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BTF > The Finance Function And Financial Information > Flashcards

The Finance Function And Financial Information Flashcards

1
Q

Four main parts of the finance function

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

Documents for recording financial transactions

A

Books of prime entry
Ledgers
Reconciliations

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3
Q

Elements of financial reporting

A

Financial statements
Tax
Regulatory information

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4
Q

Elements of management accounts

A

Costing
Budgeting
Pricing decisions
Investment appraisal
Performance management

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5
Q

Elements of treasury management

A

Cash, working capital and forex management
Managing financial risks
Raising short, medium and long term finance

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6
Q

Key issue in managing finance function

A

Assess benefit derived from information produced compared to the cost of deriving it

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7
Q

Business partnering

A

Members of finance function partnering with other functional areas of the business to add value

Providing advice + support to drive performance rather than just performing routine reporting activities

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8
Q

Purposes of information

A
  1. Planning
  2. Controlling
  3. Recoding transactions l
  4. Performance measurement
  5. Decision making
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9
Q

Issues relating to effective processing of data into information

A

{CATIVA}

Completeness
Accuracy
Timeliness
Inalterability
Verifiability
Assessability

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10
Q

Verifiability

A

Clear ‘audit trail’ from data source to information

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11
Q

Assessability

A

Information produced can be challenged

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12
Q

Transaction processing systems (TPS)

A

Systems that perform and record routine transactions

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13
Q

Management information systems (MIS)

A

Systems to provide managers with information to make effective decisions

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14
Q

Data security issues

A

{A AI CAN}

Authorisation

Availability
Integrity

Confidentiality
Authenticity
Non-repudiation

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15
Q

Data Security: Availability

A

Information can be readily accessed at all times

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16
Q

Data security: Non-repudiation

A

Users trust the information produced and the system producing it

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17
Q

2 IT control types

A
  1. Physical access controls
  2. Security and integrity controls
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18
Q

5 Types of security and integrity controls

A
  1. Input controls
  2. Output controls
  3. Back-up and archiving
  4. Personell controls
  5. Segregation of duties controls
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19
Q

4 types of input controls

A
  1. Control totals
  2. Range checks
  3. Authorisation of source data
  4. Password controls over input of data
20
Q

Control total example

A

Batch of invoices (versus batch total)

21
Q

Range Check example

A

No. Hours on time sheet less that 168 hours

22
Q

2 types of output control

A
  1. Control totals
  2. Follow up error/exception reports
23
Q

Example of error/exception report follow up

A

Large overtime payments

24
Q

Personell controls examples

A

Careful recruitment
Selection and training of staff

25
Q

Types of performance measures

A

Qualitative
Quantitative

26
Q

2 Types of quantitative performance measure

A
  1. Financial (based on sales, profit etc.)
  2. Non-financial (based on production, activity level etc.)
27
Q

Common performance measures

A
  1. Profitability
  2. Activity
  3. Productivity (efficient resource use)
28
Q

Key profitability measures

A
  1. Gross/Net margins
  2. ROCE
  3. Investment returns
29
Q

2 Types of activity measures

A
  1. Physical units (No. customers, time taken etc.)
  2. Monetary values
30
Q

Productivity measures: The 3 Es

A
  1. Economy (control over input costs)
  2. Effectiveness (output measure against objectives)
  3. Efficiency (achieving objectives at minimum cost i.e. effectiveness + economy)

E.g. output per employee, no. customers served in an hour

31
Q

Critical success factors (CSFs)

A

Product features particularly valued by a group of customers

So company must excel at to outperform competition
Business should measure performance against CSFs

32
Q

KPIs

A

Measures to performance level in an area
Target level must be achieved for business to gain competitor advantage (by outperforming competition)

33
Q

Benchmarking

A

Establishing targets and comparatives so relative performance can be measured

34
Q

Performance management process

A
  1. Identify CSFs
  2. Set and measure KPIs
  3. Benchmark performance
35
Q

The adoption of what should improve performance?

A

Best practices

36
Q

Limitations of financial performance indicators

A
  1. Historical information not guaranteed to predict future outcomes
  2. Often don’t consider external factors
  3. Can encourage short term decision making
  4. Easier manipulation (e.g. using accounting policies)
  5. Doesn’t consider whole picture
37
Q

Balanced scorecard perspectives

A

{FIIC the balanced scorecard}

  1. Financial
  2. Innovation and learning
  3. Internal business
  4. Customer
38
Q

Sustainability

A

Ability to meet the needs of the present without compromising the ability to future generations to satisfy their own needs

39
Q

3 main sustainability issues

A
  1. Social (e.g. low pay, lack of diversity)
  2. Environmental (e.g. pollution)
  3. Economic (e.g. economic stability, local economy impact, provision of jobs)
40
Q

Climate change

A

Risks (legal, technological, market, reputation, physical)
Opportunities (resource efficiency, new energy sources, new products, new markets, resilience)
Disclosure (governance, strategy, risk management, metrics+targets)

41
Q

Internal control definition

A

A process designed to provide reasonable assurance in achieving operations, reporting and compliance objectives

42
Q

5 control processes

A
  1. Control environment
  2. Risk assessment procedures
  3. Control activities
  4. Information systems
  5. Monitoring of controls
43
Q

Control environment

A

Culture
Management philosophy
Authority
Segregation of duties
Business ethics

44
Q

Risk assessment processes

A

Identifying and responding to risks
E.g. growth, change in technology

45
Q

Information systems

A

To produce information to assist with control

46
Q

2 types of control activities

A
  1. Manual
    (physical) (e.g. cash in a locked safe)
  2. Programmed
    (e.g. checks to ensure management accounts equal financial accounts)

BTF (14 decks)

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