What is this programme about?
How can activity-based costing, variance analysis and financial analysis help you as an adult educator, developer and training institute manager to make informed business decisions?
This complementary 3-hour preview course is part of our corporate finance training suite. It aims to introduce you to the concept of Activity-Based Costing (ABC) to help you price your training competitively. The session also seeks to present the concepts of variance analysis and financial analysis. The former is helpful for training developers and training institute managers in evaluating efficiency and effectiveness, while the latter introduces basic financial analysis to help training managers make informed business decisions.
The ultimate goal of corporate finance is to maximise shareholder value. It is intrinsically linked with other corporate functions, such as operation, marketing, human resource, purchasing etc. A business with sound corporate finance function is more likely to achieve the goal of enhancing shareholder value, which is the emergent property of the 4 following sub-functions.
- Investment: The goal is to earn a return in excess of cost of capital. Return is determined not just by magnitude and timing, but also affected by effects such as cannibalization. Cost of capital is a function of investment risk and debt-equity mix. Capturing risk is therefore vital, as it impacts the financial viability of a business.
- Financial Risk Management: The objective is to mitigate downside factors that could threaten shareholder value by hedging against unfavourable factors. To achieve that, a business should identify and categorise risks before hedging them. Practitioners have access to a plethora of tools, from the humble such as risk management plan to the exotic, such as financial derivatives.
- Financing: The 2 primary aims are to get the right mix of equity and debt financing and how to get the right debt structure that fits the cashflow characteristic of your project. For the former, how do you derive the optimal debt-equity mix to minimize the cost of capital. Leverage has a magnifier effect on return (and losses). Hence, it is critical to get the right debt financing.
- Dividend: The focus is to return cash to owners if there is limited profitable investment in the market. How would a manager estimate project profitability? If a business is listed on the stock exchange, which is the more efficient way to return cash to owners, dividend or stock buyback? Dividend is a delicate balancing act that has significant implication on shareholder value.
Shareholder value is the cumulation of future expected cashflows, which reflects future growth prospects. Making informed decisions based on financial statement data will help trainers, developers and managers achieve that. As a bonus, the knowledge learnt will also be very helpful in making better informed investment decisions.