CFI CBCA ASSESSING MANAGEMENT EXAM QUESTIONS AND VERIFIED ANSWERS

CFI CBCA ASSESSING MANAGEMENT EXAM QUESTIONS AND VERIFIED ANSWERS "Course Objectives - CORRECT ANSWER 1. Structured Approach to Assessing Management 2. Management Attitudes 3. Assessing Strategy & Business Plan 4. Assessing Track Record" "Course 1 Objectives - CORRECT ANSWER 1. Why Assess Management 2. Why Use a Scorecard 3. Multi Criteria Analysis 4. How & Where to Find Quantitative and Qualitative Data" "Linking Financial and Non-Financial Performance Measures You first need to ask: - CORRECT ANSWER What are the organization's long-term strategic business goals?" "Linking Financial and Non-Financial Performance Measures Then, for each business perspective, you must ask: - CORRECT ANSWER -What are the drivers of success? -What measures (key performance indicators) are appropriate to gauge how well you are doing in each of the critical areas?" "Questioning Skills Questioning is a necessary tool for - CORRECT ANSWER gathering more information which leads to better decision making." "Questioning Skills - CORRECT ANSWER Preparation is Key Think From the Other's Perspective Use Open Questions as Often as Possible Listen Give Yourself Time to Think" "Management Attitudes Session Objectives - CORRECT ANSWER 1. Attitude Framework 2. Asking the Right Questions 3. Using a Scorecard 4. Examples" "Management Attitudes - CORRECT ANSWER Ownership Risk Planning Growth" "Tools for Assessing Management - CORRECT ANSWER 1. Reputation - What do the press, customers, suppliers, and the competition say about management? 2. Consistency - Is there a clear and consistent business strategy? What is management's approach to growth? 3. Experience/stability - Qualifications, business and financial acumen, time in business, etc. 4. Statements - What are their own statements about the business like?" "Assessing Management Character - CORRECT ANSWER What are we trying to establish about the management team? A The character of the team and its major players A That the team has the ability and skills that will enable them to repay" "Management Attitudes Toward Planning Objective: to assess management skills in planning and acting on opportunities and threats - CORRECT ANSWER What are your plans for the business over the next five years? What opportunities exist for you to develop the business? What are the major threats facing the business? The plan should show specific goals and strategies that fully assess risks related to expanding the business" "Management Attitudes Toward Risk Objective: to assess management knowledge of sector, business risk and track record in taking action - CORRECT ANSWER What is your strategy to counter the threat of competition? What strategy would you adopt if you lost your major customer(s) tomorrow? Do you have a disaster response plan? How much insurance do you have? The answers should show detailed understanding of how to manage risks in the business, steps taken to decrease the chances of risks being realized, and a response plan." "Attitude to Growth Objective: to assess management attitude towards growth - CORRECT ANSWER Do you want to expand the business? Are there plans to expand into new home or export markets? Is innovation encouraged? Are new products/services being developed? Are there management resources and experience available to expand? Looking at growth, you can determine if management is satisfied with their current operations or want to expand by offering new products or services." "Internal Barriers to Growth - CORRECT ANSWER Percentage of respondents citing factor as important (Least to Greatest) Preference to maintain small size, Lack of successful innovation, Reluctance to take on new debt, Reluctance to dilute ownership, Management team too small/stretched" "Attitude to Ownership Objective: to assess management attitude to ownership and succession planning - CORRECT ANSWER Do you have outside investors in the business? What kind? Do you plan to sell to an outside party? Do you plan to sell to the employees? When do you plan to retire? What is the view on succession planning, and how does ownership impact the strategy?" "Ownership Styles - CORRECT ANSWER Size vs. Exit Method" "Dynast - CORRECT ANSWER Aim to grow; exit by family succession" "Business-oriented - CORRECT ANSWER Aim to grow; exit by sale of the business or flotation" "Family-oriented - CORRECT ANSWER Remain at current size; exit by family succession" "Protectionists - CORRECT ANSWER Remain at current size; exit by sale of the business or flotation" "Opportunities for Competitive Position - CORRECT ANSWER -Expand the business or maintain current size -Minimize shareholdings outside the family or have outside investors -Maximize personal income & investment or protect investment and pass to next generation -Prepared to use all available resources for growth or reluctant to push resources harder" "Protectionists... - CORRECT ANSWER Maintain size Outside Maximize income and investment and sell business. Reluctant to push resources harder." "Business-oriented... - CORRECT ANSWER Expand Outside Maximize income and investment and sell business. Prepared to use all available resources." "Dynast... - CORRECT ANSWER Expand Family Protect investment to pass to next generation. Prepared to use all available resources." "Family-oriented... - CORRECT ANSWER Maintain size Family Protect investment to pass to next generation. Reluctant to push resources harder." "Assessing Strategy & Business Plans Session Objectives - CORRECT ANSWER 1. Strategic Frameworks 2. Assessment Method 3. Using a Scorecard 4. Examples" "Assessing Management's Strategy - CORRECT ANSWER Objectives Strategies Measures Targets" "PESTEL is - CORRECT ANSWER a useful framework for building expectations about the external environment: Political Economic Social Technological Environmental Legal" "Hax's Delta Model - CORRECT ANSWER Customer Centric Strategy" "Dominant exchange - CORRECT ANSWER Amazon" "Proprietary standard - CORRECT ANSWER Microsoft" "Horizontal breadth - CORRECT ANSWER Fidelity" "Exclusive channel - CORRECT ANSWER Wall's" "Low cost - CORRECT ANSWER Southwest" "Redefining the member relationship - CORRECT ANSWER Saturn" "Member Integration - CORRECT ANSWER EDS" "Differentiation - CORRECT ANSWER Sony" ""The Delta Model is a... - CORRECT ANSWER "...new strategy framework that places the customer at the centre of management. It examines the primary options available to establish customer bonding and it prescribes how to link strategy with execution through the alignment of adaptive processes. The presentation concludes with an attempt to integrate the Porter's Five Forces Model, the Resource-based View of the firm, and the Delta Model" • Concentrate on the Customer • Strategic Positioning among the three positions • Determine the strategic agenda that determines the action program to implement your desired strategic option. • Design the proper metrics and rewards to facilitate the strategy development." "Ansoff Matrix - CORRECT ANSWER Assess Attitude to Growth Products, Markets" "MARKET PENETRATION (1) - CORRECT ANSWER existing products, existing markets" "PRODUCT DEVELOPMENT (2) - CORRECT ANSWER new product, existing market" "MARKET DEVELOPMENT (3) - CORRECT ANSWER existing product, new market" "DIVERSIFICATION (4) - CORRECT ANSWER new product, new market" "Understanding the ambitions of management - CORRECT ANSWER will help you assess their ability to repay." "The key to assessing management capabilities - CORRECT ANSWER is to ask the right questions and listen to the answers." "Why Should We Assess Management? - CORRECT ANSWER -We have a tendency to focus on financial issues rather than management issues -Businesses often fail as a result of management weaknesses, compared to any other single factor -Management competence is a key driver of business results -We can't just judge a business purely from financial management, the leadership team has to execute the plan" "Why Use a Scorecard? - CORRECT ANSWER -Business performance should be measured from the perspective of strategy implementation, in addition to financial results -Organizations need a balanced set of financial and non-financial performance measures and targets -A balanced set of performance measures will ensure that the entire organization participates in strategy implementation and should include:" "Building Thing - CORRECT ANSWER -Performance measured from perspective of strategy implementation -Financial Strategy Management Customer Financial and non-financial performance measures and targets -Financial ; Strategy ; Management ; Customer" "Example Scorecard Measures: Mission and strategy centered around... - CORRECT ANSWER Financial Customers Strategy Management" "Customers - CORRECT ANSWER • Reviews • Net Promoter Score (NPS) • News and media articles" "Financial - CORRECT ANSWER • Sales growth • Operating margin • EPS • ROCE/RONA" "Strategy - CORRECT ANSWER • Detailed roadmap • PEST analysis • Performance levels • Employee satisfaction" "Management - CORRECT ANSWER • Planning • Growth • Risk • Ownership" "Assessing Management Framework Structured Approach -> Multi-Criteria Analysis - CORRECT ANSWER Attitudes / Character Strategy (Look Forward) Track Record (Look Back)" "Attitudes / Character - CORRECT ANSWER • Planning • Risk • Growth • Ownership" "Strategy (Look Forward) - CORRECT ANSWER • Objectives • Strategies • Measures • Targets" "Track Record (Look Back) - CORRECT ANSWER • Budget vs. Actual • Previous Statements • Financial Trends (Performance)" "Where to Find Information - CORRECT ANSWER Qualitative Quantitative" "Qualitative - CORRECT ANSWER • Management Interviews • Financial Statements • News Releases • Proxy Statements (US Public Companies)" "Quantitative - CORRECT ANSWER • Financial Statements • Budgets • Operational Data (examples)" "More Strategic Frameworks - CORRECT ANSWER Corporate-level (Portfolio) Business-level Market Functional-level" "Corporate-level (Portfolio) - CORRECT ANSWER Portfolio approach to managing multiple businesses" "Business-level - CORRECT ANSWER Market positioning strategies to gain competitive advantages in one or multiple industries" "Functional-level - CORRECT ANSWER Activities within and between different functions aimed at improving efficiency of the overall business" "Objectives - CORRECT ANSWER What are you trying to achieve?" "Strategies - CORRECT ANSWER How are you going to achieve the objectives? What must you do to support the strategy?" "Measures - CORRECT ANSWER What are the output measures? What are input measures?" "Targets - CORRECT ANSWER Quantifiable Time-based" "Business Track Record Session Objectives - CORRECT ANSWER 1. How to Assess a Track Record 2. Looking at the Right Data 3. Using a Scorecard 4. Examples" "Budget vs Actual - CORRECT ANSWER Evaluating what has been budgeted in the past and actual performance is crucial" "Previous Statements - CORRECT ANSWER Looking at previous statements to assess financial performance can provide insight into management" "Places to Find Statements - CORRECT ANSWER Press Releases Interviews Articles Social Media" "Financial Trends - CORRECT ANSWER Looking at forecasts for the business can also indicate how hopeful management is" "Financial Information - Forecasts - CORRECT ANSWER Revenue EBITDA Free Cash Flow Net Income Earnings per Share" "Course Summary - CORRECT ANSWER 1. Structured Approach to Assessing Management 2. Management Attitudes 3. Assessing Strategy & Business Plan 4. Assessing Track Record" "Assessing management ultimately is about - CORRECT ANSWER assessing whether management has the ability and skills to run the business such that they will be able to repay." "Highlight critical elements to consider - CORRECT ANSWER when assessing management character."