Week 4 CFO Flashcards
What are the dual roles of a CFO?
- fiduciary role: producing financial statements
- decision-making role: support management
What is strategic cost management?
Aligning the costs to the business strategy. Emphasis is on information which relates to factors external to the firm and non-financial and internally-generated information.
What are the 2 types of cost-driver analysis within the firm?
- Structural: long-term
- Executional: short-term
What does the research of Henri et al.(2016) tells us about Strategic cost management?
1: Identification of environmental costs increases cost consciousness –> increases financial performance.
2: Tracking environmental costs raises awareness in organisation –> implementation of environmental contributes leads to –> increase in financial performance
What is a business model (BM)?
System of interdependent activities as well as the resources and capabilities to perform them –> affects performance potential (Capex, margins etc.)
What does the paper of Huelsback et al. (2011), tells us about the Business Model?
Even though results show a weak support of the business model, management continued to express confidence in the validity of the model
Give 4 reasons why ESG is important for a firm?
- Long-term value creation (growing the pie)
- Shareholder and stakeholder welfare (sharing the pie)
- Exclude socially or environmentally undesirable practices
- risk management and compliance
What is true cost accounting?
Includes direct costs (internal to the firm) and externalities
What are the 3 advantages of true cost accounting?
- provides ‘real’ cost of production to organisations and customers
- provides insights in additional elements affected by production
- can be extended to the corporate level (integraded P&L)
What are 5 disadvantages of the True cost accounting approach?
- Not simple: cost elements differ
- valuation is subjective
- consumer does not pay the ‘true cost’
- extensive admin and controls
- puts nature under the rules of the market: if people can pay for it, they don’t care.