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MANAGING DIRECTOR IN MY DREAMS, THANKS TO CORPORATE FINANCIAL ACCOUNTING.

Onyinye Anyakee Written by Onyinye Anyakee · 2 min read >

At the end of the interview at Nigerian Breweries, the HR Director asked, “if I had any questions for them?” I immediately decided to make my CFA Professor at LBS proud by asking if I could see their financial report for the previous year.

“Why, will you request to see that?, she questioned.
“I need to be sure that the company makes profit in order to sustain payment of my salary.” I replied.

This quickly caught the attention of one of the panelists who had been very quiet prior to this moment. He hurriedly looked through his mobile device and projected the report on the screen in the conference room and asked if I could express my thoughts on the report aloud.

Of course, my face lit up as I explained to them that different decisions were made just by looking at a financial report and this depended on who was looking.

For an potential investor, he is asking if this company is worthy of my investment and also the checking the risk profile associated with that investment.

For an existing investor, she is asking herself how much she will expect as return on her investment. This can be paid as dividend.

And for me, a potential employee, I am interested in checking the profitability of the company over the years.

I moved through the pages to the four +1 financial statements which are:

Statement of financial position (Balance sheet)
Statement of profit or loss (income statement)
Statement of changes in equity
Statement of cash flow.

+1) Notes to the account ( these provides further explanation to the details in the statements listed above).

The balance sheet captures the following accounts: assets, liability and equity.
You get the information you need for the fundamental accounting equation which states that:
Assets= Liability + Owner’s equity.

I took note of the percentage of the assets that is funded by debts and owner’s equity.
Debt, called liability in this case is not necessarily a bad thing as enormous amount of resources (assets) are needed to run a business. The business owners contribution is termed equity and the liability is outsourced.

The statement of profit or loss contains the revenue and expenses accounts.
Revenue is the amount of sales generated within the financial year and the expenses is the amount spent within that financial year to keep the business running.
When the expenses exceeds the revenue, the company is said to have a loss also profit is made when the revenue exceeds the expenses.
I looked at the profit on the board and smiled.

The statement of change in equity analyzes the share capital at the beginning of the year with the share capital at the year end. Changes in equity is usually as a result of retained earnings, this is the profit from the previous year that was not paid as dividends instead it was retained in the business.

Inflow and outflow of cash is captured in the statement of cash flow. These flows can pass through the business as either operating, financing and investing inflows or outflows.

For example, owner’s equity used to finance the business is termed as financing inflow.
Revenue generated is called operating inflow.
Money used to purchase machinery and build facilities for the business is called operating outflow because the money is deducted from the company’s account.

Finally, the notes to the account explained in details other information not captured on the table.

I was very satisfied at this point and I could see that the panelists were impressed.
Nothing could have prepared me for their next question though.

“Onyinye, how will you feel about been our new managing director”?

“Onyinye, Onyinye wake up and stop dreaming. It is seven in the morning and you are still sleeping.” I opened my eyes to the sound of my mother’s voice.

“Mummy, do you know that I was about to be made a managing director.”

She looked at me and said very sarcastically, “Okonjo iweala , go and make eba and egusi soup, your father is coming back today.”

“African parents,” I screamed as she walked away. #MMBA3

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