Global Business Strategy Unit 7.2 Global Business Strategy Level 7 15 Credits Suggested teaching and learning activities LO and Topic Time Suggested activit

Global Business Strategy Unit 7.2 Global Business Strategy Level 7 15 Credits Suggested teaching and learning activities LO and Topic Time Suggested activit

1. 1. Understand the role of financial information in business strategy

 

Need for financial information

• Assessing finance requirements, obtaining finance, reporting to owners/ shareholders/ stakeholders, setting and meeting targets, appraising new projects, managing risk, internal versus external need

 

Business risks

• Strategic and market, compliance, operational, risk modelling

 

Financial information

• Profitability, cash flow, business value, financial stability, costs projections

 

2. 2. Be able to analyse published financial statements for strategic decision making purposes

 

Published accounts

• Purpose of published accounts – provide information to shareholders/stakeholders; users of published accounts – e.g. shareholders, potential shareholders, managers, employees, lenders, creditors, suppliers, customers, community, competitors; annual reports (including main financial statements, director’s report, audit report, notes to accounts etc.); main financial statements (statements of financial position, income statements, sources and statements of cash flows); internal management accounts versus published financial accounts; structure of statements – content, requirements; weaknesses of published accounts

 

Interpretation

• Comparisons between years, comparisons between companies, industry comparisons, benchmarking, reasons for using ratios; difference between capital and revenue expenditure (definitions, decision making, treatment in financial statements)

 

Ratios and how to interpret them

• Profitability, liquidity, efficiency, capital, investor, limitations of ratio analysis

 

3. 3. Understand how businesses assess and finance non-current assets, investments and working capital

 

Long and short-term finance

• Definitions of long-term and short-term, the importance of matching finance to project

 

Sources of finance

• Range of sources, external and internal sources, role of markets and government, long-term and short-term, advantages and disadvantages of each source, implications of each source for financial statements e.g. gearing

 

Cash flow management

• Cash flow forecasts, managing inventory, trade payables, trade receivables etc., budgetary control processes – budgets and variances – how to interpret them and investigate differences

 

Investment appraisal techniques

• Net present value, discounted cash flows, internal rate of return, payback, accounting rate of return, cost benefit analysis, value for money

 

4. 4. Understand different ownership structures and how they influence and measure financial performance

 

Ownership structures

• Sole trader, partnership, limited company, public limited company; other less-used forms: charities, limited by guarantee, co-operatives, public sector organisations; international equivalents, financial implications (share structures, availability of finance); legal requirements: company law, business law; accounting standards and corporate social responsibility

 

Accountability and roles

• Stakeholder interests, control issues, shareholder versus sole trader, manager and owner, decision making interests, organisation strategy

Unit 7.4   Finance for Strategic Managers

Level 7    15 Credits

Assignment

Scenario

You are a longstanding manager in a family firm which is a small but growing organisation.  Your particular responsibility is finance. A new member of the family has just joined the firm fresh from completing a post graduate (level 7) qualification at college. He  is clear that in order to ensure the business’s continued success he must develop the financial skills required to assess and manage finance within the business.  He wishes to begin by understanding the role of financial information in business strategy and given your experience he has asked for your advice.

Heintends to create a file on finance for strategic managers which he can use as an aide memoire.

Activity 1

Prepare the first section of the file providing examples where appropriate.

This must have the following sub sections

1. an assessment of why financial information is needed in business
2. an identification of the business risks related to financial decisions
3. a summary of the financial information needed to make strategic business decisions.

Assessment Criteria 1.1/1.2/1.3

 

Activity 2

The second section of the file must provide information on published financial statements.  You must include at least one actual example of published accounts in order to illustrate the points you are making. This section must include

1. an explanation of the purpose, structure and content of published accounts.
2. your interpretation of the financial information in these accounts
3. a calculation of the financial ratios from the accounts and an explanation of how they support strategic decision making

Assessment Criteria 2/1.2/2.2/3

 

Activity 3

The new manager has made it clear that he needs to understand how businesses assess and finance various activities.  The next section of the file must therefore cover

1. an explanation which clearly distinguishes between long and short-term financial requirements for businesses
2. a table comparing the sources of long and short term finance for businesses
3. an examination of cash flow management techniques and an assessment of why the management of cash flow is so important.

Assessment Criteria 3/1, 3/2, 3/3

 

Task 4

As the business is growing, the new manager wishes to have a section of the file which considers a number of issues related to expansion

In this section of the file you must

1. consider different business ownership structures and analyse the corporate governance, legal and regulatory requirements of these.  For each of these structures compare and contrast the roles and accountability of owners and managers in making decisions.
2. carry out an evaluation of methods for appraising strategic capital or investment projects.

Assessment Criteria 3/4, 4/1, 4/2

 

Guidelines for assessors

The assessment criteria for the unit specify the standard a learner is expected to meet.  They demonstrate that the learning outcomes have been achieved.  The suggested evidence listed below is how learners can demonstrate that they have met the required standard.

Task number	ACs	Suggested evidence
1	1.1/1.2/1.3	This section of the file must include an explanation and assessment of why financial information is required and where it is used in business. The learner must also clearly identify the business risks and how they are inter related with financial decisions. This task also requires the learner to provide a comprehensive summary of the financial information required for strategic decision making.
2	2.1/2.2/2.3.	In this section of the file the learner must demonstrate their ability to analyse published financial statements and accounts. Using this data learners must:§  clearly explain the structure and content of the accounts and why they are important. §  produce a thorough analysis of the financial information §  calculate financial ratios and clearly show how they support strategic business decisions.
3	3.1, 3.2, 3.3	The learner should explain the meaning of long and short term financial requirements and clearly show the difference between them.  The table must be comprehensive and show different financing methods appropriate to different types of assets.  There needs to be a range of techniques to manage cash flow and the learner must show their understanding of the critical nature of cash flow management.
4	3.4, 4.1, 4.2	In the final section the learner must demonstrate their understanding of different ownership structures and the implications of these. The learner should analyse a range of different ownership structures.  For each of these the learner must analyse the governance, legal and regulatory requirements. There then needs to be a clarification of the roles of owners and managers in each structure which also compares and contrasts these roles and their accountabilities.There must be a balanced and thorough evaluation of the appraisal methods for strategic capital and investment projects.

 

 

 

 

 

Unit 7.4       Finance for Strategic Managers

Level 7    15 Credits

Suggested resources

Texts

Dyson, J.R., Accounting for non-accounting students Financial Times/Prentice Hall 2010

General accounting text for non-accounting students.

Horner, D., Accounting for Non-Accountants: A Manual for Managers and Students Kogan Page 2008

Accountancy text covering main accounting issues from business point of view.

McLaney, E. and Atrill, P. Accounting: An Introduction Financial Times/Prentice Hall 2010

Accountancy text with good numerical examples to demonstrate techniques and for students to practice techniques.

Arnold, Glen, Corporate financial management, Harlow; Pearson Education, 2008

Birt, Jacqueline and others Accounting Milton, Australia; John Wiley, 2008

Marsh, Clive, Mastering financial management Harlow; Financial Times Prentice Hall, 2009

Internet Resources

Financial Times website provides financial analysis and information about publishes accounts including international information www.ft.com

Beyond Budgeting Round Table – discussions about budgetary control http://www.bbrt.org/

Websites of larger organisations in UK and internationally will provide financial and other information about business organisations

 

 

 

 

Unit 7.4   Finance for Strategic Managers

Level 7    15 Credits

Suggested teaching and learning activities

LO and Topic	Time	Suggested activities	Resources and related case studies
LO1: 1.1, 1.3  Need for financial information and types of financial information		Group workInitial discussion to consider the questions of (1) why businesses need financial information, (2) who needs financial information about the business and (3) what financial information they need. Could be given a case study of a business that are making decisions about expansion/ takeover/downsizing etc – this should be related to current/ local issues and economic climate. Alternatively, given a series of business scenarios. Group report back to whole class.   Delivery: Need for financial information to cover information for: assessing finance requirements, obtaining finance, reporting to owners/shareholders/ stakeholders, setting and meeting financial targets, appraising new projects, managing risk, internal v external need for information.   Types of financial information to include information on: profitability, cash flow, business value, financial stability, cost projections.	Other Reading-Strategic corporate finance Davies, Tony; Boczko, Tony; Chen, Jean Maidenhead; McGraw Hill, 2008 Stakeholders in marketing and finance – http://openlearn.open.ac.uk/mod/oucontent/view.php?id=403988&direct=1 McCain case study – http://www.thetimes100.co.uk/download-mccain-foods-edition-13-full-case-study_101_333_839 Kellogg’s case study – http://www.thetimes100.co.uk/case-study–new-products-from-market-research–6-388-1.php Davis case study – http://www.thetimes100.co.uk/case-study–planning-a-budget–111-381-1.php Financial strategy – http://managementhelp.org/organizationalsust

 

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