Kurum-İçi Eğitim Programları
A03. Financial Skill for Managers. (5 days)
Objective of the program:
This program is intended to familiarize the non-financial managers with the valuation consequences of their day-to-day decisions. This program will familiarize all managers with financial statements and enable them to understand the information content of financial statement. All managers will be able to analyze the health of their firm, forecast likely future scenarios for their firms, discover hidden problems and strengths, compare their firm to various competitors as well as histocal benchmarks and understand ways of improving the firms’ financial performance.
Regardless of their specialization, all managers also need to be cognizant of the financial consequences of their decisions. This program will also allow them to fully appreciate the financial consequences of their decisions. Marketing managers face various decisions involving product composition, pricing, distribution, packaging, or promotion decisions on existing or new products. Do these decisions make financial sense? Strategists are concerned with strategic partnerhips and joint ventures. What is the net cost of a strategic decision to expand into a new area? Human Resource specialists are concerned about valuation consequences of employee hiring, training, compensation issues. What is the bottom-line impact of these decisions in terms of owners’ wealth? Operations specialists need to translate technical efficiencies into financial efficiencies. This five-day course will not only enable non-financial managers to understand, appreciate and take into account financial consequences of their decisions but also incorporate financial elements in supervising financial and non-financial managers. Finally, by giving all managers the the unifying language of finance, this program will enable better communication and co-ordination between different managers.
Details of topics covered:
Day 1 : Analyse the health of the firm
The source of all financial information is the financial statements. We start this program by examining the balance sheet and income statement and understand the links between them. We then introduce three important tools to analyse the health of the firm, ratio analysis, sources and uses of funds statement, and proforma income and balance sheets. Ratio analysis covers primary and secondary ratios (which show both causes and effects of managerial decisions) and allow us to compare our firm with strong industry competitors as well as against historical trends. Sources and uses of funds statement shows the evolution of the firm between two points in time and shows where the funds came from, how they were spent and whether the firm grew in a healthy balanced way. Proforma statements show the expected future state of the financial statements. Proforma statements are useful in understanding whether our firm is creating value, our funds’ needs and establishing good banking relationships, as well as financial planning and control. Applications will be done to ensure full understanding of these ideas.
Day 2. Time Value of money:
Concepts of present values, net present values, future values, discounting, compounding, opportunity cost of capital, annuities, perpetuities, growing annuities, growing perpetuities, delayed annuities, delayed perpetuities and loan amortization will be presented. Numerous applications involving savings for retirement problems, auto financing, choosing between cash discounts and lower interest rates will ensure deeper understanding of these concepts. Additional applications will explore compounding intervals, effective interest rates, and bond pricing. Finally, concepts of inflation, deflation, nominal interest rates, real interest rates, nominal cash flows and real cash flows will be explored.
Group work with problems involving time value of money, such as savings for retirements, paying for college , choosing optimal retirement package, and home mortgage loan refinancing.
Day 3: Investment decision criteria:
We will cover the concepts of net present value (NPV), internal rate of return (IRR), accounting rate of return (ARR), return on investment (ROI), payback period, discounted payback period and profitability index (PI). Strengths and weaknesses of each criterion as well as the information requirements for each criterion will be discussed. We will also discuss as to why some criteria that are clearly inferior are so popular in the real world even today. We will conclude with examination of the real world adoption of each of these criterion.
Day 3: Estimating cash flows:
We will cover the concepts of incremental cash flow, sunk costs, sunk benefits, incidental effects, net cash flow, salvage value, taxation of salvage value, net working capital, capital budgeting involving asset acquisition, replacement of aging assets, valuing subsidies, optimal timing of investment decisions, and determining the optimal life of capital assets. Our objective is to fully operationalize and use the concept of net present values in investment decision contexts. Various applications will explore problems such as replacement of an aging equipment, purchase of new equipment, optiomal life of an equipment, locating corporate headquarters, and buying versus leasing an equipment.
Day 4. Cost of capital:
We will cover the concepts of risk, business and financial risk, diversification, unique risk, market risk, beta risk. These concepts will be used to develop the capital asset pricing model, cost of equity, cost of debt, and weighted average cost of capital. We will examine each source of capital debt and equity and how they affect the project cost of capital. Implications for project capital structure will be discussed.
Super project case:
Group work with a case involving the introduction of a new product. Should the company introduce a new product? If so, what will happen to the wealth of the owners of the firm? Critical issues involve estimation of the cash flows from the new product, estimation of the cost of capital, estimating the cost of excess capacity, cannibalization of existing products as a result of the introduction of the new product. Once again, the participants will be arranged in groups and asked to analyze the case and present their findings.
Day 5: International finance:
We will introduce international financial markets and international financial relations, including covered interest rate parity, uncovered interest parity, absolute and relative purchasing power parity, and international fisher relation. Applications will include case analysis.
