Financial Analysis and Managerial Accounting

Before attending classes in this course students should attend classes in the following courses: Accounting, Corporate Finance

Contact hours with teacher:

- participation in lectures - 30 hrs

- participation in exercises - 30 hrs

- consultations - 15 hrs

Self-study hours:

- preparation for exercises – 30 hrs

- preparation for examination - 45 hrs

Altogether: 150 hrs ( 6 ECTS)

W1. The graduate knows and understands advanced tools and methods of financial analysis and managerial accounting necessary to understand the processes occurring in the enterprise, to manage them effectively. (K_W06)

U1. The graduate is capable of applying practical and innovative tools and techniques in the decision-making processes. (K_U02)

U2. The graduate is capable of processing and interpreting data in financial statements. (K_U08)

K1. The graduate is willing to carefully assessing his knowledge and, if necessary, being ready to collaborate with others to effectively use tools in the

decision-making processes. (K_K01)

Expository teaching methods:

- informative lecture, description – Power Point presentation of theoretical issues and practical examples.

Exploratory teaching methods:

- practical – solving of practical cases, project, discussion, group work.

This course shows the fundamental concepts of financial analysis and managerial accounting. Generally, financial analysis consists of two methods. The first one is connected with the use of horizontal and vertical analysis. The second method of financial analysis is based on many kinds of ratios, which allow us to assess the profitability, solvency, liquidity, and stability of a company.

In relation to Managerial Accounting, this course shows the fundamental concepts of managerial accounting and it contains e.g.: the scope of management accounting, cost and revenue classification, cost-Volume-Profit Analysis, profit sensitivity analysis, pricing decisions, cost estimation.

This course shows the fundamental concepts of financial analysis and managerial accounting.

After the course student knows, understands and considers – from the perspective of management theory – the principles and methods of rationalising decision making, regarding strategic decisions in particular, sources of costs, revenues and profit and factors influencing value of profit.

Student can also forecast, identify and analyse problems related to the operations of an organisation, making use of theoretical knowledge and formulating own opinions describes chosen problem, uses proper methods to find solution, formulates decision-making problems.

Financial analysis and managerial accounting is one of practical subjects presented during the Economics course. Taking it into consideration, topics presented in lectures should be analysed in practice during exercises.

This course shows the fundamental concepts of financial analysis and managerial accounting.

Topics covered:

1. General information on financial analysis W1

- Definition and concept of financial analysis

- Objectives and the scope of economic and financial analysis

2. Financial statements as a source of information used in the process of financial analysis W1, U2, K1

3. Horizontal and vertical analysis of financial statements W1, U2, K1

- Horizontal and vertical analysis of balance sheet

- Horizontal and vertical analysis of income statement

4. Financial ratios analysis: balance sheet/income statement ratios W1, U2, K1

- Profitability analysis

- Operational analysis

- Liquidity ratios

- Financial leverage and debt service ratios

- Investment ratios

- The limitations of financial analysis

5. Du Pont Model W1, U2, K1

6. The scope of management accounting W1

- The users of accounting information

- The decision-making process

- The role of the management accountant in the management process

- Cost accounting and management accounting

- Sources of costs, revenues and profit

7. Cost and revenue classification W1, U1, K1

- Classification of costs for stock valuation and profit measurement

- Classification for decision-making and planning

- Classification for control.

8. Cost-Volume-Profit Analysis W1, U1, K1

- Cost-Volume-Profit relationships

- The break-even chart

- The break-even analysis and the contribution margin

9. Profit sensitivity analysis W1, U1, K1

- Using Cost-Volume-Profit Analysis

- Margin of safety

- Operating leverage

- Financial leverage

10. Pricing decisions W1, U1, K1

- Cost-based pricing formulae

- Limitations of cost-plus pricing

- Reasons for using cost-based pricing formulae

- Decision-relevant costs for pricing decisions

11. Cost estimation W1, U1, K1

- The visual inspection method

- The High-low method

- Linear regression analysis - The least-squares method

- The coefficient of determination

1. S.H. Penman, Financial statement analysis and security valuation, McGraw-Hill/Irwin, 2010.

2. C. Drury, Management and cost accounting, Cengage Learning, 7 edition, London 2008.

3. A. Bhimani, Ch.T. Horngren S.M. Datar, G. Foster, Management and cost accounting, Financial Times/ Prentice Hall, 4 edition, 2008.

4. P. Atrill, E. Mclaney, Management Accounting for Decision Makers, Financial Times/ Prentice Hall, 5 edition, 2009.

5. F. Lessambo, Financial Statements: Analysis and Reporting, Cham: Springer International Publishing 2018, ISBN: 9783319999838.

6. P. Atrill, Accounting and Finance for Non-Specialists, 10/E, University of Plymouth Business School, Eddie McLaney, ISBN-10: 1292135603, ISBN-13: 9781292135601, ©2017, Pearson.

7. J.R. Dyson, E. Franklin, Accounting for Non-accounting Students, 2020 FT Prentice Hall, ISBN: 9781292286938.

There is a separate assessment for lectures and for exercises.

Lectures:

W1: written exam - multiple choice test of 20 questions +++

fail- (2) less than 12 points

satisfactory- (3) 12 points

satisfactory plus- (3+) 13-14 points

good – (4) 15-16 points

good plus- (4+) 17-18 points

very good- (5) 19-20 points

Exercises:

There are two separate written tasks to solve, the first one concerning financial analysis (U2), the second one concerning managerial accounting (U1). In order to obtain a positive grade from the exercises the student has to pass both examinations at least at a satisfactory level (which means obtaining at least 60% of total scoring during each written task to be solved).

U1: written tasks to solve +++

U2: written tasks to solve +++

K1: continuous evaluation +++

- activity – K1

- attendance – K1

K1 – Attendance and activity during exercises. In case of not sufficient attendance (less than 60% of all exercise hours) and activities, students will have to prepare a paper on a given subject.