Financial Management Purpose (2) Flashcards
What if preference shares have been classified as non-current liabilities?
Preference dividends would be included in finance costs and therefore already deducted from profit
Issue with EPS?
Can be cosmetically boosted by undertaking a share consolidation
Legitimately increased through a share buyback scheme
Possible measure for economy in a unviersity
Minimising costs epr student
Possible measure for efficiency in a unviersity
Maximising student/staff ratio
Possible measure for effectiveness in a unviersity
Quality of degrees award
Link between shareholders and directors?
Generate maximum return for shareholders
Link between employees and directors?
Work to maximum efficiency
Link between loan creditors and shareholders?
Minimise risk from uses of borrowed funds
When a company’s assets are close to the level of its liabilities?
Debt investors will pressure the directors to only undertake low risk projects as tehy’re liable. Equity investors will pressure directors as they aren’t liable
Principles of good governance (board)
Every company should be headed by an effective board
Principles of good governance (responsibilities)
Should be a clear division of responsibilities at the head of the company
Principles of good governance (election)
All directors should be required to submit themselves for re-election on a regular basis.
Principles of good governance (system)
Board should maintain a solid system of internal control
Principles of good governance (renumeration)
Remuneration committees should be comprised of independent non-executive directors.
Restrictive covenants in loan notes agency problem
Between shareholders and providers of debt finance
