¶ … business, it is vital for business owners to measure the value of their assets and to evaluate the performance of their business at any point in time. In fact, majority of strategies for popular multinational corporations, such as Samsung, Apple and Starbucks, are formulated based on the financial performance of the company as compared to other companies in a particular industry. Two courses, ACC201 and FIN301, introduce learners to fundamental principles in accounting and finance, which are meant to equip the said learners with the knowledge and skills needed to understand how businesses are valued and how leaders make important financial decisions that affect their companies in the long-run. This text summarizes the readings and assignments we covered in ACC201 and FIN301, the skills learnt and how they will be applicable in future careers.
Module 1 introduced us to the analysis of various financial statements. Using this skill, we went ahead to compare the financial status of four companies: Verizon Communications, Agilent Technologies, The Gap and Facebook, Inc. I was able to understand why companies performed poorly despite having significant amounts of assets and the different methodologies management applied to remain afloat. The Gap, for example, lacked sufficient cash to pay off debts and management resorted to closing a total of 28 stores in North America and shifting its brands to Athletica and Intermix where they were bound to perform better (The Gap, Inc., 2015). Shifting its brands in global markets would identify the most profitable areas, which would significantly increase the revenues earned.
Module 2 focused on the regulation of financial statements. We learned about the Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS) that must be followed by every organization during financial reporting. We also looked at the International Accounting Standards Board (IASB) and the Securities and Exchange Commission (SEC), bodies that ensure efficiency, orderliness and fairness in the financial markets. I was able to learn the financial disclosures that were mandatory as stipulated by the GAAP, IFRS, IASB and SEC. More specifically, I learnt the correct formats for creating the income statement, balance sheet, statement of cash flows and statements of retained earnings. I also understood the components that made up the accounting equation: assets, liabilities and equity.
Module 3, 4 and 5 were very important because they distinguished key concepts in accounting. We learnt differences in valuation between GAAP and IFRS, which is a source of debate for many accountants and financial analysts. Other components compared were: expenses and assets, period and expenses, and current and long-term assets and liabilities. I learnt the different points of revenue recognition and how the matching concept reinforced the accrual basis of accounting. Module 5 made different categories included in the cash flow statement clearer to me, which made it easier to distinguish between its direct and indirect method of reporting. The three modules involved assignments that compared more companies: Apple, Samsung and Nybrostand and the analysis of financial statements to compare their financial wellness. However, the fact that the accounting periods for different companies ended in different months made it quite difficult to make comparisons. For instance, the accounting period for Apple ended in 27th September while that of Samsung ended in 31 December in 2014 (Yahoo! Finance, 2015). The expenses were also reported differently. Explanations of how to compare companies with different reporting standards would have been appreciated.
Module 1 of FIN301 taught the various ways of financing businesses and steps involved in making financing decisions. The assignments involved choosing a company for the session long project, my choice being Starbucks due to its success and wealth of information, and an examination of the traits of successful CEOs. Module 2 looked at shares, options and futures and the present value of money. The assignments reinforced what I learnt as it involved calculations of the present value in different scenarios and determination of the futures price in Starbucks.
The calculation of the Capital Assets Pricing Model taught in Module 3 was very tough for me as I was not conversant with how to calculate the Beta. However, after further research, I was able to identify risks in three corporations: Apple, Google and Starbucks, and find out which company's stocks were better to invest in. Capital Budgeting processes involved in finding viable projects to invest in were introduced in Module 4. I was able to plot graphs that showed the relationship between the net present value (NPV), the discount rate, and also learnt how to identify attractive investment options from these graphs. In addition, I was able to identify a potential project...
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