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Important concepts to learn during an MBA in Finance

Admin | August 10, 2022

A Master of Business Administration (MBA) in Finance is a two-year postgraduate course emphasising various concepts and subjects in Financial Management like Accounting, Banking and Insurance, Mergers and Acquisitions, etc. Many accredited institutions provide MBA in Finance in both online and on-campus modes. 

There is a huge demand for candidates with an MBA in Finance. Many financial domains like investment banking, corporate accounting, macro-economist, etc., prefer a candidate with an MBA degree in Finance. 

MBA in Finance helps you enhance your knowledge and skills essential to succeed in the Banking, Financial Services and Insurance (BFSI) Industry. It is an excellent option for college graduates interested in finance and wishes to pursue a career in the Banking, Financial Services and Insurance (BFSI) Industry. An MBA in Finance is one of the highest-paying MBA fields (Source).

Read this blog post to learn about the critical concepts you should focus on during your MBA in Finance.

What are the subjects in an MBA in finance?

The MBA Finance subjects vary from one institution to another. Some of the MBA finance subjects that are taught in most business schools are as follows:

  • Cost accounting: This subject teaches how to calculate a company’s total cost of production by evaluating the variable cost associated with each step of the production process and the company’s fixed costs (e.g. lease expense).
  • Financial planning and control: This subject teaches a combination of strategies that can help in supporting the whole financial management process. It also includes many methods, techniques and future scope for financial planning and control to allow the organisation’s management to fixate on principles, policies, and rules.
  • Investment analysis and portfolio management: This subject is included in the investment domain. It teaches you about the major investment markets, their constraints and objectives, and the main participants. The subject comprises investment strategies for equities, bonds, and other financial products.
  • Banking and insurance: This subject involves the two financial sectors, banking and insurance, that are evolving at a rapid rate. Banking is the backbone of the financial sector, whereas insurance is one of the essential financial services in present times.
  • Micro and macro economics: Microeconomics deals with the supply and demand of individual businesses or conglomerates, factors that impact the product price and services, etc. On the other hand, macroeconomics deals with the policies, rules and regulations that impact the economy of a state or a nation. 
  • Fixed income securities: This subject talks about fixed income securities which are some sort of debt instruments that gives out a fixed interest amount to the investors. Some common examples of fixed-income securities are bonds, certificates of deposit (CDs), treasury bills, etc.
  • Advanced accounting: This subject emphasises advanced topics such as mergers and acquisitions, subsidiaries, consolidations, intracompany transactions, etc. 
  • Marketing and strategy:  This subject teaches how to achieve a company’s objectives by communicating the benefits of your products and services to your market audience. 
  • Financial statement analysis: This subject involves the study of the performance of an organisation in making data-driven decisions. There are many important subtopics such as horizontal analysis, trend analysis, profitability analysis, variance analysis, etc.
  • Corporate finance: This subject focuses on how corporate businesses finance their operations to maximise profits and minimise costs. It involves the daily operations of the organisation’s cash flow and the long-term goals of the company in terms of finance.

What are the top concepts to be mastered in an MBA in finance?

Some of the top concepts that you need to master in MBA Finance are categorised under these major subjects, Finance & Accounting, Economics, Securities, and Cryptocurrency & Blockchain.

Finance & Accounting

  • Liquidity

This is one of the most important terms in MBA finance. Liquidity refers to how fast individuals can convert their assets to cash. In other words, liquidity is the ability to get cash from assets whenever needed.

Liquidity can be facilitated via many options, such as money in the form of bank balance or the availability of cash in your living space that you can use in case of emergency or any financial difficulties. You could also sell your assets to get cash in return in order to liquidate your assets. Liquidity is essential because it enables individuals and companies to seize opportunities. 

Let’s understand this with an example. Suppose you own a business and you get to know of an opportunity which can bring a great return on investments. If you had liquid assets, you could have efficiently invested in the opportunity to make financial gains. Cash, checkable, and savings accounts are all considered liquid assets because all these assets can be converted into cash without any hassle.

  • Tax planning

The financial concepts for MBA include the study of tax planning. It minimises tax liabilities by learning about tax exemptions, deductions, and benefits promoted by various government policies and regulations. Simply put, it can be defined as the process of inspecting a financial plan from a tax point of view. 

It is also an important aspect of a financial plan. The primary goal of tax planning is to minimise tax liability and maximise tax efficiency. The types of tax planning are as follows:

  • Purposive tax planning: This includes planning taxes with a fixed goal.
  • Permissive tax planning: This involves strictly planning taxes by the book. (or under the government rules)
  • Long-range & Short-range tax planning: This is the planning of taxes conducted at the beginning and the end of a financial year.
  • Accounting

Accounting is one of the most important MBA finance subjects. It can be defined as the system of maintaining records of financial transactions that include both text and numbers in the format of financial statements. This process offers a vital tool for keeping logs of assets and liabilities, billing customers, tracking profitability and monitoring the cash flow of an individual or an organisation. 

Accounts are generally categorised into the following types:

  • Assets: Cash, investments, properties, equipment, other cash equivalents, etc.
  • Liability: Accrued expenses, bonds payable, accounts payable, etc.
  • Equity: Treasury stock, common stock, retained earnings, etc.
  • Revenue: Sales revenue
  • Expense: Interest on debts, depreciation, amortisation, repairs and maintenance costs, etc.

The result of the completed accounting process is a financial statement. This financial statement has all information, including the balance sheet, cash flows, shareholder’s equity, income statement, etc. This information acts as a feedback report to the stakeholders. A positive financial statement can bring various benefits like more revenue, additional investments, etc.

  • Mergers and acquisitions

The terms mergers and acquisitions are some of the most asked finance basics for MBA interviews. These terms are often used together or interchangeably. A merger refers to the process of two or more companies combining to become one larger entity. This process is generally carried out through the exchange of shares of the parent companies. On the other hand, acquisition is the process where one company buys the shares or assets of another company. In this process, the buyer pays the seller in cash, stock options, or other valuable assets. This transaction could be amicable or hostile in nature.

M&A (mergers and acquisitions) can also be interpreted as an umbrella term that includes mergers, acquisitions, consolidations, tender offers, acquisition of assets, management acquisitions, etc.

There are many other important concepts in the M&A domain that you will learn during your MBA in Finance (e.g., the structure of mergers, valuation of M&A, etc.), which are essential for pursuing a career in the banking and finance industry. 

Securities

  • Stock market

Understanding the various types of securities and the stock market is an important component of the MBA banking and finance subjects. A stock market can be understood as a venue where buyers and sellers of securities get together to carry out exchanges of shares, bonds, debentures, and other financial products of public enterprises. The stock market carries out these exchanges using the process of price discovery that is based on technical and fundamental analysis. The constant fluctuation in the price of financial products enables buyers and sellers to invest in the financial product of their choice.

For public enterprises, the stock market enables them to raise capital by providing the platform for the sale and purchase of financial products. The capital raised by the enterprises can be used in the growth of the business, expansion of operations, creation of more jobs, etc. An MBA in Finance enables you to understand the functioning of the securities market and portfolio management in detail.

  • Asset management

Asset Management can be defined as the cost-efficient process of developing, functioning, maintaining, and selling the assets of a company or an individual. This is also one of the most commonly used terms in the finance glossary for MBA students. 

Every company needs to track their assets effectively. This is done mainly to convince the investors to invest in the company. The assets of a company can be categorised into current assets and fixed assets. The fixed assets are the ones that were acquired for long-term usage, while the current assets are the ones that are liquid or can be transformed into cash easily within a short period of time.

  • Risk management

Risk Management is one of the important topics in finance basics for MBA interviews. It can be defined as the process of identifying, evaluating, monitoring and mitigating the risks that could affect the company’s objectives. Risk can be defined as the likelihood of an undesirable outcome of an action. Finance-related risks are generally categorised into the following types:

  • Strategic risk – New market competitors
  • Compliance and regulatory risk – Changes in government policies and regulations
  • Financial risk – Increment in the interest rate on loans
  • Operational risk – Robbery or theft

Let us understand this with an example: Investment in equity shares is risky. You can lose your investment if the company’s share price goes down, whereas investing in a fixed deposit is considered less risky because the bank guarantees fixed returns on these deposits. If you are planning to invest, we would recommend you diversify your portfolio to minimise the risks associated with the investments. This way, you can manage the risks associated with financial investment individually. 

  • Credit score

Credit Score is a very important aspect to learn during MBA in Finance. It is a number that describes a consumer’s creditworthiness. The higher the credit score, the more your chances to borrow money from potential lenders. Various parameters are taken into consideration while calculating the credit score:

  • The number of open bank accounts,
  • The total amount of existing debt,
  • History of debt repayments, etc.

Economics

  • Inflation

Inflation can be defined as a perpetual increase in the price of products and services as a result of the continuous decrease in the currency’s value. In other words, it can be understood as the decline in the purchasing power of a currency over time. It can be categorised into the types listed below: 

  • Cost-push inflation
  • Demand-pull inflation
  • Built-in inflation

Let us understand inflation with an example; Let us say that you receive Rs. 2,000 as your pocket money every month, which becomes second-hand monthly income for you. One year ago, you were able to manage your expenses with this pocket money. But now, because of the increased fuel prices and increased costs of goods and services, you are not able to manage your expenses within that pocket money. So the same amount of money is proving to be insufficient for one month. Because of Inflation, you are not able to manage your monthly expenses with the same amount of money.

It also helps in the identification and management of risks that can arise due to the usage and ownership of different types of assets. This can help you develop a strategic asset management plan that can help you to complete an asset inventory, calculate life cycle costs, fixate levels of service, etc.

  • GDP

This is one of the most common abbreviations used by economists, which is short for ‘Gross Domestic Product’. It measures the financial value of a nation’s produced goods and services in a certain period of time. It takes all the output generated within the country into account. GDP consists of products and services produced for market sale and non-market services such as educational and defence services offered by the local governments. 

Another way to evaluate the GDP is to consider all the output products of the country’s residents. You need to understand that if a French manufacturer has a production plant in China, the output of this production plant will be taken into account in the GDP of China and France.

It is also important to note that unpaid work is not taken into account even if they are productive in nature. Other activities, such as black market transactions are also not considered.

The main objective of the credit score of an individual is to assess the likelihood that he/she will repay the debt in the agreed timeline. Different countries have different ranges of credit scores. For e.g., in the USA, the credit scores range from 300 to 850, while in India, the CIBIL credit score ranges from 300 to 900. 

Even if you don’t use this course in your professional career, you can always use its understanding in your personal life.

Cryptocurrency and Blockchain

Cryptocurrency or bitcoin is a digital currency that’s used as an alternative form of payment created using encryption algorithms. It is designed to function as a medium of exchange through a computer network and is not dependent on any central authority to uphold or maintain it.. Cryptocurrencies function as a currency and as a virtual accounting system too. 

Blockchain is a technology that’s invented to enable cryptocurrencies  It is a decentralised ledger that lists all transactions across a peer-to-peer network. Blockchain technology allows you to transfer value online without the need for a middleman or a central clearing authority. Almost all cryptocurrencies, including Bitcoin, Ethereum, and Litecoin, are secured through blockchain networks. 

Who can pursue an MBA in finance? 

The MBA in Finance courses can be pursued by all candidates who have a strong interest in Finance-related subjects or want to pursue a career in the BFSI domain. However, there are some prerequisites to joining the MBA in Finance course. The exact eligibility criteria differ from one institution to another. 

Most MBA in Finance courses are open to any candidate who has completed a Bachelor’s degree with any specialisation. Some universities admit candidates with an undergraduate degree in Finance-related specialisation. 

Also, most universities offer seats for MBA in Finance to candidates who have obtained at least 50 percent aggregate score during their bachelor’s degree. However, some universities might have higher thresholds of cut-off percentage. 

If you are eligible to pursue an MBA in Finance but are still wondering if this is the right course, here are some pointers that can help you decide. You should opt for an MBA degree in Finance if:

  • You have a solid background in Mathematics and Statistics. There are many subjects in the program that involve the application of mathematics and statistics. 
  • You want to pursue a career in Banking, Financial Services and Insurance (BFSI).
  • You have a good background in accounting from college, higher secondary school or external certification.
  • You want to pursue a certification course, namely Chartered Financial Analyst (CFA), after your MBA course.
  • You wish to continue your studies further in the field of Finance, Investment Management, Accounting, or any finance-related specialisation.

What are the career prospects of MBA in finance graduates?

There are many potential career options that you can explore after completing your MBA in finance. Some of the most lucrative career options are as follows:

  • Investment Banker

Investment Bankers are experts on investment strategies who merge the expertise of financial services, analytical skills, and excellent communication skills to help their clients to make investment-related decisions in projects like mergers and acquisitions, capital raising, etc. In simple words, investment bankers help their clients to raise money for business operations and expansion.

They have a pivotal role to play in launching the initial public offerings (IPOs) by a company that is planning to go public. They also take part in arranging financing, equity financing, underwriting deals, negotiating mergers and acquisitions, arranging private placements, etc., for their clients. The average salary of an Investment banker is about INR 5.1 lakh per year.

  • Mergers and Acquisitions Analyst

The Mergers and Acquisitions Analysts are members of the M&A team. They are in charge of carrying out market research and communicating the findings to the executive management for potential merger and acquisition proposals for the company’s business. They are also expected to give suggestions based on their findings along with the report.

The average salary of a Mergers and Acquisitions Analyst is about INR 8 lakh per year.

  • Cost Accountant

Cost Accountants are managerial accountants hired to monitor an organisation’s total production costs by analysing the variable costs of each step in the production process and the fixed costs. 

They are in charge of evaluating process constraints, margin analysis, tracking the costs to corresponding tasks, etc. and building and monitoring the data accumulation systems required to offer an optimal level of costing-related information to executive management. 

The average salary of a Cost Accountant is about INR 5.1 lakh per year.

  • Financial Analyst

Financial Analysts are in charge of analysing the financial statements and forecasting the organisation’s future performance.

This process includes predicting future expenditures and revenues and modelling the budgets and capital structure. They are also in charge of monitoring the financial objectives of the company. 

The average salary of a Financial Analyst is about INR 4 lakh per year.

  • Financial Officer

Financial officers are responsible for supervising the financial transactions of an organisation. They are also in charge of managing budgets, reviewing transactions and creating financial reports. 

They are responsible for creating and implementing financial policies to ensure efficiency in business operations. They are expected to prepare the invoices and balance sheets of the organisation. They might also be involved in financial audits. 

The average salary of a Financial officer is about INR 4.2 lakh per year.

  • Financial Consultant

Also referred to as Financial Advisors, Financial Consultants are in charge of providing valuable advice and suggestions to their clients on many finance-related topics such as investments, taxes, retirement financing, insurance selection, etc.

They help clients achieve their financial goals through financial advice and suggestions. They work as independent consultants or for multinational financial corporations or consulting companies.

The average salary of a Financial Consultant is about INR 3.3 lakh per year.

  • Further Studies

Besides job opportunities, there is plenty of scope for further studies after an MBA in Finance. You can pursue a postgraduate degree in Financial Management or any other finance-related specialisation. You can also take up other Master courses in Data Science or Data Analytics to learn about the pivotal role of these subjects in the Finance domain. While pursuing your doctorate or PhD, you can teach other junior students in the university and earn good money.

An MBA in finance prepares you for some important certifications like:

  • Certified Public Accountants (CPA): They participate in activities related to taxes, investments, financial management, etc., for individuals and companies.
  • Certified Financial Advisors (CFA): They help individuals make better investment decisions, manage their money, and create investment portfolios.
  • Certified Management Accountants (CMA): They predict the organisation’s profit margins. They also help achieve the financing goals and safeguard the organisation from finance-related risks.
  • Financial economics: This specialisation subject involves microeconomics and the link between consumers and producers in an economy.

How does Online Manipal’s MBA in finance programme make you job-ready?

Manipal University Jaipur (MUJ) offers UGC-entitled MBA Finance degrees to its candidates. The institution is NAAC A+ accredited. The online MBA Finance degree from Online Manipal is a 24-month programme that requires 15-20 hours of study time per week. The annual fee for the online MBA Finance offered by Manipal University is INR 1,50,000. You can also pay the fees in semester-wise instalments of INR 37,500. Other than Finance, you can choose other electives such as HRM, Marketing, BFSI, Operations Management, etc.

The MBA Finance degree from Manipal University Jaipur is accepted by many companies for hiring employees and universities for higher education. Online Manipal also offers placement assistance through resume/CV writing workshops and interview tips to help you obtain a good-paying job.

Conclusion

MBA in Finance is a two-year master’s level degree that enables the student to obtain skills and knowledge in Finance-related subjects such as accounting, banking, corporate finance, etc. There are many vital subjects in MBA finance listed above that you should focus on. After completing your MBA in Finance, you can choose to pursue a career in various high-paying roles such as investment banker, financial analyst, etc.

Online Manipal offers an online MBA Finance course that helps you gain essential skills to pursue a career in the Finance-related domain.

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