Role of the finance function

Question 1

What is an organization?

Answer 1

A social arrangement which has collective goals, controls its own performance and has a boundary sperating it from its environment

Question 2

What are the factors that affect the finance function in different types of organizations?

Answer 2

• Owners and stakeholders : they have different goals and objectives
• Funding sources : Different types of organizations have different sources of funds
• Overall organizational goal : •Profit-orientated = maximize shareholder wealth
  • Not-for-profit = provide goods and services
• Organizational performance management : driven by organizational goals

-Use of technology : different types of organizations will have different levels of investment in tech

Question 3

What are the factors that affect the finance function in different types of organizations?

Answer 3

• Owners and stakeholders : they have different goals and objectives
• Funding sources : Different types of organizations have different sources of funds
• Overall organizational goal : •Profit-orientated = maximize shareholder wealth
  • Not-for-profit = provide goods and services
• Organizational performance management : driven by organizational goals

-Use of technology : different types of organizations will have different levels of investment in tech

Question 4

What is vision ?

Answer 4

The organizations view of where it sees itself going in the long-term

Question 5

What is a mission ?

Answer 5

An organization’s basic purpose and it is trying to achieve

Question 6

What is an objective ?

Answer 6

The result an organization aims to achieve inorder to accomplish its long-term vision

Question 7

What does an objective do ?

Answer 7

It translates a mission until more specific milestones and targets for the business to follow and achieve

Question 8

Why should an organization have objectives ?

Answer 8

So that it can implement strategy and manage performance

Question 9

How should objectives be ?

Answer 9

SMART :

🟠Specific
🔴Measurable
🟣Achievable
🔵Relevant
🟢Time-related

Question 10

What are the functions of objectives ?

Answer 10

PRIME

~ Planning : objectives define what the plan is about
~ Responsibility: they define the responsibilities of managers and departments
~ Intergration: Should support one another and be consistent
~ Motivation : they must be created for all areas of performance
~ Evaluation : Performance is assessed against objectives and control excercised

Question 11

What are the objectives at organizational levels ?

Answer 11

• Strategic/Corporate objectives : To set the overall long-term objectives for the business as a whole
• Tactical objectives: To plan and control the functions within the organization
• Operational objectives : To act as day-to-day targets to ensure that the organization’s operations are carried out efficiently and effectively

Question 12

What does the digital world mean ?

Answer 12

It means increasing levels of digital technology in out lives :
• Data and information collection
• Storage and communication about organizations and individuals through:
~ Computers
~ Smart phones
~ New digital technologies

Question 13

What does the business environment mean ?

Answer 13

It means everything that surrounds an organization, physically or socially

Question 14

What are the levels of the business environment?

Answer 14

• Macro environments
• Micro environments

Question 15

What does the macro environment cover ?

Answer 15

It covers all the factors that can influence the organization indirectly, and generally, the organization has no control over these factors

Question 16

What model is used to analyze the factors that can influence and organization in the Macro environment?

Answer 16

The PESTEL model :

Political
Economic
Social
Technological
Environmental
Legal

Question 17

What does the micro-environment include ?

Answer 17

It includes those areas which have a direct impact on the organization such as :
- the ability to acquire raw materials
- Competitors
- Customers
- Suppliers

Question 18

Which model is used to analyze the micro-environment factors that impact the organization?

Answer 18

Porter’s five forces model (check notes for the model)

Question 19

How is value added to an organization?

Answer 19

Through processes which follow the principles of economy, efficiency and effectiveness

Question 20

What is economy ?

Answer 20

The concept of performing an activity for the minimum at cost

Question 21

What is efficiency?

Answer 21

The concept of performing an activity by consuming the minimum resources of input

Question 22

What is effectiveness ?

Answer 22

The concept of achieving the maximum output given the resources of input

Question 23

The concept of value ?

Answer 23

Value depends on the type of organization:
• Profit-making organization = increasing shareholder wealth
• Not-for-profit organization = achievement or goals and objectives; and benefits to members and or society

Question 24

What are the basic finance activities ?

Answer 24

•Assembling information : Collecting, cleaning and connecting data into assembled information

• Analysis for insights : Analyzing financial and non-financial information to draw out patterns and relevant insights
• Advising to influence : Communicating the above insights and contributing to an objective, responsible perspective which will influence decision making
• Applying for impact : Guiding actions to help organizations to achieve the required impact

Question 25

What does the finance function value matrix do ?

Answer 25

It communicates how the organization creates and preserves value to internal and external stakeholders

Question 26

What are the value activities of the finance function ?

Answer 26

Key activities of the finance function that enable, shape and narrate value

• Planning and forecasting : literally planning and forecasting( estimating or predicting certain factors so that they can be used to drive the budget)
• Resource allocation : everything that an organization can use to meet its objectives
• Performance management: Control and taking corrective action and making the most of Performance which exceeds expectations
• Financial reporting: enables stakeholders to assess the value-adding activities of the organization