Ch 1 Summary.docx

3 Pages

Accounting & Financial Management
Course Code
AFM 481
Grant Russell

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Chapter 1: Reading Summaries Strategic Management and Decision Making – Organizational vision: core purpose/ideology to guide overall direction and approach regarding various stakeholders – Organizational core competencies: organization’s strengths relative to competitors’, creates value to stakeholders – Use SWOT analysis to determine competencies (strengths, weaknesses, opportunities and threats) – Organizational strategies: tactics used by managers to take advantage of competencies to achieve organizational vision – Make decisions, and set in stone or re-evaluate periodically – Establish long term goals – Operating plans: short-term decisions the govern day-to-day operations – Actual operations: actions taken to achieve results over a period of time Measuring, Monitoring, and Motivating Performance – Management control systems: systems/routines used to increase organizational success – Compare actual results against plans (budgets vs actual), performance evaluations and pay relating to long-term and short-term results Levers of Control – Belief systems: inspire/direct employees to do things that are consistent with the organizational vision – Vision statement describes what the organization wants to be – Mission statement explains the organization’s purpose – Core values statement summarizes the beliefs that shape the corporate culture – Boundary systems: limits on individual behaviour (code of conduct, budgets, etc.) – Diagnostic control systems: used to measure, monitor and motivate employees to achieve preset goals (required in order for the strategies to be successful) – Personnel evaluation used to motivate managers/employees – Suboptimal decisions: when employees do things for personal gains and the cost of the organization – Interactive control systems: recurring sets of info that require attention from managers of various levels Cost Accounting and Decision Making – Process of tracking, recording, analyzing and determining costs of projects, processes and activities – Management accounting: gather, summarize and report financial and non-financial information for internal purposes – Financial accounting: prepare and report financial information for external uses, must be in accordance with IFRS or Cdn GAAP – Strategic cost management: reducing costs and strengthening strategic position at the same time – Balanced scorecard: used to help translate vision to objectives so that they can be measured and monitored Information Systems and Relevant Information in Management Decision Making – Formal: point-of-service optical character readers (track inventory, geographic distribution of sales, trends, price-sales relationships) – Informal: industry journals/articles, competitor websites – Internal report: provide information for the types of management decision (frequently or not) – External report: distributed to different constituencies (required or optional) – Business intelligence (BI) and business process management (BPM): used to help managers reduce costs, improve profitability, and control operations – BI: integrated systems across or between the organization and customers/suppliers – BPM: support design, execution and monitoring of day-to-day processes – Relevant cash flows: incremental cash flows; avoidable cash flows (avoided if the decision alternative is not taken; helps to distinguish each option) – Irrelevant cash flows: unavoidable cash flows will always occur no matter which option is taken – Product costs aka cost of goods sold: cost of the units that were sold in the period – Period costs: cost of direct material, lab
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