ICAP Strategic Case Study flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

PESTLE analysis

A macro-environmental scanning framework covering political, economic, social, technological, legal and environmental factors that sit outside the industry and shape an organisation's opportunities and threats.

Porter's Five Forces

A framework assessing industry attractiveness through competitive rivalry, threat of new entrants, threat of substitutes, buyer power and supplier power; stronger combined forces mean lower long-run profitability.

Mendelow's power-interest matrix

A stakeholder mapping tool: key players (high power, high interest) are managed closely, high-power low-interest stakeholders kept satisfied, low-power high-interest kept informed, and the rest given minimal effort.

VRIN criteria

A test of sustainable competitive advantage: a resource must be valuable, rare, costly to imitate and non-substitutable before rivals are unable to replicate or neutralise it.

BCG growth-share matrix

A portfolio tool plotting relative market share against market growth, classifying businesses as stars, cash cows, question marks and dogs, each implying a different cash generation or investment strategy.

SAF evaluation criteria

A framework for appraising strategic options: suitability asks whether the option fits the strategic position, acceptability covers risk, return and stakeholder reaction, and feasibility covers resources and competences.

Balanced scorecard

Kaplan and Norton's performance system measuring financial, customer, internal process and learning and growth perspectives, linking long-term objectives to measures, targets and initiatives.

Lewin's change model

A three-stage model of organisational change: unfreezing existing behaviour, moving to the new state, and refreezing so the change is embedded as the new norm.

McKinsey 7S framework

An internal alignment model covering strategy, structure, systems, style, staff, skills and shared values; changing one element requires adjusting the others to avoid damaging misalignment.

Emergent strategy

Mintzberg's term for patterns of action that arise without prior intention; realised strategy equals deliberate strategy plus emergent strategy, less intended strategies that were never realised.

IFRS 15 five-step model

Revenue recognition: identify the contract, identify performance obligations, determine the transaction price, allocate it to those obligations, and recognise revenue when each obligation is satisfied.

Recoverable amount (IAS 36)

The higher of an asset's fair value less costs of disposal and its value in use; an impairment loss is recognised whenever the carrying amount exceeds this recoverable amount.

Right-of-use asset

Lessee accounting under IFRS 16: recognise a right-of-use asset and a lease liability measured at the present value of lease payments, then charge depreciation and interest separately.

Acquisition method goodwill

Under IFRS 3, goodwill equals consideration transferred plus non-controlling interest plus previously held interests, less the fair value of the identifiable net assets acquired.

Adjusting events (IAS 10)

Events after the reporting period that provide evidence of conditions existing at the year end; they must be adjusted in the financial statements, unlike non-adjusting events, which are only disclosed.

Weighted average cost of capital

The weighted average of the after-tax cost of debt and the cost of equity, weighted using market values of debt and equity, used to discount the cash flows of a project or firm.

Capital asset pricing model

Ke = Rf + beta × (Rm − Rf); the model prices only systematic risk because unsystematic risk can be eliminated by holding a diversified portfolio of investments.

Gordon growth model

Share value equals D1 divided by (Ke − g), where g is the sustainable growth rate, equal to the retention ratio multiplied by the return earned on reinvested funds.

Net present value rule

Accept a project when the present value of its cash inflows exceeds the initial outlay; NPV measures the absolute increase in shareholder wealth and is preferred to IRR.

Pecking order theory

Firms finance investment first from retained earnings, then from debt, and issue new equity only as a last resort, reversing the ordering implied by the static trade-off theory.

Audit risk model

Audit risk equals the risk of material misstatement (inherent risk multiplied by control risk) multiplied by detection risk, the only component that the auditor directly controls.

Modified audit opinion types

Under ISA 705: qualified for material but not pervasive misstatement or scope limitation, adverse for material and pervasive misstatement, and disclaimer where evidence is pervasively unavailable.

COSO internal control components

Five components: control environment, risk assessment, control activities, information and communication, and monitoring activities, forming the basis for assessing internal control over financial reporting.

Fraud triangle

Three conditions associated with fraud: incentive or pressure, opportunity, and rationalisation; auditors must apply professional scepticism and consider fraud risk under ISA 240.

Companies Act 2017

Pakistan's governing statute for company incorporation, directors' duties, financial reporting, audit and statutory filing, administered and enforced by the Securities and Exchange Commission of Pakistan.

Withholding tax agent

A person required to deduct tax at source on specified payments, deposit it with the revenue authority, and who is personally liable for failing to collect or deposit the tax.

Arm's length principle

A transfer pricing rule requiring transactions between associated enterprises to be priced as if agreed between independent parties, normally supported by documentation of the pricing method selected.

Input and output tax

Under sales tax, registered persons charge output tax on taxable supplies and deduct input tax paid on purchases, remitting the net difference to the tax authority for the period.

Agency problem

The conflict arising from separation of ownership and control, where directors may pursue self-interest and create monitoring, bonding and residual costs ultimately borne by shareholders.

Fundamental ethical principles

The five IESBA principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour, applied through a conceptual framework of threats and safeguards.

Independence threats

Self-interest, self-review, advocacy, familiarity and intimidation; each must be eliminated or reduced to an acceptable level using safeguards such as rotation or independent quality review.

Triple bottom line

A reporting framework measuring performance against three dimensions: people (social), planet (environmental) and profit (economic), used alongside or within sustainability and integrated reporting.