Accounting for Non-Accountants

Objectives:

• Explain the nature and role of financial statements and their interpretation
• Use the language of accounting and finance to communicate effectively with financial professionals
• Review the financial performance and financial position of an organisation using the appropriate financial ratio and break-even analysis techniques
• Use budgetary control to compare actual against planned performance and to identify corrective actions
• Evaluate investment projects using DCF and other appraisal methods
• Appreciate the important role of strategic accounting in business performance improvement 

Outlines:

 A Strategic View of the Business Environment

• The business environment
• The uses and purpose of accounting
• Users of accounting and financial information
• Accounting terminology
• Cash versus profit
• Profit and profitability
• The structure of the balance sheet
• The income statement – financial performance
• What is profit?
• The structure of the income statement
• The links between the income statement and the balance sheet
• Accounting conventions
• The published annual report

 The Financial Statements and Financial Analysis

• The cash flow statement
• What is included in the cash flow statement?
• Why is cash flow so important?
• The structure of the cash flow statement
• The links between the cash flow statement, profit and loss account and balance sheet
• Interpreting the annual report
• The key elements of published reports and accounts
• Ratio analysis: profitability; efficiency; liquidity; investment; cash flow; the Dupont system
• Cash versus profit as a measure of performance, EBITDA and
• Predicting business failure – the Altman Z-score
• Sources of financial information

 Budgeting and Break-even Analysis

• Management accounting
• Cost behaviour
• The overhead problem, traditional versus activity-based absorption
• Cost/volume/profit (CVP)analysis
• Break-even analysis
• The impact of cost structure changes
• Limitations of CVP analysis
• Purposes of budgeting
• The budget process, including activity based budgeting
• Uncertainty and risk – worst and best outcomes
• Motivation and the behavioural aspects of budgeting
• Problems in budgeting

 Budgetary Control, DCF and Capital Investment Appraisal

• Budgetary control
• Standard costing
• Flexed budgets and variance analysis
• Types of variances and the reasons they occur
• Planning and operational variances
• Investment decisions
• Time value of money
• Appraisal techniques
• The effect of inflation
• Free cash flows
• Capital rationing and control of capital investment projects
• Risk and uncertainty and decision-making – sensitivity analysis

Financing the Business and Strategic Accounting

• Financing the business
• Financing principles, including short-term versus long-term, and debt versus equity (gearing)
• Sources and types of finance
• The cost of capital, cost of equity (Ke), and cost of debt (Kd)
• Weighted average cost of capital (WACC)
• Capital Asset Pricing Model (CAPM)
• Strategic management accounting
• The effect of competitive strategy, and how to gain competitive advantage
• Competitor information and strategic positioning
• Cost of debt and equity capital
• The disadvantages of traditional cost analysis
• The balanced scorecard and critical success factors
• Economic value added
• Benchmarking