To the unfortunate MBA student with a science and engineering background, corporate finance can be quite perplexing in the beginning; in fact, it may appear to be magic! First of all, it is intriguing that the value of an asset can be so subjectively quantified by market sentiment rather than by precise measurements. Second, most things that come with a negative sign usually reduce the end result in a formula, but taxes and interest payments on the other hand can actually help companies save money! Third and most puzzling of all, money, which is like matter in the universe, can be created by a printing press in a fortified bunker! I mean it totally messes up the second law of thermodynamics, and I am sure it violates the law of mass-energy conservation in some way!

However, as “they” make you go through almost 1.2B pages of reading on corporate finance, you start to feel the effects of the cool-aid. Yeah, perhaps corporate finance is really like physics, or maybe even alchemy in chemistry. I mean, it uses similar terms in mechanics such as levers and weights; it describes cash flows in a company as though it was a closed fluid network; it has intriguing graphs that comprise all manner of crisscrossing lines and jagged edges; and it even talks about bulls and bears to add a biological flavor to the discussion. To top it off, we even get to use ridiculously long decimal places sometimes! Hey, maybe it is science after all!

Gradually, in the wee hours of the morning or on the train back from the Legoshow, revelation and epiphany will descend upon the wretched engineer trapped in an MBA student’s body. Yes, I can see it now – money zooming forward and backward through time, reducing in mass as it suffers the financial laws of entropy. Financial statements in the form of balance sheets, income statements and cash flows turning into electronic circuit boards with regulations replacing resistors, and debt and equity functioning as transistors. The physicist in the class might consider the existence of inflation as a sign that the universe could still be expanding. And, when we heat a solid company above its melting point, we get liquidation. Oh, one thing’s for sure, we will all experience the same fate as Schrödinger’s Cat when we invest in the stock market.

Of course, most of what I have written in this article can be conclusively proven to be gibberish; partly because there is a strong correlation between the amount of sleep one has and one’s sense of reality. Nevertheless, I hope that my esteemed readers will find it more entertaining than the news in the financial pages. So, to all scientists and engineers out there studying for their MBA, enjoy corporate finance – after all, the most entertaining form of stage magic comes from the creative manipulation of the laws of science.