CAPSTONE PROJECT

Prior to registering for an MBA at Lagos Business School, I had no knowledge of anything related to accounting. So, learning about Corporate Financial Accounting was just new to me. We were given a group assignment to compare HONEY WELL PLC against CADBURY NIGERIA PLC all in the FMCG sector.

I must say that at first, I was confused as I did not know how to go about it.  But then, the beauty of Lagos business school is team learning. Your strength might be another teammate’s weakness. So, we are to learn from one another. In my language, we call it ONYE AGHANA NWANNE YA.

We started by searching for the two companies financial reports. This gave me an opportunity to really know how to go through a company’s statement of account, to access if they are doing well or not. We accessed the two companies using the following ratios.

Profitability ratio This ratio shows how the company has been generating earnings in relation to its sales and assets. 

The liquidity Ratio indicates the ability of a company to pay off its CURRENT debt obligations without raising external capital.

Solvency ratio: assesses a company’s ability to meet its long-term debt obligations.

Efficiency ratio: measures a company’s ability to use its assets to generate income.

Stock Market Ratio: speaks to the confidence level of the investors and also the earnings potential and expectations of the market. 

Coverage Ratio: shows the extent to which a company can meet its debt obligations. 

In analyzing the company’s performance over a period of 10 years. I came across some many terms as well as how they are used in calculating each of these ratios.

Liquidity ratio is calculated using the following: Current ratio, quick ratio, cash ratio, receivables collection period, and payables payment period.

 Profitability ratio: it is calculated using the following: Return on assets, return on equity, net profit margin, and gross profit margin.

Stock market ratio: it is calculated using the following: Earnings per share, Book Value per share, price earning ratio, and Dividend yield.

Solvency ratio: it is calculated using the following: Debt to asset ratio, Debt to equity ratio, and interest coverage ratio.

Efficiency ratio /activity ratio: it is calculated using, assets turnover ratio, account receivables turnover, inventory turnover, and account payable turnover.

Coverage ratio: Debt service coverage ratio, assets coverage ratio, and cash coverage ratio.

I also learned how to use horizontal and trend analysis to calculate the firm’s performance. 

Some key words I learned were EBIT( earnings before interest and tax), sales (Revenue or turnover ) stocks (same as inventory), stockholders equity same as (capital reserves or total equity ), outstanding common shares, Total assets (Assets + current assets), short term liabilities = current liabilities, interest expense = Finance cost, Average payable, preferred rights /preferred shares, interest expense, earning attributable to shareholders, market price per share, principal repayment. etc.

 All these were learning points for me. 

Upon completion of the project, I placed a call to my company s consultant to inform him, that it will no longer be business as usual. L0L. Where he drops the company’s audited account, and no one questions or challenges what he has done. I notified him that I am now an MBA in view graduate, and I now have a knowledge of what he does now.

I must acknowledge Prof. Akintola Owolabi, for bringing out the best in me and for impacting me with this great knowledge. I will forever be grateful.