First session of a 12-month-MBA Program - Financial management - SBS, Abu Dhabi

Here, I am going to write about what was the first meeting hosted by Microsoft Teams, and what was in fact the first session in an MBA program conducted by SBS, Abu Dhabi. 

The lecturer was Dr. Faisal, and the session was about financial management. He started by introducing himself, and quickly kicked off by defining what business is. 

He first asked the participants to see if any could give an answer, and then went ahead and gave his own. He said that a business is an organized legal activity that provide goods and services, and which makes a profit. 

Businesses should be legal, and generating a profit. The intention of any business is to provide a profit. The word " finance" is all about the management of the money. Accounting, on the other hand, is answering questions like: why are profits there? and why are losses there? 

The difference between finance and accounting.

Daily financial activities:

• wages
• bills

Three aspects of financial management:

• New Company                                                                
• Existing & Running

Maximizing the value of the company

 He also talked about the word 'monopoly'

Monopoly 

A company that has a complete control of the product or service it provides; because it's the only company that provides it. 

In context:

' It is the government's intention to break up all monopolies.'

Dr. Faisal said that monopoly does not last for a long time. 

And here comes, according to him, the role of the finance manager to keep looking for a new investment opportunity. 

Any business needs more investment. 

This is what Pepsi has done when they started the process of diversifying as a result of the problems their current products have caused: obesity, for example. 

What they have done is finding new ways to investment. 

After that, there was that talk about:

• Capital budgeting
• Capital structure

And he meant by capital the money which is necessary for any business or project to start. This money structure can be generated by either two of the following:

• Debt
• Equity 

The debt is basically referred to as loans. While the equity is referred to as a share which is owned by somebody who has decided to buy into this business. 

He has also mentioned that it is the financial manager role to clarify the structure of the capital of the business. 

For example: to be of a 50 % loan, and a 50 % capital. 

It is also his role to manage the daily capital, like for example: rental, salaries, etc. 

Then it was the talk about the forms of business:

• Sole
• Partnership
• Corporation

He, then , started talking about the advantages and disadvantages of each one of them. 

After that, there was this word of 'drawback' of partnership which means a feature of something that makes it less useful than it could be. 

One of the characteristics of sole businesses is that they are known for their unlimited liability, by which we mean that an individual could sell their personal assets to pay their bills. 

After that, and relating to the same point of liability or responsibility, he talked about that most of companies tend to be an L.L.C- Limited Liability Company. 

If business fails, then there is no liability- no responsibility. 

• The business management equipped with the expertise

• And the owners who have the capital 

Are what any business can be built on. 

Then, the concept of 'double taxation' was discussed. 

And when this was being talked about, a technical term was mentioned: 'dividend'. 

• Dividend:

A share of the profits of a company, paid once or twice a year to the people who own the company's shares.

Or, as Dr. Faisal has said: a portion of profit, for example: a 10% to the shares' holders or the owners. He has also said that those owners are waiting for a return. And if they received no return, they will sell their shares. 

Double taxation and UAE

Dr. Faisal talked about the personal tax over profit. 

And the income tax , from which comes the concept of double taxation. 

Selling shares, he said, will be given the approval by the government.   

• No income tax in the GCC- Gulf Cooperation Council

Double taxation comes into play- start to happen or have an effect - where there is an income tax. In GCC, there is VAT only. 

According to Dr. Faisal, thanks to no income tax in the UAE, the country has been able to attract companies to do business.

After that, there was that talk about company goals. 

The agility and resilience of a company like amazon is represented by the following:

• minimizing the cost
• and managing the cost

Then, a question was raised for collecting opinions about whether downsizing- making a company or an organization smaller by reducing the number of workers- a better way of managing a business. 

Talking about how important clear goals are to a business, he also said there should be an ultimate goal to taking an MBA program. It should be a goal for life. 

One of the basic goals of any business is to maximize their profits . Be it a big - Corporation business, or a medium size one. When you grow your business as a whole - Entire business. 

At the time of talking about business goals, and maximizing profits as one of them, it happens that unnecessary cost comes into play. 

The agency problem

An agent means someone who acts on behalf of others. In business, the BOD - Board of Directors, and the CEO - Chief Executive Officer act as agents of the shareholders. This type of relationship is called agency relationship.

The classical example of Volkswagen was given. 

The handling of the agency problem.

Financial Markets:

A financial market is a medium between the lender and the borrower; it provides a platform for investors and companies. 

When answering a theory question :

• Introduction paragraph
• Opinion
• Solution, or a conclusion dependent on countries and conditions.

Selling shares to investors will not be possible if the company is a small one. It is also the local law that determines and regulates such issues. 

Then, we had some financial technical terms:

• Income statement
• Balance sheet

A balance sheet is a financial statement that reports a company's assets, liabilities and shareholders' equity. 

The three core financial statements used to evaluate a business:

• The balance sheet
• The income statement
• The statement of cash flows