s201 automated group learning (agl) agl no. 10 - financial management of working capital daily work...

S201 AUTOMATED GROUP LEARNING S201 AUTOMATED GROUP LEARNING (AGL)(AGL)

AGL NO. 10 - AGL NO. 10 -

FINANCIAL MANAGEMENTFINANCIAL MANAGEMENT

OF WORKING CAPITALOF WORKING CAPITAL

DAILY WORK PACK - PART 2DAILY WORK PACK - PART 2

Copyright: RGAB/PW 2005/3Copyright: RGAB/PW 2005/3

AGL

S202 ASSIGNMENT 1.0 REVIEW ANDS202 ASSIGNMENT 1.0 REVIEW AND SHORT QUIZ (45 minutes) SHORT QUIZ (45 minutes)

1,1 INSTRUCTIONS1,1 INSTRUCTIONS

(a)(a) Assemble in new SG and discuss outstanding Assemble in new SG and discuss outstanding questions from Part Iquestions from Part I

(c)(c) Do the short quiz which follows. Work on eachDo the short quiz which follows. Work on each question individually and then compare question individually and then compare answers in SGanswers in SG

(d)(d) When all answers have been completed, check When all answers have been completed, check with the correct solution , discuss points arising, with the correct solution , discuss points arising, and reassemble in MG when the bell rings,and reassemble in MG when the bell rings,

S203 ASSIGNMENT 2.0 STUDY - CREATIVES203 ASSIGNMENT 2.0 STUDY - CREATIVE ACCOUNTING (75 minutes) ACCOUNTING (75 minutes)

2.12.1 INSTRUCTIONS INSTRUCTIONS

(a) (a) Re-assemble in new SG, study the lecture and discuss Re-assemble in new SG, study the lecture and discuss all issues arising.all issues arising.

(c)(c) Record significant points on the flip chart.Record significant points on the flip chart.

(d)(d) Review the glossary for any difficulties with new wordsReview the glossary for any difficulties with new words

(e)(e) Record significant points in your notebook andRecord significant points in your notebook and re-assemble in MG when the bell rings.re-assemble in MG when the bell rings.

S204 ASSIGNMENT 3.0 - LECTURE - S204 ASSIGNMENT 3.0 - LECTURE - CREATIVE ACCOUNTING (30 minutes)CREATIVE ACCOUNTING (30 minutes)

3.13.1 FINANCIAL STATEMENT OBJECTIVESFINANCIAL STATEMENT OBJECTIVES

Financial statements are : income statements profitFinancial statements are : income statements profit and loss accounts), balance sheets , cash and funds flowand loss accounts), balance sheets , cash and funds flow statements.statements.

Objective - not scientific accuracy, not "correct", but Objective - not scientific accuracy, not "correct", but rather rather

"useful credible estimates for all partiesconcerned". "useful credible estimates for all partiesconcerned".

Must be credible.Must be credible.

S205 3.1 FINANCIAL STATEMENT S205 3.1 FINANCIAL STATEMENT OBJECTIVESOBJECTIVES

Financial statements for banks, shareholders, Financial statements for banks, shareholders, management, management,

suppliers and tax authorities may differ.suppliers and tax authorities may differ.

Company may have several different balance sheets, Company may have several different balance sheets, but but

the auditor normally signs only one.the auditor normally signs only one.

S206 3.2 ACCOUNTING PRINCIPLES S206 3.2 ACCOUNTING PRINCIPLES AND TAX LAWSAND TAX LAWS

Financial statements affected mainly by accounting Financial statements affected mainly by accounting principles but also by company and tax laws. principles but also by company and tax laws.

Accounting principles that help us to translate records intoAccounting principles that help us to translate records into financial statements are: cost, conservatism, consistency,financial statements are: cost, conservatism, consistency, true and fair, comparability, accounting period, entity, true and fair, comparability, accounting period, entity, matching and materiality. matching and materiality.

Matching means associating the relevant costs and revenues Matching means associating the relevant costs and revenues in the same accounting period. in the same accounting period.

S207 3.2S207 3.2 ACCOUNTING PRINCIPLES ACCOUNTING PRINCIPLES AND TAX LAWS (continued)AND TAX LAWS (continued)

Materiality is the key accounting principle. Big amounts are Materiality is the key accounting principle. Big amounts are important. small items are not significant! important. small items are not significant!

Don't bother about small amounts or minor accounting Don't bother about small amounts or minor accounting errors ... "don't polish “peanuts” ... however "satisfying" that errors ... "don't polish “peanuts” ... however "satisfying" that may be ... look for the "coconuts" ...may be ... look for the "coconuts" ...

Although influenced by company and tax law, such Although influenced by company and tax law, such accounting principles are mainly the work of professional accounting principles are mainly the work of professional accounting institutes, they enable financial statements to be accounting institutes, they enable financial statements to be “ “true and fair” (whatever that may be ...}.true and fair” (whatever that may be ...}.

S208 3.2 ACCOUNTING PRINCIPLES S208 3.2 ACCOUNTING PRINCIPLES AND TAX LAWS (continued)AND TAX LAWS (continued)

In managing working capital we have to use financial In managing working capital we have to use financial statements and therefore we must understand just statements and therefore we must understand just

how "true how "true and fair" they may, or may not be ...and fair" they may, or may not be ...

I.A.S. (International Accounting Standards) bring some I.A.S. (International Accounting Standards) bring some consistency to varying national accounting principles, consistency to varying national accounting principles, rules and standards. rules and standards.

Always ask for the profit according to IAS!!Always ask for the profit according to IAS!!

S209 3.2 ACCOUNTING PRINCIPLES S209 3.2 ACCOUNTING PRINCIPLES AND TAX LAWS (continued)AND TAX LAWS (continued)

Company law sets provisions for a minimum Company law sets provisions for a minimum disclosure of disclosure of

information in published financial statements; often information in published financial statements; often veryvery

little useful data is disclosed!little useful data is disclosed!

Financial statements "in accordance with law" are Financial statements "in accordance with law" are not not

necessarily "true or fair" or useful to management. necessarily "true or fair" or useful to management.

S210 3.3S210 3.3 COMPANY AND TAX LAWSCOMPANY AND TAX LAWS (continued) (continued)

Competitors may get more information from other Competitors may get more information from other sources sources

than from financial statements e.g from than from financial statements e.g from suppliers ,,,. suppliers ,,,.

Company law eventually follows generally accepted Company law eventually follows generally accepted accounting principles (but may bsometimes be accounting principles (but may bsometimes be

grossly grossly conservative!)conservative!)

S211 3.3S211 3.3 COMPANY AND TAX LAWS COMPANY AND TAX LAWS (continued)(continued)

Tax law sometimes requires transactions to be Tax law sometimes requires transactions to be recorded in recorded in

the books to qualify for tax relief. the books to qualify for tax relief.

This leads to poor accounting principles and This leads to poor accounting principles and distorted distorted

financial statements. financial statements.

Watch out for it ... in the notes to the financial Watch out for it ... in the notes to the financial statements.statements.

S212 3.3S212 3.3 COMPANY AND TAX LAWSCOMPANY AND TAX LAWS (continued) (continued)

Many companies maintain separate books andMany companies maintain separate books and financial statements for tax purposes and thus financial statements for tax purposes and thus

avoid avoid distortion of the management accounting. distortion of the management accounting. NOTE: In some countries watch out for several sets NOTE: In some countries watch out for several sets

of books:of books: ““one for the bank, one for the tax people, one for one for the bank, one for the tax people, one for

my my partner, and one for me " ... ?partner, and one for me " ... ?

S213 3.4S213 3.4 CREATIVE ACCOUNTING CREATIVE ACCOUNTING

Myth is that financial statements are "correct"Myth is that financial statements are "correct"

Reality is that they are normally manipulated in some Reality is that they are normally manipulated in some way.way.

Creative accounting means "adjustment" in Creative accounting means "adjustment" in

accordanceaccordance with accounting principles which gives most useful with accounting principles which gives most useful

result result for the purpose required; not illegal but may be for the purpose required; not illegal but may be

unethical!unethical!

S214 3.4S214 3.4 CREATIVE ACCOUNTING CREATIVE ACCOUNTING (continued) (continued)

GAAP - Generally accepted accounting principles , provideGAAP - Generally accepted accounting principles , provide a wide scope for creative accounting since merea wide scope for creative accounting since mere disclosure of changes in the notes to the financial disclosure of changes in the notes to the financial statements often satisfies the Auditors who ,,,,(in all good statements often satisfies the Auditors who ,,,,(in all good faith) ... may sometimes assume that all readers are expertfaith) ... may sometimes assume that all readers are expert accountants.accountants. Excessive inconsistencies and changes in accounting Excessive inconsistencies and changes in accounting principles, however. compel the Auditor to "qualify" principles, however. compel the Auditor to "qualify" his report; but ... auditors seldom actually do so because his report; but ... auditors seldom actually do so because they may thereby lose a client.they may thereby lose a client.

S215 3.4S215 3.4 CREATIVE ACCOUNTING CREATIVE ACCOUNTING (continued) (continued)

Creative accounting within accounting principles may be Creative accounting within accounting principles may be achIeved in many ways. but the general rule is:achIeved in many ways. but the general rule is: “ “ Don't manipulate the profit unless you really have to ...”Don't manipulate the profit unless you really have to ...”

And thus, to increase the profit of the year:And thus, to increase the profit of the year: (a)(a) Defer costs treat costs as balance sheet assetsDefer costs treat costs as balance sheet assets rather than expenses. i. e. R & D, advertising, pre-rather than expenses. i. e. R & D, advertising, pre- production costs.production costs.

(b)(b) Minimize accrual for liabilities don't provide for Minimize accrual for liabilities don't provide for all potential losses.all potential losses.

S216 3.4 CREATIVIE ACCOUNTINGS216 3.4 CREATIVIE ACCOUNTING (continued) (continued)

(c)(c) Release reserves into the income statement or Release reserves into the income statement or charge charge

losses to reserve. Revalue capital assets to create alosses to reserve. Revalue capital assets to create a capital reserves against which to charge special capital reserves against which to charge special

losses.losses.

(d)(d) Fixed assets - "capitalise" as much as possible; Fixed assets - "capitalise" as much as possible; depreciate over long "horizons" to reduce the annual depreciate over long "horizons" to reduce the annual depreciation charge e.g. goodwill over 40 years ... ?depreciation charge e.g. goodwill over 40 years ... ?

S217 3.4 CREATIVE ACCOUNTING S217 3.4 CREATIVE ACCOUNTING (continued)(continued)

(e) Do not consolidate a subsidiary making huge losses (e) Do not consolidate a subsidiary making huge losses because it will "distort the position". Alternatively because it will "distort the position". Alternatively arrange for such subsidiaries to be less than 51% owned.arrange for such subsidiaries to be less than 51% owned. Acquire and consolidate only profitable subsidiaries.Acquire and consolidate only profitable subsidiaries.

(f) Careful treatment of exceptional losses charge losses to (f) Careful treatment of exceptional losses charge losses to reserve or accumulated profit rather than to the income reserve or accumulated profit rather than to the income statement to "avoid distorting the profit of the year". statement to "avoid distorting the profit of the year".

S218 3.4 CREATIVE ACCOUNTING S218 3.4 CREATIVE ACCOUNTING (continued)(continued)

(g)(g) Timing - sell assets now at a profit or defer selling them Timing - sell assets now at a profit or defer selling them at a loss and thus increase the profits of this particular at a loss and thus increase the profits of this particular year.year.

(h)(h) Inventory - don't be too conservative; don't write off too Inventory - don't be too conservative; don't write off too much obsolete inventory.much obsolete inventory.

(i) Create a huge “restructuring” charge, and use it as a (i) Create a huge “restructuring” charge, and use it as a semi-secret reserve to ENSURE that profitability bounces semi-secret reserve to ENSURE that profitability bounces back well ,,, in the following year or so ,,, back well ,,, in the following year or so ,,,

S219 3.4 S219 3.4 CREATIVE ACCOUNTINGCREATIVE ACCOUNTING (continued) (continued)

(j) Profit - take profit on uncompleted contracts. (j) Profit - take profit on uncompleted contracts.

(k) Take or defer ... Forex and derivative profits or losses(k) Take or defer ... Forex and derivative profits or losses and other legal, environmental, employee, pensioner and other legal, environmental, employee, pensioner contingent liabilities, which are so difficult to identifycontingent liabilities, which are so difficult to identify and evaluate.and evaluate.

Note: In some companies the material contingent liability Note: In some companies the material contingent liability for legal claims ... may be the key to profit or loss this year ... for legal claims ... may be the key to profit or loss this year ... which may thus depend more on the opinion of the which may thus depend more on the opinion of the lawyers ... than the accountants ... conversely to reduce lawyers ... than the accountants ... conversely to reduce the profit this year ...the profit this year ...

S220 3.6S220 3.6 DETECTION OF CREATIVITY DETECTION OF CREATIVITY

To detect creative accounting. study the notes to theTo detect creative accounting. study the notes to the financial statements very carefully for financial statements very carefully for

inconsistencies in inconsistencies in accounting principles and watch for:accounting principles and watch for:

(a)(a) Deferred and intangible assets which cannot be Deferred and intangible assets which cannot be justified. justified.

(b)(b) Changes in inventory valuation and investment Changes in inventory valuation and investment values.values.

S221 3.6 DETECTION OF CREATIVITY S221 3.6 DETECTION OF CREATIVITY (continued) (continued)

(c)(c) Charges of profits or losses not to the income statement Charges of profits or losses not to the income statement but to reserves or accumulated profit.but to reserves or accumulated profit.

(d)(d) Release of reserves into profit without specific Release of reserves into profit without specific disclosure. disclosure.

(e)(e) Accruals noted but~not actually provided for.Accruals noted but~not actually provided for.

(f) Vague reserves which are not clearly equity or debt.(f) Vague reserves which are not clearly equity or debt. (g)(g) Investments in subsidiaries not consolidated. (Why?)Investments in subsidiaries not consolidated. (Why?)

S222 3.6S222 3.6 DETECTION OF CREATIVITY DETECTION OF CREATIVITY (continued) (continued)

(h)(h) Increased amount for "goodwill" in the balance Increased amount for "goodwill" in the balance sheet, sheet,

that is not written off within five years ....that is not written off within five years ....

(i)(i) Forex profits and losses.Forex profits and losses.

(j)(j) Pension fund provisions.Pension fund provisions.

(k)(k) ALWAYS ... RECONCILE THE PROFIT WITH IAS!!ALWAYS ... RECONCILE THE PROFIT WITH IAS!!

S223 3.6S223 3.6 DETECTION OF CREATIVITYDETECTION OF CREATIVITY (continued) (continued)

(l)(l) Search for extra-ordinary contingent liabilities Search for extra-ordinary contingent liabilities for FOREX ,for FOREX ,

derivatives, leasing, legal claims, environmental derivatives, leasing, legal claims, environmental issues.issues.

employee benefits etc. which may be employee benefits etc. which may be "material" ... !!"material" ... !!

Note: Try very hard to Ignore the "peanuts" ... and Note: Try very hard to Ignore the "peanuts" ... and to to

concentrate on the "coconuts" ... concentrate on the "coconuts" ...

S224 3.7 ROLE OF THE AUDITORS S224 3.7 ROLE OF THE AUDITORS

In theory the Auditor is employed by the shareholdersIn theory the Auditor is employed by the shareholders under the law to protect the interests of the shareholders; under the law to protect the interests of the shareholders; in reality he is hired by the management to satisfy the law in reality he is hired by the management to satisfy the law and add credibility to published financial data; as anand add credibility to published financial data; as an "honest professional public accountant";."honest professional public accountant";.

He protects his own interests but "bends occasionally to He protects his own interests but "bends occasionally to meet the reality of the situation" ... but is the first person to meet the reality of the situation" ... but is the first person to be sued if the company goes bankrupt .... be sued if the company goes bankrupt ....

S225 3.7S225 3.7 ROLE OF THE AUDITORSROLE OF THE AUDITORS(continued)(continued)

Auditor charges an appropriate fee for making a report on Auditor charges an appropriate fee for making a report on the financial statements; he merely tests the records and the financial statements; he merely tests the records and does not guarantee their accuracy or the absence of fraud...does not guarantee their accuracy or the absence of fraud...

Professional standards of auditors in United States, Holland, Professional standards of auditors in United States, Holland, England, Australia, New Zealand, South Africa, Canada, England, Australia, New Zealand, South Africa, Canada, etc. are higher and sometimes quite different from (so etc. are higher and sometimes quite different from (so called) professional auditors in many other countries. called) professional auditors in many other countries.

S226 3.7S226 3.7 ROLE OF THE AUDITORS ROLE OF THE AUDITORS (continued)(continued)

Note: Be a little careful with financial statements Note: Be a little careful with financial statements “audited ““audited “

in ... Suisse , France,, Germany, Italy, Spain, Africa, in ... Suisse , France,, Germany, Italy, Spain, Africa, Middle Middle

East, Asia etc ...East, Asia etc ...

unless audited by the ... “Big Five” ....unless audited by the ... “Big Five” ....

and quoted on NYSE ... under SEC rules ... and quoted on NYSE ... under SEC rules ...

and reconciled with IAS ... and reconciled with IAS ...

S227 3.7 S227 3.7 ROLE OF THE AUDITORSROLE OF THE AUDITORS (continued) (continued)

Auditor who is not independent, not a professional Auditor who is not independent, not a professional public public

accountant and has no public reputation cannot accountant and has no public reputation cannot alwaysalways

be expected to give an unbiased opinion.be expected to give an unbiased opinion. An Auditor not satisfied with financial reports must An Auditor not satisfied with financial reports must

persuade persuade client to change financial statements by appropriate client to change financial statements by appropriate

notes notes or finally he must qualify his report.or finally he must qualify his report.

S228 3.7 S228 3.7 ROLE OF THE AUDITORS ROLE OF THE AUDITORS (continued)(continued)

Auditor is "flexible" to changes in accounting principlesAuditor is "flexible" to changes in accounting principles when the tax law changes.when the tax law changes.

Particularly concerned with not overstating the financial Particularly concerned with not overstating the financial position but happy for it to be understated without position but happy for it to be understated without

comment.comment.

In some countries financial statements are expected to be In some countries financial statements are expected to be very very conservative ... and thus ... not necessarily veryvery very conservative ... and thus ... not necessarily very true or very fair e.g. Suisse!!true or very fair e.g. Suisse!!

S229 3.7 ROLE OF THE AUDITORSS229 3.7 ROLE OF THE AUDITORS

Evaluate the auditor's work not by his professional Evaluate the auditor's work not by his professional qualification alone ... qualification alone ...

but by his: name, reputation, fee, independence ...but by his: name, reputation, fee, independence ...

and the local financial norms ... and the local financial norms ...

you may be amazed to find that in some places 50% of you may be amazed to find that in some places 50% of the the

business transactions do not get recorded in the business transactions do not get recorded in the books ...!books ...!

S230 3.7 ROLE OF THE AUDITORS S230 3.7 ROLE OF THE AUDITORS (continued) (continued)

A delay of more than 2 months in publishing professionally A delay of more than 2 months in publishing professionally audited financial statements must ALWAYS ... be a audited financial statements must ALWAYS ... be a

"financial "financial danger alarm bell" ...danger alarm bell" ... Alerting you to look carefully for signs of ... creativity ... Alerting you to look carefully for signs of ... creativity ... contingent liabilities ... off-balance sheet financing" ... contingent liabilities ... off-balance sheet financing" ... FOREX losses ... environmental claims ... or even missing FOREX losses ... environmental claims ... or even missing funds ... and the usual business failures ... funds ... and the usual business failures ...

Everywhere? ... Yes ... especially in developing countries ... Everywhere? ... Yes ... especially in developing countries ...

S231 3.7S231 3.7 ROLE OF THE AUDITORS ROLE OF THE AUDITORS (continued) (continued)

Why?Why?

Because so often ... the "auditors" ... who appear to Because so often ... the "auditors" ... who appear to be be

reliable ... may in reality ... NOT BE ... as reliable ... may in reality ... NOT BE ... as professional ...professional ...

as independent ... as IAS oriented ... or as adequately as independent ... as IAS oriented ... or as adequately paid ... so be careful ... and put the audit paid ... so be careful ... and put the audit

credibility ...credibility ... into in your PFD ...into in your PFD ...

S232 3.8 DECEPTIONS INS232 3.8 DECEPTIONS IN FINANCIAL REPORTING FINANCIAL REPORTING

Figures for a purely normal year may be reported by the Figures for a purely normal year may be reported by the Chairman as "exceptionally good" by employing the Chairman as "exceptionally good" by employing the following devices: following devices:

(a)(a) Quote the amounts of differences without Quote the amounts of differences without indicating indicating

the relative difference to the whole. the relative difference to the whole.

(b)(b) Quote small difference amounts in terms of largeQuote small difference amounts in terms of large percentage changes. percentage changes.

S233 3.8 DECEPTIONS IN S233 3.8 DECEPTIONS IN FINANCIAL REPORTING (continued)FINANCIAL REPORTING (continued)

(c)(c) Quote aspects of transactions that are improving and Quote aspects of transactions that are improving and avoid the depressing aspects. avoid the depressing aspects.

(d)(d) Choose a bad prior year as a standard of comparison Choose a bad prior year as a standard of comparison such that the present year appears to be a substantial such that the present year appears to be a substantial improvement (compared with the carefully selectedimprovement (compared with the carefully selected terrible prior year).terrible prior year).

(e)(e) Attribute profit increases to good management. Attribute profit increases to good management.


(f)(f) Attribute losses to "consolidation for the future, Attribute losses to "consolidation for the future, "unfair "unfair

competition", the "depressed economy" or competition", the "depressed economy" or "government "government

policy" (and the recently retired last CEO)!! policy" (and the recently retired last CEO)!!

(g)(g) Point out exceptional profits and losses only if they Point out exceptional profits and losses only if they support the case. support the case.

(h)(h) Similarly conceal losses by charging capital reserve orSimilarly conceal losses by charging capital reserve or accumulated profit (not the income statement). accumulated profit (not the income statement).


(i)(i) Improve capital reserve by revaluing certain Improve capital reserve by revaluing certain fixed assets and then charge off the losses to fixed assets and then charge off the losses to capital reserve. capital reserve.

(j) Quote all figures but only compare certain of (j) Quote all figures but only compare certain of them with prior performance. them with prior performance.

(k) Show only those financial ratios that appear to (k) Show only those financial ratios that appear to indicate improvement over the past years; ignore indicate improvement over the past years; ignore others; choose a basis to compute the ratios that others; choose a basis to compute the ratios that suits the case. suits the case.


(l)(l) Release secret reserves by changes in policy for Release secret reserves by changes in policy for inventory and investment valuation, depreciation inventory and investment valuation, depreciation and contingencies. and contingencies.

(m)(m) Quote profits before or after income tax as Quote profits before or after income tax as appropriate. appropriate.

(n)(n) Quote employee numbers; increases result from Quote employee numbers; increases result from "expansion" decreases result from more efficient "expansion" decreases result from more efficient operations". operations".

S237 3.8 DECEPTIONS INS237 3.8 DECEPTIONS IN FINANCIAL REPORTING (continued) FINANCIAL REPORTING (continued)

(o)(o) Increase the volume of information in the annual report: Increase the volume of information in the annual report: add more maps, graphs and pictures! add more maps, graphs and pictures!

(p)(p) Consolidate or do not consolidate subsidiaries. Consolidate or do not consolidate subsidiaries.

(q)(q) Continually point out that financial statements haveContinually point out that financial statements have been prepared so as to avoid distortion of figures been prepared so as to avoid distortion of figures which could mislead the shareholders (but never which could mislead the shareholders (but never discuss “poison pills”).discuss “poison pills”).

(r)(r) Make a restructuring charge and blame the retiring Make a restructuring charge and blame the retiring CEO ... and announce a recovery for next year ...CEO ... and announce a recovery for next year ...

S238 3.8S238 3.8 DECEPTIONS IN DECEPTIONS INFINANCIAL REPORTING (continued)FINANCIAL REPORTING (continued)

Key Note: Key Note:

1. Profit at the front of the Annual Report may 1. Profit at the front of the Annual Report may "disappear""disappear"

in the small print of the notes to financial in the small print of the notes to financial statements. statements.

2. Always check the reconciliation of the net profit 2. Always check the reconciliation of the net profit figure figure

with IAS you may be very surprised ...!!with IAS you may be very surprised ...!!

S239 3.9 PRACTICAL APPROACH S239 3.9 PRACTICAL APPROACH TO ACCOUNTING PRINCIPLESTO ACCOUNTING PRINCIPLES

(a)(a) If current year's profit is adequate. be conservative and:If current year's profit is adequate. be conservative and:

1.1. Charge off all losses to the income statement either as Charge off all losses to the income statement either as operating or non operating costs, AND charge off all operating or non operating costs, AND charge off all R & D, advertising and deferred costs as soon as possible. R & D, advertising and deferred costs as soon as possible.

2.2. Take all profits into the income statement either as Take all profits into the income statement either as operating or non operating income, AND don't change operating or non operating income, AND don't change accounting principles unless absolutely necessary.accounting principles unless absolutely necessary.

S240 3.9S240 3.9 PRACTICAL APPROACH TO PRACTICAL APPROACH TO ACCOUNTING PRINCIPLES (continued)ACCOUNTING PRINCIPLES (continued)

(b)(b) If current year's profit is not adequate, be lessIf current year's profit is not adequate, be less conservative:conservative:

1. Defer costs or charge them to reserve 1. Defer costs or charge them to reserve

2. Take profits on working process to date2. Take profits on working process to date Note: Keep the "credibility gap" to the minimum but ifNote: Keep the "credibility gap" to the minimum but if loss is "inevitable" .... then make a it a "big one" ... loss is "inevitable" .... then make a it a "big one" ... add a bit more for “restructuring” ... and announce add a bit more for “restructuring” ... and announce a "recovery in the current year after re-structuring “.... a "recovery in the current year after re-structuring “....

S241 3.10 FINANCIAL POLICIES S241 3.10 FINANCIAL POLICIES Need for financial policies to provide for EVA/SVA with Need for financial policies to provide for EVA/SVA with sustainable cash flows and profits with health and continuity sustainable cash flows and profits with health and continuity of the business.of the business.

Financial management doeso not avoid risk ... it balance riskFinancial management doeso not avoid risk ... it balance risk and return. and return.

Financial statwments must occasionally be manipulated Financial statwments must occasionally be manipulated ( “window dressed “, “adjusted within the law”, “modified( “window dressed “, “adjusted within the law”, “modified in accoprdance with accounting princioples”, creative”,in accoprdance with accounting princioples”, creative”, “ “practical”, ” creative” etc.) practical”, ” creative” etc.)

S242 3.11 FINANCIAL ETHICS S242 3.11 FINANCIAL ETHICS

Now please, answer the following questions aloud, Now please, answer the following questions aloud, and toand to

try to get some general agreement in the MG:try to get some general agreement in the MG: (a)(a) Should financial statements for shareholders Should financial statements for shareholders always be “true and fair” and disclose reality? always be “true and fair” and disclose reality?

S243 3.11 FINANCIAL ETHICS (continued)S243 3.11 FINANCIAL ETHICS (continued)

(b) Even when (possible) disclosure of a dangerous (b) Even when (possible) disclosure of a dangerous position could lead to a disaster which might position could lead to a disaster which might be avoidable?be avoidable?

S244 3.11 FINANCIAL ETHICSS244 3.11 FINANCIAL ETHICS (continued) (continued)

(c)(c) Can several alternative financial statements Can several alternative financial statements all be all be

equally “true and fair”? equally “true and fair”?

S245 3.11 FINANCIAL ETHICSS245 3.11 FINANCIAL ETHICS(continued)(continued)

(d)(d) Would you legally "creative" in a financial Would you legally "creative" in a financial statement to statement to

gain time for your company's survival? gain time for your company's survival?

S246 3.11 FINANCIAL ETHICS S246 3.11 FINANCIAL ETHICS (continued) (continued)

(e) (e) Who knows best what to do with excess cash in the Who knows best what to do with excess cash in the company? Management or shareholders? company? Management or shareholders?

(f) (f) Who really should decide what profit is shown in Who really should decide what profit is shown in eacheach

year's financial statements? year's financial statements?

Accountants ? Auditors? Lawyers? Accountants ? Auditors? Lawyers? Bankers? Bankers?

Major shareholders? Management? Major shareholders? Management?

S247 3.12 LEARNING PATTERNS - REVIEWS247 3.12 LEARNING PATTERNS - REVIEW

1. CREATIVE ACCOUNTING1. CREATIVE ACCOUNTING

• TAX LAWSTAX LAWS

• COMPANY LAWSCOMPANY LAWS

• GAAPGAAP

• IASIAS

• AUDITING STANDARDS ... BUT STILL ... CAAUDITING STANDARDS ... BUT STILL ... CA


2.2. FINANCIAL POLICYFINANCIAL POLICY

BALANCING RISK AND RETURNBALANCING RISK AND RETURN

TIMING IS THE KEYTIMING IS THE KEY

• FOR EVA ... AND SVAFOR EVA ... AND SVA


3.3. CASH FLOW CASH FLOW

• CASH IS A FACT!CASH IS A FACT!

• PROFIT IS JUST AN OPINION !!PROFIT IS JUST AN OPINION !!

S250 3.13 INSTRUCTIONS (10 minutes)S250 3.13 INSTRUCTIONS (10 minutes)

(a)(a) Reassemble in SGReassemble in SG

(b)(b) Study the lecture carefully and record key Study the lecture carefully and record key points in points in

your notebookyour notebook

(c)(c) Discuss outstanding questionsDiscuss outstanding questions

(d)(d) When the bell rings continue with the case studyWhen the bell rings continue with the case study which follows.which follows.

S251 ASSIGNMENT 5.0 - LECTURE -S251 ASSIGNMENT 5.0 - LECTURE -ELECTRONICS RESEARCH COMPANY (ERC) ELECTRONICS RESEARCH COMPANY (ERC)

5.15.1 STORY OF THE CASESTORY OF THE CASE

ERC is in research and manufacture of electronic ERC is in research and manufacture of electronic components for space and computer systems. Dissident components for space and computer systems. Dissident stockholders forced the Chairman to promise a stockholders forced the Chairman to promise a small profit for last year.small profit for last year.

The new R&D project will cost an extra ECU one million per The new R&D project will cost an extra ECU one million per 2Last year's initial profit ECU .4 (400,000) was computed2Last year's initial profit ECU .4 (400,000) was computed before expending special R&D and inventory losses, before expending special R&D and inventory losses, and before possibly crediting profit on uncompleted and before possibly crediting profit on uncompleted contracts. contracts.

S252 5.1S252 5.1 STORY OF THE CASESTORY OF THE CASE

Many parties are interested in the financial Many parties are interested in the financial statements, statements,

including: including:

stock markets, tax authorities, existing and potential stock markets, tax authorities, existing and potential shareholders, trade unions, management, bank ...shareholders, trade unions, management, bank ... all the “stakeholders” ...etc.all the “stakeholders” ...etc. What profit or loss should the company report for What profit or loss should the company report for

last year?last year?

S253 5.2 HEALTH OF THE COMPANY S253 5.2 HEALTH OF THE COMPANY

(a)(a) Liquidity: quick, current and E:D ratios are all Liquidity: quick, current and E:D ratios are all poor; poor;

extensive borrowing from the bank; liquidity extensive borrowing from the bank; liquidity position position

is critical.is critical. (b)(b) Activity: sales are high, but inventory and asset Activity: sales are high, but inventory and asset

turnover turnover poor; high inventory write down; a expanding poor; high inventory write down; a expanding

company company has become increasingly inactive.has become increasingly inactive.

S254 5.2 HEALTH OF THE COMPANYS254 5.2 HEALTH OF THE COMPANY(continued) (continued)

(c)(c) Profitability: poor profitability due to the inventory write Profitability: poor profitability due to the inventory write down, government contracts, and high R & D costs; down, government contracts, and high R & D costs; poor management? poor management?

(d)(d) Potential: R&D good, but little real evidence of profitablePotential: R&D good, but little real evidence of profitable opportunities in terms of marketing, production, finance,opportunities in terms of marketing, production, finance, etc. etc.

(e)(e) Overall: company unprofitable and under- capitalizedOverall: company unprofitable and under- capitalized for further expansion.for further expansion.

S255 5.3S255 5.3 FINANCIAL STATEMENT FINANCIAL STATEMENT OBJECTIVESOBJECTIVES

Management must try to ensure the long-term Management must try to ensure the long-term survival survival

and increasing long-term value of the company. and increasing long-term value of the company.

Creative accounting ("Creative Accounting") within Creative accounting ("Creative Accounting") within the the

law and accounting principles may be justified if law and accounting principles may be justified if the the

objectives are reasonably consistent with local objectives are reasonably consistent with local business business

practices! practices!

S256 5.3S256 5.3 FINANCIAL STATEMENT FINANCIAL STATEMENT OBJECTIVES (continued)OBJECTIVES (continued)

Provided management has confidence in the future of Provided management has confidence in the future of the the

company, it must produce financial statements which do company, it must produce financial statements which do not cause unnecessary loss to shareholders, creditors, not cause unnecessary loss to shareholders, creditors, employees, etc. employees, etc.

The extent of creative accounting employed depends on The extent of creative accounting employed depends on the pressure to produce reasonable results to ensure the the pressure to produce reasonable results to ensure the opportunity for survival opportunity for survival . .

Thus CA is only a short term solution.Thus CA is only a short term solution.

S257 5.4 PARTIES CONCERNED WITHS257 5.4 PARTIES CONCERNED WITH CREATIVE ACCOUNTING CREATIVE ACCOUNTING

(a)(a) Tax Authorities: require conformity with tax Tax Authorities: require conformity with tax regulations regulations

to allow company to minimize tax liability. to allow company to minimize tax liability.

(b) Shareholders: concerned that profits should not cause (b) Shareholders: concerned that profits should not cause a fall in share price; this might motivate dissatisfied a fall in share price; this might motivate dissatisfied shareholders to try for control.shareholders to try for control. (c)(c) Trade Unions: greater pressure for higher wages if Trade Unions: greater pressure for higher wages if

the the statements show a profit.statements show a profit.

S258 5.4 PARTIES CONCERNED WITH S258 5.4 PARTIES CONCERNED WITH CREATIVE ACCOUNTING (continued)CREATIVE ACCOUNTING (continued)

(d) Banks: unhappy about large loans to company (d) Banks: unhappy about large loans to company whichwhich

is losing money, with an uncertain future and is losing money, with an uncertain future and liquidity liquidity

problems.problems.

(e)(e) Government - expects company to be profitable Government - expects company to be profitable as as

indicator for survival and thus a suitable party indicator for survival and thus a suitable party for for

government contracts.government contracts.

S259 5.4 PARTIES CONCERNED WITH S259 5.4 PARTIES CONCERNED WITH CREATIVE ACCOUNTING (continued)CREATIVE ACCOUNTING (continued)

(f)(f) Press and financial analysts: who influence thePress and financial analysts: who influence the stock market price of the company's shares, stock market price of the company's shares,

andand thus the risk of take-over.thus the risk of take-over.

(g)(g) Management and staff - expect profitable Management and staff - expect profitable results for results for

survival and morale of all company staff without survival and morale of all company staff without fear fear

of lay-offs.of lay-offs.

S260 5.5 JUSTIFICATION FOR CAS260 5.5 JUSTIFICATION FOR CA

(a)(a) Management and staff and company survival. Management and staff and company survival.

(b)(b) Recognition that cash is a fact but profit only a Recognition that cash is a fact but profit only a matter of opinion.matter of opinion.

(c)(c) Gain TIME to act, and avoid the danger of fraud Gain TIME to act, and avoid the danger of fraud by deception, which sets the limits. by deception, which sets the limits.

S261 5.6 RECOMMENDATIONS ONS261 5.6 RECOMMENDATIONS ON DISPUTED ITEMS DISPUTED ITEMS

(a) R & D Expense: no justification for carrying forward (a) R & D Expense: no justification for carrying forward the the

normal R & D expensed in the past. normal R & D expensed in the past.

New special R & D could have special benefit for the New special R & D could have special benefit for the future and could be carried forward after deduction future and could be carried forward after deduction of tax. of tax.

Not conservative accounting, but company ls not Not conservative accounting, but company ls not ableable

to take such a large loss this year.to take such a large loss this year.

S262 5.6 RECOMMENDATIONS ONS262 5.6 RECOMMENDATIONS ON DISPUTED ITEMS (continued) DISPUTED ITEMS (continued)

(b)(b) Inventory Loss: should be charged to last Inventory Loss: should be charged to last year, year,

regardless of when the inventory was made. regardless of when the inventory was made.

Charge to accumulated profit gives a false Charge to accumulated profit gives a false impressionimpression

of last year's activities and results. of last year's activities and results.

However, some auditors may pass it either However, some auditors may pass it either way.way.


(c)(c) Profit on uncompleted contracts - previous Profit on uncompleted contracts - previous accountingaccounting

practice of deferred profit until projects practice of deferred profit until projects completed is completed is

very conservative. very conservative.

All uncompleted contracts could be examined for All uncompleted contracts could be examined for a a

reasonable figure of profit to date and to be reasonable figure of profit to date and to be includedincluded

in the last year's profit.in the last year's profit.


NOTE: NOTE:

The above suggestions are not unethical nor The above suggestions are not unethical nor

illegal creative accountings, but merely practical illegal creative accountings, but merely practical

attempts to produce realistic figures which are attempts to produce realistic figures which are

useful to management and the parties interesteduseful to management and the parties interested

in the company's future success. in the company's future success.

S265 5.7S265 5.7 AUDITOR'S REACTIONSAUDITOR'S REACTIONS

Auditors insist on fair accounts in accordance with "generally Auditors insist on fair accounts in accordance with "generally accepted accounting principles" which tend to depend accepted accounting principles" which tend to depend upon the law and business practice of each country. upon the law and business practice of each country.

Currently pressure for all "quoted" companies to Currently pressure for all "quoted" companies to adopt IAS!!adopt IAS!!

Particular ERC concern this year because of unhealthy Particular ERC concern this year because of unhealthy position is possible publicity from a liquidation or take over ... position is possible publicity from a liquidation or take over ... RESULT? .... CEO GETS FIRED BUT THE AUDITORS GET SUED RESULT? .... CEO GETS FIRED BUT THE AUDITORS GET SUED FOR NEGLIGENCE ,,,, !FOR NEGLIGENCE ,,,, !

S266 5.7S266 5.7 AUDITOR'S REACTIONS AUDITOR'S REACTIONS (continued)(continued)

Disclosure of all changes in accounting principles is vital; Disclosure of all changes in accounting principles is vital; auditors usually insist that the Chief Executive "certifies" auditors usually insist that the Chief Executive "certifies" every change as being "reasonable and in the interests every change as being "reasonable and in the interests of the company". of the company".

In reality, would probably NOT agree to the normal R&DIn reality, would probably NOT agree to the normal R&D being carried forward, but would agree to alternative being carried forward, but would agree to alternative treatment (after tax) of the disputed items. treatment (after tax) of the disputed items.

All changes must be recorded as notes to the financial All changes must be recorded as notes to the financial statements with explanation of the effects on the profit figure. statements with explanation of the effects on the profit figure.


Auditors often believe that the public is "adequately Auditors often believe that the public is "adequately informed" if the data is somewhere in the financial informed" if the data is somewhere in the financial

statements,statements, even though it might require highly skilled even though it might require highly skilled

accountant toaccountant to find it! find it!

It may sometimes be difficult to change auditors It may sometimes be difficult to change auditors without without

adverse publicity. adverse publicity.


Fees not relevant here. ERC could r place a "difficult" auditor Fees not relevant here. ERC could r place a "difficult" auditor next year ... but NOT this year!!! next year ... but NOT this year!!!

Alternatively, ERC could add another (international) auditor Alternatively, ERC could add another (international) auditor this year as a "joint auditor", to influence the current this year as a "joint auditor", to influence the current auditor!!! auditor!!!

NOTE: The auditor may not be too unhappy with a long delay NOTE: The auditor may not be too unhappy with a long delay in producing published financial statements. It would givein producing published financial statements. It would give him more time to seeif the company will survive, and thus him more time to seeif the company will survive, and thus reduce his risk of damage claims by the creditors!!reduce his risk of damage claims by the creditors!!

S269 5.8S269 5.8 DECISION AND JUSTIFICATION DECISION AND JUSTIFICATION

(a) Discussion(a) Discussion

Company is in very difficult position; it must incur Company is in very difficult position; it must incur extensive extensive

R&D cost to survive and it can't afford to expense it, as R&D cost to survive and it can't afford to expense it, as in the past. in the past.

Financial policy therefore must be realistic and figures Financial policy therefore must be realistic and figures produced must be CREDIBLE to all parties concerned. produced must be CREDIBLE to all parties concerned.

S270 5.8S270 5.8 DECISION AND JUSTIFICATIONDECISION AND JUSTIFICATION (continued) (continued)

Management must first decide whether they firmly believe Management must first decide whether they firmly believe that the company has a future as an independent operationthat the company has a future as an independent operation rather than as a part of a larger group of companiesrather than as a part of a larger group of companies i.e. take-over. i.e. take-over.

Doubtful whether existing equity base could finance theDoubtful whether existing equity base could finance the WORKING CAPITAL EXPANSION, unless profits were WORKING CAPITAL EXPANSION, unless profits were

extremely extremely high. high.

This seems unlikely.This seems unlikely.

S271 5.8S271 5.8 DECISION AND JUSTIFICATION DECISION AND JUSTIFICATION (continued)(continued)

(b) Decision(b) Decision

Suggest the adjusted profit for last year be ECU .6 millions Suggest the adjusted profit for last year be ECU .6 millions computed as follws: computed as follws:

Existing profit (ECU - millions)Existing profit (ECU - millions) .4 .4 Plus: profit on all uncompleted contracts Plus: profit on all uncompleted contracts .8 .8 Total Total 1.2 1.2 Less: inventory losses Less: inventory losses .6 .6

Adjusted profit (ECU - millions)Adjusted profit (ECU - millions) .6 .6

S272 5.8 DECISION AND JUSTIFICATION S272 5.8 DECISION AND JUSTIFICATION (continued)(continued)

NOTES:NOTES:

1. Full disclosure and justification of the changes in 1. Full disclosure and justification of the changes in accounting practices must be recorded in the "Notes to the accounting practices must be recorded in the "Notes to the Financial Statements". Financial Statements".

2. No possibility of issue of new shares unless last year's 2. No possibility of issue of new shares unless last year's profit is a perceived as a "break-through". profit is a perceived as a "break-through".

3. The new product will take three years to develop and 3. The new product will take three years to develop and therefore management must seek alternative short term therefore management must seek alternative short term and long term financing arrangements and probably even and long term financing arrangements and probably even the merger or sale of the company. the merger or sale of the company.


(c) Justification(c) Justification

Liquidity is critical; the scale of operations has Liquidity is critical; the scale of operations has become too become too

great for the equity base; shareholders are great for the equity base; shareholders are unhappy.unhappy.

ERC can no longer afford to expense R&D as it did in ERC can no longer afford to expense R&D as it did in the past. the past.


The long term financial future of company is in The long term financial future of company is in doubt.doubt.

Creative accounting (creative accounting) may gain Creative accounting (creative accounting) may gain TIME to arrange the sale or merger of the company. TIME to arrange the sale or merger of the company.

Creative accounting is only an aid in financial Creative accounting is only an aid in financial management management

where the long term future of the company can be where the long term future of the company can be assured.assured.

S275 5.9S275 5.9 LEARNING POINTS LEARNING POINTS (a)(a) Parties concerned with financial statements are: Parties concerned with financial statements are: tax authorities, shareholders, management and staff, tax authorities, shareholders, management and staff, government, trade unions, banks and suppliers, financial government, trade unions, banks and suppliers, financial press and analysts etc.press and analysts etc.

(b)(b) Tax regulations are not necessarily good accounting Tax regulations are not necessarily good accounting principles although they may have to be followed toprinciples although they may have to be followed to minimize tax liability.minimize tax liability.

(c)(c) Charges for R & D expense and inventory losses, and Charges for R & D expense and inventory losses, and profits on uncompleted contracts, are susceptible to profits on uncompleted contracts, are susceptible to creative accounting.creative accounting.

S276 5.9 LEARNING POINTS (continued)S276 5.9 LEARNING POINTS (continued)

(d)(d) Objective of financial management is to ensureObjective of financial management is to ensure long term survival and increasing value of the company.long term survival and increasing value of the company.

(e)(e) Some "creativity" (creative accounting) may beSome "creativity" (creative accounting) may be inevitable when the survival of a company is in doubt;inevitable when the survival of a company is in doubt; but management must keep within generally accepted but management must keep within generally accepted accounting principles and IAS!!accounting principles and IAS!!

(f)(f) All changes in accounting principles must be noted in All changes in accounting principles must be noted in the financial statements and the effect on the current the financial statements and the effect on the current year's profit explained and reconciled with IAS.year's profit explained and reconciled with IAS.

S277 5.9 LEARNING POINTS (continued)S277 5.9 LEARNING POINTS (continued) (g)(g) Financial statements should be credible to the parties Financial statements should be credible to the parties concerned.concerned.

(h)(h) Auditors will normally agree to reasonably creative Auditors will normally agree to reasonably creative figures provided they are within I.A.S., certified by figures provided they are within I.A.S., certified by management and duly noted in the financial statements.management and duly noted in the financial statements.

(i) Changes of auditors or higher audit fees are not practical (i) Changes of auditors or higher audit fees are not practical methods of dealing with financial management problems;methods of dealing with financial management problems; may we can always appoint "joint auditors" and thereby may we can always appoint "joint auditors" and thereby apply pressure.apply pressure.

S278 5.9 LEARNING POINTS (continued)S278 5.9 LEARNING POINTS (continued)

(j)(j) Creative accounting may be inevitable and in certain Creative accounting may be inevitable and in certain circumstances may benefit shareholders, employees, circumstances may benefit shareholders, employees, management, government, banks, etc.management, government, banks, etc.

(k)(k) It is poor financial policy to defer items that should bc It is poor financial policy to defer items that should bc expensed or to charge accumulated (past) profit witexpensed or to charge accumulated (past) profit wit current losses. current losses.

(l) No need to be excessively conservative in accounting all (l) No need to be excessively conservative in accounting all the time but past conservatism may provide present and the time but past conservatism may provide present and future flexibility.future flexibility.

S279 5.10 LEARNING PATTERNS S279 5.10 LEARNING PATTERNS

1. PARTIES TO FINANCIAL1. PARTIES TO FINANCIAL

STATEMENTSSTATEMENTS

TAX MGT. BANKS OWNERS TAX MGT. BANKS OWNERS

STAFF SUPPLIERS GOVT . TU's STAFF SUPPLIERS GOVT . TU's

FINANCIAL PRESS MANAGEMENTS FINANCIAL PRESS MANAGEMENTS

AND ABOVE ALL ...AND ABOVE ALL ...CUSTOMERSCUSTOMERS

S280 5.10 LEARNING PATTERNSS280 5.10 LEARNING PATTERNS

2.2. CREATIVE ... CREATIVE ...

BUT NOT SO CREATIVE THAT ...BUT NOT SO CREATIVE THAT ...

281 5.10 LEARNING PATTERNS 281 5.10 LEARNING PATTERNS

3.3. AUDITORSAUDITORS

HONEST, TRUE, FAIR, PROFESSIONAL, OPINION, NOTES HONEST, TRUE, FAIR, PROFESSIONAL, OPINION, NOTES

BUT IN LIQUIDATION ... FIRST CREDITOR REACTION ...BUT IN LIQUIDATION ... FIRST CREDITOR REACTION ...

CAN WE SUE THEM?CAN WE SUE THEM?

S282 5.11 INSTRUCTIONSS282 5.11 INSTRUCTIONS

(a)(a) Re-assemble in CSGRe-assemble in CSG

(b)(b) Study the lecture and discuss in CSG. Study the lecture and discuss in CSG.

(c)(c) Record significant points in your notebookRecord significant points in your notebook

(d)(d) Reassemble in MG when the bell ringsReassemble in MG when the bell rings

S283 ASSIGNMENT 6.0 - BILL BROWN (30 S283 ASSIGNMENT 6.0 - BILL BROWN (30 minutes)minutes)

6.16.1 INSTRUCTIONSINSTRUCTIONS


(b)(b) Study the case and individually answer all the questions Study the case and individually answer all the questions (on the worksheet in the diary)(on the worksheet in the diary)

(c)(c) Compare your answers in SG and when the bell rings, Compare your answers in SG and when the bell rings, stop for lunch!stop for lunch!

(e)(e) After lunch, check with the correct solutions and discuss After lunch, check with the correct solutions and discuss outstanding questions outstanding questions

S284 ASSIGNMENT 7.0 STUDY - S284 ASSIGNMENT 7.0 STUDY - FINANCIAL MANAGEMENT (30 minutes)FINANCIAL MANAGEMENT (30 minutes) 7.17.1 INSTRUCTIONSINSTRUCTIONS

(a)(a) Re-assemble in new SGRe-assemble in new SG

(b)(b) Study the lecture and discuss in SG and record significant Study the lecture and discuss in SG and record significant points on the flip chart.points on the flip chart.

(c)(c) Review the glossary for any difficulties with new wordsReview the glossary for any difficulties with new words

(d)(d) Record significant points in your notebook andRecord significant points in your notebook and re-assemble in MG when the bell ringsre-assemble in MG when the bell rings

S285 8.0 - LECTURE - FINANCIAL S285 8.0 - LECTURE - FINANCIAL MANAGEMENTMANAGEMENT

8.18.1 FINANCIAL MANAGEMENT AND RISK FINANCIAL MANAGEMENT AND RISK

Financial management plans the sources and uses of Financial management plans the sources and uses of funds tofunds to

achieve objectives. achieve objectives.

Key objective is to increase the long term value of theKey objective is to increase the long term value of the business. Share value depends upon earnings. business. Share value depends upon earnings.

investment. investment. gearing, growth and dividend policies and prospects. gearing, growth and dividend policies and prospects.

S286 8.1 FINANCIAL MANAGEMENT AND S286 8.1 FINANCIAL MANAGEMENT AND RISK (continued) RISK (continued)

Financial management takes risk in a balanced way.Financial management takes risk in a balanced way.

Risks include economic risk. marketing risk. production Risks include economic risk. marketing risk. production risk, risk,

technological risk and, above all in international business. technological risk and, above all in international business. political risk. All risks end up as financial risk.political risk. All risks end up as financial risk.

Before making a financial decision. seek all available data. Before making a financial decision. seek all available data.

Analyse to seek out all possible risks and measure the Analyse to seek out all possible risks and measure the extent of those risks. extent of those risks.

S287 8.1 FINANCIAL MANAGEMENT AND S287 8.1 FINANCIAL MANAGEMENT AND RISK (continued)RISK (continued)

Seek all alternatives and avoid "emotional Seek all alternatives and avoid "emotional investment in investment in

traditional financial practices". traditional financial practices".

Financial management is creative not defensive! Financial management is creative not defensive!

But don’t be so creative ... that you have to spend a But don’t be so creative ... that you have to spend a year or two inside ... rent free !!!year or two inside ... rent free !!!

S289 8.2 TECHNIQUES OF FINANCIAL S289 8.2 TECHNIQUES OF FINANCIAL MANAGEMENT MANAGEMENT

Financial techniques aid management but are no Financial techniques aid management but are no substitute substitute

for business acumen and an intuitive feeling for for business acumen and an intuitive feeling for business business

problems. problems.

S290 8.2S290 8.2 TECHNIQUES OF FINANCIAL TECHNIQUES OF FINANCIAL MANAGEMENT MANAGEMENT

Techniques include: Techniques include:

Ratio analysis (LAPP system) Ratio analysis (LAPP system) Forecasting of funds flows and cash flows.Forecasting of funds flows and cash flows. Forecasting of income statements and balance sheets Forecasting of income statements and balance sheets Capital investment analysis Capital investment analysis EVA/SVA analysis EVA/SVA analysis Earnings per share analysis (EPS)Earnings per share analysis (EPS) Break-even analysis Break-even analysis Creative accounting (manipulation) concepts.Creative accounting (manipulation) concepts. BenchmarkingBenchmarking Intuitive assessment of potential contingent liabilitiesIntuitive assessment of potential contingent liabilities (leasing, legal, employee, environment etc.) (leasing, legal, employee, environment etc.)

S291 8.2 TECHNIQUES OF FINANCIAL S291 8.2 TECHNIQUES OF FINANCIAL MANAGEMENT (continuedf)MANAGEMENT (continuedf)

Note:Note:

The key technique in financial analysis is simply to The key technique in financial analysis is simply to compare compare

the large amounts with past. budget and industry, the large amounts with past. budget and industry, by by

amounts and ratios .amounts and ratios .

Check that they are "internally consistent" and fully Check that they are "internally consistent" and fully investigate reasons for differences.investigate reasons for differences.

S292 8.3 CONTROLS292 8.3 CONTROL

Control of a company is not merely 51% of the Control of a company is not merely 51% of the shares. but the shares. but the

ability to influence the Board of Directorsability to influence the Board of Directors

May arise from as little as 8% of shares outstanding.May arise from as little as 8% of shares outstanding.

Control by influence in good times changes rapidly Control by influence in good times changes rapidly when when

disaster strikes (unless the ‘poison pill” works) disaster strikes (unless the ‘poison pill” works)

S293 8.3 CONTROLS293 8.3 CONTROL

Effective financial management provides: cash flow, Effective financial management provides: cash flow, earnings, growth plus dividends and increased share value . earnings, growth plus dividends and increased share value .

““Poison Pills” are management schemes to prevent Poison Pills” are management schemes to prevent ““take-over” of a quoted company. take-over” of a quoted company.

I n practice, they may deter a take-over in the short run I n practice, they may deter a take-over in the short run and give managememnt time to change its policiesand give managememnt time to change its policies from un profitable “expansnsion and diversification” to the from un profitable “expansnsion and diversification” to the key priority for EVA/SVA.key priority for EVA/SVA.

S294 8.4 SHORT TERM FINANCINGS294 8.4 SHORT TERM FINANCING Determine whether the financial need is really short term Determine whether the financial need is really short term rather than long term. i.e. that funds are adequately rather than long term. i.e. that funds are adequately available in the long term. Look for the peak and durationavailable in the long term. Look for the peak and duration of short term requirements.of short term requirements. Plan for “operating” cash flow that is adequate to cover Plan for “operating” cash flow that is adequate to cover increased working capital and normal fixed assetincreased working capital and normal fixed asset requirements and ... to provide cash for new profitablerequirements and ... to provide cash for new profitable investment opportunities.investment opportunities.

Recognize the cash flow “drivers”: trading profit, sales Recognize the cash flow “drivers”: trading profit, sales growth. WC management, fixed asset management and growth. WC management, fixed asset management and taxation.taxation.

S295 8.4 SHORT TERM FINANCING S295 8.4 SHORT TERM FINANCING (continued)(continued)

Make financial projections that look for "daylight ahead"Make financial projections that look for "daylight ahead" i.e. cash flow, profitability and financial health now and i.e. cash flow, profitability and financial health now and in the future. Be creative in seeking sources of finance.in the future. Be creative in seeking sources of finance. Set financial strategies that reflect management's attitude towards Set financial strategies that reflect management's attitude towards

risk. E:D of 1:3 may be acceptable ... if it risk. E:D of 1:3 may be acceptable ... if it discourages take-over bids ...discourages take-over bids ...

Personal relationships in the financial community arePersonal relationships in the financial community are the real key to financial success ... the real key to financial success ...

Not what you know but who you know (and who will Not what you know but who you know (and who will lend you the cash when you really need it.lend you the cash when you really need it.

S296 8.4S296 8.4 SHORT TERM FINANCING SHORT TERM FINANCING (continued)(continued)

Be skillful in financial forecasting but be skeptical Be skillful in financial forecasting but be skeptical about the about the

results.results.

Question the underlying assumptions and make Question the underlying assumptions and make alternative alternative

computations.computations.

Search out the possible disasters and meet them as Search out the possible disasters and meet them as part of part of

the normal planning process.sthe normal planning process.s

S297 8.5 APPROACH TOS297 8.5 APPROACH TO WORKING CAPITAL MANAGEMENT WORKING CAPITAL MANAGEMENT

May involve:May involve:

Getting ALL managers to “OWN” the WC problem ...Getting ALL managers to “OWN” the WC problem ... Investment and management of cash. receivables and Investment and management of cash. receivables and inventoryinventory

Persuading suppliers to hold inventories and nvoice laterPersuading suppliers to hold inventories and nvoice later

Researching customers and suppliers with on site visitsResearching customers and suppliers with on site visits

Continually controllingContinually controlling

S298 8.5 APPROACH TO S298 8.5 APPROACH TO WORKING CAPITAL MANAGEMENT WORKING CAPITAL MANAGEMENT

(continued)(continued) Sources of funds:Sources of funds: Stretch the suppliersStretch the suppliers Bank loans and leasingBank loans and leasing Factoring and field warehousingFactoring and field warehousing Grey market operations (borrowing the financial Grey market operations (borrowing the financial markets but not through the banks!).markets but not through the banks!).

Note: "Get a favorable "track record" of borrowing and Note: "Get a favorable "track record" of borrowing and repayment as a financial lifeline for the future". repayment as a financial lifeline for the future".

S299 8.6S299 8.6 BANK AND BORROWER BANK AND BORROWER OBJECTIVESOBJECTIVES

Objectives are not the same.Objectives are not the same.

Bank tries to be reasonably conservative in selecting Bank tries to be reasonably conservative in selecting alternative uses for its limited money.alternative uses for its limited money. Borrower seeks to take risk by using borrowing (debt) as Borrower seeks to take risk by using borrowing (debt) as financial leverage and thus increase profitability of his financial leverage and thus increase profitability of his

equity.equity. Banks do more for old clients than for new ones because risk Banks do more for old clients than for new ones because risk seems to be lower. seems to be lower.

S300 8.6 BANK AND BORROWER S300 8.6 BANK AND BORROWER OBJECTIVES (continued)OBJECTIVES (continued)

Banks prefer borrowers to have only one source of funds Banks prefer borrowers to have only one source of funds (the(the

lender) whereas borrowers prefer to have multiple sources.lender) whereas borrowers prefer to have multiple sources.

Non bank lenders often make substantial loans if they get Non bank lenders often make substantial loans if they get not not

only interest but a piece of the action" (some equity only interest but a piece of the action" (some equity participation).participation).

Note: Always set up an good alternative ... BEFORE Note: Always set up an good alternative ... BEFORE negotiating with the bank manager ... do it from strength !! negotiating with the bank manager ... do it from strength !!

S301 8.7 LIQUIDATIONS301 8.7 LIQUIDATION

Default on borrowing makes a company liable to liquidation Default on borrowing makes a company liable to liquidation (as one of the seven alternatives ...).(as one of the seven alternatives ...).

Liquidation values are low because trade buyers normally Liquidation values are low because trade buyers normally "step back and wait for values to fall". "step back and wait for values to fall".

Generally compared with book values, fixed assets (except Generally compared with book values, fixed assets (except real estate) produce about 40%, inventory about 25% real estate) produce about 40%, inventory about 25% receivables about 60%,thus leading to substantial losses. receivables about 60%,thus leading to substantial losses.

S302 8.7 LIQUIDATION (continued)S302 8.7 LIQUIDATION (continued)

For this reason many lenders avoid actually liquidating a For this reason many lenders avoid actually liquidating a defaulter.defaulter.

Secured creditors get paid first and unsecured creditors Secured creditors get paid first and unsecured creditors may may

get little on liquidation.get little on liquidation.

The "easy" alternative of continuing the business may be The "easy" alternative of continuing the business may be costly since overheads continue and losses often increasecostly since overheads continue and losses often increase very substantially before recovery.very substantially before recovery.

S303 8.7 LIQUIDATION (continued)S303 8.7 LIQUIDATION (continued)

If a bank sells a defaulting business, it can often offer If a bank sells a defaulting business, it can often offer special special

financing to a strong buyer and thereby get a good price.financing to a strong buyer and thereby get a good price.

"Company doctors" succeed in reviving poor businesses "Company doctors" succeed in reviving poor businesses not not

merely by financial skills but also by the reputation and merely by financial skills but also by the reputation and the the

debt capacity they bring with them.debt capacity they bring with them.

Assessed tax losses may be an "asset" of the business. Assessed tax losses may be an "asset" of the business.

S304 8.8 EQUITY AND DEBT S304 8.8 EQUITY AND DEBT a . The equity : debt relationship of a company, is a measurea . The equity : debt relationship of a company, is a measure of risk, debt capacity, leverage and ability to borrow.of risk, debt capacity, leverage and ability to borrow.

b. There are various wasy of computing the E:D ratio:b. There are various wasy of computing the E:D ratio:

1. A simple computation relates Equity to Total Liabilities.1. A simple computation relates Equity to Total Liabilities.

2. An alternative ratio relates Equity to Long Term Debt.2. An alternative ratio relates Equity to Long Term Debt.

3. Another alterrnatived ratio is to relate Equity to 3. Another alterrnatived ratio is to relate Equity to “ “Net Long Term Debt “(debt less cash and marketable Net Long Term Debt “(debt less cash and marketable securities).securities).

S305 8.8S305 8.8 EQUITY AND DEBT (continued)EQUITY AND DEBT (continued)

c. An E : D of 2 : 1 is always strong but attracts “cash c. An E : D of 2 : 1 is always strong but attracts “cash hungry” take-over bids. hungry” take-over bids.

A ratio of 1 : 1 is reasonable but some industries or A ratio of 1 : 1 is reasonable but some industries or companies accept an E : D of 1 : 4 quite happily. companies accept an E : D of 1 : 4 quite happily.

It depends upon norms of the industry, the financial It depends upon norms of the industry, the financial community nd the country! (and also upon wheter the community nd the country! (and also upon wheter the banks and other creditors are also shareholders)!!!banks and other creditors are also shareholders)!!!

S306 8.8S306 8.8 EQUITY AND DEBT (continued)EQUITY AND DEBT (continued) d. Attitudes towards profit and risk depend upon the d. Attitudes towards profit and risk depend upon the personal values and experience of the Chief Executive.personal values and experience of the Chief Executive.

The timing of the risk-taking seriously affects its success or The timing of the risk-taking seriously affects its success or failure. Timing is the key!failure. Timing is the key!

e. A company may take a higher risk with E:D of 1 to e. A company may take a higher risk with E:D of 1 to finance expansion; the smaller equity base is a lower finance expansion; the smaller equity base is a lower cushion to protect creditors. cushion to protect creditors.

A temporary poor E:D ratio enables "bridging" until longer A temporary poor E:D ratio enables "bridging" until longer term finance is available , to reduce the a risk of failure.term finance is available , to reduce the a risk of failure.

S307 8.8S307 8.8 EQUITY AND DEBT (continued)EQUITY AND DEBT (continued) f. Long term assets should normally be financed with long f. Long term assets should normally be financed with long term money. term money.

But they may be "bridged" from short term funds if longBut they may be "bridged" from short term funds if long term financing is more easily available later or if equity or term financing is more easily available later or if equity or retained profits become available later.retained profits become available later.

g. Leasing of long term assets saves cash but may g. Leasing of long term assets saves cash but may (depending on the type of lease) distort the financial (depending on the type of lease) distort the financial statements, since assets and liabilities may not always statements, since assets and liabilities may not always haveto be t shown on the balance sheet Thus then E:D haveto be t shown on the balance sheet Thus then E:D looks better ... but is NOT!!!looks better ... but is NOT!!!

S308 8.8 EQUITY AND DEBT (continued)S308 8.8 EQUITY AND DEBT (continued)

h. This "OFF BALANCE SHEET FINANCING" may have to be h. This "OFF BALANCE SHEET FINANCING" may have to be revealed by capitalising the lease as an asset and a revealed by capitalising the lease as an asset and a liability, as well as a note to financial statements. It may liability, as well as a note to financial statements. It may be a "Material" contingent liability!! And it is usually very be a "Material" contingent liability!! And it is usually very expensive!!!expensive!!!

i. Similarly refinancing long term liabilities with “derivatives” i. Similarly refinancing long term liabilities with “derivatives” to reduce interest rates has become a normal financial to reduce interest rates has become a normal financial technique, which requires careful investigation. technique, which requires careful investigation.

S309 8.9 THE FINANCIAL MANAGERS309 8.9 THE FINANCIAL MANAGER

a. The financial manager needs not only knowledge and a. The financial manager needs not only knowledge and skills in accounting and financial forecasting, but skills in accounting and financial forecasting, but

also the also the "right" attitudes towards risk-taking. "right" attitudes towards risk-taking.

Timing is the key!Timing is the key!

b. Understand the effect of increased activity on assets b. Understand the effect of increased activity on assets required and the importance of planning cashrequired and the importance of planning cash flows.flows.

S310 8.9 THE FINANCIAL MANAGER S310 8.9 THE FINANCIAL MANAGER (continued)(continued)

c. Seek all "seven" alternatives before making any c. Seek all "seven" alternatives before making any major major

financial decision. financial decision.

Do a PFD (provision for disaster) brain-storming Do a PFD (provision for disaster) brain-storming just to be just to be

sure that you have considered everything that sure that you have considered everything that could go could go

wrong ... wrong ...


d. Always useful to check that the underlaying assumptiond. Always useful to check that the underlaying assumption will be valid for the future ... especially in developing will be valid for the future ... especially in developing countries ...!!countries ...!!

e. Financial risk in the 1990's may come more from politics e. Financial risk in the 1990's may come more from politics and technological change than from "normal" marketingand technological change than from "normal" marketing and production operations.and production operations.

f. Need to develop changing financial polices that f. Need to develop changing financial polices that anticipate change ... not merely react to it ...anticipate change ... not merely react to it ...

312 8.9 THE FINANCIAL MANAGER 312 8.9 THE FINANCIAL MANAGER (continued)(continued)

Notes:Notes:

Remember : FOREX and inflation are normal, and thusRemember : FOREX and inflation are normal, and thus "debt" may be a hedge against risk and an opportunity "debt" may be a hedge against risk and an opportunity to ... benefit ... from it. to ... benefit ... from it.

Remember : rethink carefully the continuing validity ...Remember : rethink carefully the continuing validity ... (or not) ... of the assumptions underlying your ... (or not not(or not) ... of the assumptions underlying your ... (or not not of the assumptions ... (very reasonable) ... financial policies of the assumptions ... (very reasonable) ... financial policies and forecasts ... they may be 80% wrong!! and forecasts ... they may be 80% wrong!!


Remember : every financial community and country has Remember : every financial community and country has its its

own "norms" of what is ... "financial health" ... what own "norms" of what is ... "financial health" ... what are ... are ...

"financial ethics" ... and they may differ very widely "financial ethics" ... and they may differ very widely indeed ...indeed ...

and the “LAW“ may take no action at all!and the “LAW“ may take no action at all!

Remember : a basic familiarity with company and tax law Remember : a basic familiarity with company and tax law may enable the financial manager to make more effective may enable the financial manager to make more effective use of so called ... "expert financial advice “... use of so called ... "expert financial advice “...


1.1. LIQUIDATION VALUESLIQUIDATION VALUES

LOW ... LOWER ... LOWESTLOW ... LOWER ... LOWEST

TIMING IS THE KEYTIMING IS THE KEY


2.2. EQUITY : DEBT EQUITY : DEBT

SIMPLE APPROACH SIMPLE APPROACH

- EQUITY : TOTAL LIABILITIES- EQUITY : TOTAL LIABILITIES

COMPLEX APPROACH COMPLEX APPROACH

- EQUITY : LONG TERM LIABILITIES - EQUITY : LONG TERM LIABILITIES

- EQUITY : NET LONG TERM LIABILITIES- EQUITY : NET LONG TERM LIABILITIES


3.3. FINANCIAL ETHICSFINANCIAL ETHICS

TIME?TIME?

PLACE?PLACE?

LOCAL LAW?LOCAL LAW?

INTERNATIONAL LAW?INTERNATIONAL LAW?

CULTURE?CULTURE?

CUSTOM?CUSTOM?

ECONOMY? PEOPLE v PRESSURE? ECONOMY? PEOPLE v PRESSURE?

S318 8.11S318 8.11 INSTRUCTIONS (10 minutes)INSTRUCTIONS (10 minutes)


(b)(b) Study the lecture carefully and record key points in Study the lecture carefully and record key points in your your

notebooknotebook

(c)(c) Discuss outstanding questionsDiscuss outstanding questions

(d)(d) When the bell rings continue with the case study When the bell rings continue with the case study which which

follows.follows.

S319 ASSIGNMENT 10.0 LECTURE S319 ASSIGNMENT 10.0 LECTURE LUMSDEN (B)LUMSDEN (B)

10.110.1 STORY OF THE CASESTORY OF THE CASE

Company expanded in response to customers orders Company expanded in response to customers orders and and

planned to finance plant and working capital from planned to finance plant and working capital from bank bank

loans. loans.

Expansion program doubled and bank forced to Expansion program doubled and bank forced to provide provide

more finance. more finance.

S320 10.1S320 10.1 STORY OF THE CASESTORY OF THE CASE (continued) (continued)

Management failed to appreciate the difficulties of Management failed to appreciate the difficulties of running running

a larger plant in economic down-turn conditions so a larger plant in economic down-turn conditions so that that

company sustained losses and defaulted upon bank company sustained losses and defaulted upon bank loan repayments. loan repayments.

Company now in critical condition as defaulter to Company now in critical condition as defaulter to the bank. the bank.

S321 10.2 HEALTH OF THE COMPANYS321 10.2 HEALTH OF THE COMPANY

(a) Liquidity(a) Liquidity

Quick ratio and current ratios poor E:D very weak Quick ratio and current ratios poor E:D very weak with little with little

hope of improvement Default on outstanding loans hope of improvement Default on outstanding loans indicates indicates

liquidity crisis. liquidity crisis.

S322 10.2 HEALTH OF THE COMPANY S322 10.2 HEALTH OF THE COMPANY (continued)(continued)

(b) Activity(b) Activity

Low inventory and receivables because the whole Low inventory and receivables because the whole activity of activity of

the company at well below capacity .the company at well below capacity .

Little prospect of increased sales which would Little prospect of increased sales which would require more working capital. require more working capital.

S323 10.2 HEALTH OF THE COMPANY S323 10.2 HEALTH OF THE COMPANY (continued)(continued)

(c) Profitability(c) Profitability

No details but losses sustained and little prospect of No details but losses sustained and little prospect of future future

profit. profit.

Any continuity of the business will probably involve Any continuity of the business will probably involve increasing increasing

monthly losses for some time, monthly losses for some time,

S324 10.2 HEALTH OF THE COMPANYS324 10.2 HEALTH OF THE COMPANY (continued) (continued)

(d) Potential(d) Potential

Market depressed, productive capacity over-specialized, Market depressed, productive capacity over-specialized, financial crisis, reputation lost with customers and financial crisis, reputation lost with customers and

suppliers,suppliers,

Management troubles .Management troubles .

Poor prospects for the future in the face of an Poor prospects for the future in the face of an immediate immediate

threat by the bank. threat by the bank.

S325 10.3 CAUSES OF FINANCIAL S325 10.3 CAUSES OF FINANCIAL DIFFICULTIESDIFFICULTIES

Expansion of long term assets with only short term Expansion of long term assets with only short term financing. financing.

Failure to increase equity base when the company was Failure to increase equity base when the company was still strong. still strong.

False assumptions of orders and profitabilityFalse assumptions of orders and profitability

Failure to recognize the risk that orders could be Failure to recognize the risk that orders could be canceledcanceled

as Lumsden was only a "marginal supplier". as Lumsden was only a "marginal supplier".

S326 10.3 CAUSES OF FINANCIAL S326 10.3 CAUSES OF FINANCIAL DIFFICULTIES (continued)DIFFICULTIES (continued)

Trade union difficulties.Trade union difficulties.

Management unable to run a larger operation Management unable to run a larger operation especially especially

in a general economic recession. in a general economic recession.

Poor financial policies at too high risk, destroyed Poor financial policies at too high risk, destroyed the financial the financial

health of the company. health of the company.

S327 10.4 DIVERSIFICATIONS327 10.4 DIVERSIFICATION

Diversification involves not only production but Diversification involves not only production but marketing channels; company too specialized and marketing channels; company too specialized and does not have distribution channels for other does not have distribution channels for other products.products.

No immediate need for WC due to low activity. No immediate need for WC due to low activity.

However improvement of activity will lead to need for However improvement of activity will lead to need for more inventory and receivables and therefore more more inventory and receivables and therefore more WC finance; bank unlikely to allow further loans in WC finance; bank unlikely to allow further loans in view of the risk.view of the risk.

S328 10.4 DIVERSIFICATION S328 10.4 DIVERSIFICATION (continued)(continued)

Difficult suppliers will not extend much credit now!Difficult suppliers will not extend much credit now! Myth that diversification into an unfamiliar new activity Myth that diversification into an unfamiliar new activity appears to be easier than the existing known business. appears to be easier than the existing known business.

Extensive loss due to overheads inevitable, pending Extensive loss due to overheads inevitable, pending INEVITABLE DELAY in the possible success ofINEVITABLE DELAY in the possible success of diversification.diversification.

S329 10.5 AMOUNT DUE TO THE BANKS329 10.5 AMOUNT DUE TO THE BANK

Bank loans ECU 400,000 long term, ECU 160,000 short Bank loans ECU 400,000 long term, ECU 160,000 short term term

less balance on hand ECU 43,000 ,gives net liability less balance on hand ECU 43,000 ,gives net liability ECU 517,000.ECU 517,000.

Bank would immediately offset the current account Bank would immediately offset the current account against against

the loan and stop all futures cheques. the loan and stop all futures cheques.

Bank may pay off small outside creditors to get freedomBank may pay off small outside creditors to get freedom to delay or sell the company. to delay or sell the company.

S340 10.5 AMOUNT DUE TO THE BANK S340 10.5 AMOUNT DUE TO THE BANK (continued)(continued)

Bank does help old clients but not bad business, Bank does help old clients but not bad business, because because

that would attract other bad business.that would attract other bad business.

Possible liquidation of Lumsden depends upon other Possible liquidation of Lumsden depends upon other alternatives available. alternatives available.

S341 10.6 POSSIBLE LOSS ON S341 10.6 POSSIBLE LOSS ON LIQUIDATION LIQUIDATION

If the assets were sold rapidly, trade competitors If the assets were sold rapidly, trade competitors would "stand back to let the prices fall". would "stand back to let the prices fall".

S342 10.6 POSSIBLE LOSS ON S342 10.6 POSSIBLE LOSS ON LIQUIDATIONLIQUIDATION

Book LiquidationBook Liquidation Value ValueValue Value CashCash 43 43 - - ReceivablesReceivables 10 10 5 5 50% 50% Inventory Inventory 101 101 25 25 25% 25% Plant Plant 854 854 472472 50% 50% 1,008 1,008 502502 Less: small creditorsLess: small creditors (71) (71) (71)(71) Less: mortgage (secured) Less: mortgage (secured) (48) (48) (48)(48) Net assetsNet assets 889 889 383383 Less bank loans (560-43 above) Less bank loans (560-43 above) 517517 net net Possible loss to the bankPossible loss to the bank 134134

Note: Assuming the bank takes over the bank balance and pays off paid off the small creditors, to Note: Assuming the bank takes over the bank balance and pays off paid off the small creditors, to get control. get control.

S343 10.7 LUMSDEN ALTERNATIVESS343 10.7 LUMSDEN ALTERNATIVESAND FINANCIAL POLICYAND FINANCIAL POLICY

(a)(a) Alternatives: Alternatives:

1, Do nothing but wait for the banks to take action. 1, Do nothing but wait for the banks to take action.

2, Sell the business to a customer (assessed tax loss is 2, Sell the business to a customer (assessed tax loss is a a

saleable asset). saleable asset).

3. Convince the bank to allow more time for business to 3. Convince the bank to allow more time for business to recover. recover.

S344 10.7 LUMSDEN ALTERNATIVES S344 10.7 LUMSDEN ALTERNATIVES AND FINANCIAL POLICY (continued)AND FINANCIAL POLICY (continued)


4, Get more equity base and make a deal with the bank.4, Get more equity base and make a deal with the bank.

5. Get a merchant bank or other partner or organization 5. Get a merchant bank or other partner or organization interested in taking some financial interest in the interested in taking some financial interest in the

business. business.

6, Sell the plant to another supplier, thereby providing 6, Sell the plant to another supplier, thereby providing cash cash

to repay the bank substantially. to repay the bank substantially.

S345 10.7 LUMSDEN ALTERNATIVES S345 10.7 LUMSDEN ALTERNATIVES AND FINANCIAL POLICY (continued)AND FINANCIAL POLICY (continued)

NOTE: With a general economic recession it is NOTE: With a general economic recession it is difficult for difficult for

Lumsden to do much in the future except try to Lumsden to do much in the future except try to defer the defer the

bank for a month until he can combine or sell the bank for a month until he can combine or sell the business.business.

His "bridging" finance has been stretched too far! His "bridging" finance has been stretched too far!

S346 10.8 BANK ALTERNATIVES S346 10.8 BANK ALTERNATIVES AND FINANCIAL POLICYAND FINANCIAL POLICY


1. Do nothing for a month or two to give Lumsden time to 1. Do nothing for a month or two to give Lumsden time to recover or do a deal.recover or do a deal. 2. Get Lumsden to put up new security for the loan.2. Get Lumsden to put up new security for the loan.

3, Foreclose on the loans and insist upon repayment 3, Foreclose on the loans and insist upon repayment immediately and then put in receiver to manage the immediately and then put in receiver to manage the business. business.

S347 10.8 BANK ALTERNATIVESS347 10.8 BANK ALTERNATIVES AND FINANCIAL POLICY (continued) AND FINANCIAL POLICY (continued)

4. Negotiate with Lumsden to take over the business "by 4. Negotiate with Lumsden to take over the business "by consent" and by paying off the small creditors; continue the consent" and by paying off the small creditors; continue the business until it can be sold.business until it can be sold. 5. Take over the business by arrangement keep the business5. Take over the business by arrangement keep the business "on ice" to cut overhead until a buyer is found later. "on ice" to cut overhead until a buyer is found later.

6. Sell the business to a customer or supplier (assessed tax 6. Sell the business to a customer or supplier (assessed tax loss is a saleable asset).loss is a saleable asset).

7. Get a new manager to run the business profitably.7. Get a new manager to run the business profitably.

S348 10.8 BANK ALTERNATIVES S348 10.8 BANK ALTERNATIVES AND FINANCIAL POLICY (continued)AND FINANCIAL POLICY (continued)

NOTE: Continuing the business may involve high overheads NOTE: Continuing the business may involve high overheads and even greater losses. and even greater losses.

Forced sale involves substantial losses, because Forced sale involves substantial losses, because competitors competitors

will not offer much at this time. will not offer much at this time.

By keeping the business "on ice" for some months the bank By keeping the business "on ice" for some months the bank could probably sell it for a good price in the future, bycould probably sell it for a good price in the future, by offering to provide substantial fFINANCIAL support tooffering to provide substantial fFINANCIAL support to a strong buyer - and that is what they decided to do!!. a strong buyer - and that is what they decided to do!!.

S349 10.9 LEARNING POINTSS349 10.9 LEARNING POINTS

(a)(a) Poor management of working capital may not become Poor management of working capital may not become apparent for a year or two when a sudden financial apparent for a year or two when a sudden financial

crisis crisis arises.arises. (b)(b) A business presently sustaining losses may well A business presently sustaining losses may well

sustain sustain even greater losses very soon. even greater losses very soon.

(c)(c) Liquidation values in a business are extremely low Liquidation values in a business are extremely low because competitors hold back until the prices fall. because competitors hold back until the prices fall.


(g)(g) Major creditors may find it useful to pay off the Major creditors may find it useful to pay off the otherother

creditors and get complete control.creditors and get complete control.

(h)(h) Bank's reputation is only one factor in its Bank's reputation is only one factor in its decision making; decision making;

also concerned with keeping losses to the also concerned with keeping losses to the minimum both minimum both

now and in the future.now and in the future.


(i)(i) Keeping a loss company going at a modest level Keeping a loss company going at a modest level involves losses and overheads and even more finance!involves losses and overheads and even more finance!

(j)(j) Sale of a company by a bank is easier when bank offers Sale of a company by a bank is easier when bank offers to finance the purchaser.to finance the purchaser.

(k)(k) Rapid expansion of a business changes its nature and Rapid expansion of a business changes its nature and changes management's job; existing management must changes management's job; existing management must be flexible enough to adopt a new style for thebe flexible enough to adopt a new style for the larger scale of operations.Rlarger scale of operations.R


(l)(l) An experienced successful older manager of a small An experienced successful older manager of a small

company may be unable to manage a large company may be unable to manage a large organization because his knowledge, skills and attitudes organization because his knowledge, skills and attitudes are inappropriate.are inappropriate.

(m)(m) Business managers must understand finance to avoid Business managers must understand finance to avoid financial disaster.financial disaster.

(n)(n) Production efficiency is not enough for business Production efficiency is not enough for business survival.survival.


(o)(o) Attractive sales orders outstanding should be viewed Attractive sales orders outstanding should be viewed skeptically, because they may be canceled without skeptically, because they may be canceled without compensation.compensation.

(p)(p) At times of low activity, receivables, inventory, sales and At times of low activity, receivables, inventory, sales and profits arc all low; however to RECOVER AND FIND profits arc all low; however to RECOVER AND FIND SUCCESS with sales and profits, we shall need cash to SUCCESS with sales and profits, we shall need cash to finance increased inventories and receivables.finance increased inventories and receivables.

(q)(q) "PFD" is vital to avoid excessive "EI" (emotional "PFD" is vital to avoid excessive "EI" (emotional investment)!!investment)!!

S354 10.10 LEARNING PATTERNS S354 10.10 LEARNING PATTERNS

1.1. BANK ALTERNATIVESBANK ALTERNATIVES

SEVEN ...SEVEN ...


2.2. COMPANY ALTERNATIVESCOMPANY ALTERNATIVES

SEVEN ..SEVEN ..

..


3.3. TIMINGTIMING

IS THE KEY TO EVA/SVA ...IS THE KEY TO EVA/SVA ...

S357 10.11 INSTRUCTIONSS357 10.11 INSTRUCTIONS

(a)(a) Re-assemble in CSGRe-assemble in CSG

(b)(b) Study the lecture and discuss in CSG.Study the lecture and discuss in CSG. (c)(c) Record significant points in your notebookRecord significant points in your notebook

(d)(d) Reassemble in MG when the bell ringsReassemble in MG when the bell rings

S358 ASSIGNMENT 11.0 - QUIZ (45 S358 ASSIGNMENT 11.0 - QUIZ (45 minutes)minutes)

11.1 INSTRUCTIONS11.1 INSTRUCTIONS

(a)(a) Reassemble in SG, and do the quiz of 100 questions Reassemble in SG, and do the quiz of 100 questions on the answer sheet in the diaryon the answer sheet in the diary

(c)(c) Check your answer with the organizer and resolve Check your answer with the organizer and resolve outstanding questionsoutstanding questions

(d)(d) Complete the first feedback form in the course diary Complete the first feedback form in the course diary and give it to the organizer.and give it to the organizer.

(e)(e) Reassemble in MG when the bell ringsReassemble in MG when the bell rings

S359 12.0 ASSIGNMENT - SUMMARY S359 12.0 ASSIGNMENT - SUMMARY LECTURE FOR PART II (30 minutes)LECTURE FOR PART II (30 minutes)

12.1 OBJECTIVES OF THE COURSE12.1 OBJECTIVES OF THE COURSE

(a)(a) Understand accounting language and the Understand accounting language and the concepts of concepts of

financial management.financial management.

(b)(b) Recognize the need for financial forecasting of Recognize the need for financial forecasting of cash, cash,

funds, income statements and balance sheets. funds, income statements and balance sheets. income income

statementsstatements

S360 12.1 OBJECTIVES OF THE COURSES360 12.1 OBJECTIVES OF THE COURSE (continued) (continued)

(c) (c) Develop practical skills in using financial data Develop practical skills in using financial data to to

manage working capital effectively.manage working capital effectively.

(d)(d) Recognize "creative accounting" in financial Recognize "creative accounting" in financial reporting, reporting,

despite IAS (International Accounting despite IAS (International Accounting Standards). Standards).

(e)(e) Motivate further study in the futureMotivate further study in the future

S361 12.2 FINANCIAL MANAGEMENT S361 12.2 FINANCIAL MANAGEMENT NEEDS NEEDS

Knowledge, skills and appropriate attitudes for creativity in Knowledge, skills and appropriate attitudes for creativity in solving financial problems. solving financial problems.

Good audited, timely (4 days monthly/40 days annually) Good audited, timely (4 days monthly/40 days annually) financial data of the current financial position (treat "delay" financial data of the current financial position (treat "delay" with great suspicion). with great suspicion).

Reliable alternative forecasts of the future: cash flow. funds Reliable alternative forecasts of the future: cash flow. funds flow, income statements, balance sheets. etc.flow, income statements, balance sheets. etc.

Benchmarking and EVA/SVA data, and limited emotional Benchmarking and EVA/SVA data, and limited emotional investment so that all seven alternatives may be fairly investment so that all seven alternatives may be fairly evaluated.evaluated.

S362 12.3 FINANCIAL STATEMENTS S362 12.3 FINANCIAL STATEMENTS Objective is to be useful and credible, by following general Objective is to be useful and credible, by following general accepted accounting principles and only be "creative" if accepted accounting principles and only be "creative" if absolutely necessary. absolutely necessary.

Accounting principles, company law and tax law, affect the Accounting principles, company law and tax law, affect the way companies present financial statements.way companies present financial statements.

The Chief Executive and not the auditor determines the profit The Chief Executive and not the auditor determines the profit disclosed each year.disclosed each year.

Creativity may achieve higher profit this year but lower profit Creativity may achieve higher profit this year but lower profit figure next year ... but let's get there first ...figure next year ... but let's get there first ...

S363 12.4 AUDITORSS363 12.4 AUDITORS

Auditor is a professional "honest man" (with professional Auditor is a professional "honest man" (with professional standards). standards).

Auditor’s OPINION is based on random tests, not detailed Auditor’s OPINION is based on random tests, not detailed checking of all transactions. checking of all transactions.

Auditor's reputation is vital to his business! Check Auditor's reputation is vital to his business! Check auditor's auditor's

name. fee and independence to evaluate the quality of his name. fee and independence to evaluate the quality of his audit and reliability of the financial statements. audit and reliability of the financial statements.

S364 12.4 AUDITORS (continued) S364 12.4 AUDITORS (continued)

Most auditors will "bend", if pushed hard enough; Most auditors will "bend", if pushed hard enough; small small

auditing firms often "bend" more easily than big auditing firms often "bend" more easily than big international international

public accountants.public accountants.

Conservatism is NOT usually regarded as creativeConservatism is NOT usually regarded as creative accounting. (especially in Germany and Suisse) accounting. (especially in Germany and Suisse)

S365 12.5 ACCOUNTING VALUES S365 12.5 ACCOUNTING VALUES

The valuation of assets in the books, affects all financial ratiosThe valuation of assets in the books, affects all financial ratios and the total validity of the financial statements. and the total validity of the financial statements.

When assets are substantially under or over valued then When assets are substantially under or over valued then adjust the ratios accordingly. adjust the ratios accordingly.

Asset values at: cost, selling price. or liquidation are all Asset values at: cost, selling price. or liquidation are all different. Value changes over time; “true and fair” values are different. Value changes over time; “true and fair” values are impossible ... seek “useful” values .... impossible ... seek “useful” values ....

Usefulness within credible standards is reasonable. Usefulness within credible standards is reasonable.

S366 12.6 FINANCIAL MANAGEMENT OFS366 12.6 FINANCIAL MANAGEMENT OF WORKING CAPITAL WORKING CAPITAL

(a)(a) Determine whether a business has a short term or long Determine whether a business has a short term or long term financial need. term financial need.

(b) Recognize that increased investment in WC must bring(b) Recognize that increased investment in WC must bring a return above thr CoC (Cost of Capital). Check the a return above thr CoC (Cost of Capital). Check the “ “materialioty” of the iINVESTMENT in receivables andmaterialioty” of the iINVESTMENT in receivables and inventory in relation to total assets; sometimes they are inventory in relation to total assets; sometimes they are more than fixed assets - and who is in control?more than fixed assets - and who is in control?

(c)(c) Evaluate past performance in relation to the industry Evaluate past performance in relation to the industry averages; then forecast the future based upon averages; then forecast the future based upon assumptions. assumptions.


(d)(d) Check the validity of assumptions underlying the Check the validity of assumptions underlying the forecasts. forecasts.

(e)(e) Manage cash, receivables, inventories and payables. Manage cash, receivables, inventories and payables. Seek all alternatives and determine appropriate risk Seek all alternatives and determine appropriate risk levels before decision making,levels before decision making, and determine and determine appropriate risk levels before decision making. appropriate risk levels before decision making.

(f)(f) Ensure that solutions to immediate short term problems Ensure that solutions to immediate short term problems will not create even bigger long term problems in the will not create even bigger long term problems in the future. future.


[g)[g) Keep relationships and alternative sources of finance Keep relationships and alternative sources of finance continually open as "Life lines" against possible disaster.continually open as "Life lines" against possible disaster.

(h)(h) Avoid unlimited rapid expansion which leads to Avoid unlimited rapid expansion which leads to excessive risk of failure ... recognize the stages toexcessive risk of failure ... recognize the stages to move from:move from:

1. Maximising sales1. Maximising sales 2. Maximising net profits2. Maximising net profits 3. Maximising cash flow 3. Maximising cash flow 4. Maximising SVA ...4. Maximising SVA ...

S369 12.7 CONCLUSIONS S369 12.7 CONCLUSIONS

(a)(a) Careful diagnosis must determine whether financial Careful diagnosis must determine whether financial problems are short or long term.problems are short or long term.

(b)(b) Use the past for diagnosis but insist also on future Use the past for diagnosis but insist also on future forecasts of cash and funds, income statements and forecasts of cash and funds, income statements and balance sheets; but always check the underlying balance sheets; but always check the underlying assumptions.assumptions.

(c)(c) Seek all seven alternatives available before Seek all seven alternatives available before developing developing

financial policies at appropriate risk levels.financial policies at appropriate risk levels.

S370 12.7 CONCLUSIONS S370 12.7 CONCLUSIONS (continued) (continued)

(d)(d) Good relationships with banks, suppliers, Good relationships with banks, suppliers, customers,customers,

shareholders. etc. facilitate effective financial shareholders. etc. facilitate effective financial management. management.

(e)(e) Creative accounting of financial statements is easyCreative accounting of financial statements is easy despite auditing standards etc. Be particularly despite auditing standards etc. Be particularly

skeptical skeptical about deferred assets, contingent laibilities, or about deferred assets, contingent laibilities, or

profitsprofits and losses charged to reserves.and losses charged to reserves.


(f)(f) Different financial statements are prepared for Different financial statements are prepared for different different

purposes bank, tax and management. purposes bank, tax and management.

(g)(g) Consolidated accounts are vital to evaluate Consolidated accounts are vital to evaluate companies companies

with major investments in subsidiaries. with major investments in subsidiaries.

S372 12.7 CONCLUSIONSS372 12.7 CONCLUSIONS(continued) (continued)

(h)(h) Financial management seeks not merely profit but an Financial management seeks not merely profit but an increase in the long term value and (continuing)increase in the long term value and (continuing) financial health of the business. financial health of the business.

(i)(i) Audited statements are neither true nor fair, but they Audited statements are neither true nor fair, but they should be useful. should be useful.

(i(i Appreciate that all financial data is an estimate and Appreciate that all financial data is an estimate and so so

avoid excessive pseudo-accuracy concentrate on avoid excessive pseudo-accuracy concentrate on materiality (... “coconuts: ,,,)materiality (... “coconuts: ,,,)

S373 12.7 CONCLUSIONS S373 12.7 CONCLUSIONS (continued)(continued)

(k)(k) Financial management is essentially a creativeFinancial management is essentially a creative activity involving knowledge, skills and above activity involving knowledge, skills and above

all all appropriate attitudes.appropriate attitudes. (1)(1) Recognize that short term financing is for Recognize that short term financing is for normal operations, but long term financing normal operations, but long term financing problems may require outside specialist problems may require outside specialist

assistance.assistance.

S374 12.7 CONCLUSIONS (continued) S374 12.7 CONCLUSIONS (continued)

(m) (m) Manage the cash effectively; make it move quickly; Manage the cash effectively; make it move quickly; don't let it lie idle earning nothing; control the timing don't let it lie idle earning nothing; control the timing

of of the cash flows; no business ever failed because of too the cash flows; no business ever failed because of too little inventory! little inventory!

(n)(n) ApprecIate that all financial problems are essentially ApprecIate that all financial problems are essentially problems of timing and human relationships not problems of timing and human relationships not

merely merely technical analysis. technical analysis.

S375 12.7 CONCLUSIONS Continued)S375 12.7 CONCLUSIONS Continued)

(o)(o) Financial management language and concepts are Financial management language and concepts are particularly effective when combined with intuitive particularly effective when combined with intuitive business skills.. business skills..

(p)(p) To avoid financial creative accounting, set clear To avoid financial creative accounting, set clear

financial policies as to how accounting principlesfinancial policies as to how accounting principles may be used and may not be abused. may be used and may not be abused.

(q) Only ONE large financial mistake is needed to ruin (q) Only ONE large financial mistake is needed to ruin years of good financial managementyears of good financial management


(r)(r) "Materiality" is the key concept of financial "Materiality" is the key concept of financial management .... worry about the big things ... the management .... worry about the big things ... the coconuts" ... leave the "peanuts" ...!coconuts" ... leave the "peanuts" ...!

(s)(s) Watch out for unexpected contingent liabilities from: Watch out for unexpected contingent liabilities from: FOREX, legal and environmental issues etc. Be careful FOREX, legal and environmental issues etc. Be careful with "derivatives" unless you ... fully understand them ... with "derivatives" unless you ... fully understand them ... and are lucky too ...and are lucky too ...

(t)(t) Watch out for "off-balance sheet financing" with Watch out for "off-balance sheet financing" with extensive special leasing obligations as the cost of extensive special leasing obligations as the cost of improving the E:D ratio.improving the E:D ratio.


(u)(u) Always do a "PFD" before actually implementing major Always do a "PFD" before actually implementing major decisions ... decisions ...

(v)(v) Benchmark to set better WC mnanagement standards -Benchmark to set better WC mnanagement standards - you may be amazed by what some other companies you may be amazed by what some other companies have accomplished so, eaily ...have accomplished so, eaily ...

(w) Recognize the key financial management objective of (w) Recognize the key financial management objective of EVA/SVA for which WC is one of the key “drivers”. EVA/SVA for which WC is one of the key “drivers”.


(x) Many companuies control investment in fixed assets (x) Many companuies control investment in fixed assets very rigorously but seed to regard increased very rigorously but seed to regard increased

investment investment in working capital as a “natural result of doing in working capital as a “natural result of doing

business”business” ... s o ... MANAGE the WC or it will manage itself ...... s o ... MANAGE the WC or it will manage itself ... very badly ....very badly ....

(y) Appreciate that all financial data is an estimate and (y) Appreciate that all financial data is an estimate and so avoid excessive “pseudo-accuracy “ - concentrateso avoid excessive “pseudo-accuracy “ - concentrate on materialty (coconuts not peanuts)on materialty (coconuts not peanuts)


(z) Use Dupont charts to “decompose” ROA (Return on (z) Use Dupont charts to “decompose” ROA (Return on Assets) into its m,ain components ... and help EVERY Assets) into its m,ain components ... and help EVERY MANAGER to “OWN” the Working Capital Management MANAGER to “OWN” the Working Capital Management problem ... and ... finally ... research the INTERNET and problem ... and ... finally ... research the INTERNET and read the daily ... WSJ ...read the daily ... WSJ ...

Wall Street Journal - to keep up with new ideas and Wall Street Journal - to keep up with new ideas and developments ... in financial managment ... developments ... in financial managment ...


1. EVA1. EVA

SVASVA

S381 12.8 LEARNING PATTERNS S381 12.8 LEARNING PATTERNS (continued)(continued)

2. CASH FLOW 2. CASH FLOW

OPERATING CASH OPERATING CASH

FLOWFLOW

S382 12.8 LEARNING PATTERNS S382 12.8 LEARNING PATTERNS (continued) (continued)

3. SEVEN3. SEVEN

EI PFDEI PFD

S383 FINAL NOTESS383 FINAL NOTES This ends our AGL program; one of a five part series.:This ends our AGL program; one of a five part series.:

• AGL 1 - Accounting ReportsAGL 1 - Accounting Reports• AGL 2 - Cost ControlAGL 2 - Cost Control• AGL 3 - Planning and Budgetary ControlAGL 3 - Planning and Budgetary Control• AGL 4 - Capital Investment AnalysisAGL 4 - Capital Investment Analysis• AGL 10 - Management of Working CapitalAGL 10 - Management of Working Capital

Some of the programs are now available in several EEC Some of the programs are now available in several EEC languages. Similar AGL programs in Business Policy and in languages. Similar AGL programs in Business Policy and in Inter-cultural Communication are being used by major Inter-cultural Communication are being used by major international companies.as international companies.as

S384 FINAL NOTES (continued)S384 FINAL NOTES (continued)

We hope ithe AGL experience has inspired you to We hope ithe AGL experience has inspired you to develope your skills by practical application.develope your skills by practical application.

Thank you for your interest and hard work. Keep ASS Thank you for your interest and hard work. Keep ASS glossary handy as a reference for accounting language.glossary handy as a reference for accounting language. and read the WSJ (Wall Street Journal) every day ...and read the WSJ (Wall Street Journal) every day ...

We hope that you have enjoyed the AGL experience and We hope that you have enjoyed the AGL experience and that it motivates you to read widely in finance and that it motivates you to read widely in finance and accounting and to continue your studies in the future.accounting and to continue your studies in the future.


Now reinforce your learning from the program by following Now reinforce your learning from the program by following the LRT (Learning Recall Tape) routine, as explained by the the LRT (Learning Recall Tape) routine, as explained by the organizer, during the days following completion of theorganizer, during the days following completion of the AGL program. AGL program.

Then please send the Final Feedback Summary on day 28, Then please send the Final Feedback Summary on day 28, by fax to the Organizer, or to Dr. R.G.A. Boland at:by fax to the Organizer, or to Dr. R.G.A. Boland at: 33 50 49 89 82 , who responds to all AGL questions33 50 49 89 82 , who responds to all AGL questions and who can suppply the latest versions of learningand who can suppply the latest versions of learning materials in various languages.materials in various languages.


We trust that you have found AGL to be both We trust that you have found AGL to be both "efficient""efficient"

(doing things right) and "effective" (doing the right (doing things right) and "effective" (doing the right things).things).

Thank you for being a member of the program.Thank you for being a member of the program.

AGL

s201 automated group learning (agl) agl no. 10 - financial management of working capital daily work...

Documents

accounting period

national accounting

lecture creative accounting

study creative accounting

financial statements

tax lawsfinancial statements

minor accounting errors

key accounting principle