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Which finance topics should we be teaching today's student in an introductory finance course?

There is a persistent theme in the Finance literature (i.e. studies from 1994, 1997, and 2002), the concepts taught in the introductory finance course are not those used by the practitioner in the office. As such, I am extremely interested in this community's take on which finance topics should we be teaching today's student in an introductory finance course. Thank you. A university professor in the introductory finance classroom.

Answers

Topic Expert
Keith Perry
Title: Consulting CFO and Business Operations A..
Company: Growth Accelerator
(Consulting CFO and Business Operations Advisor, Growth Accelerator) |

Dear Anon;

The things I usually end up teaching my freshly minted hires are:
-Analytical tools, primarily in Excel. Sorting data with VLookups and similar tools. Doing queries in Access or similar SQL languages. Presenting the data in tabular or graphical format. Properly using XIRR, etc.
-The two core concepts of Accounting that apparently aren't taught anywhere: How to map T-accounts (debit / credit) and how to do a trial balance.
-The concept of "closing" and developing / implementing a process to "close".
-Cash flow forecasting. I've known many seasoned people who still can't do this...and it is the most critical output from any forecast (imho). Largely it is getting people comfortable with uncertainty, being able to find the important factors, quantify and communicate them.

KP

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Keith,

After teaching college level accounting for 10 years, I am still shocked that in Accounting 101 no one is taught how to create a COA, what systems are common, what aren't, etc.

It's amazing that as you go through the Accounting courses every conceivable COA is available (even if used only once for a company's life), and as a rule of thumb no one really does that.

Exception was a consulting job for Mutual of New York (dates me) where I was part of team that created a COA numbering system of 24 to the 36th power.

Topic Expert
Linda Wright
Title: Consultant
Company: Wright Consulting
(Consultant, Wright Consulting) |

Keith makes some great points. I won't repeat but echo them. As strange as it seems, I also teach basic communication skills--email etiquette, PPT approaches and quick memo skills. I recall one vice chairman for whom I worked who would not listen to or read anything sloppy.

Ernie Humphrey CTP
Title: CEO & COO
Company: Treasury Careers
LinkedIn Profile
(CEO & COO, Treasury Careers) |

The role of CFO is constantly evolving so you should teach them how to understand a business across the enterprise, and not just what were once viewed as core Finance topics. As Linda mentions, communication skills are key as well as other soft skills. It may seem a bit much for an introductory course, but also teaching them how to build consensus and network would be very beneficial to them. You should also get them "up to speed" on the technology that financial professionals are using to drive results including relevant cloud based applications.

Didier Jupillat
Title: CFO
Company: Atlantic.net
(CFO, Atlantic.net) |

I totally agree with Keith, especially in the areas of analytical tools and cash flow forecasting. There is nothing more important in this world of uncertainty than projecting cash and analyzing different scenarios to be better prepared... for the worst or the best!
The best exercise I can think of for any classroom or individual is to ask them to prepare their own personal budget in Excel. Because it's something very close to their daily life, it will make much sense to them than any theoretical corporate example.
Through that exercise, they will apply the analytical tools, identify all possible sources of income/expenses, learn about forecasting methods (starting with simple averages, including moving averages, linear increases, etc.), think about those external variables the main expenses depend on, use multi-variable indicators, etc.
Learning opportunities throughout the academic year are endless, including the concepts of inflation, scenarios (implies identifying the main variables), budgeting, variance analysis, rolling forecast... all the way to ROI calculation for potential investments or valuations through discounted cashflows!

Ken Stumder
Title: Finance Director / Controller
Company: Ken Stumder, CPA
(Finance Director / Controller, Ken Stumder, CPA) |

Keith lists what I think are great examples. Looking back, my accounting degree reads "Accounting and Information Systems" but there was very little process and systems in the curriculum, while this is a critical area in developing a career in Finance.

The curriculum at the undergrad level involved little "real-world" problem solving or creativity. It would be more relevant to give students a problem and to grade them for achieving an effective result. The problems can (and should) incorporate accounting principles, so I suppose this would be be junior/senior level course material.

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