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1
Q

What is a business organisation?

A

BUCHANAN AND HUCZYNSKI definition: ‘‘Organisations are small arrangements for the controlled performance of collective goals’’ - collective goals = define their own goals - social arrangements = structured to allow people to work together towards a common goal - controlled performance = systems and procedures in place to ensure group goals are achieved

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2
Q

What does an organisation consist of?

A
  • two or more people working together in a structured way with duties and responsibilities assigned to each individual - use systems and procedures to regulate staff behaviour - pursue certain goals that are considered to be over and above individual aspirations
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3
Q

Why do organisations exist?

A
  • to satisfy social needs - to overcome the individuals limitations - to enable individuals to specialise - to save time through joint effort - to pool knowledge and ideas - to pool expertise - to provide synergy
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4
Q

What are the different types or organisations?

A
  • Commercial organisations (profit seeking) e.g. sole traders, partnerships, limited liability companies - Not for profit organisations (NFPs or NPOs) government run for the public providing a service - Non-governmental organisations (NGOs) promote a political, social or environmental change - Co-operatives owned and equally controlled by members single vote on key decisions solely to meet needs of member-owners
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5
Q

What are the two types organisations can be classified as?

A
  • Profit orientation profit seeking or non profit seeking - ownership/control public sector private sector co-operatives
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6
Q

What are the different sectors in which organisations operate in?

A
  • Agriculture - Mining - Finance - Retailers - Service - Transportation
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7
Q

Why is a Sole trader not considered as an organisation?

A

because it does not have collective goals as usually run by one person

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8
Q

What are the different structural types of an organisation?

A
  • Entrepreneurial - Functional - Divisional/product - Geographical - Matrix
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9
Q

What is an Entrepreneurial structure?

A

Built around owner-managed companies

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10
Q

What are the advantages of Entrepreneurial structure?

A
  • fast decision making - more responsive to market - goal compliance - good control - close bond to workforce
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11
Q

What are the disadvantages of Entrepreneurial structure?

A
  • lack of career structure - dependent on capabilities of owner-manager - can’t cope with growth
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12
Q

What is a functional/departmental structure?

A

groups employees to do similar tasks into departments have relatively few products or locations exist in relatively stable environment

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13
Q

What are the advantages of a functional/departmental structure?

A
  • economies of scale - standardisation (outputs/systems) - specialists more comfortable (not isolated) - career opportunities
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14
Q

What are the disadvantages of a functional/departmental structure?

A
  • empire building (managers making decisions for own benefit) - slower decisions due to chain of command - conflicts between functions - can’t cope with massive change
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15
Q

What is a divisional/product structure?

A

when organisation is split into several divisions each division overseeing products, locations, customers etc. each division has its own functional structure of departments gives more responsibility to general managers likely to be run with own profit centres, expenditure and capital investments STRATEGIC BUSINESS UNIT (SBU) - separately identified part of the business

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16
Q

What are the advantages of divisional/product structure?

A
  • enables growth (easy to add divisions on) - clear responsibility for divisions - training of general managers - easy to adapt further change - top management can concentrate on strategic matters
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17
Q

What are the disadvantages of divisional/product structure?

A
  • potential loss of control for top managers - lack of goal compliance - duplication of functions - specialist feel isolated as divisions are broken into small groups - allocation of central cost can be a problem
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18
Q

What is a geographic structure?

A

similar to divisional structure but each division has a location

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19
Q

What are the advantages of geographical structure?

A
  • enables geographic growth - allows local decision making - clear responsibilities of areas - training of general managers - top management can concentrate on strategic matters
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20
Q

What are the disadvantages of geographical structure?

A
  • potential loss of control for top managers - lack of goal compliance - duplication of functions - may lead to sub-optimisation - specialist feel isolated as divisions are broken into small groups - allocation of central cost can be a problem
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21
Q

What is a matrix structure?

A

A combination of functional and divisional structures that requires dual reporting to two different managers. allows better coordination of activities and focus on operations

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22
Q

What are the advantages of matrix structure?

A
  • advantages of both functional and divisional - flexibility to achieve objectives - customer orientated - encourages team work and exchange of opinion and expertise
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23
Q

What are the disadvantages of matrix structure?

A
  • dual command and conflict - mixture of functional authority - time consuming meetings to resolve conflicts - higher admin costs
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24
Q

What is a Boundaryless structure?

A

a modern model of organisation design which adopt a flexible unstructured design

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25
Q

What are the three different types of boundaryless structures?

A
  • Hollow organisations - virtual organisations - modular organisations
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26
Q

What is a hollow organisation?

A

they split their functions into core and non-core activities and outsource the non-core activities to other organisations

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27
Q

What is a virtual organisation?

A

they outsource a lot of their functions to other organisations with very few kept in house. have small central staff who co-ordinate the outsourcing and ensure customers needs are met

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28
Q

What are modular organisations?

A

a boundarlyess manufacturing company, instead of making their own product they break the process down into modules or components. they can choose to make their own components or outsource them and then put it together themselves

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29
Q

What did Mintzberg argue?

A

that organisations are made up of 5 key building blocks and that each block corresponds to a specific group of people in the organisation. only one building block could dominate

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30
Q

What are the 5 key building blocks?

A
  • strategic apex = senior level management - middle line = middle management - operating core = workers creating/producing core product - technostructure = analysts that plan and control work of others - support staff = admin support and indirect services - ideology = organisations beliefs and values
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31
Q

What is a simple structure?

A

dominated by strategic apex also known as the entrepreneurial structure in newer organisations whose workforce has direct supervision

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32
Q

What is a machine bureaucracy?

A

dominated by technostructure occurs in large established organisations workforce formalised with rules and procedures jobs and roles clearly defined large number of plans and budgets standardisation very important

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33
Q

What is a professional bureaucracy?

A

dominated by operating core organisations rely on highly skilled staff large number of rules and procedures staff have independence and power difficult for senior management to control organisation

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34
Q

What is a diivisionalised structure?

A

dominated by middle line similar to divisional structure middle managers have control over everyday operations and strategy of their departments leaves directors to focus on strategic planning

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35
Q

What is a adhocracy structure?

A

dominated by support staff focuses on innovation for fast moving active industries creates teams of experts from different fields power allocated where needed standardisation not encouraged

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36
Q

What is a missionary structure?

A

dominated by ideology missions and beliefs behaviour is standardised employee actions tied in

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37
Q

What is separation of direction and management?

A

ownership and management of large companies separated owners elect directors to run company for them safeguard and controls put into place so business is being run in owners interest direction and management separated directors may appoint managers to deal with day-to-day issues directors focus on high level strategies

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38
Q

What is scalar chain?

A

line of authority that can be traced up or down the chain of command relates to number of levels of management in organisation

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39
Q

What is span of control?

A

number of people a manager is directly responsible for

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40
Q

What is a tall organisation?

A

has many levels of management and narrow span of control (long scalar chain) tend to take longer to make decisions

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41
Q

What is a flat organisation?

A

few levels of management wide span of control (short scalar chain) weaker control fewer chances of progression

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42
Q

What is a shared service approach?

A

restructuring the provision of certain services so its centralised into one specific part of the business and run like a separate business charging departments

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43
Q

What is centralisation?

A

where upper levels of hierarchy retain authority for decisions

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44
Q

What is decentralisation?

A

lower levels of people and units have authority to make decisions

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45
Q

What are the factors that affect decentralisation?

A

management style ability of management/employees geographic spread size of the organisation/scale of activities

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46
Q

What are the advantages of decentralisation?

A

senior management can concentrate on strategy better local decisions due to local expertise better motivation due to training and career path smaller chain of command means quicker responses

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47
Q

What are the disadvantages of decentralisation?

A

senior management loss of control dysfunctional decisions due to lack of goal compliance poor decisions by inexperienced managers training costs duplication of roles extra cost in getting information

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48
Q

What is the Anthony Triangle?

A

model used to illustrate types of strategic planning at each level of the hierarchy

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49
Q

what are the three different levels of planning in the Anthony Triangle?

A

strategic planning tactical planning operational planning

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50
Q

What is strategic planning?

A

senior managers make long term decisions for entire organisation

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51
Q

What is tactical planning?

A

middle management look at plans for specific divisions or departments and specify how to use resources

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52
Q

What is operational planning?

A

junior management/supervisors deal with short-term detailed and practical decisions (day-to-day decisions)

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53
Q

What does Research and Development department do?

A

they improve existing products and develop new products they anticipate customer needs, generate new ideas, test and deal with costing

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54
Q

What does purchasing department do?

A

They acquire goods/services necessary for the business they deal with price and payment terms, quality and stock levels and delivery schedule

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55
Q

What does production department do?

A

they convert raw materials into finished goods deal with quality of materials and finished goods, costs, wastage and efficiency and stock levels/production schedules

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56
Q

What does Direct service provision department do?

A

provide services to clients deal with quality and time sheets/scheduling

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57
Q

What does Marketing department do?

A

they identify customer needs, conduct market research, product design, pricing, promotion and distribution deal with customer needs, quality, promotional strategy, distribution channel strategy and pricing strategy

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58
Q

What does Administration department do?

A

they process transactions and give administrative support deal with efficiency and information processing

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59
Q

What does Finance department do?

A

they are responsible for bookkeeping, financial reporting, financial controls, budgeting and raising capital deal with accuracy and completeness of record keeping, monthly management reporting, and annual financial reporting

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60
Q

What is the marketing mix?

A

controllable variables blended together to produce desired results from a chosen market

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61
Q

What are the 4 main P’s in marketing mix?

A

Product Place Promotion (distribution) Price

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62
Q

what are the 4 C’s when considering pricing?

A

Cost - high enough to make profit Customer - are they willing to pay Competition - is it higher then competitors Corporate objectives - could be set low to gain market share

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63
Q

What is cost pricing?

A

cost per unit calculated then mark-up added

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64
Q

What is penetration pricing?

A

Low price set to gain market share

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65
Q

What is perceived quality pricing?

A

high price set to reflect high quality

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66
Q

What is price discrimination?

A

different prices set for same product in different markets . e.g. off peak/peak

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67
Q

What is going rate price?

A

set to match competitors

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68
Q

What is price skimming?

A

high price set at launch and then dropped to increase demand once customers willing to pay have been skimmed off

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69
Q

What is loss leaders?

A

product sold at a loss expecting customers to go on and buy more profitable products

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70
Q

What is captive product pricing?

A

Customers buy 2 products. first one to attract buyers and second one is expensive

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71
Q

What is the AIDA sequence?

A

Awareness interest Desire Action

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72
Q

What are the different promotional techniques?

A

advertising - media sales promotions - offers personal selling - door to door public relations - sponsoring events

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73
Q

What is direct selling?

A

when manufacturer sells directly to customer

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74
Q

What is indirect selling?

A

mixture of retailers, distributors, wholesalers, and shipping agents involved in selling

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75
Q

What does marketing analysis (strategic analysis) include?

A

analysis of brand strength, product quality, reputation etc analysis of competition market research to determine attractiveness detailed analysis of customer expectations and power

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76
Q

What does marketing decisions (strategic choice) include?

A

decisions of what products to sell segmenting potential markets then targeting attractive segments developing strategies for each marketing mix variable

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77
Q

What does implementing marketing strategies (strategy implementation) include?

A

setting budgets for advertising etc. setting targets monitoring and control

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78
Q

What is the attractive segments criteria?

A

size growth prospects intensity of competition

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79
Q

What does targeting strategies include?

A

differentiated (each segment being treated separately) undifferentiated (segments approached in same way) concentrated (only one segment targeted)

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80
Q

What is organisational culture?

A

the beliefs, attitudes, norms and customs in an organisation

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81
Q

What are the three main elements of organisational culture?

A
  • set of norms of behaviour - symbols and symbolic actions - set of shared values and beliefs
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82
Q

What are the 6 factors that shape the culture of an organisation?

A
  • size of organisation - technology of organisation - diversity of organisation - age of organisation - history of organisation - ownership or organisation
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83
Q

what does Schein argue?

A

that the first leaders of the company create its culture, future leaders are selected if they agree to follow the culture, link between culture and leadership is strong, important for leaders to understand culture lack of understanding of basic value is reason for failure when implementing change

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84
Q

What are the 3 levels Schein uses to define culture?

A
  • Artefacts = aspects that can been seen e.g. dress code - Espoused values = strategies and goals - Basic assumptions and values = difficult to identify because they cant be seen
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85
Q

What are the 4 culture types Handy believes there to be?

A
  • Power culture - role culture - Task culture - Person culture
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86
Q

What is power culture?

A

often found in entrepreneurial structure, where there is one major source of power and influence and owner strives to maintain absolute control denoted by Greek god Zeus

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87
Q

What is Role culture?

A

often found in bureaucratic organisations where job descriptions dictate the way things are done. structure determines authority effective in stable environments denoted by Greek god Apollo

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88
Q

What is Task culture?

A

seen in project teams where the position is described in terms of results achieved. staff need to be flexible for deadlines and nothing can get in the way Denoted by Greek god Athena

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89
Q

What is Person culture?

A

found in small high involved organisations where individuals undertake all duties themselves. exists to satisfy requirements of the individual denoted by Greek god Dionysius

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90
Q

What did Hofsted argue?

A

looked at national differences between IBMs employees around the world to find aspects of culture influencing business behaviour

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91
Q

what 4 traits of cultural dimensions did Hofsted find?

A
  • Individualism vs Collectivism - uncertainty avoidance index - Power distance index - Masculinity vs Femininity
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92
Q

What is individualism?

A

extent of which people are integrated into groups some cultures are more cohesive than others high individualism shows staff expect to be assessed on own performance low individualism shows staff expect to be assessed in groups

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93
Q

What is Uncertainty avoidance index?

A

deals with society’s tolerance of uncertainty high UA don’t like to act out of normal job description and prefer to be directed by manager low UA are prepared to take risks and dislike bureaucracy

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94
Q

What is Power distance index?

A

where the less powerful accept and expect unequal power distribution high PD expect to answer to managers and don’t have a say in decisions low PD expect to be involved in decisions and don’t like direct supervision

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95
Q

What is Masculinity?

A

where distance between roles and values of gender is large Masculine culture is motivated by offering of job title, increased status and pay feminine culture is motivated by work life balance, quality of life and relationships at work

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96
Q

What are the 2 additional dimensions added to Hofsted’s theory?

A
  • long-term orientations - Indulgence vs Restraint
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97
Q

What are Long-term orientations?

A

Long-term focuses on future rewards short-term focuses on past and present

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98
Q

What is indulgence?

A

allows free enjoyment of basic and natural human drives related to enjoying life and having fun restrained societies cut off enjoyment

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99
Q

What is an informal organisation?

A

the network of relationships within an organisation, that evolves over time through friendship and common interests.

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100
Q

What are the advantages of informal organisation?

A

better motivation better communication provision of social control

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101
Q

What are the disadvantages of informal organisation?

A

ineffective in meeting objectives inaccurate info or rumours spread unwillingness to perform well

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102
Q

What is data?

A

consists of numbers, letters, symbols, raw facts, events and transactions that have been recorded but not processed

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103
Q

What is Quantitative data?

A

its capable of being measured numerically

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104
Q

What is Qualitative data?

A

not capable of being measured numerically but has distinguishing characteristics

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105
Q

What is Discrete data?

A

can only take specific fixed values

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106
Q

What is continuous data?

A

takes any numerical value

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107
Q

What is Primary data?

A

collected by researched for a particular enquiry

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108
Q

What is Secondary data?

A

Collected by someone other than the user

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109
Q

What is information?

A

it is data that has a meaning to the person receiving it

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110
Q

Good information should be ACCURATE. What does ACCURATE stand for?

A

Accurate Complete Cost Understandable Relevant Adaptable Timely Easy to use

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111
Q

What type of information does Strategic level require?

A

internal and external information long-term strategies internal information both quantitative and qualitative in summarised form on ad-hoc basis

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112
Q

What type of information does Tactical level require?

A

information and instructions from strategic level routine and quantitative info from operational level summarised but detailed enough to allow tactical planning for short-term planning

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113
Q

What type of information does Operational level require?

A

info from tactical level concerned about day-to-day tasks receives info from internal sources info is detailed and precise

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114
Q

What is a Transaction processing system (TPS)?

A

records all daily transactions summarises them for routine reports mainly used by Operational management

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115
Q

What is a Management information system (MIS)?

A

converts data from TPS into info for tactical management helps monitor performance, maintain co-ordination and provide background info on organisations and operations used for historic and current analysis as well as future predictions

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116
Q

What is a Decision support system (DSS)?

A

computer system that helps deal with semi or unstructured decisions where there is a high amount of factors that may affect decision draws both internal info from TPS and external info tailor made to the requirements of the organisation

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117
Q

What is an Executive information system (EIS)?

A

has flexible access to info from entire business and external environment allows senior management turn data into useful reports easily distributed to key staff many types of data on same screen easy to understand

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118
Q

what is an Expert system?

A

hold specialist knowledge allows non experts to search system for information not part of normal information hierarchy used by employees at all levels widely used

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119
Q

What are the advantages of spreadsheets?

A
  • easy to use - minimum training needed - most data managers familiar with them
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120
Q

what are the disadvantages of spreadsheets?

A
  • data needs to be copied over and over again to maintain separate files - unable to identify errors - lack of detailed sorting and querying abilities - sharing violations between users - restricted to finite number of records - takes up a lot of hard drive space
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121
Q

What are the advantages of databases?

A
  • ease of reporting and sharing data - doesn’t require much duplication - changes made doesn’t corrupt programming - better security
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122
Q

What are the disadvantages of databases?

A
  • requires training - expensive to purchase and install - unnecessary for small businesses
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123
Q

What are the advantages of computerisation?

A
  • speed - accuracy - volume - complexity - cost
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124
Q

What are Stakeholders?

A

an individual or group who has interest in what the organisation does, or who is or can be affected by the organisation

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125
Q

What are the three groups of stakeholders?

A
  • Internal - External - Connected
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126
Q

What is an internal stakeholder?

A

stakeholders inside the organisation can have a strong influence on how things are run

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127
Q

What is an external stakeholder?

A

Don’t have a direct link with the organisation but can influence or be influenced by its activities

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128
Q

What is a connected stakeholder?

A

Anyone who either invests or has dealings with the organisation

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129
Q

What is a primary stakeholder?

A

have a contractual relationship

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130
Q

What type of stakeholders would be be primary stakeholders?

A

internal and connected stakeholders

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131
Q

What is a secondary stakeholder?

A

someone who has an interest in the organisation but no contractual relationship

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132
Q

What type of stakeholder would be a secondary stakeholder?

A

External stakeholder

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133
Q

Which stakeholders commonly conflict?

A

employees and managers customers and shareholders General public and shareholder managers and shareholders

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134
Q

What is used to decide on conflicts?

A

Mandelows power-interest matrix

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135
Q

How is Mandelow’s matrix used?

A

placing stakeholders in each quadrant depending on power and interest remember stakeholders can move position in quadrants depending on specific events

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136
Q

When is Mandelow’s Matrix used for?

A

during formulation and evaluating new strategies

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137
Q

What are the sources of stakeholder power?

A

hierarchy influence control of the environment (knowledge)

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138
Q

What are the 4 categories in Mandelow’s matrix?

A

Minimal effort informed satisfied key player

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139
Q

What are the factors of category a Minimal effort?

A
  • low power - low interest don’t care about the organisation nor does the organisation care about them
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140
Q

What are the factors of category b Informed?

A
  • little influence - low power - high level of interest - don’t have significant power but can influence groups that do have power
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141
Q

What are the factors of category c Satisfied?

A
  • high power - little interest - keep them quiet by keeping them happy so don’t have an active interest in company
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142
Q

What are the factors of category d Key player?

A
  • high level of power - high level of interest - active interest - fully involved in decisions to keep them happy
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143
Q

What is a political system?

A

a set of institutions, political organisations and interest groups, and the relationships between them and rules and norms that govern their functions

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144
Q

What are the three levels of political systems that organisations have to take account of?

A
  • Global - world trade organisation - National - national government policy - Local - local government departments/councils
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145
Q

What are the sources of legal authority?

A
  • supra-national - National - Regional
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146
Q

What does supra-national consist of?

A
  • UN resolutions - international court of justice - European parliament - European courts
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147
Q

What does national consist of?

A
  • national governments through acts of parliament - senior courts (supreme court) - other major courts
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148
Q

What does regional consist of?

A
  • regional/federal government - local council through use of bye-laws
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149
Q

What are the two major ways a government can affect an organisation?

A
  • government policy - direct legislation
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150
Q

What does government policy consist of?

A
  • Housing - Crime - Education - Defence - Healthcare - Energy - Farming - Town planning - Domestic - Foreign
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151
Q

What does direct legislation consist of?

A
  • must comply with legislations or will result in fines, bans or loss of customers - most industries have specific legislation to comply with
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152
Q

What are the main types of legislation?

A

employee protection data protection health and safety consumer protection

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153
Q

What are the two data security hazards?

A

physical risk - impact on physical environment which system exists human risk - access gained by unauthorised users

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154
Q

What is the legislation protecting consumers?

A

Sales goods act 1979

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155
Q

What are the main principles of the sales goods act 1979?

A
  • seller must have legal title or ownership of the item being sold - goods must be of satisfactory quality - goods must correspond to description
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156
Q

What is the legislation for provision of services?

A

supply of goods and services act 1982

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157
Q

What does the supply of goods and services act 1982 required services to provide?

A
  • to be carried out with responsible skill and care - completed within a reasonable time - completed at reasonable price
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158
Q

What features must a simple contract consist of to be valid?

A
  • agreement - parties to agree - consideration - value from the contract -intention to create legal relations - relation to be legally binding - capacity and legality - must be capable to enter contract
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159
Q

What is Microeconomics?

A

the study of economic behaviour of individual consumers, forms and industries

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160
Q

What is Macroeconomics?

A

considers aggregate behaviour, and study of the sum of individual economic decisions (working of the economy as a whole)

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161
Q

Define Microeconomics

A

it focuses on how individual parts of the economy makes decisions on how to allocate scarce resources. individuals parts of the economy such as consumers, firms and industries And attempts to examine how supply and demand decisions made effect the selling price of goods within an industry or market

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162
Q

What is individual demand?

A

it shows how much goods someone intends to buy at different prices

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163
Q

What are the characteristics of individual demand?

A
  • needs to be effective (customer needs to have cash rather than just desire) - when considering demand at given price assume other variables are constant - demand is lower on high price and higher on low price products
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164
Q

What is Expansion?

A

When demand changes due to change in price falling then demand rises

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165
Q

What is Contraction?

A

When demand changes due to change in price rising then demand falls

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166
Q

When price is lower and demand is higher what two processes does it result in?

A
  • the substitution effect (when customers substitute products with cheaper ones) - the income effect (when customers try to save income so they buy cheaper option)
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167
Q

What is market demand?

A
  • shows total amount of effective demand from all consumers in the market - usually shortened to DEMAND - for most goods slopes downwards from left to right
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168
Q

What is the conditions of demand?

A
  • Where other factors are constant in individual and market demand - change In one or more conditions of demand will create a shift in the demand curve - if the shift is outward to the right it is an increase in demand if the shift is inward to the left it is a decrease in demand - important to distinguish increase/decrease that result from shift in demand curve as a whole that result from price changes leading to movements along demand curve itself
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169
Q

What are the main conditions that effect demand?

A
  • income (if income is higher there’s more flexibility to buy finer things) - tastes (change frequently and can be manipulated by advertising) - the price of goods (can be unrelated, or complement or substitute) - population ( increase in population leads to bigger market)
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170
Q

When PRICE change occurs what will the MOVEMENT along the demand curve result in?

A

either expansion or contraction in demand

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171
Q

When CONDITION change occurs what will the SHIFT in the demand curve result in?

A

either increase or decrease in demand

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172
Q

What is Elasticity of demand?

A

the relationship between two variables and measures the responsiveness of one dependent variable to the change in another independent variable - it explains the relationship between changes in quantity demanded and changes in price

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173
Q

Things to remember with Price elasticity of demand

A
  • percentage or proportional changes used instead of absolute ones. -if the percentage is negative the minus sign is ignored
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174
Q

what is the calculation for contributing of price elasticity of demand

A
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175
Q

How is relatively inelastic shown?

A

<1

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176
Q

How is unit elasicity shown?

A

=1

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177
Q

How is relatively elastic shown?

A

>1

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178
Q

How can PED be calculated by examining total revenue?

A
  • If total revenue increases following a price cut, then demand is price elastic
  • if total revenue increases following a price rise, then demand is price inelastic
  • if total revenue falls after price cut, then demand is inelastic
  • if total revenue falls after a price rise, then demand is elastic
  • if total revenue is unchanged then demand is unitary elastic
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179
Q

What are the factors that infulence PED?

A
  1. Proportion of income spent on goods - goods take up small portion of consumers income spent, then small price change wont have much impact
  2. Substitutes - if a substitute is available then small change in price will have great affect on quantity demanded
  3. Necessities - demand for everyday goods tends to be stable and inelastic whereas luxury goods are fairly elastic in demand
  4. Habit - goods being purchased automatically consumers not aware of price so demand is elastic
  5. Time - consumers not aware of alternatives so continue buying goods even if price rises, inelasticity reduced as consumers gain knowledge of other markets
  6. Definition of market - if market is defined widely then less likely to have alternatives so demand is inelastic. if market is narrowly specified with more brands available then more elastic
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180
Q

What is the supply curve of a firm?

A
  • shows how many units, producers would be willing to offer at different prices, over given period of time
  • based on the desire to make profit
  • demonstrates what a firm will provide to the market at certain prices
  • if price of goods increases, each unit will make more profit therefore would want to supply more to the market
  • therefore supply curve tends to move upwards
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181
Q

What are the conditions of supply?

A
  • if theres a change in factors other than price then supply curve will move
  • upward shift in supply means cost of supply has increased
  • so less is supplied for same price
  • results from:
    • Higher production costs
    • indirect taxes
  • downward shift of supply means increase in supply
  • lower profits or reduced cost of production
  • lower unit costs arise from:
    • technological innovations
    • efficient use of existing factors of production
    • lower input prices
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182
Q

What is equilibrium?

A

where demand and supply meet

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183
Q

How do you check if euqilibrium is achieved?

A
  • intended demand and planned supply put on a graph
  • where the curve meets the price is set
  • when demand and supply correspond it is equilibrium
  • only one equilibirium position in the makret
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184
Q

As well as flagging up information in the market, what else does price act as?

A

a stimulant

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185
Q

If supply and demand curves are steeper, then the price fluctuations would be _________.

A

Greater

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186
Q

the longer the production period, and more _______ the supply, the more ________ the pirce is

A
  • inelastic
  • unstable
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187
Q

What does price act as a signal to sellers on?

A

what to produce

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188
Q

When are minimum and maxiumum prices set?

A

when the equilibrium price is not the desired price, governments may set prices above or below the equilibrium price

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189
Q

How is minimum price set?

A
  • governments seek to ensure minimum price for certain goods
  • can be done in a number of ways such as providing help to direct producers
  • set legal minimum price above current market price
  • if government set minimum price above equilibrium price (price floor) a surplus of supply is created
  • if applied to labour market is known was minimum wage surplus would be equivalent to unemployement
  • if applied to physical goods price floors cause surplus in products that have to be stored or destroyed
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190
Q

How is maximum price set?

A
  • government imposes maximum price controls
  • benefits consumers on low incomes
  • control inflation (rise)
  • if government sets price below equilibrium then shortage of supply
191
Q

What is short-term cost behaviour?

A
  • macroeconomics believe costs follow the LAW OF DIMINISHING RETURNS
  • equal quantities of one variable input are added to a fixed factor, output increases by greater proportion, increasing returns causing average cost per unit to fall
  • addition to output after certain point will begin to decrease and average cost per unit will rise again
    *
192
Q

What type of curve is connected to short-term cost behaviour

A

SRACTC

short run average total cost curve

193
Q

What is long-term cost behaviour?

A
  • in long term costs tend to be flexible as its now possible to vary quantities of any factors that were fixed in short term
  • as business expands becomes less efficient to controlling costs due to poor management and pressures on supplies (diseconomies of scale) and results in average cost of production increasing
194
Q

What type of curve is connected to long-term cost behaviour?

A

LRATC

long-run average total cost curve

195
Q

What criteria does a perfect market follow?

A
  • large number of consumers and suppliers (that dont have power to dominate market)
  • products/services sold by all suppliers are identical
  • Perfect information (customers and suppliers have complete information of prices on goods/services sold elsewhere in the market)
  • no barriers on entry or exit from the market
196
Q

When looking at price elasticity of demand what is assumed?

A

that it is a perfect market

197
Q

When is Equilibrium only likely to happen?

A

in a perfect market

198
Q

What are the three forms of imperfect market?

A
  • Monopolies
  • Monopolistic competition
  • Oligopolies
199
Q

What is a Monopoly?

A

when one company controls all or most of the market for a particular product with no major competitors

200
Q

What are the features of a Monopoly?

A
  • only one major supplier in the market
  • no close substitutes available
  • supplier free to set prices due to lack of competition
  • often caused by high barriers into the market or government legislation
201
Q

What is Monopolistic competition?

A

occurs when a business has many competitors, but each offers a slightly different product

202
Q

What are the features of Monopolistic competition?

A
  • each business makes independant decisions about product its offering and price its charging
  • no major barriers into market
  • products differentiated between business meaning one business can charge more for a product than their competitors
  • due to alot of competitors theres important advertising expenditure
203
Q

What are Oligopolies?

A

where market is controlled by small number of organisations

204
Q

What are the features of Opologies?

A
  • no precise number but usually dominated by 2-6 different firms
  • dominate position tends to:
    • make it difficult for new firms to enter market
    • give them powerful influence over price of goods they sell
205
Q

What is Macroeconomics?

A

focuses on workings of the economy as a whole including:

  • aggregate demand of goods
  • output of goods (national)
  • supply of factors of production
  • national income - total incomes earned by providers of factors of production
  • national expenditure - money spend on purchasing national product
  • government policy
206
Q

What are the main objectives of macroeconomics policy?

A
  • Economic growth = increasing productivity capacity of economy
  • Low inflation = ensuring prices stay stable and sustainable
  • High employment = getting people into work
  • Sustainable balance of payments = managing trade with other counties
207
Q

What are the key factors that are referred to when predicting overall level of activity in an economy

A
  • Aggregate demand
  • Consumer confidence
  • Capital
  • Government policy
  • Exchange rate movements
  • Use of resources
208
Q

What are the points of Aggregate demand?

A
  • Total demand for countries output
  • AD = C + I +G + X - M
  • Aggregate demand = consumer spending + investment by firms + government spending + demand from exports - imports
  • higher demand means increasing output to meet demand leading to growth in economy
209
Q

What are the points of Consumer confidence?

A
  • degree of confidence consumers/businesses have about state of economy and own personal finances
  • higher consumer confidence leads to more spending leading to growth in aggregate demand
  • higher business confidence leads to more investment increasing aggregate demand
  • confidence reduced by factors such as; unemployment, high inflation
210
Q

What are the points of Capital?

A
  • more availability of finance allows businesses to raise funds leading to expansion leading to increased aggregate demand
  • lower interest rates make capital cheaper boosting investments
211
Q

What are the points of Government policy?

A
  • governments can increase/decrease level of aggregate demand by adjusting fiscal policies (government spending and taxation)
212
Q

What are the points on Exchange rate movements?

A
  • strengthaning currency makes countries exports more expensive but imports cheaper
  • tends to reduce aggregate demand
213
Q

What are the points on Use of resources?

A
  • new technology and efficient working practices improve business productivity and lower costs therefore increasing business output
  • higher level of education can improve efficiency and effectiveness of workforce
214
Q

What is trending cycles?

A

economies show fluctuations in economic activity over time with an underlying trend of output growth

215
Q

What are the four economic issues?

A
  • Stagnation and economic growth
  • Inflation
  • unemployment
  • Balance of payments
216
Q

What is Stagnation and economic growth?

A
  • Government tries to encourage economic growth:
    • more goods being demanded and provided
    • more jobs leading to people employed
    • people earning more therefore being able to spend more and higher standard of living
217
Q

What are the problems with Stagnation and economic growth?

A
  • gap between poor and rich due to benefits not being distributed evenly
  • growth may be in de-merit goods
  • expense of the environment through ecploitation of poor
  • rapid growth = rising income leading to decreased demand for imports
  • demand for goods higher then production capacity leads to goods becoming scarce therefore rapid increase in prices, increasing inflation

however government have delicate balancing act, so country can benefit economic growth while atempting to minimise risk

218
Q

What is inflation?

A
  • the rise in prices of goods/services in the economy over time
  • reduces purchasing power of money, meaning each unit of currency buys less
219
Q

What are the problems with Inflation?

A
  • as prices rise, consumers purchase less, reducing growth in economy
  • employees push for pay rises to match price rise
  • other costs for businesses rise reducing investment and production
  • customer confidence damaged due to uncertainty of price
  • people with fixed income worst off
  • high infation in one country makes imported goods more attractive affecting aggregate demand in the economy
220
Q

What are the individual affects of inflation?

A
  • people who save to spend later ‘transactions motive’ save less to avoid power of savings being destroyed
  • people who save for emergencies ‘precautionary motive’ save more as they dont know how much they may need
221
Q

What is stagflation?

A
  • inflations rises rapidly while economic growth slows
  • goes against traditional views of economics (inflation caused by significant economic growth)
  • causes dillema for government as actions to bring down inflation lead to reduction in economic growth
222
Q

What is Unemployment?

A
  • When people are willing to work but cant find a job
223
Q

What are the problems of high levels of unemployment?

A
  • government suffers loss from income tax and VAT, and increase in unemployment benefits
  • leads to increased tax on other workers reducing spending power
  • workers worry about job security
  • damages consumer confidence
  • significant reduction in income effects self image
224
Q

What is balance of payments?

A
  • records all financial payments between individuals, businesses and governments with foreign consumers and organisations
225
Q

What are the three parts balance of payments are splint into?

A
  • Current account (imports and exports of goods)
  • Capital account (net change in ownership of foriegn assets between countries)
  • Financial account (cash flows)
226
Q

What a trade deficit?

A

country’s imports exceeds exports

227
Q

What is a trade surplus?

A

country’s exports exceeds imports

228
Q

What are the long term problems of surplus and deficit?

A

trade deficit = outflow of cash from country damages internation credit rating

trade surplus = inflow of cash into the country increases wealth of country

229
Q

What are the two main ways the government has of affecting the economy?

A
  • Fiscal policy - government taxation and spending plans
  • Monatery policy - management of money supply in the economy
230
Q

in Fiscal policy what are the two key elements governments must plan for?

A
  • Income - money raised from direct and indirect taxes on individuals/businesses
  • Expenditure - total amount government needs to spend to provide services for the population
231
Q

What do medium to long term governments like to run?

A

a balanced budgets where income and expenditure exactly match

232
Q

What is a budget deficit?

A
  • is higher than income
  • government needs to borrow money - public sector net cash requirement (PSNCR)
  • puts more money into the economy than it takes out
233
Q

What strategy is budget deficit known as?

A

expansionary strategy

234
Q

when is a budget deficit usually used?

A

When a ‘deflationary gap’ exisits

level of aggregate demand is not enough to lead to full employment

235
Q

What is a budget surplus?

A
  • when spending is lower than income
  • government is taking money out of the economy
236
Q

What is budget surplus referred to as?

A

contractionary strategy

237
Q

When is budget surplus usually used?

A

when an ‘inflationary gap’ exists

when aggregate demand is higher than country can supply

238
Q

What is Monetary policy?

A

can be described as expansionary or contractionary

239
Q

what are the different ways the government increase or reduce money supply?

A
  • interest rates
  • reserve requirements
  • open market operations
240
Q

How does interest rates reduce the money supply?

A
  • raising interest rates = increasing cost of borrowing money
  • reduces amount of investment and expenditure helping reduce aggregate demand
  • high rates encourage people to save more
241
Q

how does the government reduce/increase money supply through reserve requirements?

A
  • banks operate a fractional reserve system ( only part of deposits are kept as cash)
  • increasing reserve requirement reduces amount available to lend to other people which tends to push interest rates up
242
Q

how does the government reduce/increase the money supply through open market operations?

A
  • by buying and selling its own bonds government is able to apply some control over money supply
  • buying back its own bonds releases cash back into circulation when selling bonds receives money therefore taking it out of circulation
243
Q

What are the three different economic theories?

A
  • Classical
  • Keynesian
  • Monetarist
244
Q

What does the Classical theory argue?

A
  • suggests that government does nothing
  • economy would naturally move to an equilibrium with full employment itself
  • economy sorts its self out
245
Q

What does the Keynesian view argue?

A
  • Developed by john Maynard Keynes
  • governments need to manipulate level of aggregate demand - demand side economics
  • government intervention is needed to move economy closer to ideal equilibrium point
  • if economy is left on its own it would get stuck
  • government should borrow money to inject back into the economy when growth is needed
  • government should increase taxes and run budget surplus to slow economy down if growing too fast
  • The multiplier effect
246
Q

What does the Monetarist view argue?

A
  • only one equilibrium point in the economy where supply equals demand in all markets
  • only reason economy doesnt find this equilibrium point is markets held up by imperfections
  • role of government is to remove imperfections
  • imperfections such as:
    • inflation
    • government spending & taxation
    • price fixing
    • regulation of markets
    • minimum wage legislation
  • solution to economic problems = ‘supply side economics’ focus on improving supply factors of production
247
Q

How does the government manage its economic objectives?

A
  • growth
  • unemployment
  • inflation
  • balance payments
248
Q

How does the government manage its economic objectives through growth?

A
  • running a budget deficit (Keynesian approach)
  • increasing availability of production factors (Monetarists approach)
  • cutting interest rates (Keynesian and Monetarists approach)
  • other policies = government grants/incentives
249
Q

How does the government manage its economic objectives through unemployment?

A
  • different types of unemployment
    • Cyclical unemployment (demand deficit, persistent or Keynesian unemployment) in bust peirods.
      • Keynesian would boost aggregate demand
      • Monetarists would remove market imperfections as economy would naturally move to full employment
    • Factional unemployment = people unemployed for short period between jobs
      • Monetarists solution best
    • Seasonal unemployment
    • Real wage unemployment = highly unionised industries, where union keeps wages high so number of people is reduced
      • monetarists see this as an imperfection
250
Q

How does the government manage its economic objectives through inflation?

A
  • Government policy depends on type of inflation
    • demand pull inflation = demand grows faster than ability to supply
      • Keynesian policy focuses on reducing aggregate demand
    • cost-push inflation = in countries with high imports, currency weakens, cost of import rise
      • improved by policy to strengthan currency
    • monetary inflation = increase in money supply, increase in purchasing boost too high though can cause inflation to rise
      • Monetarists argue should be controlled through increased interest rates
    • expectations effect = individuals/businesses expect prices to rise due to inflation
      • to protect themselves wages and prices rise leading to inflationary spiral because of expectations
251
Q

How does the government manage its economic objectives through balance of payments?

A
  • expenditure reducing strategies
    • government deliberately shrink domestic economy to reduce demand for imports
    • reduced through Contractionary monetary policy or budget surplus
    • resizing of economy, reduce export prices making it more competative
    • surpressing demand is likely to increase unemployment
  • expenditure switching strategies
    • government encourages customers to buy domestically produced rather than imports
    • through controls on imports, increase export funding, lower exchange rates to make imports more expensive (currency devaluation)
252
Q

What are Demographics?

A

The composition of the population in any given area

253
Q

What are the important demographic issues that a business needs to monitor?

A
  • population size = growth or decline
  • population composition = age of population
  • population location
  • wealth
  • education
  • health
254
Q

What are the key ways in which society changes?

A
  • social structure - closely related to social class
  • values - accepted behaviours and norms
  • attitudes - positive or negative views
  • tastes - personal preferences
255
Q

Who believed social influences should be monitored?

A

Johnson and Scholes

256
Q

What social influences should be monitored?

A
  • population demographics
  • income distribution
  • social mobility
  • lifestyle changes
  • consumerism
  • levels of education
257
Q

how has government policy responded to impact of social and demographic change?

A

Through:

  • population structure
  • housing
  • employment
  • health
258
Q

How do businesses effect the environment?

A
  • pollution
  • wastage of resources
  • destruction (of habitats)
  • Loss of plant and animal species
259
Q

How does the environment effect the business?

A
  • changing climate
  • lack of resouces
  • loss of sales
  • legislation
260
Q

What can businesses do to limit damage to the environment?

A
  • use fewer raw materials in products
  • reduce packaging on products
  • recycling
  • improve energy efficiency
  • careful production planning (only produce whats requires and reduce wastage)
261
Q

What is sustainability?

A
  • use of resources that does not compromise needs of the future
262
Q

What are the benefits of sustainability to stakeholders?

A
  • Workers/local community ⇒more pleasent healthier environment
  • Customers ⇒prefer dealing with business that takes care of the environment
  • Shareholders ⇒reduced waste and increased efficiency improve business profits
  • Public ⇒reduced pollution lead to fewer environmental problems
263
Q

How do technological changes effect firms?

A
  • Organisational structures (being able to work from home)
  • product developments
  • production changes
  • marketing
264
Q

How does technologial changes impact organisational structure?

A
  • roles being replaced by it systems
  • production roles being replaced by automated systems
  • improved communications
265
Q

What is downsizing?

A

reducing the number of employees without reducing workload

266
Q

What is Delayering?

A

removes layers of management, emphasises on team working with people taking on different roles in different teams

267
Q

What is Outsourcing?

A

contracting work out to specialist providers

268
Q

What are the different types of IT Outsourcing?

A
  • Total = third party supplies most/all IT systems to organisation
  • Ad-hoc = organisation needs IT support for short period of time on a temporary basis
  • Partial = some outsourced some kept in house
  • Project management = creation or implementation of specific IT systems outsourced
269
Q

What are the advantages of IT?

A
  • supplier may have specialist skills and knowledge
  • may operate fixed fee contract so amount is known
  • improves business flexability
  • supplier may be more efficient in running IT function
270
Q

What are the disadvantages of IT?

A
  • difficult to bring IT back to organisation
  • organisation may be locked in contract
  • supplier is able to access organisations information that maybe confidential
  • relying on third party leaves organisation unable to create own unique system so cant obtain competitive advantage
271
Q

What are the four competitive factors?

A
  1. Competitive advantage
  2. Porter’s 5 forces
  3. Porter’s value chain
  4. SWOT (strengths, weaknesses, oppertunities, threats)
272
Q

What is competitive advantage?

A

Firms external analysis assessing the degree and sources of competition within the industry.

Key issues is whether the firm has sustainable competitive advantage

273
Q

What are the three stages competitive advantage is analysed in?

A
  1. main competitive forces in the industry
  2. different ways a firm can gain competitive advantage
  3. how different activities and departments contribute to its competitiveness
274
Q

What is Porter’s five forces?

A

Looks in detail at a firms competitive environment by analysing five key areas which together determine the overall profit potential of the industry. Firms ability to earn high profit margins determines whether or not it can manage the 5 fources more effectively than competitors

275
Q

What are Porter’s five forces?

A
  1. Competitive rivalry
  2. Threat of entry
  3. Threat of substitute products
  4. Bargaining power of customers
  5. Bargaining power of suppliers
276
Q

What are the factors of Competitive rivalry?

A
  • Number of relative strength of competitors (less intense by industries dominated by few large companies)
  • rate of growth (low key in expanding market)
  • high fixed costs (cut prices to drive competitors out)
  • competition is keen if buyer can easily switch between suppliers
  • if exit barrier is high company will hang on till forced out , therefore increasing competition and depressing profit
  • company is highly competitive if presence in the market it due to strategic need
277
Q

What are the 6 major barriers to entry?

A
  • Economies of scale (hard to start on comparable cost basis)
  • product differentiation ( cost of overcoming good brand image and loyalty is high)
  • capital requirements (heavy initial investment)
  • switching cost (one off costs to switch between suppliers)
  • access to distribution channels may be restricted (difficult to gain shelf space)
  • cost advantages independent of scales (special knowledge favourable to suppliers)
278
Q

What are the threats of substitute products?

A
  • threats across the industry or within
  • Perter explains - ‘substitutes limit the potential returns…by placing acceiling on the price which firms in the industry can profitably change’
  • the better the price performance alternative offered the more easily customers will switch
279
Q

What is the bargaining power of customers?

A
  • powerful customers can force price cuts and quality improvements
  • bargaining power is high when combination of factors arise
  • factors can include:
    • where buyer pruchases high proportion of supplier business or total trade in market
    • buyer makes low profit
    • where quality of purchase not important or delivery timing irrelevant prices forced down
    • products strongly seperated with good brand image, retailer has to stock complete range to meed demand
280
Q

What is the bargaining power of suppliers?

A
  • power or supplier to charge higher prices influenced by:
    • degree to which switching costs apply and substitutes are available
    • prensence of one or two dominant controlling suppliers
    • extent to which prouducts uniqueness, technical performance or design not available elsewhere
281
Q

What are the three generic strategies Porter argued businesses could adopt to gain competitive advantage?

A
  • Cost leadership
  • Differentiation
  • Focus
282
Q

What is cost leadership?

A

involves business making products of similar quality to rivals at lower cost normally achieved through internal efficiencies

this allows the organisation to sell products at lower price than rivals (increasing sales) or sell products at same price as rivals (increasing profit)

283
Q

What is Differentiation?

A
  • involves persuading customers product is better than rivals
  • can be done by adding additional features
  • altering customers perseption through advertising
  • allows business to charge premium price
284
Q

What is Focus?

A
  • involves aiming at part of the market not market as a whole
  • particular group of customers identified with same needs and product tailored to their needs
  • allows business to charge premium prices
285
Q

What did Porter conclude about generic strategies?

A

businesses need to choose one strategy or they would be stuck in the middle making it difficult for them to compete successfully

286
Q

What is Porter’s value chain?

A
  • was developed to determine whether and how a firms activities contribute to its competitive advantage
  • involves breaking firm down into 5 ‘primary’ and 4 ‘secondary’ activities and then seeing if each gives a cost advantage or quality advantage
287
Q

What are the 5 Primary activities of Porter’s value chain?

A
  1. inbound logistics ⇒receiving, storing and hanfling raw materials
  2. operations ⇒transformation of raw materials to finished goods
  3. outbound logistics ⇒storing, distributing and delivering finsihed goods to customers
  4. marketing and sales ⇒market research & 4Ps (product, price, place, promotion)
  5. service ⇒ all activities that occur after point of sale
288
Q

What are the 4 secondary (support) activities of Porter’s value chain?

A
  1. Firm infustructure ⇒ how the firm is organised
  2. technology development ⇒how the firm uses technology
  3. human resources development ⇒how people contribute to competitive advantage
  4. procurement ⇒purchasing but not just limited to materials
289
Q

What are value networks?

A
  • set of connections between organisations and individuals interacting together to benefit entire group
  • allows members to share information aswell as buy and sell products
290
Q

What is corporate appraisal (SWOT)?

A
  • examines - strengths, weaknesses, opportunities and threats of an organisation
  • used to view internal and external situation an organisation is in
  • strengths and weaknesses examine what company does good or bad
  • opportunities and threats look at positive/negative factors that may impact organisation externally
  • draws on PEST analysis
  • vital for long term strategic planning
291
Q

What is the Consequentialist approach to ethical decisions?

A
  • decision is right or wrong depending on consequence of decision
  • if outcome is right then action itself is irrelevant
  • EGOISM = action considered morally right if if outcome is favourable to person making the decision
  • UTILITARIANISM = action considered morally correct if outcome is favourable to greater number of people ‘greater good’
292
Q

What is the Pluralist approach to ethical decisions?

A
  • trys to cater to needs of stakeholders without seriously compromising interests of any one group
293
Q

What is the Relativism approach to ethical decisions?

A
  • no universal moral code to judge actions
  • something classed as ethical or not depends on circumstances
  • accepts that different people and cultures will have different views on whats right and wrong
  • more responsive to local attitudes
  • often argued that its an excuse for organisations to do whatever they want
294
Q

What is the Absolutism approach to ethical decisions?

A
  • certain actions are inherently right or wrong regardless of context or circumstances
  • provides a framework of rules that are easy for everyone to follow
  • unclear where to find these ethical rules (should it be religious or universally accepted)
  • may lead to one rule conflicting another
  • linked to idea of deontological ethics (obligation based ethics)
  • linked to IMMANUEL KANT’s work who suggests that looking at action being considered and deciding if its inherently right or wrong, ignores consequense and focuses on moral duties of individual
295
Q

How are business ethics important to organisations?

A
  • good ethics should be seen as driver of profitability rather than burden on business
  • ethical framework is part of good corporate governance and suggests well run business
  • investors reasured about company’s approach to risk management
  • employees motivated in the knowledge that they operate in environment of good ethical corporate behaviour
296
Q

How are business ethics important to the individual?

A
  • cosumer and employee expectations have evolved over years
  • consumer may choose to purchase ethical items, even if they aren’t the cheapest
  • employees wont blindly accept orders to act in a way they believe to be unethical
297
Q

What is a profession?

A
  • mastering of specialised skills during a period of training
  • governance by a professional organisation
  • compliance with an ethical code
  • process of certification before being allowed to practice
  • have a code of conduct that members are required to follow to ensure repuation is not damaged
298
Q

What is the IFAC’s code of ethics for professional accountants?

A
  • lays down ethical standards to be applied by practising accountants around the world
  • recognises that some countries have specific requirements different from its own, therefore stricter rules should be complied with unless prohibited by local laws or regulations
  • IFACs code no administered by IESBA
  • based on conceptual approach to problem resolution
  • Accountants required to identify and address threats to comply with fundemental principles
  • takes an interest in ensuring accountants act in the interest of public
299
Q

What are the IFAC code of conduct fundamental principles?

A
  • integrity
  • objectivity
  • professional competence and due care
  • confidentiality
  • professional behaviour
300
Q

What is the ACCAs cpde of ethics?

A
  • contained in the annual rulebook issued by the association
  • students, affiliates and members required to comply
  • similar framework to IFAC listing identical st of fundemental principles that must be followed
301
Q

What are the ACCAs code of ethics and coduct, Fundamental principles?

A
  • integrity
  • Objectivity
  • professional competence and due care
  • confidentiality
  • prefessional behaviour
302
Q

What does the Fundamental principles acctually mean?

A
  • Integrity = implies fair dealings and truthfullness
  • Objectivity = professional judgement should not be compromised because of bias or conflict of interest
  • Professional competence and due care = must have nesessary knowledge and skill required and must follow professional standards
  • Confidentiality = should not be disclosed to third party unless authority is given
  • Professional behaviour = must comply with relevant laws and regulations and avoid behaviour that would bring profession to disrepute
303
Q

What is corporate code of ethics?

A
  • most companies approach corporate code of ethics by creating set of internal policies for employees
  • policies can be broad generalisations (corporate ethics statement) or specific rules (corporate ethics code)
  • no standard list of conduct but may contain guidelines
  • some organisations appoint ethics officers (compliance officers)
  • can be seen as company escaping legal liability when employee is caught doing something wrong
  • also argued that its used as a marketing tool showing public how good they are
304
Q

What are the threats that accountants should try and avoid?

A
  1. self-interest threat - other interest influences judgement
  2. self review threat - required to re-evaluate own previous judgement
  3. advocacy - promoting a position or opinion where impartiality is compromised
  4. familiarity threat - sympathetic to others interest or close relationship
  5. intimidation threat - through actual or perceived threaths
305
Q

What safeguards have been put into place to eliminate threats?

A
  1. ethics training for all professional accountants
  2. creation of corporate governance requirements
  3. professional or regulatory monitoring and disciplinary procedures
  4. setting of professional standards
306
Q

What have organisations done to help reduce ethical breaches?

A
  • having effective internal complaints procedures
  • creating a culture helping employees follow professional codes
  • and applying six values - HOTTER
    • honesty
    • openess
    • transparacy
    • trust
    • employment - making own decisions
    • respect
307
Q

What are the steps an accountant should take if they come accross unethical behaviour?

A
  1. speak to who ever is responsible for control or ethics within the organisation
  2. if problem remains then, should seek legal advice or advice from professional body e.g. ACCA
  3. if still not resolved, then consider reporting to relevant authorities and withdraw from engagement
308
Q

What is Seperation of ownership and control?

A

Where the people who own the company (shareholders) are not the people who run the company (board of directors)

309
Q

What is an ‘Agency problem’

A

where directors run the business in their own interest rather than that of shareholders or stakeholders

310
Q

What is Corportate governance?

A

Set of processes and policies by which the company is directed, administered and controlled, which includes the appropriate role of the board of directors and auditors of the company

311
Q

What are the main recommendations of best practice in effective corporate governance?

A
  • the membership of the board of directors
  • how directors pay is decided and disclosed
  • role of internal and external audit
  • how the public as rightful stakeholders in large companies have the right to know how its being governed
312
Q

What are executive directors?

A

those that are involved in the day to day running of the company

313
Q

What are non-executive directors?

A

not employees of the company and have no managerial responsibilities but do attend board meetings and have a say in strategic decision making

314
Q

According to Higgs Report (2003) what do NEDs roles include?

A
  • Strategy -effective challenge and contribution to development of strategy
  • Performance - check performance of management is meeting objectives and monitor senior management
  • Risk - financial information is accurate and risk management is strong and defensible
  • People - determining appropriate levels of pay for executives and incharge of appointing and removing senior management
  • Independence - should be independent to carry out role effectively and responsibily
315
Q

What are the other recomendations of what NED roles include?

A
  • half the board should be independent NEDs except chairman who usually is a NED
  • smaller companies should have at least 2 independent NEDs
  • One independent NED should be appointed to ‘senior independent direct’ who shareholders can contact outside of normal executive channels of communication
  • Chairman should be different to the Cheif Executive Officer (CEO)
  • executive directors and NEDs have to stand for relection by shareholders every 3 years
  • NED who have been with company for 9 years must stand for re-election annually
316
Q

What is a remuneration committee?

A
  • made up of NEDs responsible for deciding pay and incentives of executive directors
  • no director should be involved in setting their own pay
  • remuneration committee should have atleast 3 independent NEDs (2 for smaller companies)
  • also responsibile for setting executive director’s pension rights and compensation payments
  • the whole board of directos should be responsible for deciding level of remuneration for NEDs though can be delegated to committee of the board
317
Q

What are the advantages of having a remuneration committee?

A
  1. avoids agency problem of directors deciding their own pay
  2. leaves board free to make strategic decisions about company’s future
318
Q

What are the disadvantages of having a remuneraiton committee?

A
  1. danger of NEds recommending high remunerations for executive directors on the understanding that executive directors will do the same back
  2. cost involved in preparing for and holding committee meetings
319
Q

What is the audit committee?

A
  • consists of independent NEDs responsible for monitoring and reviewing company’s internal financial controls and financial statements
  • act as an interface between board of directors and both internal and external auditors
320
Q

What are the responsibilties of the audit committee?

A
  • reviewing accounting policies and financial statements as a whole to ensure they are appropriate and balanced
  • review systems of internal control and risk management (risk management may be dealt with by risk committee)
  • agreement of work agenda for internal audit department and reviewing results of internal audit work
  • making recommendations to the board to put forward to shareholders about appointment/removal of external auditors and their remuneration and terms of engagement
321
Q

What are the advantages of an audit committee?

A

allows auditors to report their findings to independent directors to avoid:

reporting errors to executive directors as they may have been the ones responsible for them and internal auditors may not feel comfortable reporting weaknesses to executive directors

322
Q

What is the Nomination committee?

A
  • formed to ensure that composition of the board is balanced
  • monitors process of appointment of directors to the board of directors
  • when recomending it needs to:
    • consider size of the board
    • various skills needed to be on the board
    • mix of executive and non executive directors
    • need for continuity on the board
    • attract diverse backgrounds to improve organisations strategy
323
Q

What are the reasons why companies adopt good corporate governance?

A
  • Business success - improved controls and decisions help corporate success
  • investor confidence - investors more likely to trust company thats being run well
  • minimisation of wastage - helps minimise waste in the company
  • listing requirements - following corporate governance guidelines is required by may stock exchanges to obtain a listing
324
Q

What is corporate social responsibility?

A
  • idea that company should be sensitive to needs and wants of stakeholders not just shareholders
  • organisations duty to maximise positive impacts on stakeholders while minimising negative effects
  • closely linked to SUSTAINABLE DEVELOPMENT
  • organisation needs to understand who the stakeholders are and what they expect
325
Q

What are the key issues in CSR debate:

A
  1. employee rights
  2. environmental protection
  3. supplier reactions
  4. community involvement
326
Q

What are the drawbacks of adopting CSR approach?

A
  • increased cost of sourcing materials from ethical sources
  • turning away business from unethical customers
  • management time consumed by CSR planning and implementation
327
Q

What are the benefits of being socially responsible?

A
  • attracts customers by enhancing organisations repuatation
  • helps attract and retain good employees
  • avoiding pollution saves money in the long run
  • being environmentally friendly can save money e.g. lower bills
328
Q

What is a committee?

A
  • a group of people appointed to administer, discuss or make reports concerning a subject
    • tend to be permanent or long term
    • have authority
    • follow well established procedures
    • provide a way of making difficult decisions by involving key individuals and departments
329
Q

What is the purpose of a committee?

A
  • they brainstorm new ideas
  • allow number of people with different skills and knowledge to work together in a co-ordinated manner
  • act as a delaying mechanism
  • help make or implament decisions
  • oversee a function or procedure
  • gather information about particular issues
330
Q

What types of committees are used by organisations?

A
  • Executive committee = have administrative poers, meet frequently to manage affairs e.g. board of directors
  • Standing committee = formed for a particular purpose permanently
  • Ad-hoc committee = formed to complete a particular task temporarily
  • Sub committee = subordinate committee made up of members put together by a parent committee. look into particular issued or help parent committee with workload
331
Q

What are the advantages of committees?

A
  • brings together individuals with necessary skills and knowledge to successfully complete a task
  • slows decision making process down so poorly considered decisions less likely to be made
  • decisions more likely to be accepted as they have been made by a committee with reps from different departments
  • setting up committee can delay decision making process leading to increased company time
  • more people involved in decision making process leading to increased motivation
  • collective responsibility means no individual is responsible for consequences or recommendations
332
Q

What are the disadvantages of committees?

A
  • slow decision making can lead to increased cost and possibly miss out on valuable oppertunities
  • collective responsibility means no individual is responsible for poor performance so reduces motivation of committee members
  • members of committee may wish to further develop their own department causing conflict
  • work based on compromise between various members therefore fail to recommend decisive action where needed
  • normally only attend to the committee part time so may take committee work less serious
  • some ‘experienced’ committee members may dominate
333
Q

What are the two key rols in the committee?

A
  • the chairperson
  • the secretary
334
Q

What is the chairperson responsible for?

A
  • keeping the meeting on schedule and agenda
  • maintaining order
  • impartiality
  • summing up
  • checking and signing the minutes of the meeting
335
Q

What are the responsibilities of the secretary?

A
  • undertaking all administration relating to the committee and support the chairperson in ensuring smooth running of the committee
  • before the meeting they:
    • fix date and time
    • book the venue
    • prepare and issue the agenda and other documents
  • during the meeting they:
    • assist the chairperson
    • make notes
    • advise chairperson on points of procedure
  • after the meeting they:
    • prepare minutes
    • act on and communicate decisions
    • deal with correspondance
      *
336
Q

What are regulatory bodies?

A

set up by the government to oversee regulation and accounts of companies

e.g. companies house in the UK

337
Q

What do companies have to submit to regulatory bodies?

A
  • financial statements so interested parties can inspect them
  • certain key documents e.g.
    • register of shareholders
    • register of directors
338
Q

What do companies have to submit to tax authorities?

A
  • tax returns each year showing amounts of taxable profits earned that they own to the tax authority
339
Q

What other regulatory authorities are companies accountable to?

A
  • Financial services = FCA (financial conduct authority) and PRA (prudential regulation authority)
  • Charities = The charity commission
  • Utilities = OFGEM (office of gas and electricity markets)
340
Q

How long do companies need to keep their accounting records for/

A

minimum of 7 years

341
Q

Which legislation in the UK covers preparing financial statements?

A

companies act 2006 (CA2006)

342
Q

What does legislation governing financial statements contain?

A
  • the need to prepare financial statements
  • how they should be prepared (frequency and format)
343
Q

What are the typical requirements of financial statements?

A
  • to be produced to be a ‘true and fair’ view of the position and performance of the company
  • they follow all appropriate accounting standards
  • contain information of sufficient quality to satisfy the reasonable expectation of the users
  • follow generally accepted practice
  • reasonably accurate without errors
344
Q

Who is responsible for financial records?

A

under company legislation the directors are responsible for producing financial statements

It is delegated to the Finance Director or the Chief Financial Officer

If the FD doesnt have the skills to prepare it then an external accounting firm can assist

345
Q

What is the role of the IFRS Foundation?

A
  • Is the supervisory body for the IASB responsible for governance issues and ensuring member body is propery funded
  • develop a set of high quality, understandable, enforceable and globally accepted financial reporting standards
  • promote the use and application of these standards
  • bring about fusion of national and international financial reporting standards
346
Q

What is the International Accounting Standards Board (IASB)?

A

the independent standard setting body of the IFRS Foundation responsible for development and publication of IFRSs and interpretations

347
Q

What is the IFRS interpretations committee (IFRS IC)?

A

review widespread accounting issues on a timely basis and provides authoritative guidence on these issues

348
Q

What is IFRS Advisory Council (IFRS AC)?

A

formal advisory body to the IASB and IFRS Foundation

comprised of wide range of members affected by the IASBs work

They advise IASB on agenda decisions and priorities in their work, inform the IASB of views of the council with regard to major standard setting projects

give other advice to the IASB or Trustees’

349
Q

What is the role of the IASB?

A
  • based in london
  • has 14 members from 9 countries
  • aims to develop singh set of high quality, understandable and enforceable global accounting standards and co-operate with national accounting standard setters to achive unity around the world
350
Q

What are the standards produced by the IASC (originator to the ISAB) called?

A

International Accounting Standards

351
Q

What are the standards produced by the IASB called?

A

International Financial Reporting Standards

352
Q

How are standards produced?

A
  1. start of as a Discussion Paper (DP)
  2. IASB then assigns working group to develop a new standard following input from the Staff Accounting Bulliten (SAB) and produce the first draft with points of discussion made available for public to comment on
  3. Views from the DP are taken into account when drafting the Exposure Draft again available for public to comment on
  4. finally IFRS issued that can be amended when necessary
353
Q

Who writes the accounting standards for the UK?

A

Financial Reporting Council (FRC)

354
Q

Who is one of the secondary committees that contorls creation of the UK accounting standards?

A

Accounting Standards Board (ASB)

355
Q

What are the UK standards called?

A

Financial Reporting Standards (FRS)

356
Q

What was FRS previously known as?

A

Statements of Standard Accounting Practice (SSAPs)

357
Q

What are the four committees of the Financial Reporting Council (FRC)?

A
  1. Auditing Practices Board = establishes standards and guidence for auditing of companies
  2. The Professional Oversight Board = independent supervision and regulation of the accounting profession in the UK
  3. The Financial Reporting Review Board = examine accounts of large companies and investigate failure to comply with accounting practices
  4. The Accounting and Actuarial Disciplinary Board = enforce codes of conduct and professional behaviour in the UK
358
Q

What are the responsibilities of the Finance Director?

A
  • Debt equity strucutre
  • Financial measurement of commercial success
  • Resource allocation
  • Planning aquisitions and divestments (selling of subsidiary business investments or interests)
  • Dividend policy
  • Shareholder/stock market and financial press
  • relationships
359
Q

What are the responsibilities of the Cheif Accountant?

A
  • Financial accounting
  • Auditor relationship
360
Q

What are the responsibilities of the Treasurer?

A
  • Debt strategy
  • Currency management
  • Working capital management
  • Investment appraisal
  • Banking forecasting
  • Interal financial structure
  • Risk management
361
Q

What are the responsibilities of the Tax manager?

A
  • Tax strategy
  • Tax mitigation
  • Compliance
362
Q

What are the responsibilities of the Management Accountant?

A
  • Management information and accounting
  • Budgeting and forecasting
  • Internal financial structure and control
  • Investment appraisal
363
Q

What are the three key functions within the accounts department?

A
  1. Financial accounting function
  2. Management accounting function
  3. Treasury function
364
Q

What is the Financial accounting function?

A
  • produce annual financial statements
  • whenever business transaction takes place needs to be recorded in organisation’s accounting records
  • first need to be entered into the books of prime entry
  • then either daily or weekly entered into ledger accounts
  • at end of financial year balance is calculated on ledger accounts and balances used to create financial statements
365
Q

What are the three main financial statements produced by businesses?

A
  • Statement of profit or loss (the income statement) details income aswell as costs incurred
  • Statement of financial position - shows assets and liabilities also shows stake that owners have of the business (shareholders equity)
  • Statement of cash flow - summarises cash receipts and payments for the year helps show if company is solvant and where money is being spent
366
Q

What is Management accounting?

A
  • assists management in fullfilling their duties to plan, direct and control the operations of the business
  • connected with process of measuring, analysing, interpreting and communicating information in a form management can understand
  • uses financial accounting records as a source of data and other sources they feel useful
  • no legally required format for management accounts
  • have several common key management reports
367
Q

What are the three most common management reports?

A
  1. cost schedules
  2. budgets
  3. variance reports
368
Q

What are Cost Schedules?

A
  • lists various expenses involved in manufacturing units of a product
  • list of costs incurred when making a unit of each type of product
  • known as standard cost card
  • several key decisions that this report helps make:
    • Pricing decisions
    • Break-even analysis
    • Key factor analysis (outsourced or not)
    • Investment appraisal
369
Q

What are Budgets?

A
  • once cost per unit identified budget can be produced
  • shows total planned revenues and costs for business for the coming period
  • based on the cost schedules
  • budgets are useful for several reasons (CRUMPET)
    • co-ordination
    • REsponsibility
    • Utilisation
    • Motivation
    • Planning
    • Evaluation
    • Telling
  • drawback is that its only an estimate
  • therefore Variance report needs to be prepared at end of each period
370
Q

What are Variance reports?

A
  • compares budget to actual results and identifies significant differences/variances between them
  • management may need to know why variance has ocurred, decision can then be made as to what control measurements are appropriate
371
Q

Why is information mainly produced in Management accounting and Financial accounting?

A
  • Management accounting = for internal use
  • Financial accounting = for external use
372
Q

What is the purpose of information in Management accounting and Financial accounting?

A
  • Management accounting = aid planning, controlling and decision making
  • Financial accounting = record financial performance in a period and financial position at end of the period
373
Q

What are the legal requirements for Management accounting and Financial accounting?

A
  • Management accounting = none
  • Financial accounting = limited companies must produce financial accounts
374
Q

What are the formats for Management accounting and Financial accounting?

A
  • Management accounting = management decide on information required and presentation of it
  • Financial accounting = format and content must follow accounting standards and company law
375
Q

What is the nature of information in Management accounting and Financial accounting?

A
  • Management accounting = Financial and non-financial
  • Financial accounting = mostly financial
376
Q

What is the time period for Management accounting and Financial accounting?

A
  • Management accounting = historical and forward looking
  • Financial accounting = mainly historical
377
Q

What is the function of the Treasury?

A
  • corporate handling of all financial matters, generation of external and internal funds for a business
  • manages currencied and cash flows
  • complex strategies, policies and procedures of corporate finance
378
Q

What are the key roles of the Treasury?

A
  • Working capital management = monitor cash balance and working capital ensuring it never runs out of money
  • Cash management = prepare cash budgets and arrange overdrafts
  • Financing = monitor investments and borrowings ensuring they gain as much investment as possible or little interest as possible
  • Foreign currency = monitor exchange rates and manage affairs so minimises losses due to exchange rate
  • Tax = manage affairs to try legally avoid as much tax as possible
379
Q

What is a ‘forward exchange contract’?

A

exchange rate is fixed before buying.

depends on what the market thinks is going to happen to exchange rates

380
Q

Who decides on the appropriate level of investment in working capital for a business?

A

Treasury and Finance function

381
Q

What are the advantages of holding large balances for the following

Inventory

Trade receivables

Cash

Trade payable

A
  • Inventory = customers happy as goods can be immediately supplied
  • Trade receivables = customers happy as they like credit
  • Cash = creditors happy as bills paid promptly
  • Trade payables = preserves own cash
382
Q

What are the advantages of holding small balances for the following

Inventory

Trade receivables

Cash

Trade payable

A
  • Inventory = low handling costs less risk of un-used costs
  • Trade receivables = good for cash flow, less risk of unrecoverable debts
  • Cash = more invested elsewhere to earn profit
  • Trade payables = happy suppliers and may offer discounts
383
Q

What are the two main types of finance?

A
  • Debt - borrowing cash from third party
  • Equity - selling stake in business to raise cash
384
Q

What are the advantages of debt finance?

A
  • interest payments are allowences against tax
  • doesnt change ownership of organisation
  • cheaper to service than equity , secured against assets of company
  • debt takes priority over equity in liquidation
385
Q

What are the advantages of equity finance?

A
  • no minimum level of dividend that must be paid to shareholders
  • as bank normally requires assets to secure for loan if company doesnt have quality assets to offer then equity is more attractive as doesnt require security
386
Q

What is Tax avoidence?

A

legal use of rules of tax regimes for own advantage, reduce amount of tax payable within the law

387
Q

What is Tax evasion?

A

use of illegal means to reduce tax

388
Q

What is Tax mitigation?

A

conduct that reduces tax liabilities without counteracting the intentions of parliament

389
Q

What are the advantages of a formal system?

A
  • transactions are recorded in the same way
  • can be adopted by everyone
  • staff can refer to written procedures for clarification
  • new staff trained more quickly
  • easy for auditors to follow
  • errors and frauds identified more easily
390
Q

What do system designers need to consider

A
  • objectives of the system
  • the required outputs
  • likely inputs
391
Q

What are the main stages in the purchasing cycle?

A
  • requisition - staff decide what good need to be ordered and produce a purchase requsition, then authorised and passed to purchasing department
  • ordering - order placed, obtain quotes, order authorised
  • goods received - goods inspected, and recored kept
  • invoice received - supplier bills company, before recording in accounts, price and quantity checked
  • invoice recorded - recorded in accounting system
  • payment made - cheque produced, approved by senior manager
392
Q

What are the main stages in the Sales cycle?

A
  • Order received - order received, and recorded
  • Order processed - check if customer has valid credit account, or paid cash, check goods in inventory, order confirmation sent
  • Goods dispatched - goods sent to customer, goods dispatch note produced
  • Invoicing - invoice sent to customer
  • Recorded in accounts - invoice entered into accounts
  • Payment received - payment is received
393
Q

What is a Credit controller?

A

sets credit limit, and chases late payments when necessary

394
Q

What are the main stages in the payroll system?

A
  • Hours worked recorded - hours recoreded and authorised by supervisor
  • Overtime recorded - timesheet of overtime recorded
  • Pay rates obtained - per hour/mont, changes authorised by senior manager
  • Pay calculated - hour x rate
  • Deductions calculated - tax etc deducted
  • Net pay paid to employee - paid into employee account
395
Q

What is the receipts system?

A
  • cheques received from customers are recorded in cash book and customers account. cashier pays cheque in to company bank account
  • usually 2 employees open cheques and list them and supervisor checks they have all been banked
  • cashier goes through bank statement to check bank transfers entering the details into the cash book and passes information to sales ledger section deducting amount from customers balance
396
Q

What is the payments system?

A
  • companies usually pay monthly by cheque
  • cheque requisition prepared for each payment
  • cheque and cheque requsition and invoice subbmited to senior manager for approval
  • large amounts usually need 2 signatories
  • suppliers being paid by bank transfer should be authorised by senior manager first
397
Q

What is the petty cash system?

A
  • certain amount of cash kept on hand for small expenses
  • cheque made out to cash, to generate initial cash
  • staff claiming petty cash need to fill out form stating what its for and attach receipt
  • further cheques made out to replenish petty cash float
398
Q

What are the issues in the purcashing system?

A
  • Safeguard assets - ensure only goods received are paid for and are in good condition
  • Efficiency - best price is negotiated before buying
  • prevent fraud - preventing staff from accepting payment from supplier to get them to only buy from that supplier
  • prevent errors - correct amount charged by supplier, ensure all purchases are recorded
399
Q

What are the issues in the sales system?

A
  • safeguard assets - ensure goods only sold to customers likeley to pay
  • efficiency - process orders promptly so customers dont go elsewhere
  • prevent fraud - no theft of cash from customers
  • prevent errors - correct quantity of goods dispatched and invoiced
400
Q

What are the issues in the wages system?

A
  • safeguard assets - ensure cash wage cnt be stolen
  • efficiency - only pay approved overtime
  • prevent fraud - correct people being paid, ensure people dont claim for hours they havent worked
401
Q

What are the issues in the cash system?

A
  • Safeguard assets - cash kept safe from theft
  • efficiency - cash banked promptly so it can gain interest
  • prevent fruad - ensure employees dont claim expenses not incurred
  • prevent errors - ensure entries into cash book are correct
402
Q

What are the issues in the inventory system?

A
  • safeguard assets - inventory kept free from damage
  • efficiency - inventory only produced when it can be sold qucikly
  • prevent fraud - ensure it cant be stolen by employees
  • prevent errors - cost of finished goods are calculated properly
403
Q

What are the features of Automated systems?

A
  • uniform processing of transactions
  • Lack of segregation of functions - one person can access all information
  • potential for data to be corrupted easily
  • potential for increased management supervision
404
Q

What are the advantages of a Manual system?

A
  • low capital cost
  • no computer experience required
  • easy to correct errors
  • ledgers are portable
  • can review transactions for logical sense while entering calculations
405
Q

What are the disadvantages of Manual systems?

A
  • slower at performing calculations
  • more likely to make calculation errors
  • analysis of information more time consuming
  • leass easy to audit
406
Q

What are the advantges of Automated systems?

A
  • quicker at processing information and calculations
  • can perform more complex calculations
  • fewer errors
  • more security
  • easier to sort and analyse data
407
Q

What are the disadvantages of automated systems?

A
  • capital costs to set up equipment
  • training cost
  • less easy to correct errors
  • system can crash
408
Q

How does the Purchasing department co-ordinate with the Accounting department?

A
  • accounting and buying department negotiate with supplier credit terms
  • accounting advises buying on maximum price that should be paid to maintain margins
  • payments approved by buying and made by accounting
  • order details input by buying and passed to accounting
  • purchasing consults with inventory section of accounting to determine quantity already held and required
  • accounting consults with buying on likely costs when preparing budgets
409
Q

How does the Production department co-ordinate with the accounting department?

A
  • production measures quantities of materials and time used, management accountant gives monetry value. costs then allocated and absorbed to calculate production costs
  • cost of produxing items determined by production and accounting together
  • production and accounting discuss features that can be added and raw materials that should be used. discuss how to maximise quality and profit
  • production liases with inventory to ensure there is enough inventory before production is planned
410
Q

How does the Marketing department co-ordinate with the accounting department?

A
  • marketing and accounting discuss likely sales volume of each product in order to produce the sales budget
  • accounting helps marketing in detting budget and monitoring if it is cost effective
  • accounting has input on price thats charged
  • accounting can provide marketing with information on sales volumes to help maketing determine market share
411
Q

What are the four main features of Service?

A
  1. Intangible = not pysical
  2. Inseperable = created when customer uses it
  3. Perishabile = cant be stored or used twice
  4. Variable = each is unique
412
Q

How does the service department co-ordinate with the accounting department?

A
  • Charge out rates - hourly rate which is charged
  • Estiating costs - amount of overhead cost that should be included in charge out rate
  • Problems measuring benefits - intangible and difficult to measure
413
Q

What is internal control?

A

process designed and affected by management, to provide reasonable assurance about achievement of the company objectives with regards to:

  • relaiability of financial reporting
  • effectiveness and efficiency of operations
  • compliance with applicable laws and regulations
414
Q

What are internal checks?

A
  • Element of Internal control ensuring that no single task is finished start to end by one single person reduces likelyhood of error or fraud
415
Q

What is the purpose of internal control?

A
  • ensure orderly and efficient conduct of the business
  • safeguarding of assets
  • prevention and detection of fraud and error
  • accuracy and completeness of account records
  • timely preperation of reliable financial information
416
Q

What are the components of internal control?

A
  • control environment
  • entity’s risk assessment process
  • information system relevant to financial reporting
  • control activities
  • monitoring of controls
  • sontrol environment
  • risk assessment process
  • the information system
417
Q

What should information systems be able to do?

A
  • identify and record valid transactions
  • describe it in enough detail
  • mesure the value
  • determine the accounting period it should be recognised in
  • properly present transactions and related disclosures in financial statements
418
Q

What are control activities?

A

policies and procedures help ensure management instructions are carried out

419
Q

What does ACCA MAPS stand for?

A
  • Authorisation
  • Comparison
  • Computer controls
  • Arithmatical controls
  • Maintaining a trial balance and control accounts
  • Accounts reconciliation
  • Physical controls
  • Segregation of duties
420
Q

What is monitoring of controls?

A

process to assess the quality of internal control performance over time

involves assessing the design and operation of controls and taking necessary corrective action

421
Q

What are the three key types of control?

A
  • preventive control
  • detective control
  • corrective control
422
Q

What does Preventive control consist of?

A
  • control that prevents errors and frauds occurring
  • segregation of duties
  • recruiting and training the right staff
  • control culture
423
Q

What does Detective control consist of?

A
  • detect if any problems have occurred
  • designed to pick up errors that havent been prevented
  • reconciliation
  • supervision
  • internal checks
424
Q

What does Corrective control consist of?

A
  • address any problems that have occurred
  • when problems identified, ensure they are properly rectified
  • follow-up procedures
  • management actions
425
Q

What is the most powerful type of control?

A

preventive

as it stops the problem

426
Q

What does Principle C2 of the UK Corporate Governance code state?

A

the board is responsible for determining the nature and extent of the significant risks it is willing to take in achieving its strategic objective. the board should maintain sound risk management and internal control system

the board should review this annually and report to shareholders

427
Q

What is an internal auditor?

A
  • not legally required
  • advises management on whether the organisation has a sound system of internal control to protect them against loss
  • work is determined by management and they cover all areas of the organisation
  • operational and financial
428
Q

What is an external auditor?

A
  • provide an opinion to shareholders on whether the financial statements give a true and fair view
  • legally required in large companies and public companies
  • the work is determined by the auditor but are financially focused
429
Q

What are the limitations of internal audit?

A
  • unavoidable independance problem
  • employed by management but expected to give an objective opinion
  • need to be properly staffed and resourced
  • may be unwilling to disclose identification of fraud due to reprecussions
430
Q

Whare the advantages of External auditors?

A
  • disputes between management more easily settled
  • application to third party for finance enhanced by audited accounts
  • likely to include an in depth examination of business
431
Q

What are the disadvantages of External audit?

A
  • the fee
  • disruption in organisations work as people need to take out time to provide information
432
Q

What is an error

A

an unintentional mistake

433
Q

What is an irregularity?

A

something opposite to a particular rule of standard

434
Q

What is a Misstatement?

A

something stated wrongly

435
Q

What are the three prerequisites required for fraud?

A
  1. Dishonesty - lack of inegrity or honesty
  2. Opportunity - opportunity or opening for fraud
  3. Motivation - individual must feel reward will outweigh cost of being caught
436
Q

What factors could indicate increased risk of fraud?

A
  • Management domination by one person or small group of people
  • Unnecessarily complex corporate structure
  • Poor staff moral
  • Personnel who don’t take leave/holidays
  • Lavish lifestyles of employees
  • Inadequate segregation of duties
  • Lack of monitoring of control systems
  • Unusual transactions
  • Payments for services disproportionate to effort
437
Q

What are the three maub offences relating to money laundering?

A
  1. Laundering - max 14 yrs prison
  2. Failure to report - max 5 yrs prison
  3. Tipping off - Max 2 yrs prison
438
Q

What are the three phases money laudering goes through?

A
  1. Placement - placing money in legit business
  2. Layering - moving money so harder to trace
  3. Integration - money now appears clean
439
Q

What is the reporting process for suspected money laundering?

A
  1. Employee reports it to the money laundering reporting officer MLRO
  2. MLRO investigates it further
  3. if grounds are reasonable then MLRO reports to relevant authorities
440
Q

What duties do the Board of directors have in preventing fraud?

A

Maintain sound system of internal control

441
Q

What duties do the audit committee have in preventing fraud?

A

monitor and review internal control and risk

442
Q

What are the duties of employees in preventing fraud?

A

fruad prevention and detection

443
Q

What does leadership mean?

A

an interpersonal influence directed to the achievement of a goal

444
Q

What does management mean?

A

the effective use and co-ordination of business resources in order to achieve key objectives with maximum efficiency

445
Q

What does supervision mean?

A

a person given responsibility for planning and controlling the work of a group of employees

a connection between management and the workforce

446
Q

What are the 5 ypes of sources of power identified by French and Raven?

A
  1. Reward power
  2. Coercive power
  3. Expert power
  4. Referent power
  5. Legitamate power

two other possible sources

  1. Resource power
  2. Negative power
447
Q

What are the classical theories of management?

A
  • Foyal - the five functions of management
  • Taylor - scientific management
448
Q

What is Foyals Five functions of management?

A
  1. Planning
  2. Organising
  3. Commanding
  4. Co-ordinating
  5. Controlling
449
Q

what is Taylors theory of Scientific Management?

A
  • one best way of performing a task
  • stated that pay was only motivation
  • four key principles:
    • tasks analysed in detail
    • staff scientifically managed
    • managers make key decisions
    • work divided between managers and staff
450
Q

What did Mayo argue?

A
  • employee behaviour depends mainly on group relations
  • wages are not dominating motivation factor
  • worker attitudes, group relations and leadership styles are key factors that determine productivity
451
Q

What are Druckers five basic operations that all managers perform?

A
  1. Set objectives
  2. Organise
  3. Motivate and communicate
  4. Establish yardsticks
  5. Develop people
452
Q

What is Mintzbergs theory on the ten skills managers need?

A
  • Interpersonal
    • Figurehead
    • Leader
    • Liason
  • Informational
    • Monitor
    • Disseminator
    • Spokesperson
  • Decisional
    • Entrepreneur
    • Disturbance handler
453
Q

What are the three main types of leadership theories?

A
  1. Trait theories
  2. style theories
  3. contengency theories
454
Q

What is a trait theory?

A

leaders are born not made

455
Q

What are the key points on Blake and Moutons grid?

A
  • 1.1 = management impoverished
  • 1.9 =country club manager
  • 9.1 = task management
  • 5.5 = middle of the road management
  • 9.9 = team management
456
Q

What are the four main management styles of Asridge college?

A
  • Autocratic = Tells
  • Persuasive = Sells
  • Participative = Consults
  • Democratic = Joins
457
Q

What do contingency theories suggest?

A
  • There is no correct style or approach
  • successful leadership involves adapting to circumstances
458
Q

What does Adairs action centered leadership argue?

A
  • any leader has to aim to balance three inter-related goals in order to be effective
    • Task needs
    • Individual needs
    • Group needs
      *
459
Q

What are Fielders two distinct styles of leadership?

A
  • Psychologically distant managers - PDMs
  • Psychologically close managers - PCMs

most effictive depends on circumstances of manager

460
Q

What are the two types of leaders Bennis argues there are?

A
  • transactional leaders- service loyalty and compliance
  • transformational leaders - motivating, change cultures

argued there is no right way to lead

461
Q

What is Kotter achnge in approach to dealing with resistence

A
  • participation and involvement
  • education and communication
  • facilitation and support
  • manipulation and co-operation
  • negotiation and agreement
462
Q

What does Heifetz argue?

A
  • main role of manager is to help people face reality and mobilise them to make changes
  • true leader doesnt have all the answers but encourages people to tackle tough challenges
463
Q

What are the nine stages of selecting the right candidate through recruitment and selection?

A
  1. Agree vacancy
  2. Job analysis
  3. Job description
  4. Person specification
  5. Attract candidate
  6. Application forms
  7. Interviews
  8. Testing
  9. References
464
Q

What seven point plan did Alec Rodgers devise suggesing the content of a person specification?

A
  1. Specialist aptitutes (ability)
  2. Circumstances
  3. Interests
  4. Physical make-up
  5. Disposition
  6. Attainments
  7. General intelligence
465
Q

What are the different types of discrimination that equal opportunities tries to prevent?

A
  • direct discrimination
  • indirect discrimination
  • victimisation
  • positive descrimination
466
Q

What is role theory?

A

suggests that behaviour of individuals depends on other peoples expectations of them and how they are supposed to behave in given situations

467
Q

What are the three key terms related to role theory?

A
  • Role behaviour
  • Roll set
  • Roll signs
468
Q

What are the problems with the patterns in role theory?

A
  • Role ambiguity (doubt)
  • Role conflict
  • Role incompatability
469
Q

What are the benefits that groups have over individuals?

A
  • mixture of skills and abilities
  • synergy - pooling ideas
  • increased flexability
  • better control
  • increased motivation
  • improved communication
  • healthy competition within the organisation
470
Q

What are the disadvantages in group work?

A
  • slow decision making
  • discussions become compromises
  • group pressure to conform
  • lack of individual responsibility
  • too much social interaction
  • increased competition and conflict
471
Q

What is Belbins 9 roles in team role theory?

A
  • Leader - pulls group together
  • Shaper - promotes activitym dominant
  • Plant - ideas person
  • Monitor-evaluator - criticeses others ideas
  • Resource-investigator - looks for alternative solutions
  • Implementer - turns ideas into practical solutions
  • Team worker - concerns with relationships in the group
  • Completer-finisher - progress chaser
  • Specialist - provides knowledge/skill for project
472
Q

What are the four main stages that Tuckman argues all teams progress through?

A
  1. Forming - team initially comes together
  2. Storming - conflict stage, members compete for chosen roles
  3. Norming - co-operation begins and roles agreed
  4. Performing - group able to operate at full potential

Added later

  • Dorming - if performing phase lasts too long team begins to operate on auto-pilot
  • Adjourning Mourning - objectives complete team closes down
473
Q

What are Peters & Watermans five key aspects of a successfull team?

A
  1. small team
  2. limited duration
  3. voluntary members
  4. communication should be informal and unstructured
  5. action-orietated
474
Q
A

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