MN6068 - Financial Decision Making for Managers (2019/20)
|Module specification||Module approved to run in 2019/20|
|Module title||Financial Decision Making for Managers|
|Module level||Honours (06)|
|Credit rating for module||15|
|School||Guildhall School of Business and Law|
|Total study hours||150|
|Running in 2019/20||
Financial decision-making is important for any and every business. This natural mental process needs to be informed to select a course of action from several alternative options. One of the most essential elements that help to facilitate the implementation of the business strategy in an organisation is Finance. The financial manager of an organisation plays a central role in making decisions on optimum utilisation of financial resources and assess the implications for shareholders and other stakeholders, and the need for effective corporate governance. Therefore, managers require critical understanding of key financial management issues, performance indicators and methodologies relating to financial management frameworks. Managers use these tools when they are faced with making financial decisions in the business environment. This module provides students with knowledge about financial decision-making approaches and control systems businesses use to make managerial decisions.
The module also provides the knowledge and skills necessary to evaluate the impact of financial decisions. It enable learners of today, who are managers of tomorrow, to participate in decision making processes concerning the utilisation of finances in investment, financial and risk management, and the delivery of value for money in achieving the objectives of the business. Although managers are not always required to perform detailed financial analysis, they need to have a clear understanding of how the process of financial management and decision-making work to ascertain that decisions are properly made and implemented and that apposite risk management system are in place.
The module focuses on fundamentals of financial management, the need for accounting and finance, financial governance, making capital investment decisions, balancing risk and return, tools of financial analysis, interpretations and planning, reading financial reports, cost challenges in decision making, working capital management, sources of finance, cost-volume-profit analysis and its use in managerial decisions and planning.
Prior learning requirements
BA4006 and BA5002, CA4051, AC4003, AC5003
• Fundamentals of financial decision-making: introduction to the module, financial variables for decision-making, accounting conventions and the need for accounting and finance for managers, roles of financial function, objectives of financial decision-making, planning and control. LO1
• Balancing risk and expected return: identifying and managing financial risk, main forms of financial risk, methods for hedging financial risk, including futures options, forward rate agreements, swaps and money market hedges, confidence on expected return, risk appraisal methods including sensitivity analysis, scenario analysis, expected NPV, event tree diagrams. LO3
• Arithmetic of finance for decision-making: analysing, interpreting and reporting financial results/statements, contribution margin analysis, financial ratio analysis including profitability, efficiency, liquidity, gearing and investment performance. LO3
• Cost-volume-profit: CVP assumptions, the manner in which fixed and variable costs interact, the use of these concepts for FDM, basic operational elements such as sales volume and price, production volume and costs, multiple breakeven points, profitability and breakeven analysis, contribution margin, margin of safety. LO2
• Making capital investment decisions: issues in investment appraisal such as cash flow estimation, relevant costs and benefits, impact of taxation and the problem of inflation. LO2
• Cost of capital and capital structure decision: basic principles of Capital Asset Pricing Model, cost of loan capital, gearing and its effect on risk and returns to shareholders, factors influencing the level of gearing in practice, budgeting.LO3
• Issues in managing working capital and short/long term financing: nature and purpose of working capital, analysis and interpretation of working capital ratio, working capital policies, sources of short and long-term financing, LO2
• Financial governance: corporate governance and the agency problem, the UK Corporate Governance Code. LO1
Balance of independent study and scheduled teaching activity
The module is delivered in a weekly 2 hours Interactive Lecture/Seminar, and 1-hour tutorial/activity session, part of which may encompass the use of computers to analyse financial statements. The lecture session is designed in an interactive manner to effectively help the learning process and engage students through a collaborative two-way-process. The interactive approach stimulates motivation and interest in the subject area.
As the module content focuses on financial decision making, students are given the opportunity, using own cognitive ability, to take part in the decision making process, while learning a broad context of knowledge in the process. This approach is aimed at creating a context in which their aspiration and ability to work most effectively to achieve deep understanding.
In the interactive lecture session, students are given more opportunities to stimulate their motivation and develop the understanding of the weekly topics. In the tutorial/activity session, they are given guidance to think carefully and critically when analysing and expressing their thoughts. Their learning process is monitored continuously using valid assessment schemes. They are provided and are able to access company data such as financial statements and reports so they read, discuss and analyse financial positions, performances and future prospects to recommend possible improvement options from management perspective. This process enhances their critical and analytical thinking ability, which develops their problem-solving skills.
Students receive in-house materials, which includes weekly lecture/seminar notes in the form of PPT presentations, and scenario based activities. They are expected to complete set tasks in seminars (in part), tutorial sessions and some of the tasks may be left for the students to complete them outside the formal contact hours.
The tutorial sessions are blended into the weekly tasks so students are using computer facilities (mainly for Excel package) to analyse financial statements and word processing to write their critical analysis in the form of a report. As this is a practice-oriented module, online and blended learning approaches are sought to facilitate communication, engagement in group work activities, independent learning and discussions.
On successful completion of this module, students will be able to:
LO1: Demonstrate conceptual understanding of the fundamental financial theories relevant to financial decision making and governance,
LO2: Understand, critically analyse and evaluate using various analytical tools to facilitate strategic decision making,
LO3: Evaluate elements of risk, return and value strategic operational financial decisions,
The assessment strategy for this module is implemented through formative and summative approaches. The assessment is developed in line with the module learning outcomes and to provide feedback to students on a regular basis. The students’ performance will also provide valuable feedback to, continuously; improve the content and delivery of the module.
This assessment strategy takes place during the interactive lecture, seminar and tutorial/activity sessions. It is implemented in the form of activities on preliminary financial analysis, evaluating company performance and identify problems, in-class discussions, weekly questions, short reflective writings and Q&A sessions. The outcome of the formative assessment provides immediate feedback to improve teaching and learning simultaneously. This approach also greatly help leaners to self-assess their own learning progress and knowledge retention. As part of the formative assessment, students are asked to utilise financial evaluation criteria to appraise their own or a pear’s work through writing or group discussion.
As this is a standardised formal assessment, it is developed with the goals to meet the module learning objectives. This assessment strategy is organised in a progressive manner. Students are undertaking a form of secondary research on a selected company/business.
The assessment is conducted through in-class test (case study based, CSB), and individually-completed project of 3000 words:
• In-class CSB test (1.5 hour) 20% weighting
• Individual coursework (project) 80% weighting
The in-class CSB test assesses the students’ progress after the first seven weeks of learning. It provides valuable feedback and feedforward to allow both staff and students to identify learning gaps along the way, monitor teaching and learning progress and assess improvement options (if necessary) and find ways to close the gaps. The individual piece of coursework requires the application of financial analysis tools to evaluate company/business financial position and suggest possible improvement options in the form of a project task.
Essential (Core) textbooks:
Atrill, P. (2017). Financial Management for Decision Makers (8th ed). Pearson Education. ISBN-13: 978-1292134338.
Seal, W. (2011). Management Accounting for Business Decisions (1st ed.). London: McGraw Hill. ISBN-13: 978-0077126728.
Recommended (Other) textbooks:
ICSA (2016). Financial Decision Making (2nd ed.). ICSA publishing Ltd. ISBN-13: 978-1860726811
Foerster, S. (2014). Financial Management: Concepts and Applications, Global Edition. Pearson. ISBN-13: 978-1292077833
Chadwick, L. (2002). Essential Finance & Accounting for Managers (1st ed.). Financial Times/ Prentice Hall.. ISBN-13: 978-0273646488
Drury, C. (2016). Management Accounting for Business, (5th ed.). London. Cengage Learning. ISBN-13: 978-1408093818.
Director, S. (2012). Financial Analysis for HR Managers: Tools for Linking HR Strategy to Business Strategy (1st ed.). Pearson FT Press. ISBN-13: 978-0133925425.
Journals: for the latest journal articles, please visit the library catalogue
• Materials will be available on module Weblearn: https://bblearn.londonmet.ac.uk
• LMU library catalogue for Journal articles – through popular e-resources: http://catalogue.londonmet.ac.uk/
• Use MetCat to search inside e-resource collections for ebooks and ejournals
• FAME UK companies – access through library catalogue popular e-resources, with your login details: https://fame4.bvdinfo.com/version-201861/fame/1/Companies
• Current business and financial reports and latest business news:
o MiNTEL Academic (though library catalogue with your login details,
o Financial Times: https://www.ft.com/?edition=uk
• FAME UK companies (as above)
• Office for National Statistics (ONS): https://www.ons.gov.uk/
• Bank of England SI Database: www.bankofengland.co.uk
• European Banking Federation (for facts and figures): https://www.ebf.eu
Harvard referencing style guide (London Metropolitan University): http://student.londonmet.ac.uk/library/subject-guides-and-research-support/referencing-and-copyright/referencing/