Sunday, September 10, 2006

Rocket Science

In my earlier life as a Corporate Banker, I have done a large number of Financial Statement Analysis. But I never thought that so much goes behind generating those three statements Balance Sheet, Income Statement, Cashflow Statement and the notes associated with them.

From a lenders point of view, some numbers are very important and thats what we focused on when analysing the statements or forecasting the numbers or doing a variance analysis. However, when its your own organization not some but all numbers are important and significant importance is given to all variances.

I told my chartered accountant colleague that I never considered that so much goes behind generating these statements. Its like a different world altogether. He comforted me that 'you can easily master it; its no rocket science'. I replied that I excelled in such subjects in academia as Derivatives, Options and Futures, Fixed Income Securities and Financial Engineering, Ito's Lemma, Black Scholes, Greeks etc. otherwise known as rocket science.

However, this cost allocation, internal pricing, warranty amortization, labor cost, bonuses, etc. and to top it all of budgeting, strategy planning, balance scorecards, feasibilities and forecasting is driving me nuts. The other day I was at the office on a weekend finalizing the budget numbers. An ex-colleague of mine in Pakistan found out. He was flabbergasted, "Working on a weekend in Middle East? Qiyamat ki nishaani hai (sign of the end of the world)!!!"

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