A/615/2677 Finance for Strategic Managers - ATHE Level 7 Diploma in Strategic Management

Aim: The learners will develop knowledge, understanding and skills that will enable them to analyse internal and publicly available financial information. This will help to inform strategic decision making.

Learning outcome 1: Understand the importance of financial data in formulating and delivering business strategy
Learning outcome 2: Be able to analyse financial data for an organisation in order to inform strategic decision making purposes
Learning outcome 3: Be able to evaluate proposals for strategic decisions on capital expenditure in an organisation

Indicative Content

1. Understand the importance of financial data in formulating and delivering business strategy

• Sources of financial information: Internal (internal accounting systems, payroll etc.), External (suppliers, Companies House, the Budget etc.)

• Financial information: Profitability, Cash flow, Business value, Financial stability, Cost projections.

• Need for financial information: Assessing finance requirements, obtaining finance, reporting to owners, shareholders and stakeholders, Setting and meeting targets, appraising new projects, Managing risk, Internal needs v External needs.

• Business risks: Strategic, Market, Compliance, Operational, Risk modelling.

2. Be able to analyse financial data for an organisation in order to inform strategic decision making purposes

• Published accounts: Purpose, Provide information to shareholders/stakeholders, Users - for example, shareholders, potential shareholders, managers, employees, lenders, creditors, suppliers, customers, community, competitors, Annual reports, including main financial statements (statements of financial position, income statements, sources and statements of cash flows), director's report, audit report, notes to accounts etc., Internal management accounts versus published financial accounts, Structure of financial statements - content and requirements, Limitations of published accounts.

• Comparative analysis: Comparison between years, Comparison between businesses, Industry comparisons, Benchmarking.

• Ratio analysis: Reasons for using ratios, advantages and limitations, Ratio categories, including profitability, liquidity, efficiency, capital and investor.

3. Be able to evaluate proposals for strategic decisions on capital expenditure in an organisation

• Types of expenditure, difference between capital and revenue expenditure (definitions, decision making, treatment in financial statements)

• Investment appraisal techniques: Payback, Accounting rate of return, Net present value, Internal rate of return, Discounted cash flow, Cost benefit analysis, Value for money.

• Long term and short-term finance: Definitions of long term and short term, Importance of matching finance to project.

• Sources of finance: Range of sources, External and internal sources, Role of markets, Role of government, Long term and short term, Advantages and disadvantages of each source, Implications of each source, for example gearing.

• Cash flow management: Cash flow forecasts v Cash flow statements, Managing inventory, trade payables, trade receivables, etc., Budgetary control processes - budgets and variances.