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Kultur Dokumente
Topic 1:
1. Decisions managers make:
a. Organizational vision:
- The core purpose and ideology of the entity
- Guides the entitys overall direction and approaches towards its
various stakeholder groups
b. Organizational core competencies:
- The entitys strength relative to competitors
c. Organizational strategies
- Tactics that managers use to take advantage if core
competencies while working towards the firms vision
- Low cost, differentiation strategy
d. Operating plans
- Specific short-term decisions
- Shape the organizations day-to-day activities
- Include specific performance objective
e. Actual operations
- Various actions taken and results achieved over a period of
time
2. Role of information and decisions:
- The key focus of management accounting is provision of
information of decision making
- Relevant information: helps the decision maker evaluate and
choose among alternative courses of actions; concerns the future; vary
the actions taken
- Irrelevant information: Does not vary the actions taken => not
useful
- Relevance depends on the decision and other factors
- Higher quality information: certain, complete, relevant, timely,
valuable
2. Variances
Market size = Change in mkt size * Planned mkt share * Planned avg CM
Market share = Actual mkt size * Change in mkt share * Planned avg CM
Product mix = Change in average CM * Actual unit volume
Advantages
1. Simplicity: Easy to calculate
and understand.
2. Can be used as a rough
measure of project risk.
3.
It can help minimize the
Disadvantages
1. It
ignores
the
performance of projects
beyond the payback
period.
2. It
ignores
the
Accounti
ng Rate
of
Return
(ARR)
Net
Present
Value
(NPV)
Internal
Rate of
Return
(IRR)
1. By ignoring the
time value of money
and can lead managers
to choose projects that
do
not
maximise
profitability.
2. It ignores cash
flows.
1. Sensitivity
to
discount rates- a small
increase or decrease in
the discount rate will
have a considerable
effect on the final
output.
1. It is based in the
unrealistic assumption
that
cash
flows
generated
by
the
project are reinvested
at the IRR.
2. By
measuring
profitability in relative
terms,
does
not
consistently result in
choices that maximize
shareholders
wealth
therefore it is not
adequate to evaluate
mutually
exclusive
projects.
3. When cash flows
change from positive to
negative over the life of
the project there can