Unit 6 Flashcards
(19 cards)
Payback period (AO4)
Length of time for net cash inflows to be larger than the original investment
Payback is when the accumulated cash flow reaches zero
Average Rate of Return (AO4)
Measures the annual profitability of a project as a percentage of the initial capital cost
Average Annual Profit / Initial
Capital Cost x 100
1) Calculate the total profit (sum of all cash flows or last accumulated cash flow)
2) Divide by years
3) Divide by the original cost
4) x100
Average Rate of Return (ARR) advantage over the Payback Period as an appraisal method
- ARR includes all cash flows over the project’s entire life, not just up to payback.
- This means late‑arriving but large cash inflows are fully captured, giving a truer picture of total profitability.
- The Payback Period stops once the initial cashflow is recovered, ignoring any cash generated afterward, so it can miss substantial long‑term returns.
ARR gives a more comprehensive view of an investment’s long‑term profitability, whereas the Payback Period focuses only on liquidity recovery speed.
Manager
A person who organizes the resources within an organization in order to achieve the objectives of the organization
Getting things done
Leader
A person who has a vision for the future of the organization and inspires others to follow them
Inspiring other to achieve things
What do managers do?
- Coordinating
- Planning (setting objectives)
- Controlling
- Commanding
What do leaders do?
- Creates a vision for the organization
- Is a role model
- Inspires and motivates employees
- Builds the culture required
Scientific Management/thinking/ decision making? Pro and Con?
Data is collected and analyzed and a decision is made based on this
Pro: Logical, rational and data-based
Con: But data may be costly, biased or unavailable
Intuitive Management/thinking/ decision making? When is it suitable
Decisions are based on intuition or gut-feeling
Good when:
Data is not available or potentially biased
Autocratic leadership
Leaders make decisions on their own without input from others and then announce the decision to employees
Autocratic leadership? Pro, when is it suitable and Cons
Pro:
- Quicker decision making and implementation
- If the employees are unskilled
- Consistent goals and direction
- Clear hierarchy - employees know who’s in charge
Con:
- Employees become dependent on leaders and don’t make decisions
- Low morale and high staff turnover
- Higher likelihood of Employee-management conflict
Paternalistic leadership
Similar to autocratic, but leaders listen to employees and make decisions in their best interest, but still make the final decision
Paternalistic leadership? Pro and Con
Pro:
- Staff feels like they are being listened to: Higher morale, loyalty, motivation
Con:
- Still no participation in decision making
Democratic leadership
Employees participate in decision-making and decisions are made based on what the majority decides
Could be voting or through informal discussions
Democratic leadership pros and cons
Pro:
- Higher morale, empowered
- Committed to the decision
Con:
- Slow decision-making
- Leaders and employees need certain skills
Laissez-faire
Leaders trust and allow employees to make decisions on their own. Decision-making is done mostly by employees with little input from management
Laissez-faire pro and cons
Pro:
- When teams need freedom or need to be creative
- Employees are highly-skilled
- Self-motivated, they get to be creative
- Empowered
Con:
- Some employees might become less productive without oversight
- Management know less about what’s going on
- Less standardized output
Situational leadership
When a leader adjusts their leadership style to suit the situation or task
Ansoff Matrix (AO4)
A matrix showing different strategies in which a business can grow
Market Penetration
Market development
Product development
Diversification
