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1 What is accounting about?

Let's start with a question – we shall call questions ‘Activities’. For many of these activities you will need a pen and paper, or you can use the course Forum, to note down your own ideas. Once you have completed the Activity you should return to the text, read the comments that follow the activity, and then think again about your answer. Change it, if you like. Once you are happy that you have understood the comments and that your own answer is alright, you should continue to read the
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Acknowledgements

Except for third party materials and otherwise stated (see terms and conditions), this content is made available under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 Licence

The material acknowledged below is Proprietary and used under licence (not subject to Creativ
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3 Factors influencing culture

Where the culture of a business comes from, and how it develops, is the subject of much discussion within business studies. Every commentator seems to have their own list of key factors. One example is by Drennan (1992), who proposes twelve key factors that shape the culture of a business. These are:

  1. the influence of a dominant leader – the vision, management style and personality of the founder or leader in a business often has a significant influen
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2.1 Culture as socialisation

The cultural perspective has become popular in business studies because it offers a way of explaining performance and understanding difference. It is only one way of analysing business, but it is an interesting one as it focuses particularly on the insider point of view, or on what it is ‘really’ like to work in an organisation. There have been many definitions of organisational culture. One definition that is often cited is:


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Learning outcomes

After studying this course, you should be able to:

  • explain the relationship between research on national cultures and the development of the culture perspective in business studies

  • describe some of the problems of working in, and doing business with, businesses in other countries

  • offer a definition of organisational culture

  • recognise the factors that constitute or influence the culture of a business.


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3.6 Event risk

This is not unlike default risk but it is a special case meriting its own category. The shareholders or management of a company might consciously and voluntarily enter into a major transaction that radically changes either the company's nature or its capital structure (that is, the balance and mix of shares and various types of debt in its overall sources of finance). Such a restructuring might cause some or all investors to suffer a significant increase in the uncertainty of their investment
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3.3 Liquidity

Borrowers prefer to have the use of funds for as long as possible, while investors generally prefer to be able to get their money back as soon as possible. A major function of the financial markets, and of the stock market in particular, is to reconcile these conflicting requirements. The stock market enables shareholders and bondholders to realise their investment independently of the company by selling their holdings to other investors. This is called the secondary capital market, to distin
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3.2 Maturity

The maturity of an investment is the date when the investor is contractually entitled to demand repayment of the investment and the associated return. Some investments (such as company shares, as discussed in Section 3.1) actually have no contractual maturity. Others – such as demand deposits at banks – are subject to contractual repayment at
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3.1 Background

In practice, there is almost always some element of risk (in the technical sense of ‘uncertainty’) in any investment return. There is in finance the theoretical concept of a truly risk-free asset, but at the moment it is sufficient just to be aware of the main factors causing risk or uncertainty in practice. These are:

  • maturity

  • liquidity

  • variability of income

  • default or credit risk

  • event r
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2.2 Calculating returns

Our first question was: what is the mean expected total return for next year? We calculate this by taking each of the possible returns and weighting it by its relative probability. As our table is so simple and symmetrical, it is not difficult to see that the weighted mean return is 7% per annum.

Our second question was: what is the degree of risk or uncertainty in this mean figure? In other words, how widely dispersed are the possible outcomes around the mean expected outcome? The most
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2.1 Looking at each of the possible alternative outcomes

Investment risk is synonymous with uncertainty of outcome, so it is logical to try to quantify risk by looking at the relative uncertainty, or probability, of each of the possible alternative outcomes.

Suppose that we are interested in investing in the shares of Company X, and want to know:

  • What is the mean or average expected total return for the next year?

  • What is the degree of risk or uncertainty in this mean figure?


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1.2 Are investors risk-averse?

We will define ‘risk premium’ as an extra reward required by investors to compensate for perceived uncertainty in the amount or timing of an expected return.

But do investors in fact require an extra premium for uncertainty, or is this perhaps just a convenient assumption?

The following activity is designed to give you an opportunity to test your own reactions.


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5.1 Introduction

As we noted earlier, both the rational-economic and psychological perspectives on decision making tend to ignore the social context in which we live and work. We turn now to consider this social context.

<
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3 What would suit me?

You should now have built up a realistic picture about what you want to achieve and what you have to offer and be able to match up all of these against some possible activities.

Here are some different ways to get you started:

Have another look at some of the statements in Section 1.3. These are just to get you thi
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1.2.2 Summary

  • The results of successive editions of the Eurobarometer show that in most EU countries only a very small percentage of people, around 5 per cent, declare having an exclusive European identity, while up to 50 per cent do not have any sense of European identity.

  • European political identity is weak and there is a great variation across states.


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1.2.1 The role of the Eurobarometer

In 1973 the Directorate of Information of the European Commission instituted a survey of public opinion amongst the members of the EEC. So now, twice a year, a sample of about 1,000 people from each country are interviewed on topics related to European integration and EU policy and institutions. This survey of public opinion is usually referred to as Eurobarometer. The reports are initially published by the Commission in French and English, though they are subsequently made available i
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4.3 Conclusion

If social researchers are to be effective in understanding people, they need to be detached from common sense (the perspective of the person on the street). However, they should not be so detached that they fall into the trap of imposing their own categories upon the object without regard for the experience of those involved (the perspective of the expert).

The standpoint of the ‘stranger’ provides a way of mediating between the detached position of the scientist and the personal ex
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