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Exam study book Financial Management of Thomas Power, Stephen Walsh, Paul O'Meara - ISBN: 9780717145546 (Detailed exam pack)
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questions and answers Exam (elaborations) FIN3403 FINANCIAL MANAGEMENT (FIN3403) Financial Management, ISBN: 9780717145546
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OCTOBER –NOVEMBER
2020
[Type here]
Academic needs contact: 065 160 9781/ www.unitutorials.co.za
, SOLUTION 1: BUDGETING & PLANNING;
PERFORMANCE MEASUREMENT; STANDARD
COSTING; RELEVANT DECISION – MAKING;
ABSORPTION & DIRECT COSTING SYSTEMS;
COST – VOLUME – PROFIT (CVP) ANALYSIS;
TRANSFER PRICING; ETHICS; & BUSINESS
VALUATIONS
(a) Goal Congruence
(i) Goal congruence refers to the situation that exists when controls motivate
employees to behave in a way that is in tune with the organization’s goals.
Results controls can promote a number of harmful side-effects. They can lead
to a lack of goal congruence when employees seek to achieve the
performance targets in a way that is not organizationally desirable. They can
also lead to data manipulation and negative attitudes, which can result in
a decline in morale and a lack of motivation as employees strive to achieve
the targeted return on investment, residual income and gross profit margin at
all costs.
(ii) Potential negative consequenses of decentralization
The major potential disadvantage of divisionalization is that there is a danger
that divisions may compete with each other excessively and that divisional
managers may be encouraged to take action that will increase their own
profits at the expense of the profits of other divisions and the company as a
whole. This may adversely affect cooperation between the divisions and lead
to a lack of harmony in achieving the overall organizational goals of the
company.
Coordination may become complex due to diverse policies and procedures
followed by different divisions of the company.
Decentralisation results in a duplication of staff effort as each division might
have access to purchasing, personnel, marketing and other specialists in
order to be independent. As a result, each division will be expected to engage
a large group of staff specialists at ernomous cost.
[Type here]
Academic needs contact: 065 160 9781/ www.unitutorials.co.za
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