Reflection on Finances economics and decisions course

Briefly address the following:
What are the 5–10 most useful takeaways you have learned in this course?
How will you apply what you have learned in this course to the Marketing and Strategy Business Plan that you’ve been developing throughout your MBA studies?
How might you apply what you learned in this course to your future professional work?

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This module introduces no new material. Students should use the time to review and organize their thoughts about the overall course, and how they can apply what they have learned to future courses and to their professional lives.

Takeaways From the Course

1. The most common financial reports are various forms of income statements, cash flow statements, and balance sheets. But financial decision makers use countless other reports.
2. A simple financial model is typically a spreadsheet, or a set of linked spreadsheets, that shows the effect of various inputs on future performance. A financial model could be for an entire organization or just for a specific activity or investment proposal.
3. Investment analysis generally includes a cash flow timeline, which is a type of financial model. All cash flows should be incremental to the decision. Be sure to exclude any allocated or sunk cash flows.
4. The most important concept in finance is time value of money (TVM): the idea that the value of money today depends on when it is paid or received.
5. Effective management decision making requires a focus on the qualitative, not just quantitative, factors that drive an organization’s financial performance. Managers should understand the specific issue to be decided, as well as the organization, its industry, and the economic environment. For example, “What is the unmet market need, and how can our organization gain a competitive advantage over others in the industry?”
6. Decision making always involves uncertainties about the future. There are tools for measuring, communicating, and managing these risks and opportunities. Financial projections often include decision trees, sensitivity analysis, scenario analysis, or even Monte Carlo simulations.
7. Businesses can expand organically, by direct investment (DI) in new facilities, employees, and technologies. Or they can expand via strategic partnerships, licenses or franchises, joint ventures, acquisitions, or mergers. This choice is sometimes called “build it or buy it.”
8. Managing multiple currencies for transaction processing and financial reporting is less difficult than it may first appear. (An organization’s banks and accountants can help if needed.) Geographic expansion into other countries requires an understanding of the local physical, legal, cultural, and economic characteristics. But the similarities among countries are as important as the differences.
9. Managers should acquire and manage productive assets to maximize the economic value added (EVA). Financial ratios such as ROI, ROA and ROE can be useful, but have limitations. Specific investment decisions should be based on maximizing the net present value (NPV) of the estimated future cash flows when discounted at the risk-adjusted cost of capital commensurate with that decision’s risk.
10. Many of the concepts covered in this course are applicable not only to businesses, but also to not-for-profit organizations, governments, and even households. Use these concepts to not only help provide answers, but also to help you ask the right questions.

Key Skills for Financial Decision Making

In this course, we have focused on decision making based on quantitative and qualitative data, microeconomic variables, and internal financial priorities. Below are some of the key skills for financial decision making that we have covered in the course:

• Finding and understanding financial information, including growth rates, and other financial ratios
• Understanding qualitative drivers about an organization, its industry, and its economic environment
• Financial modeling, including spreadsheets
• Ability to measure and manage uncertainty
• Collaboration and communication