HKDSE Business, Accounting and Financial Studies (BAFS) Comprehensive Review

Comprehensive practice flashcards covering Business Management, Human Resources, Marketing, Financial Management, Capital Budgeting, and Risk Management from the lecture notes.

How do tall and flat organizational structures compare regarding flexibility and span of control?

A tall structure has lower flexibility because coordination and decision-making are complicated across many levels, and a narrower span of control where each manager oversees only a few subordinates. A flat structure has higher flexibility with faster decision-making and a wider span of control where each manager oversees many subordinates.

Under what specific work conditions is an autocratic leadership style inappropriate?

An autocratic style is inappropriate when employees can work independently and are highly motivated (lack of autonomy demotivates them), or when tasks require great freedom of expression and a high level of creativity (excluding employees from decision-making stifles innovation).

What are the four core steps in the management controlling process?

Step 1: Set performance standards; Step 2: Measure actual performance; Step 3: Compare actual performance with standards; Step 4: Take corrective actions.

What are the key contributions of Small and Medium Enterprises (SMEs) to the economy?

SMEs provide specialised goods and services to meet customer needs in niche markets, generate substantial employment (employing approximately $45\%$ of Hong Kong's total working population), introduce innovative products to stay competitive, and support large corporations as suppliers, subcontractors, and distributors.

What are the four sequential steps in the manpower planning process?

1. Forecast manpower demand based on business expansion scale and plans (quantity and quality of manpower); 2. Estimate manpower supply (assessing staff turnover rate, retirement policy, and attrition rate); 3. Compare manpower demand and supply (identifying shortfalls and skill deficiencies); 4. Develop action plans and follow up (recruitment, selection, and training/development activities).

What factors directly influence the external manpower supply of an organization?

Staff turnover and attrition rates, government regulations/human resource policies (e.g., retirement age laws and work visa requirements), composition and demographics of the labour force (e.g., an ageing workforce or fewer graduates entering a discipline), and overall economic conditions (e.g., unemployment rates during economic downturns).

How do permanent hires and temporary hires compare in terms of advantages and disadvantages for an employer?

Permanent hires provide higher commitment, greater motivation, and workforce stability, but incur higher recruitment and employee benefit costs and lower manpower flexibility. Temporary hires offer cost-effectiveness and high scheduling flexibility to meet seasonal demand, but employees usually demand higher wages, possess lower organizational commitment, and may lack motivation due to low job security.

What are the primary advantages of internal recruitment over external recruitment?

Internal recruitment enhances employee morale and motivation by opening promotion pathways, saves recruitment advertising costs and onboarding time, ensures faster adaptation as existing employees understand the corporate culture, and provides management with proven knowledge of candidates' abilities and work habits.

What are the sequential steps in conducting a performance appraisal before making promotion decisions?

Step 1: Set performance standards and communicate them clearly with both the appraiser and appraisee; Step 2: Measure actual employee performance and compare it against the pre-set standards; Step 3: Conduct appraisal interviews to deliver constructive feedback and discuss results.

What is the key difference between profit sharing and a bonus regarding their awarding criteria and dependence on company performance?

Profit sharing is strictly tied to company profitability using a predetermined formula (if the company earns no profit, no profit sharing is paid) to align employee interests with overall financial success. Bonuses can be based on individual or team milestones, project completion, or company performance, and do not necessarily depend solely on net profit.

How do piece rate and commission differ as performance-based pay systems?

Piece rate pays a fixed monetary amount for each unit produced or task completed (common in production environments to maximize physical output). Commission pays a fixed percentage or rate based on sales revenue earned (common in sales roles to maximize revenue), which can lead to income insecurity and monthly earnings volatility for workers.

What are the key advantages and disadvantages of using case studies in off-the-job training?

Advantages include bridging theoretical concepts with real-world scenarios, promoting critical thinking and multi-perspective analysis, and fostering collaborative team discussions. Disadvantages include being time-consuming to prepare and discuss, potential confusion due to varied subjective interpretations, and the requirement for a highly skilled facilitator.

According to Herzberg's Two-Factor Theory, how do motivators differ from hygiene factors?

Motivators are intrinsic job factors (such as achievement, recognition, the work itself, responsibility, advancement, and growth) that directly create job satisfaction. Hygiene factors are extrinsic workplace factors (such as company policy, supervision, salary, working conditions, and job security) that do not generate strong motivation on their own but prevent dissatisfaction if handled properly.

How do the managerial assumptions and incentive methods in McGregor's Theory X and Theory Y differ?

Theory X assumes employees inherently dislike work, avoid responsibility, and lack ambition, motivating them through monetary rewards and security benefits. Theory Y assumes employees view work as natural, exercise self-control, and seek responsibility, motivating them through decision-making participation, job autonomy, challenging assignments, and personal growth opportunities.

What are the four sequential steps in formulating a marketing plan?

Step 1: Review current performance and conduct a SWOT analysis; Step 2: Set marketing objectives; Step 3: Select target markets; Step 4: Formulate marketing strategies.

How do primary and secondary data differ in marketing research?

Primary data is deliberately gathered first-hand for the specific research problem at hand, ensuring high relevance, timeliness, and quality, but requiring greater time and financial expenditure. Secondary data consists of existing data collected for other purposes, saving time and costs, but carries the risk of being outdated, less relevant, or of unverifiable accuracy.

How does stratified random sampling differ from convenience sampling?

Stratified random sampling divides the target population into mutually exclusive subgroups (e.g., by age or income) and randomly draws elements from each using a sampling frame to ensure accurate demographic representation. Convenience sampling selects subjects that are most conveniently accessible to the researcher without a sampling frame, which may yield a sample that fails to represent the broader target population.

How does the business market differ from the consumer market regarding buying decision complexity and buyer-seller relationships?

The business market involves formalised procurement procedures with multiple participants, derived demand, larger and more frequent purchases, and close, long-term contractual buyer-seller relationships. The consumer market involves simpler individual personal buying decisions, direct consumption in smaller quantities, and transactional, less durable buyer-seller relationships.

What are the four major bases used to segment consumer markets?

1. Geographic segmentation (by region, city, or district); 2. Demographic segmentation (by age, gender, or income level); 3. Psychographic segmentation (by social class, lifestyle, or personality characteristics); 4. Behavioural segmentation (by benefits sought or product usage rates).

What are the four unique characteristics of services that distinguish them from physical goods?

1. Intangibility (services cannot be seen, touched, or tasted before purchase; addressed with tangible clues and physical evidence); 2. Variability (service quality varies with the provider and delivery context; addressed via standardized operational procedures); 3. Inseparability (production and consumption occur simultaneously; addressed through staff interpersonal training); 4. Perishability (unused service capacity cannot be inventoried; addressed via part-time staffing and reservation systems).

How do product and place strategies differ between e-marketing and traditional marketing?

In product strategy, e-marketing enables easy digital delivery, customisation, and customerisation, whereas traditional marketing focuses on standardised physical goods. In place strategy, e-marketing operates $24/7$ without physical brick-and-mortar stores and cuts out intermediaries, whereas traditional marketing depends on physical outlets with fixed operating hours and channel members.

How do the marketing objectives and strategies differ between the Introduction and Maturity stages of the Product Life Cycle (PLC)?

In the Introduction stage, the objective is to build brand awareness and induce trial by offering basic models, setting price with high launch costs in mind, and using selective distribution. In the Maturity stage, the objective is to defend market share and maximize short-term profit by adding features (line stretching), using competitive pricing, and employing intensive distribution.

Why is customer retention generally prioritized over customer acquisition in Customer Relationship Management (CRM)?

Losing existing customers forfeits their entire customer lifetime value, acquiring new customers incurs significantly higher advertising and promotional costs than retaining established ones, and existing customers provide easier and more receptive opportunities for cross-selling and up-selling.

What is the operational difference between cross-selling and up-selling?

Cross-selling means selling additional, similar, or related products to an existing customer, whereas up-selling means selling a more premium, feature-rich, or expensive product version to an existing customer.

Why is the quick ratio considered a stricter measure of liquidity than the current ratio?

The quick ratio ($\frac{\text{Current Assets} - \text{Inventory}}{\text{Current Liabilities}}$) excludes inventory, which takes time to sell and may not be readily convertible into cash, thereby providing a more conservative evaluation of a firm's ability to settle immediate short-term obligations.

What are the common causes of an unfavourable sales volume variance and an unfavourable material price variance?

Unfavourable sales volume variance is caused by unforeseen decreases in market demand, sales force inefficiency, or overly optimistic initial budget forecasts. Unfavourable material price variance is caused by higher-than-expected inflation, smaller-than-anticipated trade discounts from suppliers, or purchasing in small order lots.

How are financing methods classified into short-term and long-term financing categories?

Short-term financing (providing capital for one year or less) includes short-term bank loans, commercial paper, trade credit, overdrafts, accrued expenses, and factoring. Long-term financing (providing capital for more than one year) includes issuing common stock, issuing bonds, long-term bank loans, retained profits, and hire purchase/leasing.

How do debt financing and equity financing compare regarding financial risk, dilution of control, and financing cost?

Debt financing has higher financial risk (mandatory periodic interest and principal repayment irrespective of profits), does not dilute ownership control (lenders lack voting rights), and has lower issuance costs with tax-deductible interest expenses. Equity financing has lower risk (dividends are discretionary and capital has no maturity), dilutes control by adding voting shareholders, and incurs higher non-deductible costs.

What decision rule governs whether a firm should take a supplier's cash discount on accounts payable?

If the firm's bank borrowing interest rate is lower than the annualised rate of return on the cash discount, the firm should borrow funds to pay early and take the discount. If the borrowing interest rate is higher than the annualised cash discount return, the firm should forgo the discount and utilize the trade credit until the credit period expires.

What are the 5Cs of credit analysis used when assessing credit standards?

1. Capital (financial position, net worth, and liquid assets); 2. Capacity (cash flow generation and ability to repay debt obligations); 3. Collateral (valuable assets pledged to secure the debt); 4. Character (reputation, credit history, and past repayment track record); 5. Condition (general economic climate and industry-specific market trends).

Using the data for FMO Limited ($D = 100\text{ units/year}$, $F = \$500/\text{order}$, $C = \$200/\text{unit/year}$), what are the Economic Order Quantity (EOQ) and the total inventory cost?

$\text{EOQ} = \sqrt{\frac{2DF}{C}} = \sqrt{\frac{2(100)(500)}{200}} = \sqrt{500} \approx 22.4\text{ units}$, rounded up to $23\text{ units}$. The total inventory cost equals total carrying cost ($\frac{23}{2} \times 200 = \$2,300$) plus total ordering cost ($\frac{100}{23} \times 500 = \$2,173.9$), totaling $\$4,473.9$.

At what point is the total inventory cost minimized under the Economic Order Quantity (EOQ) model?

Total inventory cost is minimized when total ordering cost equals total carrying cost, striking the optimal compromise between ordering frequency and the average amount of inventory held on hand.

What are the decision rules and major limitations of the Net Present Value (NPV) method in capital investment appraisal?

Accept a project if $\text{NPV} \ge 0$, and select the project with the highest positive NPV among mutually exclusive options. Limitations include difficulty in choosing an accurate discount rate, challenges when comparing projects with different operational lifespans or initial outlays, and ignoring the absolute capital size required for each project.

What are the four primary risk control strategies available to a business?

1. Risk avoidance (refusing to engage in operations carrying loss exposure); 2. Risk assumption (absorbing losses directly, such as establishing an internal reserve fund); 3. Risk reduction (minimising loss severity or probability, e.g., installing alarms); 4. Risk transfer (transferring financial risk to a third party, such as purchasing insurance or outsourcing).

What five criteria must a risk meet to be considered an insurable risk?

1. The risk must be pure (involving only loss or no loss, not speculative); 2. It must be accidental and uncontrollable; 3. The probability of occurrence must be calculable; 4. Potential losses must not be too frequent or financially trivial; 5. The risk must not affect an excessively large number of insureds at the exact same time (e.g., catastrophic war).