Finanace associate

ALPINE SKI HOUSE
FINANCE
ASSOCIATE
TRAINERS GUIDE

ALPINE SKI HOUSE
Chapter-1
Accounting - Financial Strategy
• Strategic financial management refers to specific planning
of the usage and management of a company's financial
resources to attain its objectives as a business concern and
return maximum value to shareholders over the long run.
• Strategic financial management involves precisely defining
a company's business objectives or goals, identifying and
quantifying its available or potential resources, and devising
a plan for utilizing finances and other capital resources to
achieve its goals.
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• A financial strategy is an important aspect
of any business. Financial strategies
should be discussed and shared with
company shareholders, executives and
employees, so everyone is on the same
page financially.
• Establish Operating Costs
• Set Financial Goals
• Financial Projection
• Manage Collections
IMPORTANCE OF
FINANCIAL STRATEGY
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• Organizational goals are created in an
attempt to achieve a desired state of
profit and success.
• General organizational goals are found in
the mission/vision statement of the
company, but details of those goals are
defined in the business plan.
Understand organization
goal achievement
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• Clearly Define Your Goals
• Make Sure Everyone Knows About Your
Goals
• Refer to Your Goals Often
• Define the Building Block Initiatives That
Will Make Your Goals a Reality
• Establish an Approach to Completing the
Building Blocks Initiatives:
• Give the Building Block Initiatives Adequate
Effort to be Completed.
• Publicize Progress in Achieving Your
Goals
Steps that will help you achieve
your organizational goals
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RISK
• Risk is the potential of gaining or losing
something of value.
• Values (such as physical health, social status,
emotional well-being, or financial wealth) can
be gained or lost when taking risk resulting
from a given action or inaction.
• Risk can also be defined as the intentional
interaction with uncertainty.
• Uncertainty is a potential, unpredictable, and
uncontrollable outcome; risk is a consequence
of action taken in spite of uncertainty.
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TYPES OF RISK
• Credit or Default Risk
• Country Risk
• Foreign-Exchange Risk
• Interest Rate Risk
• Political Risk
• Market Risk
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FOREIGN-
EXCHANGE RISK
• Foreign exchange risk is a financial risk that
exists when a financial transaction is
denominated in a currency other than that of
the base currency of the company.
• Foreign exchange risk also exists when the
foreign subsidiary of a firm maintains financial
statements in a currency other than the
reporting currency of the consolidated entity.
• Investors and businesses exporting or
importing goods and services or making
foreign investments have an exchange rate risk
which can have severe financial consequences.
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MARKET RISK
• Market risk is the possibility of an investor
experiencing losses due to factors that affect
the overall performance of the financial
markets in which he or she is involved.
• Market risk, also called "systematic risk,"
cannot be eliminated through diversification,
though it can be hedged against.
• Sources of market risk include recessions,
political turmoil, changes in interest rates,
natural disasters and terrorist attacks.
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FOUR MAIN
TYPES OF
MARKET RISK
• Interest rate risk covers the volatility that may
accompany interest rate fluctuations due to
fundamental factors, such as central bank
announcements related to changes in monetary policy.
This risk is most relevant to investments in fixed-
income securities, such as bonds.
• Equity risk is the risk involved in the changing prices of
stock investments, and commodity risk covers the
changing prices of commodities such as crude oil and
corn.
• Currency risk, or exchange-rate risk, arises from the
change in the price of one currency in relation to
another; investors or firms holding assets in another
country are subject to currency risk
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Difference Between Financial Risk and Political Risk
Financial risk
• Financial risk is any of various types
of risk associated with financing, including financial
transactions that include company loans in risk
of default.
• Often it is understood to include only downside
risk, meaning the potential for financial loss and
uncertainty about its extent.
• A science has evolved around managing market and
financial risk under the general title of modern
portfolio theory initiated by Dr. Harry Markowitz in
1952 with his article, "Portfolio Selection".
• n modern portfolio theory, the variance (or standard
deviation) of a portfolio is used as the definition of
risk.
Political risk
• Political risk is a type of risk faced
by investors, corporations, or conditions will significantly
affect the profitability of a business actor or the expected
value of a given economic action.
• Political risk can be understood and managed with
reasoned foresight and investment.
• The term political risk has had many different meanings
over time. Broadly speaking, however, political risk refers
to the complications businesses.
• Or "any political change that alters the expected outcome
and value of a given economic action by changing the
probability of achieving business objectives". 11

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RISK MITIGATION
STRATEGIES
• General guidelines for applying risk
mitigation handling options.
• These options are based on the
assessed combination of the probability
of occurrence and severity of the
consequence for an identified risk.
• These guidelines are appropriate for
many, but not all, projects and
programs.
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Chapter-2
Accounting – Decision Making Process
• A critical managerial function is decision-making.
Decisions which management must make may be
classified as marketing, production, and financial.
Decisions may also be classified as strategic and
tactical and long-run and short-run.
• A primary objective of decision-making is to achieve
optimum utilization of the business’s capital or
resources. Effective decision-making requires relevant
information and special analysis of data.
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DIFFERENT
TYPES OF
DECISIONS
1. Programmed and non-programmed
decisions:
2. Routine and strategic decisions:
3. Tactical (Policy) and operational decisions:
4. Organizational and personal decisions:
5. Major and minor decisions:
6. Individual and group decisions.
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DECISION-MAKING
PRINCIPLES
• Business Maturity Date.
• Make more money in less time.
• Focus on my lifetime goals, not just on growing my
business.
• Get off the treadmill, own the business instead of
the business owning me.
• ake decisions on where I want to be, not where I
am.
• Bad plans carried out violently many times yield
good results. Do something
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WHY MANAGEMENT
ACCOUNTING IS
IMPORTANT IN DECISION-
MAKING
• Small business owners and managers are faced
with countless decisions every business day.
• Management accounting uses information
from your operations to produce reports that
provide ongoing insight into business
performance, such as profit margin and labor
utilization, so you and your managers have
data-driven input to make everyday decisions.
• Small businesses can leverage this powerful
trove of calculations to improve decision-
making over time for higher profitability and
greater competitive advantage.
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ACCOUNTANT CAN
HELP A SMALL
BUSINESS
• If you are bootstrapping or starting a small
business on a limited budget, you have probably spent
some time trying to figure out where you can cut
business costs and do more on your own in order to
stretch the funds you have available.
• One area you may consider doing it yourself instead
of hiring it out is accounting. If you have an
accounting background and a solid understanding of
business finances, then this may be a good place to
cut costs.
• However, if you lack experience in managing the
books of a business and expect to learn as you go,
you should think twice. Managing your own
accounting system incorrectly can hurt your business
not only now, but also in the long-term.
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FACTORS THAT HAVE PROPELLED
THE IMPORTANCE OF STRATEGIC
DECISION MAKING
• Data deluge: As per IBM, every day, we create more
than 2.5 quintillion bytes of data.
• Globalization: Globalization has led organizations to
adopt internationally best practices of accountancy and
business management across countries. There is also
growing demand for more detailed information and
transparency.
• Internal changes: Corporate landscape is a perpetually
dynamic one. hierarchical change or downsizing have
increased in recent times.
• External changes: Changes that happen outside the
company but have an impact on its operations can be
termed as external changes.
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DECISION MAKING
PROCESS
• Identification of a problem
• Diagnosing the problem
• Collect and analyze relevant information
• Discovery of alternative course of action
• Analyzing the alternatives
• Screening the alternatives
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EFFECTIVE
DECISION MAKING
Step 1: Identify the decision
Step 2: Gather relevant information
Step 3: Identify the alternatives
Step 4: Weigh the evidence
Step 5: Choose among alternatives
Step 6: Take action
Step 7: Review your decision & its consequences
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BUSINESS GROWTH
STAGE
• Provide advice on property and equipment leasing
and purchase.
• Help you prevent getting audited by the IRS.
• Prepare you for and guide you through an audit, if
necessary.
• Create financial forecasts so you can make better
decisions in your business.
• Work with you to create a business budget that will
support your business goals.
• Provide advice and resources to assist you with the
sale of your business
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THE START-UP PROCESS
• Determining the best business structure for your situation.
• Assisting with the financial analysis in your business plan.
• Providing advice on the type of accounting software you
may need.
• Providing advice and assistance on opening a business bank
account.
• Making sure your accounting procedures comply with
government regulations and requirements.
• Providing advice on how to track expenses during your daily
business activities.
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Chapter-3
Decision Making for value analysis
• Value analysis is not a critical review, constructability
review, or cost cutting exercise.
• It is a problem solving and decision-making technique
that bypasses learned responses to produce alternative
solutions achieving all required functions of the original
design at the least cost over the life of the facility.
• It is a team effort which follows an established,
organized, job plan, and problem identification format
that promotes objectivity and stimulates creativity.
• When the value analysis methodology is followed
precisely, beneficial results are ensured.
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TARGET COSTING
• A customer-centric costing
system that bases all cost
workings for a product from its
market price.
• The purpose is to reduce cost of
a product as low as possible to
arrive at a price that would be
either equal to or less than that of
competitors’ product while
delivering the same functionality.

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Committed cost
• Committed costs refers to the costs that
management agrees to incur for product
development through all stages of the life cycle.
• Studies have suggested, about 70% to 80% of
manufacturing cost is committed at design stages
of a product. TC focus all attention at cost
components (materials, labor & overheads) at
design stages.
• Suppliers are also involved at design stages to
provide cost effective solutions.
• For instance, suppliers can help in reducing cost by
suggesting alternative parts or components at the
lowest cost for a desired level of functionality.
Similar decisions are made for labor and overhead
costs

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LIFE CYCLE
COSTING
• Lifecycle Costing (LCC) refers to a process of
identifying and recording all costs that are
incurred over the entire lifecycle of a product.
LCC includes cost incurred before production of
the product till cost incurred for disposal of the
product.
• •TC attempts to achieve reduction of Lifecycle
Costs of a new product by examining all stages
for cost- reduction at R&D, production and
disposal stage a product. TC is just not a costing
system but a comprehensive profit planning tool
for a product over the entire lifecycle. Target
Costing 21 Analysis of Lifecycle Costs
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Comparison
TARGET PRICING
• Competitors’ prices are considered for setting
prices
• Price determines cost of a product
• Design is primary focus for reducing cost
• Cross functional team of technicians
participate in cost management
• Suppliers are involved at design stages
• Involve value chain in cost planning
COST-PLUS PRICING
• A certain amount of profit is added to cost to
arrive at a price
• Cost determines price of a product
• Focus is on meeting budgeted cost, reducing
production losses and wastages
• Cost and Management Accountants work out
cost of products and suggest cost reductions
• Suppliers are involved at production stage
• There is no consideration for value chain at
cost planning stage 27

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CHARACTERISTICS OF
LIFE CYCLE COSTING
• Life-Cycle Costs are all the costs
associated with the product for
its entire life cycle.
• Product life cycle costing traces
costs and revenues of each
product over several calendar
periods throughout their entire
life cycle.
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LIFE CYCLE
COSTING PROCESS
i. Life cycle costing is a three-staged process.
ii. The first stage is life cost planning stage
which includes planning LCC Analysis,
Selecting and Developing LCC Model,
applying LCC Model and finally recording
and reviewing the LCC Results.
iii. The Second Stage is Life Cost Analysis
Preparation Stage followed by third stage
Implementation and Monitoring Life Cost
Analysis

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Benefits of Product Life
Cycle Costing
1. It results in earlier action to generate revenue
or lower costs than otherwise might be
considered. There are a number of factors that
need to be managed in order to maximize
return in a product.
2. Better decision should follow from a more
accurate and realistic assessment of revenues
and costs within a particular life cycle stage.
3. It can promote long term rewarding in
contrast to short term rewarding.
4. It provides an overall framework for
considering total incremental costs over the
entire span of a product.

ALPINE SKI HOUSE
COMPREHEND
VALUE ANALYSIS
• An approach to improving the value of an item or
process by understanding its constituent
components and their associated costs.
• It then seeks to find improvements to the
components by either reducing their cost or
increasing the value of the functions.
• Recent discussion has begun to use the term 'value
management' to describe a broad approach
including tools of value analysis.

ALPINE SKI HOUSE
Effects of Life-
Cycle Costing
• Life cycle costing helps companies to
be aware of where their products are
in their life cycles.
• because in addition to the sales
effects, the life-cycle stage may have
a tremendous impact on costs and
profits.

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ACTIVITY-BASED
COSTING
• Activity-based costing (ABC) is an accounting method
that identifies and assigns costs to overhead activities
and then assigns those costs to products.
• An activity-based costing (ABC) system recognizes the
relationship between costs, overhead activities, and
manufactured products, and through this relationship,
it assigns indirect costs to products less arbitrarily than
traditional methods.
• Some costs are difficult to assign through this method
of cost accounting. Indirect costs, such as management
and office staff salaries, are sometimes difficult to
assign to a product. For this reason, this method has
found its niche in the manufacturing sector.

ALPINE SKI HOUSE
Chapter-4
Risk analysis and control strategy
Risk Control Strategies are the defensive measures
utilized by IT and InfoSec communities to
limit vulnerabilities and manage risks to an
acceptable level.
There are a number of strategies that can be
employed as one measure of defense or in a
combination of multiple strategies together.
A risk assessment is an important tool that should be
incorporated in the process of identifying and
determining the threats and vulnerabilities that could
potentially impact resources and assets to help
manage risk.
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THE IMPORTANCE
OF SYSTEMS
• Systems and processes play a significant role
in building a company. They serve as the
company’s essential building blocks and
support.
• It is also important to consider the efficiency
and accuracy of the business systems. This
way, the business’ principles and
implementation become a lot clearer and
easier.
• Systems also enable employers to monitor and
manage their staff. It allows them to interact
with each other and connect them to the
operational strategies of the business.
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Why are systems so
important?
• Running a successful business requires
quality information systems to process
all the data and statistics, both financial
and organizational.
• If you’re like most, your company has
surely come across data problems
related to accuracy and reliability that
have slowed down your workflow
drastically.

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REASONS TO INVEST
IN INFORMATION
SYSTEMS
 Organized Data
 Perspective on Your Business Future
 Information Storage
 Avoiding Crisis
 Easier Decision Making
 Analyzing and Planning
 Data Control
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Internal control system
• Internal control, as defined in accounting and auditing,
is a process for assuring achievement of an
organization's objectives in
operational effectiveness and efficiency, reliable
financial reporting, and compliance with laws,
regulations and policies. A broad concept, internal
control involves everything that controls risks to an
organization.
• It is a means by which an organization's resources are
directed, monitored, and measured. It plays an
important role in detecting and preventing fraud and
protecting the organization's resources, both
physical and intangible.

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ADVANTAGES OF
INTERNAL CONTROL
• The advantages of internal control are obvious, since
they lead to a more efficiently run organization.
Strong internal controls will ensure a company's
resources are utilized only for their intended
purposes
• Internal control also prevents any financial
irregularities by detecting them quickly and thus
resolving any issues that arise in a timely manner.
• In addition, having strong internal controls in place
can prevent a company's employees from being
accused of any irregularities or misappropriations of
funds.
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Dis-advantages of
internal control
• Internal control also has the potential for
disadvantages. If internal controls are badly
planned or executed, employee frustration or
apathy may result. In addition, an internal control
system that is too rigidly designed to allow for
adaptation to a particular organization may be
difficult to sustain.
• Perhaps the biggest disadvantage to internal
control is that it may cause a company's auditors
to become over-dependent on the internal
control system, which may lead them to relax
other measures of checking for fraud and errors.

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IMPORTANCE OF
CORPORATE
GOVERNANCE
• Corporate governance ensures that a properly
structured Board, capable of taking independent &
objective decisions is at the helm of affairs of the
company.
• It improves strategic thinking at the top by
inducting independent directors who bring a wealth
of experience & a host of new ideas.
• It rationalizes the management & monitoring of
risk that a corporation faces globally.
• Corporate governance emphasizes the adoption of
transparent procedures & practices by the Board,
thereby ensuring integrity in financial reports.
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Corporate governance
Ethics
• Corporate governance is the term used to refer to
the policies and processes by which a corporation
(or other large, complex institution) is controlled
and directed.
• It refers especially to the way power and
accountability flow between shareholders, boards
of directors, CEOs, and senior managers.
• For most corporations, the basic governance
structure is this: shareholders vote for, and hence
empower, a board of directors, who then have a
fiduciary responsibility to look out for
shareholders’ interests.
• The board hires a CEO, who is accountable to the
board. The CEO (sometimes with input from the
board) hires a management team, and so on.

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STAKEHOLDERS
• In A corporate stakeholder can affect or be
affected by the actions of a business as a
whole.
• Whereas shareholders are often the party with
the most direct and obvious interest at stake in
business decisions, they are one of various
subsets of stakeholders,
as customers and employees also have stakes in
the outcome.
• In the most developed sense of stakeholders in
terms of real corporate responsibility, the
bearers of externalities are included in
stakeholder ship
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Shareholders
• A shareholder or stockholder is an individual or
institution (including a corporation) that legally
owns one or more shares of stock in
a public or private corporation.
• Shareholders may be referred to as members of a
corporation. Legally, a person is not a shareholder
in a corporation until his or her name and other
details are entered in the corporation‘s register of
shareholders or members.
• A beneficial shareholder is the person that has the
economic benefit of ownership of the shares, while
a nominee shareholder is the person who is on the
corporation’s register as the owner while being in
fact acting for the benefit and at the direction of
the beneficiary, whether disclosed or not.

ALPINE SKI HOUSE
Chapter-5
Accounting – Business Economics Strategy
• Business economics is a field of applied
economics that studies the financial,
organizational, market-related and
environmental issues faced by corporations.
Assessments are made using economic
theory and quantitative methods.
• Business economics analyzes subjects such
as business organization, management,
expansion and strategy.
• Studies might include how and why
corporations expand, the impact
of entrepreneurs, the interactions
among corporations and the role of
governments in regulation.
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Strategy Formulation
Process
• Strategy formulation refers to the process of
choosing the most appropriate course of
action for the realization of organizational
goals and objectives and thereby achieving the
organizational vision.
• The process of strategy formulation basically
involves six main steps. Though these steps
do not follow a rigid chronological order,
however they are very rational and can be
easily followed in this order.

ALPINE SKI HOUSE
STEPS OF STRATEGY
FORMATION
1. Environmental Analysis and Diagnosis
2. Gap Analysis
3. Identification of Mission and Long-
Range Objectives of the Enterprise
4. Development of Strategy Alternatives
5. Evaluation of Strategy Alternatives
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BUSINESS GOALS
Profit - Making profit is the primary goal of
any business enterprise.
Growth - Business should grow in all
directions over a period of time.
Power - Business houses have vast resources
at its command.

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TYPES OF
ENVIRONMENT
• Technological Environment
• Political Environment
• Economic Environment
• Global or international
Environment
• Social and culture Environment
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IMPORTANCE OF
ENVIRONMENTAL STUDY
• The benefits of environmental study are as
follows
• Development of broad strategies and long-
term policies of the firm.
• Development of action plans to deal with
technological advancements.
• To foresee the impact of socio-economic
changes at the national and international levels
on the firm’s stability.
• Analysis of competitor’s strategies and
formulation of effective countermeasures.
• To keep oneself dynamic.

Difference between political and economic environment
Political Environment
• It refers to the influence exerted by
the three political institutions viz.,
legislature executive and the judiciary
in shaping, developing and controlling
business activities.
• A stable and dynamic political
environment is indispensable for
business growth.
Economic Environment
• There is close relationship between
business and its economic
environment.
• Business obtains all its needed inputs
from the economic environment and it
absorbs the output of business units.
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Organizational Responses
• Business process reengineering
• Reducing cycle time and time to
market
• Empowerment of employees
• Customer focused approach
• Restructuring and team based
structure
• Business Alliances
• Electronic Business, Commerce

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POLITICAL FACTORS
AFFECTING
BUSINESS
• The political factors affecting business are
often given a lot of importance. Several
aspects of government policy can affect
business. All firms must follow the law.
Managers must find how upcoming
legislations can affect their activities.
• The political environment can impact
business organizations in many ways. It
could add a risk factor and lead to a major
loss. You should understand that the
political factors have the power to change
results.
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5 Factors that Influence
Business Environment
1. Environment Analysis-Political environment
2. Economic environment
3. Social environment
4. Technological environment
5. Legal environment

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Chapter-6
Different types of variances
The following points highlight the four
major types of variance analysis. The
types are:
1. Material Variances
2. Labour Variances
3. Variable Overhead Variances
4. Sales Variances.
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ADVANTAGES OF
STANDARD
COSTING
• Formulation of price and production policies
• Comparison and analysis of data
• Management by exception
• Delegation of authority and responsibility
• Cost consciousness
• Better capacity to anticipate Better economy, efficiency,
and productivity
• Preparation of periodical financial statements
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Budget
• A budget is a financial plan for a
defined period of time, usually a year. It
may also include planned sales volumes
and revenues, resource quantities, costs
and expenses, assets, liabilities and cash
flows.
• Companies, governments, families and
other organizations use it to express
strategic plans of activities or events in
measurable terms.

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IMPORTANCE OF
BUDGETS
• Budget is needed for planning for future course
of action and to have control over all activities in
the organization.
• It facilitates coordinating operation of various
departments and sections for realizing
organizational objectives.
• Budget serves as guide for action in the
organization.
• Budget helps one to weigh the values and to
make decision when necessary on whether one is
of greater value in the program than the other.
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FEATURES OF BUDGET
• It should be synthesis of past, present, and future.
• It should be product of joint venture +
cooperation of executives/ department heads at
different levels of management.
• It should be in the form of statistical standard laid
down in specific numerical terms.
• It should have support of top management
throughout the period of its planning and
supplementation.
• It is a plan of program and has comprehensive
plan of action
• It should estimate revenues & expenditures as
accurately as possible

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TYPES OF BUDGET
• Capital budget
• Cash budget
• Expense budget
• Sales budget
• Labor budget
• Production budget
60
Budget
Capital
budget
Cash
budget
Expense
budget
Sales
budget
Production
budget
Labor
budget

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Limitations Of Standard
Costing
• High degree of technical skill
• Segregation of variances into
controllable and noncontrollable
factors
• Duplication in recording,
• Either too strict or too liberal.
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NEED OF
STANDARD
COSTING
• Future cost estimation: Standard
Costs are determined after considering
all the possibilities that may arise in the
future.
• Performance check: Standard cost
acts as targets to the cost center's
which should not be transcended.
• Budgeting: The standard costs are
used to prepare budgets, and evaluate
the performance of the executive staff
on the basis of these budgets.
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• In variance analysis (accounting) direct
material total variance is the difference
between the actual cost of actual
number of units produced and its
budgeted cost in terms of material.
Direct material total variance can be
divided into two components:
• the direct material price variance,
• the direct material usage variance.
Direct material total
variance
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ADVANTAGES OF
BUDGET
• Fixed and variable costs and their effect on
the total cost are analyzed.
• Budget plans for detail program activities.
• They state goals for all the units, offer a
standard performance, and stress the
continuous nature of planning and control
process.
• It encourage managers to make a careful
analysis of operations and to make decision
on careful consideration.
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Disadvantages of
budget
• Its time consuming and expensive.
• There is danger of over budgeting; the
budget becomes cumbersome,
meaningless, and expensive.
• Forecasting is required but uncertain
because budgetary control is subject to
human judgement, interpretation, and
evaluation.
• Skill and experience are required for
successful budgetary control.

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