ICAB CL Business & Finance flashcards
ICAB CL Business & Finance · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- PESTLE analysis
- A framework scanning Political, Economic, Social, Technological, Legal and Environmental factors in the macro-environment to identify external influences on an organisation's strategy and performance.
- Span of control
- The number of subordinates directly reporting to a single manager. Wider spans reduce management layers and cost but increase supervisory workload and reduce individual attention.
- Limited liability
- A legal principle shielding shareholders from company debts beyond the amount they invested or any unpaid amount on their shares, encouraging external investment.
- Agency problem
- The conflict arising when managers (agents) pursue their own interests rather than those of shareholders (principals), mitigated by incentives, monitoring and independent boards.
- Price elasticity of demand
- The percentage change in quantity demanded divided by the percentage change in price. Values above one in absolute terms indicate elastic demand; below one indicates inelastic demand.
- Marginal revenue equals marginal cost
- The profit-maximising condition: output should expand while each extra unit's revenue exceeds its cost, and stop where marginal revenue equals marginal cost.
- Monopolistic competition
- A market with many firms selling differentiated products and free entry. Short-run economic profits attract entrants, eroding profits toward normal levels in the long run.
- Weighted average cost of capital
- The blended required return on a firm's debt and equity, weighted by market values, used as the discount rate for investment appraisal.
- Pecking order theory
- A financing hierarchy stating firms prefer retained earnings first, then debt, and issue new equity last, because of information asymmetry and issue costs.
- Gearing
- A measure of financial leverage, typically debt divided by debt plus equity, indicating reliance on borrowing and the associated financial risk borne by shareholders.
- Cash conversion cycle
- Inventory days plus receivable days minus payable days. It measures how long cash is tied up in operations before collection from customers.
- Net present value
- The sum of a project's future cash flows discounted at the cost of capital, less the initial outlay. Positive NPV indicates value creation.
- Internal rate of return
- The discount rate at which a project's net present value equals zero. Projects are accepted when the IRR exceeds the required rate of return.
- Sunk cost
- A cost already incurred and unavoidable, which must be excluded from investment appraisal because it does not change with the decision.
- Secondary market
- A market where investors trade securities already issued, providing liquidity and price discovery without raising new funds for the issuing company.
- Yield to maturity
- The total return earned by holding a bond to redemption, equating the present value of its coupons and redemption value to its current market price.
- Capital Asset Pricing Model
- A model pricing required equity return as the risk-free rate plus beta multiplied by the market risk premium, capturing only non-diversifiable systematic risk.
- Systematic risk
- Market-wide risk affecting all securities, such as interest rate or recession shocks, which cannot be eliminated through portfolio diversification.
- Ansoff matrix
- A growth framework combining existing and new products with existing and new markets, producing penetration, product development, market development and diversification options.
- Balanced scorecard
- A performance measurement system combining financial, customer, internal process, and learning and growth perspectives to link operational activity to strategic objectives.
- Return on investment
- Operating profit divided by capital employed, expressing the profit generated per unit of invested capital for comparing divisional or project performance.
- Adverse variance
- A difference between actual and budgeted figures that reduces profit, such as costs exceeding budget or revenue falling short of the planned amount.
- Product life cycle
- The sequence of introduction, growth, maturity and decline stages a product passes through, each requiring different marketing, pricing and investment decisions.
- Economic order quantity
- The order size minimising total inventory cost by balancing ordering costs, which fall with larger orders, against holding costs, which rise with larger orders.
- Labour turnover
- The proportion of employees leaving an organisation over a period, calculated as leavers divided by average employee numbers, indicating retention and HR cost pressure.
- Market segmentation
- Dividing a heterogeneous market into groups with similar needs or characteristics, so that marketing effort and product offers can be targeted effectively.
- Triple bottom line
- A corporate social responsibility framework reporting performance across economic, social and environmental dimensions, often summarised as profit, people and planet.
- Whistleblowing
- Disclosure by an employee of suspected wrongdoing within or by an organisation, typically protected when made through authorised channels in good faith.
- Money laundering
- The process of disguising criminal proceeds through placement, layering and integration so they appear legitimately sourced, countered by customer due diligence and reporting.
- Residual risk
- The risk remaining after controls and risk responses have been applied, which management must consciously accept or treat further.
- CIA triad
- Three core information security objectives: confidentiality, restricting access to authorised users; integrity, ensuring accuracy; and availability, ensuring timely access.
- Segregation of duties
- An internal control dividing transaction stages among different people so no individual can initiate, authorise, record and reconcile the same transaction, reducing fraud risk.