ACCA Strategic Business Leader (SBL) Practice Exam

Who is typically referred to as the principal in business terms?

1. Manager of operations

2. Owner of the company

3. Shareholder

4. Senior financial officer

The correct answer is: Owner of the company

In business contexts, the term "principal" often refers to the owner of the company. This designation signifies that the principal is a key decision-maker in the organization and holds substantial authority over its strategic direction and operational activities. The owner is typically invested in the company, both financially and personally, and bears the risks and rewards associated with ownership. This connection to the company’s overall success and the capacity to influence major decisions underscores why owners are frequently viewed as principals. On the other hand, while managers, shareholders, and senior financial officers have critical roles within a business, they do not inherently possess the overarching ownership and decision-making power that characterizes the principal. Managers operate under the direction of owners or higher executives, shareholders may influence decisions but do not manage day-to-day operations, and senior financial officers focus primarily on the financial aspects of the company rather than ownership. Thus, the owner stands out as the principal due to their fundamental connection to the business.