KASNEB CS23 key terms

The system of rules, practices and processes by which a company is directed and controlled, balancing the interests of shareholders, management, creditors and other stakeholders while promoting accountability and long-term value.

Any individual or group that can affect or be affected by the activities of an organisation, such as shareholders, employees, customers, suppliers, lenders, regulators and the wider community.

A legal obligation on directors and trustees to act in the best interests of the company or beneficiaries with loyalty, good faith, care and skill, and not to use their position for personal gain.

A conflict that arises when managers, acting as agents, pursue their own interests rather than those of the owners who appointed them, creating costs of monitoring and control.

A board member with no executive role and no material relationship with the company or its management, appointed to bring objective judgement to board decisions and to challenge executive performance.

A committee of the board, normally made up of independent non-executive directors, responsible for overseeing financial reporting, internal controls, risk management and the relationship with internal and external auditors.

The disclosure by an employee or insider of illegal, unethical or unsafe practices within an organisation to a person or body able to take corrective action.

A situation in which a person's private interests or loyalties could improperly influence decisions made in an official or professional capacity, requiring disclosure and often abstention from the decision.

A statutory officer of a company responsible for ensuring compliance with company law and the constitution, maintaining statutory records, advising the board on governance and organising meetings.

The document that sets out the internal rules for running a company, covering share rights, board procedures, meetings and voting, and which operates as a contract between the company and its members.

A formal decision adopted by the directors at a properly convened board meeting, or by written consent, recording the directors' authority for a specified action.

The minimum number of members or directors who must be present for a meeting to be validly held and for the decisions taken at it to be binding.

A person appointed by a shareholder to attend and vote at a meeting on that shareholder's behalf, or the written instrument used to make the appointment.

A resolution passed by a specified supermajority of members, commonly three-quarters of the votes cast, required for major changes such as altering the constitution or winding up the company.

A court's power to disregard a company's separate legal personality and hold its shareholders or directors personally liable, typically where the company is used to commit fraud or evade the law.

Beyond the powers of a person or body. A company or public authority acts ultra vires when it does something not authorised by its constitution or by the law.

A strategic planning technique that examines an organisation's internal strengths and weaknesses together with external opportunities and threats, helping managers match capabilities to the environment in which they operate.

A framework for scanning the macro-environment by examining political, economic, social, technological, legal and environmental factors that may affect an organisation's performance and strategy.

The number of subordinates who report directly to a particular manager, which determines how tall or flat an organisational hierarchy becomes.

The process by which a manager assigns duties and the necessary authority to a subordinate while retaining accountability for the outcome.

The shared values, beliefs, norms and behaviour patterns that shape how members of an organisation interact, make decisions and respond to change.

A structured approach to guiding people and processes through organisational change so that new ways of working are adopted and the intended benefits are realised.

An attribute that allows a firm to outperform its rivals in the marketplace, such as lower costs, superior quality, innovation, brand strength or a unique market position.

The process of evaluating and selecting long-term investment projects, deciding which fixed assets or expansion plans an organisation should commit its funds to.

The value today of a project's expected future cash inflows minus its outflows, discounted at a required rate of return; a positive result suggests the project adds value.

The minimum return a firm must earn on its investments to satisfy lenders and shareholders, reflecting the weighted cost of its debt and equity financing.

The funds tied up in day-to-day operations, calculated as current assets minus current liabilities, managed so as to keep the business liquid while supporting its activities.

A measure of the extent to which a company's capital is funded by fixed-interest debt rather than equity, indicating the degree of financial risk borne by shareholders.

The set of rules a company uses to decide how much of its profit to distribute to shareholders and how much to retain for reinvestment in the business.

A technique that determines the level of sales at which total revenue equals total cost, so that the business makes neither a profit nor a loss.

A method of accounting under which revenue and expenses are recorded when they are earned or incurred, rather than when cash is received or paid.

The assumption that an entity will continue in operation for the foreseeable future, without any intention or necessity to liquidate or significantly curtail its activities.

The systematic allocation of the cost of a long-term asset over its useful life, matching the expense to the periods that benefit from the asset.

The process of comparing a business's cash records with its bank statement and explaining the differences so that both show the correct closing balance.

A consumption tax charged at each stage of the supply chain on the value added, collected by registered traders and passed to the revenue authority, with the final burden falling on consumers.

A tax levied on the gain realised when a capital asset is disposed of for more than its cost, usually subject to allowances and exemptions for certain assets.

A tax deducted at source by the payer of certain incomes, such as dividends, interest, rent or professional fees, and remitted to the revenue authority on behalf of the recipient.

Arranging one's affairs within the law to reduce tax payable; it is lawful, but arrangements lacking commercial substance may be challenged or closed by anti-avoidance rules.