KASNEB CS23 cheat sheet

Directors' general duties: act within powers, promote the success of the company, exercise independent judgement, use reasonable care, skill and diligence, avoid conflicts of interest, refuse benefits from third parties and declare interests in proposed transactions.

The statutory framework in Kenya is the Companies Act 2015; listed companies follow the Capital Markets Authority Code of Corporate Governance (Mwangaza) and state corporations follow the Mwongozo Code.

Core governance principles: accountability, transparency, fairness, responsibility and independence - used to evaluate any board structure or disclosure question.

The agency problem flows from separation of ownership (shareholders) and control (managers); remedies are independent non-executive directors, board committees, performance-linked pay, audit and full disclosure.

Standard board committees: audit (financial reporting, internal control, external auditor independence), risk, nomination and remuneration; each is chaired by an independent non-executive director.

Ethical theories for decision rules: utilitarianism judges by consequences (greatest good for the greatest number); deontology judges by duty and rules irrespective of outcome; virtue ethics judges by the character of the actor; justice ethics judges by fair distribution.

Ethical safeguards inside a company: written code of conduct, conflict-of-interest register and disclosure, gifts and hospitality policy, protected whistleblowing channel, and tone set at the top by the board.

Corporate social responsibility is captured by the triple bottom line (people, planet, profit) and ESG reporting; insider dealing - trading on unpublished price-sensitive information - is prohibited for directors and officers.

Elements of a valid contract: offer, acceptance, consideration, intention to create legal relations, capacity and legality of object; the agreement must be free from misrepresentation, duress and undue influence.

Under the Companies Act 2015 a private company needs at least one director (a natural person) and one member, while a public company needs at least two directors and a suitably qualified company secretary.

General meeting notice: 21 clear days for a public company annual general meeting (may be shortened with members' consent); special notice of 28 days is required to remove a director or an auditor.

Resolution thresholds: an ordinary resolution needs more than 50% of votes cast; a special resolution needs at least 75% and is required to alter articles, change the company name, reduce capital or wind up voluntarily.

Unless the articles provide otherwise, the quorum for a general meeting is two members personally present or by proxy.

A public company must hold its first annual general meeting within 18 months of incorporation and thereafter at intervals of not more than 15 months; private companies are not obliged to hold one.

Statutory records: register of members, register of directors and secretaries, register of charges and minutes of meetings, which members may inspect; an annual return must be filed with the registrar every year.

Particulars of a charge created by a company must be delivered to the registrar for registration within 30 days of its creation, failing which the charge is void against a liquidator or creditor.

Management functions are planning, organising, leading and controlling; Mintzberg groups managerial roles as interpersonal (figurehead, leader, liaison), informational (monitor, disseminator, spokesperson) and decisional (entrepreneur, disturbance handler, resource allocator, negotiator).

Environment tools: PESTLE scans the macro-environment, Porter's Five Forces assesses industry attractiveness, SWOT matches internal strengths and weaknesses to external opportunities and threats.

Ansoff growth matrix: market penetration (existing product, existing market), product development, market development, diversification (new product, new market - highest risk).

BCG matrix classifies business units by market growth and relative market share into stars, cash cows, question marks and dogs.

Motivation theories: Maslow's hierarchy (lower needs must be met first), Herzberg's two factors (hygiene prevents dissatisfaction, motivators create satisfaction), McGregor's Theory X and Y, Vroom's expectancy theory where motivation = valence x instrumentality x expectancy.

Leadership: autocratic, democratic and laissez-faire styles; Blake and Mouton's managerial grid plots concern for people against concern for production, with 9,9 team management ideal.

Control cycle: set standards, measure actual performance, compare against standards and isolate deviations by exception, then take corrective action.

Change management: Lewin's unfreeze-change-refreeze model and Kotter's eight steps, which run from creating urgency to anchoring the change in culture; span of control, chain of command and centralisation determine structure.

Time value of money: FV = PV(1 + r)^n and PV = FV / (1 + r)^n; the present value of an annuity is A x [1 - (1 + r)^-n] / r.

Investment appraisal: NPV = sum of CFt / (1 + r)^t less the initial outlay, accept if NPV > 0; IRR is the rate at which NPV = 0, accept if IRR exceeds the cost of capital.

WACC = (E/V) x ke + (D/V) x kd(1 - t), using market value weights and the after-tax cost of debt because interest is tax deductible.

Cost of equity: CAPM gives ke = rf + beta(rm - rf); the Gordon growth model gives ke = D1/P0 + g, where D1 = D0(1 + g).

Breakeven quantity = fixed costs / (selling price - variable cost per unit); contribution margin ratio = contribution / sales.

Inventory: EOQ = square root of (2DO / H), where D is annual demand, O is order cost and H is holding cost per unit per year; reorder level = maximum usage x maximum lead time.

Liquidity and working capital: working capital = current assets - current liabilities; current ratio = current assets / current liabilities; quick ratio = (current assets - inventory) / current liabilities.

Leverage and appraisal: DOL = % change in EBIT / % change in sales, DFL = % change in EPS / % change in EBIT, DCL = DOL x DFL; ARR = average annual profit / average investment.

The accounting equation is Assets = Capital + Liabilities; every transaction is recorded by double entry so that total debits always equal total credits.

Underlying assumptions and qualities: going concern, accrual, consistency, prudence, materiality and the separate business entity concept.

Depreciation: straight line = (cost - residual value) / useful life; reducing balance = net book value x rate; IAS 16 requires annual review of useful life and residual value.

IAS 2: inventories are measured at the lower of cost and net realisable value, with cost assigned by FIFO or weighted average because LIFO is prohibited.

A complete set of financial statements comprises the statement of financial position, statement of profit or loss and other comprehensive income, statement of changes in equity, statement of cash flows and notes.

Bank reconciliation: adjust the cash book for bank charges, interest and standing orders, then reconcile to the bank statement using unpresented cheques, uncredited deposits and errors.

Kenya corporation tax: resident companies pay 30% of taxable profit, branches of non-resident companies pay 37.5%, and tax is paid through four instalments during the year.

VAT: standard rate 16%; registration is compulsory once taxable turnover reaches KES 5 million in twelve months; zero-rated supplies allow input tax recovery while exempt supplies do not; capital gains tax is charged at 15% on net gains from disposing of property in Kenya.