Personal study time

Pic 01: *8* hours study? No time even for a haircut?

Dear ACCA/CAT candidates,

An opportunity for an honest self-evaluation. A poll survey is posted on top left corner. Without obligation, participate in the survey with probity ethics. How much time you put in studying and preparing for your exams? That, as a student, is your primary responsibility. Well, you can vote and see the overall results. Already, we know that ACCA is the most challenging but not impossible set of exams.

One purpose of this poll study is to send a personal reminder to students, are you doing your job - well? Time is fast running out as June 09 exams are fast approaching. As of today, you have 8 weeks left to study. If attempting 3 study subjects, you need to to deduct 3 weeks for Intensive Revision Classes which include review of notes done in them. That leaves 5 weeks or 35 days. This means on average, you have slightly over 11 days to completely study and finish the syllabus! Have you done all your Question Bank in the BPP Revision Kit? 11 days from now, you should have completed your study for one paper.

If answer is no you have not, then start taking corrective actions today.

Best regards,
Marcus - exam preparation strategist

P1 PRACTICE QUESTION: RYAN AIR

-relevant to Intensive Practice Session (IPS) P1 (ACCA).


From left to right:
Pic 01: Ryan Air Proud Fleet
Pic 02: Comfortable seats at an affordable price. A potent business model!
Pic 03: Serving Asian Cuisines in Europe? [read case study]

Dear P1 (IPS) students,

As you are aware that David Campbell has increased in his sophistication of examining you. Its imperative you know the underlying concepts while be sharp in deciphering the case study by offering 'real solutions'. Please attempt the question below. Answers will be given in our next class.

Happy trying,

Marcus Ong

Case Study: Ryan Airlines

Background
Ryan Airlines emulated the success of Southwest Airlines (USA) Ltd by offering major price reductions for inter-city travels within European Union €. Ryan Airlines chose secondary and often old under-utilised airports to avoid high airport levy fees and congestions common in international airports. Since Ryan Airlines uses 55 Airbus of 147-seats aircrafts, it only needs short runways. The average age is 15.5 years and management is confident that with good maintenance record, the planes useful life of 20 years could be achieved.

GE Engines Limited is the main outsourcer contractor to maintain, repair and at times overhaul Ryan Airlines jet engines. GE parent company recently face a downgrade on its bond status as one of its major subsidiary, GE Finance is caught in the financial meltdowns in USA. Though unrelated, there was widespread fear that GE Engines Limited may be affected by Group’s cash flow crisis.

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Pre-flights matters
Customers are encouraged to book flights using the e-ticketing system which was set up by IBM (USA) Limited team of consultants [security risks] . There was no unusual activity and Ryan Airlines management are happy with the outcome.

Experienced engineers normally take 15 minutes to re-fuel the planes. The best record for turnaround time compared with other no-frills rivals like Virgin Blue which takes 35 minutes. Ryan Airlines boasts this feat as attributable to its team of engineers that have industry experience of over 25 years.

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During flight matters
Passengers handle their own luggage which they can ‘tuck in’ to the upper cabinets on board . Main course food like ‘nasi lemak’, an Asian delicacy of oily high cholesterol rice, are sold with attractive pricing which Ryan Airlines enjoys brisk sales.

To cut labour costs, Ryan Airlines hires mothers who want flexibility in time management. They can choose to work 3 day week program. Take a frequent 3 flights a day work schedule. Ryan Airlines saves on workers allowances and accommodations since the stewardess need not be posted overseas.

Post flight matters
Pilots are trained over 5 years and then bonded to work for Ryan Airlines over 10 year contract. Their remuneration is fixed based on pre-determined formula. As such Ryan Airlines enjoys good profit margins of 34% versus industry’s average of 19% attributable to its ability to ‘locked-in’ pilots wages. If pilots are to resign, they are punitively charged with penalties equivalent to the amount of training costs and lost services Ryan Airlines face.

Pic 04: A dream job, see the world.

Passengers are given the option to purchase insurance cover inclusive of their ticketing prices. Many passengers felt, since this is only a short 3 hour flight, they opt not to buy the cover.

Recently a contract with DHL was signed to allocate 30% of Ryan Airlines’ cargo place for DHL exclusive use. Whether it was utilise, the cargo was paid in advance by 2 years valued £23 million. Ryan Airlines is naturally pleased and is actively seeking more of such deals.

Required:
a) Explain and assess the risks of Ryan Airlines. [7 marks]
b) Recommend to top management how the risks should be dealt with? [8 marks + 2 professional marks]
c) Explain briefly the relevance of control activities in risk management? [8marks]

PS: For part (c) please refer to BPP manual on page 173 as guide.

P1 Case Study: General Motors' Stakeholders - Powers at Play

-Relevant to ACCA P1 and P3.

Pic 01: Soon to be museum artefact.
Pic 02: Now that I am fired, I have the time the spend £19.5 million salaries earned (looted?) last 2 years. (Rick Wagoner, ex-CEO of GM)

CASE STUDY : GENERAL MOTORS CHANGE IN STAKEHOLDERS' INFLUENCE
1. Rick Wagoner, the chairman and chief executive of General Motors (GM) is to resign as part of an agreement with the White House to get more federal aid for the struggling carmaker. The Obama administration is believed to have asked Mr Wagoner, who has led GM since 2000, to give up his post.
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2. GM has received £9.38 billion from the US Government and has asked for a further £11.65 billion but warned that even with that aid it may still reamined near to bankruptcy status if car sales do not pick up by early 2010. GM, which is the world’s second largest car company by unit sales, has made £101.88billion in losses in the past four years. If not for the US Government stepping forward with the loan, it would promptly collapse leading to systemic economic damage to the world’s largest economy.
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3. Mr Wagoner said he would work for just £1 this year after being paid £5.4 million last year. This was down from £14.1 million in 2007.

4.President Barack Obama is due to announce that GM and its smaller rival Chrysler might be nursed back to health. The President told a television show yesterday that he intended to set out “a set of sacrifices for all parties involved — management, labour, shareholders, creditors, suppliers, dealers”.
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5.GM and Chrysler have until March 31 to submit new restructuring plans which include mass redundancies program to the Government’s automotive task force, which will determine whether they are capable of survival. Chrysler received $4 billion in taxpayer loans in December and wants £6.7 billion more.

Applications based on stakeholders interests
I) Instrumental stakeholders view are the profit & economic welfare of GM plus Chrysler and Ford. All 3 automakers account for roughly 7% of USA GNP. This is equal to the size of 7.5 times the size of Malaysian economic output!
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II)Normative view are the ethical stand to take on whether to cut minority jobs in favour of saving the majority jobs? Highly debatable since government does not want to risk unpopular actionof being seen as putting poor families on the street.
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III)Primary stakeholders are government as of now due to ‘national interests’ to keep major corporations afloat so as to protect jobs, industries that rely on automobiles and social stability by staving off unemployment. We can see that government has inserted their powers even demanding a once powerful CEO, Rick Wagoner, to step down. In other words, he was fired.
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IV)Secondary view are the top management here who in the view of government has failed in their stewardship to protect GM’s interests.
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V) Active stakeholders are trade union in addition to government busy setting up bail out plans and strategic management busy asking for hand outs. Trade unions which represent 64% of over 800,000 employees are once powerful demanding generaous pay package terms and unheard of retirement benefits. Their pay is at US$90 per hour compared to Japanese owned rivals with USA plants of US$55 per hour. Clearly unsustainable cost level. With the government presence, trade unions are unable to hold on to generous compensation programs. In fact already 80,000 employees are laid off. Passive view stakeholders are individual shareholders who sees their investment values fell, but feeling helpless to take any actions.
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VI) Voluntary stakeholders are the customers who have the choice. Clearly their choices are high in view that they can easily switch away with reliable Japanese cars or the Value For Money Koreans. Involuntary stakeholder here is applied to individual employees awaiting their fate which is not pretty. Facing either redundancy or pay cuts certainly are stressful to these ones.
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VII)Known stakeholders who take active interests in reviving GM includes the charismatic President Obama. He enjoys unprecendented support and popularity among USA voters who sees him doing what is necessary ie swift actions taken.
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VIII)Unknown stakeholders are families and dependents on the employees for their livelihood. Imagine a hard working single mother fending for her children, now is out of job. Who is to put food on the table, school pocket money for the young and medical care for the elderly dependents? What you read in the newspapers clearly failed to highlight the plights of innocent victims who are have hardworking parents.

DAVID CAMPBELL exam style:
questions:
a) Why the importance of stakeholders mapping? (8 marks)
Note: please be careful here. He is ‘not’ asking what it stakhlders, rather why or the reasons to conduct it.
b) Evaluate stakeholders interests and powers matrix on the case study. (12 marks)
Note: another major trap, as David will not put the obvious stakeholders in the case study for you to pick. How can he if you have to call it unknown stakeholders. Candidates have to read enough case studies to sharpen their perspectives.
c) What is the normative and ethical views that President Obama should take? Obviously he cannot allow too much job cuts as this makes him politically unpopular for not caring for Americans while he also cannot impose conditions on business firms who have to watch their profits. Please write a highly confidential paper to the White House. (10 marks)
d) 4 professional marks for the above. Please do not explain in details to assert your arguments. All points made are in numbered short paragraph formats.
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PS: please obtain the answers from me in class.
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Related Link:
http://marcusong88.blogspot.com/2008/08/mission-analysis-cultural-perspective.html

References:
Christine Seib, 2009, Rick Wagoner To Step Down From GM In Return For More Aid,
Http://Business.Timesonline.Co.Uk/Tol/Business/Industry_Sectors/Engineering/Article5999604.Ece, Visited On 30th March
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Bill Vlasic and Sheryl Gay Stolberg, 2009, G.M. Chief Is Said To Be Resigning In Deal With U.S. Http://Www.Nytimes.Com/2009/03/30/Business/30auto.Html, Visited On 30th March

TOLL FREE HIGHWAYS!

-related to P3, some extend F7 & F9 and all Road users in Malaysia



From left to right:
Pic01 : Datuk Lin, MD of Gamuda Berhad which owns LDP, Kesas Highways;
Pic 02: Famous hanging bridge over Federal Highway, near to Motorola Factory
Pic 03: Next big idea? Toll road for pedestrian walk ways.

I. Global recession is here and scary. Everyone is concerned with their survival. Jobs are at stake. The government can do wonders in stimulating the economy by effectively making the Malaysian economy the best place to do business, at least in the South Asian region.

II. One way is to reduce the burdensome transportation costs. Already Malaysia has the second highest tax rates on cars in the world, after Singapore. But in Singapore, a car cost is equivalent to 2.5 years of average wage, whereas in the Boleh Land its 7 years! So that should makes us No.1 ranking, as in the most expensive car.

III. Below is the proposal of how to make our highways toll-free expecially beneficial to the ones where commuters use it daily! The BEST part of the proposal, there is no toll fee increase needed.

PROPOSED TOL FREE BUDGET

NOTE 1. Borrowings __________________________17.20 billion
NOTE 2. Interests at 2.5%_______________________ 3.01 billion

TOTAL NATIONALISATION COSTS______________20.21 billion

NOTE 3. Toll profits for 7 years to 2017 (no price hikes) __25.00 billion
NOTE 4.SURPLUS [Note 3 less Note 2]_____________ 4.79 billion

EXPAINATORY NOTES:
1. Nationalise all 5 highways (LDP, Shah Alam Highway, Cheras-Kajang Highway, Kuala Lumpur-Karak Highway and the Guthrie Corridor Expressway) purchasing shares not already owned by government. PLUS comes with the highest price, buying 32% shares. The current share price is at RM2.99. Government gives a mandatory offer at RM3.26 per share which is the highest price level past 1 year. That amounts to RM2.98billion. Government needs to undertake PLUS liabilitiesof RM8.72billion. PLUS nationalised bill works to RM11.7billion. All 5 highways nationalisation bill works out to approximately RM17.2billion.

2. Fund the nationalisation program with borrowings with Government bond at 2.5% interest rate. The interests payment then works out to RM430million per year. Over 7 years total interests liability is RM3.01 billion

3. If we continue pay toll, all 5 highways expected to generate profit of RM25billion over 7 years. This is assuming a modest traffic growth of 3% per year. By 2017, the amount can completely repay the Government debt and still has a surplus.

All road users, from thereon, get to use the highway for FREE due to the nationalisation program. We could spend on other more productive industries such as homes, durable goods, retails and food (BAK KUT TEH!) sectors

4. Take note that by year 2017, government still has surplus of RM4.79 billion! This is so even when there is NO increase in toll! This save taxpayers approximately 30% which translates to RM7.5billion over the 7 year period. In other words, the government is taking less money from rakyat's pocket. The amount which otherwise could be spent on productive industries.

IV. Other benefits are :
a) Substantially reduce the cost of doing business
b) Increase our standard of living. Noteworthy is in Shanghai, China of 10 million population has toll-free “Elevated” highways. Propels commercialism sector.
c) encourage more inter-state travels, giving an economic spillovers to poorer states like Perlis, Kelantan and Pahang.
d) The above proposal is far less burdensome compared to current system of double loss.Firstly road users face a toll hike prices every 3 years until 2030. Secondly government guarantees to pay the shortfalls in event Toll Operators didn't collect the minimum sum. In year 2007 and 2008, government [our money again] forked out RM2.85billion and RM2.82billion respectively. These subsidies have been ongoing for last 20 years!

V. The above is a broad extraction knowledge from F7, F9 and P3 of ACCA. A demonstration to you all ACCA students that knowledge is power! So study hard and your brains will be your most valuable asset. Employers and Business partners alike will like you.

Disclaimer: Due to lack of transparencies in accounts, I could not dwell deep and accurately calculate the figures. Hence they are 'roughly' right.

RM60 Billion “stimulus” package: How the man-on-the-street will NOT feel it!

- relevant to P1, P5 and all Malaysians

1. On the outset, the government should be commended for doing something about the global recession crisis. The announced package is RM60 billion. However, it’s worth a closer look to see if it really benefits the rakyat, you and I.

2. Lets get to the details of RM60 billion. RM10billion allocated for investment fund over 2 years. From track record, Government Investment House – Khazanah, will continue pour good money over poorly managed GLC (Government Linked Companies) like Telekoms, Proton and Maybank who continue to make us squint at the failures such as overseas (costly) investment, selling out-dated car technology to us and extending risky loans that spikes NPL [Non Performing Loans], respectively. In effect a bail out of under-performing civil servants managing these GLCs.

3. That leaves RM50 billion. RM5billion are for guaranteed loans to SMEs provided (i) banks approve such loans in which in current credit crisis, laon approvals are very stringent, and here is the good part (ii) only if the borrower defaults will the government pays. So the incentive is extend to poor credit status SME (I can’t help it but think of politician cronies) and then government will use taxpayers’s fund to repay the bank.

4. That leaves RM45Billion. Another RM15 billion will be extended to Large companies. Who? Well take your pick, MAS, PLUS, Sime Darby, all of which at best only offers mediocre performance.

5. That leaves RM30billion. Spent RM7 Billion on mega project in which government said will be the likes of LCCT (though was announced the project was cancelled) or something equivalent. Never mind that we already have 2 major airports in Selangor, One military airport in Sg Besi (Kuala Lumpur) and disuse airport in Subang. Lets build another white elephant project. Who benefits? Well, newspaper said that Sime Darby is the front runner. But they will “Fund” the project. This means that the RM7Billion does not come from the government although they are too happy to claim it so.

6. That leaves RM23 billion. Another RM 5 billion will be for industry restructuring. Well, to restructure what? No details here except the name suggest, bail out some industries that are in trouble. Who, you might say? TENAGA (Electricity) will fit the condition nicely for they as the sole seller of power could still incur loss of over RM1Billion. Now, that requires some ‘restructuring’.

7. That leaves RM18billion. RM3 Billion for tax incentives where retrenched workers could get the 1st RM10,000 tax exempt instead of normal RM6,000. Each retrenched worker will have tax savings of RM640 per year. Hardly to shout about and provided the retrenched worker able to find another job in this global recession where jobs are obviously scarce.

8. That leaves a paltry RM15billion. Now I am a bit exhausted here, so won’t go into details. Just give the benefit of doubt, that the balance RM15billion is spent to directly benefit the rakyat, which is over 2 years, to a population of 29 million Malaysians. That works out to RM517 over 2 years which is an average of RM21.55 per month. A stimulus effect? I bet your pocket money is bigger ‘stimulus’.

9. Is all of the above enough? To quote former economics advisor Tun Daim Zainuddin, “The (global recession) crisis is a ‘moving target’ and we have yet to see the worst of it. Therefore, I don’t think that this mini-Budget is the single cure for the crisis.”

10. To clinch Tun Daim concluding chilly statement, “Nobody really knows the extent of this crisis. For example, many analysts believe that the US economic contraction has still a long way to go and has not reached the bottom yet...”

11. In my humble opinion, I have propose a stimulus package that invest and emphasise developing Human Resource talents, Telecommunication infrastructures, mega projects like bullet trains linking to Singapore, attracting soft skills talents to set up research based universities and liberalising lame ducks industries (cars, banks, air travel) to nudge them to achieve world-class level of competition. For more details, please visit the article in http://marcusong88.blogspot.com/2009/02/my-letter-to-prime-minister.html

What does this mean for you?
If the Government continues to drag its feet of “too late and too little” effect, we will all bear the consequences.

There is a solution! You ‘invest’ in yourself! Education which Empowers you, truly! I suggest then, don’t wait for handouts from the government for destiny is in your OWN hands. Be Masters of your own [good] fate. Happy studying!