UNIT 04: FINANCIAL DECISION MAKING - 1.1 Analyse the factors that guide and drive decision making in business

Unit Reference Number

T/616/2737

Unit Title

Unit 04: Financial Decision Making

Unit Level

6

Total Qualification Time (TQT)

200 Hours

Guided Learning Hours (GLH)

80 Hours

Number of Credits

20

Mandatory / Optional

Mandatory

Unit Grading Structure

Pass / Fail

Learning Outcome – The learner will:

Assessment Criterion – The learner can:

1

Understand the role of financial information and financial analysis in business risk assessment and decision- making.

1.1

Analyse the factors that guide and drive decision making in business.

1.2

Assess the significance of financial factors in business decision making.

1.3

Evaluate the characteristics of business risk that impact on financial and business decisions.

2

Understand how financial statements and their structure aid business decision making.

2.1

Compare the accrual and cash flow approaches to accounting and financial reporting and the implications of each for business decision making.

2.2

Evaluate the structure and content of final accounts and their uses for business decision making.

2.3

Interpret financial information in balance sheets, income statements as well as sources and applications of funds statements.

2.4

Differentiate between financial decisions relating to capital expenditure and those relating to revenue expenditure.

3

Be able to perform effective capital expenditure appraisal using range of techniques.

3.1

Appraise various sources of short-term and long- term financing for businesses.

3.2

Critically examine key factors affecting the choice of source of financing.

Topic

Course Coverage

Learning Outcome 1

Ownership structures, financial statements

·         Sole traders, partnerships, limited companies, public limited companies, public sector organisations, cooperatives, international business structures, implications for finance

·         Structure of statements for each type of organisation, differences between organisations, reporting requirements (UK and/or international law and standards)

Learning Outcomes 2 and 3

Structure, format and requirements of published accounts

·         Role of auditors, published vs internal financial information, main published financial statements: statement of financial position, statement of financial performance, statement of cash flows

·         Different ratios: profitability, liquidity, efficiency, capital, investor, using ratios: calculation and interpretation, industry benchmarking, limitations of ratio analysis

Learning Outcomes 1 and 3

Business finance needs and sources of finance

·         Long term – non-current assets; Short-term – working capital; importance of working capital for business continuity

·         Costs of finance, effect on financial statements, range of sources, external and internal sources, long-term and short-term role of stock markets and advantages, disadvantages of each source

·         Matching source of finance to project (long or short term, external or internal, asset backed finance etc.

Learning Outcomes 3 and 4

·         Cash flow forecasts, budgetary control systems and