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GMS802
Chapter 7
| Question | Answer |
|---|---|
| Finance | Funds operation decisions. Helps projects future scenarios and make decisions. |
| accounting | counts and classifies what operation have occurred. Helps reconcile and understand what is happening and what just happened. Provides a window into the organization for the individual and institutional investors. |
| Finance without ethics | Is just numbers, just follows the financial model, does not make value judgements |
| Finance with ethics asks: | Do I work to ensure that the financial model is compete or that I communicate that alternatives and their impact to my stakeholders? |
| Valuation Method | Which model do we use and what are the ramifications on the stakeholders? |
| Constructed Value | What do we mean by value? Which stakeholders will have an opinion as to what constitutes value in this decision? Does the decision change based upon the type of values compared? |
| Presentation of Value | This constitutes the decision making process. What information do you present and to whom? |
| Two views of the corporation: Simplified View | Managers are agents of the owner, managers have a duty to stakeholder interests above any other stakeholder, other stakeholders are a means to achieve the goals of the stockholders. |
| Two views of the corporation:Robust View | The firm is a set of relationship between stakeholders trying to achieve a common goal of value creation. Mangers seek to make a decision that meets the needs and goals of all stakeholders and long term interest. |
| Accounting without ethics | Just filling numbers into a formula. Assume outsiders to the company have no interest in what goes inside. The less other groups know about our inside decisions the better off everyone is. |
| Accounting with ethics asks questions: | Are my actions in line with the standards of accounting? Who are the stakeholders involved in the process and what other stakeholders should be added? |
| Managerial accounting | Focus on the internal decision makers. Mangers, allocation of funds, revenue and cost projection. |
| Financial accounting | Focus on external stakeholders. The market, the government and reporting through financial statements. |
| Financial Accounting Practices that stretch the rules: | Changing the reporting or classification for specific purpose/stakeholder. Making operational decision based on their impact to financial statements. Manipulating revenue or expenses with short-term focus. Making decisions because everyone else does it. |
| Purpose of Financial Statements | Not a tool to manipulate information. Primary communication vehicle to outside stakeholders. Are integral to those making investment decisions. |
| Accountants & Managers need to ask: | Are the financial statements abiding by the letter and spirit of the rules? Are the financial statements hiding any actions likely to jeopardize the firm's reputation. |
| The Public is Key Stakeholder | The market and outside investors must be able to trust public accountants. Must provide accurate information which stakeholders can rely upon. Avoid any perceived conflict of interest. |
Created by:
rafi.sultani
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