2. Understand how working capital can be effectively managed Working capital components • • • •
Bank and cash balances Debtors Creditors Stock
Management of working capital • Working capital ratios – calculation and evaluation • Ways to manage working capital – payment and collection cycles, stock control, overdrafts etc.
3. Understand management accounting techniques Management and financial accounts • • • •
Users Outputs – information required by managers Monthly/quarterly accounts Useful ratios
Budgetary control • Purpose and content of budgets • Cash flow forecasts • Budgetary control process • Importance of budgets for management • Zero based budgeting, incremental budgeting • Advantages and disadvantages of budgets • Variances • Flexing the budget • Calculating variances • Explaining variances – financial and non-financial factors • Reconciliation of budgeted to actual profit • Advantages and disadvantages of variance analysis Costing and pricing • Classifying costs – direct/indirect, fixed/variable • Calculating unit cost • Dealing with overheads – full absorption costing and overview of other costing methods • Pricing – cost plus, marginal cost, price takers etc. • Break-even – calculation and explanation • Marginal costing
4. Understand how to evaluate business projects Project appraisal methods • • • •
Accounting rate of return Payback Net present value Internal rate of return
Evaluation • Strengths and weaknesses of each method • Non-financial factors – organisational goals and vision, time factors etc. • Organisational preference Obtaining project finance • Sources of finance – internal and external • Making a case for finance • Providing assurances and project projections
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