Paper 2.4 - Financial Management and Control
 

Aim

To develop knowledge and understanding of financial management methods for analysing the benefits of various sources of finance and capital investment opportunities and of the application of management accounting techniques for business planning and control.

Objectives

On completion of this paper candidates should be able to:

  • explain the role and purpose of financial management
  • evaluate the overall management of working capital
  • evaluate appropriate sources of finance for particular situations
  • appraise capital investment through the use of appropriate methods
  • identify and implement appropriate costing methods
  • prepare budgets and use them to control and evaluate organisational performance and
  • demonstrate the skills expected in Part 2.

Content

Financial Management (60%)

Financial management objectives nature and purpose of financial management; nature, scope and form of financial objectives, relationship with organisational strategy; roles, responsibilities and relationships of key personnel.

Management of working capital nature, scope and importance, managing cash balances, management of debtors, creditors and stock.

Sources of finance capital markets, significance of corporate markets, efficient market hypothesis, dividend policy, bank finance, trade credit, government sources, introduction to overseas capital, determining finance requirements, determining appropriate sources of finance.

Capital expenditure and investment identifying investment opportunities, appraising capital investments - ROCE, payback, discounting based methods, capital rationing, lease or buy, effects of taxation and inflation.

Management Accounting (40%)

Costing systems Costing concepts, methods and techniques including activity based costing, marginal and absorption costing, target costing, life-cycle costing, implications of use.

Standard costing and variance analysis calculation of variances, uses and limitations, determination of standards, variance investigation, planning and operational variances, behavioural implications.

Budgeting and budgetary control objectives, budgetary systems - fixed and flexible, zero-based, incremental, periodic, continuous, activity based, budget development processes, co-ordination of sub-budgets, principal budget, budget review, use of computer based models, capacity variations, flexible budgets, calculating and analysing variances, budgets and employee motivation.

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