Accounting & Control - EMBA Programme
Financial Accounting (Core)
A set of annual report and accounts is the window through which skilled analysts gain an insight into a company’s operational and managerial strengths and weaknesses. A manager involved with companies or other organisations should possess some of the same skills; in addition, he/she should understand the concepts and language of financial statements. Without these analytical skills a manager has no way of answering some fundamental questions: Will my customer be around next year? How financially secure are our suppliers? How burdensome will the debt on today’s balance sheet prove to be going forward? To what extent have one-off charges/credits distorted a company’s bottom line profits? What’s the difference between “above the line” and “below the line”? How can a company go out of business while reporting a profit?
This module is designed to give participants sufficient knowledge and confidence to use accounting information more effectively as a tool in assessing competitive advantage and financial performance. It is not designed to turn them into accountants! Participants will be able to put what they learn to use immediately in assessing, monitoring, and articulating the strengths and weaknesses of companies in which they are involved. The material is intensely practical in nature and ample opportunity is given to participants to work through cases at each stage. The jargon of the subject will be explained in simple everyday terms. Topics to be covered
- An introduction to financial accounting;
- An explanation of the differences between, and respective importance of, the profit and loss account, the balance sheet and cash flow statement;
- Understanding why companies are under pressure to report increasing earnings per share and the massaging tricks managers and accountants use to achieve this;
- Using ratios to make a forensic analysis of the last fifteen years' accounts of three global technology companies (participants break into groups to make a strategic analysis of one of these companies and present their findings to the class);
- Becoming familiar with the crucial distinction between profit and cash and how to convert one into the other;
- An introduction to the role of the International Accounting Standards Board and a brief look at specific standards
Managerial Accounting (Core)
This course explores the use of accounting information for internal planning, decision-making, and performance evaluation. The main objective of the course is to equip you with the knowledge to understand, evaluate, and act upon the many financial and non-financial reports used in managing modern firms.
A firm’s managerial-accounting system serves two fundamental purposes.
First, managing the modern firm requires financial and non-financial information about the firm’s products, processes, assets, and customers. This information is a key input into a wide range of analytical tools to support decisions: analyzing profitability of various products, managing product-line portfolios, setting prices, measuring and managing profitability of customers, making operational and strategic decisions, evaluating investments, investigating efficiency, and so on.
Second, modern economic complexity requires that owners or top managers of a firm delegate the rights to make critical business decisions to managers at all levels of the firm. The firm’s information system plays a key role in providing incentives to these managers and evaluating their performance. The focus of this course is on these two central objectives of internal accounting systems. Along the way, we will discover that many companies have not provided their managers with useful information. These managers have to rely on information systems designed years ago for very different business processes and with very different technologies. We will take a look at a number of pitfalls that these systems can induce and the dangers in using them to make business decisions. We will also investigate some modern ideas in how an organization’s information system should be designed. To attain the right level of understanding, you will need to be familiar with the mechanics of the many techniques used to prepare management reports. But the emphasis in this course is very much on interpretation, evaluation, and decision making.
Financial Statement Analysis (Elective)
The objective of the course is to provide students with hands-on experience in financial statement analysis. Students will be exposed to general tools of financial analysis, theoretical concepts, and practical valuation issues. By the end of the course, students should be comfortable with using firms' financial statements to develop an understanding of their performance and to establish a basis for making reasonable valuation estimates.
This course is aimed at all students who expect at some point in their careers to use financial statements to evaluate the performance, prospects, and value of a business. The primary emphasis will be on the analysis of public companies, but many tools and techniques utilized are relevant to private enterprise financial analysis as well.
Please note that this is not a course on “forensic accounting.” We will focus on accounting issues so that we can “cleanse” the financial statements before we carry out any analysis. We will use the case method almost exclusively in this course.
In this course students will be exposed to a comprehensive financial statement analysis and valuation framework that integrates strategy, financial reporting, financial analysis and valuation, and the application of this framework to fundamental analysis.
The course develops an accounting-based valuation framework that integrates a firm's strategy, its financial performance, and its accounting credibility. Two main topics will be covered:
- Reporting strategy analysis: assessing a firm's value proposition and identifying key value drivers and risks; evaluating the degree to which a firm's accounting policies capture the underlying business reality; assessing a firm's earnings quality; making accounting adjustments to eliminate management biases.
- Performance analysis and valuation: evaluating current performance and its future sustainability, making forecasts of future profitability and risk, and valuing businesses using earnings and book value data.
- Next, the course applies the above framework to a variety of business valuation contexts.
After finishing the course, you will understand:
- Value—i.e., what it is and why it’s important.
- How to effectively communicate your ideas and their impact on value to your internal colleagues, external clients, etc.
Measuring the Impact of Strategic Decisions (Elective)
Corporate executives need to understand how their strategic decisions relate to and affect the financials of the firm. Not only do they need to gauge the financial impact of their decisions, these executives also need to communicate about this impact with the firm’s stakeholders.
In this context, this course zooms in on a number of important corporate strategic decisions, identifies their financial consequences and maps these consequences into the firm’s KPIs and its valuation.
Examples of strategic decisions the course will focus on are, among others:
- M&A activity,
- Corporate Tax Policy,
- Executive Compensation Policy,
- Strategic Alliance Policy.
The course considers both US GAAP and IFRS rules to discuss the rigor and flexibility provided by these accounting standards in showing the impact of the decisions. To help the interpretation of the impact of these strategic decisions the course discusses their financial reporting consequences within a valuation framework that centers on the measurement of the ‘Return on Invested Capital’ or ROIC for the firm.
In discussing the impact of strategic decisions on ROIC, the course will consider both contemporaneous and future measurement of firm performance, thus introducing the notions of earnings quality and sustainable profitability that are central to firm valuation.
While designed with a course participant/decision maker in mind who is not an accounting practitioner or specialist, the discussions in the course will at times be technical and precise, building on previous accounting knowledge of participants (see below: Course pre-requisite).
After concluding the course, participants will have deepened their knowledge of the relevant aspects of the accounting language needed to understand how important strategic decisions map into the firm’s financials. Importantly, this enhanced understanding will sharpen their skills to communicate with the firm’s stakeholders on these decisions.
