MIR 889: Financial Literacy for NonFinancial Managers: Introduction
Today’s Session
• Introductions: Around the room: who are you,
your background, your expectations.
• Relationship of Accounting to Business Strategy
– Len
• Financial Literacy: What is that? – Andy
• Purposes of Accounting – Len
• Users of Financial information – Len and Andy
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Course Objectives
• Familiarization with financial concepts
• Comfort with discussing the financial aspects of
the work
• Demystify financial management
• Leveraging financial literacy to get your job done.
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About Us
• Len Anderson
• Andrew Graham
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About You
Tell us who you are, what your
background is, what you aspire to on
graduation and your expectations for
this course.
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About the Course:
Approach to Learning
• Classes will be active. Students will be asked to undertake
the following tasks, as part of the learning and evaluation
process:
– Text reading,
– Some assigned out-of-class exercise,
– Class quiz,
– Class case studies for discussion in group and feedback,
– Reviews of annual reports and financial statements,
– Group work and presentations (2), including a capstone final
presentation, and
– Written assignments.
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About the Course:
Text and Readings
Accounting for Non-financial
Manager, Third Edition, John
Parkinson with Charles Draimin,
Captus Press
All other readings will be provided
on the Moodle site in pdf format.
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About the Course:
Assignments
For the Presentations, a marking rubric
has been provided in the Outline.
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About the Course:
Architecture
Shareholder
Perspective
• Foundations:
The World
and
Language of
Accounting
Management
Perspective
• Applications:
Budgets,
Risk, Control
and
Performance
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About the Course:
The Flow
Accounting
Fundamentals
Assessing
Performance
Financial
Statements
Analysing
Financial
Statements
Risk and
Control
Business
Planning
Financial
Reporting
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Remember, there is no stupid
question.
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Establishing context
Consider the following metaphor: what does it tell
us about success in business?
Nascar strategy
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Fundamentally
• Business success is about direction and traction
• Accounting is a tool to help with direction setting
and the measurement of traction
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What is Financial Literacy?
• Understand the lingo:
– Some core terminology is essential.
– However, much of this terminology may have
nuanced meaning in the particular operating
culture of one organization.
• Read the Reports:
– This is best translated as being an intelligent user
of financial information, be it costing for policy
design or cash forecasts for the first quarter of the
fiscal year.
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What is Financial Literacy?
• Get Clarity:
– This may mean asking dumb questions.
– It may also mean pushing the point of
understanding so that everyone is actually talking
about the same thing.
• Marry up Numbers on a Pages with What
Happens at the Mission End of the Organization:
– A financially literate manager can see the link – or
insist that it be clearly stated – between what may
be for some just a bunch of numbers and the
policy and operational impact.
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Not Just a Financially Literate
Manager or HR/IR Advisor, but a
Financially Literate Organizations
• All managers do not need to be accountants
• Being ready users of financial tools and
information is great
• If the company does not use these tools it will fail
• Two-way street – financial people need to
understand what you do
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Are Finance and HR Oil and Water?
Words to describe concerns
of Finance and Human
Resources
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So being financially savvy is good for the
company
Finance
Human
Resources
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Forecasting
Controlling
Financial
Condition
Analysis
Costing
Identifying,
Assessing and
Managing Risk
Core
FM
Skills
Communicating
financial and
program
information
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The textbook view of the
Nascar lessons
• Directional activities can be broken down into:
– Attention directing
– budgetary control, variance analysis, control triggers
– Decision making
– choices between alternatives, viability assessments,
build/buy
• Measurement of traction
– Scorekeeping
– Inherently a “rear view mirror” activity, stewardship
reporting
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Accounting serves all three
purposes dynamically
Decision making
Strategy
Scorekeeping
Attention directing
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Consider one strategy model
• Michael Porter “Competitive Advantage”
• Cost Leadership v Differentiation
• Exercise – identify two businesses in each of the
following sectors that each embody one of Porter’s
strategy focus points:
• Airlines
• Grocery stores
• Hotels
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The management perspective
• Now ask yourselves
• What would you expect these businesses to
look like in a financial statement?
• Think: sales volumes, profit margins, number and
cost of people, investment in physical infrastructure
• What would be important to management?
• And what financial information would they focus on
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Users and uses
• In groups, read the tabletop cases handed out
• Take 15 minutes for reading and discussing in
your groups
• Tabulate the following:
• Who are the likely users of the financial
statements in each case?
• For which of the three purposes do they seek
information ?
• How do they get the information?
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Wrap up
• Questions?
• Homework – read Parkinson Chapters 2, 4 and 5
including appendix 4.1
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Lecture: First Session, 10 September 2014