APPLIES TO ACADEMIC YEAR 2014/2015

BST 9502 Advanced Managerial Accounting and Real Investment Theory

Responsible for the course
Espen Skaldehaug

Department
Department of Accounting - Auditing and Law

Term
According to study plan

ECTS Credits
15

Language of instruction
Norwegian

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

Learning outcome
Acquired knowledge
After taking the course, the students should be able to explain key concepts and give an account of the tools of analyses of business economic problems (these tools include methods, techniques, theories, etc. applied in the subject area).
Examples:

• How business management reports should be developed.
• Decision-making, both in the short and the long term.
• Achieve an understanding for the evolution of modern business economics, which will make the students suitable for master studies.
• Achieve an understanding for different sides of business management, and the relations between subjects such as strategy, finance and accounting.

• Be able to see the relations between goal, problem description, data quality, method and the consequences for the decision-making.
• The students shall realise that the final decision recommendation is a consequences of a range of assumptions and choices, made during the reporting process. “Everything depends on something”.
  Examples:
  • The reliability of a recommendation depends on both data quality and the method that has been chosen.
  • Decisions may imply new behaviour that should be taken into account during the decision-making process.

• Be able to understand that doing the best in the interest of one party often will bring a poorer solution for another party. Using business management models will neither ensure justice or maximize the involved persons as a group.
• The students should understand the importance of being able to compare the different advantages and disadvantages of alternatives, analyse them and make conclusions.
• In addition, the students should realise that despite the problem related to measuring the firm’s output (quality and productivity) in one sense, it is important to try to figure out some objective goals. Afterwards, it is the individual employee’s responsibility to try to get as good results as possible from the resources she or he has at her/his disposal. Is it possible to maintain or improve output, measured both in terms quality and productivity, with less expenses?

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

• 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

• 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?

• 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.

• 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