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UNLOCKING THE NUMBERS

Mobolaji Abidoye Written by Spreado · 2 min read >

The Corporate financial accounting classes with Chiemaka Ojiabor were very interesting so I decided to write about them today.

At the commencement of the classes during the intensive week, it seemed like we were going to be part of another regular but fun sessions of CFA but as it turns out, we were about to experience why we paid the fees we paid. In Chiemakas words.

“You cannot pay that amount of money to come and be doing account posting, that will be done by someone else, your role as an executive is to analyses”                                                                                      or the much funnier side

“Stop throwing words at me, I have something to throw too”

These words stayed with us all through the intensive week session and beyond. Prior to meeting him during the intensive week, we had only been taught by Professor Akintola Owolabi and the sessions had been very great. Lots of insights and knowledge was gained and I already highlighted some of them in previous blog posts.

Chiemeka Ojiabors task was different, it was to expose us to a world of analysis using financial statements. From Income statements to balance sheet, from cash flow statements to change of equity statements, we were to learn how to combine all these to make informed managerial level decisions that will affect the destiny of the organization.

The first case treated was the case of Jprep. Jprep was a franchised clothing retail store based in Reykjavik Iceland. It was an upscale store, and the owner Gunnar Larson was faced with a problem of cashflow after two months of operation despite good sales. The company, Jprep was also expected to make good sales in the coming winter holidays, but Mr. Larson was worried that if something was not done quickly, he would be unable to pay his employees wages for the coming month.

The case required us to analyze the situation and find out what went wrong despite all indices pointing to a profitable business. We were required to at first, post the balance sheet for transactions in September, October, and November. After that, the analysis commenced. We discovered that the problem with Jprep was not profit but over capitalization. Essentially, the company had too much cash than the business required and was also spending cash at an unprecedented rate. The company had been operating mostly by paying off suppliers immediately even when it had an opportunity to settle these liabilities after 30 days. Mr. Larson had also taken on a lot capital prior to the commencement of the business which meant he had more than he needed. This would inevitably make most new entrepreneur or startup spend more cash. Finally, Mr. Larson was guilty of restocking and keeping excess inventory when it was not required causing him to have too much at any point in time.

The conclusion and knowledge I gained from Jprep was that businesses should be mindful of their cash flow statements. Is there is no need to take on more cash, then don’t do so. Also, if there is an opportunity to explore credit facilities and max them out, a business is advised to do so.

The next case treated during Ojiabors class was the case of Union bank PLC. We treated the case using an edited version of the bank statement of financial position as December 2010. From the analysis, we could deduce that union bank was in serious jeopardy of not meeting the statutory requirements as dictated by the central bank of Nigeria. This meant the bank was at risk of being declared bankrupt and its banking license withdrawn. The class discussions were very intensive and even though I will not claim to understand all that was discussed, I understood the solution proffered to the management of the bank. The final solution proffered was to sell some shares of the owners to raise funds from the stock market as soon as possible. Though this solution seemed to solve the immediate problem, 4 years later, the bank was back in crisis.

The final case we treated was tantalizers but due to time constraints, we could not go into many details. Overall, the knowledge passed rom these sessions were a new dimension and I can proudly say I will be applying every bit of it in my daily life. I say a big thank you to Chiemeka Ojiabor and Professor Akintola Owolabi. God bless you both and God bless the federal Republic of Nigeria.

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