Financial Performance & Management Control - TUHH Institute of Management Accounting & Simulation, Hamburg · part of my Technology Management MBA · study notes for revision.
This module is really two courses stitched together, and it helps to see them that way from the start. Part I is financial accounting - the language a company uses to describe itself to the outside world. You learn to read a balance sheet and an income statement, why an accountant’s “profit” is not the cash in the bank, how the international rulebook (IFRS) decides what may appear on the balance sheet and at what value, and finally how to turn a set of statements into a judgement about the business with a handful of ratios. Part II is management accounting and control - the same numbers pointed inward, so managers can steer: what a product really costs, how many you must sell to break even, how to set a price, and how to measure and reward performance without accidentally rewarding the wrong behaviour.
The course runs on cases and a business game rather than on theory alone. We played an accounting version of Monopoly and had to build the statements from our own moves, valued a smartphone maker’s unsold inventory, read a football club’s annual report, checked whether an internet café in Kingston could ever break even, and redesigned a department store’s scorecard. Most chapters below carry a worked example with the real numbers from class, so the ideas stay attached to something concrete.
These are study notes for revision. Every chapter ends with a key-terms table, a short self-test with answers, and a one-minute recap.
1 · Accounting as the Language of Business
What accounting is for and who uses it: financial vs management accounting, the purposes of the numbers (information, documentation, distribution), the reporting system, auditing, and why accounting is shaped by history - with the Monopoly business game as the way in.
2 · The Balance Sheet
The snapshot: assets = liabilities + equity as a truth that always holds, what counts as an asset or a liability, how equity is shown, building a balance sheet from an inventory list, and how every transaction moves at least two accounts.
3 · The Income Statement, Cash & Accruals
The flow: revenues, expenses and profit; the functional P&L; the income statement as the detail behind equity; and the accrual idea - revenue recognition and matching - that makes profit differ from cash.
4 · IFRS & the Framework
Who sets the rules and why: the IASB, investor-oriented disclosure versus creditor-oriented prudence, the complete set of statements, and the hierarchy of decisions - definition, recognition, measurement (cost or fair value), disclosure.
5 · Tangible Assets: PPE & Inventories
The rules applied: acquisition and production cost, depreciation methods and impairment, inventory cost formulas (FIFO, weighted average) and the lower-of-cost-or-net-realisable-value test - with the smartphone inventory write-down case.
6 · Intangibles & Provisions
The hard cases: why intangibles matter yet mostly stay off the balance sheet, research versus development, goodwill, provisions and contingent liabilities, and the relevance-versus-reliability trade-off - with a football club’s player registrations.
7 · Financial Statement Analysis
From statements to judgement: common-size statements, financing ratios and profitability ratios, ROCE against the cost of capital, value creation, and the turnover-times-margin decomposition - worked on four car makers and a football club.
8 · Management Accounting & Cost Concepts
The switch to steering: what management accounting is for, the controller’s roles, cost objects, direct versus indirect and variable versus fixed costs, and why unit costs must be handled with care.
9 · Cost-Volume-Profit & Break-Even
How many must we sell? Contribution margin, the three ways to find break-even, sensitivity to cost structure, operating leverage, and relevant-cost thinking - with the Kingston internet café feasibility case.
10 · Costing & Pricing
What should it sell for? Full costing and cost-plus with a target return, the hidden cost of complexity, target costing from the market price backwards, and the non-cost side of pricing.
11 · Performance Measurement & Control
Measuring people and units: types of measures, why decentralisation needs control, the agency model and its design principles, output control, and the trap of rewarding managers on ROI.
12 · Systems & the Balanced Scorecard
From single measures to a system: the DuPont tree, linkage versus balance, the four perspectives of the Balanced Scorecard and its strategy map - with the department-store scorecard case.