How do ratios affect the business?

1. Liquidity

Liquid capital: is current assets excluding stock.
Liquid capital ratio(Acid test ratio): liquid capital/current liabilities

The liquid capital ratio measures: liquid assets in relation to current liabilities the amount of liquid assets available to pay the debts of the business.

If the acid test ratio is increasing, this could imply that the business will find it easier to pay its debts, but that might have too many resources tied up as current assets or liquid capital. If the ratio is decreasing, this could imply that the business will find it more difficult to pay its debts, but that might have reduced the resource tied up current assets or liquid capital to more efficient level.



2.Gearing

It is fixed-return financing in relation to all sources of finance, the ratio is expressed as a percentage.

Formula: Fixed return financing/All sources of finance

The gearing ratio measures:
how a company if financed
finance on which there is a fixed return compared to all of a company's finance

If the percentage is above 50%, this tells that the company is high-geared, which means it has high amounts of fixed-return financing in relation to all financing, and it is able to pay interest/dividends on the fixed-return financing reasonably easier if the company is doing well in terms of profits. However, the business may have difficult to borrow more, because it already has a relatively high amount of fixed-return finance and it's hard to pay interest/dividends if the profits are low.

If the percentage is below 50%, the company is low geared, so it has low amounts of fixed-return financing in relation to all financing and the business may find easier to borrow additional funds.


3. Debtors collection period: Debtors/sales times 365 days,

this is trade creditors in relation to credit purchases.

Debtors collection period measures how many days on average a credit customer takes to pay.

If it's increasing, that means the debtors are taking longer to pay then previously. There will be a weakness because it could imply that credit control is not being as carefully managed as previously and this could lead to an increase in bad debts. However, if previously credit control was too tight, and the change has resulted in a greater volume of credit sales.

If it's decreasing, that means the credit control is being better managed and this could reduce bad debts. But, if previously credit control is too tight, the change may result in a decline in credit sales.


4. Credit collection period: credit/sales times 365 days,

This measures how many days are taken on average to pay for credit purchases.

If the credit collection period is increasing, this tells you hat a business is taking longer to pay its creditors than previously. The business is exceeding the credit period allowed by suppliers and as a result suppliers may discontinue to offer credit facilities. But the cash flow will be improved.

If it is decreasing, that means the credits control is being better managed and that difficulties with supplies over exceeding credit limits will no longer happen. However, the business is now paying suppliers earlier than necessary, resulting in negative impact on cash flow.

( We have to always remember, if the creditor payment period is shorter than the debtor collection period this will have a negative impact on cash flow)

Dilemma 7 : The liar

Ok, the story is about the white lie.

Zjamel has a boyfriend, called Bernard, and he is having an affair with Ethel ( A married woman). Zjamel asks him:"Are you two having an affair?", Bernard said:" Of course not, darling," and gives her a big kiss. Zjamel's hearer.t picks up, and she feels much better, and in a few months Bernard and Ethel have got bored of the affair and no one ever thinks about the matter again. The questions is: Did Bernard do the right thing?

Well, in my opinion, as much as I hate being lied to, I don’t think today’s society could survive without lies, I totally agree and believe that "lying is a necesary of life." The reason for Bernard lied to Zjamel is that he doesn't want to upset her, even through he dosen't like lying either. Bernard just wants to get over, either he is trying to get past this difficult situation with little hardship to himself, or he is trying to get things to go his way. Maybe he couldn't bare to tell Zjamel about the truth because he knew it would crush them . Maybe you couldn't bare to tell someone you care about the truth because you knew it would crush them (the person telling the lie doesn't have to face the difficult task of hurting the person they care about).

If you are the person on the receiving end of the lie, maybe it’s easy to say, "I’d rather you have told me the truth." The truth of the matter is that the person on the giving end of the lie doesn’t have the constitution to tell you that truth and deal with the consequences of that truth. However, someone close to me or someone I deeply trusted lying to me would really disappoint me. If I can’t trust you, if I can’t believe what you say, how I can I be around you? I don't want myself to be too suspicious. But, how to stop people lying and how can the people who receive lies accept the truth?

solution 7:End Britain Oil Addiction

The problem of oil is being more and more discussed. As a limited resource, oil is now becoming exhausted, and the price of oil is absolutely becomes more and more expensive at this moment. Also, many serious conflicts happen because of the oil dependency, especially in the Middle East. We konw how important the oil is to every single person.

I saw a sentence from the article said:" If you can run onw coutry without oil, you can run the world without oil. If you can do it with cae technologies, it could happen in 15 years." I agree with idea because our technology skills are improved quite a lot and you can't imagine how fast the speed of that imprvement. So, it is very possible to have cars which don't need oil in few years later. That means people don't need to spend so much money on oil, and the cars whithout oil will be sold like hot cakes! That also means a big number of profit! The pollution is also a very bad effect on society, such as global warming, and many people now are tring to figure out the best subtitude of oil, like electric-cars.

The UK is a big industrial coutry, it needs oil every second, it is impossible to stop it using oil, and to reduce the demand of oil must be difficult and it will be a huge cost. Tax may be higher and citizen's welfare may be suffered because the UK government is investing to reducing the demand of oil.

However, it is good to find out the substitudes to replay oil, no one dosen't want to live in a beautiful and green environment. But we should pay the cost of pollution, those troubles we meet while reducing the oil addiction are the cost.

Solution 6:Manage from the bottom up

Good management structure is very important to the business success. Bottom-up management turns the traditional organization model upside down, it challenges the way of management interacting with employees traditionally.

The young and ambitious manager is motivated by power, reponsibility, and prestige, he is able to accomplish his achievements. Accordong to Herzberg's motivation theory, to improve in recognition, responsibility, work itself, achievement and etc these areas will lead to increase in motivation. Bottom-up management is quite suitable for companies at this moment, it invloves job enrichment and job enpowerment, which motivates staff and also increases productivity,

Usually, the employees' direct manager is the one that has huge influence in measuring the performance of employees. I think every employee can provide strengths for the managers to learn and become better in management. Though there are few drawbacks with this approach, in the long run, the “bottom up management” is a better way to improve manager accountability.

For Bottom Up Management, the biggest disadvantage i think is that the manager is not a subscriber and out of ideas. And the biggest advantage is that he has a total understanding of the whole structure of the company. and the manager will always have the respect of the people below, and also he will have a better understanding of the rick factors in running a business.

Also, i think many banks in the UK should start the bottom-up management, especially those having so many troubles at this time.

Report: How Can EF Increase Profit

EF Education First is the world’s largest private education company, with a group of fifteen subsidiaries and non-profit organizations centered around language learning, educational travel, cultural exchange and academic programs. EF has over 29,000 employees, teachers and volunteers, with offices and schools in over 50 countries.

How does this company increase its profit?


Advertising


EF has a definitely perfect website, which introduces us how wonderful the courses they have, how great the teachers they have, how good the facilities they have, how successful the students have and etc.
EF schools are located around the world, the most of student who choose EF school are preparing to study abroad, and the schools are far away from them, so, the website must be a very good channel for them to know EF schools. Therefore, website is very important for EF company, they have to make the website perfect that make viewers deeply the school is really like that.
They put videos, a lot of pictures of students' life and the beatiful scenario outside EF, aslo they have wrote somethinf like guarantee of success, for example, "100% of our successfully graduating students have gained entry into one of our 150 partner universities, or won palces at anotheer top-ranked university" and "The Times recently ranked the UK top 100 universities. Of those universities listed in the top 30, our students have gone on to study at all of them! More than 50% of last year's A-Level Programme graduates had offers from the top 10 universities including Oxford and Cambridge." This kind of information extremely attracts forein students and I think if we put "10 EF students go to Oxford Univercity", we will have 100 more new students this year ! :)



Staff Training


The Agent staff plays a very important role. No different with insurance agent, the EF agent should have quite wonderful salesmanship. Especially they have to perfome very good when parents and students come to ask about the information. Because sometimes they are the only bridge between the parents and the school, their behavior may directly affect the parents' decision.



Cafeteria


Every student must eat (although some of them are on diet ^^), cafeteria beings considerable profits, and the price is getting more and more expensive now, the number of students who buy things in the cafeteria never reduce. Because cafeteria is located in the school, this is also a place where students get together to study or chat. The cafeteria may introduce more sorts of food and drinks, and provide something like daily special to attract more students. They also can hire part-time worker, such as students, becasue they are not highly paid.



Reputation


As i mentioned before, EF is the world’s largest private education company, it has huge popularity and experience. The reason for most of the parants send their children to EF school might be EF's good reputation, and most of the stdents are language students, so they normally don't find out the turth of EF. Although they are disapointed or regret their dicision, they just stay there for several weeks, not like me!

Solution 5: Revive the export economy.

Some people argued that the UK manufacturing has withered in the face of unsustainable housing and credit booms, so Britain will have to go back to producing manufactured goods. Also, there's an idea which is using "economic geography", the study of the processes that make economic activity cluster in particular locations. The British government could develop new industrial sectors to revive its economy and also to spot these innovation hotspots early on and facilitate their growth with an injection of investment.

Obviously, developing new industrial sectors might be a good idea to make a quantitative increase in exports, and it helps to increase trade. The unemployment problem might have been lightened and also the local economy will be improved by the developing of industrial. There are other ways to revive the export economy as well such as to reduce the transaction cost for exporters by doing away with multiple agencies to make the process as seamless as possible, to add the Goods & Services Tax and etc. These plan are seemed to be possible to implement and they will be quite effective.

However, the innovation hotspots also mean a big number of costs, and at this time the UK economy is not that flourish even some people think it is falling into recession. Maybe it is a little bit hard for the British government to supply the financing, and the innovation must be incubated, this is a big goal which needs the government spend a lot of money and time to achieve.

Solution 4: Reduce the national debt

From the article, I have known that the UK national deficit will rise to 14 per cent in 2010-the highest in the Western world. There's a lot of bad affects caused by increasing of the national debt, the interest rates on government bound will rise, which will make long-term inflation. That means those with pensions and saving suffer, unless the Government raises taxes and makes big cuts in public.

Well, first of all, the national debt is also known as government debt, which is money owed by any level of government, otherwise, it is an indirect debt of the taxpayers. National debt plays a very important role in the development of economy and society. The UK government need the money to support its military forces and the development of infrastructure and public facilities. Also, the goverment needs enough number to develop the education career, health care, and welfare fund.

Reducing the national debt will make the government to raise taxes and make a big cut in spending, that means citizen's welfare might be suffered. Anyway, there are other ways to reduce debtors such as reduce the wastings of spending, so it is important for government to manage spending correctly. Reducing national debt may help the UK economy to advoid a long-term inflation and also reduce the risk of recession.

Solution 3: Reinvent business with digital economics

This topic is discussing the how the model for business to change with digital economics. Chris Anderson is a big-idea man, he argued that the near-zero marginal costs of digital distribution have created a new marketplace where free pricing is practically a force of economic gravity, and every industry is either going to have to become free or compete with free in the future.

Well, Internet is a huge advertising medium, you can virtually sit in middle of nowhere and connect with people across the globe, its quite fast and efficient with low cost. It's much cheaper than advertising on tv plus you will be advertising to million even billions of people. So, this is a very easy way of advertising for many companies plus the advertisement could also become interactive making it more interesting. when you purchase a product on Internet its usually cheaper because usually the store selling the product which allows direct contact with the consumer.

However, there are always problems such as items that were sold were often not in stock, even when stock came in there was inadequate warehouse space and insufficient staffing. When goods went to customers they were often sent too late, or were wrong items, were broken on arrival or had vital parts missing,etc. The goods were often returned, but there was no solid system for handling returns.

Anyway, I think this sentence that Chris Anderson said is really good---"The old model for business was 'make something people will pay for'. The new model is something people will want and something they'll pay for." Maybe Internet is a good place for business to change into a new model.

Extra work ! Is it possible to use scientific approach effectively in a subject that deals with human being?

Really difficult question for me, coz i don do economic and socialogy :) but i still have to try !!

Economics is the study of man and his activities in relation to his environment. The study of ends and scarce means which studies alternative uses.

Fom the little i know, economics is a social science because it studies human environment, there is no specific(physical) laboratory. if we want to test anything concerning with economics, then we survey and taking primary and secondary research and analyse the things and it is carried out on the society. thus, society is the laboratory for any test of the subjects concerning with economics.

Most subjects in the sciences have a constant and specific way of carrying out their activities. For instance, to test the pH level of a matter requires a particular method, unlike in economics where the issue of unemployment solved in China differs from the way it will be addressed in the UK. Economics deals with the study of the environment in different ways. Therefor, i think it is possible to use scientific approach effectivelyin a subject that deals with human beings, but it must be a tough.

Report: Hurbank plc

I'm now an independent management consultant, to write a report to the analyse the main arguments for and against the relocation.

For:
By looking at the Human resource and operations data for Cellton factory and the information on possible Chinese relocation. Above 80% employees are trade union membership and there's non in China, that means Chinese workers are unprotected and then Hurbank plc can make worker on overtime, and the unemployment in the region of the new factory in China is 14%, which is high. Also, the average annual pay within Chinese region is very low, which is 2,000 pounds pa and the average proposed annual pay for staff in Chinese factory is 16,000 lower than the average proposed annual pay for staff in the UK factory. This is a big advantage to Hurbank plc to reduce the cost for long views. Also Hurbank plc has to pay the net present value of the investment for the first five years about 5.7 million pounds, which is a large number. By looking at the break even, it is faster to meet the break-even point if the factories are relocated in China because the lower variable cost and lower fix costs, that means the risk of the loss has been reduced. We also can see, at the same volume (700), the profit will be higher, and there is 25% more capacity, so that much more profit!

Against:
By looking at the Human resource and operations data for Cellton factory and the information on possible Chinese relocation. There are absolutely the estimated costs of relocating and setting up in China, and this will cost a lot about 22 million pounds. This big cost may case cash flow problems and the company may be forced to increase their bank loans or bank overdraft. Also, the percentage of shirts returned by customers will be increased a lot from 0.01% to 1 %, this means the quality of the shirts are being bad and this will affect the company's reputation straightly, otherwise, the Hurbank plc has to introduce new machine and train the Chinese workers to improve the quality, and this increases the cost. The lead time is being longer as well because China as far away from the UK, and the number of redundancies in the UK is 350, and each person cost the company 100 pounds. Also, there's a forecasted change in the value of pound relative to Chinese currency, and it is -18%, which is not good to the Hurbank plc.

In summarise, I don't think to move all three factories to China is a good idea, because the disadvantages are more than the advantages above!

Case Study: Sainsbury plc

I'm supposed to do the Q3 ^^

The question is : Assess the extent to which Sainsbury's plan for 2007-10 is likely to enable it to meet its corporate objectives.

Here's the plan for 2007-10

• Space growth--10% new space by March 2010.
• Development of grocery and non-food ranges.
• Costs--cost savings of 155 million pounds in 2007/2008, thereafter ongoing cot savings to offset half our operating cost inflation.
• Channel growth through online and convenience expansion.
• Profit--profit growth flowing through at a percentage rate in high single digits.
• Sales growth--total additional sales of 3.5 billion by March 2010.
• Cash flow neutral over 3 years.

I think the corporate objective of 10% new space by March 2010 is likely to be met. First of all, the company must do a lot of marketing researches and analyse the data they've got after researching. They have to evaluate the place where they decide to open the new stores, including the population and accessibility, because these are very important factors which affect the number of customers straightly to a supermarket. Also, the situation of competitors are virtual to Sainsbury plc, they can't open a new store which too near the Tesco. And the company has to consider whether the staff think much of new store or not as well, that to motivate staff because staff are a part of this project. After marketing research, Sainsbury plc should set a complete and correct, proper and effective marketing strategy to make the space growth successfully, such as the way of advising their new stores.

However, 10% new stores is a big number and it is tough to achieve in only three years, that means a big number of cost and it may causes further problems for Sainsbury plc such as the cash flow problem and etc. Also, after opening the new stores, Sainsbury will have a range of troubles to solve like if some new stores can't get enough profit as they expected.

In summarise, I think it is possible to have 10% new space in three years by Sainsbury plc, although this is hard to achieve this goal, but Sainsbury has good reputation and popularity, also, their profit was doubles from 2005 to 2007, they have the ability to make the goal achievable.

Solution 2: meet the developing world

The reccession is being more and more discussed, some people think that recessions provide and aboudance of opportunities. However, "recessions" is a negative word, so does" The worse the crisis, the greater the opportunity" really make sense?

Receesion means a general slowdown in economic activity over a long period of timeGDP, employment, investment spending, capacity utilization, household incomes and business profits all fall during recessions. So, most business people think it is not good to start a business in a reccesion.

There are some examples have been given from this article to show us how to catch the opportunities in a reccesion, after I summarised, i think the first thing that the business peopole have to do, is to think of what needs may emerge. For example, many unemployed people need assistance to help them to find new jobs. This is a good time to consider starting an employment agency, a life coaching service, a job skills training centre. Aslo, the people who had started a businnes already could consider what alternative options they have if they go out of business.

Anyway, opportunities are limited, business people should have full of passion and innovated ideas to survive in a reccetion.

Balance sheet analysis (Lapdesk)

Report for Hebden Design ltd

Balance sheet is a list of the resource that a business owns and the amounts it owes to others.
By looking at the balance sheet of Hebden Design Ltd in 2008 and 2009, first of all, I see the shareholder's funds(net assets) goes down from -3,037 pounds to -4,674 pounds, this is absolutely not good to the company, the reason for this decrease might be the reduction of the profitability. So the value od business is getting less and it might cause to lose shareholders. However, the liquidity of this company has increased because the debtors increases, but it means that the risk of bad debts aslo increases. Also, the whole curent assets still decreases from 447 pounds to 419 pounds because of the reduction of stock, so the profitability still falls. This company is suffering from its profit, so they'd better to do something to increase their profit as soon as possible.

Survey of HONESTY

1. If there's a product that would help you to cheat in your examination successfully, would you buy it?

2. If that cheating product is too expensive to your income, would you still buy it?

3. A membership card provides discounts to the individual only, however, people sometimes leand their cardsto the others. Do you think whther it is dishonest or not?

4. Do you think whether it is honest to sell weapons at very low price or not?

5. Do you think whether there's a strong reationship between HONESTY and LEGALITY?

Please comment your answers, u ll really help me alot ! Thx ! ^^

Solution 1: Break up the banking system.

People debate about how long banks such as RBS and Lloyds should remain nationalised, and some people think that it will be sold off at a substantial profit to the taxpayer.

OK, every time I see"BANK" i think about the CREDIT CRUNCH. With the consumer credit and commercial real estate mortgage loan defaults increase, the financial system is suffering from a shock. That means banks don't have enough money, also, people decide to take their money from the banks, they don't dare to deposit their money into the banks.

Well, first i want to talk about the strengths of bank nationalisation. Under the governmental control, the advantages of creditors and depositors are being protected, the assets of the banks will be improved obviously, also it helps the financial markets to be stable.

However, we realize that to remake the banking system by the government must be a real ly tough progress, and how many operations which involved in the business will be damaged by the reorganisation during 10 years?