Accounting and Finance
The module delivered over the five days covers three days of accounting topics and two days of Finance Topics. The Accounting part builds on and adds to the topics covered by introduction to practical accounting. The module will first introduce you to accounting standards, particularly international accounting standards. This is key to understanding how and why financial statements are prepared and presented in the way they are. The module will then move on to analysing the performance of firms using their financial statements. This will be done via the computation and interpretation of financial ratios. The course will use a real life company to illustrate the concepts.
The finance part of the module will start with understanding and measuring risk and returns of financial assets and portfolios of assets. This will enable you to understand the concept of expected returns (versus actual returns) and compute expected returns based on the riskiness of the asset. The course will then introduce the concept of time value of money and how financial assets can be valued using simple discounted cash flow technique. The final part of the course will focus on some important models used in the valuation of the stock (shares) of a firm. We will look at simple numerical examples as well as data from a real life company to illustrate concepts.
Accounting concepts and the international accounting standards covered in the course are internationally applicable. The finance concepts are internationally applicable.
Understanding how financial statements are prepared and presented is a critical skill as the financial statements are a way of summarising the actual or expected results of the firm’s decision making. Business plans often require you to prepare proforma statements including forecasted statements. Understanding and measuring risk and returns and valuation techniques are critical in evaluating projects and financial assets.
Research in Teaching:
Discussion will be complemented, where appropriate, with insights from theoretical and empirical research in accounting and finance.
Full module specification
|Module title:||Accounting and Finance|
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Duration (weeks) - term 1: |
The general aim of this module is to help you to gain an understanding of how to prepare and use financial reporting information. You will be expected to develop valuation-related and financial analysis skills to support the interpretation, evaluation and use of accounting information from the view point of major users of financial reports (i.e. equity investors, lenders, managers etc.) Real life examples will be integrated into the lecture material to help support your understanding of the concepts.
ILO: Module-specific skills
- 1. Explain key accounting standards and how they affect financial statements are prepared and presented.
- 2. Compute financial ratios from financial statements and interpret them.
- 3. Compute returns and risk measures for individual assets and portfolios of assets.
- 4. Value a company using Discounted Cash flow technique and relative valuation techniques.
- 5. Compute implied growth and cost of capital using valuation models.
ILO: Discipline-specific skills
- 6. Rigorously analyse problems in accounting and finance.
- 7. Collect both market data and company financial data and analyse and interpret them.
ILO: Personal and key skills
- 8. Plan and manage independent study and research, and communicate effectively in writing.
- 9. Plan and manage their own study both individually and within a group.
a) Day 1 – Key Accounting Standards.
b) Day 2 – Calculation of Ratios, Interpretation of Ratios.
c) Day 3 – Applying what we have learnt so far to our chosen company.
d) Day 1 – Risk and Return and Time Value of Money.
e) Day 2 – Equity valuation models.
Indicative learning resources - Basic reading
- Rice, A. (2015). Accounts demystified: the astonishingly simple guide to accounting. Pearson UK. This book covers the accounting part of the module.
- A textbook is not compulsory for the Finance part but a very good introduction to some of the concepts we will cover is in: Fraser-Sampson, G. (2011). No Fear Finance: An Introduction to Finance and Investment for the Non-finance Professional. Kogan Page Publishers. (Chapters 7, 8, 9 and 10 are relevant for the Finance part of the module).
Indicative learning resources - Web based and electronic resources
Credit Suisse Global Investment Returns Yearbook 2018: Chapter 1 and 2
Indicative learning resources - Other resources
Software: For the finance part you will need a laptop with preferably with MS Excel installed or alternative (that you should be familiar with).
Last revision date