FUNDAMENTALS OF FINANCE FOR NON-FINANCIAL MANAGERS

INTRODUCTION TO VALUE BASED MANAGEMENT

Programme content

  1. Financial Accounting Statements

-Financial accounting principles and procedures

-Balance sheet and income statement accounts

-Cash flow is a fact, profit is an opinion

-Shortcomings of accounting numbers

-The fundamental finance principle

  1. Analysis and interpretation of financial statements

Basic classification of financial ratios

Liquidity ratios

-Net working capital and working capital requirement

-The matching strategy

-Traditional measures of liquidity

-Efficiency ratios

Profitability and debt ratios

-Measures of profitability

-The key drivers of a firm’s operating profitability

-Debt ratios

-Financial leverage equation

Measuring and forecasting cash flow

-Getting to know cash flows and their sources

-Variations of the cash flow statement

-The cash conversion cycle

-Managing business growth: sustainable growth model

Limitations of ratio analysis

Case studies

3. Analysis of Investment Decisions

-Identifying and estimating a project’s relevant cash flows

-Traditional capital budgeting techniques: payback, accounting rate of return

-The time value of money

-Discounted cash flow techniques: net present value, internal rate of return, profitability index

-Inflation and capital budgeting

-Calculation of the weighted average cost of capital (WACC)

-Case study

4. Introduction to value based management

-Fundamental principles of value creation

-Techniques for measuring value creation: the concept of shareholder value added (SVA), market value added (MVA) and the concept of economic value added (EVA)

-Identifying the drivers of value creation

- When and why growth may not lead to value creation

-How can management increase EVA?

-Common problems in implementing EVA

-Linking operating performance and remuneration to value creation

-Value based management and the balanced scorecard

-Putting it all together: the financial strategy matrix

-Case- study

Programme methodology

The programme combines presentations, discussions and hands-on casestudies to allow to put theory into practice. Participants should bring a calculator or a laptop.

Learning objectives

After having attended this programme, managers should understand :

- The meaning of managing a business for value creation.

-The terminology used in accounting and modern corporate finance.

-The relationship between profit and cash flows.

-How data from a firm’s financial statements can be combined to evaluate the firm’s profitability, its ability to generate cash and its capacity to grow.

-How to measure the value that may be created by a business proposal, such as an investment project.

-Risk, how to measure it and how it affects the firm’s cost of capital.

-When and why growth may not lead to value creation.

-How to measure a firm’s capacity to create value.

Fundamentals of finance Benny Podevyn1