MBA Chronicles- Corporate Financing Accounting for Dummies

Corporate Financial Accounting (CFA) is one of the introductory modules on the Executive MBA at the Lagos Business School. The topic is not intended to be derogatory but to emphasize that new learners of accounting will benefit from simplicity. Just as in the Dan Gookin’s “For Dummies” series, the Financial Accounting for MBAs (Easton et al.) as recommended by Professor A. Owolabi presents topics in a flexible and non-intimidating way. The Professor complements the learning experience by a commendable job of breaking down concepts into relatable bits. An extremely useful approach for a novice. Below is an account of my experiences so far- learnings, challenges, and outlook.

LEARNINGS SO FAR

I have learnt about the importance of Corporate Financial Accounting in business. Accounting is a subset of the enterprise-wide information system. This is often employed in objective decision making in today’s business world. It helps existing investors decide whether to continue investing. Similarly, potential investors can decide whether to invest. The key drivers of investment are returns, risk and time. Therefore, a business needs to communicate these outcomes to stakeholders through its lifetime.

CFA has also exposed me to reading financial statements. These are reports of financial activities or performance of a business entity. According to the International Financial Reporting Standards, there are four principal financial statements. They are Statement of Financial Position (Balance Sheet), Statement of Profit or Loss (Income Statement), Statement of Cash Flow, and Statement of Change in Equity. Professor Owolabi adds one which he refers to as notes to the accounts, bringing the total number to 4+1. Financial statements are mostly influenced by five major forces confronting companies. These forces are buyer power, product substitutes, industry competition, supplier power and not the least threat of new entrants into the market.

The demand and supply for financial statements to support efficient business outcomes cannot be overemphasised. Decision makers such as managers, employees, stockholders, and customers may demand information from businesses regarding their past and prospective performance. This helps them estimate risk. Similarly, companies supply financials to evaluate spending and comply with governance structures set by regulatory agencies, such as the Ministry of Finance or Central Bank of Nigeria.

The highlight of my introduction to CFA is becoming familiar with the fundamental accounting equation: Assets = Liabilities + Owner’s Equity. This simply means what a company owns, known as assets is a function of money raised from banks or creditors (Liabilities) and money from Stockholders (owner equity). Most of the other concepts learnt have built on this basic equation.

CHALLENGES

My biggest challenge has been with time. Revising taught concepts before the next class is key in CFA for Dummies. Unfortunately, time does not seem to be my friend. Twenty-four hours is suddenly insufficient. Having to balance school life, work and family is quite a task. However, I am learning to cope and prioritise tasks, while striving to strike the balance.

OUTLOOK

My expectation from the module is to be able to read, understand and interpret financial statements to guide my business decisions now and in future. In effect, move from a “dummy user” of financial information to a more proficient one. Hopefully, I would become confident enough to start my personal accounting dummy series.

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