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Business, Technology, and Finance > The Business's Finance Function > Flashcards

The Business's Finance Function Flashcards

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1
Q

What are the four main finance functions?

A
  1. Recording financial transactions
  2. Financial reporting
  3. Management accounting
  4. Treasury management
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2
Q

Which finance functions are internal?

A
  1. Management accounting

2. Treasury management

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3
Q

Which finance function is external?

A

Financial reporting

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4
Q

Which tasks are involved with recording financial transactions?

A
  1. Books of prime entry
  2. Ledgers
  3. Reconciliations
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5
Q

What tasks are involved with financial reporting?

A
  1. Financial statements
  2. Tax
  3. Regulatory information
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6
Q

What tasks are involved with management accounts?

A
  1. Costing
  2. Budgeting
  3. Pricing decisions
  4. Investment appraisal
  5. Performance measurement
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7
Q

What tasks are involved with treasury management?

A
  1. Cash management
  2. Working capital management
  3. Foreign exchange management
  4. Managing financial risks
  5. Raising finance
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8
Q

What are the types of performance measure?

A
  1. Qualitative measures

2. Quantitative measures

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9
Q

Define qualitative measures

A
  1. Subjective
  2. Judgemental
  3. Cannot be expressed in numerical terms
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10
Q

Define quantitative measures

A
  1. Objective
  2. Based on reliable data
  3. Numerical
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11
Q

What are the types of quantitative measures?

A
  1. Financial measures

2. Non-financial measures

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12
Q

What are financial measures based on?

A

Sales, profit, etc

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13
Q

What are non-financial measures based on?

A

Production, activity levels, etc

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14
Q

What are examples of performance measures?

A
  1. Profitability
  2. Activity
  3. Productivity
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15
Q

Define profitability as a performance measure

A
  1. Comparisons of income generation and associated costs

2. Key measures include gross and net margins, return on capital employed, required returns of investors

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16
Q

Define activity as a performance measure

A
  1. Physical units
  2. Number of customers
  3. Time taken
  4. Monetary values
17
Q

Define productivity as a performance measure

A

Efficient use of resources

18
Q

What are the measures of productivity?

A
  1. Economy
  2. Effectiveness
  3. Efficiency
19
Q

Define economy as a measure of productivity

A

Control over input costs

20
Q

Define effectiveness as a measure of productivity

A

Output measure against objectives

21
Q

Define efficiency as a measure of productivity

A

Achieving objectives at minimum cost

22
Q

Define critical success factors

A

Those product features that are particularly valued by a group of customers, and, therefore, where the organisation must excel to outperform the competition

23
Q

Define key performance indicators

A

Measures of the level of performance in an area where a target level must be achieved in order for the business to outperform rivals and achieve a competitive advantage

24
Q

Define benchmarking

A

The establishment of targets and comparatives by which relative performance can be established

25
Q

What are the limitations of financial performance indicators?

A
  1. Historical information is not necessarily useful when trying to predict future outcomes
  2. FInancial information mostly reports internal performance and does not always consider external factors
  3. Can encourage short-term decision-making at the expense of long-term objectives
  4. Can be easily manipulated with the use of accounting policies etc
  5. Does not consider the whole picture
26
Q

What is the benefit of the balanced scorecard approach?

A

Ensures that a mixture of financial and non-financial perspectives are considered when selecting performance indicators

27
Q

What are the four perspectives that Kaplan and Norton suggest performance indicators should consider?

A
  1. Financial perspective
  2. Internal business perspective
  3. Innovation and learning perspective
  4. Customer perspective
28
Q

What are the main issues to consider when measuring sustainability?

A
  1. Social
  2. Environmental
  3. Economic
29
Q

Define internal control

A

A process, effected by the entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance

30
Q

What are the internal control processes?

A
  1. Control environment
  2. Risk assessment processes
  3. IS
  4. Monitoring of controls
  5. Control activities
31
Q

What are the features of the control environment?

A
  1. Culture
  2. Management philosophy
  3. Authority
  4. Segregation of duties
  5. Business ethics
32
Q

What are the features of risk assessment processes?

A
  1. Identify risks

2. Respond to risks

33
Q

What are the features of IS?

A

Produce information to assist with control

34
Q

What are the features of control activities?

A

Specific manual and physical controls

35
Q

What are the features of the monitoring of controls?

A

Checking that controls are working as prescribed

Business, Technology, and Finance (8 decks)

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