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Q1.1 Accounting for Decision Making with Professor Mark Finn

Please notice this was first posted in the period 2012-2014 and can be outdated

Every normal human being knows that accounting is quite boring; even Professor Mark Finn, who has come over from Kellogg, dares to admit that at the beginning of the course “Accounting for Decision Making”, which he himself teaches. So instead of going through all the similarities and differences of US GAAP and IFRS he tries to make it more fun by just giving us the big picture and connecting it to real-life situations like newspaper articles and big accounting scandals. And if you already have a background in accounting you would even notice he has a sense of humor that is probably going lost on the majority of people at an average cocktail party.

One of the answer options was that they see him as a liability. If you don’t get the joke it might be time to learn the basics of accounting, or watch more soccer.

Unlike the course “Microeconomic Analysis” by Professor Richard Kihlstrom  which we also had this first hexamester at Sasin, the grading for this course is divided into several parts. Of course there is an exam at the end of the course (which weights 55% of the total grade), closed book this time, but during the weeks leading to this exam we are also supposed to do multiple choice quizzes online (weighting 10%), do a group assignment where we take an actual look at the annual report of GMM Grammy (weighting 25%), and participate in class when questions are being asked (for the final 10% of the grade). This participation part is just added to keep people alive during class I suppose, and Professor Finn never made it a secret he will try to give everybody a decent shot at getting this 10%.

Perfect score; sir, you are a genius (or your classmates are). But, as you can see, we are allowed to discuss the quiz with each other before sending in our answers.

While the quizzes we made during the course were pretty hard for the people who have never done any accounting before, I doubt if anybody scored very low, or even mediocre, on these quizzes. Fact is that there are several people in the Sasin MBA class of 2012 who have extensive working experience in accounting and we have a Facebook page where all classmates have access to. Combine these two facts and you can image that the average score for the quizzes would be somewhere near 95% with a standard deviation of only a couple of percent. Let me point out, just to be sure, that the rules for making the quizzes set out by Professor Finn state that it is allowed to conspire and discuss the questions with each other.

While you might expect a free-rider problem when answers are shared this way, I guess the people who did not put in the time to understand which answer is the correct one to each question would find themselves in trouble later on because the final exam, which counts for 55% of your final grade, was totally based on the quizzes made during the course. This means that some of the numbers in the questions were changed to make sure that people did not learn the answers by heart, but besides that it covered the same subjects, in the same way, with the same techniques.

Finally there was the group assignment, which had to be done in groups of 5, where we had to go through the annual report of GMM Grammy and answers a total of 13 questions about the balance sheet, statement of cash flows, profit and loss account, and the notes at the end of the annual report. In this case no sharing was allowed between groups but the questions were not so hard that we experienced real trouble finding the correct answers. Looking back I guess the aim of this exercise was to show that even though we did a lot of things during class, the things can also be applied in real life.

While this course was fun to follow and it was good to go over the concepts again, there was one big thing missing that was mentioned in the name of the course: the decision making. So we now know how to calculate the D/E-ratio of a company, how the type of leasing has an influence on many ratios, and how to use the indirect method to come to the cash flow of operations, but we still have no idea how to use this to make an actual decision. Between what range should a D/E-ratio be? Is a higher cash flow from operations always better than a lower? What does the method of leasing chosen by a company say about that company? While these questions are nearly impossible to answer generically, it would have been nice if the focus would have been more on the decision making part instead of just on the accounting. They could of course also just chose to drop the “for decision making” from the name of the course and then I would have nothing to complain (it reminds me of the course “Management Analysis” we had earlier this year where the name of the course also did not cover the content of the course).