Michigan Tech College of Business Newsblog

Accounting is the language of business; it allows companies to accurately convey important financial information to stakeholders. Accountants have many jobs, but among them are preparing the company’s financial statements, which show the financial position of a company.

There are three main financial statements: the balance sheet, income statement, and statement of cash flows. 

The balance sheet is a snapshot of a company’s financial position at one point in time. It details the amount of a company’s assets, their liabilities, and how much owner’s equity is in the company. Assets are things the company owns, liabilities are how much a company owes to others, and owner’s equity is the residual assets that would be leftover if a company paid all of its liabilities at that point in time. 

The income statement shows how much a company made during a period of time. The income statement and statement of cash flows are different from the balance sheet in that they both show financial information for a period of time, versus one point in time. To show how much a company made, the income statement shows a company’s revenues (earnings), minus their expenses. 

Finally, the statement of cash flows details all of the cash a company received and used during a period of time. These cash flows are broken into operating, investing, and financing cash flows. Operating cash flows are from running normal business activities, investing cash flows section shows how much money was made or spent on investing activities, and the financing section shows how a company funded its operations. 

Stakeholders are anyone who have an interest in a company’s performance and include, but are not limited to: investors, creditors (people and other businesses who the company owes money to), banks, and even employees. Enabling companies to accurately convey their financial information to both exterior parties and people within an organization is critical for both publicly and privately held companies. 

For example, when a company wants to borrow money from the bank, the bank wants to ensure the company has the ability to repay the loan. By looking at the company who is borrowing money’s financial statements and other factors, the bank is able to see how much money they should lend the company and what interest rate (to accommodate for risk) they should charge on the loan. 

Another example is when investors look at a company’s financial statements to see if a company is a worthy investment opportunity. Investors can look at various financial statements and use various techniques and accounting ratios to gauge their investment decisions. In the week two video, Jacob showed you an example of how the students in Michigan Tech’s Applied Portfolio Management Program use various financial statements to decide whether they should buy or sell shares of a company. 

In this week’s video, Sheila Milligan, a senior accounting lecturer at Michigan Tech, explains what the income statement is and how investors can use it to gauge their investment decisions.

Please note: Teams are encouraged to continue making trades and checking tournament updates during upcoming spring breaks. 

Have you been watching the markets lately? We have been on a historic, almost 10-year-long, bull run. A bull run is when prices in the stock market rise over an extended period of time, whereas in a bear run, the opposite is true. You can remember the difference by picturing a bull, which bucks upwards, and a bear, who swipes his claw downwards.



You may also have noticed that the DOW and S&P 500 dropped more than 3 percent last Monday and the NASDAQ had a two-day drop of 6.38 percent–the worst since June 2016.

What should investors do with this information? If prices are dropping, should you be selling your assets before prices can get any worse? Is now the time to buy and ride out the market dip? Making hasty sell decisions is rarely a good choice in times like these.

Here are two major factors driving changes in the market, and what investment professionals are saying about them:

You’ve surely heard about the coronavirus (COVID-19). While the loss of life and emotional toll of the disease are potentially monumental, we will focus on the financial side of things.

At this time, experts predict that although the results will be substantial, and already are, they will be temporary. Historically, when there is an outbreak such as this, markets are influenced in the short-run, but recover following the outbreak. One aspect of the coronavirus that is likely to have a lasting global impact, is the issue that is created in supply chains with shut downs in China.

Since we source many of our products from the country, there is fear that companies will not be able to meet consumer demands. This may cause ripple effects that last into the rest of 2020. Some companies, such as Apple, predict lower sales in the fiscal year. Apple’s sales may be down this year if they are not able to produce enough iPhones for the company’s annual new product release, which is generally in September. 

Politics are also a major factor in financial markets. With the upcoming election and primaries beginning, news in politics is constantly impacting the market. Although the influence of politics on the market is difficult to predict, there are several trends that have been noticeable. Presidential candidates are often gauged as “pro” or “anti” business and the stock market reacts accordingly. When candidates generally seen as pro-business are leading in the polls, the market tends to go up. When candidates that aren’t seen as pro-business are in the lead, the market tends to head in the opposite direction.

Going one step further, certain sectors and companies can be impacted to a greater extent depending on the platform of the politicians. For example, a “hawkish” politician would be good for the defensive industry versus a “dovish” politician. That being said, the effect on the stock market is a wild card. At this point in the election process, investors will see politics playing a heavy role in the market, which will likely increase the volatility of stocks.

With everything going on in the markets, it is difficult to predict how the multitude of influences will blend together to move the market going forward. Watch this week’s video to learn more about supply chain management, and how investors can use this information when making decisions. 

Welcome to week two of the Husky Investment Tournament!

There are more than 300 students competing to see who can make the most money with a million dollars in only seven weeks. Teams are beginning to make trades and are gaining confidence. Have you made your first trade? Time is limited, so start now!



Investing for retirement is like running a marathon. A steady, well-diversified portfolio comprised of a large number of stocks will win out in the long run. Investing for a stock contest, however, is like running a sprint. You need to pursue an aggressive portfolio comprised of a small number of high-risk stocks to be the top performer over the short run.

In real-life investing, investors match their investment style to their risk aversion, or the level of risk you are willing to accept for a potential return. Generally, higher risk is an indicator of a higher potential return (or loss). For an average person, there is a need to lower risk using a well-diversified portfolio. In this model, investors allocate their investments between stocks and fixed-income instruments (bonds, CDs, etc.). Fixed-income instruments are investments whose interest payments are set at a fixed value and are paid on a regular schedule. These investments are generally less risky than equity investments because of the fixed payment schedule and the order assets are distributed in the event a company goes bankrupt (bond holders receive payment before equity holders); however, the lower level of risk generally leads to a lower rate of return than equity instruments.

To further diversify, investments are also distributed between several different sectors (technology, financials, consumer staples, etc.) and at least 30 different individual assets. This mitigates diversifiable risk, or risk that can be reduced by spreading out your investments. While this technique works well in reality, it may not be best for the Husky Investment Tournament.

This competition is judged based on total portfolio value at the end of the last trading day and returns are not risk-adjusted, so teams may find it lucrative to pursue risk for the potential for a higher return. 

This week’s video comes from Jacob Mihelich, a current student in the Michigan Tech College of Business and an investor in the Applied Portfolio Management Program. He provides helpful pointers on selecting stocks.

It’s exciting to see new faces, as well as returning schools! We look forward to working with everyone and sharing valuable information about investing. Wherever life takes you after graduation, this knowledge will bid you well.


As young people, you have the most valuable asset on your side—time! Why is investing early so important? The answer is compound interest. $1,000 invested at 8 percent will grow to be $1,080 after one year. After two years, it will grow to $1,164.40 due to earning compound interest (you earn 8 percent on last year’s $80 in interest = $4.40 plus 8 percent on your $1,000 = $80).

That may not seem like a big deal, but consider a longer time period. What will your $1,000 grow to be in 55 years when you retire? The answer: $68,913.86. That’s right, your $1,000 will generate $67,913.86 in interest.

Want to be a millionaire? If you invest $1,117 each year for 55 years and earn 8 percent, you will have more than $1,000,000!

So, as you can see, investing when you are young is the first key to a secure retirement. 

The second key is the rate of return you earn. If you invest $1,117 each year for 55 years and earn one percent, you would only have $85,820.19. Which retirement would like to have—one with more than $1 million or one with less than $100,000?

Where can you earn an 8 percent return? In a savings account at a bank? In a Certificate of Deposit? Or in the stock market?

The College of Business at Michigan Technological University wants you to understand the basics of stock investing while you are young. People naturally avoid things they don’t understand. We want you to understand that investing isn’t as complex as it may appear. Only one team will finish in first place in this competition, but all of you can win in the retirement tournament.

This week’s video is from Dean Johnson, dean of the MTU College of Business. He provides an introduction into stocks and investing to help get you started, as well as an explanation of rules and trading restrictions. Good luck, and have fun!