15 Essential Governance Topics you Need to Control.
Because Good Governance is Good Business.
Rules, Practices, Processes to Direct and Control it.
And to Balance the Interests of its many Stakeholders:
Shareholders, Management, Customers, Suppliers, Financiers, Government, and the Community.
In general, Business Governance is mainly concerned with:
1. Structure: how the Business is set up to operate
2. Policies and Procedures: how the Business operates legally and ethically
3. Accountability and Transparency: how the Business is transparent and accountable for its actions
4. Ethics and Integrity: how the Business is honest and trustworthy in its activities
5. Risk Management: how the Business is managing potential risks
6. Compliance: how the Business is complying with laws, regulations, and standards
7. Stakeholder Rights: how the Business is ensures the rights of all stakeholders are respected and protected
8. Corporate Social Responsibility: how the Business is operating responsibly accounting for the interests of its stakeholders.
What do you think?
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The “rent” is the opportunity cost of capital required to get from Accounting Profit to Economic Profit.
➡️ If economic profit is positive, it means the company is generating returns above the opportunity cost of all resources used, not just the costs recorded on the books
But
➡️ EBITDA doesn’t account for any opportunity costs.
Indirect costs or operating expenses not directly attributable to a specific product or service
⚫ Overhead can be manually allocated to products and services
⚫ Rent, utilities, and indirect labor fall under overhead costs
🎯 How is Overhead allocated?
1️⃣ Traditional costing
⚫ A costing methodology where overhead costs are amalgamated into a single cost pool and then allocated based on a single so called “cost driver” like direct labor hours or machine hours