Financial Management
What is the major objective of financial managers?
To maximize the value of the firm for its shareholders
What is the difference between a merger and an acquisition?
a merger: this is when two companies join together to form a new one
an acquisition: this is when one company buys another one
What are the types of an auditor's opinion?
Unqualified, qualified, adverse
What is "creative accounting"?
Recording transactions and values in a way that produces a false result
The day-to-day recording of transactions
Bookkeeping
What does the enterprise financial plan comprise?
Financial resources needed, amounts currently available and expected in the future (revenues and expenditures)
What are the major advantages of mergers or acquisitions over internal expansion?
Less costly, less time-consuming and risky
Why can an auditor issue a disclaimer of opinion?
If they can not obtain sufficient and appropriate financial statements. The management does not have enough documents to support their accounting transactions.
What is IFAC?
The International Federation of Accountants. The global advocacy organization for the accountancy profession. The organization supports the development, adoption, and implementation of international standards for accounting
to expand into new fields
diversify
Why can corporate governance be called "the system of checks and balances"?
The shareholders own the enterprise, managers run the operation and board directors oversee the operation as agents of the shareholders.
Ikea, a flat-pack retailer, purchased Swedwood, a manufacturing company. What kind of integration was it?
Vertical
What is the most serious type of risk an auditor runs?
Detection risk. It is the risk that the auditor fails to detect the material misstatement in the financial statements and then issued an incorrect opinion to the audited financial statements.
What does the unit-of-measure assumption in accounting presuppose?
All financial transactions are in a single monetary unit or currency.
an obligation of an entity arising from past transactions or events
liability
What did financial management consist in prior to the 1930s?
Desriptive discussions of various financial markets, securities traded in those markets and fund raising.
What are the major reasons for failed mergers and acquisitions?
Not enough synergy, lack of a strategic plan, lack of cultural fit, misunderstanding, external factors
What are the stages of audit?
Planning stage, performing a preliminaryanalytical review, performing an audit, giving opinion in the auditor's report
What are the phases of accounting?
Capture, processing and communication of financial information
an expense that is recognized on the books before it has been paid
accrued expense
What indicators of a company’s performance are usually measured?
Solvency, efficiency, profitability
What was characteristic of the US stock market in the early 1980s after the recession?
There were many large companies (conglomerates) with good earnings but low stock prices. Raiders started to buy them, split them up and resell at a profit.
What actions should an auditor take if they detect financial infringements?
Report to investigating authorities
How is the usefulness of information provided in financial statements determined?
It should be relevant, consistent, reliable, timely, material, comparable.
a relationship indicating a firm's capacity to meet short and long-term liabilties
financial leverage ratio