module specification

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, aviation performance indicators and methodologies relating to financial management frameworks. Managers use these tools when they are faced with making financial decisions in the aviation business environment. This module provides students with knowledge about financial decision-making approaches and control systems aviation businesses use to make managerial decisions.

The module also provides the knowledge and skills necessary to evaluate the impact of financial decisions. It enables 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 systems are in place.

The module focuses on fundamentals of aviation 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- passenger volume-profit analysis and its use in managerial decisions and planning.

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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 fuel and currency hedging of 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, IRR, ROCE and 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 passenger/cargo sales volume and associated prices, cost of production, 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. Sources of aviation finance - 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

The module is delivered in a weekly 3 hours Workshop, part of which may encompass the use of computers to analyse financial statements. The workshop 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 workshop 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 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 well-spaced two assessments focus on,

A1: Seen In class test. This case study based in- class test requires students to read financial reports and statements of a company or business.

A2: This individual piece of work (individual project of 1500 words) requires students to analyse and evaluate a selected business.

Textbooks:

Core Texts:

Vasigh, B.(2010). Foundations of Airline Finance. Ashgate.
Atrill, P. (2017). Financial Management for Decision Makers (8th ed). Pearson Education.

Other Texts:

Bamber, M and Parry, S Accounting & Finance for Managers, 2nd Edition Kogan Page.

ICSA (2016). Financial Decision Making (2nd ed.). ICSA publishing Ltd.

Forester, S. (2014). Financial Management: Concepts and Applications, Global Edition. Pearson.

Chadwick, L. (2002). Essential Finance & Accounting for Managers (1st ed.). Financial Times/ Prentice Hall.

Drury, C. (2016). Management Accounting for Business, (5th ed.). London. Cengage Learning.

Director, S. (2012). Financial Analysis for HR Managers: Tools for Linking HR Strategy to Business Strategy (1st ed.). Pearson FT Press.

Seal, W. (2011). Management Accounting for Business Decisions (1st ed.). London: McGraw Hill.

Journals:

For the latest journal articles, please visit the library catalogue

http://catalogue.londonmet.ac.uk/

Websites:

• 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

Electronic Databases:

• 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/