Finance and Accounting

Total Hours in Course162

Number of hours for lectures24

Number of hours for seminars and practical classes24

Independent study hours114

Date of course confirmation19.01.2022

Responsible UnitInstitute of Economics and Finance

Course developers

prof.

Ingrīda Jakušonoka

Dr. oec.

lect.

Ingrīda Pētersone

Mg. oec.

Course abstract

Students gain in-depth knowledge of financial reporting and financial analysis methods in a company. Understands the impact of business transactions on the balance sheet and financial stability of the company. Able to perform financial analysis and make suggestions for the improvement of accounting and financial work.

Learning outcomes and their assessment

Students will be able to
1. Demonstrate the knowledge of the basic idea of a balance sheet and the basic principles of classification of balance sheet items. Discussions in classes, test.
2. Demonstrate an in-depth understanding of the effects of economic transactions on the balance sheet Discussions in classes, test.
3. Demonstrate an in-depth understanding of the nature of revenues and expenses and their inclusion in a profit or loss account. Discussions in classes, a test.
4. Demonstrate an in-depth understanding of recording economic transactions in the double-entry system. Discussions in classes, test.
5. Demonstrate an in-depth knowledge and understanding of the composition and the basic principles of preparing a financial statement. Test.
6. Demonstrate an in-depth understanding of the application of financial statement analysis methods and their role in ensuring the company’s financial stability. Discussions in classes.
7. Independently assess simple economic transactions and record them according to their economic nature. Practical assignments, discussions in classes.
8. Calculate the values of balance sheet items and perform calculations related to the analysis of financial results. Test.
9. Able to independently choose the most suitable type of financing for the company and evaluate the financial results of the company's operations. Test with calculations, independent work, discussions in classes.
10. Independently apply theory, research methods and problem-solving skills. Independent work, discussion.
11. Find, critically assess and creatively use information for performing a task and finding a solution. Independent work, discussion.
12. Cooperate and communicate with others. Group works, case study.
13. Draw up a balance sheet and a profit or loss account for an enterprise Practical assignments, test.
14. Independently keep accounts of economic transactions according to their economic nature and relevant legal requirements. Test with calculations.
15. Able to evaluate and analyse the information contained in the company's financial statements. Exam.
16. Apply the knowledge acquired, successfully develop a financial plan and the cash flow for an enterprise, use modern financial management method. Perform a financial analysis and interpret the results, come up with proposals for decision-making based on economic changes. Practical assignments, tests, an exam.

Course Content(Calendar)

1. Review of regulatory enactments regulating accounting. Analysis of accounting tasks and requirements for keeping accounts. Requirements and significance of accounting documentation. (lecture 1 hour, practical classes 2 hours)
2. Preparation of the balance sheet and description of balance sheet items and classification requirements. Impact of economic transactions on balance sheet items. Analysis of the impact of transactions. (lectures 3 hours, practical work 2 hours)
3. The preparation of a profit and loss account and the characterization and classification of items of income and expense in the income statement. Conditions for recognizing revenue and expenses and their effect on the company's profit or loss. (lecture 1 hour, practical work 2 hours, test 1 hour)
4. Analysis of economic transactions and double entry in the accounting accounts. Preparation of the chart of accounts in accordance with the specifics of the company's operations and the chosen accounting methods. (lectures 3 hours, practical work 2 hours)
5. Components of the annual report, their general description. Regulatory basis regulating the preparation of annual reports. Approval, submission and publication of the annual report. Significance of the auditor's opinion on the financial statements. Preparation of the balance sheet, profit and loss account and cash flow statement. (lectures 4 hours, practical work 2 hours, test 1 hour)
6. The main directions of the company's financial activities and influencing factors. Blocks of financial tasks: financial planning, resource management, capital structure management, investment activities, analysis and evaluation of results. Financial functions: in the field of cash fund management, planning, capital structure management, accounting and control, tax policy, corporate property protection and risk minimization, consulting, management information system development. Entities in financial activities. Key elements of the financial mechanism. Information provision of financial work: plans, forecasts, regulatory enactments, accounting data, report data, management information. (lectures 1.5 hours)
7. Risks of the company's capital formation: imbalance of the amount of generated capital with the volumes of the company's economic activity, risk of reduction of financial stability, insolvency risk, inflation risk, interest rate risk, currency risk, tax risk. Factors affecting the need for external financing. Factors that increase credit risk. Possible causes of credit default. Latvian credit register and regulatory enactments regulating it. Debt collection services. Analysis of Creditreform operations and services. (lectures 1.5 hours)
8. Sources of financing the company's capital. Co - financing platforms. Capital price. Weighted average cost of capital (WACC). Bank loans, bond loans, ordinary and preferred share capital, reinvested earnings, etc. evaluation of sources. WACC valuation based on balance sheet data. CAPM - expected return on shares. Determining the WACC market average. Optimal ratio of own and borrowed funds. Types of corporate financing: conservative financing type, optimal financing type, aggressive financing type, financial crisis financing type. Level of working capital financing, its determination. (lectures 2 hours, practical work 2 hours)
9. Stages of financial planning: forecasting of financial activity, current planning of financial activity, operational planning of financial activity. Financial budget: cash flow plan and balance sheet forecast. Financial responsibility (management) centers. Indicators of financial targets to be achieved: EEA - economic value added, NPV - discounted present value of invested funds, ROI - return on investment, FCF - net cash flow. (lecture 1 hour, practical work 1 hour)
10. Financial analysis and decision making. Selection of indicators for financial analysis. Profit and loss account analysis, balance sheet horizontal and vertical analysis, comparative analytical balance. Financial stability analysis. Solvency and liquidity analysis. Asset turnover analysis, efficiency and profitability analysis. Impact of changes in sales volume on variable and fixed costs. Factors affecting gross profitability. DU PONT integrated system and matrix, its use in financial analysis. Loss point analysis. Return on investment analysis. (lectures 2 hours, practical work 2 hours)
11. Company's cash flow and settlement of liabilities. Accounts payable and their management. Debt restructuring. Financial leverage and its efficiency. Impact of capital structure on return on equity. Creditworthiness and factors influencing it. Loan servicing costs. Loan repayment methods: with a single payment, debt repayment with equal term payments, repayment of the principal debt divided into equal parts. Loan repayment schedules and methods of their preparation. (lectures 2 hours, practical work 4 hours)
12. Insolvency forecasting models and their application in different industries. E. Altman bankruptcy forecasting models and their application. G.Springeit Z model. R.Tafler / H.Tishov four-factor model. Calculation of the creditworthiness ratio. Credit coverage ratio. (lectures 2 hours, practical work 1 hour, test 2 hours).

Requirements for awarding credit points

1. Classification of balance sheet items, impact of economic transactions on the balance sheet, recording of economic transactions, preparation of financial statements. Practical work (5%)
2. The nature of the balance sheet, the classification of balance sheet items, the effect of economic transactions on the balance sheet, the nature of revenue and expenses and the classification in profit or loss. Test with calculations (20%)
3. Accounting for business transactions, accounting accounts and double entry, composition of the financial statement, its description and preparation. Test with calculations (20%)
4. Determining the level of financing of the company's AL; calculation and compilation of loan repayment schedules; determination of the weighted average cost of capital, calculation and evaluation of financial results and profitability of operations, bankruptcy forecasting models and their application in financial analysis; calculation and evaluation of financial leverage and its effect indicators. Group work, case studies. Test with calculations (15%)
5. Exam (financial topics, written) (40%)

Description of the organization and tasks of students’ independent work

Getting ready for practical assignments, tests and exam.

Criteria for Evaluating Learning Outcomes

All assignments shall be completed. Every assignments is graded. The evaluation of the study course depends on the evaluation of practical assignments (tasks), tests and exam. 10% corresponds to one point on the 10-point assessment scale.

Compulsory reading

1. Atrill P., McLaney E. Accounting and finance. Pearson, 2016. 852 p.
2. Brooks R.M. Financial management: core concepts, Boston: Pearson. 2016. 648 p.
3. Brealey R.A., Myers S.C., Marcus A.J. Fundamentals of Corporate Finance. Boston: McGraw-Hill/Irwin, 2020. 993 p. Pieejams: Principles of Corporate Finance
4. Elliot B., Elliot J Financial Accounting, Reporting and Analysis: International Edition. London: Prentice Hall, 2006. 696 p.
5. Krogzeme H. Komersantu darbības analīze un kontrole. Rīga: RTU Izdevniecība, 2013. 348 lpp.
6. Kusins J., Zariņa V. Gada pārskats un iepriekšējo periodu kļūdas. Palīglīdzeklis grāmatvežiem, Rīga: Biznesa augstskola Turība, 2016. 2017. 352 lpp.
7. Leibus I., Pētersone I., Jesemčika A., Svarinska A., Grigorjeva R. Finanšu grāmatvedība. Rīga: Lietišķās informācijas dienests, 2020. 318 lpp.
8. Pike R. Corporate Finance and Investment: Decisions and Strategies. 8th ed. New York: Pearson Education Limited, 2015. 844 p.
9. Saksonova S. Finanšu informācijas un pārskatu praktiskā izmantošana uzņēmumu finanšu lēmumu pieņemšanā. Rīga: Info tilts, 2014. 313 lpp.

Periodicals and other sources

1. Žurnāls: Bilance. Elektroniskais žurnāls. // Pieejams: https://www.plz.lv/
2. Žurnāls: IFinanses. Elektroniskais žurnāls / Pieejams: https://ifinanses.lv/
3. Journal of Corporate Finance Journal of Corporate Finance - Journal - Elsevier. Pieejams LLU FB datubāzē ScienceDirect journals ar LLU lietotājkontu (e-studiju parolēm): https://www-sciencedirect-com.ezproxy.llu.lv/journal/journal-of-corporate-finance
4. Journal of Financial Stability Journal of Financial Stability / ScienceDirect.com by Elsevier Pieejams LLU FB datubāzē ScienceDirect journals ar LLU lietotājkontu (e-studiju parolēm): https://www-sciencedirect-com.ezproxy.llu.lv/journal/journal-of-financial-stability
5. Finanšu ministrija. Pieejams: http://www.fm.gov.lv

Notes

Compulsory study course for the academic master’s study programme “Economics”

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