Module 1

Question 1

Aim of a for profit organisation

Answer 1

Maximise the wealth of shareholders

Question 2

Shareholder wealth can be maximised through

Answer 2

• Payment of dividends

- Increase in the share price, creating a capital gain

Question 3

Shareholder wealth can only be achieved with

Answer 3

Support and co-operation of wider stakeholder group

Question 4

Aim for not for profit organisation

Answer 4

Do not have a primary profit motive - need to create value for money

Question 5

Value for money framework (3)

Answer 5

• Economy - cost of inputs
• Efficiency - ratio in inputs to outputs
• Effectiveness - quality of outputs

Question 6

Rational planning model - three stages

Answer 6

1) Where are we now?
2) Where do we want to be?
3) How shall we bridge the gap?

Question 7

Where are we now? - SWOT analysis

Answer 7

Internal
- Strengths
- Weaknesses
External 
- Opportunities
- Threats

Question 8

Where do we want to be? - SAF

Answer 8

• Suitable
• Acceptable
• Feasible

Question 9

Suitable

Answer 9

Does it further the overall goals and objectives of business

Question 10

Acceptable

Answer 10

Is it appropriate/ ethical

Question 11

Feasible

Answer 11

Is it possible

Question 12

How shall we bridge the gap?

Answer 12

Mendelow’s stakeholder map - categorises and prioritises stakeholders according to power they wield

Question 13

Financial strategy

Answer 13

Should assist the organisation in meeting overall objectives

Question 14

Long term financial strategy

Answer 14

Maximising shareholder wealth

Question 15

Short term financial strategy

Answer 15

Not running out of cash as long term strategies are executed

Question 16

Long term financial strategy > three key decisions

Answer 16

• Financing - where should we get money from?
• Investment - what should we do with money once we have it?
• Dividend - should we provide a return to shareholders or reinvest?
  Three decisions inextricably linked

Question 17

Long term financial strategy > three key decisions > age of business

Answer 17

The age of the business (start up/ mature) will impact the three key decisions significantly

Question 18

Liquidity management

Answer 18

Business needs to plan to ensure sufficient (but not excessive) cash available to pay immediate liabilities of organisation

Question 19

Chair of board (2)

Answer 19

• Manager of directors

- Ensures long term strategic direction of business

Question 20

Chief Executive Officer (CEO) (2)

Answer 20

• Lead executive responsible for operations of the business

- Manager of the executives

Question 21

Finance Director (3)

Answer 21

• Executive director
• Two roles:
• Head of finance
• Director on the board