An Introduction into Business Administration and
Organization of Publishing Companies
Cairo, December 3rd- 5th 2008.
By the „End of the Day (Workshop)“ you
should have an impression on:
How You Will Lead your Publishing Company
Organizationally and Economically into A successful
Future!!
2
Table of Contents (1)
I What you have learned so far and what is still to come
II Economical Basics
1. What is Business Administration about
2. Components of Decision Making
3. The Relevance of Organization for Acting economically
4. Tasks to be coordinated
5. Business Organization as a Means of Optimizing Business Performance
III Basics of Organizational Theory
1. Basics of Organizational Theory
2. What is structural organization
2.1 Organization as a structured entity
2.2 Structural Organization versus Process Organization
2.3 Line Organization
2.4 Divisional Organization
2.5 Matrix Organization
2.6 Organization of a Publisher
2.7 Excercises I & II
3
Table of Contents (2)
3. Organization Described as a Process
3.1
3.2
3.3
3.4
3.5
Questions to be asked while optimizing processes
Visualization of a Business Process
Possible way of Optimizing Processes
Phases of Optimizing your Process
How the Process of an Order reaching you Process Organization is visualized
4. Process Organization of a Publisher
4.1 Excercise III & IV:
IV Integrated Publishing Information System (IPIS): Connecting Information and
Organization
1. Often seeked information in daily work
2. Often met situations in publishing companies
3. Goals of an IPIS
4. Summary of Goals
5. Additional uses of IPIS
6. Possible structure of a System
7. Components of IPIS
8. A publishers production process
9. Strategic Programm-Planning
10. Steps of realiziation
4
Table of Contents (3)
V Organizational Management Principles
1. Centralization vs. Decentralization
2. Management by delegation
3. Management by exception
4. Management by objectives
5. Excercise V
VI. Financial Reporting for Corporate Governance Purposes
1. Examples
1.1 Balance Sheet, Profit and Loss Account
1.2 Precalculation sheet for an Author´s Right to be Purchased
1.3 Comparing your Fiscal Year with the Previous Year and your Business Plan
2. What is accountancy
3. Purposes of Accountancy
3.1 External Recipients of Information
3.2 Internal Recipients of Information
4. Focus of Information
4.1 Usually externally focused information
4.2 Usually internally focused information
5. Balance Sheets
5.1 Purpose of a Balance sheet
5.2 How to understand a balance sheet
5
Table of Contents (4)
5.3 Comparisson of assets and liablitlities
5.4 Balance Sheet Positions
5.5 The Reliance of Balance Sheet Information
5.6 The Connection between a Balance sheet and a Profit and Loss account
5.7 Balance Sheet of a Big company
5.8 Excercise VI: Set up a balance sheet for a newly founded company
5.9 Depreciation
5.10 The Profit and Loss Account
5.11 The Profit and Loss account of a Publishing Group
6. Excercise VI: Find out about the influence of the Balance sheet to the P&L Account and vice versa
VII Financials and the Balance Sheet
1. Financial Rules
1.1 Vertical Structural Rule
1.2 Golden Rule of Financing
1.3 Golden Balance Sheet Rule
2. Types of Financing
2.1 Internal and External Financing
2.2 Owner´s equity and Loans
2.3 Interdependencies between the 2
3. Planning your monthly liquidity
4. Exercise VII
6
Table of Contents (5)
VIII Figures and Ratios of Profitability
1. Examples
2. The Purpose of figures of probitability
3. Productitvity
4. Economic efficiency
5. Profitability
6. Return on Investement
8. What may they really tell us
9. The Balanced Score Card: Multiple Goals
10. Exercise VIII
IX Internal Accounting is Cost Accounting
1. The purpose of Cost-Accounting
2. Three perspectives of Cost-Accounting
3. Cost types
4. Payments, Expenses, Costs
5. The differences between direct (variable) and overhead (fix) costs
6. Distinguishing direct costs and overhead costs
7. Direct cost: the principle of causation
8. Overhead costs
9. Cost Centre Accounting
7
Table of Contents (6)
10. Contribution Margin Accounting
11. The Break-even Analysis
12. Contribution Margins: a permanent ex post calculation, example of a publisher
13. How to keep your stock under control (it ties up your capital)
14. Visualizing the different importance of your book segments: revenues, contribution absolutely
and %
15. Exercises IX
16. Scenarios of Precalculation
X Planning
1. What needs to be planned
2. Reasons for planning
XI Excercises
8
I. What you have learned so far and what
is still to come







Marketing for Publishers
Sales for Publishers
Programmplanning:A Strategic Approach
Production of Books
Organization of a Publishing Company
The Business Administration Tool Set
Projectmanagement
9
II. Economical Basics
1.
2.
3.
4.
5.
What Business Administration is about
Components of Good Decision Making
The Relevance of Business Organization
for Acting Economically
Tasks to be coordinated
Business Organization as a Means of
Optimizing Business Performance
10
Money- and Capitalmarkets
Equity (Eigenkapital)
Capital
contribution
Dept capital (Femdkapital)
Withdrawal
(Entnahm.)profits
Pay backs
credits
interest
(Einlagen)
Accountancy
Finanancials
Financial
Purchase
market
Money,
cash
Sales
market
stock
unfinished
products
Management
Employess
Personal
Sales of
products
„Production“
Machines
Other
companies
Inventory
Material
Current
assets
Combination of
factors
Stock of
finished
products
Taxes
Fees
Etc.
House
holds,
privats
Contributions
subentions
Government
Flow of goods
Flow of finances
11
1. What is Business Administration about?


Resources are Scarce!
You need to d e c i d e on best possible allocation of
rare resources! (Economic principle: Reach maximum output with
given resources or reach a given goal with minimum input.)




Decision Making always is a choice among alternatives!
Evaluation of alternatives depends on correct and good
information!
Business Administration is the art of providing adaquate
information and taking good decisions!
The ultimate goal is to act economically: to maximize
profits or minimize losses (non profit organizations)!
12
2. The Components of Good Decision
Making
There is internal and external information necessary to take good decisions


Sources of internal information are:

up-to-date information -flows between departments.

Historical financial data including fiscal resources

Decision Makers´ evaluation of future market development
Sources of external information are:

Knowledge on marketconditions, both: sales and purchase

Fiscal matters (taxes, fees, ...)

Financial Information (Owners Capital, Banks, Insurances, Investors)

Market data as to development of Consumption, Competition, income available

Relevant themes for publication of books

Development of New Media
13
3. The Relevance of Business Organization
for Acting Economically (1)
To act economically you at least need to provide the following basic
resources:


MONEY provided by revenues, bank, owners, supplier-credits
PERSONAL to fulfill all tasks and to carry the know how of
transforming „material“ into goods (books): lecturers, sales
personal, logistics, bookkeeping, …
14
3. The Relevance of Business Organization
for Acting Economically (2)

INVENTORY: machinery, computers, offices, …

STOCK finished products and „raw material“: Rights, Books, …
These resources need to be transferred
into an efficient internal and external process,
This is the task of BUSINESS ORGANIZATION
.
15
4. Tasks to be coordinated
The following tasks need to be coordinated for the Business
participants to interact economically:
Managing
including Planning, Organization, Controlling, Supervision
Financing
getting the money for operations (back)
Investing
getting the tools/ rights necessary to operate
Purchasing getting the current assets to operate
Warehousing
getting material (digital data) and products (books) stored
Producing
getting the rights into a sellable book,e-books, licences
Selling
finding and stimulating your customers and sell to them
Transporting
advertising and marketing
getting your books to the customer
16
5. Business Administration as a Means of
Optimizing Business Performance
In order to make the „economical priciple“ reality it is
necessary to use the information listed above. Business
Administration is to collect, organize and communicate this
information to all decision makers, respectively, in order to
achieve your strategic goals at the best possible. The
quality of your achievements, however, highly depends on
how strategic goals are postulated and communicated into
your publishing company.
17
III. Basics of Organizational Theory
1. Basics of Organizational Theory
2. What is structural organization
2.1 Organization as a structured entity
2.2 Structural Organization versus Process organization
2.3 Line Organization
2.4 Divisional Organization
2.5 Matrix Organization
2.6 Organization of a Publisher
2.7 Excercises I & II
3. Organization Described as a Process
3.1
3.2
3.3
3.4
3.5
Questions to be asked while optimizing processes
Visualization of a Business Process
Possible way of Optimizing Processes
Phases of Optimizing your Process
How the Process of an Order reaching you Process Organization is
visualized
4. Process Organization of a Publisher
4.1 Excercise III & IV
18
2. What is structural Organization
There is no enterprise possible without organization.
Organization ist the total of all rules, the management
fixes in order to run a publishing company. These rules
have to be followed while realizing plans.
These rules determine what happens in a company in
formal processes, giving concrete instruction to the
members of the company.
Al-Qahira, Dec. 2 –Dec. 5 2008
2.1 Organization as a structured Entity

Giving a structure to a company is to fix
responsibilities. A hierarchie is determined by

Setting up hierarchies/ departments/ Positions
fixing rules of cooperation and competencies
Explaining who reports to who

thus organizing information and product flows.


20
2.2 Structural Organization vs. Process
organization
•The structural organization contains all rules which are relevant
for the production process. They are „independent“ of time, they
reflect to the structure of the company.
•Structural organization fixes all positions within a company, i.e.
determining tasks of each employee in respective departments.
•Structural Organization is visualized via
Task plans for
employees, job discriptions, functional diagrammes
Al-Qahira, Dec. 2 –Dec. 5 2008
2.2 Structural Organization vs. Process
Organization
•Process Organization fixes, what has to be done and in what
order. It is to optimize the workflow
•It is visualized via processdiagrammes working rules. Prior view
is laid upon the business process of optimally, (as to the economic
principal) putting out the products
•A business process is dependently showing the interaction of
tasks to be fulfilled in order to reach the company´s output. The
business process therefore is determined by the need to reach the
anticipated customers´ requirements, i.e. to publish books, which
well can be sold.
Al-Qahira, Dec. 2 –Dec. 5 2008
2.3 Prototype: Line-Organization
Chief Executive Officer
Chief Publishing Officer Chief Sales Officer
Chief Publishing Non Fiction
Publisher Biografies
Lector
Chief Bookstores Classical
Key Account Manager
Sales Representative
Chief Financial Officer
Chief of Bookkeeping
Chief of Debtors Bookkeeping
Bookkeeper
23
2.3 The Line-System
Executive officers
Chief publishing
officer
Lecturing
fiction
1 2 3
Lecturers
Lecturing
Non fiction
4
Chief Financial
Officer
Chief
Chief
Accountancy Controlling
3 4
1 2
bookkeepers
Chief Sales and
Marketing Officer
Chief Sales
1
Al-Qahira, Dec. 2 –Dec. 5 2008
Chief
Marketing
2
3 4
Sales Advertising
2. 3 Line and Staff Organization
Organization
Development
Secretaray , Press
Management
Publ. Director
Chief Fiction
Financial Director
Chief Non
Fiction
Accountancy
Sales
etc.
Al-Qahira, Dec. 2 –Dec. 5 2008
Law and Business
Administration
Market exporation
2.4 Prototype Divisional Organization
Head of Company
Division I:
Fiction
Division II:
Non Fiction
Division III:
Non Books
Purchase
Production
Sales
Controlling
26
2.5 Matrix-Organisation
Management
Staff
Publishing Lines
(objectorientiation)
Management
Fiction
Management
Non Fiction
Purchase Rigths
Editorial
Productions
Personal
Sales
Marketing
Financial
Al-Qahira, Dec. 2 –Dec. 5 2008
Management
Audio
2.6 Typical Structure of a Book Publisher
Company Owners
Supervisory Board
Board of Directors
Financial Department
Sales and Marketing
Publishing
Personal and Social Affaires
Salaries
employees committee
Controlling
Salescontrolling
Productcontrolling
Bookkeeping
Debtors
Creditors
Inventory
Rights
Production and purchase
Softcover
Hardcover
Content Management
Audio Books
Central Services
Mail
car pool
Reception/ Telefone
Housekeeping
Security
Inormation Technology
User Support
Programming
Rechenzentrum
Internet/ CMS
Marketing
Planning
Advertising
Sales Folders
Telefon Marketing
Market Analysis
Appearance dates
Structure
Fiction
Thriller
Crime
Love
Erotics
Historical
Chick Lit
Humor
Sales
Sales Bookstores
Sales Department Stores, Stations, Airports
Sales "Grosso, Barsortiment"
Sales Key Accounts
Sales Electronic Media
Sales to Wholesalers
Press and Event Mangement
Customer Relation Management
Distribution
Nonfiction
Current Affairs
How to
Life Aid
Politics
Biografie
History
Foreign Rights
Audio Books
Rewriting
Production
Speakers
Sound Studio
usually sourced out
sometimes sourced out
28
2.7 Exercise I: Structuring entities




Fix four groups. Each group put down an organizational model (the
structure), the group-members are working in, using either one of
the organizational model presented before.
Put your draft down on a flipchart.
Explain how your company, as to your impression, is organized.
Time: 30 minutes
29
2.7 Exercise II: Pros and Contras of
Organizational forms



Please discuss in 4 groups the Pro´s and the Con´s of the before
presented organizational forms.
Present your results.
Time 15 minutes
30
3. Organization described as defined Process of
„How to“


You may also describe „organization“ in means of a
workflow, a process, putting down which tasks need to
be fulfilled in their temporay and local order.
Designing processes you need to optimize speed and
distances thus making the economical principle subject
to the work flow.
31
3.1 Questions to be asked while optimizing
processes
How
do we
proceed today?
May we
Are
are
Is
Do we
May we
save
responsibilities
systems
workflow
Keep Data
save
Time?
Clear?
Clear?
Efficient?
Twice?
Money?
32
3.2 Visualization of a Business process
Presales
-----
---------
-----
Product
Development
Sales
-----
-----
---------
-----
-----
-----
After Sales
-----
---------
-----
-----
-----
---------
-----
Customer
Execute
-----
-----
-----
-----
-----
-----
Customer
-----
Process view
-----
-----
-----
-----
-----
---------
-----
-----
Service / Support
-----
-----
-----
-----
-----
-----
Functional View
33
3.3 Possible ways of optimizing processes
Clearify your
Business processes
Make processes easier
Parallelize
of dependent processes
Integrated processes
Department- and
company-wise
Methods for
Optimizing processes
Short
Indepent
workflows
Optimize
Segmentation
Integrate tasks into
One if possible
Clear definition
Of responsibilities
optimize
(de-)centralization
34
3.4 Phases of Optimizing your Process
Fix Strategy and Business Goals
01 develop your
Non fiction strategy
05 Plan results
And forecast for next years
Realize your Goals and Strategy
02 Purchase rights of
Book segments to be covered
04 Invest into new segments
07 organize sales
Organize printig
Market
Market
03 Buy licenses
customers
08
Organize stock and logistics
customers
09 Build up organization
Control Strategy and Goal achievements
06 Establish a current
Reporting on goal achievements
feed back
35
3.5 How the Process of an Order reaching you
Process Organization is visualized
Dataview
Product
(1,n)
Belongs to
ist
assigned
(o,n)
(o,n)
Offer to
customer
(1,n)
order
customer
Productionplan
Functional view
order
ist
Come in
Fiscal check.
Fiscal
o.K.
Technical check
Technically
feasible
Company
IT
Financials
Sales
Organizational View
Resources
Al-Qahira, Dec. 2 –Dec. 5 2008
3.6 Processual Organization of a Publisher
Purchase
activities
Production
Acitivites
Sales
Activities
Check
Manuscript
Calculate
Advance
Negotiate
Rights
Accept Ready
Manuscirpt
Edit
Manusscript
pay advance 2
Fix Retail Price
Set up marketing strategy
Offer to the
Retailer
Sign Contract
Negotiate
Production
Distribute to
the Retailer
pay advance 1
Layout/ Typo
Printing Finish
Fix date of
appearance
pay advance 3
Collect Money
from retailers
37
4 Exercise III: Please design the workflow of
your Company in total while exploiting a
publishing right


1.
2.
3.
4.
What steps in terms of general (not detailed) activities does it take
you, to publish a book, including the final decision, to take it out of
your programme.
Consider the life cycle of the right, (not only the book), and
different distribution channels.
Join to groups of 4.
Please list at least 20 steps.
Please put down, who is responsible for the steps, respectively and
maybe also, who she/he/they is (are) interacting with.
Take 30 minutes to put it down and be prepared to present (10
min.)
38
3.5 Exercise IV: Please design the detail
workflow for a task you choose, for example




1.
2.
3.
Purchasing

paper,

a right,

Printing-services
Delivering a book to a Retailer
Preparing your presence to a fair
Collecting money from your customers
Please list at least 10 steps for the activity you chose.
Remember to put down, who you interact with
Take 15 minutes to put it down and be prepared to present (5
min.)
39
IV Integrated Publishing Information System
(IPIS): Connecting Information and
Organization
1. Often seeked information in daily work
2. Often met situations in publishing companies
3. Goals of an IPIS
4. Summary of Goals
5. Additional uses of IPIS
6. Possible structure of a System
7. Components of IPIS
8. A publisher´s production process
9. Strategic Programme-Planning
10. Steps of realiziation
40
VI. The integrated Publishing Information
System iPIS


Concept to Economize information flows and raising efficiency in
Publishing Companies
Concept for a systematical analysis of profit contributions of titles,
rights, customers and employees by using such information in the
every-day´s publishing-work.
1. Often seeked information in daily work (1)





What profit contribution comes from a certain title, author, genre or
lable within a certain period?
Did our expectations in revenues, sales or profit fulfill in a certain
period of planning/ of our precalculation?
How much may you offer as a guarantee for a certain author´s right?
How did certain segment of publishing develop over the time in respect
of revenues and profits?
How is the today state of our next season´s programmes, are there
gaps to be filled in your next book programme?
42
1. Often seeked information in daily work (2)





What profit contributions stem from certain regions, customers, Chains,
Sales people, Lectureres
How „risky“ are certain authors, single titles, programme segments in
respect of stock and guarantees paid?
How may I systematically incorporate market know-how or know-how
from market exploration into determining future programme?
Is there a systematic influence of certain factors like cover design,
colour, prizing to be recognized concerning sales?
How is work in progress for certain titles?
43
2. Often met situations in Publishing companies







Difficult or impossible aggregation of data, belonging together, low
flexibility, differred keeping of data.
Heterogene IT-systems.
Software-programming is too expensive.
Information flow between departments isn´t satisfying. Redundances
in raising and keeping data, not up-to-date, many mistakes possible.
Decision making via tummy and seldomly based onreliable statistical
data.
No transparency on Profit-Contributions of certain market-,
programme- or sales-segments, of marketing -acitivities.
Planning of seasonal programmes often not systematically enough. Not
enough inclusion of market factors, which determine succes of
publishing-work.
44
3. Goals of an IPIS



While getting a Publishing Information System into existence, up-todate Information , which is important for decision-making and
production purposes should be available at any time. Double work will
be reduced, quality of decisions will become better, Programmeplanning will gain more transparency earlier and processes will be
speeded up.
Before set into action, processes and responsibilities need to be fixed.
It therefore ist necessary to analyze processes and interfaces in
process-organization. Helpfull may be an instrument, showing
operations and consequencies of changes. This means, too, that
optimizing processes and integration of strategic programme-planning
becomes to be a permanent task.
In order to always be able to decide, you need a direct grip on
contents of production and editing, which ideally also should be usable
in Internet (CMS: Content Management System): bookcovers, flap copy
(Klappentext), information on the author should also be usable for
sales folders. Audio- and Video-data should as well be available as the
manuscript (totally or in parts): E-books.
45
4. Summary of Goals
The Goal of implenting a Integrated Publishing Information System is to







integrated processes and data
realize transparency on work in progress
integrate information flow between the departments
Gain transparency on profit contributions of products, customers and
employees,
Assist and speed up the decission making process.
include employees into profit sharing
Assist all business processes and thus reach
Higher Economical Success
System users are all the employess who need to take decisions in their
daily work!
46
5. Additional Possibiltes of Using an iPIS (1)


Data-keeping is free of redundancies and up-to –date.
Optronically archived contracts as well as editorial data (Cover, flap
copies (Klappentexte), Bookreviews, informationen on the author).

Negotiation: always be able to look at data of historical pre-calculation.

Always be able to look at authors´/ genres success in the past

Higher quality in decision making helps save guarantees.
47
5. Additional possibilities of Using an iPIS (2)






Up-to-date transparancy on work in progress of different product forms
(HC, AudioBool, PB, Licences) in departments: Editorial, Production,
Coverdesign, Marketing und Sales.
Always available: news on economical development of a Right and
early possibility to intervene, if not satisfactory
Periodical Plan/ Actual/ Previous Year comparisson on any level of
aggregation: Right, Title, Author, Customer, …
Aid in strategic programme planning (see below)
Systematically using advances to an author so far not paid in.
First Priority: Adaquacy to the User and Easy to Handle
48
6. The possible structure of the System
royalty accountancy
Accountancy
Contracts archives (opt.)
royalties,
Material/ Stock
Publishing Informational System
(incl. Worklows)
Sales/ Revenues/ fees / stock
Distribution
Employee- Profit- Sharing
MS-Office-Tools
49
7. Components of the total system
Philosphy/ strategy of Company: How will our company look in 5 years
Media
hardcover
downloads
pocket book Digitale Träger
audio book Archiv
Means of Organization
software systems
organizational software
editorial system
Qualitymanagement ("six sigma")
technique
Contents
Hardware
Software
Inhalte
Employees and Organization
Strategy and Fixing Goals to be achieved
50
8. A Publisher´s production process
Marketanalysys
Customerattraction
Productideas
Lecturing
Rights
Produktion
Coverdesign
Sales
Marketing
customer
51
9. Inclusion into the strategic Programme Planning
Phase 1
Phase 2
Phase 3
Phase 4
Phase 5
item
How will market
develop?
Organizational
structure
structure of
programme
for t +3 to 5
Planning of
programme next to
seasons
Production and
Marketing
goals
expected
marketdevelopment to
strategically plan your
publ-shing-programme
Basis of
Information,
Procedures
Historical data, Media
control, GFK, "tummy"
aids
statistics/ controllingdata
market-orientated
Planning of new
responsibilities in
strategic
titles (novelties) to
sales as well as programmplan
appear in next
ning
lectuters´
season
departmebt
produce advertising
publications
(Vorschauen)
fixing
Fixing of each title
list of titles to
Fixing main tasks to
structure of
lecturers as well as
to appear next
appear and current
programme for
to sales persons
season
status
t +3 to 5
Rights
Rights pre- and post
organigramme
available
calculation
TIME
52
10. Steps of Realisation





Give up ancient production lists
Pre-calculation
Profit-Contribution calculation
Content Management System
Also: Set up an employee profit participation model based on a
system of goals (Strategy) of the whole publishing company
referring to data provided by iPIS!
Each period of realization needs to be accompanied by
intensive traingings into the system!
53
V Organizational Management Principles
1.
2.
3.
4.
5.
Centralization vs. Decentralization
Management by delegation
Management by execption
Management by objectives
Excercise V
54
1. Centralization vs. Decentralization
Where are the decisions taken?
Centralisation, in its extreme, means, that all decisions
are taken by only one person/ departement in a company.
All others are just to fulfill the orders given.
This principle only seems possible in very small companies.
With its growth, a need for decentralisation becomes
necessary!
Al-Qahira, Dec. 2 –Dec. 5 2008
2. Management by Delegation (MbD)
•MdB delegates competencies and responsibilities to people
below in the hierarchie. Task are to be fulfilled on a lower
hierarchical level
•Delegation needs decentralisation.
•Advantages are
Higher elasticity
Lower working-burdens to the leading managements,
respectively
Higher feeling of responsibility and more fun at work
Al-Qahira, Dec. 2 –Dec. 5 2008
3. Management by Exception (MbE)
•Only under exceptional circumstances the management is
involved into the process.
• Only if there are exceptionally important decisions to be
taken or
•in case of high deviations (Abweichungen) from goals
given, the management acts into the area of responsibility
of his employee.
•Comptencies and responsibilities for „normal“ tasks are
delegated to a lower level in hierarchie.
Al-Qahira, Dec. 2 –Dec. 5 2008
3. Management by Exception (MbE)
Management by exception needs:
 Clear definitions of and compentencies to tasks
delegated
 Real delegation of responsibilities for tasks transferred.
 Definition on what is routine and what is exceptional.
 Definition of tolerance area for deviations from goals
clearly specified.
Al-Qahira, Dec. 2 –Dec. 5 2008
4. Management by Objectives (MbO)
•Managment and employees agree upon objectives to be
reached.
•Employees are responsible for reaching the objectives.
•Employees are free in choice of instruments for reaching
goals.
•They are not judged for measures or decisions taken but only
for realization of objectives given
•Compensation (Salary and Boni) are determined by degree of
goal achievement.
•This Participation in Decision Making Process motivates and
helps develop responsibilities and motivation.
Al-Qahira, Dec. 2 –Dec. 5 2008
Exercises V:



Explain according to what Management prinicple your
Organization works think about possibilities of
improvement by changing principles
Think about what needs to be done in order to change
way of cooperation within your company and put it down
in a paper (which is just for your own use).
Give concrete examples on each one of the management
principles
60
VI. Financial Reporting for Corporate
Governance Purposes
1. Examples
1.1 Balance Sheet, Profit and Loss Account
1.2 Precalculation sheet for an Authors Right to be Purchased
1.3 Comparing your Fiscal Year with the Previous Year and your
Business Plan
2. What is accountancy
3 Purposes of Accountancy
3.1 External Recipients of Information
3.2 Internal Recipients of Information
4. Focus of Information
4.1 Usually externally focused information
4.2 Usually internally focused information
5. Balance Sheets
5.1 Purpose of a Balance sheet
5.2 How to understand a balance sheet
61
VI. Financial Reporting for Corporate
Governance Purposes
5.3 Comparisson of asstes and liablitlities
5.4 Balance Sheet Positions
5.5 The Reliance of Balance Sheet Information
5.6 The Connection between a Balance sheet and a Profit and Loss account
5.7 Balance Sheet of a Big company
5.8 Excercise VI: Set up a balance sheet for a newly foundet company
5.9 The Profit and Loss Account
5.10 Depreciation
5.11 The Profit and Loss account of a Publishing Group
6. Excercise VI: Find out about the influence of the Balance sheet to the
P&L Account and vice versa
62
1.1 Example: Balance Sheet of Bertelsmann
12/07 (1)
63
1.1 Example: Balance Sheet of Bertelsmann
12/07 (2)
64
1.1 Profit and Loss account of Bertelsmann
12/07
65
1.2 Example for a Pre Calculation of a Book
CAIRO
publisher
Title number
0
11111 Date
Format
Jusuf
retail price
Sales into retail
300 P
0
Edit.1
total printed
0 cm
40026 No Pages
in %
12.000
Edit.2
in %
10.000
29,95 €
337.631
100,0
328.331
Net Rev. (ex discount, tax Return
171.847
50,9
material cost per copy
material in total
4,00
Edit.4
in %
8000
24,95 €
9.394
gross Revenues (Bruttoerlös)
in %
15.000
34,95 €
11.273
Edit.3
39,95 €
14.091
7.515
351.582
100,0
300.242
100,0
167.214
50,9 179.024
50,9
152.978
51,0
5,00
3,50
100,0
6,00
48.000
27,9
50.000
29,9
52.500
29,3
48.000
31,4
5.000
2,9
5.000
3,0
5.000
2,8
5.000
3,3
Absatz Festabnahme
0
0,0
0
0,0
0
0,0
0
0,0
Umsatz Festabnahme
0
0,0
0
0,0
0
0,0
0
0,0
Contributions (Zuschüsse)
0
0,0
0
0,0
0
0,0
0
0,0
31.705
17,9
30.367
17,6
33.589
18,3
28.155
17,8
176.847 100,0
172.214
97,4 184.024 104,1
157.978
89,3
Revenues from Licences
fees total (incl. Sales fees to author)
Total revenues net
direct costs in total
79.705
45,1
80.367
46,7
86.089
46,8
76.155
48,2
97.142
54,9
91.847
53,3
97.934
53,2
81.823
51,8
cost of sales (Prov. Auslieferung)
27.661
15,6
26.914
15,6
28.816
15,7
24.622
15,6
overhead inkl. advertising/ interest
51.120
28,9
49.764
28,9
53.224
28,9
44.033
27,9
Result after overhead
18.361
10,7
15.169
9,1
15.895
8,9
13.168
8,6
Break even No. Of copies
10.718
89,3
9.093
90,9
13.668
91,1
7.311
91,4
Results before overhead
66
2. What is accountancy?


Accountancy : all methods of numerically collecting and
presenting goods- and money -flows mainly accruing
from a company´s acitvities (i.e. production and selling).
We usually differ among the following, however
dependent, parts:



bookkeeping, balancing, profit and loss- accounting, liquidityobservation; the main focus is on periods
Controlling: profits and losses on a mainly product/rights and
customer basis within periods to be specified
Planning the future development.
67
3. Purposes of Accountancy
While interdependent, the parts of
accountancy have different purposes:





Balancing: showing a period´s success to meet
taxing-purposes; to assure creditors (law)
Controlling: mainly decision making- and
supervising- purposes
Planning: forecasting the future and compare
developments with past and plan.
Therefore the recipients of the information not
necessarily aren´t identical: they are internal
and/or external.
68
3.1. External Recipients of Information

Who are the Recepients of External Information?





Financial Intermediary (Banks)
Government (Tax)
Suppliers
(Stockholders) Owners of Capital Companies stock
companies
Public (large Companies or Government owned
companies)
69
3.2 Internal Recipients of Information

Who are the Recipients of internal
Information?




Capital owners
Supervisory Board
Management
All decisions takers

Lecturers, Sales Personal, Producers, …
70
4.1 Usually externally focused information
Providing External Information:





The Profit and Loss-Account
The Balance Sheet
The Cash flow
Business Report
Balance Sheet, Profit and Loss- Account and
Liquidity-Report interact in a specific
deterministic manner (to be explained later)!
71
4.2 Usually internally focused information
Planning of Balance/ Profit and Loss/ Liquidity for a i.g.
3-years period of time.
Planning on a product or customer basis





Pre-Calculation of Rights offered
Pre-Calculation of an Edition to be (re-) printed
Pre-Calculation of a Price offered
Comparing Pre-Calcs with Reality

Optimizing Decision Making Process: Feedback
Interdependencies between internal and external
figures.


72
5.1 Purpose of a Balance sheet
The purpose of a Balance Sheet is to report the financial position of
a company at a certain point in time. It is divided into two columns.
The first lists, what the company owns (assets) on the left. The
second shows what the company owes (liabilities and net
worth) on the right. At the bottom of each list is the total of that
column. As the name implies, the bottom line of the balance sheet
must always "balance." In other words, the total assets are equal
to the total liabilities plus the net worth.
73
5.2 How to understand a balance sheet
Sources and Uses

A way to look at the balance sheet is in terms of the "sources" and the
"uses" of cash. Liabilities and net worth are sources of cash. They
represent debt owed to creditors who have supplied cash or its
equivalent. Assets are a use of cash. The company uses cash to
purchase assets in order to make a profit.

A Balance Sheet represent Owns and Owes, i.e. the Use of
Cash and Source of Cash.







Assets which are the most like cash
Obligations which must be paid to keep creditors happy
Assets which will turn into cash within one year
Obligations which will be due and payable within one year
Assets which may never mature into cash
Obligations which are the least nervous and never due
Total Assets Liabilities & Net Worth
74
5.3 Comparisson of assets and liabilities
Balance sheet
Assets
Liabilites
How is money used:
OWNS
Where does money
come from: OWES
ground (asset) will turn into cash
only when sold
• owners´ equity
• buildings (asset)
• machines (asset)
• stock (current asset): will turn
into cash soon
• liabilites due in more than a
year
•Liablilities due in at least one
year
• cash (current asset): most like
cash
Die Gewin- und Verlustrechnung (Aufwand und Ertrag) ist eine Rechnung in der Stromgrößen berücksichtigt werden
Al-Qahira, Dec. 2 –Dec. 5 2008
5.4 Explanation of Balance Sheet positons (1)








Current Assets: those assets which mature into cash in one year or less (CA).
Accounts Receivable: dollars due from customers as a result of selling inventory or
services on terms which allow for delivery prior to the payment of cash. The transaction
exists as a receivable on the balance sheet until cash is collected from the customer
(A/R).
Inventory: the goods and materials a company sells to make a profit. Inventory exists
in three forms: raw materials, work in progress, and finished goods. In the process of
selling inventory, either cash is received or an account receivable is created (INV).
Prepaid Expenses: when cash is used to purchase a good or service, the benefits of
which will be realized or received within the current year (12 months).
Fixed Assets: physical assets which have life in excess of one year. This includes land,
buildings, machinery, equipment, furniture/fixtures, and leasehold improvements (FA).
Net Fixed Assets: Also known as the book value, the net fixed asset is calculated as
the purchase price of the asset (gross fixed asset) less the accumulated depreciation
(the sum of the annual amounts charged for the "wearing out" of the asset) (NFA).
Notes Receivable: a loan made by the company which is evidenced by a promissory
note (N/R).
Intangibles: assets which have no physical properties or "set" values. Examples of
intangibles include authors rights, research and development, and goodwill (INT).
76
5.4 Balance Sheet positons (1)









Current Liabilities: what the company "owes" which must be paid within one year
(CL).
Note Payable Bank: obligations evidenced by a promissory note from the bank
which have maturity dates of less than one year (N/P).
Accounts Payable: amounts due to suppliers who have provided inventory to the
company (A/P).
Accruals: obligations owed but not yet billed (ACCR).
Current Portion of Long-Term Debt: the portion of a long-term loan (principal
only) which is due within the next 12 months (CDTD).
Long Term Debt: the portion of a term loan which does not have to be paid within
the next year.
Subordinated Officer Debt: Cash the officers have invested in the company which
is subordinated to any bank financing the company has received.
Net Worth: The owner's investment or "equity" in the company which may be either
"purchased" or "earned." Purchased equity consists of preferred stock, common
stock, and capital surplus. Simply put, the net worth is the difference between the
assets and liabilities of a company (NW).
Retained Earnings: another term for earned equity; represents the profits of a
company which have been reinvested within the business.
77
5.5 Reliance of Balance Sheet information


The particular elements of a balance sheet may vary significantly from day
to day. Over time, these "snapshots" of a company, taken on a year-end or
monthly basis, can reveal important information about the ability of the
company to satisfy its creditors, manage inventory, and collect its
receivables.
There are many possibilities to influence values in a balance sheet, for
instance: depreciations or valuation adjustments
78
5.6 The Connection between Balance Sheet and its
Connection to the P&L Account
• Assets:
shows structure of assets
• Debts:
shows structure of debts and owners capital
• assets - debts = owners capital (OC)
• OC in t2008 - OC in t2007 = Profit t 008
= Profit from Profit + Loss Acc.
79
Types of acc.
Asset Account
+
-
asset accounts
Changes
in
debt-accounts
+
+
Profit and Loss
Erfolgskonten
Acc
-
-
Cost
Aufwandsaccounts
Konten
Income
Ertragsaccounts
Konten
reduction
increase
WertIn value
mehrungen
+
Changes
von
in debts or
assets
owners
capital
BALANCE
BILANZ:
Active>Passiva = profit
Activa<Passiva = loss
equitiy =Vermögen
capital = Kapital
WertIn Value
Profit
and Loss
GuV-RECHNUNG:
Revenues>
= Surplus
Ertrag
Aufwand Cost
= Jahresüberschuß
Revenues<
= Loss
Ertrag
AufwandCost
= Jahresfehlbetrag
80
Closing up of a P&L-Account with variable
Owners Equity
Expense account
Income account
Profit & loss acc.
Owners equity
account
Final balance
sheet
81
5.7 Balance sheet structure of a Big Capital Company (1)
Assets:
A. Anlagevermögen:
B. Umlaufvermögen
I. Immaterielle Vermögensgegenstände:
I. Vorräte:
1. Konzessionen, gewerbliche Schutzrechte und ähnliche Rechte
und Werte sowie Lizenzen an solchen Rechten und Werten;
2. Geschäfts- und Firmenwert;
3. geleistete Anzahlungen;
1.
2.
3.
4.
II. Sachanlagen:
II. Forderungen und sonstige
Vermögensgegenstände:
1. Grundstücke, grundstücksgleiche Rechte und Bauten auf fremden
Grundstücken;
2. technische Anlagen und Maschinen;
3. andere Anlagen, Betriebs- und Geschäftsausstattung;
4. geleistete Anzahlungen und Anlagen im Bau
Roh-, Hilfs- und Betriebsstoffe;
unfertige Erzeugnisse, unfertige Leistungen;
fertige Erzeugnisse;
geleistete Anzahlungen;
1. Forderungen aus Lieferungen und Leistungen;
2. Forderungen gegen verbundene Unternehmen,
3. Forderungen gegen Unternehmen, mit denen ein Beteiligungsverhältnis besteht,
4. sonstige Vermögensgegenstände;
III. Finanzanlagen:
III. Wertpapiere:
1.
2.
3.
4.
1. Anteile an verbundenen Unternehmen;
2. eigene Anteile;
3. sonstige Wertpapiere;
Anteile an verbundenen Unternehmen;
Ausleihungen an verbundene Unternehmen;
Beteiligungen;
Ausleihungen an Unternehmen, mit denen ein Beteiligungsverhältnis besteht;
5. Wertpapiere des Anlagevermögens;
6. sonstige Ausleihungen.
IV. Schecks, Kassenbestand, Guthaben bei
Kreditinstituten.
C. Rechnungsabgrenzungsposten
82
5.7 Balance sheet structure of a Big Capital Company (2)
Passiva:
A. Eigenkapital
C. Verbindlichkeiten:
I. Gezeichnetes Kapital;
1.
2.
3.
4.
5.
II. Kapitalrücklage;
III. Gewinnrücklagen:
1.
2.
3.
4.
gesetzliche Rücklage;
Rücklage für eigene Anteile;
satzungsmäßige Rücklagen;
andere Gewinnrücklagen.
IV. Gewinnvortrag/ Verlustvortrag;
Anleihen, davon konvertibel;
Verbindlichkeiten gegenüber Kreditinstituten;
erhaltene Anzahlungen auf Bestellungen;
Verbindlichkeiten aus Lieferungen und Leistungen;
Verbindlichkeiten aus der Annahme gezogener Wechsel
und aus der Ausstellung eigener Wechsel;
6. Verbindlichkeiten gegenüber verbundenen Unternehmen;
7. Verbindlichkeiten gegenüber Unternehmen mit denen ein
Beteiligungsverhältnis besteht;
8. sonstige Verbindlichkeiten, davon aus Steuern, davon im
Rahmen der sozialen Sicherheit.
V. Jahresüberschuß/ Jahresfehlbetrag.
B. Rückstellungen:
D. Rechnungsabgrenzungsposten
1. Rückstellungen für Pensionen und ähnliche Verpflichtungen;
2. Steuerrückstellungen;
3. sonstige Rückstellungen.
83
5.8 Excercise VI: Set up a Balance sheet for a
newly founded company
• You have got 23.000 Pounds and may loan another 10.000 from your bank.
• You put into your company several Personal Computers worth 4.000 Pounds
• You purchase an author´s right for 5.000
Start Balance
Owns
Al-Qahira, Dec. 2 –Dec. 5 2008
Owe
s
5.9 Profit and Loss Account (P&L)
The P&L- account sums up and compares expenses and
incomes of a period.
It explains how profits or losses have developed,
while the balance sheet only shows its height
(Höhe).
Reason for Balancing: Documentation of changes
of Stock (Bestandsgrößen) within a certain period of time
For tax reason one would not need a P&L-Account.
85
The Balance Sheet is a snap shot in time of a company’ s overall worth.
5.9 The Profit and Loss Account (P&L) is a report of
the publisher´s profit on the sale of their books or the provision of their
sales of licences over a trading period, normally one year
.
PROFIT & LOSS
ACCOUNT 2001/2000
Note
01.
02.
03.
04.
05.
06.
07.
08.
09.
Income
Turnover
Cost of Sales
Materials
Wages
Total [4+5]
GROSS PROFIT [2-6]
Distribution
Marketing
10.
11.
12.
13.
Delivery Costs
Total [9+10]
Expenses
Rent/Lease
(£000)
1
3050
1400
650
2050
1000
75
80
155
Insurance
Professional Fees
Utilities
Debt Write Off
Salary
Motor
Interest Charges
Depreciation
14. Total [All of 13]
15. NET PROFIT BEFORE TAX
13
10
30
35
30
120
80
50
50
418
427
86
5.9 Explanation of the Positions
01. INCOME: (02)
This is the total value of INVOICED books or licences sold, LESS vat, and trade discounts over a one
year period. The words 'Turnover' and 'Sales' would mean the same.
03. COST OF SALES: (04, 05, 06)
This is the direct cost of goods or licences SOLD. All other goods left at the end of the accounting
period are entered as 'Stock' in the Balance Sheet. So all finished and unfinished books´ value
are to be found in the Balance Sheet..
07. GROSS PROFIT
This figure is the total amount of profit on all sales after deducting the direct cost of making the
goods or supplying the service. Expenses, tax and interest are yet to be deducted.
08. DISTRIBUTION (09, 10, 11)
This area covers postal and vehicle distribution, wages for sales and marketing staff, agent
commissions, sales outlets and anything that is clearly involved with sales promotion.
87
5.9 Explanation of the Positions
12. EXPENSES (13, 14)
All costs outside of 03. and 08. are listed here. Again, as with all costs in the P&L, figures exclude
vat. Most of the expenses are self explanatory, however, depreciation is not so straight
forward.
Depreciation is the reduction in value of a fixed asset.
When you buy a new machine the purchase value is added to the FIXED ASSET column in the
Balance Sheet. At the end of each year the value of the machine reduces the FIXED ASSET
amount in the Balance Sheet. For an equal five year period a compensating entry is needed in
the P&L (this is 'double entry' bookkeeping). It is very similar to a write off entry.
15. NET PROFIT BEFORE TAX
This figure is the profit resulting from all sales in the period. Corporation Tax 20% (or whatever
the current rate if different) has to be deducted from this amount for a true figure.
88
5.10 Depreciation: why pay outs not
directly are costs
Purchasing publishing-rights, machines or inventory reduces
your cash or raises your loans in the moment of purchase.
But it does not in the same instant raise your cost: Using
machines or rights of several fiscal years consume their
value while being used. Reducing the value of Machines etc.
in your balance is called depreciation.
The value may also be decreased because of a loss in
marketability, i.e. when you see, that the money you paid for
a machine or a right may not come in directly or indirectly via
sales again. Then you do a special write of (depr.).
89
5.10 Profit and loss account of a publishing
group
total company
in TDM in %
publ. 1
in %
publ. 2
in %
publ. 3
in %
publ. 4
in %
publ. 5
in %
publ.6
Overhead
Revenues retailers
19.336
100,0
2.460 100,0 1.318
100,0
1.591
100,0
734
100,0
12.324
100,0
705 100,0
204
100,0
Material and Authors
12.225
1.946
63,2
10,1
26,7
5,9
-10,6
31,4
68,6
31,4
14,3
6,4
1,3
1,7
23,7
7,7
3,3
1,0
2,0
5,7
1,7
0,0
1,7
1.351 54,9 850
320 13,0 171
789 32,1
297
190 7,7
25
0 0,0
0
599 24,4
272
1.861 75,6 1.046
599 24,4
272
188 7,6 172
68 2,8
51
244 9,9
41 1,7
40
541 22,0
263
58
2,4
9
0,0
0,0
0,0
0,0
58
2,4
9
0,0
58
2,4
9
64,5
13,0
22,5
1,9
0,0
20,6
79,4
20,6
13,1
3,9
0,0
3,0
20,0
0,7
0,0
0,0
0,0
0,0
0,7
0,0
0,7
870
175
54,7
11,0
34,3
11,2
0,0
23,1
76,9
23,1
15,1
1,2
0,0
0,8
17,0
6,1
0,0
0,0
0,0
0,0
6,1
0,0
6,1
460
66
62,7
9,0
28,3
4,6
0,0
23,7
76,3
23,7
0,0
2,6
0,0
1,6
4,2
19,5
0,0
0,0
0,0
0,0
19,5
0,0
19,5
8.380
1.033
68,0
8,4
23,6
2,6
0,0
21,0
79,0
21,0
2,1
0,6
0,0
0,1
2,8
18,2
0,0
0,0
0,0
0,0
18,2
0,0
18,2
288 40,9
113 16,0
304 43,1
117 16,6
-55 -7,8
242 34,3
463 65,7
242 34,3
102 14,5
101 14,3
2 0,3
6 0,9
211 29,9
31
4,4
2 0,3
5 0,7
1 0,1
0,0
35
5,0
0,0
35
5,0
26
68
12,7
33,3
53,9
139,2
-980,4
895,1
-795,1
895,1
885,8
442,6
4,4
96,1
1.428,9
-533,8
309,3
91,7
187,3
539,2
-1.103,4
2,9
-1.106,4
Distribution and Sales personal
contribution margins Retail
5.164
Depreciation on Stocks
1.147
-2.055
Contribution after Depr.
Sum Costs
Wertschöpfung
6.072
13.264
6.072
Adv. Press PR Fairs
Room Rents
2.769
1.233
255
321
Cost of Overhead
Results operatively
4.578
1.494
Cost of Interest
633
192
383
1.100
Personal
Sachkosten
Depreciation on Inventory
Revenues of interes
extraordinary Earnings
extraordinary Costs
Result before Tax
Tax
Annual net profit
336
6
330
546
178
0
368
1.223
368
240
19
12
271
97
97
97
208
34
0
174
560
174
0
19
12
31
143
143
143
2.911
319
0
2.592
9.732
2.592
260
72
14
346
2.246
2.246
2.246
110
284
-2.000
1.826
-1.622
1.826
1.807
903
9
196
2.915
-1.089
631
187
382
1.100
-2.251
6
-2.257
90
Profit and Loss account per month x in year y
Month x
in %
Plan
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
19
20
21
22
23
24
Revenues retail
60,6
29,0
4,6
484
100,0
1.458
100,0
1.329
100,0
-9
174
27 Total Direct Costs
191
39,4
1.036
71,0
1.268
95,4
22
564
-18
-7,7
28
29
30
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
60,6
422
511
213
-7
717
21
10
-306
50
27
0
0
-382
-2
-380
0
27
115
0
80
29,0
61
263
143
-58
348
3
9
-282
41
27
56
-1
-293
0
-293
0
27
33
0
140
4,6
-86
-48
-33
0
-51
-84
-8
-8
-17
2
####
####
-23
-105
-23
-79
106
195
252
0
76
0
76
0
0
176
0
0
0
0
176
0
176
0
0
0
0
0
107,7
Deprecition to goodw ill (+)
Deprecition to inventory (+)
Provisions (Rückstellungen)
Depreciatuibs (Wertberichtigungen)
293
128
49
0
177
53
14
79
43
26
28
1
36
0
36
0
26
18
0
107
Cash flow
187
176
75,5
Sales personal
Contribution retailing
Revenues special sales
Material
Authors f ees
Cost of Distribution
Sales personal
Contribution special sales
Remaindering sales
Material, Distribution Salesf ees
Contribution Remaindering
Contribution Lice ns e s ale s
Adv. PR Press Fairs
Depreciation Debtors
Depreciation Stocks
Depreciation Gurantees to Others
Contribution after Depreciation
Economical Value Added
Personal Costs
other Cost
Umlagen
Total indirect costs
interest costs
interest revenues
operative result
interest to the ow ner
Goodw ill-depreciation
special Results
special costs
Result before Tax
Tax
Annual net profit
dav.
151,6
100,0
34,6
8,1
0,0
6,1
51,2
100,0
40,0
60,0
100,0
31,2
0,0
5,2
0,0
26,4
10,0
0,0
36,4
10,9
3,0
16,2
8,9
5,4
5,7
0,2
7,4
0,0
7,4
38,7
-159
37,3
100,0
17,2
3,7
0,0
8,4
70,7
100,0
6,8
93,2
100,0
13,4
0,0
0,0
0,0
35,0
14,6
-0,5
49,2
1,4
0,7
-21,0
3,4
1,8
0,0
0,0
-26,2
-0,1
-26,1
-10,9
-93
45,5
19,8
16,7
1,3
16,6
100,0
35,8
8,0
0,0
5,9
50,4
100,0
0,2
99,8
100,0
15,3
0,0
1,9
0,0
19,8
10,8
-4,4
26,2
0,2
0,7
-21,2
3,1
2,0
4,2
-0,1
-22,1
0,0
-22,1
-7,0
436
-386
963
691
-45
-41
-3
0
-5
###
-7
-5
117
-99
261
-167
35
###
0
###
-79
in %
26 Total Revenues
Cost of Distribution
41,8
9,0
8,0
3,9
100,0
Total
plan
-12
-4
96
85
-71
-61
26
162
171
####
-13
-11
####
-314
####
-210
4
####
####
####
-86
-85,5
10,0
11,3
12,5
100,0
Diff.
Diff.
P/I % I/I%
1.104
503
219
185
14
183
238
85
19
0
14
120
6
0
6
-20
204
0
25
0
61
Authors f ees
100,0
This Year
Ist
in %
1.250
523
112
100
49
466
190
33
7
0
16
134
0
0
0
18
196
0
0
0
422
Material
206
-176
21
23
26
312
246
85
20
0
15
126
3
1
2
30
151
0
25
0
293
in %
0,0
97
-94
-36
-458
-5
3
103
-234
-915
###
-915
75
31
-41 -150
234
100,0
70
29,7
8
3,2
9
3,8
-14
-6,0
162
69,4
0
100,0
0
-35,0
0
0,0
0
0,0
-90 ######
90 ######
0
100,0
0
5,9
0
94,1
0 ######
0
0,0
0
0,0
0
0,0
0
0,0
252
107,7
234
100,0
0,0
32,3
0,0
32,3
0,0
0,0
75,5
0,0
0,1
0,0
0,0
75,3
0,0
75,3
91
6. Excercise: Examining interdependencies
between Balancing and P&L
Balance sheet
Intangible Assets (i.e. rights)
Tangible Assets
Financial Assets
Total Assets
Raw material (paper)
Semi finished products (films)
Finished Products (Books)
Debtors from Sales
Cash
Current Assets
Assets
19,0
7,0
3,0
29,0
2,6
4,7
29,0
33,2
1,5
71,0
100,0
Owners´ equity
annual profit
Total owners´ equity
Credits from Suppliers
Bank credits up to one year
Bank credits more than 1 year
Liabilities
total Liabilities
24,9
7,5
32,4
22,0
13,6
32,0
67,6
100,0
Delta due to changes in interest
change
Profit and Loss Account
Revenues
440,0
Material
-162,8
Personal
-106,6
Depreciation
-1,6
Marketing Sales
-152,7
Result
16,3
Financial Revenues
0,2
Interest
-3,2
Financial Result
-3,0
Tax
Surplus
-5,8
7,5
EBITDA
EBIT
12,1
10,6
change
tax
0,0
Average time of use
4,5
interest 5%
5%
interest 7 %
7%
tax
45%
0,0
92
6. Groupwork: What happens to Balance sheet
and P&L, if you
1.
2.
3.
4.
5.
6.
7.
8.
loan 1 from your bank for 2 years put it in cash
buy material on stock via bank: 2
sell products for 25 at a margin of 50 % on credit
Receive an invoice 5 for books you put on stock,
paying later
Pay salaries at 5
pay an advance to an author at 10
pay 15 royalties to your authors, 50% of which may
be calculated against guarantees
pay profit shares to your owners 2
93
VII Financials and the Balance-sheet
1. Financial Rules
1.1 Vertical Structural Rule
1.2 Golden Rule of Financing
1.3 Golden Balance Sheet Rule
2. Types of Financing
2.1 Internal and External Financing
2.2 Owner´s equity and Loans
2.3 Interdependencies between the 2
3. Planning your monthly liquidity
4. Exercise VII
94
1. Financial Rules
.
Financial rules
Horizontal
Capital
Structural rule
Vertical capital
strucural rule
Golden
Financial
Rule
Golden
Balancingrule
95
1.1 Vertical structural rule
• Looks upon the „Liability“ side of the balance sheet
•Sets up relation between loaned money and equity capital
ideally ratio of:
loaned/
= 1:1
own money
Reduces risk in the eyes of capital loaners
96
1.2 Golden Rule of Financing
• Connects assets and liabilities in a balance sheet-view
• Seeks congruency between period of time assets are in
use and the time, equitiy-capital (EK) and long-termloaned money is available.
• It is to assure liquidity and shows the ability of an
publisher to always pay his debts in time
97
1.3 Golden Balance sheet rule
• tightest view:
assets (tangibel,intangibel, financial) = owners capital
• more generous view:
assets = owners cap. + longterm loaned money
• most generous view:
assets + longterm current ass. = OC + longterm liabilities
98
2. Types of Financing
Types of Financing
Depending on
Source of Finances
Internal
Financing
External
Financing
Depending on Relation to
to the enterprise
Owners´
Equity
NonOwners´
equity
99
2.1 Internal- and External Financing
Internal Financing´s sources mainly are Revenues. The money comes from
external from the customers who pay back in money terms what the enterprise
invested in the past into its products.
 External Financing is Financing with the Money coming from outside the
company. Capital does not come from the enterprise´s production process while
selling products, but comes from credits by banks or from shareholders.
100
2.1 Internal- and External Financing
Financing
External Financing
Internal Financing
credits
Money
Financing
Financing
loans
from the
out of
out of
share-
retained
provisions
holders
earnings
(Rückst.
/Rücklage)
101
2.2 Owner´s equity and Loans
Financing via own resources is putting in capital by
the shareholders, i.e. equity capital or loans by the
owner.
If capital does not come from the owners but from
outside creditors.
Examples are: current accounts, suppliers´credit,
loans (Darlehen)
102
2. 3 Interdependencies between the 2
According to sources of money
Types of financing
Financing
according
to legal
State (rechtl.
Status)
State of who
gives the
capital
Internal Financing
External financing
Out of the enterprise´s
Not directly connected to the
production process
enterprise process
Self-financing out of profits
Owners give money into the
company either as credits or
as share-money
Outside Money Financing out of Provisions
Financing:
(Rückstellungen)
Creditor
Financing
Financing from loans, credits
Own Equity
Financing
103
3. Planning your monthly liquidity
Liquidity Planning
month
Income
from sales
other income
total income
expenditure
material
external services
salary
energy
Reparatur und Instandhaltung
advertising and marketing
interest (depend on loans needed)
taxes and fees
other expenditure
total expentidure
income- surplus / -deficit
Financials and Investments
credits: repayment (-) / raising (+)
Financial investm: increase (-) / decrease (+)
Owners withdrawal (-) / contribution (+)
Investitments (-) / Desinvestments (+)
Saldo
Change in Liquidity
Liquid money by end of month
Liquidity 1 (without short term bank credit)
short term credit Limit
Liquidity (including short term reserves)
Start
-10
100
90
1
2
3
4
5
6
7
8
9
10
11
12
900
0
900
1.100
100
1.200
1.000
0
1.000
1.100
0
1.100
1.200
100
1.300
1.300
0
1.300
1.100
200
1.300
1.100
100
1.200
1.100
0
1.100
1.100
0
1.100
1.100
200
1.300
1.100
0
1.100
200
100
300
5
0
200
0
0
0
805
400
100
300
5
0
100
0
0
0
905
400
100
300
5
100
200
10
0
0
1.115
400
100
300
5
0
200
0
0
0
1.005
400
100
300
5
0
300
0
0
0
1.105
500
100
500
5
0
200
12
0
0
1.317
400
100
300
5
0
200
0
0
0
1.005
400
100
300
5
0
200
0
0
0
1.005
400
100
300
5
100
200
10
0
0
1.115
400
100
300
5
0
200
0
0
0
1.005
400
100
300
5
80
200
0
0
0
1.085
500
100
400
5
0
200
10
0
0
1.215
95
295
-115
95
195
-17
295
195
-15
95
215
-115
-100
-100
-50
-50
0
0
-100
-150
-100
-100
-100
-100
-100
-100
-100
-100
-100
-100
-100
-100
-200
-100
-100
20
20
-100
-100
-50
-55
195
-215
-5
95
-117
95
95
5
-5
115
-165
-65
100
35
130
100
230
-85
100
15
-90
100
10
5
100
105
-112
100
-12
-17
100
83
78
100
178
83
100
183
78
100
178
193
100
293
28
100
128
104
4. Exercises VII
Please set up a liquidity plan for the next 3
months as follows
Start credit at bank
Credit line
Monthly income:
Monthly expenditure:
You invest on machines in month 2
Depreciation months 1 and 2,
Depreciation month 3
Owners withdrawal in months 3
-20
50
100
-80
-50
5
7
-20
What kind of financing is deprecition/ is owners withdrawal?
105
VIII Figures and Ratios of Profitability
1. Examples
2. The Purpose of figures of probitability
3. Productitvity
4. Economic efficiency
5. Profitability
6. Liquidity
7. Return on Investement
8. What may they really tell us
9. The Balanced Score Card: Multiple Goals
10. Exercise VIII
106
1. Examples for Figures of Profitabilty
1.
2.
3.
Creditors are concerned with the abiltiy of a company to pay its current
obligations. So they seek information about the relationship of current
assets to current liabilities
Stock holders are concerned with dividend
Management is concerned with the activity of merchandising inventory
So figures of interest are:

Productivity

Rentability







Profitability of
shareholders capital
Total capital employed
Revenuerentability
Liquidity
Return on Investment
Balanced Score Card
107
2. The Purpose of Figures of Profitability
They are useful to judge economical behavior
They give extremely condensed information
There are absolute and relative figures:
Absolut figures are: profit, operating result
(Betriebsergebnis),
Cash flow.
Relative Figures are: productivity, economical efficiency,
rentability, liquidity.
Al-Qahira, Dec. 2 –Dec. 5 2008
3. Productivity
Productivity is the ratio between input and output and usually
refers to quantities
Productivity =
Output
Input
109
4. Economic Efficiency
(Wirtschaftlichkeit)
Ratio between the values in input and output
Kapitalumschlagshäufigkeit
[%]
=
Umsatzerlöse
.
(durchschn.) Gesamtkapital ohne Finanzanlagen
Turnover in capital = Revenues/ average total capital (except Fin. assets)
Economic efficiency =
Revenue/Expenses
Revenue/ Costs
Cost realized/ Cost planned
110
5. Profitability
The Profitability, also called rate of return, is the most often used figure. It
usually is a percentage of profit in relation to capital applied.
Profitability = profit/ capital applied
Umsatzrentabilität [%]
=
Betriebsergebnis (vor Steuern)
Umsatzerlöse
•revenue profitability: profit/ revenues
• share holders´ capital profitablity: profit/ equity
(shareholders capital)
• total capital´s profitability: (profit + interest) / total capital.
•EBIT: Earnings before interest and taxes
•EBITDA: Earnings before interest taxes, depreciation and amortization
111
6. Liquidity
Liquidity is the ability of an enterprise to always serve liabilities and debts in
time
Liquidity always dominates profitability
There are different degrees of liquidity
Liquidity of 1st degree
=
Liquidity 0f 2nd degree
=
Liquidity of 3rd degree
(Current Ratio)
=
cash + cash at bank + stocks in current assets
short term loaned money
above +
+ short term accounts receivable + stock
short term loaned money
current assets .
Short term loaned money
Short term loaned money = kurzfristiges Fremdkapital
112
7. Return on Investment
a) ROI = (profit/Revenues x revenues/total capital) *100
(= Kapitalumschlag: turnover of capital)
b) ROI = Profit x 100 / total capital
Profit = 50, revenues = 1000, capital = 400
a) (50/1000x1000/400)*100 = 12,5%
b) 50*100/400=12,5%
113
8. What may those figures really tell us
Figures of Profitability are means of planning and
controlling the processes of an enterprise
They may not be looked upon absolutely. So it is useful
to compare those figures over a several periods in time
or with those of other enterprises.
You often need a „healthy“ mix between the figures:
Highest liquidity (all your money in cash) may cause lowest
profitability. On the other hand highly profitable capital
investments carry a danger of Illiquidity if the enterprise you
gave money to becomes insolvent. To control this mix is the
task of the enterprises
Al-Qahira, Dec. 2 –Dec. 5 2008
9. The Balanced Score Card: Multi Goal Figure
System
Balanced Scorecard
Authors
Revenues
foreign Authors
100
Return on Sales
Financials
80
No. Of Titles put out
capital profitabilty (ROI)
60
40
quality of authors
ratio of steady customers
20
Customers
0
motivation
how customers pay
Employees
qualification
Customer satisfaction
Processes
Satisfaction
Vorschlagswesen
how orders are performed
quality management
Ziel
Ist
115
10. Excercise
Balance sheet
Intangible Assets (i.e. rights)
tangible Assets
Financial Assets
Total Assets
Raw material (paper)
Semi finished products (films)
finsished Products (Books)
Debtors from Sales
Cash
Current Assets
Assets
19,0
7,0
3,0
29,0
2,6
4,7
29,0
33,2
1,5
71,0
100,0
Owners Capital
Credits from Suppliers
Bank credits up to one year
Bank credits more than 1 year
Capital
Liabilities
32,4
22,0
13,6
32,0
67,6
100,0
Sales
cost of sales
Gross profit
expenses
depreciation
interest
operating profit
Taxes
profit
2005
100
65
35
23
3
2
7
2
5
2006
100
68
32
23
3
3
3
1
2
2007
100
70
30
22
3
3
2
1
1
In 4 groups find out (15 minutes):
1.
Ebit/ da
2.
Total capital´s profitability
3.
Share holder´s profitability
4.
Return on investment
5.
Vertical capital structure (see below)
116
IX Internal Accounting is Cost Accounting
1. The purpose of Cost-Accounting
2. Three perspectives of Cost-Accounting
3. Cost types
4. Payments, Expenses, Costs
5. The differences between direct (variable) and overhead (fix) costs
6. Distinguishing direct costs and overhead costs
7. Direct cost: the principle of causation
8. Overhead costs
9. Cost Centre Accounting
10. Contribution Margin Accounting
117
1. The purpose of Cost Accountint
Internal accounting is often called cost accounting. It is set up mainly for
internal controlling purposes, i.e. to provide information for decission making.
It is only set up to control (to steer) the company towards better performance.
There are 3 Parts of cost accounting and results accounts (K&L):
1.
Analysis of cost by Type (how are costs structured):
2.
Cost Centre Accouting: Where do costs occures
3.
Cost allocation Accounting: what are the cost, each indiviual product
needs to carry. (Kostenträger):
Kostenartenrechnung
Kostenstellenrechnung):
Al-Qahira, Dec. 2 –Dec. 5 2008
2. The Three Perspectives of Cost Accounting
Cost type-accounting Cost centre-accounting




Fixes costs
Variable cost
Direct costs
Overhead costs
Values come form bookkeeping
Types of costs are allocated
to the departments in which
they occured.
Unit cost-accounting
Cost from cost centres are
allocated to the products or
other units, which earn the
money to bear them.
Cost centre costing is to show,
where costs came into
existence
Values stem from cost-type
accounting
Values stem from cost-centre
accounting
Al-Qahira, Dec. 2 –Dec. 5 2008
3. Cost Types
Personell expenses
Cost of material
Capital costs
External services
Fiscal fees
etc.
120
4. Payments/ Expenses/ Costs
Auszahlungen <> Ausgaben <>Aufwand <>Kosten
Einzahlungen = Einnahmen = Ertrag = Leistung
Payment<>expenses<>costs
Pay ins <> revenues <>earnings
Normally the above categories are not identical, because they may refer to different
periods of time:
You buy a computer and pay 100 payment. You use it for 5 years. While your bank
account will be reduced by 100, your profit will only be reduced by 20 but this for
each of the next 5 years (costs).
The same may be true for your sales: You sell books for 100 and realize revenues in
your P&L account. Terms of trade are: payment within 30 days. So revenues are now,
but cash in is only within 30 days.
Al-Qahira, Dec. 2 –Dec. 5 2008
5. Differences between direct (variable)
and overhead (fix) costs
Usually variable costs depend on the number of units
put out. Overhead costs are (in a short period of time)
independent of output, i.e. number of units produced.
Cost C
CC
+C f
= Cv
Total costs C
variable portion
Of total Costs C
v
Overhead costs
f
Overhead portion of
Total Costs C f
Output- Number of units
Al-Qahira, Dec. 2 –Dec. 5 2008
6. Distinguishing Direct Costs and Overhead
Costs
While fixed an variable costs differ concerning their respective reagility to
changes in output, the difference between Direct Costs an Overhead Cost
refer to the decision why costs accrue and the posibility to allocate costs to
an object depending on causality:
Direct Costs:
are unit costs which would not have occured, if the object would not have
been produced or a department would not exist. Direct cost are or will be
caused by the decision to, for example, purchase an Authors´ right, print a
book, set up an office in Alexandria. Without that decision the cost would not
have occured or will not be occuring.
All other cost are overhead costs (concerning the unit looked upon). So with
the change of perspective (looking upon different items) different costs may
be allocated.
Al-Qahira, Dec. 2 –Dec. 5 2008
7. Direct Costs: The principle of Causation
Direct cost are costs which directly are or will be
caused by a unit looked upon respectively.
Principle of causation
Examples of direct costs and overhead costs:
Personell costs: are no direct costs to the product, but they are
direct costs to the decision to set up a new department.
Authors guarantee fee: is no direct cost postion to the pocket
book, if there is also a hardcover to be published. Is direct costs of
the decision process to purchase it
124
8. Overhead costs
Overhead costs may not be allocated directly to a
product, department, sales person, customer, because
they occure not only for this unit.
Examples: insurances (if not for a specific event),
electricity, salary of CEO (as long as not for the decision
to set up a new plant and employ a new CEO; in this
case his salary would be direct costs of the decision, to
set up this plant).
125
9. Cost Centre Accounting
Cost centres are departments of a Company. They are
units with different functions, and usually located in
different rooms, in which costs occur or may be allocated
to.
Cost Centre Accounting is to give transparency to how
and where costs occur and a means to transfer costresponsibility to the chief of specific departments or cost
centres.
Cost Centre Accounting is an overhead accounting
Al-Qahira, Dec. 2 –Dec. 5 2008
9. Cost Centre Accounting (CCA)
CC
CEO
CC
Purchase
CC
Production
CC
Administration
CC
Sales
CC
Sales
personell
CRM
CC
Marketing
CC
Distribution
CC
Offer-handling
Al-Qahira, Dec. 2 –Dec. 5 2008
CC
Billing/Invoices
10. Contribution Margin Accounting CMA
In a CMA only a part of the costs are considered while calculating a price,
i.e. the direct part of total costs. Costs independent of the product or is
sales efforts (fixed costs or overhead) stay out of consideration. The
(positive) difference between price and direct cost is called contribution
margin. This margin contributes to cover the indirect costs and to reach a
profit. CM needs to reach a certain percentage of sales to also cover
indirect costs and also take care of a profit, too.
cm = p -- cd
while
cm = contribution margin per unit
p = netprice to be acchieved
cd = direct costs (costs per unit)
Al-Qahira, Dec. 2 –Dec. 5 2008
10. The contribution margin: an example
in %
Revenues per Unit
- cost dependent on revenues
commision to sales personell
licences to the author
freight/ logistics
printing costs per unit
Marketing expense (give aways)
total direct costs
contribution Margin
199,00
100,0
19,90
30,00
21,90
40,00
9,00
120,80
78,20
10,0
15,1
11,0
20,1
4,5
60,7
39,3
With this contribution overhead and profits need to be finananced
129
11. The Break-Even-Analysys
Revenue
p=price, C=Total costs
Break-Even-Punkt
fixe costs Cf
Area of profit
Area of loss
Total costs
variable Cost Cv
Output X
Profit = cm • X - Cf
oder Profit = (p-Cv) • X - Cf
0 = cm • X* - Cf or 0 = (p-Cv) • X* - Cf
Cf
X* =
(p -Cv)
= Break even quantity
Al-Qahira, Dec. 2 –Dec. 5 2008
12. Example of a Permanent ex post calculation
by means of contribution margin: calculation
Contribution Margin Calculation
Titles
1
2
3
Sales No.
Price per Cpy
4
5
6
variable Costs
Fixed costs Break-EvenCM per Cpy
per Cpy
per title
quantity
7
8
9
10
Revenues
variable Costs
CM 1
CM 2
Grisham
120
9,95
0,60
9,35
100,00
11
1194,00
72,00
1.122,00
1.022,00
Parmuk
80
14,90
4,10
10,80
120,00
11
1192,00
328,00
864,00
744,00
Brown
220
3,20
1,90
1,30
150,00
115
704,00
418,00
286,00
136,00
Follett
150
4,90
0,80
4,10
60,00
15
735,00
120,00
615,00
555,00
Patterson
250
7,90
1,20
6,70
230,00
34
1975,00
300,00
1.675,00
1.445,00
King
80
2,95
2,90
0,05
110,00
2200
236,00
232,00
4,00
-106,00
Perry
110
8,90
2,10
6,80
100,00
15
979,00
231,00
748,00
648,00
Meade
160
4,50
1,90
2,60
150,00
58
720,00
304,00
416,00
266,00
131
12. Example of a Permanent ex post calculation
by means of contribution margin: Graphics
2500,00
2000,00
1500,00
1000,00
500,00
0,00
Grisham
Parmuk
Brown
Follett
Patterson
King
Perry
Meade
-500,00
Revenues
CM 1
CM 2
132
12. Example of a Permanent ex post calculation
by means of contribution margin: real case
T itle
Nr
Ca te g o rie T itle
100613 Architektur
T itle 1
Familie und Freizeit
T itle 120
Familie und Freizeit
T itle 154
Film und Fernsehen
T itle 179
Film und Fernsehen
T itle 198
Geschenk
T itle 199
Geschenk
T itle 213
Gesundheit T itle 214
Gesundheit T itle 296
Glas
T itle 297
Glas
T itle 308
Holz
T itle 309
Holz
T itle 336
Holz
T itle 337
K u Gestalt T itle 338
K u Gestalt T itle 372
K u Gestalt T itle 392
Katalog
T itle 393
Katalog
T itle 467
Körper u.Geist
T itle 470
Kreative Freizeit
T itle 471
Kreative Freizeit
T itle 550
Kreatives Gestalten
T itle 591
Kunst
T itle 592
Malen und Zeichnen
T itle 740
Meditation
T itle 741
Meditation
T itle 762
Natur
T itle 882
Papier
T itle 894
Papier
T itle 895
Ratgeber Familie
T itle 896
Spiritualität T itle 1046
T extiles Gestalten
T itle 1047
T extiles Gestalten
T itle 1048
T ibetischer Buddh.
T itle 1150
Weisheit
T itle 1151
Zeitgeschichte
T itle 1171
Zeitgeschichte
T itle 1173
Zen
T itle 1191
Zen
T itle 1193
P rice
19,90
19,90
14,90
58,00
39,90
24,00
25,00
29,90
3,85
25,00
10,28
19,90
78,00
19,90
29,90
38,00
38,00
19,90
2,20
49,90
2,50
12,90
5,97
68,00
24,90
24,00
44,00
490,00
29,90
19,90
24,90
25,00
7,95
19,90
49,90
28,00
78,00
48,00
29,90
78,00
Co st
of
S a le s
R e ve M a t./ N o .
nue s in
R e turns
p Cp y Cp ie s
2007
in €
3,93
1.583
8.784
-1.009
3,07
2.469
13.328
-876
2,21
3.182
12.110
-53
7,72
102
1.575
-182
6,00
3.007
26.667
-264
5,52
84
910
-399
5,00
3.650
22.167
-328
3,85
2.500
20.822
-1.610
2,00
12.643
24.887
0
26,68
15
127
-30
5,71
2.000
10.512
0
5,41
827
4.271
-60
11,03
1.599
24.499
-312
3,66
187
681
0
8,45
0
16
-75
7,11
595
6.191
-61
2,68
252
2.519
-62
5,83
261
1.308
0
0
11.628
9.417
0
7,35
3.225
41.094
-2.128
1,16
-52
2
-139
2,17
766
2.479
-18
5,07
10.143
30.961
0
16,55
30
536
0
4,30
3.356
21.075
-93
3,80
63
483
-94
5,33
3.816
41.437
-746
0,00
8
917
0
7,90
984
8.772
-943
5,55
2.596
13.073
-72
1,83
276
1.911
-289
5,00
1.609
9.987
-77
6,29
5.404
4.795
-453
5,61
341
2.172
-364
6,00
376
4.615
-17
3,50
88
715
-104
7,71
47
2.703
-1.982
5,23
-73
692
-1.645
3,02
1.497
10.530
-372
14,60
423
8.490
-181
R e ve nue s
Co st o f
V e ränd . p ro co ntrion
a fte r
D isma te ria l W B
viso ns to b utio n
Gua ra nS to ck
re turns
co unt in to ta l
Be sta nd a utho rs
(D B)
te e re st in %
cp ie s
7.775
51,7
6.221
-3.252
1.420
4.314
0
28,37
4.116
12.452
53,0
7.687
2.917
909
18.674
0
76,68
2.247
12.057
53,2
7.032
-3.102
1.752
11.696
0
49,60
7.050
1.393
49,3
795
237
0
2.166
0
79,51
2.061
26.404
46,1
18.042
0
8.551
25.048
0
48,50
1.872
511
53,0
508
-292
88
112
0
11,21
354
21.839
50,1
18.250
0
5.817
18.646
984
43,65
2.390
19.212
53,8
9.625
-565
4.849
22.536
0
59,98
3.285
24.887
107,0
25.286
0
0
23.390
0
48,05
0
97
54,0
454
-74
0
-338
0 #####
94
10.512
107,0
11.420
0
0
9.140
0
44,46
0
4.212
53,6
4.474
843
916
3.690
0
44,80
741
24.187
40,6
17.637
0
0
29.669
5.000
62,72
1.394
681
38,3
684
-5.675
156
-5.183
0 #####
3.153
-58
837
0
0
-950
0 836,18
2.318
6.130
56,7
4.230
0
0
7.758
0
64,71
52
2.457
53,7
675
0
528
3.603
0
74,96
3.066
1.308
52,7
2.454
1.238
0
1.342
0
52,45
429
9.417
393,7
0
0
0
94.119
0 100,00
0
38.966
50,7
23.704
0
11.470
41.037
0
53,85
492
-136
219,5
0
0
0
-267
0 100,00
0
2.461
52,1
1.662
-6.084
299
-3.233
1.201 -67,17
6.337
30.961
107,0
51.425
0
0
9.129
0
15,08
0
536
55,0
993
611
0
667
0
63,61
637
20.982
52,5
14.431
-1.978
2.969
21.660
31
52,78
4.599
389
53,8
239
0
141
380
0
49,97
54
40.691
50,7
20.339
-2.088
14.919
42.239
0
53,07
3.939
917
49,0
0
-366
0
1.428
0
79,59
0
7.829
55,7
7.774
-21.293
1.067
-14.822
3.800 -96,79
6.455
13.000
52,7
14.408
-1.901
0
9.117
0
35,86
3.457
1.622
49,4
505
1.323
0
3.991
0 125,76
2.645
9.911
51,6
8.045
-4.477
2.565
4.297
0
22,17
4.477
4.342
21,1
34.293
24.153
13
-1.661
0 -19,56
0
1.807
55,7
1.919
774
375
2.016
0
57,02
1.673
4.598
51,3
2.256
0
0
6.737
0
74,91
73
611
51,9
333
67
225
703
0
58,87
241
721
41,2
625
34
144
676
9.830
47,91
1.727
-952
56,9
-335
-47
-273
-1.302
40.456
69,92
3.989
10.159
47,5
4.521
-1.392
2.283
11.672
0
58,75
2.117
8.309
52,7
6.176
0
1.522
8.554
0
52,63
97
133
14. How to keep your stock under control
No
3000
3001
500073
3002
500075
500074
3003
500076
500075
3004
500077
500076
3005
500078
500077
3006
500079
500078
3007
500080
500079
publ.
Comp.
xxy
xxy
xxy
xxy
xxy
xxy
xxy
xxy
xxy
xxy
xxy
xxy
xxy
xxy
xxy
xxy
xxy
xxy
xxy
xxy
xxy
Dat of app.
19951010
19950503
19950510
19950904
19951010
19950803
19960328
19960328
19960328
19960328
19980225
19971020
19960228
19960228
19980205
19960328
19960910
19970318
19960910
19970820
19960709
Titel
Title
Title
Title
Title
Title
Title
Title
Title
Title
Title
Title
Title
Title
Title
Title
Title
Title
Title
Title
Title
Title
Price
34,00
28,00
68,00
48,00
29,00
38,00
34,00
39,90
49,90
29,90
36,00
29,90
28,00
28,00
28,00
39,90
39,90
48,00
29,90
24,00
39,90
Mat.
Before
depr.
11,38
3,50
36,41
10,39
4,74
8,30
5,24
7,61
9,56
6,61
4,25
2,95
4,13
3,69
2,39
7,09
7,94
8,02
5,85
5,52
4,90
R
Mat.
E
Net
Cost
Sales Return
Reaches
Sales 2005 M
Sales On Stock
after
2006 s 2006
until
I
2006
dep.
L
3,60
115
56
18
38
1.345
Jun 29
1,21
174
39
16
22
541
Mrz 23
11,87
57
4
1
-2
520 ewig
0,94
330
126
4
120
1.347
Mai 15
2,29
227
73
1
67
160
Mrz 11
4,04
255
84
2
78
917 Sep 15
2,72
61
62
3
59
2.077
Mai 29
4,76
302
138
13
124
1.030 Sep 13
7,17
482
230
3
221
40
Jan 09
4,03
531
200
21
177
3.365 Dez 19
4,25
971
154
22
131
1.103 Sep 13
2,21
1.883
929
20
905
830
Okt 09
3,10
452
146
13
132
610
Jun 13
2,77
635
263
50
207
213 Nov 09
2,39
3.383
1.638
22 1.584
4.063
Mai 11
5,32
336
200
1
198
569 Sep 11
3,29
179
117
7
110
1.704 Nov 17
5,48
11
52
12
39
2.414 Dez 44
2,10
154
99
8
90
1.681 Sep 19
4,14
495
295
4
255
1.650 Aug 12
0,95
-11
29
5
22
4.248
Mai 21
134
14.1 Visualizing the relative importance of
programme segments: revenues Contributions
absolutely and by %
R e v e n u e p e r P r o g r a m m e se g m e n t
610
148
Segment 17
1. 380
1. 228
Segment 15
631
662
Segment 13
468
464
Segment 11
1. 224
644
Segment 9
879
808
Segment 7
277
73
Segment 5
844
1. 394
Segment 3
298
209
Segment 1
0
200
400
600
800
1. 000
1. 200
1. 400
135
14.2 Visualizing importance of Segments
because of their contributions in €
C ont r i but i on pe r S e gm e nt i n T- €
235
50
Segment 17
477
617
Segment 15
223
252
Segment 13
205
171
Segment 11
710
350
Segment 9
437
429
Segment 7
99
44
Segment 5
260
190
Segment 3
92
83
Segment 1
0
100
200
300
400
500
600
700
800
136
14.3 Visualizing importance of Segments
because of their contributions in %
C ont r i but i on pe r S e gme nt i n % of R e v e nue s
38, 5
Segment 17
33, 7
34, 6
Segment 15
50, 2
35, 3
Segment 13
38, 1
43, 9
Segment 11
36, 9
58, 0
54, 4
Segment 9
49, 7
53, 1
Segment 7
35, 6
60, 2
Segment 5
30, 9
13, 6
Segment 3
31, 0
39, 6
Segment 1
0, 0
10, 0
20, 0
30, 0
40, 0
50, 0
60, 0
70, 0
137
15. Excercises

Contribution Margin for Decision Making
purposes:
Discount 50 %
 Distribution costs 8 %
 Advertising Marketing 10 %
Please Calculate if to purchase an Author´s
right according to the following handout

138
16. Scenarios to Precalculation
Author- s productio Author´s Price per No. of returns in Printing
Scenario guarantee n fee provision book cps. %
cost Comment
1 10.000,00 3.000,00 10% 15,00 20.000 10% 5,00
2 10.000,00 3.000,00 10% 20,00 15.000 10% 6,00
3 10.000,00 3.000,00 10% 25,00 12.000 10% 7,00
4 10.000,00 3.000,00 10% 30,00 9.000 10% 8,00 The Contract with the Author has already been signed
139
X. Planning
1. What needs to planned?


Each year about a quarter before the end of the current year, planning
process for the next fiscal year and the 2 trend years to follow starts
Elements of planning are for example (as to be seen from the p&l-account):





all books: frontlist and backlist: hardcover, softcover, audio books, e-books in
terms of prices and quantitities as well as licences to be sold
Budgets for authors´ rigths to be purchased
Budgets for investments in computers, cars, furniture etc.
Overhead costs like salaries, additional personal (or also reductions) rents for
rooms, energy, journies, fairs to be attended,
Cash flow in order to identify cash to be set free or money needed from banks or
owners and interest to be paid to banks or owners.
The best way to plan is: bottom up (and not top down), i.e. to collect
product sales and costs and see what comes out and to adjust for
deficits by deciding on reducing costs or raising sales
140
2. Reasons for planning

Reasons for planning are:







Anticipate future developments to act pro- actively
Deligate (cost centre-) responsibilities to heads of departments
Arrange for new activities like setting up a new book programme line
Realize what budgets are available for different goals
Banks and owners need a perspective on what is up
with their money (Ratings as to „Basel 2“ in Europe are forcing banks to look at
plans)
Decide on changes in the companies structure.
To set up good plans you need a strategy derived from your
vision: What is my enterprise to look like in 5 or 10 years?
What strategic goals must be reached to achieve this vision?
How are goals to be realized within individual fiscal year´s
plans?
141
Exercise: Summary or I to X
I
II
III
IV
V
VI
VII
VIII
IX
X.
What you have learned so far and what is still to come
Economical Basics
Basics of Organizational Theory
Integrated Publishing Information System (IPIS): Connecting
Information and Organization
Organizational Management Principles
Financial Reporting for Corporate Governance Purposes
Financials and the Balance Sheet
Figures and Ratios of Profitability
Internal Accounting is Cost Accounting
Planning
142