CFA…..

CFA is one course I have come to appreciate the most. I realised that there is no knowledge that is a waste. on a normal, I run away from any course that has anything to do with numbers but trust me, when you say you are doing MBA, there are some number courses you can never run away from and CFA is one of them.

During my course of study, I discovered that knowing the fundamental of the course can help you know if your business is doing well or not, if a company is good enough for you to invest in and which company is actually paying their taxes.

I usually see the formula, ASSET=LIABILITY + OWNERS EQUITY which is accounting equation and never understood what it meant but during my CFA class, I realised that the equation simply meant that, liability (debt owed by the company) and owners equity which are the share holders who brings in the capital used in funding the company was being equalled to get the company’s asset(properties owned by the company)

DIFFERENT RATIOS IN CFA

As an MBA student doing CFA, I was taught different ratios and how it was calculated. Below are some of the ratios I was taught

Current ratio, Acid-test ratio, Leverage ratio, Liquidity ratio, solvency ratio, profitability ratio and gearing ratio etc.

CURRENT RATIO: Current ratio is when your liability is able to meet your current obligations. This simply means that, which asset can you quickly sell to get cash to pay your debt. To calculate your current ratio, you will divide your current asset by your current liabilities.

LEVERAGE RATIO: This measures the ability of a firm to meet its long-term obligation. This means the ability of the firm to pay its maturing long term-debt.

GEARING RATIO: Gearing ratio is like the capital structure of your company. This is to say that a firm has more equity than a long-term debt and the formula for calculating this ratio is LONG-TERM DEBTS/SHAREHOLDERS EQUITY.

FINANCIAL AND ANNUAL REPORT

This was another thing I learnt during my CFA classes. Before now, I wasn’t able to differentiate between financial and annual report. I thought both meant same thing until I was taught that financial report shows the summary of a financial report of an organization while an annual report gives a detailed summary of a company’s activities through out the preceding year.

CONCLUSION

CFA as a positive impact on everybody. I have realise that just as an accountant needs to know the financial report of the organization, that’s the same way an investor, manager, and employee needs to know about the financial report of the company.

Sylvia Hogan

#MMBA3