Management Accounting Financial Strategy
Course End Date:
At the end of the training, participants will:
• Understand and apply contemporary thinking on strategic financial management;
• Understand and utilize appropriate tools for strategic financial management;
• Evaluate strategic financial management options in light of the needs of management and the policy of the enterprise;
• Characterize and describe the enterprise's financial strategy and use that characterization to develop optimal financial
strategy for all stages of the life-cycle;
• Assess and evaluate proposed strategies.
Who Should Attend:
Financial managers, financial controllers, finance department heads, chief financial officers, accounting managers, and senior finance officers.
of Financial Strategy
The financial and non-financial objectives of different organizations (e.g. value for money,
shareholder wealth, providing a surplus).
The three key decisions of financial management (by which we mean investment, financing,
Benefits of matching characteristics of investment and financing, (e.g. in cross-border investment.)
Identifying the financial objectives of an organization and the economic forces affecting its
e.g. interest, inflation and exchange rates.
Assessing attainment of financial objectives.
Developing financial strategy in the context of regulatory requirements (e.g. price and service
by industry regulators) and international operations.
Modeling and forecasting cash flows and financial statements based on expected values for
(e.g interest rates) and business variables (e.g. volume and margins)
a number of years.
Analysis of sensitivity to changes in expected values in the above models and forecasts.
Identifying financing requirements (both in respect of domestic and international operations)
and the impacts
of different types of finance on the above models and forecasts.
Assessing the implications for shareholder value of alternative financial strategies, including
(Note: Modigliani and Miller's theory of dividend irrelevancy will be tested in broad terms. The mathematical
proof of the model will not be required, but some understanding
of the graphical method is expected.)
Current and emerging issues in financial reporting (e.g. proposals to amend or introduce new
standards) and in other forms of external reporting (e.g. environmental accounting).
• Financial Management
Working capital management strategies. (Note: No detailed testing of cash and stock management models will
be set since these are covered at the Managerial level.)
Types and features of domestic and international long-term finance: share capital (ordinary and preference
shares, warrants), long-term debt (bank borrowing and forms of securitized debt, e.g. convertibles) and finance
leases, and methods of issuing securities.
The lender's assessment of creditworthiness.
The lease or buy decision (with both operating and finance leases).
The operation of stock exchanges (e.g. how share prices are determined, what causes share prices to rise or fall,
and the efficient market hypothesis). (Note: No detailed knowledge of any specific country's stock exchange will
The capital asset pricing model (CAPM): calculation of the cost of equity using the dividend growth model
(knowledge of methods of calculating and estimating dividend growth will be expected), the ability to gear and
ungear betas and comparison to the arbitrage pricing model.
The ideas of diversifiable risk (unsystematic risk) and systematic risk. (Note: use of the two-asset portfolio formula
will not be tested.)
The cost of redeemable and irredeemable debt, including the tax shield on debt (numerical questions on the cost
of convertible debt will not be tested).
The weighted average cost of capital (WACC): calculation, interpretation and uses.
Criteria for selecting sources of finance, including finance for international investments.
The effect of financing decisions on balance sheet structure and on ratios of interest to investors and other
financiers (gearing, earnings per share, price-earnings ratio, dividend yield, dividend cover gearing, interest
Management of the finance function and relationships with professional advisors (accounting, tax and legal),
auditors and financial stakeholders (investors and financiers).
The role of the treasury function in terms of setting corporate objectives, liquidity management, funding
management, currency management.
The advantages and disadvantages of establishing treasury departments as profit centers or cost centers, and
• Business Valuations and Acquisitions
Valuation bases for assets (e.g. historic cost, replacement cost and realizable value), earnings (e.g. price/earnings
multiples and earnings yield) and cash flows (e.g. discounted cash flow, dividend yield and the dividend growth
The strengths and weaknesses of each valuation method and when each is most suitable.
Recognition of the interests of different stakeholder groups in mergers, acquisitions and company valuations.
Application of the efficient market hypothesis to business valuations.
Selection of an appropriate cost of capital for use in valuation.
The impact of changing capital structure on the market value of a company. (Note: An understanding of
Modigliani and Miller's theory of gearing, with and without taxes, will be expected, but proof of their theory
will not be examined.)
Forms of intellectual property and methods of valuation.
The reasons for merger or acquisitions (e.g. synergistic benefits).
Forms of consideration and terms for acquisitions (e.g. cash, shares, convertibles and earn-out arrangements),
and their financial effects.
The post-merger or post-acquisition integration process (e.g. management transfer and merger of systems).
The implications of regulation for business combinations. (Note: Detailed knowledge of the City Code and EU
competition rules will not be tested.)
The function/role of management buy-outs, venture capitalists.
Types of exit strategy and their implications.
• Investment Decisions and Project Control
Identification of a project's relevant costs (e.g. infrastructure, marketing and human resource development needs),
benefits (including incremental effects on other activities as well as direct cash flows) and risks (i.e. financial and
Linking investments with customer requirements and product/service design.
Linking investment in IS/IT with strategic, operational and control needs (particularly where risks and benefits
are difficult to quantify).
Calculation of a project's net present value and internal rate of return, including techniques for dealing with cash
flows denominated in a foreign currency and use of the weighted average cost of capital.
The modified internal rate of return based on a project's 'terminal value'
(reflecting an assumed reinvestment rate).
The effects of taxation (including foreign direct and withholding taxes), potential changes in economic factors
(inflation, interest and exchange rates) and potential restrictions on remittances on these calculations.
Recognizing risk using the certainty equivalent method
(when given a risk free rate and certainty equivalent values).
Adjusted present value. (Note: The two step method may be tested for debt introduced permanently and debt in
place for the duration of the project.)
Capital investment real options (i.e. to make follow-on investment, abandon or wait).
Project implementation and control in the conceptual stage, the development stage, the construction stage and
initial manufacturing/operating stage.
Post completion audit of investment projects.
Single period for capital rationing for divisible and non-divisible projects. (Note: Multi-period rationing will not