Finance for Decision-making

This subject is primarily for practioners who have not undertaken formal studies in accounting and/or finance, but require the solid foundation in accounting and finance principles and practice needed as the basis for a career as a company secretary or professional in corporatet governance or risk management.

 Learning outcomes

  1. Understand and interpret financial reports
  2. Identify the financial reporting regulatory regimes and their objectives
  3. Identify and critically evaluate sources of finance and their associated risks and returns
  4. Utilise the major fundamental financial models and evaluate these for decision-making
  5. Conceptualise the nature and importance of capital structure and the cost of capital and evaluate these for decision-making

Indicative content

This subject comprises the following 12 modules:

Module 1: Introduction to  Financial Information and Business Decision-Making

  • Financial accounting and its role in decision-making
  • The need for regulation in financial reporting
  • Sources of company regulation
  • Australian and international accounting standards
  • Structure of the conceptual framework
  • Statutory framework and legal requirements
  • Limitations of financial information and financial reports
  • Contemporary reporting developments

Module 2: Analysing the assets and liabilities of the organisation - The balance sheet

  • Purpose, content and structure of the balance sheet
  • Definition and recognition of assets
  • Definition and recognition of liabilities
  • Definition and nature of equity
  • Measurements of assets and liabilities
  • Limitations of the balance sheet

Module 3: Analysing the profit of the organisation - The profit and loss statement 

  • Purpose, content and structure of the statement of profit or loss and other comprehensive income
  • Definition, recognition and classification of income
  • Alternative financial performance measures
  • Statement of changes owners’ in equity
  • The relationship between the balance sheet, statement of profit or loss and other comprehensive income and statement of changes in equity

Module 4: Analysing the cash flows of the organisation - The cash flow statement

  • Purpose of the statement of cash flows
  • Format and classification of cash flows in the statement of cash flows
  • Preparing statement of cash flows using direct method and indirect method
  • Interpreting the statement of cash flows
  • Other components and disclosures made in the published financial statements
  • Reporting by groups of companies
  • Requirements and preparation of consolidated financial statements

Module 5: Analysis Business Financial Perfomances

  • Why users require financial statements to be analysed
  • Comparative analysis
  • Ratio Analysis
  • A typical ratio analysis framework
  • Ratio interrelationships
  • Limitations in using financial statements to assess past or future performance

Module 6: Analysis and interpretation of financial statements - A case study of ratio analysis

  • Profitability analysis
  • Efficiency analysis
  • Liquidity analysis
  • Capital structure analysis
  • Market performance analysis
  • DuPont analysis

Module 7: 

  • Strategic planning and budgeting
  • Influences on the formulation of strategies
  • Determination of corporate strategies
  • The budgeting process
  • Master budget
  • The use of budget in planning and control
  • Behavioural aspects of budgeting
  • Performance measurement

Module 8: Financial investment principles

  • The goal of financial management
  • Corporate financial management decisions
  • The time value of money
  • The aim of financial mathematics
  • General principles of valuation
  • Investors’ attitudes to risk
  • Measuring historical risk and return
  • Estimating future risk and return
  • Volatility and capital market efficiency
  • Causes of share price variation
  • The principle of diversification — Use of portfolios to reduce risk
  • The concept of beta
  • The CAPM — The relationship between risk and rates of return

Module 9: Financing the business — Analysing risks and returns 

  • Financing and the financial system
  • The debt/equity financing pattern
  • Short-term or long-term financing?
  • Management of working capital
  • Sources of finance — Debt, equity and hybrids
  • Methods for raising debt, equity or hybrid finance
  • Mechanisms to expedite financing

Module 10: Assessing capital structures and the cost of finance

  • The capital structure question
  • Factors that determine capital structure in companies
  • Operating (business) risk and financial risk
  • Capital structure theories — How they help
  • Qualitative factors in determining capital structure
  • Determining the cost of capital
  • Application of the WACC

Module 11: Analysing the investment decision (capital budgeting) 

  • Investing and the capital budgeting process
  • Project appraisal techniques

Module 12: Assessing competitive advantage and the investment decision system

  • Investing and strategic planning
  • Competitive advantage and other strategic tools
  • Analysis of projects
  • Common capital budgeting errors
  • Quantitative risk management tools
  • Qualitative risk management tools
  • Evaluating mutually exclusive projects with unequal lives
  • Issues in international capital budgeting

Required texts

Birt J, Chalmers K, Maloney S, Brooks A, Oliver J and Bond D, 2020, Accounting: Business Reporting for Decision Making, 7th ed, John Wiley & Sons Australia Ltd; Accounting Standards.

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