ICMAP Managerial Level flashcards
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33 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Accounting Equation
- The fundamental relationship Assets = Liabilities + Equity. Every transaction affects at least two elements while keeping the equation in balance.
- Accrual Basis
- Revenue is recognised when earned and expenses when incurred, regardless of when cash is received or paid. It underpins matching and faithful representation.
- Goodwill Impairment
- Under IFRS, goodwill is not amortised; it is tested at least annually for impairment and written down if carrying amount exceeds recoverable amount.
- Lower of Cost and NRV
- IAS 2 requires inventory to be measured at the lower of cost and net realisable value, ensuring assets are not overstated when selling prices fall.
- Contribution Margin
- Sales revenue minus variable costs. It contributes first toward covering fixed costs and then toward generating profit for the entity.
- Break-Even Point
- The activity level where total revenue equals total cost and profit is zero. In units it equals fixed costs divided by contribution per unit.
- High-Low Method
- A technique that separates mixed costs into fixed and variable elements using the cost difference divided by the activity difference between highest and lowest points.
- Relevant Cost
- A future, incremental cash flow that differs between alternatives. Sunk costs and allocated common fixed costs are excluded from decisions.
- Overhead Absorption Rate
- Budgeted overhead divided by a budgeted activity base such as labour hours or machine hours. It allocates indirect costs to products or jobs.
- Material Price Variance
- (Standard price minus actual price) multiplied by actual quantity purchased. A positive result is favourable; negative is adverse.
- Separate Legal Personality
- A company is a legal person distinct from its shareholders and directors, so it owns property, contracts, and sues in its own name.
- Fiduciary Duty
- Directors must act honestly and in good faith in the company's best interests, avoid conflicts, and not misuse corporate opportunities or information.
- Business Judgment Rule
- A protection for directors who act on an informed basis, in good faith, and in the honest belief their decision serves the company's best interests.
- Cash-Flow Insolvency Test
- A company is insolvent if it cannot pay its debts as they fall due. This liquidity test is applied alongside the balance-sheet test.
- Related-Party Transaction
- A transaction between the company and a director, major shareholder, or affiliate. It requires disclosure and often independent approval to prevent self-dealing.
- Taxable Income
- Accounting profit adjusted for disallowed expenses, non-taxable income, capital allowances, and allowable loss relief. It is the base for computing tax payable.
- Capital Allowances
- Tax deductions for the cost of qualifying capital assets, replacing accounting depreciation. Depreciation is added back and allowances deducted in the tax computation.
- Tax Shield
- The reduction in tax payable caused by deductible items such as interest. Interest tax shield equals interest expense multiplied by the tax rate.
- Deferred Tax
- Tax arising from temporary differences between an asset's accounting carrying amount and its tax base, recognised under the IAS 12 liability method.
- Arm's Length Principle
- Transfer pricing rule requiring related-party transactions to be priced as if between independent parties, preventing profit shifting to low-tax jurisdictions.
- Net Present Value
- Present value of future cash inflows minus the initial investment. A positive NPV indicates the project adds value at the given discount rate.
- Weighted Average Cost of Capital
- The blended required return on a firm's equity and debt, weighted by market values, with debt adjusted for the tax shield.
- Capital Asset Pricing Model
- Ke = risk-free rate plus beta times the market risk premium. Beta measures a security's systematic risk relative to the market.
- Cash Conversion Cycle
- Inventory days plus receivable days minus payable days. A shorter cycle frees cash and reduces working capital financing needs.
- Payback Period
- The time required for cumulative cash inflows to recover the initial investment. It ignores cash flows after payback and the time value of money.
- Porter's Five Forces
- A framework assessing industry attractiveness through rivalry, new entrants, substitutes, supplier power, and buyer power, which together shape profitability.
- Generic Strategies
- Porter's three approaches: cost leadership, differentiation, and focus. Firms failing to pursue one clearly risk being stuck in the middle.
- BCG Matrix
- A portfolio tool classifying businesses as stars, cash cows, question marks, or dogs based on market growth and relative market share, guiding investment.
- Ansoff Matrix
- A growth framework with four options: market penetration, product development, market development, and diversification, ordered by increasing risk.
- Balanced Scorecard
- A performance system measuring financial, customer, internal process, and learning and growth perspectives to link strategy with operational metrics.
- COSO Framework
- An internal control model with five components: control environment, risk assessment, control activities, information and communication, and monitoring activities.
- Segregation of Duties
- An internal control principle separating authorisation, custody, recording, and reconciliation so no single person can both commit and conceal an error or fraud.
- Predictive Analytics
- Analytical techniques using historical data and statistical models to forecast future outcomes such as demand, default risk, or fraud likelihood.