Evolution of Freelancing

Freelancing is not a new phenomenon. It has been there from the time people started working and using currency; only the form of work was different. Initially, all temporary work, mainly labor work, was done by freelancers (daily wage workers), then came the era of project-based freelancers (contractors) which especially gained momentum in the field of real estate development and property building and finally people started to use flexi-working as a form of freelancing where some people specialized in handling short-term gigs, rather than then-stable fixed, regular jobs.

Back in the day when internet was not very common, the concept of telecommuting was not very popular largely because it was not quite practical. When internet came in, people started to use it as an entertainment and communication vehicle, however, in no long time did people realize the kind of opportunities they could grasp through working online. Everything started to turn on the internet from photography to writing to coding. However, the idea of getting work done online as well as working online did not click with many of the professionals.

When people started to notice significant other players jumping in, the utility of the online marketplace went up as now there were more and more opportunities to work online or combine a chunk of your work with online work and enjoy the perks of telecommuting. As every other bandwagon appeal, the concept picked up amongst the buyers and sellers of all kinds of work. With so many players in the market and little background to judge the people on, the costs went down and quality started to get compromised on many deals. So, again, many of the players went back to real world or at least mixed their portfolio to have some “real” players and some online. For instance, buyers kept hiring offline and online and freelancers kept searching for work on internet as well as in the real world.

Meanwhile, some freelancers kept working hard to build their online repute. They changed the web space overall. Now, in the web space, freelancers fall into two main categories in every domain: the good ones and the not-so-good ones. Until the new, struggling ones don’t fall into the first category through sheer effort, hard work and dedication, they are considered a probable part of the second category.

For the not-so-good ones, the road is rough and much work need to be done. Sometimes, they would also need to put up a lot of effort and search work offline too.

For the good ones, it’s far more interesting, and a lot more paying. They often have queues of buyers who are willing to pay a premium for the brand these good providers have developed.

However difficult it might be, one thing is certain that a lot of hard work and time need to be devoted with a clear vision and focused approach to register a mark into the first category.

Using ratio analysis in financial forecasting – II

So how to go about organizing financial ratios in proforma sheets?

The best way to go about doing this is to divide the ratios into five broad categories and use these categories to classify the core category ratios within each of these classifications. The categories could be:

  • Liquidity Ratios – tells you if the company can pay off its debt and payments falling due within a year
  • Activity Ratios – important for manufacturing companies in order to analyze if the inventories, accounts receivables and account payables are handled efficiently; also tells about whether the asset utilization is appropriate.
  • Solvency Ratios – Debt repayment capacity of the company; could be critical for some of the companies
  • Profitability Ratios – margins earned and return on assets and equity
  • Valuation Ratios – how is the market valuing the company measured largely through relative valuation ratios

Once you have linked ratios sheet in place, you could look at the same from time to time to help you guide if you’re going in the right direction or not. In case, you’re unsure about how to check, always try to take a comparative time series analysis into account and check the performance over the years. In some cases, looking at more than one ratio together could tell loads about the company. For example, looking at the accounts receivable turnover, accounts payable turnover and inventory turnover in conjunction with each other could actually provide insights into the big picture of where the possible issues could be as far as the organizational value chain is concerned.

Using ratio analysis in financial forecasting – I

Most of the people who study or read about ratio analysis don’t realize how powerful it could actually get, especially when you apply it in dynamic context of financial modeling. It serves two clear purposes: firstly, it acts as a sanity check to the model’s sanctity. Sometimes, when financial modeling involves many linkages, some of the linkages are misapplied resulting in a situation where you don’t realize you have made a mistake. As difficult as it is to verify all linkages, it is impractical to keep doing that all the while the model is being constructed.

With financial ratios linked to the proforma forecasting sheets, one can easily make sure that the model is going in the right direction, and any wrong linkage would lead to one of the ratios being out of line with the others or out of line compared to other years. An example in this regard could be a situation where you have prepared the proforma income statements for 5 years, and coming down from the Profit before tax level to Net profit levels, accounting for taxation. If the company is projected to have a loss before taxation in one of the years projected and the formula is subtracting the taxes from profit before tax levels, it would create a mess in your spreadsheet, which could be overlooked.

If you had linked the ratios to the P&L previously, you would see some inconsistency on the net profit margin figure in that particular year compared to other years, and then you can go back to check if how you calculated the figure was correct.

The Big Picture in financial writing

When you think about creative writing, you think about fancy writing and imaginative use of vocabulary and language to make wonderful masterpieces, but when it comes to financial writing, you don’t need to be a Shakespeare!

What is important is that you make a connection with the reader in a way that the latter doesn’t need to read everything to understand what you are saying. Let me elaborate. When you’re writing a financial report, it usually has an audience that are busy people working in corporations, investors, investment houses, portfolio managers and common people who are not very well-versed in finance. So, you have to convey your point through illustrative means, i.e. pictures, charts and graphs and make it a point to use language that could be understood by others who don’t have a finance background.

The beauty of an analyst report comes when a reader is able to read through the high points of the entire text in less than 2 minutes discerning what is important for the company and finally deciding to read further or not. That essentially is the success of that analyst. You don’t have to come out with a “BUY” or “SELL” recommendation every time you write a report, however, you must be sure about what you are talking. Once you convey things and perspectives on the company in an easy language, but also include further information for the technical/sophisticated investors, you can be expected to be doing a reasonable job. This work could turn into an outstanding one only in the case when there is quality and forethought behind your assumptions.  So always be careful on what you assume, because the results come out of your assumptions only. The assumptions should make sense when you look at the big picture for the business model of the company you’re writing about. Link the assumptions to the big picture to see if those are reasonable.

Analyst report

This is a report I wrote on the same company with two other mates, it is clearly illustrating that scientific writing and financial writing are really worlds apart. I have co-authored research papers in college, two of which were published in very respectable international publications in Aucland, New Zealand and IIM, Ahmedabad, India and can safely say there is a bit of unlearning to do for those who thrive in scientific writing.

Why is it different? What is so different about financial writing? What are the key themes in financial writing that need to be made sure. Is it better to write a small report or a long one? I would also talk about some of the issues in financial writing and how’s and why’s around it. Till then, you can have a look at the report and your feedback on this is most welcomed too 🙂

Investor Presentation

This is an investor presentation pitch that I made in collaboration with two other team mates at the business school. The idea about a good investor presentation goes beyond the color scheme and the number of slides. It is in essence built upon the storyline that you put forward. To build a credible story around your recommendation is very important – you can’t expect everyone to know about the company or industry you’re talking about as much as you do. So, make sure you have everyone’s interest.

Look out for many more tips coming about on how to handle investor pitch/presentations.

Valuation Model for an Oil & Gas E&P Company

This is a valuation model of a leading petroleum company operating in Pakistan, Pakistan Petroleum Limited. You can clearly see how this comprehensive model entails working on each individual component of the business, for instance, production and sales separately eventually building up within the model.

Although many businesses are based on simpler models, and are handled very differently from this one, some analysts focus on the complexity and predicting each individual tiny component so much that they lose sight of the big picture. I will be talking about how to go about modeling in some of the future posts where you will get to learn the to-dos and not-to-dos of the modeling world. It is always best to keep things simple, which can make life easier for everyone and increase utility of the financial model many folds.


In the world of finance, handling MS Excel is expected to be an individual’s second-nature. When I see a cross-section of new and old graduates in finance, business administration and accounting, it becomes clear that this is one edge to the newer graduates which differentiates them, increases their productivity and improves their decision-making support.

MS Excel might have just grown out a simple spreadsheet system of the 80s, or 90s, but it is not just that anymore. Financial analysis, reporting, critical business operation assessment and financial modeling utilizing debt and equity modeling using proforma statements and financial forecasting, all start and end on Excel.

I’ll try to write, post videos and talk about various tools, approaches and ideas that one could utilize to effectively use Excel to prove their Excellence. So hang on and keep visiting!

Importance of volunteering

In this day and age where everyone seems to be busy with their lives so much that none of us find enough time for everything that we would like to. In many ways, we have overcomplicated many facets of our lives so much that we sometimes lose that touch with reality.

People who are privileged to go through the education system are also trained to prepare themselves for the corporate work life, where no one has time for no one. In this rush, people tend to develop an indifference to many things around them. They tend to develop a sort of one-track mind on most of the issues they are surrounded with.

During this rush, many people don’t recognize the exact opportunity volunteer work offers. The very skills and traits that most people run after to develop – interpersonal skills, confidence, passion and compassion, audacity, vision and a sense of connection with the audience – are all very well developed through volunteering. Some people I have met tell me that it’s such a waste of time that it should be avoided or that we’re always so busy that we can’t just volunteer now. On asking further, I have mostly come to know it is usually those people who have never volunteered themselves for any cause.

When we volunteer for the first time, we have different views on it depending on at which age we start to volunteer, the volunteer opportunity being in our area of interest and our other responsibilities. In my opinion, one should start volunteering with the leading organizations at an early age. Scouting could also be a great start for young ones, as this exposes you the real world in a protected environment. People who have volunteered a lot know about the range of different organization types, organizational hierarchies and functions and they get to connect with people in the same area of interest who also have an urge to share their time and abilities without any commercial end in mind. I would say you could get very good friends and contacts by volunteering since you would meet people from all walks of life and unlike commercial organizations where hierarchies dictate who’s senior, dedication, commitment and hard work differentiates volunteers from the rest in the club. Moreover, one can learn a lot of managerial abilities by volunteering their time – the earlier you start doing it, you would realize the better it turns out to be.

Beyond all these reasons, the most important reason is that the experience where you get to help people, develop compassion and learn to appreciate the diversity and problems of others around you. This is a very humbling experience in itself and I think, it’s a reason enough to volunteer!