Week 37 (30.12.07)

Learn

• An audited financial statement package includes an:

1. Income Statement (Revenue - Expense = Net income (Profit/Loss))
2. Balance Sheet (Assets = Liabilities + Equity)
3. Retained Earnings Statement (return of shareholder's investment)
4. Cash Flow Statement (from operations, investment & financing)
5. Auditor's opinion & notes to the statements

• An "unqualified" auditor's opinion indicates that the statements were prepared in accordance with GAAP and that they fairly present the organization's financial position.

Ratios are a key component of financial statement analysis.

• Financial statement analysis should include assessments of the organization's liquidity, leverage, and profitability.
• The DuPont formula and Economic Value Added (EVA) are tools that can be used to improve the profitability of an organization.
• Du Pont formula to evaluate management performance.
• EVA and Cash Flow Return on Investment (CFROI) to determine if a segment of an organization is adding value to the business.

Unlearn

Did not know the complexity of annual report.

Relearn

Understand the various components of an annual report. I started to realize the importance and use of financial ratios to evaluate:

1. company's liquidity, leverage and profitability
2. company's performance as compared to its competitors'
3. company's performance compared with budgeted goals

Week 36 (23.12.07)

Learn

• The income statement presents the organization's profitability over a certain time period.
• The balance sheet gives the organization's financial position on a particular day: what it owns, what it owes, and the shareholders' investment in the business.
• The cash flow statement describes the sources and uses of the organization's cash during a specified period of time.
• Double-entry accounting is the system specified by GAAP. Every transaction has a debit side and a credit side, and the two must equal.
• The ledger is the heart of the accounting system. Financial statements are prepared from the ledger.

Unlearn

Nil.

Relearn

Accounting and it's principle is new to me.

Start to apply and understand "Revenue - Expense = Profit/Loss (which means profitability)" - can be obtained from company's Income Statement.

Week 35 (16.12.07)

Learn

Module 1: Fundamentals of Finance and Accounting for Nonfinancial Managers

• The accounting equation: Assets = Liabilities + Equity
• Revenues : Money earned from product sold
• Expenses : Costs incurred running the business
• Generally accepted accounting principles (GAAP) are a standardized set of accounting practices. Audited statements normally conform to GAAP.
• GAAP has 3 assumptioons:

1. Fiscal period : usually 1 year
2. Use of historical cost : as basis for valuing assets
3. Conservatism : losses be recognized as soon as can be quantified; gain recorded when earned

• To conform to GAAP, business must use "accrual-basis" accounting. 2 assumptions:

1. Revenues are recognized when they are earned
2. Revenues are matched with the expenses

• Accrual accounting indicates the profitability of the organization, but it is not a reflection of the organization's cash portion.

Unlearn

Did not realize that in accounting reporting, accrual is taken into calculation versus cash-accounting.

Relearn

Started to learn to read financial report by download from Pfizer website. Seek help from colleague whom has accounting background to guide in assessing the report. Had a discussion on what FIFO, LIFO and weighted average cost means.

Week 34 (6.12.07)

Learn

29 Leadership Secrets from Jack Welch

• Accept Change - Business leaders who treat change like enemy will fail at their jobs. Change is the one constant, and successful business leaders must be able to read the ever-changing business environment.
• Let your employees know that change never ends - Teach your colleagues to see change as an opportunity - a challenge that can be met through hard work and smarts.
• Face reality - Business leaders who avoid reality are doomed to failure.
• Act on reality quickly - Those who truly face reality can't stop there. They must adapt their business strategies to reflect that reality, and they must do so quickly.
• Manage less - Teach your managers to manage less, even though their training may be to manage more.
• Instill confidence - Treat employees with respect and build their confidence.
• Emphasize vision, not supervision - Managing less lets managers think big thoughts and come up with new ideas to benefit the business.
• Business is simple - Complications arise when people are cut off from vital information.
• Managing is allocating people and resources - Put the right people in the right job, give them what they need, and then get out of the way.
• Create values that are consistent with the company vision - Values should reflect the vision, culture, and goals of the organization.

Unlearn

Did not cascade or teach colleagues to see change as an opportunity.

Relearn

In our recent sales executive competency model ie Project Jupiter, I communicated and informed clearly on what the changes are in order to set a clear expectation and buy in from colleagues. The change is better because it sets clearer objectives, less time consuming without compromising on the standards to achieve.