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Strategic corporate finance or financial management is always dependent on the financial results and management forecast of financial outlook of the company. Companies always have concern to manage their financial position and performance. Even if you are assessing any company on the front of her financial position or performance so you must be focusing towards her true financial reflection of past leading towards future financial variables. Sometimes it is more your grip on strong efficiencies (high level of information – from public to private) that produces closer to reality probabilities or data and this is the essence of knowing how the future of the company would be.

If you want to know about a company on the front of her financial position and performance, you can grab financial statements of it and try to evaluate company’s standings. The basic thing that we have to understand about company’s financial statement is; it is the record of past and closed transactions. Logically financial statements produced as on date; is not the true reflection of financial position in which you are investing today or if you are a financial manager so it is lesser effective in understanding financial management variables if the environment is highly volatile. One can even draw a regression from the elements of statement but the trend line that is drawn is always subjected to the change in environments and variables that caused the financial events in the past.

If something (transaction) happened once in last five year is lesser probable to happen in next five year but lesser probable (events or transactions) never means it can not occur. If something have been happening consistent for last five years is having higher probability to happen in next five years but again higher probability never means it will happen with certainty. So what is the key point in this? The key point is if something happening, so it is because of a CAUSE. It is the study of causes and then assigning its probabilities; is the starting point in understanding financial position and performance of the company because you are not making strategy or making investment in past but your concern is future. It is future that is not merely an outcome of past derived regression but inclusion of new efficiencies and scenarios that can present a true financial reflection of variables that cause financial events to occur.

So if someone want to study impacts, it is necessary to study cause of it. It is all “the cause and impact game”. If financial statements are really sufficient to understand the financial scenarios of the company so there is no one in this world who ask for top financial analysts. The basic point is simple that financial statements in its shape are not self explanatory. It needs a lot more to forecast and manage finance than merely benchmarking financial data appearing on financial statements for making decisions. Even by saying this I am not underestimating the importance of financial statements, they are highly necessary and it is required to take an overview of them. But they are a part of financial analysis not a whole of it.

It is evident that accountancy records are made in compliance of IAS, IFRS and relevant regulatory framework of the country. There are many items like Goodwill, Depreciation, Amortization, Deferred Tax Asset, Deferred tax liabilities etc that can distort analysis. In this regard it is necessary to come up with the financial statement adjusted from all ambiguities for reaching financial reflection in true sense. It is sometime not self explanatory that the company having EPS of $ 20 would be an attractive investment opportunity than a company having EPS of $ 10. We have to see the patterns and reoccurrence of events in details. Many times a single figure of unrealized gain on investment can increase earning per share of the company but if it doesn’t look probable in future or even in next year it can not be realized due to crash in stock market so it is irrelevant for analysis. We have to see financial statement in regard to the consistency of the events posting on it.

Getting a true financial reflection of business is the toughest of jobs. Here the skills of analyst have to be tested and the way he defines variables and their probability of occurrence set directions for corporate financial management. Business decision making on the front of finance have never been the same. Innovation, skills and understanding of occurred events is turning out to be the basic requirement to develop class financial analysis. It is always recommended that we have to see financial result in its broader scope. Sometimes we think Management Accounting is all about COSTING issue but here it has to be taken for FINANCIAL MANAGEMENT perspective also. In order to develop decision making matrix we have to come up with separate stream of accounting; based on economic value and business value of company. It is necessary for management to understand the financial reflections of the future and investors can also acquired help otherwise one can easily deceive from ready to use set of regulatory financial statements.

It has always been my consideration to clarify concepts on business issues. In this regard all those who are associated with financial profession have to come up and redefine the basis of understanding business in its true and fair value. It is important for investors, financial managers and all other relevant people so they can ensure smooth running of business and decision making would be sounder on the basis of rational reasoning. The cause and impact both have to be analyzed rather than calculating the worth of impacts and considering it a trend for future. It is the probability of causes that ensures financial impacts. The concept of financial reflection is far beyond the calculation of standard deviation, coefficient of correlation & determination and trend analysis. Here we have to embed our analysis with the probability of causes to define the future of impacts and this is a FINANCIAL REFLECTIONS are all about for me.

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Mr. Omer

Mr. Omer [1982 born] started  his professional career as a commercial / investment banker after achieving Gold Medal in Finance at master level from University of Karachi in 2006.

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