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| C O U R S E S Y L L A B U S |
Language Of Business
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| Course Code: |
LOB |
| Faculty: |
Prof. H.G. Tan |
| Class: |
MBA 2008 |
| Sessions: |
First Semester 20 sessions |
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Course Descriptions
The Language of Business (LOB) course is designed to equip the students with a working knowledge of financial accounting. LOB is part of the Financial Management and Control module of the MBA course. Sufficient knowledge of financial accounting principles and concepts and the mastery of financial accounting analytical skills is a prerequisite for future financial management courses. Also, for those students interested to pursue a CFA Charter, the LOB course is designed to cover most of the preliminary topics for Financial Statement Analysis indicated in the CF A Level I Learning Outcomes. |
Course Objectives:
- To equip the students with a working knowledge and skills in financial accounting.
- To provide students with the basic tools and techniques needed for financial management course.
- For those interested to pursue a CFA Charter, to cover most of the preliminary topics for Financial Statement Analysis indicated in the CFA Level I Learning Objectives.
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Learning Methodologies and Approaches Used
This course will use the following learning methods and approaches:
- Lecture - This will be the predominant method as bulk of the learning objectives are knowledge and skill based at this early stage.
- Case Analysis - This will be an important method as the objectives of this course focus on honing the use of financial accounting concepts, tools and techniques in the development of analysis for decision-making and policy formulation.
- Examinations - Examinations take two forms. First, regular quizzes will be given primarily to evaluate the students understanding of various concepts and formulas. Second, case analysis examinations will be given to measure the ability of students to analyze business situations and to formulate recommendations which integrate all of the concepts discussed during the course.
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Evaluation and Feedback Systems
Students are evaluated on the following basis:
- Class Participation - This measures the quality of students' insight during case analysis and lecture-discussion sessions (40%).
- Quizzes- These are given to measure the performance of students with regard to understanding stand alone topics (30%).
- Final Examination - Case analysis exam will be given to gauge the ability of the students in integrating the various concepts taken up in the course (30%).
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Primary Textbooks
- Accounting: Text & Cases, 11th Edition, Robert N. Anthony, David F. Hawkins and Kenneth A. Merchant
- The Analysis and Use of Financial Statements, 3rd Ed., Gerald 1. White, Ashwinpaul C. Sondhi, and Dov Fried
- Other assigned reading which will be distributed as part of the students' casepack.
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| Session No. |
Cases, Readings and Exercises |
| Part 1: Introduction to LOB and the Accounting Cycle |
| 1 |
Topic: Overview of LOB and the Accounting Spectrum
Read: 1. Chap. 1: Anthony, Hawkins and Merchant, 11th Ed.
2. Chap. 1: White, Sondhi and Fried, 3rd ed.
3. IASB Framework
Learning Mode: Case: Kim Fuller
TEACHING PURPOSE: To impress upon the students the relevance of financial accounting information in day-to-day decision making within the firm and to provide the context in which financial accounting will be studied during the course.
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| 2 |
Topic: Understanding the Balance Sheet
Read: 1. Chap. 2: Anthony, Hawkins and Merchant, 11th Ed.
2. Chap. 2: White, Sondhi and Fried, 3rd ed.
3. The Accounting Framework, Financial Statements and
Some Accounting Concepts
4. Asset Reporting
5. Liability Reporting
6. Presentation of Financial Statements (IAS 7)
Learning Mode: Case: Music Mart, Inc.
TEACHING PURPOSE: To introduce the Balance Sheet, with emphasis on understanding the basic concepts that guide balance sheet construction, the format and terminology used in a balance sheet and the type of information the balance sheet offers.
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| 3 |
Topic: Understanding the Balance Sheet
Read: Review Session 2 Readings
Learning Mode: Case: Lone Pine Cafe
TEACHING PURPOSE: To drill the students in understanding how business transactions affect balance sheet accounts.
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| Part 2: Analysis of Accounts |
| 4 |
Topic: Understanding the Income Statement
Read: 1. Chap. 3: Anthony, Hawkins and Merchant, 11th Ed.
2. Chap. 2: White, Sondhi and Fried, 3rd ed.
3. The Accounting Framework, Financial Statements, and Some Accounting Concepts
4. Revenue Recognition and Reporting
5. Expense Reporting
6. Presentation of Financial Statements (IAS 7)
Learning Mode: Case: Pine Tree Motel
TEACHING PURPOSE: To introduce the Income Statement, with emphasis on understanding the basic concepts that guide income statement construction, the format and terminology used in a income statement and the type of information the income statement offers.
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| 5 |
Topic: Understanding the Income Statement
Read: Review readings from Session 4
Learning mode: Cape Cod Novelty Shop
TEACHING PURPOSE: To drill the students in understanding how business transactions affect income statement accounts.
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| 6 |
Topic: The Accounting Cycle
Read: Chap. 4: Anthony, Hawkins and Merchant, 11th Ed.
Learning Mode: Lecture/Discussion and Exercises
TEACHING PURPOSE: To explain how financial statements are constructed from a list of business transactions.
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| 7 |
Topic: Accounting Cycle
Learning Mode: Case: PC Depot
TEACHING PURPOSE: To drill the students in the various accounting cycle skills.
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| 8 |
Topic: B/S and I/S Construction: Complete Cycle
Learning Mode: Case: Octane Service Station
TEACHING PURPOSE: To drill the students in the various accounting cycle skills.
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| Part 2: Analysis of Accounts |
| 9 |
Topic: Revenue and Monetary Assets
Read: 1. Chap. 7: Anthony, et.al
2. Accounting for Current Assets
3. Revenue Recognition and Reporting
4. Revenue (IAS 18)
Learning Mode: Joan Holtz (A)
TEACHING PURPOSE: To delve into the issues surrounding revenue recognition and to analyze the measurement of short-term monetary assets.
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| 10 |
Topic: Cost of Sales and Inventories
Read: 1. Chap. 6: White, Sondhi and Fried, 3rd ed.
2. Chap. 6: Anthony, 11th ed. *
3. Inventories (IAS 2)
4. Review Accounting for Current Assets from Session
10
Learning Mode: Joan Holtz (B)
TEACHING PURPOSE: To explore various inventory valuation methods and to relate these methods with the calculation of Cost of Goods Sold (Sales).
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| 11 |
Topic: Long Lived Assets
Read: 1. Chap. 7: Anthony, et.al.
2. Chap. 7&8: White, Sondhi and Fried, 3rd ed.
3. Accounting for Property, Plant and Equipment and Other Assets
4. Property, Plant & Equipment (IAS 16)
5. Impairment of Assets (IAS 36)
6. Intangible Assets (IAS 38)
Learning Mode: Lecture and Exercises
TEACHING PURPOSE: To explore the various methods in calculating depreciation and understanding the economic, tax and financial implications of choosing any of these methods.
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| 12 |
Topic: Long Lived Assets
Read: Review readings from Session 12
Learning Mode: Case: Joan Holtz (C)
TEACHING PURPOSE: Introduction to depreciation policies and choices. To explore the various methods in calculating depreciation and understanding the economic and financial implications of choosing any of these methods.
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| 13 |
Topic: Short-Term Liabilities
Read: 1. Chap. 8: Anthony, et.al.
2. Chap. 10: White, Sondhi and Fried 3rd ed.
Learning Mode: Lecture/Discussion & Exercises
TEACHING PURPOSE: To understand the various types of short-term liabilities
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| 14 |
Topic: Long Term Liabilities, Leases and Off-Balance Sheet Debt
Read: 1. Chap.11: White, Sondhi and Fried, 3rd ed.
2. Chap. 8: Anthony, 11th ed. *
3. A Note on Liabilities and Time
4. Leases (IAS 17)
Learning Mode: Lecture and Exercises
TEACHING PURPOSE: To explore the various types of liabilities that are considered to be long term in nature and understand how the liabilities are measured.
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| 15 |
Topic: Stockholder's Equity
Read: Chap. 9: Anthony, et.al.
Introduction to Owners' Equity
Learning Mode: Case Innovative Engineering
TEACHING PURPOSE: To understand the various sources of equity financing to the firm and to calculate the amount of equity.
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| 16 |
Topic: Net Income and Earnings Per Share
Read: 1. Chap. 6 & 10: Anthony, et.al.
2. Chap. 4 White and Sondhi
3. Review Expense Reporting
Learning Mode: Lecture & Exercises
TEACHING PURPOSE: To understand the concept of earnings per share explore various expense issues and its impact on the calculation of EPS.
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| Part 3: Integration |
| 17 |
Topic: The Gash Flow Statement
Read: 1. Chap. 11: Anthony, etal.
2. Chap. 3:White, Sondhi and Fried, 3rd ed.
3. Solving the Puzzle of the Cash Flow Statement
Learning Mode: Lecture and Case: (Spadey A & B)
TEACHING PURPOSE: To introduce the concept of the cash flow statement and understand its usefulness in financial statement analysis.
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| 18 |
Topic: The Cash Flow Statement
Read: Chap. 11: Anthony, et.al.
Chap. 3: White, Sondhi and Fried, 3rd ed.
Cash Flow Statements (IAS 7)
Learning Mode: Case Medieval Adventures Company
TEACHING PURPOSE: To drill skills in constructing and analyzing cash flow statements
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| 19 |
Topic: Financial Statement Analysis
Read: Chap. 13 Anthony, et.al.
Chap. 4: White, Sondhi and Fried, 3rd ed.
Learning Mode: Case: Sears, Roebuck & Co. vs. Wal-Mart Stores, Inc.
TEACHING PURPOSE: To show how the integrated analysis of ratios can be used to evaluate corporate performance.
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| 20 |
Topic: Understanding Financial Statements
Read: Chap. 14 Anthony, et.al.
Learning Mode: Case: Porter Lumber, Company, Inc.
TEACHING PURPOSE: To pull together and review the financial accounting concepts and to ensure the right balance between appreciating the value of accounting information and recognizing its limitations.
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| FINAL EXAM: Coverage: Parts 2 and 3 of LOB |
Knowledge, Competencies, Skills, Values and Attitudes Sought
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| Session No. |
Knowledge |
Skills & Competencies |
Values & Attitudes |
| 1 |
Understand the following:
- Objectives of financial statements
- Assumptions of financial accounting
- Desired characteristics of financial accounting information
- Basic accounting principles
- Constraints of financial accounting
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Identify the various types of information needed to aid in corporate decision-making. |
Appreciate the importance of financial accounting information in day-to-day corporate decision-making. |
| 2-3 |
Understand the following:
- Basic concepts that guide the construction of the balance sheet. The definition of the various balance sheet account terminology.
- The organization and format of the balance sheet.
To understand the fundamental equation of the balance sheet (Assets = Liabilities + Equity)
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To understand the effects of various business transactions on the balance sheet. |
All business transactions has a financial impact, some of which are measured in the balance sheet |
| 4-5 |
Understanding the following:
- Basic concepts that guide the construction of the income statement.
- The definition of the various income statement account terminology.
- The organization and format of the income statement.
To understand the fundamental equation of the income statement (Revenues - Expenses = Net Income).
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To understand the effects of various business transactions on the balance sheet. |
All business transactions has a financial impact, some of which are measured in the balance sheet |
| 6-8 |
Understand the practice and the mechanisms used to collect, organize and present financial accounting information. |
Journalize business transactions.
Set-up T-Accounts to determine ending account balances.
Prepare the various financial statements. |
Useful financial statements are developed only from the proper analysis and organization of business transaction information. |
| 9 |
Understand the conditions under which revenue can be recognized.
Understand the various revenue recognition methods.
Understand the concepts behind the calculation of accounts receivable and bad debt.
Understand the criteria used to account for cash, cash equivalents and short term investments. |
Calculate recognized revenue using different recognition methods.
Calculate allowances for doubtful accounts and bad debt expense. |
The methods used to calculate revenue and bad debt may lead to numbers with different meanings. |
| 10 |
Understand the various inventory valuation methods (specific, average, first-in, first-out (FIFO), and last-in, first-out (LIFO).
Understand quality issues in relation of the valuation of inventories. |
Calculate the value of inventory and cost of goods sold using the different valuation methods. |
Corporate managers have latitude in choosing which inventory valuation method to use. To correctly assess a firm's balance sheet, analysts must understand why and under what conditions managers may choose a specific method. |
| 11-12 |
Understand how the depreciation for PPE is estimated using various methods.
Understand the economic, tax and financial implications of each method.
Understand how other assets are amortized or depleted. |
Determine the cost of fixed assets, its useful life, and salvage value.
Estimate depreciation expense using the various methods. |
Depreciation accounting has a significant impact on the analysis of quality of earnings over time and assets deployed by a firm. |
| 13 |
Understand the nature of various short-term liabilities.
Understand how short term liabilities are measured. |
Calculate trade payables, various types of accrued expenses, unearned revenues, etc. |
Short-term liability analysis is critical in assessing short-term risks and exposures. |
| 14 |
Understand difference between term loans, bond liabilities, and capital leases.
Understand the definition of off balance sheet debt and the issues surrounding its use and analysis. |
Calculate the liability due to a term loan.
Calculate the liability due to a bond floatation.
Calculate the payment schedule and liability due to a capital lease. |
The long-term liabilities has a major impact on the financial risk profile of a firm and thus careful analysis and understanding of these accounts is necessary in assessing a firm's financial health. |
| 15 |
Understand the various classes of owners in a firm and their economic rights and responsibilities.
Understand the impact of share sales, share and cash dividends, stock splits and share repurchases on the calculation of owners' equity
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Calculate the effect of share sales, share and cash dividends, stock splits and share repurchases on owners' equity. |
The choice of where equity is sourced has an impact on the risk profile of the firm as well as on the returns of equity earned by the various owners. |
| 16 |
Understand the relevance of EPS to financial statement analysis and determine how EPS is calculated.
Understand how operating expenses, non-operating expenses, extraordinary items and other adjustments to equity affect the calculation of net income and earnings per share. |
Calculate EPS in a situation where a firm has either a simple or complex equity structure. |
EPS and EPS growth play a major role in the valuation of corporate stock. It is critical to understand how EPS is calculated and reported and how analysts should react to a particular EPS calculation. |
| 17-18 |
Understand the basic concepts that guide the construction of the cash flow statement.
Understand how business transactions affect the cash flow statement.
Understand the analytical power of the cash flow statement in assessing a firm's liquidity, solvency and overall financial health.
Understand the different parts of the cash flow statement (operations, investing and financing).
Differentiate between the direct and indirect method of reporting cash flows from operations. |
Construct the cash flow statement (using both the direct and indirect methods) from existing balance sheets and income statements.
Be able to reconcile net income and net cash using the direct method. |
The cash flow statement is perhaps the most powerful tool in assessing a firm's financial health. Understanding how net income (calculated using accrual accounting) and net cash is reconciled gives significant insight into the firm's current condition and may be used to forecast future performance. |
| 19 |
Understand the following concepts:
- purpose, use use and limitations of ratios
- the use of common-size statements
- measures of operating and financial leverage integrated analysis of ratios
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Compute and analyze ratios
Interpret common-size statements
Use integrated analysis of ratios to evaluate corporate performance |
Appreciate the importance of financial ratio analysis as an effective tool in business decision making |
| 20 |
Understand the right balance between appreciating the value of accounting information and recognizing its limitations. |
Identify the uses and limitations of financial statements in decision making |
Appreciate the uses and limitations of financial statements in decision making |
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