Week 1 chapter notes

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Financial Accounting
Liang Chen

Chapter 1 The Role of Accounting Information in Ethical Management Decision-Making Notes Uncertainties, Biases, and Management Decision Quality Uncertainties N uncertainties issues and information about which we have doubt; prevent managers from accurately describing a problem, identifying all possible options, knowing the outcomes of various options, or anticipating all future conditions N managers often face a great deal of uncertainty when they launch a new product Biases N managers make poor decisions when they fail to adequately recognize and allow for uncertainties N this type of failure often occurs because of management bias N biases preconceived notions that are adopted without careful thought; cause decision makers to ignore weaknesses in their preferred course of action and prevent them from adequately exploring alternatives Decision Quality N decision quality refers to the characteristics of a decision that affect the likelihood of achieving a positive outcome N uncertainty and bias reduce decision quality N higher-quality decisions have more positive outcomes because they involve less uncertainty and decision makers are less biased N with lower-quality decisions, the opposite is true N managers can actively work to reduce or eliminate their biasesalthough uncertainties cannot be eliminated, managers can make higher-quality decisions by acknowledging and more thoroughly addressing uncertainties Management Decision-Making N people at different levels in an organization continuously make many different kinds of decisions N they range from broad decisions to detailed decisions Organizational Vision N organizational vision core purpose and ideology of an organization, which guides the organizations overall direction and approaches toward various stakeholder groups N organizational success increases when employees understand the organizational vision and work collectively to achieve it N to clarify and communicate the vision to employees and other stakeholders, managers sometimes divide the vision into one or more written statements, which vary from organization to organization N in general, a vision statement is a theoretical description of what the organization should become N a mission statement is a summary of the beliefs that define the organizations culture N some managers also publish codes of conduct or statements describing the organizations social or environmental responsibilities Organizational Core Competencies N organizational core competencies the organizations strengths relative to competitors; closely related to organizational vision N to create value for stakeholders, an organization must have strengths relative to competitors N the vision should build an existing and achievable strengths Organizational Strategies N organizational strategies tactics that managers use to take advantage of core competencies while working toward the organizational vision; guide long-term decisions such as the proportion of financing through debt and equity, types of goods and services offered, and investments in property, plant, and equipment N some of these decisions are made and then rarely need to be reconsidered, while others should be re-evaluated periodically N to monitor strategic progress, managers establish and monitor long-term goals such as market leadership Operating Plans N operating plans specific short-term decisions that shape organizations day-to-day activities such as drawing cash from LOC, hiring employee, or ordering materials; often include specific performance objectives, such as budgeted revenues and costs Actual Operations N actual operations various actions taken and results achieved over period of time, including customer orders received, revenues earned, employees hired, costs incurred, units of goods or services produced, cash received and paid, etc.; data about actual operations are collected and measured by organizations information system and then used to monitor and motivate performance Measuring, Monitoring, and Motivating Performance N managers need information about costs to help decide whether to sell a particular product N they also need information to measure actual operations so that they can monitor the success of their decisions and motivate employees to work toward the organizational vision www.notesolution.com
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