Many companies will start as private corporations and then go public (though an initial public offering, IPO) to raise additional funds to continue growing.