ICMAP Strategic Level flashcards
ICMAP Strategic Level · 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.
- Five Forces framework
- Porter model assessing industry profitability through rivalry, new entrants, substitutes, supplier power and buyer power; all five forces jointly determine structural attractiveness.
- Ansoff growth matrix
- Classifies growth strategies by product and market novelty into market penetration, product development, market development and diversification; risk rises moving away from penetration.
- BCG growth-share matrix
- Plots business units on market growth against relative market share, producing stars, cash cows, question marks and dogs; cash cows fund stars and selected question marks.
- Core competence tests
- Prahalad and Hamel criteria: a competence must deliver customer value, be difficult for competitors to imitate, and provide access to extendable future markets.
- Porter generic strategies
- Cost leadership, differentiation and focus; firms failing to pursue one of these coherently are described as stuck in the middle and earn below-average returns.
- Value chain activities
- Primary activities are inbound logistics, operations, outbound logistics, marketing and sales, and service; support activities are infrastructure, HRM, technology development and procurement.
- PESTLE analysis
- Framework scanning Political, Economic, Social, Technological, Legal and Environmental macro-environment factors that create opportunities and threats beyond the firm's control.
- Balanced Scorecard perspectives
- Kaplan and Norton framework measuring financial, customer, internal process, and learning and growth perspectives; non-financial measures act as leading indicators of future financial performance.
- Target costing formula
- Target cost equals target selling price minus target profit margin; the cost is set at design stage and the product is engineered to meet it.
- Throughput accounting ratio
- TPAR equals return per bottleneck hour divided by factory cost per bottleneck hour; a ratio below one signals the product does not cover factory costs.
- Activity-based costing
- Allocates overheads to activities and then to products using cost drivers that reflect consumption, giving more accurate costs where product diversity and overheads are high.
- Life-cycle costing
- Accumulates all costs from design through to disposal; most costs are committed at the design stage, so pre-production decisions dominate total product profitability.
- Residual income
- Divisional profit less an imputed interest charge on capital employed; unlike ROI it discourages managers from rejecting profitable projects that would dilute the divisional percentage return.
- Transfer pricing general rule
- Minimum transfer price equals variable cost plus the opportunity cost of the transferred unit; market price applies where an active competitive market exists.
- Net present value rule
- Discount expected future cash flows at the cost of capital and deduct the initial outlay; accept projects with positive NPV because they add shareholder value.
- Weighted average cost of capital
- WACC equals equity weight times cost of equity plus debt weight times post-tax cost of debt; it is the discount rate for projects of average business risk.
- Capital asset pricing model
- Cost of equity equals the risk-free rate plus beta multiplied by the market risk premium; beta measures systematic risk, which cannot be diversified away.
- Modigliani-Miller with tax
- Gearing increases firm value by the present value of the debt tax shield, so a geared firm's value equals its ungeared value plus debt times the tax rate.
- Theoretical ex-rights price
- TERP equals the combined market value of existing shares plus rights issue proceeds, divided by the total number of shares after the issue.
- Dividend growth model
- Share price equals next year's dividend divided by the cost of equity minus growth; rearranged it estimates cost of equity as dividend yield plus growth.
- Adjusted present value
- Base-case NPV discounted at the ungeared cost of equity plus the present value of financing side effects such as tax shields and issue costs.
- Agency problem
- Conflict arising when managers who control a company pursue their own interests rather than shareholders'; mitigated by monitoring, incentives, independent boards and transparent reporting.
- Comply or explain
- UK Corporate Governance Code approach requiring listed companies either to follow each provision or to disclose and justify the departure; flexible rather than rigid statutory rules.
- Board independence criteria
- The chairman should be separate from the chief executive, and at least half the board excluding the chairman should be independent non-executive directors under the UK Code.
- Audit committee composition
- Comprises independent non-executive directors, at least one with recent relevant financial experience; the committee should not be chaired by the chairman of the board.
- OECD governance principles
- Cover shareholder rights, equitable treatment of shareholders, the role of stakeholders, disclosure and transparency, and board responsibilities; they are non-binding international benchmarks.
- Section 172 duty
- UK Companies Act duty of directors to promote the success of the company for members as a whole, considering long-term consequences, employees, customers, suppliers, community and environment.
- Five ethical fundamental principles
- IESBA code principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour; compliance is mandatory for members.
- Self-interest threat
- Ethical threat where the financial or other personal interest of the accountant or firm improperly influences judgement, such as fee dependency or a shareholding in the client.
- Fraud triangle
- Cressey model explaining fraud through three conditions: pressure or incentive, opportunity to act, and rationalisation or attitude that justifies the dishonest behaviour.
- Money laundering stages
- Placement of criminal proceeds into the financial system, layering through transactions to obscure their origin, and integration back into the legitimate economy as apparently clean funds.
- Caparo negligence test
- The claimant must show that a duty of care was owed, that the duty was breached, and that the breach caused damage of a type that is not too remote.