QCF Syllabus. Management of Financial Resources and Performance

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1 QCF Syllabus Management of Financial Resources and Performance Unit Title Management of Financial Resources and Performance Unit Reference Number D/602/5727 Guided Learning Hours 180 Level 7 Number of Credits 25 Unit purpose and aim(s): This unit aims to give learners a sound understanding of: the evaluation of performance using financial statements the use of management accounting information in the planning and control of resources how contemporary management accounting methodology can support the management and control of resources. the management and performance of resources in business strategy and planning alternative financing to achieve organisational objectives the use of financial data in long-term capital decision making the international aspects of financial strategy how organisations manage risk Learning Outcome 1 The learner will: Know how to use financial statements to evaluate performance, and appreciate the limitations of such analysis. 1.1 Identify, calculate and interpret key performance ratios from an organisation s financial statements. 1.2 Discuss the limitations of financial statements and consider the impact of these limitations to the analysis. 1.3 Use financial statements and other published financial data to evaluate comparative performance Calculate and interpret efficiency, liquidity and financing ratios Calculate and interpret investment ratios i.e. dividend and earnings yield, PE, and gearing Analyse and make recommendations for how performance can be improved Understand the different accounting treatments of assets e.g. depreciation, inventory, capitalisation, valuation Consider treatment of intangible assets, e.g. goodwill, patents, brands etc Be familiar with International Accounting Standards and appraise differences in financial reporting Use financial statement and online data to compare performance with competitors and industry averages Use industry comparison information and subscriber intelligence services.

2 Learning Outcome 2 The learner will: Know how to use management accounting information in the planning and control of an organisation s resources and appraise its effectiveness. 2.1 Evaluate the different methodologies and approaches to costing products, services, functions and activities. 2.2 Use marginal cost methodology to support short term decision making. 2.3 Critically analyse the role and limitations of traditional budgets and approaches to driving value through better budgeting Describe and explain the treatment of direct and indirect costs in costing products and services Describe and evaluate different cost treatment of job, process and contracts Understand the features and consequences of absorption costing Describe and evaluate the distinction between fixed and variable cost Undertake cost-volume-profit analysis and short term decision analysis Understand relevant cost and its application to decision-making Define budgeting and conditions where traditional functional budgets can be effective Understand the problems and motivational impact of functional annual budgets Evaluate alternatives to functional budgets activity based, continuous, and the Beyond Budgeting Roundtable. Learning Outcome 3 The learner will: Know how to critically appraise and evaluate contemporary management accounting methodology to support the effective management and control of resources. 3.1 Appraise the role of activity based management, and use activity based costing method to support re-engineering, product costing, budgeting and benchmarking. 3.2 Use cost management methodology to support lean enterprise, business excellence and value chain analysis. 3.3 Prepare and present strategic management accounting information to analyse investment in advanced manufacturing technology and support competitive strategy Consider relevance lost and problems of traditional management accounting and treatment of overhead Appraise activity based costing in providing costs of products, services, customers and in profitability analysis Use activity based management to support re-engineering, product costing, budgeting and benchmarking Appraise the relationships between lean enterprise, business excellence and value chains Evaluate the contribution of financial analysis to areas of world class operating e.g. cost benefit of quality, throughput accounting, analysis of waste, value analysis of the activity chain Undertake a resource audit of the value chain to measure effectiveness of each element, and competitive advantage of each process Identify the place of management accounting in analysing response to competitors, strategic positioning and competitive advantage Appraise investments in advanced technology by incorporating tangible and intangible benefits Use the balanced scorecard to support the achievement on strategy and vision.

3 Learning Outcome 4 The learner will: Know how to identify and critically assess the management and performance of tangible and intangible resources in business strategy and planning. 4.1 Appraise the impact of resource decisions on an organisation s performance and effectiveness. 4.2 Identify and map the processes and activities of an organisation and use these to improve resource allocation. 4.3 Evaluate the use of benchmarking an organisation s products, processes and practices to identify opportunities to deliver value Identify and appraise methods by which resources are allocated to achieve corporate strategy Use appropriate criteria to evaluate the allocation of resources Identify and manage gaps between strategic need and availability Understand the principles of process re-engineering and business re-engineering Apply the principles of process re-engineering and appreciate the impact on management style Appreciate the use of process and activity mapping to reduce activity, delayer and eliminate unnecessary activity Define and assess the value of alternative forms of benchmarking Identify the purpose, dynamics and stages of benchmarking Critically assess inherent problems and virtues of best in class benchmarking. Learning Outcome 5 The learner will: Understand organisational objectives and alternative finance available to fund the achievement of these objectives. 5.1 Debate the tensions between financial and strategic objectives. 5.2 Identify and evaluate alternative sources of finance available to organisations. 5.3 Appraise the role of treasury management in the financing, risk and control of liquidity Distinguish between profit maximisation and shareholder wealth maximisation Debate tensions between, and common interest of, shareholder and stakeholder expectations Debate agency issues and tensions of managers, shareholders, debt providers in determining corporate strategy Explain the features, advantages and disadvantages to the organisation and the investor of the alternative sources of equity and debt Calculate the cost of each source and return to the investor Calculate operating and financial leverage and explain the opportunities and dangers of different levels of gearing Explain the role of the treasury manager in obtaining the appropriate mix of finance Explain the different types of risks for a business and how these may be reduced by treasury management Explain and consider alternative working capital policies and dangers of liquidity issues.

4 Learning Outcome 6 The learner will: Know how to use financial data, techniques and tools to evaluate long term capital decisions. 6.1 Appraise capital investment projects, using alternative methodologies. 6.2 Calculate an organisation s cost of capital and explain the limitations of such calculations. 6.3 Evaluate strategic investment opportunities and financially appraise strategic proposals Understand the distinction between profit and cash and the relevance to long term Calculate the accounting rate of return, payback and net present value of an investment proposal Explain the features and advantages of the alternative investment appraisal techniques Calculate the costs of the constituent elements of capital i.e. equity, preference and debt Calculate the weighted average cost of capital using market and balance sheet values Explain the benefits and limitations of the different approaches to calculating the cost of capital Evaluate the suitability of a strategic investment in terms of strategic fit and exploiting core competences Consider the acceptability and feasibility of a strategic investment against performance criteria, stakeholder expectations and strategic capability Consider quantitative and qualitative issues of strategic proposals and the extent to which market factors and competence enhancement can be evaluated financially. Learning Outcome 7 The learner will: Understand the international aspects of financial strategy. 7.1 Identify the financial risks of operating in an international market. 7.2 Appraise international 7.3 Evaluate financing options for multinationals and overseas subsidiaries Appraise the role and importance of international financial markets Identify financial risk specific to operating in international markets Evaluate approaches to managing economic, translation and transaction risk in international operations Appreciate the risks and complexities of capital budgeting in an international context Calculate forward rates and evaluate an international capital project Appraise indirect and non-quantifiable benefits and costs of international Evaluate the main internal and external sources of finance available to multinationals Explain the Eurocurrency (Eurodollar) market and its role in international finance.

5 Learning Outcome 8 The learner will: Understand the sources and consequences of risk for organisations and know how these risks may be managed. 8.1 Identify types and sources of risk for organisations including those operating internationally. 8.2 Use appropriate techniques for evaluating and managing an organisation s risk. 8.3 Prepare and utilise risk management reports Identify types and sources of risk for organisations, the sensitivity and degree of organisation control Appraise the additional risks associated with international operations Identify methods for dealing with risks specific to overseas operations Prepare and interpret risk maps and surveys Prepare contingency plans for dealing with potential risk Identify and assess techniques to manage risk through avoidance, reduction, transference and retention Debate the need and value of a formal risk management report Identify the emphasis given to risks in the report linked to sensitivity and impact Understand the content of the risk management report and how each risk should be managed. Assessment: Written assignment of 3500 words, plus or minus 10% (unless otherwise stated). All learning outcomes will be assessed. Recommended Reading: Please refer to the Tuition Resources section of the Members Area of the ABE website ( for the recommended reading for this subject.