The module aims to provide a foundation knowledge and understanding of the principles of accounting and corporate finance. The accounting section will examine published accounting information from a user’s perspective. The corporate finance section will provide an introduction to some of the major issues involved in making corporate investment and financing decisions.
By the end of the module students will be able to:
- explain the nature and roles of accounting and finance.
- identify and explain the nature of financial statements included in company annual reports.
- explain and apply basic accounting principles and conventions.
- identify and evaluate the accounting issues that are currently controversial in accounting practice.
- calculate accounting ratios and select and apply those that are appropriate in the analysis of company financial statements.
- apply discounting and compounding techniques to various cash flow patterns and be proficient in the use of financial tables.
- explain the relative merits of the basic capital budgeting decision tools: NPV, IRR, AAR, payback, discounted payback, and the profitability index.
- apply the above decision tools to solve capital budgeting problems.
- identify relevant cash flows for capital budgeting and identify and evaluate sunk costs and opportunity costs
- explain the concept of forecasting risk in capital budgeting and evaluate the usefulness of scenario, sensitivity and simulation analysis.
- explain the relationship between risk and return, the difference between systematic and unsystematic risk, and explain how risk is priced via the Capital Asset Pricing Model (CAPM).
- derive the cost of debt and the cost of equity and determine the weighted average cost of capital (WACC).
- explain the different theories of dividend policy and engage in the dividend decision debate.
- explain the concept of the Efficient Market Hypothesis (EMH) and the role of Technical and Fundamental analysis in investment decision making.