Contents

Background
Programme Content
Benefits
Learning outcomes
Learning methods
Who should attend
Module co-ordinator

Background

Projects often represent significant financial investments. Project managers must understand the financial motivations of their clients and the constraints within which they operate. An understanding of the basis concepts of accounting and project finance are of prime important in interpreting client objectives. The module is introductory in nature and is specifically designed for non-specialists.

Programme Content

Accounting and Financial Analysis

• Financial Statements I: The Balance Sheet
  Definition and structures of assets and liabilities. The fundamental accounting equation. Alternative formats of the balance sheet; company law formats. Profit measured as an increase in net assets. Accounting conventions and principles which govern the inclusion and valuation of assets in the balance sheet.
• Financial Statements II: Profit Measurement
  The nature and structure of a trading and profit and loss account. Recognition of revenues and expenses. The distinction between cash and accruals accounting. Capital and revenue expenditures. Manufacturing accounts. Adjustment of a profit and loss account. Accounting conventions and principles which govern the preparation of the profit and loss account.
• Financial Statements III: Cash Flow Statement
  The distinction between profit and liquidity. The preparation of a cash flow statement from the profit and loss account and balance sheet of a business and its interpretation.
• Financial Analysis
  The use (and limitations) of ratio analysis in the interpretation of financial statements. Calculation and interpretation of the main classes of ratio (profitability, activity, liquidity, financial structure and investment).
• Cost Concepts and Classification
  Basic cost distinctions (direct/indirect; variable/semi-variable/fixed etc.). Product costing, ABC systems. Contribution and break-even analysis. Incremental and relevant costs.
• Budgeting
  Nature of a master budget. Behavioural implications of the budgeting process. The preparation of a cash budget.

Investment Appraisal

• Investment theory and valuation models. The role of property within an investment (multi-asset) portfolio.
• Property valuation and appraisal. The application of discounted cashflow to valuations and calculation of worth; Net present value (NPV); internal rate of return (IRR).
• Traditional and discounted cashflow valuations of freehold property, implied and explicit growth; the relationship between initial yields and equated yields. Concepts of price, value and worth.

Development Appraisal

• The role of appraisal within the development process. Traditional residual valuation; cashflow residuals; discounted cashflow residuals
• Measures of profitability; IRR and NPV; profit ratio; sensitivity analysisl scenario analysis; development funding.
• Equity and debt financing; return on capital employed.

Benefits

Several of the core concepts addressed in this module are often misrepresented in traditional construction course. Construction professionals will therefore benefit from a more rigorous grounding from subject experts. This will enable a much greater degree of confidence when dealing with specialists from client organisations and the development sector. An understanding of the financial aspects of project development is of crucial important to professionals who aspire to a project management role.

Learning outcomes

At the end of this module the delegate will gain:

• An understanding of financial balance sheets and profit & loss accounts
• A familiarity with the use of financial ratios
• An introductory grounding in the principles of management accounting
• An appreciation of property as an investment
• An insight into the role of appraisal within the development process
  

Learning methods

The module will be taught by a combination of lectures, tutorial discussion and case study work. A particular emphasis will be placed on discussion and the challenging of accepted concepts. Preliminary reading will be required for students with no previous experience. The module will be supported by Internet-based learning material.

Who should attend

The module will appeal to managers who wish to enhance their understanding of accounting conventions and investment/development appraisal. The content will be especially useful to those aspiring to a project management role from engineering and architectural backgrounds. Quantity surveyors will also have much to benefit from a more systematic grounding in accounting and project finance.

Module co-ordinator

Patrick McAllister

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