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CIMA E1 - MM > Role and Activities of Finance > Flashcards

Role and Activities of Finance Flashcards

1
Q

What is the finance function?

A

The part of the organisation which controls and manages anything related to finance

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2
Q

What are the key drivers of change in organisations?

A
  • Changing technology
  • Changing levels of competition
  • Growing collaborative consumption
  • Changes to customer expectations
  • Less customer loyalty
  • Globalisation
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3
Q

True or False: The average life-span of products is increasing.

A

False

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4
Q

What is Corporate Social Responsibility (CSR)?

A

A company’s responsibility to society covering issues like environmental policy, health and safety, and charitable contributions

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5
Q

List some benefits of CSR for businesses.

A
  • Brand differentiation and reputation
  • Avoiding regulation
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6
Q

In which region is philanthropy often the favored approach to CSR?

A

United States

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7
Q

What is one way to build CSR into an organisation?

A
  • Inclusion of CSR values within the mission statement
  • Creating focused CSR objectives
  • Establishing CSR policies
  • Engaging in philanthropy
  • Benchmarking CSR performance
  • Social accounting, auditing and reporting
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8
Q

What are the four levels of Carroll’s pyramid of Corporate Social Responsibility?

A
  • Economic responsibility
  • Legal responsibility
  • Ethical responsibility
  • Philanthropic responsibility
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9
Q

What is the primary responsibility of an organisation according to the economic level of CSR?

A

To stay in business and return value to shareholders

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10
Q

True or False: Ethical responsibilities are optional for organisations.

A

False

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11
Q

What does financial planning and analysis (FP&A) involve?

A

Gathering data, examining information, and analyzing trends to support decision-making

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12
Q

What are some techniques used in project appraisal?

A
  • Net Present Value (NPV)
  • Internal Rate of Return (IRR)
  • Payback period
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13
Q

What is the role of taxation specialists in an organisation?

A
  • Ensuring tax compliance
  • Assisting with tax planning
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14
Q

What is financial accounting primarily concerned with?

A

Producing reports for external stakeholders based on the current financial state of the business

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15
Q

Who are considered external stakeholders interested in a company’s financial position?

A
  • Shareholders
  • Suppliers
  • Banks
  • Customers
  • Bond holders
  • Tax authorities
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16
Q

What is the sales day book used for?

A

Listing and totaling all sales

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17
Q

Fill in the blank: The _______ is where all purchases made by the business are listed.

A

Purchase day book

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18
Q

What is the cash book used for?

A

Contains all cash receipts and payments

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19
Q

What does the petty cash book contain?

A

Small miscellaneous expenses such as paying for coffee

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20
Q

What is the purpose of a journal in financial accounting?

A

To record various types of financial transactions

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21
Q

What is the purpose of financial accounting?

A

To provide statutory information for external stakeholders

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22
Q

What are the books of prime entry in financial accounting?

A
  • Sales day book
  • Purchase day book
  • Cash book
  • Petty cash book
  • Journal
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23
Q

What does an income statement show?

A

Costs and revenues in a particular period, indicating profit or loss

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24
Q

What is a statement of financial position also known as?

A

Balance sheet

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25
Q

What is the purpose of a cash flow statement?

A

To show the incomings and outgoings of cash over a certain period

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26
Q

True or False: Accurate reporting is not essential in financial accounting.

A

False

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27
Q

What is statutory reporting?

A

Mandatory submission of financial accounts to government/regulatory bodies

28
Q

What is the key difference between financial accounting and management accounting?

A

Financial accounting is for external stakeholders, management accounting is for internal stakeholders

29
Q

What is a budget?

A

A quantified financial plan for a forthcoming accounting period

30
Q

List the purposes of budgeting.

A
  • Planning
  • Responsibility
  • Co-ordination
  • Motivation
  • Control
31
Q

What is variance analysis?

A

Comparing the budget with actual results and reporting the differences

32
Q

What is feedforward control?

A

Comparing budgets to forecast results to address issues before they occur

33
Q

Define operational reporting.

A

Producing management information focused on recording incomes and costs

34
Q

What is treasury management?

A

Management of the company’s capital and financial holdings to maximize liquidity and value

35
Q

What does liquidity refer to in treasury management?

A

Having cash available to pay suppliers as debts fall due

36
Q

What are some sources of finance?

A
  • Banks
  • Shareholders
  • Venture capitalists
  • Individuals or businesses
  • Debt factors
37
Q

What is currency risk?

A

The potential change in the exchange rate of one currency against another

38
Q

What is effective tax management?

A

Paying tax in full and on time while legally minimizing tax burden

39
Q

What is the goal of working capital management?

A

To ensure sufficient cash flow for operations and to meet short-term debts

40
Q

Fill in the blank: A budget serves as part of the _______ and control process.

A

[planning]

41
Q

True or False: Management accounting is usually confidential and used by management.

A

True

42
Q

What is the role of the finance department in budgeting?

A

To produce accurate budgets based on previous years’ results and forecasts

43
Q

What is the significance of budgeting in planning?

A

Helps define targets for managers to achieve and forces management to plan ahead

44
Q

What does a favourable variance indicate?

A

Less was spent than expected

45
Q

What does an unfavourable variance indicate?

A

More was spent than expected

46
Q

What is the main responsibility of the treasury function?

A

To raise capital for the business

47
Q

What is tax avoidance?

A

Legally configuring finances to pay as little tax as possible

48
Q

What is the importance of cash flow forecasting?

A

Identifies expected cash balances to plan for borrowing and payments

49
Q

What are receivables?

A

Monies owed to the business

50
Q

What is cash flow forecasting?

A

Identifies expected cash balances over coming weeks and months.

51
Q

What is the primary goal of cash management?

A

To ensure sufficient cash for day-to-day expenses without excess liquidity.

52
Q

Define receivables in the context of working capital management.

A

Monies owed to the business from customers (debtors).

53
Q

What is the typical time frame for collecting receivables?

A

60-90 days.

54
Q

Define payables in working capital management.

A

Money the business has to pay to suppliers for goods received on credit.

55
Q

What is a benefit of managing payables?

A

Acts as a free source of finance by delaying payment.

56
Q

What is the role of a company secretary?

A

To ensure compliance with statutory and regulatory requirements.

57
Q

List three responsibilities of a company secretary.

A
  • Managing governance structures
  • Compliance with business and company law
  • Organising and attending board meetings
58
Q

What is the purpose of internal auditing?

A

To add value and improve an organisation’s operations.

59
Q

What types of audits do internal auditors conduct?

A
  • Compliance audits
  • Value for money auditing
  • Management audits
  • Social and environmental audits
  • Fraud investigations
  • Post-implementation project reviews
60
Q

True or False: An audit committee oversees the work of internal auditors.

A

True.

61
Q

Define operations management.

A

Overseeing, designing, and controlling the production process for efficiency.

62
Q

What are the four Vs in operations management?

A
  • Volume
  • Variety
  • Variation in demand
  • Visibility
63
Q

Define stakeholders.

A

Any parties that can affect, or be affected by, an organisation’s strategy and policies.

64
Q

List five examples of stakeholders in a publicly funded school.

A
  • Teachers
  • Pupils
  • Parents
  • Administrative staff
  • Local education authority
65
Q

What is the ICE mnemonic used for?

A

To classify stakeholders into internal, external, or connected.

66
Q

What is the primary concern of financial accounting?

A

Producing reports on the current financial state of the business for stakeholders.

67
Q

Who are some external stakeholders interested in a company’s financial position?

A
  • Shareholders
  • Suppliers
  • Banks
  • Customers
  • Bond holders
  • Tax authorities

CIMA E1 - MM (11 decks)

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