FINA

True pricing

incorporating the external costs of a product into its price. External costs are caused by the company but borne by society (e.g. polluted soil, child labour in supply chains).

Cooperative

Owned by its members, managed by a board appointed by members.

Association (Vereniging):

members own it; board manages it. No liability for members (unless limited capacity board).

Job Production

Customized design for one specific customer

Batch-job production: Custimised but from pre made components (dell computers)

Batch mass production: variety of models of a standard product (Volkswagen Golf variants)

Realization Principle (Revenue)

Revenue is recorded only when it has been EARNED — that is, when the product has been delivered or the service performed. It does not matter when the customer pays.

•      Correct: record the sale in December when the goods are shipped.

•      Wrong: record the sale in January when the cash arrives.

If a customer pays in advance, the advance is recorded as a liability (prepaid revenue) until delivery occurs.

Matching Principle (Costs)

Costs must be recorded in the same period as the revenue they help generate.

Product matching costs

tied to a time period — recorded when the period occurs regardless of when cash is paid (e.g., rent, insurance, interest, depreciation).

Period matching costs

tied to a time period — recorded when the period occurs regardless of when cash is paid (e.g., rent, insurance, interest, depreciation).

Vertical integration

one company controls multiple successive links (e.g., Shell extracts, refines and sells petrol at the pump).

Horizontal integration

a company operates in the same link across different supply chains (e.g., a petrol station also sells food and drinks).

Conglomerate

A company in different links of different supply chains (e.g., Stork: food, aviation, printing). Risky to manage; trend is 'back to core business'.

Types of Cooperation Between Companies

1. Takeover

2. Merger

3. Joint Venture

4. Franchising

5. Cartel

Joint Venture

Two companies jointly set up a new subsidiary they both own

Cartel

ILLEGAL: agreement between competitors to fix prices or devide markets

Management Accounting

Internal, future orientated (forecasts, budgets)

Financial Accounting

External, for shareholders. Past oriented (last year results).

Replacement investments

replacing worn-out assets to maintain current production capacity

Expansion investments

growing production capacity to generate more revenue

Free Cash Flow

Profit after tax + Depreciation - Investment + disinvestment