Management 11b Chapter 1 Test Questions – Flashcards

ethics, strategic management, enterprise risk management, corporate social responsibility, process management, and leadership.

Financial accounting is concerned with reporting financial information to external parties, such as stockholders, creditors, and regulators.

Managerial accounting is concerned with providing information to managers for use within the organization.

Reports to those outside the organization (owners, creditors, tax authorities, regulators). Emphasizes financial consequences of past activities Emphasizes objectivity and verifiability Emphasizes precision Emphasizes companywide reports Must follow GAAP/IFRS Mandatory for external reports

Reports to managers inside the organization for (planning, controlling, decision making) Emphasizes decisions affecting the future Emphasizes relevance Emphasizes timeliness Emphasizes segment reports Need not follow GAAP/IFRS Not mandatory

Financial accounting emphasizes the financial consequences of past activities, objectivity, and verifiability, precision, and companywide performance. Managerial accounting emphasizes decisions affecting the future, relevance, timeliness, and segment performance.

A segment is a part or activity of an organization about which managers would like cost, revenue, or profit data. Examples of business segments include product lines, customer groups (segmented by age, ethnicity, gender, volume or purchase, etc), geographic territories, divisions, plants, and departments.

Planning, controlling, and decision making.

Planning involves establishing goals and specifying how to achieve them.

Controlling involves gathering feedback to ensure that the plan is properly executed or modified as circumstances changes.

Decision making involves selecting a course of action from competing alternatives.

A budget is a detailed plan for the future that is usually expressed in formal quantitative terms.

This process would include gathering, evaluating, and responding to feedback to ensure that this year's recruiting process meets expectations.

A performance report compares budgeted data to actual data in an effort to identify and learn from excellent performance and to identify and eliminate sources of unsatisfactory performances. Performance reports can also be used as one of many inputs to help evaluate and reward employees.

Protect investors and other external parties by assuring them that companies are reporting historical financial results that comply with applicable accounting rules.

Managerial accountants have strong financial accounting skills. They play an important role in helping their organizations design and maintain financial reporting systems that generate reliable financial disclosures.

If you plan to become an accounting major, the Certified Management Accountant (CMA) designation is a globally respected credential that will increase your credibility, upward mobility, and compensation.

The CMA exam focuses on the planning, controlling, and decision-making skills that are important to nonpublic accounting employers.

Ethical behavior is the lubricant that keeps the economy running. Without that lubricant, the economy would operate much less efficiently- less would be available to consumers, quality would be lower, and prices would be higher.

Adopted an ethical code called the Statement of Ethical Professional Practice that describes in some detail the ethical responsibilities of management 4

First to maintain a high level of professional competence; second, to treat sensitive matters with confidentiality; third, to maintain personal integrity; fourth, to disclose information in a credible fashion.

A strategy is a "game plan" that enables a company to attract customers by distinguishing itself from competitors. The focal point of a company's strategy should be its target customers.

Customer value propositions tend to fall into three broad categories- customer intimacy, operational excellence, and product leadership. Companies that adopt a customer intimacy strategy are in essence saying to their customers, "You should choose us because we can customize our products and services to meet your individual needs better than our competitors"

It is called operational excellence, are saying to their target customers. "You should choose us because we deliver products and services faster, more conveniently, and at a lower price than our competitors."

It is called product leadership. "You should choose us because we offer higher quality products than our competitors."

Enterprise risk management is a process used by a company to identify those risks and develop responses to them that enable it to be reasonably assured of meeting its goals.

Companies use controls to reduce the risk that their plans will not be achieved.

Responsibility to serve other stakeholders- such as customers, employees, suppliers, communities, and environmental and human rights advocates - whose interest are tied to the company's performance. Concept whereby organizations consider the need of all stakeholders when making decisions.

Companies should provide customers with: Safe, high-quality products that are fairly priced, (competent, courteous, and rapid delivery of products and services), (Full disclosure of product-related risks), (Easy-to-use information systems for shopping and tracking orders).

A series of steps that are followed in order to carry out some task in a business. These steps often span departmental boundaries, thereby requiring managers to cooperate across functional departments.

Often used to describe how an organization's functional departments interact with one another to form business processes. A value chain, consists of the major business functions that add value to a company's product and services.

Managers frequently use a process management method known as lean thinking, or what is called Lean Production in the manufacturing sector.

Lean Production is a management approach that organizes resources such as people and machines around the flow of business processes and that only produces units. It is often called just-in-time production (JIT) because products are only manufactured in response to customer orders and they are completed just-in-time to be shipped to customers.

Lean thinking differs from traditional manufacturing methods, which organize work departmentally and encourage departments to maximize their output even if it exceeds customer demand and bloats inventories. The lean approach also results in fewer defects, less wasted efforts, and quicker customer response times than traditional production methods.

An organization is more likely to prosper when its employees are intrinsically motivated to pursue its interest. A leader, whose employees perceive as credible and respectful of their value to the organization, can increase the extent to which those employees are intrinsically motivated to pursue strategic goals.

Technical competence (that spans the value chain), personal integrity (in terms of work ethic and honesty), and strong communication skills (including oral presentation skills and writing skills).

Example: A bonus by employers

Distorted thought process

First, they should acknowledge their own susceptibility to cognitive bias. For example, a leader's judgement might be clouded by optimism bias (being overly optimistic in assessing the likelihood of future outcomes) or self enhancement bias (overestimating ones strengths and underestimating ones weaknesses relative to others). Second, they should acknowledge the presence of cognitive bias in others and introduce techniques to minimize their adverse consequences.

System by which a company is directed and controlled. If properly implemented, the corporate governance system should provide incentives for the board of directors and top management to pursue objectives that are in the interests of the company's owners and it should provide for effective monitoring for performance.

Intended to protect the interests of those who invest in publicly traded companies by improving the reliability and accuracy of corporate financial reports and disclosures.

First, the Act requires that both the CEO and CFO certify in writing that their company's financial statements Second, the Act established the Public Company Accounting Oversight Board to provide additional oversight over the audit profession. The Act authorizes the board to conduct investigations, to take disciplinary actions against audit firms, and to enact various standards and rules concerning the preparation of audit reports. Third, the Act places the power to hire, compensate, and terminate the public accounting firms that audits a company's financial reports in the hands of the audit committee of the board of directors. Fourth, the Act places important restrictions on the audit firms. Historically, public accounting firms earned a large part of their profits by providing consulting services to the companies that they audited. Fifth, the Act requires that a company's annual report contain an internal control report. Internal controls are put in place by management to provide assurance to investors that financial disclosures are reliable. Sixth, the Act establishes severe penalties of as many as 20 years in prison for altering or destroying any documents that may eventually be used in an official proceeding and as many as 10 years in prison for managers who retaliate against a so-called whistle-blower who goes outside the chain of command to report misconduct

Process designed to provide reasonable assurance that objectives are being achieved.

Companies use internal controls to provide reasonable assurance that its financial reports are reliable.

Deters undesirable events from happening

Detects undesirable events that have already occured