Accounting Scandal Essay -- essays research papers

I should be guilty of dissembling if I were not to refer to the economic difficulties which have affected Japan recently along with several other countries. I assume that these difficulties have come as a shock to people in Japan because of their contrast with the prolonged period of economic success which preceded them. But they show, as history has shown so often, that the enjoyment of steady uninterrupted growth, over the very long term, is beyond the capacity of nations. Every country, no matter how successful, seems bound to experience setbacks. The history of the changing wealth of nations is the subject for a different speech by a different speaker. But accounting has a part to play, an important part, because of its role in making markets work effectively. And this is very much the subject for this speech and this speaker. The Value of Accounting Standards Today, the central focus of accounting is surely the measurement of business performance. Over the last 200 years or so, the broad trend of economic development has been towards specialisation, large scale production, enabled by increasing domestic and international trade. Large scale production has depended on the growth of capital markets. Hence, although other purposes remain important, the modern focus of accounting has come to be to serve the capital markets, to make those markets work efficiently. This process is not finished in any country of the world, much less internationally. I want to emphasise the importance of this purpose of accounting. People who provide capital do so for a return and they wish to have reports of performance to help them decide how much to invest in particular businesses and on what terms. They wish performance to be reported in a manner which helps them to assess future prospects. Investors generally dislike risk. The higher they perceive the risk to be, the higher the return they seek for providing capital to a particular business. Perceived risk comes partly from economic fundamentals: from technologies, from demand factors and from competition. But it also comes from accounting. If accounting information is failing to meet the needs of investors, perhaps because it is perceived by them to be unreliable, the investors will feel more uncertainty in judging economic prospects than is warranted by the economic fundamentals. Investors will require to be compens... ...urrently experiencing a time of economic stress. I wonder whether people in Japan will think that this is the ideal time to accept international standards for cross border listings in Japan, whether they will think that acceptance of international standards would provide the clearest possible signal of Japan's determination to be in the mainstream of international accounting developments. I wonder whether people in Japan might think that this is the ideal time to undertake a review of all Japanese accounting rules to incorporate the best of international accounting so that, like Australia, Japan could say that compliance with national standards would produce compliance with international standards without the two sets of standards necessarily being identical. People might think that this would remove inhibitions for international investors in investing in Japanese companies and would enable Japanese companies to obtain their capital on the most favourable possible international t erms. People might think that everything possible would then have been done to ensure that accounting was playing its part in the economic recovery which your overseas visitors so warmly wish you to enjoy.

Brand’s Market Analysis Essay

However, other brands are engaging in more aggressive advertising and increasing brand awareness, bridging the gap of perceived difference between BRAND’S and their products, and offering buyers more choices, hence buyers have medium power. Supplier bargaining power BRAND’S ingredients are mainly chicken essence and a small proportion of caramel. Although these ingredients are relatively easy to procure, there is high regulation from authorities restricting the number of suppliers, because of the recent 2004 avian flu which prompted authorities to step in to tighten regulations on the quality of avian products2. Due to loyalty to ingredient supplier since 2004, and the fact that few suppliers are qualified and approved by authorities, BRAND’S is assured of the quality of its ingredients, but suppliers enjoy high bargaining power because of its quality assurance. Threat of new entrants There are high fixed costs due to production method and machinery, and seasonal demands during critical periods such as examinations, as well as market saturation and high existing brand equity with other industry competitors. This creates a high barrier of entry due to high start-up capital and high economies of scale. BRAND’S recent entry to the health supplement market, has heightened the threat of new entrants (e. g. InnerShine series3), as these products do not enjoy similar consumer loyalty and new entrants can imitate them. Despite extensive brand building, threat of entrants is overall medium. Threat of substitutes Substitutes of BRAND’S include mainstream health supplements, which may appeal to consumers who do not like the bitter taste of BRAND’S traditional products. In response, BRAND’S has diversified their product line to include tablets. Moreover, BRAND’S has always been active in research and recently discovered the link between consumer benefits to an active compound4 in its products. This is in contrast to its substitutes, especially western health supplements, who have prided themselves on a long history of research and the ability to back its products with scientific foundations. Despite this, threat of substitutes is medium as BRAND’S health supplements are relatively new. Industry competition In actuality, BRAND’S products have little difference with its competitors and there are fairly similar marketing target segments because BRAND’S competitors are able imitate its marketing strategy5. Growth in demand of such products as a result of increasing competitive environments has allowed competitors to capitalize on the high demand from a spectrum of consumers. As a result, BRAND’S direct competitors price their products lower than BRAND’S and appeal to price-sensitive consumers, thus leading to a relatively strong rivalry. BRAND’s recent foray into the mainstream health supplements market also exposed itself to great competition because of existing industry players, giving it an uphill task to gain market share. As a result, industry competition is relatively intense. In conclusion, strong brand equity empowers BRAND’S and reduces threats from buyers and new entrants. Overall competitive environment was medium high due to pressures from substitutes, suppliers and competitors which led CPL to adopt the strategies below. 2. Competitive Strategies adopted in 2009 and 2010 CPL primarily uses focus differentiation strategy, coupled with some elements of cost leadership strategy, during the period 2009 to 2010, which enabled it to survive the challenging environment and gear itself towards sustainable growth in the long run. Fierce industry competition during the period has led to CPL being active in its brand building strategy through various channels. Some of these include engaging brand amba ssadors, outreach on television media and organizing study camps. This brand management strategy has resulted in perceived uniqueness of their product, even though there are competitors with similar physical products. In a bid to convince consumers of its uniqueness, it has invested in research facilities to provide scientific backing to its products. The successful patent of its discovery will lend further credence to its advertising and products which will make it harder for its rivals to imitate its marketing strategy. Focus strategy is evident through marketing strategies targeted at students. Collaboration with schools and the organization of student events (e. . Sudoku competitions, summer camps) have enabled CPL to improve its outreach to students. This is in response to the increasingly competitive education systems in Singapore and China, where students will be inclined to take supplements that are deemed beneficial to the well-being of the mind. The global recession of 2009 and declining sales forced CPL to rethink a low cost strategy, in response to more price-sensitivity among consumers, and rising price of ingredients. This is illustrated in its continual capacity expansion, allowing it to enjoy future economies of scale. The increase in volume of production will allow it to spread its fixed costs over a larger quantity, reducing its average unit cost of production. Furthermore, investments in specialized technology6 for the manufacturing process will likely result in higher efficiency and lower average cost in the long run. Price negotiations to mitigate upward pressure7 in ingredient prices also help to keep unit costs low. In the event of future recessions, CPL will be able to respond and translate lower prices to consumers through promotions and offers. To conclude, even though BRANDS is not a price leader in the industry, its long term low cost strategy in bringing down its production cost, along with increased investments in brand building to promote product uniqueness, will allow it to reap increased profits in good times. Where times are bad, CPL can afford to lower selling prices and still make healthy profits. 2. 3 Top Three Business Risks and Counter-measures Risk 1: Declining market shares and strong competition Strong competition from existing competitors present a threat to BRAND’S standing in the market. BRAND’S has lost market shares in beauty oral aid products8 and Innershine products in countries such as Malaysia while competition in other countries remains intense. In response to the competition, CPL engaged in active advertising to improve brand image and increase outreach. Campaigns directed to improve sales of specific products are also held resulting in significant effect in capturing customer’s attention to BRAND’S products. Innovative ways to increase sales such as ‘cubic shop’ retailing, blogs and increasing of sales channels to cosmetic shops9 has helped to gain a competitive advantage and modernize their image. CPL has also carried out extensive research for BRAND’S to scientifically assure the benefits and safety consumption of their product which no other company had done so for this category of products hence winning over customer’s approval and loyalty. Risk 2: Decreasing sales due to the global economic recession The global economic recession has made a declining effect on the sales number for BRAND’S product. However CPL had manage to minimize the effects of the recession by investing heavily on research ;amp; development and capacity building allowing them to stay resilient in the face of the recession. Up to date technology to transform operations to be fully automated has allowed CPL to decrease cost of production and increase product output hence maximizing profits during the recession. The investment in increasing capacity includes construction of factories costing a total of 2. 45 billion baht10 and opening of Indonesia offices. This move coupled with aggressive marketing sales strategy aims to increase their presence in the market and improve sales in the short run while the construction of the factory aims to allow CPL to increase their competitiveness and secure a larger market share in the long run. Risk 3: Decrease consumer confidence in BRANDS products News reports of a recall of essence of chicken products in the United States spark1ed some controversy amongst consumers11. In addition, just as the business in the People’s Republic of China (PRC) was beginning their operations, food safety concerns caused by the melamine food scare12 significantly affected consumer sentiment. Above this, news of the import ban on BRANDS’ products spread worldwide, affecting the business segment. Fortunately, BRANDS subsequently stepped out to explain that the cause of the import ban was a result of compliance issues13. CPL also affirmed its commitment to quality assurance through various press releases to ease consumer sentiments14. 2. 4 Overview of Value Chain Activities We have identified the value chain activities that enable CPL to stay ahead of competitors, in particular, support activities such as research and development and human resource management provide BRANDS the extra edge in the industry and primary activities such as operations, advertising, brand building and service distinguish BRANDS from their rivals. CPL has affirmed its commitment to Research and Development by launching the BRANDS Health Science Centre and they have discovered the active compound in their health product which is believed to enhance mental performance. Work is still done to further understand how to maximize the uses of the compound for consumer benefits15. As a result, BRANDS product credibility in the industry will be improved with the backing of this scientific discovery. This discovery of this compound ‘Probeptigen’ will help to distinguish BRANDS from its rivals and increase customer loyalty. Finding ways of harnessing the active compound in different ways should be the next step that CPL works towards to, and will aid its differentiation strategy if new and innovative products can be released with its findings. Human resource management is identified as key to the organization16. This is important to the development of the next generation of leadership and talent retention and particularly relevant as a strong management team will be vital to steer the waves of future recessions. A highly efficient management team will create value for shareholders and maintain the pristine image of BRANDS products to consumers. Efforts are made to engage employees, develop leadership skills and align the right behaviors and values across the organization17. Further improvements can be made by providing quality training to service staffs with higher emphasis on after sales services. For operations, CPL has been actively expanding its manufacturing facilities, allowing them to better match its production capabilities with the growing demands. Increased output volume helps in its long-term low cost strategy by reducing average unit production costs. Enhanced manufacturing capabilities enable BRANDS to diversify and offer new products with special features. This allows CPL to serve various consumer needs and provide more product choices, which aid its differentiation strategy. Improvements to the manufacturing process are made through installation of latest technology to increase efficiency and reduce waste. CPL can improve its existing operations by developing new distribution channels to cope with higher output capabilities. This helps prevent bottlenecks in its supply chain. Advertising and brand building activities help to transform consumer mindsets, as well as contemporize product image. Conventionally viewed as traditional health products for medicinal purposes18, new branding strategies repositions BRAND’S with brain-enhancing functions. With these activities, BRANDS can increase the efficacy of its focus differentiation strategy. Increased industry competition led CPL to enhance the uniqueness of its products from its close competitors. Appealing to students and young adults via brand imaging strengthens its focus strategy. Improvements are made with research and patents to provide scientific foundations to its products. Further improvements can be by capitalizing on these scientific insights to explicitly educate consumers on the specific benefits of each product to achieve full effects of its brand building strategy. Service in the organization adds value to consumers through its customer relationship management (CRM) policies. In a saturated industry, close similarities with rivals can be mitigated with unique after sales services and quality consumer experiences. This helps BRANDS to connect with its consumers on a more personal level, and allow it to leverage on customer insights to better anticipate demands19. This is particularly important for BRANDS’s focus differentiation strategy as it reduces the time BRANDS takes to rectify product errors or push out new products by reconciling its supply side capabilities with the demand side factors such as change in consumer preferences. CRM initiatives are constantly being reviewed and improved in the organization by benchmarking its quality against service industry averages19. In addition, human resource management is important as such after sales services require quality labor inputs, which require constant retraining of employee. . 1 List of Financial Ratios Liquidity ;amp; Efficiency| 2008| 2009| 2010| Current Ratio| 1. 56| 1. 70| 1. 69| Quick Ratio| 1. 21| 1. 23| 1. 27| Cash Ratio| 0. 65| 0. 59| 0. 73| Assets Turnover| 1. 19| 1. 20| 1. 35| Fixed Assets Turnover| 5. 87| 4. 40| 4. 37| Inventory Turnover| 4. 59| 4. 07| 4. 60| Days to Sell| 79. 52| 89. 68| 79. 35| Receivables Turnover| 7. 81| 7. 37| 8. 35| Days to Collect| 46. 73| 49. 53| 43. 70| Profitability| 2008| 2009| 2010| Gross Profit Margin| 50. 24%| 49. 72%| 47. 93%| Net Profit Margin| 11. 35%| 11. 73%| 12. 09%| Return on Assets| 13. 8%| 14. 09%| 16. 29%| Return on Fixed Assets| 66. 63%| 51. 63%| 52. 81%| Return on Equity| 23. 66%| 24. 49%| 28. 06%| Earnings Per Share| 25. 72 cents| 26. 29 cents| 32. 68 cents| Solvency| 2008| 2009| 2010| Debt Ratio| 42. 64%| 42. 35%| 41. 56% | Times Interest Earned (TIE) Ratio| 19. 71| 30. 77| 49. 32| Selected business segments turnovers (in millions)| 2008| 2009| 2010| BRAND’S Liquids| 403. 7| 431. 0| 503. 7| Eu Yan Sang (EYS) Chicken Essence21| 6. 1| 6. 1| 8. 6| Woh Hup Sauces| 159. 3| 138. 3| 171. 0| 3. 2 Comments and Explanations of Financial Ratios Debt ratios fell between 2009 and 2010, despite similar amount of borrowings reported on the balance sheet. Total assets grew as a result of capacity expansion, investment gains and increased cash holdings. In particular TIE ratios fell because borrowing rates were lowered22 in a bid to stimulate the economy. The recovery of the economy posted a hike in turnover and profits, which led to a surge in TIE ratio. As part of the Group’s commitment to maximize shareholder wealth, ROE and EPS values rose. The decreasing debt ratios showed the Group’s emphasis on funding through internal growth and reduced reliance on external financing. This also indicates the Group’s attitude towards shareholder value creation, in which a long term approach is employed, without leveraging on higher debts to fund short-term growth which could run the risk of financial bankruptcy. Gross Profit Margin fell from 2009 to 2010. The Group experienced upward pressures in prices of commodities, such as raw bird’s nest, coffee and sugar during the period23. Despite the higher dollar amount of turnover in 2010, the price pressures impacted costs of sales which outstripped the growth in turnover. This led to lower Gross Profit Margin in 2010. However, Net Profit Margin rose slightly by 0. 36%. Though there were higher expenses incurred from increased investments in branding, research and development, growth in turnover managed to keep pace with this rise. The main reason for the slight increase in Net Profit Margin in 2010 was due to foreign exchange losses24 experienced in 2009, which arose as a result of the Group’s foreign currency purchases and acquisition of foreign businesses such as Toby’s Estate. Against the backdrop of the global recession, this translated to substantial foreign exchange losses, impacting Net Profit Margin in 2009. The Group’s liquidity position was very weak in 2009. Despite the similarity in current ratios between 2009 and 2010, the Group held substantially lesser cash during 2009, evident from its cash ratio. Both the inventory and receivables turnover ratio indicated that a large proportion of current assets were tied up in receivables and illiquid inventories. This was probably a result of lower consumer sentiment due to the effects of the financial crisis. Certain business segments, such as sauces and beverages25, suffered lower turnover. This caused inventory to pile up, and is illustrated in the huge spike in inventories in 2009. To encourage customer purchases, the Group probably extended credit to customers which resulted in higher proportion of credit sales experienced. Dividend pay-outs averaged 25 cents a share26 despite slowing growth. Moreover, investments in manufacturing, research and brand building continued amidst the downturn. As a result, the Group’s cash outflows outpaced inflows, which jeopardized its liquidity position of 2009. In 2010, liquidity position improved, as capacity expansion and brand building in the preceding years allowed it to capitalize on the recovering economy. Its CRM policy also allowed it to leverage on consumer feedback and enabled it to handle the surge in demand timely. Turnover for 2010 spiked as a result, which led to better operating cash inflows. The Group made heavy investments in fixed assets in 2009 and 2010, such as the launch manufacturing plants in Malaysia and Thailand, and building of offices in Indonesia. The fairly similar fixed asset ratios indicated that sales and profits were able to keep pace with these extensive investments, an indication of effective utilization of manufacturing resources. Despite this, there is definitely room for improvement, as higher investments should warrant a multiplier effect on sales in the long run, and lead to better fixed asset ratios in future. Comparisons of the turnover in business segments show that despite stagnation in EYS chicken essence in 2009, strong brand equity in BRAND’S products allowed appreciable growth in BRAND’S liquids. However, this figure is not wholly representative as within the category of BRAND’S liquids, relatively newer liquids such as BRAND’S InnerShine do face stiff competition into its market share. Growth in BRAND’S liquid is mainly attributed to the flagship product of chicken essence, highlighting the strong branding that BRAND’S traditional products enjoy. Moreover, chicken essence is neither the flagship product of EYS, which explains the relatively lower turnover figures. In the sauces industry, the general decrease in turnover in 2009 was probably due to decrease in number of people dining out and the perception that sauces were non-essentials during the 2009 recession27. Despite the turnaround growth in 2010, Woh Hup Sauces still faces stiff competition from close rivals28. In conclusion, we believe that CPL is well positioned to make further inroads into its different business segments with the recovery of the economy. With its competitive strategies, and coupled with a prudent management team, we believe CPL will be able to thrive in the competitive environment and improve its financial position in the future.

An Overview of Economic Stagflation in the 1970s

The term stagflation—an economic condition of both continuing inflation and stagnant business activity (i.e. recession), together with an increasing unemployment rate—described the new economic malaise in the 1970s pretty accurately. Stagflation in the 1970s Inflation seemed to feed on itself. People began to expect continued increases in the price of goods, so they bought more. This increased demand pushed up prices, leading to demands for higher wages, which pushed prices higher still in a continuing upward spiral. Labor contracts increasingly came to include automatic cost-of-living clauses, and the government began to peg some payments, such as those for Social Security, to the Consumer Price Index, the best-known gauge of inflation. While these practices helped workers and retirees cope with inflation, they perpetuated inflation. The governments ever-rising need for funds swelled the budget deficit and led to greater government borrowing, which in turn pushed up interest rates and increased costs for businesses and consumers even further. With energy costs and interest rates high, business investment languished and unemployment rose to uncomfortable levels. President Jimmy Carters Reaction In desperation, President Jimmy Carter (1977 to 1981) tried to combat economic weakness and unemployment by increasing government spending, and he established voluntary wage and price guidelines to control inflation. Both were largely unsuccessful. A perhaps more successful but less dramatic attack on inflation involved the deregulation of numerous industries, including airlines, trucking, and railroads. These industries had been tightly regulated, with the government controlling routes and fares. Support for deregulation continued beyond the Carter administration. In the 1980s, the government relaxed controls on bank interest rates and long-distance telephone service, and in the 1990s it moved to ease regulation of local telephone service. The War Against Inflation The most important element in the war against inflation was the Federal Reserve Board, which clamped down hard on the money supply beginning in 1979. By refusing to supply all the money an inflation-ravaged economy wanted, the Fed caused interest rates to rise. As a result, consumer spending and business borrowing slowed abruptly. The economy soon fell into a deep recession  rather than recovering from all aspects of the stagflation that had been present. Source This article is adapted from the book Outline of the U.S. Economy by Conte and Carr and has been adapted with permission from the U.S. Department of State.