Stakeholder Theory and Language Learning Concepts

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Questions and Answers

What is the primary focus of stakeholder theory in organizational management?

Ensuring compliance with financial regulations alone.

Promoting employee well-being as the sole objective.

Maximizing shareholder profits above all else.

Identifying the stakeholders and modeling their interrelations. (correct)

Which of the following best describes 'decision-useful information'?

Details that are not relevant to stakeholders.

Information primarily aimed at enhancing company profits.

Only information derived from financial reports.

Data that assists stakeholders in making informed decisions. (correct)

How does stakeholder theory differ from traditional shareholder value concepts?

It includes consideration for a wider range of stakeholder interests. (correct)

It focuses solely on the company's internal policies.

It suggests that only customers matter in decision-making.

It prioritizes shareholder profits as the main goal.

What does stakeholder theory imply about organizational ethics?

Ethical considerations are integral to managing stakeholder relationships. Signup and view all the answers

Which group is NOT typically considered a stakeholder in a company?

Competitors Signup and view all the answers

What is NOT considered as part of the broader perspective on languages applied by enterprises?

Colloquial communication styles Signup and view all the answers

Which step is crucial for effectively learning a new language?

Actively participating and exploring the culture Signup and view all the answers

Which of the following components is part of the language of business?

Financial and non-financial reporting standards Signup and view all the answers

What is emphasized as a way to enhance language acquisition?

Having fun and exploring the country Signup and view all the answers

What is Milton Friedman’s primary view on the responsibility of business?

To increase profits while conforming to societal rules. Signup and view all the answers

What can lead to economic frictions between a company and its shareholders?

Information asymmetry. Signup and view all the answers

According to Rappaport (1999), which of the following is a key component of valuation in shareholder value creation?

Debt financing costs. Signup and view all the answers

Which management activity is NOT considered a driver of value for shareholders?

Public relations activities. Signup and view all the answers

What does a manager's responsibility include according to Friedman?

To satisfy the desires of the shareholders, typically to maximize profits. Signup and view all the answers

How can business models affect shareholder value?

By dictating the duration of value creation. Signup and view all the answers

Which option is a potential outcome of adverse selection in business?

The hiring of less qualified personnel. Signup and view all the answers

Which concept refers to the challenge of ensuring maximum shareholder value given a managerial policy?

Value creation. Signup and view all the answers

Friedman's perspective on business profits emphasizes which of the following?

Maximizing shareholder returns without deception. Signup and view all the answers

Which of the following represents a shortcoming of prioritizing shareholder value?

Neglect of long-term sustainability. Signup and view all the answers

What is the approximate present value of receiving €100 in 1 year?

€93 Signup and view all the answers

How much is the present value of receiving €100 in 10 years approximately?

€46 Signup and view all the answers

Which of the following statements about discounting is true?

The longer the wait for money, the less its present value. Signup and view all the answers

Why is the present value of €100 in the long term (10 years) significantly lower than in the short term (1 year)?

Inflation reduces the value of money over time. Signup and view all the answers

What does discounting help to understand regarding company value?

It equates future cash flows to present value. Signup and view all the answers

What is the concept that explains why past investments influence current decision making?

Sunk cost fallacy Signup and view all the answers

What is the main reason for discounting future cash flows?

To account for the opportunity to use funds currently Signup and view all the answers

How do sunk costs affect rational decision making in practice?

They serve as a reference point. Signup and view all the answers

What can result from considering sunk costs in decision-making?

Inefficient resource use Signup and view all the answers

What occurs when funds are received in the future without the possibility to generate cash flows?

Opportunity cost Signup and view all the answers

What is the impact of inflation on future cash flows?

It reduces the real value of future cash flows. Signup and view all the answers

Which statement reflects the burden associated with waiting to receive funds?

It requires discounting for accurate valuation. Signup and view all the answers

What is the significance of considering the 'burden of waiting' in financial decisions?

It affects the valuation of future financial gains. Signup and view all the answers

What is the primary focus of external financial reporting?

Issuing financial statements Signup and view all the answers

Which accounting standards are described as being rules-based?

US GAAP Signup and view all the answers

How are financial transactions ultimately presented in reports?

As financial statements Signup and view all the answers

What is one purpose of the wide array of reports beyond just annual statements?

To provide ongoing communication Signup and view all the answers

Which of the following is NOT a characteristic of IFRS?

House of recommendations Signup and view all the answers

In external reporting, what aspect determines what items and transactions are recognized?

Recognition criteria Signup and view all the answers

What is the implication of the statement 'Blindfolded Monkey Beats Humans With Stock Picks'?

Randomness can outperform expertise Signup and view all the answers

Which of the following does NOT fall under external reporting tools?

Private emails Signup and view all the answers

What encompasses the measurement of financial items in reports?

Valuation methods Signup and view all the answers

Among the following, which report type is typically not part of external reporting?

Employee performance reports Signup and view all the answers

What is the role of the valuation function in external reporting?

Determining market prices and valuations Signup and view all the answers

In financial reporting, the consideration for what to recognize is primarily directed by?

Accounting standards Signup and view all the answers

Which statement about the differences in accounting standards is true?

US GAAP is more extensive than German standards Signup and view all the answers

Study Notes

Accounting Course Information

Bachelor in Management & Data Science
TUM Campus Heilbronn
Winter semester 2024/25
Professorship of Accounting, TUM School of Management, Technical University of Munich

Unit 01 - Language of Business

Course: "Accounting"
Key topics:
- Introduction
- Corporate data
- Recording business transactions
- Cost accounting
- Financial reporting
- Sustainability reporting
- Accounting policies and incentives
Units have unique numbers for easier discussion
Focus: company perspective and key business questions (what is a company, business model, performance, value?)

Unit 04 - Shareholders, Stakeholders, and the Company

Aspects in this unit:
- Understanding a company
- Boundaries of a company
- Corporations vs. partnerships
- Shareholder vs. stakeholder approach
Baseline understanding of a company's economic activities (input, process, output)
Overview of economic units (private persons, public budgets, enterprises, public authorities, companies)
Definition of "company" (from a scientific/technical perspective): Oxford dictionary, functional, institutional
Boundaries of a company ("group perspective")
Netting of transactions
Incorporation of transactions along the value creation chain (upstream, within, downstream impact)
Fundamental distinction between partnerships and corporations. Examples of legal forms (sole proprietor, partnership, corporation)
General distinction between shareholder value approach, shareholder value maximization, and pluralistic/stakeholder value approach
The key role of valuation for any company
Decision-useful information and resource allocation with shareholders and stakeholders.
Theoretical fundament of the shareholder value concept
Drivers of shareholder value

Unit 06 - Company Value and Valuation

What is the value of the chicken?: Question for conceptualizing the valuation perspective for a company
Company values and valuations are subjective and depend on (valuation perspective, purpose of the valuation, conceptual valuation assumptions).
Basic drivers of (economic) values: (timeline of benefit, type of transaction, measurement concept)
Values are always relative, consistent comparisons of comparable companies
Importance of systematic comparisons for company valuation exercises
Fundamental definition of present value (with examples)
Understanding discounting (with examples)
Remarks on the sunk cost fallacy (explaining why retrospective costs are often irrelevant for future decision making.)
Why discounting future cashflows?
Understanding discounting (examples in the short and long term)
Different discount rates (examples and discussion)
Time horizons in company valuation

Unit 11 - Accounting Fraud

Howeycoins, a fake investment opportunity, is presented. Study the website and white paper to better understand the opportunity.
Howeycoins fake case study for accounting fraud understanding risk
Distinction between accounting error and accounting fraud (misstatement, unintentional, intentional).
Particularly destructive forces of accumulated misstatements: True profitability, manipulated profitability, accumulated overstated profitability, problematic overstatement, etc
Asymmetric evaluation of manipulations (how "errors" or "frauds" are analyzed differently depending on whether they are deliberate or not)
Examples of well-known accounting scandals.
The importance of management awareness in the organization and governance for avoiding fraud.
A "little bit of cheating” can be a part of the game, but a focus on "truly innocent" companies is narrow.
Assessment of accounting misstatements and manipulations:
Assessment perspective related to countries with different cultures. Ethical satisfaction is not the same as economic necessity.
A fish always rots from the head down (The Wirecard case example)

Unit 13 - Internal and External Corporate Data

Major data-driven technological changes that affect business environments.
Dealing with data from various sources as a key part of accountants' daily work, illustrating difference between 1980 and 2030.
Unobservable reality, description through data, and interpretation of the data (e.g., characteristics of a product, company, or economy described through data
Intentionally and unintentionally generated data (different types and their relationships)
Distinctive characteristics of data for managerial purposes and external reporting.
Legitimate and questionable data collection aspects, and privacy questions.
Trend of establishing platform-based solutions for accounting and management purposes, and the use of technologies to accomplish such goal
Only a marginally small portion of all generated corporate data really used (with statistics to show the proportion)
Public and private data with examples of different types data
Why doesn't all private information become public or accessible? (cost-benefit considerations)
Increasing data generating, storage, and usage fit ethical principles and sustainability
Energy demand for data-driven AI products and controversies around such topic
GDPR 2016 and its restrictions for natural person data (seven overarching principles).
Importance of a "personal touch" in corporate information and the implications of data standardization
Web-based official information channels with examples from EU countries and a summary of their data sources for accounting/economic use.
Official SEC channels.
Ad hoc requirements (example of EU's Market Abuse Regulation).
Standardize corporate communication and how they're used or presented (examples of annual, quarterly, semi-annual reporting, corporate websites)

Unit 15 - Position and Performance Data

Structuring of business transactions to insightfully inform corporate interactions.
Time horizons (past, present, future) in terms of company valuation and business transaction structuring.
Concept of a position statement
Concept of a performance statement
Comparative overview financial position and performance statements (with examples)
Overall organization of the statement of financial position in line with IFRS
Relationship between the three key financial statements (with an example)
Equivalent styles of financial position statements (with examples)
Example of BMW (2023) - Group financial statements, statement of cash flows, with examples, and details
Extensive disclosures about compensation of board members, and why it is important
Examples of BMW (2023) - Annual performance measures

Unit 16 - Business Transaction Data

Examples for different business challenges that require differently defined transaction data.
Definitions of basic flow variables
Distinction between cash outflows and expenditures.
Distinction between cash inflows and receipts
Distinction between receipts and income.
Illustrative examples of business transactions with different types of companies (e.g., purchasing cycle).
Distinction between income and activity, expenses and costs.

Unit 18 - Sales

Major aspects addressed in this unit (basic understanding of sales, contract components, payment, reporting period, intra-group sales, etc.)
Attention: This unit primarily contains regulations in accordance with IFRS.
Basic understanding of sales: components of sales
How to define and consider sales?
Regulations of IFRS 15 - Scope, timing, and measurement of sales (examples)
Regulations of IFRS 15 - Key terms
Regulations of IFRS 15 - Five steps approach
Regulations of IFRS 15 - Example of total sales measurement (with example)
Regulations of IFRS 15 - Example of the components approach
Regulations of IFRS 15 - Payment before, concurrently, and after realization (examples)
Regulations of IFRS 15 - Multi-period construction contract (examples)
Intra-group sales-What are transfer prices?
Intra-group sales - Survey evidence on the most important tax issues for tax directors (EY 2007 data examples.)
Intra-group sales - Transfer prices and profit when tax rates are identical (examples)
Intra-group sales - Transfer prices and profit when tax rates differ (examples)
Intra-group sales - Tax aggressiveness and transfer pricing (example of international companies such as Amazon, Apple, Google)
Standard approaches to determine transfer prices (negotiation, combinations, corporate policies)

Unit 20 - Material Costs

Important types of materials in the production process: raw materials, auxiliary materials, operating materials.
Method for recording and valuing material consumption (e.g., consumption method, inventory method, etc.).
Characteristics of material prices (constant price, changing price)
Financial reporting requirements for inventories (IAS 2).
Valuation methods for interchangeable materials (e.g., first-in, first-out (FIFO), last-in, first-out (LIFO), weighted average).

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Description

This quiz explores the principles of stakeholder theory in organizational management and its ethical implications. Additionally, it delves into language learning strategies, highlighting decision-useful information and components of the business language. Test your knowledge on how these theories and concepts intersect.