A Financial Perspective
“Financial management is at the heart of any business, it is one area that can help drive it forward” – quote master
Jan 2021 marked my introduction to the world of Corporate Financial Accounting. I now know that Future executive have to make informed business decisions using accounting information about the business they manage. With overwhelming amount of data available in this digital age, it is important to know what information is relevant for decision making. The CFA course gives exposure to the concepts, preparation and application of financial accounting information and how decision makers use the information. All accounting is based on the fundamental accounting equation, it states the relationship between Asset, liabilities and owners’ equity. In my world, Assets meant an item of property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies while liability is a thing for which someone is responsible, especially an amount of money owed. I now know that’s not the meaning of asset and liabilities in the corporate finance world
Financial reports are very important for various reasons. Investors need the reports to determine whether a company is a good investment or not. Regulator, Professional bodies, Consultants and others use the report for other decisions. Do you think the CFO of any organization is responsible for the financial statement of the business? Well, that is not correct. Responsibility for the financial reporting lies with the C-suite executives or management. Companies report their financial activities over a period using four statements. These are known as the key elements of accounts – the statement of Financial Position/Balance sheet, Statement of Profit or loss, Statement of Cashflow and Statement of change in equity. The balance sheet shows the equality between investing and financing of a company. Asset equal Owner financing and Non-owner financing. Non-owner financing is also known as liabilities.
The ratio of Asset to liability of an organization is influenced by the nature of the organization. I worked with a team group to analyze the relative proportion of assets to liability for 10 companies in Nigeria. The industry of operation influences this asset: Liabilities ratio. Banks have about 70% liabilities while FMCG companies have about 40% liabilities and 60% Asset. The Analysis of financial statements is very insightful. It gives a perspective on the performance of a company.
Analysis of Transactions made me feel like an Accountant. Knowing what transactions should be allocated to the five account types – Asset account, liability account, Owners Equity, Expense or revenue account was very interesting. The Faculty also made understanding the concepts very easy. I’ve had so many “Aha!” moments, from learning that CEO’s and CFO’s are required to sign a confirmation that the full content of the financial report is correct and if any fraud is detected they may be required to serve jail terms to
The knowledge from the course will no doubt be very useful in equipping me for Business and Board leadership. I look forward to learning about analyzing, interpreting and forecasting financial statements.
“You can analyze the past, but you have to design the future”
~Edward De bono.