AGL 10 - FIN.MGT.
WORKING CAPITAL
FOR MANAGERS - 2/3 DAYS OF
INTENSIVE LEARNING IN GROUPS
CASE GUIDE
(NOT RETAINED
TYPING CONVERSION TO BE REVISED )
ENGLISH
FRENCH
GERMAN
For further information:
Dr. R.G.A. Boland
Chemin de la Garenne
Prevessin-Moens 01280 France.
robertboland@wanadoo.f
Copyright: RGAB 2005/3
DIARY
DRAFT 6.6.05
AUTOMATED GROUP LEARNING
(AGL)
NO. 10 - EVA & FINANCIAL MANAGEMENT OF WORKING CAPITAL
CASE GUIDE
(Not Retained)
Copyright: RGAB 2005/3
No copies of without written permission.
FEEDBACK QUIZ
Choose if possible the most correct answer and mark the answer sheet (a) (b) (c) (d) with an X.
Do not mark the quiz
1.The key objective in financial management is to increase the:
(a)
(b)
(c)
(d)
2.
liquidity of the business
amount of outside finance
long term value of the business
bonus of the CEO
Effective financial management is indicated by the:
(a)
(b)
(c)
(d)
overall health of the company
weight of the financial controller
profitability
high cash balance
3.For a "quoted" company, the key objective of financial management must always be to
increase:
(a)
cash flow
(b) return on equity
(c) operating cash flow
(d) SVA
4.Lack of creativity in financial management normally results from management's:
(a)
(b)
(c)
(d)
5.
attitude
lack of skills
marital inexperience
lack of knowledge
The financial manager deals with risk by:
(a) avoiding it
(b)providing for it at the level required by the chief executive
(c) off-balance sheet financing
(d) ignoring it
6.
Control of working capital is the responsibility of the:
(a)
(b)
(c)
(d)
accountant
trade unions
all managers
finance manager
7.Critical profit making factor of a business are important in financial management because they
affect the:
(a)
(b)
(c)
(d)
8.
sources of finance
morale of the accountants
industry standards
key financial policies
The critical skills of financial management are mainly:
(a)
(b)
(c)
(d)
accounting and pessimism
timing, relationships and creativity
accuracy and honesty
forecasting and astrology
9.The horizon of a CAPITAL INVESTMENT ANALYSIS project is normally:
(a)
(b)
(c)
(d)
the economic life of the project
the technical life of the project
simply a matter of management judgment
the tax life of the major asset
10.New investment in ... is usually very poorly controlled by management:
(a)
(b)
(c)
(d)
working capital
fixed assets
R&D
subsidiaries
11. Creative Accounting:
(a)a method of accounting used in the advertising industry
(b)a cynical description given by chartered accountants to accounts prepared by anybody
else
(c) a work of classic art
(d) an American expression for manipulating figures
12. To maintain credit from suppliers, a liquidity crisis:
(a)
(b)
(c)
(d)
pay on delivery
pay a little regularly to key suppliers
simply refuse to pay up
bring in the auditors, and blame them
13. Fixed assets are best financed by:
(a)
(b)
(c)
(d)
long term finance
equity
someone else
bank loans
14.The cheapest form of finance for working capital is normally:
(a)
(b)
(c)
(d)
field warehousing and theft
bank overdraft
convertible debentures
suppliers when discounts lost
15.Investment in inventory is high, therefore the financial manager must:
(a)
(b)
(c)
(d)
depend on the situation
cut the inventory
cut sales
defer payables
16. Extensive leasing of assets:
(a)
(b)
(c)
(d)
reduces costs
is a high contingent liability
is cheaper than purchase
makes the E:D ratio look worse
17. The equity: debt ratio:
(a) must always be at least 2 : 1
(b) depends on the attitude of the chief executive
(c)indicates the "cushion" against loss by the creditors
(d) is the same as the industry average
18. When sales expand:
(a)
(b)
(c)
(d)
more assets are not required with good WC management
generally more assets required
everybody is delirious
profits increase
19.In financial management what is more important, analysis of the past or forecasting of future
cash flows:
(a)
(b)
(c)
(d)
analysis of the past
both equally
forecasting of future cash flows
neither
20. Factoring of receivables does not:
(a)
(b)
(c)
(d)
provide immediate cash flow
improve credit control
reduce profit margins
always damage company image
21.By not taking discount offered by suppliers on 2/10 days nett 30 day terms the effective cost
of money is about:
(a)
(b)
(c)
(d)
24%
36%
8%
2%
22.Money borrowed short term until some form of long term finance is arranged is:
(a)
(b)
(c)
(d)
bridging finance
subordinated debt
a scam
a form of debenture
23.For management purposes, given only the following options, which would you choose:
(a) profit figures three months old,
(b)profit figures of recent origin which were prepared under pressure of time and accuracy
(c) sales figures and bank account which are up to date
(d) daily output in both physical and money terms
24.Operational cash flow is:
(a) net profit plus depreciation
(b) Earnings before interest and taxes (EBIT)
(c) sales less cost of sales
(d)EBIT less taxes and less changes in working capital and capital expenditure
25. For most companies, the health of a financial ratio is best related to:
(a)
(b)
(c)
(d)
financial managers
the weather
international standards
industry averages
26.SVA depends mainly upon:
(a)reduced WC
(b) the weather
(c) dividend policy
(d) new investment producing more than the cost of capital.
27.In financial management the cash balance is:
(a) the unnatural result of doing business
(b) the key to liquidity
(c) the result of working capital management
(d) too low
28. Cash forecasting is designed to show the:
(a)
(b)
(c)
(d)
cash balance in five years time
same as the balance sheet
peak and duration of cash requirements
impossibility of surviving in the modern world
29The key overall test of liquidity is measured by the ratio of:
(a)
(b)
(c)
(d)
equity to debt
current assets to current liabilities
quick assets to quick liabilities
stocks on cash or credit
30. Equity base of a company should be kept:
(a)
(b)
(c)
(d)
as low as possible
as high as possible
higher than the payables
as a cushion for creditors against loss
31. Financial statements are more reliable when they are:
(a)
(b)
(c)
(d)
audited
absolutely correct
three years late
prepared for tax purposes
32. "Sales increase but inventory stays at about same level"
This statement is:
(a)
(b)
(c)
(d)
true
always false
not usually true
irrelevant to WC management
33.Cost of capital is the:
(a) cost of equity minus debt
(b)arithmetic average of cost of equity and cost of debt
(c) long term interest rate
(d) weighted average of cost of equity and cost of debt
34.When you are asked to examine a set of annual accounts with a view to making a valuation
for acquisition purposes - the first thing to do is:
(a) find out who audited the accounts, and
(b) ask yourself - why does the other guy want to sell
(c) see how much cash is in the bank
(d)order an immediate check on all the assets, and make a judgement on the quality of
profits
34. Annual cash flow is:
(a)
(b)
(c)
(d)
the decrease in bank borrowings over the year
retained profits plus depreciation,
the amount of new cash received during the year
a Xmas party bonus
35.EVA is achieved when:
(a)OCF is positive
(b)Cost of Capital is low
(c)Cost od Capital is high
(c)OCF is negative
37.Balance Sheet
Liabilities & Assets
Owner's Equity
OE 10FA 20
LTL 2 OCA 1
CL 10Cash 1
22 22
Which statement is the most appropriate:
a)current assets are too high
b)equity is too high
c)liquidity is poor
d)fixed assets are too high
Note:
OCA=Inventories and Accounts Receivable
FA =Fixed Assets
CA =Current Assets
LTL =Long-term Liabilities
OE =Owner's Equity
DRS =Debtors (receivables)
38.Balance Sheet
Liabilities & Assets
Owner's Equity
Yr.1 Yr.2Yr.1Yr.2
OE 60 100FA 40 50
LTL 20 20Inv. 30 30
CL 20 40Drs. 20 80
Cash 10 100 160 100 160
Which statement is the most appropriate:
(a)the material increase is in fixed assets
(b)there is probably poor control of debtors
(c)sales manager is sick
(d)there is poor use of long-term funds
39.EVA is a:
a)new tax on added value
b)concept similar to cost of capital
c)measure of value created by a business
d)measure of return on equity
40.Which of the following is not a key EVA driver?
a)operating profit margin
b)working capital
c)cost od capital
d)level of inflation
41.Balance Sheet
Liabilities & Assets
Owner's Equity
Cash 2 CL 2
OCA 2LTL18
FA18OE 2
2222
Which statement is the most appropriate:
a)current liabilities are to low
b)owners equity is too low
c)long-term liabilities are adequate
d)fixed assets are too high for the other current assets
42.Balance Sheet
Assets:
Yr.1 Yr.2
FA 4 18
OCA 5 5
Cash 1 1
10
24
Less:
CL (2) (4)
LTL (2) (4)
OE 6 16
Which statement is the most appropriate:
a)increase in current assets is financed by liabilities
b)increase in fixed assets is financed by liabilities
c)increase in fixed assets is financed by receivables
d)increase in fixed assets is financed by owners equity
43.Balance Sheet
Liabilities &Assets
Owner's Equity
Yr.1 Yr.2 Yr.1 Yr.2
OE 6 13FA 4 4
LTL 2 2OCA 5 22
CL 2 12Cash 1 1
10 27 10 27
Profit and Loss Account
Yr.1Yr.2
Sales 20 40
GP 10 20
NP 4 7
Which statement is the most appropriate:
a)stock and debtors increase is financed by liabilities
b)stock and debtors increase is financed by equity and liabilities
c)stock and debtors increase is due to sales expansion
d)profit margins are increasing
44.Balance Sheet ... have a care now ....!
Assets
Yr.1 Yr.2
FA 4 5
OCA 5 10
Cash 1 1
10 16
Less:
CL (2)(10)
Net assets 8 6
OE 6 6
LTL 2 Financing 8 6
Which statement is the most appropriate
a)sales increase led to an increase in debtors and stock
b)cash balance is too low
c)liabilities are too high in relation to sales
d)significant increase in fixed assets is financed by liabilities
45.Balance Sheet
Liabilities & Assets
Owner's Equity
OE 22FA10
LTL -OCA 11
CL - Cash 1
22 22
Which statement is the most appropriate:
a)current assets are too high
b)SVA is too high
c)owners equity is too high
d)fixed assets are too high
46.Balance Sheet
Liabilities & Assets
Owner's Equity
OE 10 FA18
LTL 2OCA 2
CL 10Cash 2
2222
Which statement is the most appropriate:
a)long-term liabilities are too low for the cash
b)a FOREX or a DUREX problem
c)liquidity is satisfactory
d)owners equity is too low for fixed assets
47.Balance Sheet (Careful!)
AssetsLiabilities &
Owners Equity
Cash 1CL OCA20LTL20
FA 1OE 2
2222
Which statement is the most appropriate:
a)liquidity is OK
b)Owners equity is too low
c)current liabilities are well managed
d)LBO is the answer
48.In the capital asset pricing model (CAPM) the Beta coefficient measures the:
a)bankruptcy risk of the company
b)dividend yield
c)relative volatility of the company share price in relation to the stock market index.
d)ratio of market value to book value
49.Balance Sheet
Liabilities &Assets
Owner's Equity
Yr.1 Yr.2 Yr.1 Yr.2
OE 6 8FA 4 5
LTL 2 2OCA 5 10
CL 2 8Cash 1 3
10 18 10 18
Operating Statement
Yr.1Yr.2
Sales 20 21
GP 10 10
NP
2 2
Which statement is the most appropriate:
a)stock and debtors are too high in relation to OE
b)stock and debtors are too high in relation to gross profit
c)margins are improving
d)stock and debtors are too high in relation to sales
50.Balance Sheet
Liabilities & Assets
Owner's Equity
Yr.1 Yr.2Yr.1 Yr.2
OE 60 60 FA 40 180
LTL 20140 Stock 30 20
CL 20 40 DRS 20 30
Cash 10 10
100240 100 240
Income Statement
Yr.1Yr.2
Sales 100 150
GP 40 60
NP 20 30
The material change between year I and II is:
a)increase in sales
b)increase in fixed assets
c)SVA
d)reduction in profit margin
51.Balance Sheet
Liabilities & Assets
Owner's Equity
Yr.1Yr.2 Yr.1Yr.2
OE 60 65 FA 40 50
LTL 20 20 Stock 30 100
CL 20 05 DRS 20 20
Cash 10 10
100 180 100 180
Which statement is the most appropriate:
a)increase in fixed assets is financed by equity
b)increase in SVA
c)increase in stock is mainly financed by liabilities
d)increase in sales is mainly financed by the workers
52.Which of the following is never good security for a banker:
(a)
(b)
(c)
(d)
bills receivable
inventory
goodwill and reputation
accounts payable
53.In responding to a loan request, the bank's first attention is whether the:
(a)
(b)
(c)
(d)
client is an old one or a new one
amount is too high
security is adequate
purpose is legal
54.In practice the main security for the bank loan is the:
(a)
(b)
(c)
(d)
cash in hand
face of the client
reputation of the customer
size of the safe
55.Banks do not like to lend to companies making losses because;
(a)
(b)
(c)
(d)
they are inefficient
its bad for their image
they can't afford high interest rates
they may soon have higher losses
56.The best reason for not using a bank to finance the purchase of a fixed asset is because:
(a)
(b)
(c)
(d)
it is not ethical
the interest rate is too high
the bank may require payment if conditions broken
the bank will ask repayment "on demand"
57.Liquidation values are:
(a)
(b)
(c)
(d)
dependent upon the way assets are sold
more than book values
always stable but low
the same as book values
58."If the company cannot repay the loan on demand then the bank has practical alternative but
to liquidate the company". This statement is:
(a) always true
(b) generally true
(c) not possible
(d) false
59. A "company doctor" is a man who:
(a) gives medical treatment to staff
(b) treats the chief executive for financial ulcers
(c) is under contract for legal services
(d) something else
60.If a banks sells a defaulting company it will often get a good price because it:
(a) can afford to wait
(b) can finance the purchase
(c) knows the buyer's reputation
(d) is on INTERNET
61.In times of inflation the most important factor for the banker in considering a bank loan
increase is:
(a)
(b)
(c)
(d)
payback
"gilt edge" security
age of the chief executive
government fiscal controls
62.
Net profit plus depreciation is:
(a)
cash flow
(b) operating cash flow
(c) funds flow
(d) cost of capital for the year
63.
Visit the bank manager when:
(a)
(b)
(c)
(d)
you need a lot of money
you don;t need money yet
no-one else will lend the money you need
you need money desperately
64.If a company needs 80,000 but the bank lends only 40,000, then the bank is:
(a) unwise
(b) conservative and mean
(c) forgetful
(d) wise
65.A large increase in payables is a:
(a) source of funds
(b) source of worry
(c) decrease in cash
(d) usually a good thing
66."The difference between sources and uses of funds, usually results in an increase or decrease
in working capital". This statement is:
(a) true
(b) unethical
(c) meaningless
(d) false
67.Which of the following is not a source of funds:
(a) expanded credit from suppliers
(b) sale of shares or stock
(c)increase in "the excess of the cost of an investment in subsidiaries over its net book
value"
(d) borrowing from a bank
68.
Cost of capital is:
(a)
(b)
(c)
(d)
SVA
hurdle rate for new investment
EVA
cost of equity
69.In year I the net profit was 1000 (after depreciation of ;200). In year 2 the net profit was 050
(depreciation 300). The change in the source of funds from profits in year 2 was:
(a) plus 1000
(b) plus 50
(c) minus 50
(d) no change from year 1
70.
Cash flow is the key to all except:
(a)
(b)
(c)
(d)
71.
Funds flow is used in financial management to show:
(a)
(b)
(c)
(d)
72.
SVA
cost of capital
EVA
liquidity
sources and uses of cash
what to do now
key management decisions on fund sources and uses
needs for the next month
Cash flow forecasting is normally:
(a)
(b)
(c)
(d)
shorter in time than funds flow
briefer than funds flow
easier than funds flow
detailed
73.A difficult problem in financial management is to determine if the cash need is:
(a) exactly right
(b) short term or long term
(c) short term
(d) unreasonable
74.How should we safely finance a long term capital project where profitability fluctuates
considerably:
(a)
(b)
(c)
(d)
supplier long term credit
off-shore companies
equity
bank loans
75.The parties who might be interested in financial reports are limited to:
(a)
(b)
(c)
(d)
management and shareholders
management, government and Commercial Crime Unit
management, government and bank
even more parties
76.The change of a share price in relation to the change in the share market is the:
(a)
(b)
(c)
(d)
SVA
Beta factor
EVA
dividend cover
77.Creativity in financial statements is not usually revealed by examining:
(a)
(b)
(c)
(d)
deferred assets
charges to previous years
auditor's report
chairman's annual statement
78.Creativity in financial statements satisfies the needs of
(a)management
(b)shareholders
(c) banks
(d) many parties
79.Creative accounting is often best revealed by the:
(a)
(b)
(c)
(d)
80.
notes to financial statements
income statement
chairman's report
confession
The most important accounting principle is that of:
(a)
(b)
(c)
(d)
cost
materiality
consistency
honesty
81.
If assets are undervalued in the financial statements:
(a)
(b)
(c)
(d)
something crooked is going on
equity appears to be higher
ratios are generally misleading
debt capacity is increased
82."Tax laws change accounting principles". This statement is:
(a)not always true, but some financial statements tend to follow the tax laws
(b) false
(c)true, but do they not affect the financial statements
(d) true
83.If on the balance sheet the assets are 2,341 (000) and the liabilities and owners equity are
2,340, then we must conclude:
(a) fraud
(b) many errors
(c) poor accounting
(d) nothing special
84.Which of the following will manipulate the profit upwards:
(a) balloons
(b) low receivables
(c) low accruals
(d) fixed assets charged to expense
85.To have a higher "creative" profit this year we could:
(a) defer liabilities
(b) defer expenses
(c) expense fixed assets
(d) increase accruals
86.If exceptional losses on sale of investment have been charged to reserve rather than to the
income statement "to avoid distorting the profit of the year" then this is probably:
(a)
(b)
(c)
(d)
financial mismanagement
the only sensible thing to do
manipulation
criminal
87."The results of the year are below expectations therefore both management and shareholders
may prefer the profit to be more creative". This statement is:
(a) always true
(b)rubbish
(c)not ethical
(d) sometimes true
88.Which of the following is NEVER considered to be manipulation in practice:
(a) charging exceptional losses to accumulated profit
(b) excessively conservative accounting practices
(c) revaluing selected fixed assets
(d) release of reserves to cover current losses
89.The auditor influences the company towards more reliable financial statements by
(a)
(b)
(c)
(d)
refusing to report
higher fees
resigning
insisting on notes to the financial statements
90.If the financial statements are too creative then the auditor must:
(a) ensure adequate disclosure in the notes
(b) resign
(c) confess to the police
(d) qualify his report
91.The value of the auditor's report may best be judged by his:
(a) fee
(b) social standing
(c) professional qualifications
(d) reputation, qualification and independence
92.A reasonable delay in producing publishes audited financial statement, after the year end is:
(a) 1-2 weeks
(b) 1-2 months
(c) 1-2 years
(d) impossible to fix
93.Auditors are mainly concerned with:
(a) retaining the client
(b) fees
(c) fraud
(d) materiality
94.EVA is the concern of:
(a)finance manager
(b)all managers
(c)CEO
(d)auditors
05.For every financial management problem there are always seven alternative solutions:
(a)
(b)
(c)
(d)
true
sometimes true
false
impractical
96.The advantage of factoring over bank loans is:
(a) cheaper
(b) quicker
(c) more respectable
(d) something else
97.
Factoring is used when the company:
(a)
(b)
(c)
(d)
cannot get more equity
needs increasing cash for increasing turnover
must have long term finance
needs special services
98.The chief executive should deal with working capital problems by:
(a)
(b)
(c)
(d)
leaving them to the finance man
keeping up appearances
setting risk levels to be followed
setting the routine to be followed
99.It is poor management to finance long term assets with short term money:
(a)
(b)
(c)
(d)
always true
always false
irrelevant
generally true
100.The "Dupont Chart" is a:
(a)graph illustrating the risk and return relationship
(b) formula to demonstrate financial leverage
(c)analytical tool decomposing ROA (Return on Assets) into its main components
(d)chart of share price movements of the Dupont company
FEEDBACK QUIZ RESULTS
1. c a d a b 6. c d b a a11. d b a d a16. b c b c d21. b a b a d
26. d c c a d31. a c d b c36. a a b c d 41. b b a b c46. d b c b d
51. c d a c d 56. c a d d b 61. d a b a a 66. a c b b c 71. c a b c d
76. b c d a b 81. c a d c b 86. c d b d a 91. d b d b a 96. d b c d c
Note: one or two may be wrong ... but you have to decide ... and agree ...
ASSIGNMENT 6.0 - LECTURE - PENELOPE TIMBER CO. (PTC)
6.1STORY OF THE CASE
PTC an owner operated wholesale timber merchant of good reputation with two buildings, 20
employees, no sales representatives and annual staff bonuses of 40% of salaries.
Increased sales lead to increased receivables and inventory financed by a bank loan and
stretching of payables; sales discounts increase but shortage of cash prevents taking
purchase discounts.
Should further planned expansion be financed by bank loans or payables or something else?
6.2FINANCIAL HEALTH
(a) Liquidity:
Quick ratio and current ratios below industry average. Equity: debt only .5:1 (industry 1:1); bank
loan 48,000 insufficient to allow taking purchase discounts; payables stretched; cash
extremely short.
(b) Activity:
Sales/assets ratio above average but inventory turnover weaker; receivables 38 days (industry 30
days) and payables 85 days (industry 20 days); very active company possibly over trading
for its low equity base.
{c) Profitability:
Gross profit percentage to sales falling (12.2%) but up to industry average (12%); net profit to
owners equity good; very profitable company even after charging very high staff bonuses!
(d) Potential:
Sales potential good, facilities and staff adequate, management good, but finance probably
inadequate for the planned expansion.
6.3FUNDS FLOW AND ECF
Funds flow indicates key management decisions on sources and uses of funds; no additional
capital; very little expended on fixed assets and nothing on dividends.
Funds flow confirms the need for further funds to finance a higher level of activity.
Will substantial new fixed assets also be necessary soon?
ECF confirms the need for further funds and failure to give priority to EVA.
6.4EFFECT OF SALES EXPANSION ON FINANCIAL HEALTH
Sales increase naturally lead to increase in receivables and inventory; high sales cash discounts
allowed to get cash quickly.
Increased profits substantially distributed to employees as bonus leaving relatively little in the
business to finance expansion.
In the past assets were financed equally by equity and debt (1:1) but in the last year financed
mainly by liabilities (.5:1).
Higher leverage and risk of failure!
Sales and profit expansion has led to high profitability, high risk and relatively poor financial
health.
Cost of losing purchase discounts of 2% 10 days net 30 days is 2%, for the additional 20 days of
credit i. e. 36% per annum (365/20 x 2%) ... but only 4% if the 30 days become 182
days(365/182 x 2%) ...
6.5NEW FORECASTS AND CASH REQUIREMENTS
Underlying assumptions may prove to be not valid:
(a)Gross profit optimistic 14% (last year 12.2%, industry 12%).
{b)Receivables 30 days (last year - 30 days).
(c)Inventory turnover 5 times (last year - 4 times).
(d)Bank loan for 48, 000 may not continue.
NOTE: Forecast shows need of 64,000 but the existing bank may withdraw, thus creating a need
for more than 112, 000. Can the company afford to give away so much in sales cash
discounts?
6.6PROVIDING NECESSARY CASH
(a)Asset Management
Cash - reduce the minimum cash balance?
Receivables - reduce by: selecting better paying customers, expediting more efficiently, billing
on time, changing the cash discount policy, site research visits, error free invoicing,
rapid credit note processing, benchmarking, and getting all managers to "own" the
problem.
Inventory - reduce by: getting suppliers to hold inventory, cutting back on requirements,
standardization, JIT, site research visits, benchmarking, and getting all managers to
"own" the problem.
(b)New Sources
Payables - well "stretched' but the discounts lost have cost about 36% p.a. - cheaper to borrow
from the bank even at 10%!
Possible factoring of debtors to get immediate payment for mounts outstanding!
Possible bank loan?
NOTE: Overall, to what extent can planned expansion be cut back to reduce need for funds?
6.7FINANCIAL PROBLEMS AND ALTERNATIVES
Difficult to determine whether the problem is short term or long term without a five year
financial forecasts.
Initial forecast shows need for at least 64,000 of additional funds.
Profits must be retained in the business to reduce reliance on suppliers (to avoid stretching
payables excessively and to take purchase cash discounts).
Equity: debt relationship of .5:1 is below industry average and therefore not healthy; could be
accepted as a "bridging situation" depending long term finance from profits or new equity;
will further fixed assets be necessary with the increasing turnover?
Alternatives available: bank, suppliers, factoring, mortgage, long term loans, new equity, or
reduction of assets?
NOTE: Stretching payables is only cheap after cash discounts already lost - but rather risky;
when equity: debt becomes very weak. Survival may depend more on suppliers than
management!
6.8DECISION AND JUSTIFICATION
(a)Decision - depends upon the risk level which Penelope will accept, his personal objectives for
expansion and the possible need to expand merely to survive.
If sales can be kept to 1,200,000 (not 1,600,000) then receivables and inventory could be cut
back substantially and very little additional finance needed either from banks or
equity.
If, however, business expansion is vital for survival then new funds must finance the increased
receivables and inventory. Funds from banks or stretching payables is a high risk
approach.
A lower risk approach to expansion would be to provide new equity funds thus increasing the
equity base and improving the general financial health.
Bank may refuse new loan and (try to) withdraw existing loan if PTC goes to another bank.
(b)Recommendation - increase the equity base now while the business is very profitable;
alternatively get a temporary bank loan as "bridging" finance whilst seeking new
equity.
(c)Justification - there is no point in taking excessive risks with a successful business; don't push
bank too hard too soon! Don't pursue sales regardless of financial risk and
requirements.
NOTE: There are several acceptable alternative solutions evaluate them in terms of the level of
risk - PTC should accept!
6.9LEARNING POINTS
(a)Health of the business may be determined ln terms liquidity, activity, profitability and
potential.
(b)Ratios must be compared with industry averages to determine their significance.
(c)Increased sales lead to increased working capital in receivables and inventory.
(d)Profits produce funds for financing increased working capital provided they are not
distributed as dividends.
(e)Working capital may be managed either by reducing the uses, or increasing the sources, of
funds.
(f)Must determine whether the financial need is short term or long term, since the solutions will
differ.
(g)Creative financing considers all alternatives before making a decision.
(h)Cash flow, funds flow and forecasted income statements and balance sheets help to clarify
financial needs.
(i)Funds flow reveals key management decisions.
(j)"Bridging" finance is short term money pending raising of long term funds.
(k)Management must decide the level of risk that it will accept before deciding upon the
expansion and planning the financing.
(l)Financing of working capital easier if company has facilities from more than one bank.
(m)Always seven alternatives.
(n)Cut receivables and inventories in ten ways plus benchmarking and getting all managers to
"own" the problem.
6.10LEARNING PATTERNS
1.SALES EXPANSION
RECEIVABLES +
INVENTORIES +
CASH
-
2.SHORT-TERM/LONG-TERM
SALES & PROFITS NOW ..... PERHAPS DISASTER LATER?
3.WORKING CAPITAL MANAGEMENT
PROBLEM "OWNED" BY ALL THE MANAGERS ...
6.11INSTRUCTIONS
(a)Re-assemble in CSG
(b)Study the lecture and discuss in CSG.
(c)Record significant points in your notebook
(d)Reassemble in MG when the bell rings
ASSIGNMENT 10.0 - LECTURE ON LUMSDEN (A)
10.1STORY OF THE CASE
Lumsden manufactures wooden cabinets for electronic equipment and plans substantial
expansion to meet unfilled orders.
Expansion financed by long term bank loan 140,000 for capital expenditure and 160,000 for
working capital.
Lumsden commits for increased capital expenditure of about 400, 000 before consulting the
bank and thus breaks the agreement.
10.2HEALTH OF THE COMPANY
(a)Liquidity
Quick ratio is a little weak, although stronger than previous years; current ratio is strong.
Equity:debt ratio of 2.4: 1 is very strong indeed, both compared with previous years and
the industry.
Overall, fairly liquid and well able to meet its commitments at the present level of operations.
(b)Activity
Turnover of assets and inventories fair; receivables better than industry average; payables settled
with cash discounts; overall, a fairly active company.
(c) Profitability
Gross profit percentage very high in the first seven months (un-audited!); similarly net profit to
sales higher than the industry (why? manipulated?).
Overall return on equity is very good. Subject to possible manipulation of inventory value (need
an audit), profitability seems very good indeed.
(d)Potential
Market potential good; management effective but a little old and unreliable; production
expanding.
NOTE: Overall a healthy company, with cash and funds flow adequate to finance current
operations.
10.3FUNDS FLOW AND ECF
Funds flow indicates major management decisions regarding source and use of funds.
Only a small past increase working capital, since profits mainly used for fixed assets and
mortgage repayments. Funds raised from the bank to finance fixed assets and working
capital expansion. Is this wise?
Substantial increase in assets financed largely by accruals for taxes; no draining off of profits
into dividends.
ECF confirms the need for further funds and failure to give priority to EVA.
10.4ORIGINAL BANK LOAN
Criteria for bank finance:
(a)Personal relationship with the bank - Lumsden well-known to the bank for some years but a
little old (health risk?).
(b)Purpose - expansion to meet outstanding orders; market seems to warrant such expansion.
(c)Profitability - company very profitable and healthy.
(d)Payback - no drain.off of profits into dividends; profitability should enable payback in the
time allowed.
(e)Security - general security of the business including property, inventory, etc. seems adequate
for the loan.
NOTE: Lumsden well qualified for the original loan of 140, 000 for capital expenditure and 160,
000 for working capital; bank acted wisely in making loan because it met the criteria.
10.5BANK AGREEMENT
Lumsden has broken the bank agreement because he has committed for more than 140, 000 of
new capital expenditure; bank could call in loan immediately.
Bank only committed in Sept last year to 80, 000 outstanding; could be repaid with no loss to the
bank; the substantial cash balance could be immediately offset against the loan and
Lumsden could get finance from another bank or financial source.
New cash needed for fixed assets is 400, 000 and working capital 160, 000, but no forecasts
available for five years to ensure these amounts will be adequate.
Is the estimate of 400, 000 reliable for a new plant? Will 160, 000 be adequate for working
capital if sales increase from 1 to 3 million? Probably more money needed.
10.6FURTHER BANK FINANCE
(a) Criteria for a new loan:
Personal relationship with the bank - Lumsden broke his agreement once and therefore cannot be
relied upon in the future; is the breach a serious one? Probably not since only 80, 000
is outstanding at the moment. Can Lumsden manage bigger plant? Labor problems?
Can he adapt to new scale of operations which is three times what he is used to? He is
quite old and may find it difficult.
Purpose - additional plant to meet market need; Lumsden only a "marginal supplier" and the
economy might turn down.
Profitability - Lumsden still profitable but no audited accounts available for last year.
Payback - larger amount harder to pay back out of profits; depends upon the general success of
Lumsden and good cash flow from profits.
Security - still fairly strong since the plant could be sold if necessary; less security for a larger
loan than a smaller one.
NOTE: Overall, Lumsden still a good financial risk, subject to his ability to work well with the
bank and to restrain himself from excessive expansion and meet new business
management problems!
Total money requirement probably higher because of the uncertainty; loan terms should try to
restrict Lumsden's activities and require very close reporting and control. Bank policy is
to be aggressive in seeking and keeping clients.
(b)Alternatives open to Lumsden:
Get the money from another bank
Get loans from suppliers of equipment
Factor receivables
Lease rather than buy the plant
Raise new equity but keep control of the company
Don't expand
Sell out
NOTE: Many opportunities open to Lumsden if the bank refuses.
10.7FINANCIAL POLICIES
(a)Lumsden
Recognize the risks involved in such extensive expansion; play safe by increasing equity base
now but keep control of the company.
Set up alternative financial sources to avoid reliance on one lender. Consider leasing the plant
rather than buying it. Achieve better relationship with the bank or with several banks to
provide flexibility (and strength!)
Overall - accept the loan if offered, but keep to the terms and seek equity soon while the
company is still healths and profitable.
NOTE: ALWAYS SET UP ALTERNATIVE FINANCING ... BEFORE ... NEGOTIATING
WITH A BANK ... NEGOTIATE FROM STRENGTH ... NOT WEAKNESS ...!!!
(b) Bank
Decide if Lumsden can be relied upon to remain a good client; if not, reclaim the money
immediately and seek business elsewhere.
If Lumsden remains a client, give the loan provided he also increases the equity base!
Set controls upon him in terms of monthly audited reporting and inspection of the plant, to
ensure that the bank is well informed of developments in time.
(c) Justification
Expansion by bank finance is "bridging" until more equity financing can be found.
Don't risk all for profits now; share the equity and keep financial health.
In the future avoid commitment before providing financial resources.
NOTE: Always do a PFD before activity major financial decisions, to check again the
underlying assumptions: economic, marketing, technical, financial, management etc.
10.8LEARNING POINTS
(a)Criteria for bank lending includes: personal relationship, purpose, profitability, payback and
security.
(b)Breach of a bank loan agreement, gives the bank the right to reclaim money immediately and
to offset all balances.
(c)Bank confidence in the client is key to bank financing.
(d)Many alternatives for financing of working capital including reduction of activity, factoring,
financing by suppliers, leasing, etc.
(e)Set up alternative financial plans before negotiating a final deal, so as to be flexible to
negotiate from strength.
(f)No need to own the whole business and keep all the profits. Increasing the equity base of the
business means sharing: profits, risks and losses.
(g)Financial control involves regular, reliable and timely monthly or weekly data, audited when
necessary.
(h)"Bridging" finance provides short term resources pending long term financing arrangements.
(i)Need financial forecasts for five years ahead to determine whether problems are short term or
long term.
(j)Unaudited financial statements are not reliable; they may have been manipulated.
(k)Think creatively about financing problems and seek out all (SEVEN) alternatives before
making a critical financial decision.
(l)Decide very carefully about the extent and duration of the risk level to be accepted.
(m) Keep options and relationships open.
(n)Benchmark to set standards for WC management.
(n)Use benchmarking to set standards for working capital management, and to get all managers
to "own" the problem.
10.9LEARNING PATTERNS
1. MAXIMIZING GOALS
SALES
PROFITS
CASH FLOW
SVA ...
2.INVESTMENT
MUST RETURN ABOVE C. OF C.
FIXED INVESTMENT - CONTROLLED WITH CAPITAL BUDGETS
WC INVESTMENT - USUALLY NOT CONTROLLED AT ALL ...
3.FINANCIAL MANAGEMENT SKILLS
TIMING ...
10.10INSTRUCTIONS
(a)Re-assemble in CSG
(b)Study the lecture and discuss in CSG.
(c)Record significant points in your notebook
(d)Reassemble in MG when the bell rings
ASSIGNMENT 5.0 - LECTURE -ELECTRONICS RESEARCH COMPANY (ERC)
5.1STORY OF THE CASE
ERC is in research and manufacture of electronic components for space and computer systems.
Dissident stockholders forced the Chairman to promise a small profit for last year.
The new R&D project will cost an extra ECU one million per annum but has considerable
potential.
Last year's initial profit ECU .4 (400,000) was computed before expending special R&D and
inventory losses, and before possibly crediting profit on uncompleted contracts.
Many parties are interested in the financial statements, including: stock markets, tax authorities,
existing and potential shareholders, trade unions, management, bank etc.
What profit or loss should the company report for last year?
5.2 HEALTH OF THE COMPANY
(a)Liquidity: quick, current and E:D ratios are all poor; extensive borrowing from the bank;
liquidity position is critical.
(b)Activity: sales are high, but inventory and asset turnover poor; high inventory write-down; a
expanding company has become increasingly inactive.
(c)Profitability: poor profitability due to the inventory write-down, government contracts, and
high R & D costs; poor management?
(d)Potential: R&D good, but little real evidence of profitable opportunities in terms of
marketing, production, finance, etc.
(e)Overall: company unprofitable and under-capitalized for further expansion.
5.3FINANCIAL STATEMENT OBJECTIVES
Management must try to ensure the long-term survival and increasing long-term value of the
company. Manipulation ("Creative Accounting") within the law and accounting
principles may be justified if the objectives are reasonably consistent with local
business practices!
Provided management has confidence in the future of the company, it must produce financial
statements which do not cause unnecessary loss to shareholders, creditors, employees,
etc.
The extent of manipulation employed depends on the pressure to produce reasonable results to
ensure the opportunity for survival. Thus CA is only a short term solution ...
5.4PARTIES CONCERNED WITH MANIPULATION
(a)Tax Authorities: require conformity with tax regulations to allow company to minimize
liability.
(b)Shareholders: concerned that profits should not cause a fall in share price; this might
motivate dissatisfied shareholders to try for control.
(c)Trade Unions: greater pressure for higher wages if the statements show a profit.
(d)Banks: unhappy about large loans to company which is losing money, with an uncertain
future and liquidity problems.
(e)Government - expects company to be profitable as indicator for survival and thus a suitable
party for government contracts.
(f)Press and financial analysts: who influence the stock market price of the company's shares,
and thus the risk of take-over.
(g)Management and staff - expect profitable results for survival and morale of all company staff
without fear of lay-offs.
5.5JUSTIFICATION FOR CA
(a)Management and staff survival.
(b)Recognition that cash is a fact but profit only a matter of opinion.
(c)Gain TIME to act, and avoid the danger of fraud by deception, which sets the limits.
5.6RECOMMENDATIONS ON DISPUTED ITEMS
(a)R & D Expense: no justification for carrying forward the normal R & D expensed in the past;
new special R & D could have special benefit for the future and could be carried
forward after deduction of tax; not conservative accounting but company less able
to take such a large loss this year.
(b)Inventory Loss: should be charged to last year, regardless of when the inventory was made.
Charge to accumulated profit gives a false impression of last year's activities and
results. However, some auditors may pass it either way.
(c)Profit on uncompleted contracts - previous accounting practice of deferred profit until projects
completed is very conservative. All uncompleted contracts could be examined for
a reasonable figure of profit to date and to be included in the last year's profit.
NOTE: The above suggestions are not unethical nor illegal manipulations, but merely practical
attempts to produce realistic figures which are useful to management and the parties
interested in the company's future success.
5.7AUDITOR'S REACTIONS
Auditors insist on fair accounts in accordance with "generally accepted accounting principles",
which tend to depends upon the law and business practice of each country. However
their is pressure for all "quoted" companies to adopt IAS!!
Particular concern this year because of unhealthy position and possible publicity from a
liquidation or take-over, which might be a cause for creditors to make legal claims
against the auditor for negligence!
Disclosure of all changes in accounting principles is vital; auditors usually insist that the Chief
Executive "certifies" every change as being "reasonable and in the interests of the
company".
In reality, would probably NOT agree to the normal R&D being carried forward, but would
agree to alternative treatment (after tax) of the disputed items. All changes must be
recorded as notes to the financial statements with explanation of the effects on the
profit figure.
Auditors often believe that the public is "adequately informed" if the data is somewhere in the
financial statements, even though it might require highly skilled accountant to find it!
It may sometimes be difficult to change auditors without adverse publicity. However, it is always
possible to hire additional "joint" (international) auditors who happen to agree with
company policy.
Fees not relevant here. ERC replace a "difficult" auditor next year but this year!!! Alternatively,
ERC could add another (international) auditor this year as a "joint auditor", to influence
the current auditor!!!
NOTE: The auditor may not be too unhappy with a long delay in producing published financial
statements. It would give him more time to see if the company will survive, and thus
reduce his risk of damage claims by the creditors!!
5.8DECISION AND JUSTIFICATION
(a)Discussion
Company is in very difficult position; it must incur extensive R&D cost to survive and it can't
afford to expense it, as in the past. Financial policy therefore must be realistic and
figures produced must be CREDIBLE to all parties concerned.
Management must first decide whether they firmly believe that the company has a future as an
independent operation rather than as a part of a larger group of companies i.e. takeover.
Long term financial forecasts must be made, to see how viable the company would be if sales
expanded extensively, thus requiring a much higher level of assets and working capital.
Doubtful whether existing equity base could finance expansion unless profits were
extremely high; this seems unlikely.
(b) Decision
Suggest the adjusted profit for last year be ECU .6 millions computed as follows:
Existing profit (ECU - millions) .4
Plus: profit on all uncompleted contracts .8
Total 1.2
Less: inventory losses .6
Adjusted profit (ECU - millions) .6
NOTE: Full disclosure and justification of the changes in accounting practices must be recorded
in the "Notes to the Financial Statements".
NOTE: No possibility of issue of new shares unless last year's profit is a perceived as a "breakthrough"; the new product will take three years to develop and therefore management
must seek alternative short term and long term financing arrangements and probably
even the merger or sale of the company.
(c) Justification
Liquidity is critical; the scale of operations has become too great for the equity base;
shareholders are unhappy, ERC can no longer afford to expense R&D as it did in the
past. The long term financial future of company is in doubt.
Creative accounting (manipulation) may gain TIME to arrange the sale or merger of the
company. Manipulation is only an aid in financial management where the long term
future of the company can be assured.
5.9LEARNING POINTS
(a)Parties concerned with financial statements are: tax authorities, shareholders, management
and staff, government, trade unions, banks and suppliers, financial press and
analysts etc.
(b)Tax regulations are not necessarily good accounting principles although they may have to be
followed to minimize tax liability.
(c)Charges for R & D expense and inventory losses, and profits on uncompleted contracts, are
susceptible to manipulation.
(d)Objective of financial management is to ensure long term survival and increasing value of the
company.
(e)Some "creativity" (manipulation) may be inevitable when the survival of a company is in
doubt; but management must keep within generally accepted accounting principles
and IAS!!
(f)All changes in accounting principles must be noted in the financial statements and the effect
on the current year's profit carefully explained (and reconciled with IAS).
(g)Financial statements should be credible to the parties concerned.
(h)Auditors will normally agree to reasonably creative figures provided they are within I.A.S.,
certified by management and duly noted in the financial statements.
(i)Changes of auditors or higher audit fees are not practical methods of dealing with financial
management problems; may we can always appoint "joint auditors" and thereby
apply pressure.
(j)Manipulation may be inevitable and in certain circumstances may benefit shareholders,
employees, management, government, banks, etc.
(k)It is poor financial policy to defer items that should bc expensed or to charge accumulated
(past) profit with current losses.
(l)No need to be excessively conservative in accounting all the time - but past conservatism may
provide present and future flexibility.
5.10LEARNING PATTERNS
1. "STAKEHOLDERS" TO FINANCIAL MANAGEMENT STATEMENTS:
TAX BANKS OWNERS STAFF SUPPLIERS GOVT
TU's PRESS MANAGEMENT AND ... CUSTOMERS
2.CREATIVE ...
BUT NOT SO CREATIVE THAT ...
3.AUDITORS
HONEST, TRUE, FAIR, PROFESSIONAL STANDARDS
OPINION NOT A GUARANTEE
FINANCIAL STATEMENTS AND THE NOTES
BUT ... IN FINANCIAL DISASTER ...
FIRST CREDITOR REACTION ... CAN WE SUE THEM?
5.11INSTRUCTIONS
(a)Re-assemble in CSG
(b)Study the lecture and discuss in CSG.
(c)Record significant points in your notebook
(d)Reassemble in MG when the bell rings
ASSIGNMENT 10.0 - LECTURE - LUMSDEN (B)
10.1STORY OF THE CASE
Company expanded in response to customers orders and planned to finance plant and working
capital from bank loans. Expansion program doubled and bank forced to provide more
finance.
Management failed to appreciate the difficulties of running a larger plant in economic down-turn
conditions so that company sustained losses and defaulted upon bank loan repayments.
Company now in critical condition as defaulter to the bank.
10.2HEALTH OF THE COMPANY
(a) Liquidity
Quick ratio and current ratios poor; E:D very weak with little hope of improvement; default on
outstanding loans indicates liquidity crisis.
(b) Activity
Low inventory and receivables because the whole activity of the company at well below
capacity; little prospect of increased sales which would require more working capital.
(c) Profitability
No details but losses sustained and little prospect of future profit. Any continuity of the business
will probably involve increasing monthly losses for some time,
(d) Potential
Market depressed, productive capacity over-specialized, financial crisis, reputation lost with
customers and suppliers, management troubles and overall poor prospects for the future
in the face of an immediate threat by the bank.
10.3CAUSES OF FINANCIAL DIFFICULTIES
Expansion of long term assets with only short term financing.
Failure to increase equity base when the company was still strong.
False assumptions of orders and profitability.
Failure to recognize the risk that orders could be canceled as Lumsden was only a "marginal
supplier".
Management unable to run a larger sized operation.
Trade union difficulties.
General economic recession.
Poor financial policies at too high risk, destroyed the financial health of the company.
10.4DIVERSIFICATION
Diversification involves not only production but marketing channels; company too specialized
and does not have distribution channels for other products.
No immediate need for WC due to low activity. However improvement of activity will lead to
need for more inventory and receivables and therefore more WC finance; bank unlikely
to allow further loans in view of the risk.
Difficult suppliers will not extend much credit now!
Myth that diversification into an unfamiliar new activity appears to be easier than the existing
known business.
Extensive loss due to overheads inevitable, pending INEVITABLE DELAY in possible success
of diversification.
10.5AMOUNT DUE TO THE BANK
Bank loans ECU 400,000 long term, ECU 160,000 short term less balance on hand ECU 43,000
gives net liability ECU 517,000; bank would immediately offset the current account
against the loan and stop all futures cheques.
Bank may pay off small outside creditors to get freedom to delay or sell the company.
Bank does help old clients but not bad business, because that would attract other bad business.
Possible liquidation of Lumsden depends upon other alternatives available.
10.6POSSIBLE LOSS ON LIQUIDATION
If the assets were sold rapidly, trade competitors would "stand back to let the prices îall".
Possible loss to the bank: (ECU - 000)
Book LiquidationComment
Value Value
Cash 43 - Receivables 10 5 50%
Inventory 101 25 25%
Plant 854 472 50%
1,008 502
Less: small creditors (71) (71)
Less: mortgage (secured) (48) (48)
Net assets 889 383
Less bank loans (560-43)
517 net
Possible loss to the bank 134
Note: Assuming the bank takes over the bank balance and pays off paid off the small creditors,
to get control.
10.7LUMSDEN ALTERNATIVES AND FINANCIAL POLICY
(a)Alternative:
Do nothing but wait for the banks to take action.
Sell the business to a customer (assessed tax loss is a saleable asset).
Convince the bank to allow more time for business to recover.
Get more equity base and make another deal with the bank.
Get a merchant bank or other partner or organization interested in taking some financial interest
in the business.
Sell the plant to another supplier, thereby providing cash to repay the bank substantially.
NOTE: With a general economic recession it is difficult for Lumsden to do much in the future
except try to defer the bank for a month until he can combine or sell the business; his
"bridging" finance has been stretched too far!
10.8BANK ALTERNATIVES AND FINANCIAL POLICY
(a)Alternatives:
Do nothing for a month or two to give Lumsden time to recover or do a deal.
Get Lumsden to put up new security for the loan.
Foreclose on the loans and insist upon repayment immediately and then put in receiver to
manage the business.
Negotiate with Lumsden to take over the business "by consent" and by paying off the small
creditors; continue the business until it can be sold.
Take over the business by arrangement with Lumsden, pay off the small creditors but keep the
business "on ice" to cut overhead and losses, except the minimum of maintenance until
a buyer is found later.
Sell the business to a customer or supplier (assessed tax loss is a saleable asset).
Get a new manager to run the business profitably.
NOTE: Continuing the business may involve high overheads and even greater losses. Forced
sale involves substantial losses, because competitors will not offer much at this time.
By keeping the business "on ice" for some months the bank could probably sell it for a good
price in the future, by offering to provide substantial financial support to a strong buyer
- and that is what they decided to do!!.
10.9LEARNING POINTS
(a)Poor management of working capital may not become apparent for a year or two when a
sudden financial crisis arises.
(b)A business presently sustaining losses may well sustain even greater losses very soon.
(c)Liquidation values in a business are extremely low because competitors hold back until the
prices fall.
(d)When a business is in difficulties all creditors, suppliers and banks immediately become
worried, and attempt to reduce amounts due, thus making operations even more
difficult.
(c)Financial planning must consider possible disasters so as to provide for them early!
(f)Lenders has many alternatives which are more attractive than liquidating a defaulting debtor.
(g)Major creditors may find it useful to pay off the other creditors and get complete control.
(h)Bank's reputation is only one factor in its decision making; also concerned with keeping
losses to the minimum both now and in the future.
10.9LEARNING POINTS
(i)Keeping a loss company going at a modest level involves losses and overheads and even
more finance!
(j)Sale of a company by a bank is easier when bank offers to finance the purchaser.
(k)Rapid expansion of a business changes its nature and changes management's job; existing
management must be flexible enough to adopt a new style for the larger scale of
operations.
(l)An experienced successful older manager of a small company may be unable to manage a
large organization because his knowledge, skills and attitudes are inappropriate.
(m)Business managers must understand finance to avoid financial disaster.
(n)Production efficiency is not enough for business survival.
(o)Attractive sales orders outstanding should be viewed skeptically, because they may be
canceled without compensation.
(p)At times of low activity, receivables, inventory, sales and profits arc all low; however to
recover sales and profits, we shall need cash to finance increased inventories and
receivables.
(q)"PFD" is vital to avoid excessive "EI" (emotional investment)!!
10.10LEARNING PATTERNS
1.BANK ALTERNATIVES
SEVEN ...
2.COMPANY ALTERNATIVES
SEVEN ...
3.TIMING
IS THE KEY TO SVA ...
10.11INSTRUCTIONS
(a)Re-assemble in CSG
(b)Study the lecture and discuss in CSG.
(c)Record significant points in your notebook
(d)Reassemble in MG when the bell rings