...performance to the Board of Directors. The three companies traditionally measured their performance using the Profit figure, but MarineCorp’s parent company, the SURIA Group, recently adopted Value Based Management (VBM) and requires the use of Economic Earnings as a performance measure. This becomes a source of anxiety for the senior management of the three companies as their performance evaluation directly hinges on the measure to be adopted. Protagonist/Decision-maker The protagonist of this case is Hafiz Hashim, the Chief Financial Officer (CFO) of MarineCorp Sdn Bhd and its subsidiaries, Green Port Sdn Bhd and Sungai Emas Port Sdn Bhd. MarineCorp, and by extension its two subsidiaries, are all members of the SURIA Group of Companies. Hafiz strongly believes in measuring a company’s financial performance through the value it creates rather than merely reporting on the profit. The case takes place at the end of 2009. Performance Measurement Metrics Comparison NET PROFIT | ECONOMIC EARNINGS (EVA) | Suitable for companies with more intangible assets | Suitable for capital-intensive companies | Benefits the senior officers in MarineCorp and its subsidiaries due to profit-based performance evaluations | Benefits SURIA Group’s BoD (and shareholders in general) in pursuing VBM | Simpler to understand | A little bit more complex | Problems 1. Hafiz is currently in dilemma on whether using economic earnings or profits in reporting financial performance. 2. Hafiz’s calculations...
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...7 Economic Value Added (EVA) 7.1 What is EVA? • EVA ™ is a measure of performance similar to residual income, except the profit figure used is ECONOMIC profit and the capital employed figure used is ECONOMIC capital employed. This is because it is argued that the profit and capital employed figures quoted in the fillclncial statements do not give the true picture and that the accounting figures need to be adjusted to show the true underlying performance. • Th e bCl sic concept of EVA is that performance should be measured in terms of the value added during the period. It is a measure of performance that is directly linked to shareholder wealth. EVA calculation Net operating profit after tax (NOPAT) Less economic value of capital employed x WAee EVA Decision rule: accept the project if the EVA is positive. 7~ ~. VVh ~.t . !~..~.9..~~.r.~................................... 0 • • •••••••••• ••• • COlltrol'(lblePAT Add back non-cash items such as: 8ccollilting depreCiation n O fl-C Cls h expenses interest paid net of tax Add back items that add value such as: qoodwill 8mortisation development and advertising costs operating lease interest cost • ••• • •• • • • • •• ••••• • •• •• •••• • • • •• • x x X X x X X Deduct: econ o mic depreciation impairment to the value of goodwill amortisation of development and advertising costs =NOPAT (X) (X) (X) X •• ...
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...MA360 EXAM SOLUTIONS – 2011 SECTION A Question 1 (a) |Selling Price per|Year 1 Sales Units |Year 1 Year End Stock units |Year 2 Unit Sales |Sales Revenue Year 1 | |Unit (£) | | | |(£) | |20,000 |800,000 |400,000 |500,000 |(100,000) | |40,000 |1,600,000 |800,000 |500,000 |300,000 | |60,000 |2,400,000 |1,200,000 |500,000 |700,000 | |80,000 |3,200,000 |1,600,000 |500,000 |1,100,000 | |100,000 |4,000,000 |2,000,000 |500,000 |1,500,000 | (5 Profit calculations x 1 marks each = 5 marks) [5] Building Division |Output (Units) |Total Revenues |Var.Costs (£15/unit) |Transfer In Costs (£40 /m2) |Fixed Costs |Total Profit / (Loss)| |20,000 |2,200,000 |300,000 |800,000 |1,200,000 ...
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...Value Based Business Steering / Value Based Management Han Levink 2 maart 2004 1. 1.1 Inleiding Shareholder Value De focus van het management op het creëren van aandeelhouderswaarde heeft de afgelopen jaren in navolging van de Verenigde Staten ook in West Europa een sterke vlucht genomen. Een belangrijke oorzaak van deze toegenomen aandacht is de overnamegolf eind jaren tachtig van de vorige eeuw in de Verenigde Staten. Bedrijven die een zogenaamd positieve “value gap” lieten zien, waren een gewilde prooi voor de zogenaamde “Corporate Raiders”. De value gap kan gedefinieerd worden als het verschil tussen de waarde van de onderneming (indien deze waarde wordt nagestreefd vanuit het oogmerk om aandeelhouderswaarde te maximaliseren) en de huidige marktwaarde (Rappaport, 1998). De verdere globalisering in concurrentie en kapitaalmarkten, alsmede het toegenomen aandelenbezit onder particulieren in Nederland en de rest van West Europa, verklaart waarom deze aandacht voor aandeelhouderswaarde ook in West Europa sterk is toegenomen. In de jaren negentig van de vorige eeuw gingen steeds meer aandeelhouders van het management verlangen dat het bedrijf zou worden gestuurd op aandeelhouderswaarde. Deze druk werd nog versterkt door de toegenomen betrokkenheid van institutionele beleggers Bovendien is er reeds jarenlang sprake van aanzienlijke ontevredenheid met betrekking tot boekhoudkundige winst- en rendementsmaatstaven. De kritiek spitst zich met name toe op het feit dat ondernemingen...
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...RELEVANCE LOST (DISCUSSIE EN ONTWIKKELINGEN) Relevance lost is a title of the book written by Johnson and Kaplan, where they were complaining that management accounting techniques emerged centuries ago, are still used, but they no longer relevant in today’s highly competitive environment. CHAPTER 5 - CONTROLLING THE MULTI DIVISIONAL ORGANIZATION 64. What are the two major obstacles to the success of the integrated firm? 1. Complexity - or the bureaucratic paralysis caused by complexity. 2. Management indifference to the owner's goals (p.94). This potential problem resulted when managers replaced owners in performing the managerial functions. 65. How did the integrated firms cope with these problems? Multi divisional firms might have developed better accounting systems, (e.g., using Church's ideas) but instead they coped with these obstacles using decentralization (p.94-96). In decentralized firms, top management plans strategy, while subordinate managers coordinate and control operating activities (p.97). 66. What was the New Use Developed For ROI? J&K indicate that ROI was used to delegate responsibility and allocate funds, i.e., capital (p.98). (Note: Technically, responsibility can be assigned, but not delegated. The authority to act on one's behalf can be delegated as when someone is hired to do a tax return, but the taxpayer is still responsible.) 67. Success of multi divisional firms depends on the management accounting system to perform three task...
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...Introduction MarineCorp Sdn Bhd, incorporated in 1992, was a maritime solutions provider for the SURIA group of companies. It had been vested with the authority by SURIA to regulate and enforce conformance to its policy on maritime activities. It major businesses are vessel inspection and vetting. MarineCorp also provide consulting services to SURIA and its related contractors for oil and gas’s vessel operations. In addition, MarineCorp established strategic alliances with Marine Department, the Ministry of Transport and State Port Authorities. It was also appointed as a consultant for the Port Facility Security Assessment (PFSA) by Marine Department. In the company, Hafiz Hashim was a Chief Financial Controller (CFO). He is responsible for the financial management of MarineCorp and its wholly-owned subsidiaries which are Green Port Sdn Bhd and Sungai Emas Sdn Bhd. The financial statements of the three companies will end by twelve months on 31st December 2009. Green Port ran marine facilities included pilotage and marine support, emergency response, port management and operation and marine service. In the other hand, Sungai Emas ran port facilities such as marine support, emergency response, port management and navigational safety. Question 1 Determine the economic earnings of MarineCorp Sdn Bhd, Green Port Sdn Bhd and Sungai Emas Port Sdn Bhd. Economic earnings = NOPAT- Capital Charge * MarineCorp Sdn Bhd = 15 128 917- 854 306 = RM 14 274 611 *...
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...Guía Práctica de Gobierno Corporativo Experiencias del Círculo de Empresas de la Mesa Redonda Latinoamericana Motivación Motivación Índice Índice de Términos Índice Índice de Términos Copyright © 2010 Corporación Financiera Internacional 2121 Pennsylvania Ave. NW, Washington, DC 20433 Estados Unidos de América Miembro del Grupo del Banco Mundial Todos los derechos reservados. Las observaciones, interpretaciones y conclusiones expresadas en esta publicación no deben atribuirse en modo alguno a la Corporación Financiera Internacional (IFC), la Organización para la Cooperación y el Desa rrollo Económicos (OCDE) ni a sus instituciones afiliadas, los miembros de sus directorios / juntas / consejos o los países que representan. La IFC y la OCDE no garantizan la exactitud de los datos contenidos en esta publicación, ni aceptan responsabilidad alguna por las consecuencias de su uso. La información corporativa proporcionada por los miembros del Círculo de Empresas de la Mesa Redonda Latinoamericana sobre Gobierno Corporativo, refleja las opiniones de la gerencia y el directorio / junta / consejo de las empresas sobre sus motivaciones, desafíos, soluciones y ventajas para el diseño y la aplicación de mejores normas y prácticas de gobierno corporativo. El contenido de esta publicación está registrado como propiedad intelectual. Su reproducción y/o transmi sión, total o parcial, sin la debida autorización, puede constituir una violación de la legislación...
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...Butterworth-Heinemann is an imprint of Elsevier Linacre House, Jordan Hill, Oxford OX2 8DP, UK 30 Corporate Drive, Suite 400, Burlington, MA 01803, USA First edition 2009 Copyright © 2009 Elsevier Ltd. All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher Permissions may be sought directly from Elsevier’s Science & Technology Rights Department in Oxford, UK: phone (144) (0) 1865 843830; fax (144) (0) 1865 853333; email: permissions@elsevier.com. Alternatively you can submit your request online by visiting the Elsevier web site at http://elsevier.com/locate/permissions, and selecting Obtaining permission to use Elsevier material Notice No responsibility is assumed by the publisher for any injury and/or damage to persons or property as a matter of products liability, negligence or otherwise, or from any use or operation of any methods, products, instructions or ideas contained in the material herein. Because of rapid advances in the medical sciences, in particular, independent verification of diagnoses and drug dosages should be made. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloguing in Publication Data A catalog record for this book is available from the Library of Congress ISBN–13:...
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...Leadership Development Seminars and ECQ-based Readings The success or failure of any endeavor depends on leadership. Now, more than ever before, we need leaders in our organizations and in our world. Great leaders create and communicate a vision and move people into action to achieve it. They ignite our passion and inspire us to do our best. Government leaders in the 21st century are experiencing change at a more rapid pace than previous generations. Rapid advances in technology have expanded the quantity of work we are capable of accomplishing, and also where it’s accomplished. We have a more highly educated workforce, yet face diminishing resources with an increased demand for productivity, and the essential services we provide to the American public. To be successful at navigating these challenges leaders must develop the essential skills to motivate their employees, effectively communicate with others, fine-tune critical thinking skills, and build and leverage partnerships. Future leaders must also be visionary; i.e., possess the ability to identify trends and the courage to be innovative. Being technically adept in your field will no longer be enough. In response to these demands on senior executives, the U.S. Office of Personnel Management identified five Executive Core Qualifications (ECQs) that all aspiring government leaders and executives must possess. These ECQs and Fundamental Competencies were developed by OPM after extensive research on the attributes...
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...Leadership Development Seminars and ECQ-based Readings The success or failure of any endeavor depends on leadership. Now, more than ever before, we need leaders in our organizations and in our world. Great leaders create and communicate a vision and move people into action to achieve it. They ignite our passion and inspire us to do our best. Government leaders in the 21st century are experiencing change at a more rapid pace than previous generations. Rapid advances in technology have expanded the quantity of work we are capable of accomplishing, and also where it’s accomplished. We have a more highly educated workforce, yet face diminishing resources with an increased demand for productivity, and the essential services we provide to the American public. To be successful at navigating these challenges leaders must develop the essential skills to motivate their employees, effectively communicate with others, fine-tune critical thinking skills, and build and leverage partnerships. Future leaders must also be visionary; i.e., possess the ability to identify trends and the courage to be innovative. Being technically adept in your field will no longer be enough. In response to these demands on senior executives, the U.S. Office of Personnel Management identified five Executive Core Qualifications (ECQs) that all aspiring government leaders and executives must possess. These ECQs and Fundamental Competencies were developed by OPM after extensive research on the attributes...
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