Excerpt from course description

Advanced Managerial Accounting and Real Investment Theory

Introduction

ThiIn combination with BTH 9503 Bachelor’s Thesis – Business Economics, 15 credits this course will constitute a specialization of 30 credits, and be named as a specialization on the certificate. Other students can choose the course as an elective course in their 3rd year of study.

The specialisation is analytically oriented and develops the participants’ skills to take decisions according to the partner’s interest. The purpose of the interplay between economic theory, economic models and data from the market and the accounting system, is to ensure that the students gets the necessary knowledge to be strong- minded persons regarding problems of business management. The specialisation is practically oriented, and the intention is to make sure that the student is familiar with the most common economic problems, from both the private sector and public sector. The specialisation intends to give the participants a background that will enable them, after acquiring the necessary knowledge of the relevant trade, to become business partners

Course content

Business Economic consist of four topics:

  1. Strategic cost analysis
  2. Incentive contracts modelling
  3. Linear programming
  4. Multi period firm valuation and project valuation

Topic 1: Strategisk cost analysis
Strategic cost analysis deal with different aspects of cost management, such as problems regarding the best way to distribute resources, deciding the best extent of resources and how to motivate the employees to work with resource management. An important objective is to make students to understand that “number is alive”, that every number has to be tailored depending of what kind of decision is going to be taken. The amount of such numbers, decision relevant numbers, depends on the aims of the decision. Relevant theory and methods, making students able to calculate or estimate decision relevant costs, whether the decision is a matter of products, customers, efficiency or outsourcing, will be emphasised.

  • Introduction to Strategic cost analysis
  • Cost management
  • Activity analyse, from an internal and an extern perspective.
  • Activity based costing and activity based management, capacity problems, how to choose resource drivers and cost drivers
  • Profit analyse, and the need for tailor-made numbers, depending on aim and cost object.
  • Solving the problem with joint costs
  • Life cycle cost
  • Time driven activity based costing
  • Lean Costing
  • Relevant articles regarding to:
  • Stall points
    • Managements systems
    • Shared Services
    • Lean Costing
    • Time Driven Activity Based Costing

Topic 2: Incentive contracts modelling
The students shall understand a simple principal –agent model, the advantages and disadvantages, and be able to analyse and develop incentive contracts in practice. The students shall know the essential results from international studies.

  • Introduction to Incentive contracts modelling
  • A framework for incentive modelling, a simple principal - agent model with a risk neutral agent
  • Motivation and behavioural economics
  • Screening
  • Formal models in incentive contracts
  • Executive contracts and bonus plans
  • Incentives in team
  • Options
  • Empirical studies: How effective are economics incentives?

Topic 3: Linear programming
The students shall understand the need for Linear Programming (LP), for instance in connection with staff allocations, capital rationalisation, production planning and deciding the product mix. They shall also be able to formulate different business problems, use the solver function in Excel, interpret data and reflect on the Excel solution, and finally, outline improving amendments.

  • Introduction to LP:
  • Structuring LP-problems
  • LP as a method improve activity analyses, iterative budgeting and capital rationalisation problems.
  • Slack variables, shadow prices, decision variables, base solutions, variables in and outside base solutions, other LP notions.
  • Fundamental understanding of the Simplex algorithm function.
  • Transformation of the constraints to a specific problem, to be able to evaluate whether the solution is optimal or amendments should be taken into concern.
  • Different solution presentation; graphic, analytical, Excel and the connections between those presentation formats.

Topic 4: Multi period firm valuation and project valuation
Multi period valuation is about economic evaluation of real investments alternatives or about economic evaluation of firms, or parts of firms. Regarding to the evaluation of real investments alternatives, the value of flexibility will be emphasised, and thus the students will be able to use the net present value method in an advanced way. The insight of flexibility will help the students to understand that flexibility, the possibility to make corrective decisions, must be taken into account before the decision has been made. This is true whether the result in the future, as a consequence of the decision, proves to be better or worse than expected. Practical use of option theory, and how qualitative factors can be taken into consideration, will be lectured. The students will learn about different firm valuation methods, and in relation with this, the need for accounting corrections.

  • Introduction to Multi period firm valuation project valuation
  • Traditional Net Present Value analyse
  • Fundamental options theory
  • Risk adjusting in the numerator or in the denominator? Calculating the risk equivalent cash flow
  • The value of flexibility in strategic decisions
  • Different kinds of flexibility
  • Multi period binominal model
  • Real options theory
  • Flexibility and the consequences for the concept of relevant risk and the stipulation of the risk adjusted discount rate (RADR)
  • Risk neutral method
  • Project Score Card
  • Accounting numbers versus corrective accounting numbers versus market value numbers
  • Calculating free cash flow
  • Different firm valuation methods

Disclaimer

This is an excerpt from the complete course description for the course. If you are an active student at BI, you can find the complete course descriptions with information on eg. learning goals, learning process, curriculum and exam at portal.bi.no. We reserve the right to make changes to this description.