Ramon Ecung's Personal Blog

I have very limited experience with financial management. Most of what I know is self-taught from dealing with budgets, trying to follow conversations between people in accounting departments, and general life experience. Most of my knowledge actually comes from watching Jim Cramer, host of the TV show Mad Money on CNBC. In his books he praises understanding the fundamentals of a company in order to properly invest in a stock.

I can truly appreciate reading the chapters in our Entrepreneurial Financial Management book because a company’s financial statement provides a window into the company itself. Between the Income Statement, Balance Sheet, and the Statement of Cash Flows, you can tell the condition of the company, how it actually makes it’s money (it’s not always obvious!) and how well positioned it is to weather a storm or take advantage of an opportunity.

I also have experience in a small family business that had years of excellent income, and poor income, but being able to tell what the differences between the years wasn’t readily obvious. To this day it’s possible the company was more profitable in it’s slower years than it’s higher income years, but because no accounting system was in place, valuing the company was extremely hard. It was much like Mr. Compaine said, we looked at the checking account to see how we were doing. To this day I invest in ETF’s, not individual stocks because I’m incapable of fully understanding what I’m reading when it comes to financial statements.

One reason I never took an accounting class during my undergrad was the perception that accounting was hard and overly complicated. Hearing all of the analogies that it’s like another language didn’t help. I’ve had a paradigm shift recently and I now compare accounting to algebra. I see it as a relatively complex system that has simple rules, and once you understand the rules, the system becomes infinitely more simple.

I look forward to learning the language of business, and have started by taking one of my girlfriend’s textbooks (she’s an accounting major!) and making flashcards of terms  that I need to know. I’ve also made flashcards of concepts from the EFM book of anything that I don’t know or understand 100% that way I’ll at least know the concepts by rote memorization. I’m also able to talk with someone about accounting concepts intelligently and she can teach me about accounting while I can expose her to entrepreneurial concepts she may not learn in her studies.