Week 4 CFO

Question 1

What are the dual roles of a CFO?

Answer 1

1. fiduciary role: producing financial statements
2. decision-making role: support management

Question 2

What is strategic cost management?

Answer 2

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.

Question 3

What are the 2 types of cost-driver analysis within the firm?

Answer 3

1. Structural: long-term
2. Executional: short-term

Question 4

What does the research of Henri et al.(2016) tells us about Strategic cost management?

Answer 4

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

Question 5

What is a business model (BM)?

Answer 5

System of interdependent activities as well as the resources and capabilities to perform them –> affects performance potential (Capex, margins etc.)

Question 6

What does the paper of Huelsback et al. (2011), tells us about the Business Model?

Answer 6

Even though results show a weak support of the business model, management continued to express confidence in the validity of the model

Question 7

Give 4 reasons why ESG is important for a firm?

Answer 7

1. Long-term value creation (growing the pie)
2. Shareholder and stakeholder welfare (sharing the pie)
3. Exclude socially or environmentally undesirable practices
4. risk management and compliance

Question 8

What is true cost accounting?

Answer 8

Includes direct costs (internal to the firm) and externalities

Question 9

What are the 3 advantages of true cost accounting?

Answer 9

1. provides ‘real’ cost of production to organisations and customers
2. provides insights in additional elements affected by production
3. can be extended to the corporate level (integraded P&L)

Question 10

What are 5 disadvantages of the True cost accounting approach?

Answer 10

1. Not simple: cost elements differ
2. valuation is subjective
3. consumer does not pay the ‘true cost’
4. extensive admin and controls
5. puts nature under the rules of the market: if people can pay for it, they don’t care.