OTHM Level 6 Diploma in Business Management

Unit 04: Financial Decision Making

Ref. No. - T/616/2737

Aim: The aim of this unit is to demonstrate the links between business decision making, risk assessment and financial information. Learners will understand how businesses are financed through their fixed and working capital requirements and how the financial management of each organisation is influenced by its governance and ownership structure.

Learning Outcome 1: Understand the role of financial information and financial analysis in business risk assessment and decision- making.
1.1 Analyse the factors that guide and drive decision making in business.
1.2 Assess the significance of financial factors in business decision making.
1.3 Evaluate the characteristics of business risk that impact on financial and business decisions.

Learning Outcome 2: Understand how financial statements and their structure aid business decision making.
2.1 Compare the accrual and cash flow approaches to accounting and financial reporting and the implications of each for business decision making.
2.2 Evaluate the structure and content of final accounts and their uses for business decision making.
2.3 Interpret financial information in balance sheets, income statements as well as sources and applications of funds statements.
2.4 Differentiate between financial decisions relating to capital expenditure and those relating to revenue expenditure.

Learning Outcome 3: Be able to perform effective capital expenditure appraisal using range of techniques.
3.1 Appraise various sources of short-term and long- term financing for businesses.
3.2 Critically examine key factors affecting the choice of source of financing.
3.3 Evaluate various techniques used for appraising and making decisions regarding capital expenditure.
3.4 Explain the possible benefits and drawbacks of off-balance sheet financing.

Learning Outcome 4: Be able to evaluate how different ownership structures impact on financial performance.

4.1 Critically analyse the corporate governance, legal and regulatory environments of different business ownership structures.
4.2 Compare and contrast stakeholder interests of owners and managers in decision making.
4.3 Evaluate the significance of Return on capital Employed (ROCE), Earnings Per Share (EPS) and other overall performance measures for the long-term sustainability of businesses.
4.4 Differentiate between business ethics, governance and accounting ethics as controls on business accountability.