Financial Management & Control

ACCA Paper 2.4 Lecture 1 - 14th September, 2004 Introductions

Lecture 1 : Agenda
Introductions Our Environment Reading College Course Outline Course Subject Matter Introduction to Financial Management & Control

ACCA FM&C 1

Introductions

Jim Green BSc(Econ) ACMA is a highly experienced finance professional who has had considerable experience in senior financial and general management positions in the UK and internationally. He has worked in the Fast Moving Consumer Goods (FMCG), Packaging, Fashion Retailing and Food sectors. He is now retired early from business life and works part time at Reading College, teaching Finance, mostly at the postgraduate level. E-mail greenjm@reading-college.ac.uk

ACCA FM&C 1

Reading College
Student Handbook The Campus
Dining Toilet Facilities Health & Safety Smoking Policy Learning Resource Centre Faculty Office
Contact Maria Tsang ( Telephone E-mail tsangm@reading-college.ac.uk

Welfare

ACCA FM&C 1

Course Outline
Financial Management & Control
Its FINANCE not Bookkeeping or Accounting Its mostly about the Financial Rationale for business decisions

Its also about economic performance measurement

Planning & Control

Its a mixture of Accounting and Economics The emphasis is Cash Course Textbook
ACCA Official Guide Paper 2.4 Financial Management & Control STUDY TEXT Dec 2004 / June 2005 - FTC Foulkes Lynch www.financial-training.com 23.00
ACCA FM&C 1

Course Outline
Like all ACCA subjects its assessed by examination Typically the examination consists of:
One Compulsory scenario based question 50 Marks A choice of 2 from 4 questions 25 marks each

Examination Time 3 Hours Examination Technique

ACCA FM&C 1

Course Subject Matter

Financial Management Objectives
Scope of Financial Management Financial Management v Financial or Management Accounting Financial Objectives & Organisation Strategy Owners v Agents (Managers) Objectives in Not-for-profit organisations

ACCA FM&C 1

Course Subject Matter

The Financial Management Environment
Financial Intermediation & Credit Money & Capital Markets Market Efficiency Hypothesis Interest Rates & Yields Fiscal & Monetary Policy Regulation of Business

ACCA FM&C 1

Course Subject Matter

Management of Working Capital
Funding requirements Requirements in different business Working Capital & Solvency Management of the elements of working capital Working Capital Management techniques

ACCA FM&C 1

Course Subject Matter

Sources of Finance
External Funds Internal Funds What type of external funds Capital Markets Capital Structure
Debt v. Equity Costs of Finance
Dividends / Interest

Financial gearing

ACCA FM&C 1

Course Subject Matter

Capital Investment Appraisal
Discounted Cash Flow Techniques
Simple & Compound Interest Net Present Value / Internal Rate of Return Annuities, Perpetuities

Uses of DCF Techniques

Risk v return ROCE Capital Rationing Lease v. Buy Capital replacement decisions

ACCA FM&C 1

Course Subject Matter

Costing Systems & Techniques
Purposes Differing approaches Information requirements Impact of differing systems on:
Managerial behaviour Profit Reporting Product Pricing Internal Pricing

ACCA FM&C 1

Course Subject Matter

Standard Costing & Variance Analysis
Determination of standards Calculation of sales & cost variances Operating Statements Relevance & Interpretation of Variances Behavioural Implications

ACCA FM&C 1

Course Subject Matter

Budgeting and Budgetary Control
Objectives & Behavioural Implications Different types of budgetary systems
Fixed, Flexible, zero-based, incremental, periodic, continuous, activity based

The Budgeting process Variance Calculation & performance control Quantitative aids to budgeting

ACCA FM&C 1

Course Subject Matter

Performance Measurement
Productivity, activity, profitability & quality Monetary & non-monetary measures Indexation to allow comparison over time Evaluation against planned performance Responsibility Reporting
Cost centres, Profit centres, Investment centres

Benchmarking

ACCA FM&C 1

Specific Exclusions
Calculations to Derive the Cost of Capital
Capital Asset Pricing Model (CapM) ? Weighted Average Cost of Capital
Candidates will be supplied with an appropriate disount rate

Calculations relating to Modigliani & Miller propositions

ACCA FM&C 1

Teaching Methodology
Handouts Class worked examples Homework Pre-Lecture Reading Website

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Todays Summary
Examinations Course subject matter
Financial Management Objectives The Financial Management Environment Management of Working Capital Sources of Finance Capital Investment Appraisal Costing Systems & Techniques Standard Costing & Variance Analysis Budgeting and Budgetary Control Performance Measurement

ACCA FM&C 1

For Next Week

Homework
Read the syllabus Get the Textbook

Pre-lecture Reading
Study Text Chapters 1 & 2 (pages 1 15)

Next Weeks Lecture

Public Finance, Economics & Politics 101

ACCA FM&C 1