FROM IT ANALYST TO A FINANCIAL ANALYST

As someone with a background in computer electronics and a specialization in designing financial technology (FINTECH) applications, analyzing financial statements was never expected of me. From early on in my entrepreneurship journey, I learned the power of delegating responsibilities and focusing on my areas of expertise. Therefore, I never developed an interest in learning how to read and analyze my company’s quarterly financial statements, including the balance sheet, income statement, and cash flow statement. Instead, I entrusted these tasks to my financial team.

However, my perspective changed after attending the Corporate Financial Accounting (CFA) program at Lagos Business School (LBS). Before, I had evaluated a business’s performance through profit. But, my learning at LBS taught me that profit is a subjective opinion, not a fact. A company’s returning profit does not always imply it is financially stable.

After two months in LBS (Lagos Business Ratio), I learned to read, understand, and analyze financial statements by using ratio analysis to express one accounting parameter in relation to another. I now use the liquidity ratio (current ratio, quick ratio, acid test) to evaluate my company’s ability to pay off short-term creditors. Additionally, I use the leverage ratio to determine how much my company relies on borrowing and to analyze its financial risk. The efficiency ratio is used to measure the ability of the company to use all its assets to earn revenue.

I have learned from LBS (Lagos Business Ratio) about the power of leveraging in financial management. Financial leverage is the strategic attempt to borrow money from banks to invest in assets. The return on the invested assets must exceed the cost of borrowing funds that paid for those assets. The primary goal of financial leverage is to increase the company’s profitability and liquidity without using additional personal capital. Using other people’s money as leverage helps to improve the company’s cash flow and liquidity.

Alvin Toffler once said, “The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn.” LBS provides me with the platform to unlearn my ignorance in financial management and learn/re-learn financial analysis to transform my career from an Information Technology (IT) analyst to a Financial analyst.