module specification

This module is concerned with the strategic, long-run decisions facing the firm.  Specifically it deals with the Income Statement, in terms of revenue earning and cost reducing, and the Position Statement, in terms of raising finance and capital investment. 

It therefore focuses on the strategic aspects of management accounting and will explore and critically
evaluate management accounting techniques encountered in previous management accounting modules as well as developing students’ knowledge and critical understanding of the theoretical models, analytical methods and practical aspects of corporate financial decision making in a competitive business environment and a dynamic capital market.

It is concerned with areas traditionally seen as concerned with financing and investment: capital structure and dividend policy, investment appraisal, working capital management, the acquisition and restructuring decisions of companies as well as those focusing on cost and revenue such as pricing, and more advanced costing techniques.

The context of the module is that of strategic vision so it incorporates those techniques seen as the province of modern manufacturing including TQM.

Management Accounting and Principles of Finance

The principal aims of this module are:

1. To apply knowledge, understanding and skills learnt at Certificate and Intermediate levels to give an appreciation of the wider picture - essentially taking a strategic standpoint and thereby providing an appropriate foundation for higher studies.
2. To evaluate financial and non-financial evidence including arguments and assumptions in order to reach objective conclusions.
3. To develop students’ knowledge and critical understanding of the theoretical models, analytical methods and practical aspects of financial decision making and management accounting in competitive business environments and dynamic capital markets.
4. To display the accountant’s need to remain innovative and play a pivotal part in the management of change in organisations, which is increasingly becoming a corporate requirement. It also encourages accountants to remind themselves of their ethical and social responsibilities; this is apposite in the light of the continuing series of corporate scandals that has often implicated accountants.

It also aims to develop students’ skills, in particular those relating to:

• analysis and presentation of data;
• critical thinking, writing, and problem solving;
• study skills such as critical reflection, time management, and self-awareness.

This syllabus deals with leading edge issues and may be modified as new issues emerge.

• The role of the management accountant and the relevance of management accounting information.
• How strategic management accounting fits into an organisations strategic framework.
• External strategic management accounting information.
• Internal strategic management accounting information.
• Selecting product pricing strategies, value analysis of product attributes, determination of product costs, life cycle costing and experience curves.
• Techniques to manage risk and uncertainty.
• Quality and throughput issues in cost management.
• Time and strategy issues in cost management.
• A critical review of financial and non-financial performance measures including the balanced scorecard, results and determinants framework, etc.
• Decision making techniques within a strategic remit including project abandonment, post completion audit, etc.
• Ethical considerations.
• Corporate Objectives: corporate strategy and shareholder wealth maximisation; agency costs, stakeholders and corporate governance.
• Corporate Valuation: alternative models; valuing equity as an option, Value Based Management.
• Sources and cost of funds from banks and the capital market.
• Capital structure theory and policy in the light of Modigliani-Miller propositions, agency cost and signalling.
• Venture capital and other sources of finance for entrepreneurial firms.
• Dividend and distribution decisions in the light of Modigliani-Miller propositions, agency cost, signalling and corporate life-cycle.
• Capital investment decisions: corporate strategy and investment decisions; capital rationing and asset replacements; the treatment of risk and uncertainty as well as taxation and inflation in investment appraisal.

• Mergers, acquisitions and corporate restructuring.
• Leasing and hire purchase.
• Money Markets and Working Capital Management.

Teaching will be based on a three-hour combination of lecture, seminar, and workshop per week. The lectures – normally of 1.5 hour duration per week - will be used mainly to explain the key issues of each topic and set the parameters for student research and preparation for small group work. Depending on the lecture topic, classes may involve seminars or workshops in which students will answer questions and solve problems, analyse cases and sometimes present the results of research to their peers. Students are normally required to prepare their solutions to questions, and analysis of cases before the seminars and workshops.

On successful completion of this module students should be able to:

1. by analysing and critically evaluating relevant literature that provides the conceptual underpinnings of corporate financial decision making demonstrate a critical awareness of how corporate strategies provide the basis for determining appropriate financial strategies and policies for a company;
2. use quantitative models and independent judgement to analyse financial decisions and recommend feasible options that managers can implement, thereby appreciating the role of the accountant in the strategic planning process;
3. apply theoretical concepts and relevant empirical evidence to justify, recommend and defend appropriate capital investment, financing, dividend policies, costing, pricing and other management accounting solutions for firms in different industries, types of organisational situations and problems, and at different stages of their life cycle;
4. understand and appreciate the differences between UK management accounting and finance systems and methods and those used internationally;
5. appreciate the ethical issues and problems involved in being a financial manager.

Assessments for this module will take three forms:

(i) a) a coursework which will require either a report, an essay or a case study (15%);
(i) b) a series of tests (15%);
(ii) a three-hour unseen end of course examination (70%).

The first coursework will test the ability to: research and write persuasively about a topic; search for and use data from a variety sources to analyse a corporate finance problem; apply theories and empirical evidence to the analysis of a decision and demonstrate evidence of independent thinking and judgement.
(Potentially, all Learning Outcomes)

The series of tests will examine students’ continuing engagement with the course material.  As such they will provide both formative and summative assessment;
(Learning Outcomes 3, 6, 7 and 8)

The final unseen examination will be designed to test the student’s knowledge and understanding of the subject matter as well as the cognitive skills of analysis, synthesis and evaluation. Some of the questions will require numerical calculations and the others will be essays or reports.
(All Learning Outcomes except 2)

Both elements i) and ii) will have a minimum mark of 35%, i.e.

Current editions of the following books:

Core Reading

Drury C Management & Cost Accounting Thomson Learning,
Arnold Glen, Corporate Financial Management, Financial Times Management.

Additional Reading

Brealey, R.A. and S. C. Myers, Principles of Corporate Finance, McGraw Hill.
Bromwich,M and Bhimani,A Management Accounting, Evolution not Revolution, CIMA,
Bromwich,M and Bhimani,A Management Accounting: Pathways to Progress. CIMA
Chew, Donald G, The New Corporate Finance: where theory meets practice, McGraw Hill,
Copeland T. E., J Fred Weston and K Shastri, Financial Theory and Corporate Policy, Addison Wesley.
Johnson G and Scholes K Exploring Corporate Strategies ST Prentice Hall.
Johnson, H Thomas. Relevance regained – from top down to bottom up empowerment, Free Press.
Kaplan and Norton Strategy Focused Organisations Harvard Business School Press.
Kaplan,R and Johnson,H Thomas. Relevance Lost – the Rise and Fall of Management Accounting, Harvard Business School Press.
Lynch R, Corporate Strategy, Pitman.,
Monden Y and Sakurai, M, Japanese Management Accounting – a world class approach to profit management, Productivity Press.
Pike, R. & B. Neale, Corporate Finance and Investment Decisions, Prentice Hall.
Ross S. A,, R. Westerfield & J. Jaffe, Corporate Finance, Irwin Inc.
Samuels J, Wilkes, F & Brayshaw, R, Management of Company Finance International Thompson Press.
Scapens, R W. Management Accounting – a review of recent developments, Macmillan
Smith, Malcolm Strategic Management Accounting, Butterworth and Heinemann.
Ward, K. Strategic Management Accounting, Butterworth and Heineman,
Warner, A. Beyond the Bottom Line, Gower.
Yoshikawa, T et al, Contemporary Cost Management, Chapman Hall

Journals

Journal of Applied Corporate Finance
Financial Management Journal
Management Accounting
Management Accounting Research
Journal of Business Finance and Accounting
Quality Newspapers.

Databases

Bankscope
Datastream
Financial Analysis Made Easy (FAME)