...Chapter 15, Business Strategy in Asia, Kulwant Singh, Nitin Pangarkar and Loizos Heracleous, 2004 NOL and APL (A) CASE 15 After several years of dismal results, Neptune Orient Lines (NOL) was widely viewed as a laggard. The national shipping line was one of the worst performers among Singapore’s many government-linked corporations. Perhaps the low point was reached in 1996, when industry publication Containerisation International ranked NOL last in a field of 24 shipping firms on return on assets, and 18th in net profit margins. This was in stark contrast to the performance of other government firms, several of which could claim industry-leading performance, reputation and profitability. This poor performance imposed great pressures on NOL to take drastic action. Possibly in reaction, NOL announced in April 1997 that it was acquiring APL, the leading U.S. shipping line. This would be the largest acquisition ever by a Singapore firm and would catapult the firm into the league of major shipping lines. There were some concerns that NOL’s strategy was risky, as it was acquiring a firm larger than itself for a price some observers judged to be excessive. But NOL’s management was confident that it had found a solution to its problems, and that the acquisition of APL would ensure its future success. The future seemed bright. Introduction NOL AND APL (A) NOL Southeast Asia-Australia routes. Its ship charter business, American Eagle Tankers, focused on chartering ships...
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...year, mainly reflecting the impact of liquidity management operations undertaken by the Bank. The income from foreign assets declined for the second successive year, reflecting the low interest rates in international markets. The decline in income from foreign assets in 2010-11 was, however, more than offset by earnings from domestic assets which have expanded. While the Bank’s gross income increased by 12.73 per cent to ` 37,070.12 crore in 2010-11, there was a 3 per cent increase in total expenditure to ` 8,655.22 crore. After meeting the needs of necessary transfer to the Contingency Reserve and the Asset Development Reserve, `15,009 crore was allocated for transferring to the Government.XI.1 The size of the Reserve Bank’s balance sheet increased significantly in 2010-11 (July-June) mainly on account of its liquidity management operations. On the liability side, the expansion was on account of a large increase in notes in circulation as also an increase in banks’ deposits with the Reserve Bank in line with the deposit growth in the banking system (see Box II.6). On the asset side, there was a significant increase in Bank’s portfolio of domestic assets in the form of government securities on account of open market purchases, repo purchases and disinvestment of Government of India’s surplus balance parked with the Reserve Bank. The increase in foreign currency assets mainly reflected the valuation effect on the portfolio.XI.2 The financial statements of the Reserve Bank are prepared...
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...Kimmel, Weygandt & Kieso - Sample Exam 1 Name: __________________________ Date: _____________ 1. Which financial statement would best indicate whether the company relies on debt or stockholders' equity to finance its assets? A) Statement of Cash Flows B) Retained Earnings Statement C) Income Statement D) Balance Sheet 2. Stockholders' equity A) is usually equal to cash on hand. B) is equal to liabilities and retained earnings. C) includes retained earning and common stock. D) is shown on the income statement. 3. Which of the following activities involves collecting the necessary funds to support the business? A) Operating B) Investing C) Financing D) Delivering 4. Issuing shares of stock in exchange for cash is an example of a(n) A) delivering activity. B) investing activity. C) financing activity. D) operating activity. 5. Which of the following is not a principal type of business activity? A) Operating B) Investing C) Financing D) Delivering 6. Which of the following is not a common way that managers use the balance sheet? A) To analyze the balances of assets, liabilities, and stockholders' equity throughout the accounting period B) To determine if the cash balance is sufficient for future needs C) To analyze the balance between debt and common stock financing D) To analyze the balance of accounts receivable on the last day of the accounting period Page 1 Kimmel, Weygandt & Kieso - Sample Exam 1 7. Ashton Company began the year with retained earnings of $210,000...
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...Projected benefit obligation 205 Fair value of plan assets 175 There is no balance in prepaid/accrued pension costs. Required: a. Calculate the funded status of the plan (see definition under ASC (was old SFAS 158 for funded status). Is the plan overfunded or underfunded? b. If the projected benefit obligation provides the appropriate measure of the company’s obligation for pension benefits and the assets in the fund are viewed as satisfying all or part of that obligation, what is Penny Pincher’s liability, if any, for the pension plan at year-end? Briefly explain, citing the conceptual framework’s definition of liabilities in your explanation. c. What amount will Penny Pincher have to report in its balance sheet? Is it an asset or liability? ANSWER a. Calculate the funded status of the plan (see definition under ASC (was old SFAS 158 for funded status). Is the plan overfunded or underfunded? The overfunded or underfunded status is measures as the difference between the projected benefit obligation and the fair value of the assets at the period end date. The accumulated benefit obligation does not include the present value of the future benefits for non-vested employees. FASB requires that the funding status be determined using the projected benefit obligation that includes the non-vested benefits. Fair value of assets. $175 Projected benefit obligation ...
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...According to “Financial Accounting, sixth edition”, cash flow “permits a company to expand operations, replace worn assets, take advantage of new investment opportunities, and pay dividends to its owners”. Analyzing cash flow enables one to understand what happened to cash and cash equivalents throughout a specific period – how to the beginning balance of cash become the ending balance. The statement classifies cash flow in three different categories; operating activities, investing activities, and financing activities. To better understand and prepare the statement manipulating the balance sheet equation is a must. Assets can be further broken down into cash/cash equivalents and noncash asset. It is important to note that any change in cash also results in a change of liabilities, stockholder’s equity or noncash assets. With all of this, the “new” equation follows, change in cash = change in liabilities + change in SE – change in noncash assets. Cash flows from operating activities relate directly to revenues and expenses on the income statement. Examples of cash inflow activities include cash received from customers, dividends and interest on investments. Examples of outflows would be salaries, wages and income taxes. There are two methods in which one can present operating activities on the statement. It is important to note that both methods will provide the same number. The first is the direct method. This method “reports components of cash flow as gross receipts...
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...also inaccurate c. Inventory – with sales under perform, the inventory forecasts are also inaccurate. With much higher inventory than anticipated, especially in January 1991, the residual between actual and forecast is 924,000, which is a very big different. These excess inventories became illiquid assets, thus increased the liabilities which have a negative effect on the company’s financial health. Nevertheless, with lack of previous years’ financial data in addition to the unpredictable recession of the economy, it is hard to say whether or not these data were exaggerating. 2. Risk assessment a. Liquidity – as of March 1991, the current and cash ratio of Dynashears are 5.99 and 0.38, which are not bad numbers. The ratios shows that Dynashears’ current assets are still well cover (almost 6 to 1 ratio) over its increasing liabilities due to illiquid assets and that it still has sufficient cash for optimum operation. b. Long-term debt ratio – as of March 1991, the debt ratio is 4.71% which is very low, indicates that Dynashears still able to borrow a lot more. Even though Dynashears’ asset turnover rate is low (estimate at 0.24) and sales performance is not great, Dynashears’ fix assets such as their land, and plant and equipment are very valuable, thus able to leverage more debt. c. Profitability – as far as gross margin (26.19%), operating...
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...(January 1, 2012 – February 29, 2012) MARCH 1, 2012 RELOCATION DEADLINE 3 Overview of Public-Private Partnership (PPP) • New ESC will cost $387MM • Financing will require public-private partnership – PRIVATE PARTICIPATION • Kings as anchor occupant • Third party investors in operator and/or developer roles – PUBLIC PARTICIPATION • ESC will be public asset owned by taxpayers • Multiple revenue streams required 4 Guiding Principles in Developing PPP • Protect taxpayers • Learn from best practices in comparable markets • Maximize private investment by creating viable economic model • Ensure return on public investment in form of jobs and economic activity • Focus on public revenues created or enhanced by ESC that would not otherwise exist 5 Conceptual Model for PPP Public-Private Partnership Public Private New revenues created directly by ESC Revenues from assets enhanced by ESC Other revenues Anchor Tenant lease payment Third Party Investment Other private participation FOCUS FOR TODAY 6 Public Assets with Potential ESC Synergies Parking Billboards • Asset value increases because of the ESC • May not otherwise be available if no ESC constructed • Do not increase costs to the public or...
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...Liquidity Ratio: Liquidity Ratio measures a firm’s ability to satisfy its short term obligations as they come due. Bellow we have shown the liquidity ratio of the Confidence Cement. For the year 2002, 2003.2004.2005 & 2006. 1. Current Ratio: The current ratio is a widely used measure for calculating a company’s liquidity and short term debt paying ability. Generally, the higher the current ratio, the more liquid the firm is considered to be. The current ratio is sometimes referred to as the working capital ratio. The current ratio is only one measure of liquidity. Ratio Formula 2002 2003 2004 2005 2006 Current Ratio Current Asset Current Liabilities 1.45 times 1.21 times 1.09 times 1.12 times 1.17 times Interpretation Here we have calculated the current ratio of the Confidence Cement for 5 years. Here we considered current asset = Stores + book debits+ other transactions. And we considered current liabilities = creditors + proposed dividend + other accounts. Here we have seen that for Confidence Cement all the current ratios have the minimum ability to meet the short term obligations. Hopefully we see that from 2002 to 2006 it is fluctuating and company have more current ratio in 2002. One thing we should considered that a value of current ratio acceptability depends on the industry in which the firm...
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...Assignment: Following are some independent situations with reference to liability of an auditor: 1. Mr. Touseef, the bookkeeper, had embezzled a large sum of money by manipulating the ‘Wage Sheet’. He was incharge of voucher, wage sheet and many other documents. There is no system of internal check in the organization. Later on, the auditors were appointed to conduct a continuous and detailed audit but they failed to find the embezzlement. 2. Mr. Atif was director of a company. He needed more capital so he put an advertisement in the national news papers for acquiring further capital. Mr. Ijaz (new investor) responded with intension to invest Rs. 20 million but with the condition that he wanted to see company’s audited accounts before making his final decision. Mr. Atif hired the services of a local audit firm to audit the company accounts and balance sheet. Mr. Ijaz relied on the accuracy of the audited financial statements and invested Rs. 20 million without knowing the facts that the company was in very bad state and financial position had been misstated. Mr. Atif used all the investment for his personal affairs and then declared bankruptcy. Eventually, Mr. Ijaz lost his entire invested money. 3. An auditor circulated its opinion in the press, before the final signature on financial statements, that the stock/inventory was manipulated by the directors of the organization to attract the investors but the charge was not verified yet. 4. Mr. Arslan was an auditor...
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...Nesrine Jebali January 17th, 2012 ID# 9219986 ACCO 320 – Section F Problems 13-12 & 13-13 * 13-12 a) * PE GAAP 1. | Loss from Accident | $800,000 | | | Liability for Accident | | $800,000 | Note to financial statements: Hamilton Airlines is faced with a personal injury suit for $4,000,000. The company estimates that it will likely have to charge $800,000 in estimated losses for the accident in 2011. 2. Loss from uninsured accident | $3,000,000 | | Liability for uninsured accident | | $3,000,000 | Note to financial statements: The company is faced with 18 personal injury suits of $5,000,000 due to an accident on Flight No. 901 that occurred in 2011. Hamilton Airlines is recording a charge of $3,000,000 as the appropriate estimate for expected losses that it is likely to have to pay. * IFRS 1. | Loss from Accident | 800,000 | | | Liability for Accident | | 800,000 | Note to financial statements: Hamilton Airlines is faced with a personal injury suit for $4,000,000. The company estimates that it will probably (more likely than not) have to charge $800,000 in estimated losses for the accident in 2011. 2. Loss from uninsured accident | $3,000,000 | | Liability for uninsured accident | | $3,000,000 | Note to financial statements: The company is faced with 18 personal injury suits of $5,000,000 due to an accident on Flight No. 901 that...
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...Introduction Guillermo Navallez has been in the furniture making business for several years in Sonora, Mexico. This once quiet town was notorious for vacationing and has a great supply of timber for the furniture that Guillermo produces. Consumers pay a higher premium for the well-crafted furniture and his labor is inexpensive. In Guillermo’s Furniture Store scenario, there are various financial concepts that are found. Location For 13 years Guillermo’s furniture business was at a prime location partially due to materials being available, after the competition had moved in creating numerous changes, the location has declined. In one year from 12/31/09 to 12/31/10 Guillermo’s assets, liabilities and equity, and overall total liabilities increased 1.12% and total liabilities & equity also increased 1% despite the competitive changes. Although the business shows an increase, it is not large enough to maintain a steady profit. Operating Expenses For years Guillermo has used local timber that delivers high quality furniture. His products were priced higher because of the craftsmanship and well-known quality. He had developed a variance analysis that displays his budget for various expenses including materials. All total operating expenses (excluding supplies) exceeded the budgeted amount by 1.1%, while his overall revenue had not met his budgeted amount which could be due to competitive products that are moving in. For example, because of budgeted net revenue...
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...users in making rational investment, credit, and similar decisions. An accounting system is the means by which a company records and stores the financial and managerial information from its transactions so that it can retrieve and report the information in an accounting statement. A doubleentry system standardizes the method that a company uses to record changes in its accounts resulting from various transactions or events. For each transaction or event that a company records, the dollar amount of the debits entered in all the related accounts must be equal to the total dollar amount of the credits. These debit or credit entries affect two or more accounts in the assets, liabilities, and stockholders' equity (including the temporary accounts). All normal accounts on the left side of the accounting equation (assets) are increased by debits and decreased by credits whereas accounts on the right side of the equation (liabilities and stockholders' equity) are increased by credits and decreased by debits. A permanent account is an account whose balance at the end of the accounting period is carried forward into the next accounting period. Examples: Cash, Accounts Payable, Capital Stock. A temporary account is an account that is used temporarily to determine the change in retained earnings that occurred during the accounting period. The balance in a temporary account is closed out at the end of the period. Examples: Sales, Cost of Goods Sold, Salaries Expense. The major financial statements...
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...Ltd uses a discount rate of 12% for investment appraisal purposes and expects investment projects to recover their initial investment within two years. Required: (a) Explain why risk and uncertainty should be considered in the investment appraisal process. (b) Evaluate the sensitivity of the project’s net present value to a change in the following project variables: (i) sales volume (ii) sales price and discuss the use of sensitivity analysis as a way of evaluating project risk. QUESTION 2 BAMBI Ltd specialises in organising outdoor activities for college students during holidays. You are given the following information: Abbreviated balance sheet as at 30 September 2011 $’000 Net Fixed Assets 560 Current Assets: Cash 30 590 Current Liabilities: Creditors 180 Long-Term Liabilities 110 300 Equity: Share capital 100 Retained Earnings 200 300 Its sales estimates for the next six months are as below: |Month |Number of Bookings |Holidays taken |Promotion Expenditure ($’000) | |October |1,000 |Nil |100 | |November |3,000 |Nil |150 | |December |3,000 |1,000 |150 | |January...
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...broken down into general, special revenue, debt service, capital projects and permanent funds. It is interesting to note that the city of Seattle has identified 3 major governmental funds that are presented separately in the governmental funds balance sheet and statement of revenues, expenditures, and other changes in fund balances. The major funds are the General Fund, Transportation Fund, and Low-Income Housing Fund. The general fund should always be reported as a major fund. Other individual funds should be reported as major funds if, 1) total assets, liabilities, revenues, expenditures of that fund are at least 10% of the corresponding total for all funds of that category and 2) total assets, liabilities, revenues, expenditures of that fund are at least 5% of the corresponding total for all governmental and enterprise funds combined. For example, the total assets for the transportation fund of $57,493 are at least 5% of the total assets of $1,048,526 for all funds combined. 2. The city has numerous proprietary funds that account for governmental activities similar to activities a “for profit” organization reports. These types of funds or activities typically charge user fees or cost to the citizens. They are reported as...
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...a. The share price reaction to the missing inventory, writeoffs of restructuring costs and goodwill writedowns does not suggest the securities market inefficiency. First we discuss how we define the securities market efficiency. According to the efficient-market hypothesis (EMH), the financial markets are “informationally efficient”. That is, no one can consistently achieve returns in excess of average market returns by using any information that market already knows. That means when the investment is made, the information is publicly available. One important characteristic of the efficient market is we assume the prices of securities are fully reflective of all publicly known information about the security at all time. For Philip Service Corp. case, the head of this public company tried to artificially inflate its stock price by falsely overstating the amounts of Philip’s goodwill and inventory. The information which affected the price was the inventory and goodwill being overstated. Did this information belong to the publicly known information? The answer is no. This information was not publicly information. Then when did these problems present to the public? It was in year 1998. So we can assume this information did not present in Philip’s financial statements of year 1995 and 1996 and the first nine months of year 1997. Philip Service deliberately concealed certain information. The missing inventory, writeoffs of restructuring costs and goodwill writedowns were inside...
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