AMA2218 Fundamentals of Finance and Accounting for Non-Financial Managers

1. Basic Accounting Concepts

• Importance of the accounting equation
• Significance of generally accepted accounting principles (GAAP)
• Accrual process
• Difference between accounting profit and cash flow

2. Understanding Financial Statements

• Purpose of and terminology associated with the following financial statements:
  • Income statement or profit and loss statement (P&L)
  • Balance sheet
  • Statement of retained earnings
  • Cash flow statement
• The accounting process, from recording business transactions to preparing financial statements
• How various business transactions affect the financial statements

3. Reviewing an Annual Report

• Components of an annual report
• Importance of notes in evaluating financial statements
• External auditor's role and the significance of the opinion letter

4. Evaluating a Company's Financial Statements

• Calculate the key financial ratios using the financial statements
• Use financial ratios to evaluate:
  • An organization's liquidity, leverage, and profitability
  • An organization's performance compared with budgeted goals
• Use the Dupont formula to evaluate management performance
• Use the concept of Cash Flow Return on Investment (CFROI) to determine if a segment of an organization is adding value to the business

5. Improving Profitability through Cost Analysis and Profit Planning

• Differentiate between fixed and variable costs
• Help your organization improve profitability through the use of:
  • Break-even analysis
  • Contribution margin analysis
  • Direct costing in appropriate situations
• Traditional cost accounting and its limitations
• Relevance of activity-based costing in today's business environment

6. Capital Expenditure Analysis

• Distinguish between capital expenditure budgets and operating budgets
• Function of the capital budget
• Why cash has a time value
• Recognize and apply different methods of evaluating capital expenditure and monitoring project performance

7. Budgeting More Effectively

• Role of budgeting and issues budgets can solve
• The budgeting process
• Types of budgeting systems in use today
• Analyze budgets for different purposes
• Recognize and apply different methods of evaluating and monitoring operating performance

• Key finance terms: assets, liabilities, capital, depreciation, capitalization, current ratio, and others
• The accounting process: journals and ledgers and how debits and credits work
• Basic accounting principles
• Apply accounting conventions and guidelines
• Develop working rules regarding your corporate financial statements
• Use the balance sheet to examine assets and liabilities
• Analyze the income statement to assess revenues and expenses
• The statement of cash flow: sources and uses of funds
• Content and format of the annual report
• Debt vs. equity financing
• How leverage can increase return to shareholders
• Keep your plan on target with budgetary controls
• Use profit-planning tools, break-even analysis, and financial forecasting
• Cash flow: where cash comes from and how it's applied
• Elements of cost accounting
• Analyze payback method, discounted cash flow, present value, and present value index in making profitable capital investment decisions
• Criteria for examining the performance of divisions and product lines
• Cost of capital

Nonfinancial managers in every functional area of responsibility in all industries. Please bring a calculator and a copy of your annual report (if available).