OVERVIEW

The Finance and Control course aims to give an integrated view of corporate finance and management control issues, which are a fundamental pillar of the business of all kinds of companies, by industry and size. The subject area of teaching includes management accounting, the process of management control, investment analysis, business planning and performance analysis. These are very complex and varied processes that require a systematic approach to go into detail on individual aspects of evaluations without ever losing sight of the overall picture.

AIMS AND CONTENT

LEARNING OUTCOMES

The course deals with the topic of finance and control activities in the context of business management and aims to provide all the necessary tools to plan and analyze business decisions and performance in the most effective and efficient possible way, referring to centers of responsibility into which the company organization can be divided.

AIMS AND LEARNING OUTCOMES

Understand and know how to apply economic and quantitative information as a tool to map profitability according to different perspectives of analysis

Understand and know how to apply economic and quantitative information as a means of defining responsibilities, influencing behavior, and increasing motivation

Understand and know how to apply economic and quantitative information as a reference for product, process and business model innovation. 

Understand and analyze techniques for choosing business investments 

Understand and model the opportunity cost of investment as a function of risk 

Understand the relationship between risk and return in a financial market. 

Analyze the financing tools available to organizations and be able to rank them.

PREREQUISITES

To approach the study of the management control module, it is necessary to have acquired the general and management accounting topics covered in the economics and business organisation course.

TEACHING METHODS

Teaching consists of face-to-face lectures, totaling 108 hours. Readings, in-depth studies on specific topics of interest, case analyses and exercises will be offered during the course and will be archived on Aulaweb.

SYLLABUS/CONTENT

The course program includes presentation and discussion of the following topics:

• Full costs and their use
• Brief excursus on traditional costing systems (already in the student's educational curriculum), job costing, process costing, operation costing, cost center accounting, with in-depth discussion of some aspects, such as:
  • Employment of flexible budgeting for overhead predetermined rate computation
  • Employment of practical capacity for the overhead predetermined rate computation
• Activity-based costing (ABC)
• Standard costs, variable cost systems, quality costs, and joint costs
• Analysis of cost variances
• The context of control: accounting by responsibility centers:
  • The revenue centers
  • The cost centers
  • The profit centers
  • The investment centers
• The process of directional control:
  • The stages of the process
  • The accounting information
  • The behavioral aspects
• Strategic planning and budget development
• Business performance evaluation systems
  • The principle of revenue maximization: its indicators and limitations
  • The multistakeholder perspective
  • The models for measuring performance (Tableau de bord, Balanced Scorecards, Strategic Alignment Matrix)
  • The organization's performance and that of its responsibility centers.

The specificity of the problems related to the measurement of the value of the assets of an investment center motivates the choice to dedicate an ad hoc section of the course to the analysis of this particular type of responsibility centers, so to equip the student with the necessary skills and knowledge to make the most appropriate investment decisions in real assets and debt or equity financing on behalf of a business.

The section on the investment center focuses on two main themes:

1. Evaluation and choice of company investments. Here, the concept of present value of the expected cash flows of a corporate investment is presented. The present value is then compared with other investment valuation methodologies, such as the internal rate of return and the payback period, highlighting the applicability limits of the latter. The problem of choosing between alternative investments in the presence or absence of capital rationing is then discussed. The concept of present value is also enriched with the concepts of uncertainty and risk and its application to the valuation of shares and bonds issued by a company is discussed. Furthermore, some concepts relating to stock markets are discussed. The Capital Asset Pricing Model is then presented in order to provide a quantitative model that links the cost / return of corporate equity to risk, conceived as systematic or market risk.

2. Evaluation and choice of financing mechanisms for corporate investments. Here, the financing decisions of a company are presented, with particular attention to its financial structure, i.e. the relationship between debt and equity. In particular, the fundamental results of the Modigliani-Miller Theorem are presented and demonstrated, in relation to the irrelevance of the financial structure and the independence of the weighted average cost of capital in conditions of perfect financial markets and in relation to the irrelevance of the financing mechanisms for investment decisions. The empirical evidence and the pecking order theory are then discussed in relation to the concepts of information asymmetry.

RECOMMENDED READING/BIBLIOGRAPHY

Brealey R., Myers S., Allen F. (2020) Principles of Corporate Finance. 13ed Mc Grwa Hill

https://www.mheducation.com/highered/product/principles-corporate-finance-brealey-myers/M9781260013900.html

Berck, DeMarzo (2017). Corporate Finance, 4/ed. Pearson

https://www.pearson.com/us/higher-education/product/Berk-Corporate-Fina…

Teaching material and scientific papers provided by Professors

TEACHERS AND EXAM BOARD

Exam Board

SILVIA MASSA (President)

LINDA MADDALENA PONTA

SILVANO CINCOTTI (President Substitute)

MARCO RABERTO (President Substitute)

STEFANIA TESTA (President Substitute)

LESSONS

EXAMS

EXAM DESCRIPTION

The exam consists of a written part with exercises and an oral part.

Students with learning disorders ("disturbi specifici di apprendimento", DSA) will be allowed to use specific modalities and supports that will be determined on a case-by-case basis in agreement with the delegate of the Engineering courses in the Committee for the Inclusion of Students with Disabilities

ASSESSMENT METHODS

The written test is aimed at evaluating:

• the student's understanding of the techniques for choosing corporate investment according to the level of risk of the investment;
• the student's ability to apply the aforementioned techniques to example cases;
• knowledge of the various sources of financing for the company and their possible choice order depending on market conditions.

The oral examination will cover the topics discussed during the lectures and will aim to assess not only whether the student has achieved an adequate level of knowledge, but whether he or she has acquired the ability to critically analyze management control problems that will be posed during the examination.

Exam schedule