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CIMA E1 - MM > Role and Activities of Finance > Flashcards

Role and Activities of Finance Flashcards

(67 cards)

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1
Q

What is the finance function?

A

The part of the organisation which controls and manages anything related to finance

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2
Q

What are the key drivers of change in organisations?

A
  • Changing technology
  • Changing levels of competition
  • Growing collaborative consumption
  • Changes to customer expectations
  • Less customer loyalty
  • Globalisation
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3
Q

True or False: The average life-span of products is increasing.

A

False

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4
Q

What is Corporate Social Responsibility (CSR)?

A

A company’s responsibility to society covering issues like environmental policy, health and safety, and charitable contributions

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5
Q

List some benefits of CSR for businesses.

A
  • Brand differentiation and reputation
  • Avoiding regulation
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6
Q

In which region is philanthropy often the favored approach to CSR?

A

United States

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7
Q

What is one way to build CSR into an organisation?

A
  • Inclusion of CSR values within the mission statement
  • Creating focused CSR objectives
  • Establishing CSR policies
  • Engaging in philanthropy
  • Benchmarking CSR performance
  • Social accounting, auditing and reporting
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8
Q

What are the four levels of Carroll’s pyramid of Corporate Social Responsibility?

A
  • Economic responsibility
  • Legal responsibility
  • Ethical responsibility
  • Philanthropic responsibility
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9
Q

What is the primary responsibility of an organisation according to the economic level of CSR?

A

To stay in business and return value to shareholders

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10
Q

True or False: Ethical responsibilities are optional for organisations.

A

False

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11
Q

What does financial planning and analysis (FP&A) involve?

A

Gathering data, examining information, and analyzing trends to support decision-making

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12
Q

What are some techniques used in project appraisal?

A
  • Net Present Value (NPV)
  • Internal Rate of Return (IRR)
  • Payback period
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13
Q

What is the role of taxation specialists in an organisation?

A
  • Ensuring tax compliance
  • Assisting with tax planning
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14
Q

What is financial accounting primarily concerned with?

A

Producing reports for external stakeholders based on the current financial state of the business

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15
Q

Who are considered external stakeholders interested in a company’s financial position?

A
  • Shareholders
  • Suppliers
  • Banks
  • Customers
  • Bond holders
  • Tax authorities
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16
Q

What is the sales day book used for?

A

Listing and totaling all sales

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17
Q

Fill in the blank: The _______ is where all purchases made by the business are listed.

A

Purchase day book

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18
Q

What is the cash book used for?

A

Contains all cash receipts and payments

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19
Q

What does the petty cash book contain?

A

Small miscellaneous expenses such as paying for coffee

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20
Q

What is the purpose of a journal in financial accounting?

A

To record various types of financial transactions

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21
Q

What is the purpose of financial accounting?

A

To provide statutory information for external stakeholders

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22
Q

What are the books of prime entry in financial accounting?

A
  • Sales day book
  • Purchase day book
  • Cash book
  • Petty cash book
  • Journal
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23
Q

What does an income statement show?

A

Costs and revenues in a particular period, indicating profit or loss

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24
Q

What is a statement of financial position also known as?

A

Balance sheet

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25
What is the purpose of a cash flow statement?
To show the incomings and outgoings of cash over a certain period
26
True or False: Accurate reporting is not essential in financial accounting.
False
27
What is statutory reporting?
Mandatory submission of financial accounts to government/regulatory bodies
28
What is the key difference between financial accounting and management accounting?
Financial accounting is for external stakeholders, management accounting is for internal stakeholders
29
What is a budget?
A quantified financial plan for a forthcoming accounting period
30
List the purposes of budgeting.
* Planning * Responsibility * Co-ordination * Motivation * Control
31
What is variance analysis?
Comparing the budget with actual results and reporting the differences
32
What is feedforward control?
Comparing budgets to forecast results to address issues before they occur
33
Define operational reporting.
Producing management information focused on recording incomes and costs
34
What is treasury management?
Management of the company’s capital and financial holdings to maximize liquidity and value
35
What does liquidity refer to in treasury management?
Having cash available to pay suppliers as debts fall due
36
What are some sources of finance?
* Banks * Shareholders * Venture capitalists * Individuals or businesses * Debt factors
37
What is currency risk?
The potential change in the exchange rate of one currency against another
38
What is effective tax management?
Paying tax in full and on time while legally minimizing tax burden
39
What is the goal of working capital management?
To ensure sufficient cash flow for operations and to meet short-term debts
40
Fill in the blank: A budget serves as part of the _______ and control process.
[planning]
41
True or False: Management accounting is usually confidential and used by management.
True
42
What is the role of the finance department in budgeting?
To produce accurate budgets based on previous years' results and forecasts
43
What is the significance of budgeting in planning?
Helps define targets for managers to achieve and forces management to plan ahead
44
What does a favourable variance indicate?
Less was spent than expected
45
What does an unfavourable variance indicate?
More was spent than expected
46
What is the main responsibility of the treasury function?
To raise capital for the business
47
What is tax avoidance?
Legally configuring finances to pay as little tax as possible
48
What is the importance of cash flow forecasting?
Identifies expected cash balances to plan for borrowing and payments
49
What are receivables?
Monies owed to the business
50
What is cash flow forecasting?
Identifies expected cash balances over coming weeks and months.
51
What is the primary goal of cash management?
To ensure sufficient cash for day-to-day expenses without excess liquidity.
52
Define receivables in the context of working capital management.
Monies owed to the business from customers (debtors).
53
What is the typical time frame for collecting receivables?
60-90 days.
54
Define payables in working capital management.
Money the business has to pay to suppliers for goods received on credit.
55
What is a benefit of managing payables?
Acts as a free source of finance by delaying payment.
56
What is the role of a company secretary?
To ensure compliance with statutory and regulatory requirements.
57
List three responsibilities of a company secretary.
* Managing governance structures * Compliance with business and company law * Organising and attending board meetings
58
What is the purpose of internal auditing?
To add value and improve an organisation's operations.
59
What types of audits do internal auditors conduct?
* Compliance audits * Value for money auditing * Management audits * Social and environmental audits * Fraud investigations * Post-implementation project reviews
60
True or False: An audit committee oversees the work of internal auditors.
True.
61
Define operations management.
Overseeing, designing, and controlling the production process for efficiency.
62
What are the four Vs in operations management?
* Volume * Variety * Variation in demand * Visibility
63
Define stakeholders.
Any parties that can affect, or be affected by, an organisation's strategy and policies.
64
List five examples of stakeholders in a publicly funded school.
* Teachers * Pupils * Parents * Administrative staff * Local education authority
65
What is the ICE mnemonic used for?
To classify stakeholders into internal, external, or connected.
66
What is the primary concern of financial accounting?
Producing reports on the current financial state of the business for stakeholders.
67
Who are some external stakeholders interested in a company's financial position?
* Shareholders * Suppliers * Banks * Customers * Bond holders * Tax authorities

CIMA E1 - MM (11 decks)

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