The Role Of The Finance Function

Question 1

Describe the different legal structures a business can take

Answer 1

Company (Ltd or PLC)
Multinational
Partnership
Sole trader

Question 2

Other types of organisations

Answer 2

Not for profit/charities

Question 3

Features of private limited company

Answer 3

Typically a smaller commercial organisation
Owner also runs it
Sale of shares is restricted (not usually for sale to the general public)

Question 4

Features of a public limited company

Answer 4

Larger
Shares sold publicly
Shareholders appoint directors to run the company on their behalf

Question 5

What is VUCA

Answer 5

It is used to describe the modern business environment
Volatility
Uncertainty
Complexity
Ambiguity

Question 6

What causes V in VUCA?

Answer 6

Volatility
Tech advances affect market, operation and purpose of organisation. Need to adapt to changing tech
Competition may affect business model and it takes time to adapt and respond

Question 7

What causes U in VUCA?

Answer 7

Uncertainty
Tech advances are unpredictable and guarded to maintain competitive advantage. Uncertain if investment in tech will be worth it or made
Inherently uncertain if what your competitors will do

Question 8

What causes the C in VUCA?

Answer 8

Complexity
Tech change is complex
Many competitors means many options which is complex for customers. Also different customer needs means it is complex to attract them. Businesses are customers through procurement and also affect this way by complexity

Question 9

What causes the A in VUCA?

Answer 9

Ambiguity
Tech change causes confusion if different parts of society respond differently to the new tech. How to provide service effectively if people want different things?
Complexity causes ambiguity and confusion

Question 10

How do accountants enable value creation?

Answer 10

Planning, forecasting which enables resource allocation and planning

Question 11

How do accountants shape value creation?

Answer 11

Through performance management and control - eg comparing actual to budget

Question 12

Hire do accountants narrate value creation?

Answer 12

Corporate reporting - financial statements provide information which is useful to investors, lenders, other creditors to make decisions

Question 13

What are the principles of the code of ethics?

Answer 13

CIPOP
Confidentiality
Integrity
Professional behaviour
Objectivity
Professional competence and due care

Question 14

What are the different ethical stances?

Answer 14

Short-term shareholder interest
Long-term shareholder interest
Multiple stakeholder view
Shaper of society

Question 15

What is short term shareholder interest?

Answer 15

Concentrating on shareholders because society is government’s responsibility

Question 16

What is long term shareholder interest?

Answer 16

Meeting interests of other stakeholders in short term (not only shareholders) because it can lead to long term profitability and stability - eg good reputation and legal sanction

Question 17

What is multiple stakeholder view?

Answer 17

Meeting the expectations of multiple stakeholders in the long term because success is measured by more than just profit - eg The Body Shop

Question 18

What is a shaper of society?

Answer 18

Attempt to determine what society expectations should be and will most likely be

Question 19

What is corporate governance?

Answer 19

The system by which companies are directed and controlled. It provides the structure and processes to ensure companies are managed in the interest of their owners

Question 20

Aims of corporate governance

Answer 20

CORPORATE
Control
Oversight
Risks
Profit maximisation
Objectives
Roles
Active
Telling
Experience

Question 21

Principles of corporate governance

Answer 21

Interests of stakeholders
Roles and responsibilities of the board
Integrity and ethical behaviour
Disclosure and transparency

Question 22

What is corporate social responsibility?

Answer 22

The responsibilities a company has towards society and the wats organisations exceed the minimum obligations to stakeholders specified through regulation and corporate governance

Question 23

Benefits of being a good corporate citizen

Answer 23

Builds company reputation
Help with recruitment, motivation, retention
Improved investor relations
Improved competitiveness and market positioning
Improved operational efficiency

Question 24

Internal data sources

Answer 24

HR - payroll, clockcards, access passes
Operations - fixed asset register, vehicle logs, potentially endless data depending on the nature of operations
Sales - sales ledger, market research, website hits

Question 25

External data sources

Answer 25

Potentially endless but include:
Supplier price lists, negotiations with customers, trade journals, information from newspapers, information from regulatory agencies, the internet

Question 26

Mintzberg five components of an organisation

Answer 26

Strategic apex
Technostructure - Middle line - Support staff (admin)
Operating core

Question 27

Centralised structure advantages and disadvantages

Answer 27

Adv
Experienced people make the decisions
Consistent policies throughout the company
Quick decisions without consultation
Standardised procedures (leading to EOS)
Disadv
Reduces input of day to day exports in decision making
Demoralising branch managers by making their opinions unheard

Question 28

Decentralised structure advantages and disadvantages

Answer 28

Adv
Reduces burden on senior management
Empowers local managers
Subordinates have better knowledge of local conditions
Middle management are groomed to take higher positions
Disadv
Reduction in uniformity will unsettle customers
Local managers may not see the bigger picture like head office does

Question 29

Span of control definition

Answer 29

Refers to the number of direct reports or subordinates controlled by a manager

Question 30

Scalar chain definition

Answer 30

The number of layers of management from the bottom of the organisation to the top
Tall organisation triangle = long scalar chain
Flat organisation triangle = short scalar chain

Question 31

Tall organisation features

Answer 31

Long scalar chain
More managers with narrow span of control
Suffer from too many managers
Expensive to run
Decisions take long time to reach the bottom of the organisation
Good promotion opportunities
Managers do not have to spend a lot of time managing staff

Question 32

Flat organisation features

Answer 32

Relatively few managers with a wide span of control
Quick decisions
More susceptible to fraud and error