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Accounting and Finance for Decision Making
This subject concerns the use of accounting information for management planning. It emphasises product costing. Topics covered include elements of costing, absorption and marginal costing, cost-volume-profit analysis and standard costing. It also focuses on the use of accounting information for planning and control and decision-making. Topics include relevant costing, performance evaluation involving return on investment, transfer pricing, and budgetary control.
The subject also reinforces the dynamic nature of the markets and rapid developments in the financial system, the module will attempt to use example and cases to highlight the role of financial markets and financial intermediaries and the main players in the financial system. The subject is designed to provide students with a basic understanding of the cash flow statements, the management of capital expenditure and short and long-term sources of finance.
On successful completion of this subject, the student will be able to:
• Identify how accounting information helps decision makers.
• Explain when it is beneficial for a company to use financial leverage.
• Identify information that companies report about obligations to lenders and explain the transaction affecting long-term debt.
• Discuss how strategic and operational planning uses accounting information.
• Understand the use of cost-volume-profit analysis in managerial decision-making.
• Explain how budgets influence strategic decisions.
• Identify various organisational levels within a company and explain how performance at each level may be evaluated.
• Explain the historical context in which returns on investment was developed.
• Discuss various transfer-pricing methods that have been developed to influence managerial behaviour.
Macroeconomics
This syllabus covers the main principles involved in the determination of real income, employment and unemployment, the price level and inflation in an open mixed economy, and the conduct of macroeconomic policy.
The main topics are:
Aggregate demand in a closed economy: the determinants of consumption, investment, demand for and supply of money; wealth effects; the IS-LM model and policy prescriptions.
Aggregate demand in an open economy: exchange rate regimes, international trade and capital flows, and external balance; the IS-LM-BP model and policy prescriptions.
Aggregate demand, aggregate supply and the price level: the aggregate demand curve; short and long run aggregate supply curves; the aggregate demand-aggregate supply model and its applications to the determination of the price level and real income, and demand management policy; the neo-classical (Solow) growth model.
Inflation and unemployment; models of inflation; costs of inflation; counter-inflationary policy; full employment and the natural rate of unemployment; types and causes of unemployment, and policies to reduce them.
Principles of Banking and Finance
Part 1 Financial systems
• Introduction to Financial Systems; Role of financial systems (role of households, government, and firms in terms of savings and investments). Financial intermediaries, securities and markets. Taxonomy of financial institutions. Nature of financial claims (debt
versus equity, bonds and notes, fixed and floating interest rates, common and preferred stocks). Structure of financial markets (direct and indirect finance, dealers and brokers, banks, mutual funds, pension funds, and insurance companies).
• Comparative Financial Systems; Bank-based systems against market-based systems.
Legal aspects.
Part 2 Financial intermediaries
• Role of Financial Intermediation; Nature and process of financial intermediation. Theories of financial intermediation (transformation of assets, uncertainty, reduction in transaction costs, reduction of problems arising out of asymmetric information). Implications of financial intermediation (Hirshleifer model, effect on economic development).
• Regulation of Banks; Regulation of banks (free banking, arguments for or against regulation, traditional regulation mechanisms, alternatives to traditional regulation).
• Risk Management in Banking; Market risks: Liquidity risk, interest rate risk, foreign exchange risk. Credit risk: Screening and monitoring, credit rationing, collateral.
Part 3: Principles of finance
• Financial Securities: Risk and Return; Portfolio analysis: mean-variance portfolio theory. The portfolio selection process: the correlation of securities returns (single-index model and multi-index models). Asset pricing models: capital asset pricing models (CAPM) and arbitrage pricing model (APT).
• Capital Budgeting; Pricing of bonds and stocks. Net present value. Project appraisal.
• Financial Markets: Transmission of information; Efficient markets, theory and empirical evidence. Concepts of weak, semi-strong, and strong efficiency. Concepts of excess returns. Micro-structures.
Corporate Finance
Project evaluation: Hirschleifer analysis and Fisher separation; the NPV rule and IRR rules of investment appraisal; comparison of NPV and IRR; 'wrong' investment appraisal rules: payback and accounting rate of return.
Risk and return - the CAPM and APT : the mathematics of portfolios; mean-variance analysis; two-fund separation and the CAPM; Roll's critique of the CAPM; factor models; the arbitrage pricing theory.
Derivative assets - characteristics and pricing: definitions: forwards and futures; replication, arbitrage and pricing; a general approach to derivative pricing using binomial methods; options: characteristics and types; bounding and linking option prices; the Black-Scholes analysis.
Efficient markets - theory and empirical evidence: underpinning and definitions of market efficiency; weak-form tests: return predictability; the joint hypothesis problem; semi-strong form tests: the event study methodology and examples; strong form tests: tests for private information.
Capital structure: the Modigliani-Miller theorem: capital structure irrelevancy; taxation, bankruptcy costs and capital structure; the Miller equilibrium; asymmetric information - 1) the under-investment problem, asymmetric information; 2) the risk-shifting problem, asymmetric information; 3) the pecking order theory.
Dividend theory: the Modigliani-Miller and dividend irrelevancy; Lintner's fact about dividend policy; dividends, taxes and clienteles; asymmetric information and signalling through dividend policy.
Mergers and acquisitions: motivations for merger activity; calculating the gains and losses from merger/takeover; the free-rider problem and takeover activity.
Banking Operations and Risk Analysis
Trends in banking structure: considers the main trends influencing the development of financial institutions around the world. The most important of these are the impact of technological and financial innovations combined with the structural de-regulation of financial markets. One of the consequences of these trends is a move towards the concentration of financial services with an increasing number of mergers between banks and other financial organisations.
Theories of the banking firm: examines various models of the banking firm, such as the asset allocation and the liability of choice models, as well as considering the asset transformation role of banks and the various roles of banks' liabilities and the two-sided nature of the financial firm. Various methods of analysing bank performance are also considered.
Balance sheet management, liquidity and capital adequacy: considers the asset and liability management of banks. A brief history of asset and liability management is followed by an examination of techniques for managing assets and liabilities, including the role of liquidity and capital adequacy.
Risk and risk management: covers risk and risk management. Six main types of risk are analysed: credit risk, liquidity risk, interest rate risk, currency risk, country risk and contingent risk (off-balance sheet risk). The various methods for controlling these risks are considered.
Lending: Analyses the leading functions of banks, covering short, medium and long-term lending and the associated assessment of risk/return. Issues of security, ability to repay and the administrative process are also considered.
Retail banking: covers trends and developments in retail banks. Of particular relevance is the impact of technological and socioeconomic developments which have influenced the supply of new banking products. The evolution of new products over the last 20 years is considered together with the changing nature of the bank/customer relationship.
Wholesale and corporate banking: examines wholesale and corporate banking covering produce range, treasury functions (including derivatives), and the changing nature of the relationship between banks and their corporate clients. Of particular relevance is the segmentation of the market between small and large corporate clients, and how banks respond to their different needs.
International banking: covers trends in international banking by examining the various definitions of different types of international banking and branches overseas; the relationship between international banking and the capital markets (particularly the Euromarkets), the role of banks in international financing, and the role of banks in lending to the Third World countries.
Risks, crises and prudential regulation: analyses risks, crises and prudential regulation. The various types of risks which need to be regulated are examined together with issues surrounding prudential regulation, including the move towards a common international environment.
Risk management:
• Managing interest rate risk: assets with fixed cash flows; assets with variable cash flows; caps and collars; swaps; interest rate futures; forward rate agreements; portfolio of assets.
• Managing foreign exchange risk: full hedge with forward or futures contracts; complexities of hedging with futures contracts; partial hedges with forward or future contracts; hedge with an option contract; partial hedge with options; full hedge with a money market hedge; managing exchange risk using swaps; contingent assets; future debt; future asset with a random value; balance sheet hedge; hedging with derivatives; diversification into currencies.
International Financial Markets and Comparative Banking
This subject examines the structure and operations of international financial markets through an analysis of the economic principles underlying the evolution of market practice and instruments. The internationalisation of capital flows has enhanced global liquidity and the price sensitivity of markets, so leading to new hedging and investment opportunities.
By examining the activities of institutions when trading positions to hedge or invest, the syllabus develops an understanding of the risk/reward relationship that drives the growth of these markets.
A distinctive feature of this course/module is the inclusion of alternative banking systems especially Islamic banking, which has a strong base in Muslim countries or countries with a sizeable Muslim population. A critical approach will be used to compare the role of alternative financial markets and their banking systems with established financial systems.
Introduction to international financial markets: the growing importance of international markets; the size and classification of the markets; operations in the markets.
Interest rates in international markets: the term structure of interest rates – expectations theory, liquidity preference and segmentation theory; determination of international interest rates.
Foreign exchange markets: exchange rates and the FOREX markets; contracts in the market; movements in spot rates; contracts in organised exchanges; quotations of rates.
International money markets: the Eurocurrency markets; the growth of the Eurodollar markets – interest rates, lending and country risk; Euronotes and Eurocommercial paper.
International bond markets: composition and evolution of the markets; issuing; private placements; bought deals; floating rate notes; global bonds.
International equity markets: international equity investments; emerging stock markets; portfolio investment in developing countries; issuing international equity.
Diversification in international markets: fundamentals of the theory of investments; benefits of international diversification; optimal allocation of assets in international markets.
Risks in international markets: exchange and interest rate volatility; identifying and measuring risk; interest rate risk; exchange rate risk.
Financial derivatives: forwards and futures contracts – payoff, quotations and forward rate agreements; options contracts – payoff, pricing, quotations, options on futures; interest rate and currency swaps.
International banking: international activities of banks; foreign exchange trading; trade financing; international lending; risk management products; capital adequacy.
Banking Law and International Banking Law
This course is designed to familiarise the student with the key principles relating to the modern law of banking.
Four main areas will be covered:
• the law of negotiable instruments,
• the law of payment systems,
• the banker customer relationship and
• bank regulation.
Students who wish to obtain a basic knowledge of banking law will benefit from this course. It is also recommended that those who wish to specialize in banking law take this course as a foundational course, prior to studying the more advanced banking courses.
This course will also introduce students to international banking transactions and enable them to analyse the relevant legal issues. Correspondent bank relationships and the structure of international banking, banking networks, representative offices and agency banks will be examined. Substantive topics include a legal analysis of;- foreign currency deposits (including ACU deposits); methods used to transfer money (including the operations of the SWIFT system; portfolio management; and letters of credit. The course will be useful for students who intend to practise international commercial law or work in an international financial institution.
The appropriate laws as seen in alternative banking systems such as Islamic banking and the banking environment in socialist states such as China will also be introduced.
Banking and Finance Final Project
The Project will be prepared on an individual basis with weekly supervision and guidance.
The students should work on a case study or an industrial problem.
By applying the skills of research and report writing, students will develop a project plan, from initial problem definition or hypothesis, through to data collection, analysis and implementation strategies.
In the process they may have to identify project respondents for data collection, conduct interviews, undertake a literature review, develop analytical models and to develop recommendations and/or to draw conclusions based on their analyses.
The project will be presented on week 12 in the form of a report and a stand-up presentation.
Students will also get weekly Counselling sessions with highly trained professional, who will be able to provide an added dimension and insights into the Business environment in Singapore.
Each module is assessed by a combination of some/all of the following:
- Assignments
- Quizzes
- Examinations
- Projects
- GCE ‘O' level qualification, with at least C6 for English and Mathematics, plus one more 'O' level subject or
- ITC/ITE graduates from certificate in Office Skills, Certificate in Business Studies (Accounting/Secretarial) or
- A minimum of 12 years of basic education
- Relevant diploma holders from government polytechnics and recognized educational institutions will enjoy module exemptions
Completed application forms should be accompanied by:
- 2 photocopies of academic certificates/transcripts to be certified as true copy by Hartford Institute Pte Ltd
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University of Wales
