Professor
Alberto PetroniLearning objectives
The course is designed to provide students with a detailed introduction to the topics of financial analysis and planning, costing systems in different industrial contexts and cost-based decisions to improve the quality, efficiency and effectiveness of operations. The main topics covered are:• Budget documents and ratio analysis for financial analysis purposes• Cash flow analysis and cash budgeting• Financial leverage and working capital financing• Job and process costing• Activity-based costing and activity-based management• Cost management for profitability, efficiency, effectiveness and quality assessments
Expected learning outcomes
At the end of the course, the student should have developed and achieved specific skills and learning outcomes. Knowledge and understandingThe student:- examines the three fundamental financial statements;- understands the different relevance of the ratios to measure profitability, the degree of resource utilization, liquidity and the level of recourse to debt;- is aware of the various financial forecasting methods to take into account seasonal effects and other factors impacting cash flow;- is able to explain the difference between operating and financial leverage;- associates the sales and production processes, has knowledge of the financial aspects of working capital management and the factors that determine the development of an optimal policy;- identifies the fundamental themes underlying the design of cost systems;- differentiates rules and procedures for assigning costs in job-order and process costing systems;- compares product costing systems based on activities with those based on traditional methods;- provides a critical explanation of the reasons why activity-based management can be usefully used to improve company operations. Ability to apply knowledge and understandingThe student:- quantifies the variations of the company's cash position;- applies the Du Pont analysis system to identify the sources of profitability of the activities and the return to shareholders;- prepares the cash balance sheet and the pro forma balance sheet;- uses the break-even analysis to determine the volumes of activity to be carried out in order to avoid incurring losses;- produces a report that combines sales forecasts, receipts and payments and cash budget;- designs and manages a two-stage allocation system for determining the cost of the product;- determines the allocation of overheads using predetermined bases and coefficients;- prepares and analyzes a report on production costs;- applies the logic of the "hierarchy of costs" for cost management;- produces a report on the cost flows that pass through the chart of accounts of the industrial accounting using activity-based costing. Autonomy of judgmentThe student is able to collect and interpret relevant data in order to:- provide a meaningful comparison of a company with the operators in the sector;- predict and quantify in advance the financial resources necessary to support the growth of a company;- evaluate the Product, customer and channel profitability - provide information to support strategic decisions related to the quality, efficiency and effectiveness of business operations.Communication SkillsStudents will demonstrate the ability to communicate information, ideas, problems and solutions in the field of financial analysis and cost management. The student is able to communicate information and solutions both in written and oral form.Learning skillsThe student has the learning skills necessary to undertake the development of both a decision support tool and a subsequent financial analysis / forecasting project that requires a high level of autonomy. Particular attention will be paid to developing learning skills through the “Problem-Solving Learning” approach in problem solving and discussion of integrative cases.
Course content
Accounting and financial statement reviewThe income statementThe balance sheet depreciation and cash flowsFree cash flowsIncome tax considerationsFinancial analysisTrend analysisThe impact of inflation on financial analysisOther elements of distortion of earningsFinancial planningThe construction of pro forma statementsThe pro forma income statementThe cash budgetThe pro forma balance sheetThe percentage of sales methodOperating and financial leverageLeverage in businessOperating leverageFinancial leverageCombining operating and financial leverageDegree of combined leverageWorking capital and financing decisionsThe methods of asset growthManagement of assets- Comparison between sales and productionFinancing modelsThe financing decisionA decision-making processTowards an optimal policyFundamentals of costing of products and services- Cost management systems- Fundamental themes underlying the design of cost systems for managerial purposes- Costing in the case of homogeneous product and continuous process- Costing in the case of homogeneous product and discrete process- Multiple allocation bases and Two-Stage Systems - Different Companies, Different Production and Cost SystemsCosting by JobThe Definition of a JobCosting in the Job ShopMeasuring Job CostsUsing Job Costing in Service CompaniesEthical Aspects and Job CostingManaging ProjectsCosting by ProcessThe Equivalent UnitsProduct Cost in Process IndustriesProduction Cost ScheduleCost Assignment Using the First-In, First-Out (FIFO) Method Comparison of FIFO and Weighted AverageSummary of the Steps to FollowCosts “Transferred” from “Upstream” DepartmentsChoosing Job and Process CostingOperation CostingComparing Job, Process, and Operation CostingActivity-Based CostingProduct Costs and Decision MakingCost Assignment in a Two-Stage ModelActivity-Based CostingCost HierarchiesCost Flows Through Cost Accounting AccountsChoosing Activity Bases in Modern Production ContextsActivity-Based Costing in Administrative ActivitiesFundamentals of Costing managementActivity-Based Cost Management and Value ManagementManaging customer and supplier costsDetermining supplier costsManaging capacity costsManaging quality costs
Bibliography
Adopted textbookFinancial and cost management, Create series, Mcgraw-Hill Education Publisher, 2020. The textbook (custom publishing) is a collection of the following chapters:a) Selected chapters from the book “Foundations of Financial Management”, 16th Edition, 2017, by Block, Hirt, Danielsen:Chapter 2 – Review of AccountingChapter 3 – Financial AnalysisChapter 4 – Financial ForecastingChapter 5 – Operating and Financial Leverage Chapter 6 – Working Capital and the Financing Decisionb) Selected chapters from the book “Fundamentals of Cost Accounting”, Fifth Edition, 2017 by Lanen, Anderson, MaherChapter 6 – Fundamentals of Product and Service Costing Chapter 7 – Job Costing Chapter 8 – Process Costing Chapter 9 – Activity-Based Costing Chapter 10 – Fundamentals of Cost Management
Teaching methods and tools
9 ECTS are allocated to the teaching; the overall workload for the student is therefore equivalent to 225 hours divided between: a) attendance of lectures on theoretical and applicative aspects (in class), b) completion and writing of a report on the resolution of the exercises and integrative cases at the end of the chapter of the textbook (individual study), c) individual study and preparation for the exam (individual study). 50% of the classroom lessons are on theoretical content (40 hours) and 50% are related to the resolution of exercises/problems by the teacher (40 hours). The texts of the exercises and integrative cases (both for classroom lessons and for individual study) are reported in the adopted textbook.
Assessment methods and criteria
The learning assessment includes, for both attending and non-attending students: a) a written test (30 points and 50% of the final overall grade) on theoretical content and simple numerical exercises; b) an oral test (30 points and 50% of the final overall grade) on the resolution of more complex, complete problems and discussion of supplementary cases. The two tests must be taken in the same exam session. The possible formats of the questions in the first written test will be of the types of "open questions", "multiple choice", "true or false" and "questions with gaps filled". For each question, the score associated with it will be clearly indicated in the text of the written test. To be admitted to the oral test, it is necessary to obtain a minimum score of 14 points in the written test. The oral test, aimed at ascertaining the achieved ability to apply knowledge, consists of: - discussion of parts of the report on the exercises and supplementary cases that the student has collected in the personal file; - resolution of a problem structured on several points. The final overall grade (out of thirtieths) is calculated as a weighted average of the two tests; the exam is passed if the student achieves a minimum overall score of 18/30. The grade of “30 cum laude” is awarded to candidates who have achieved the highest partial grade on each of the two tests.
Additional info
Each student is provided with a file (downloadable from the Elly platform) for the exercises and integrative cases to be solved. Students are encouraged to work in teams (up to 3 members). Each member of the group will bring his/her own copy to the oral exam of the final exam. Active participation and discussion of the course contents are encouraged. Therefore, the study of the specific bibliographical references in advance of each class is strongly recommended. The lecture slides (downloadable from the Elly platform) are only a tool used to fix the main concepts and cannot in any way replace the textbook. Additional teaching material consisting of video lessons, interactive animations, online multiple choice tests and excel templates for solving exercises/problems can be used by students via links available on the Elly platform.
