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Or can I say that (earning + dividend) = retained earning
Retained earning = value of the company??Not sure whether wrongly allocated the defect mistakes and symptoms will be given marks??
@richardpenfound said:
Q3.a) Evaluate the likelihood of failure as suggested by the application of Argenti’s A Score.
Or words to that effect.
This was straightforward. They gave us the overall score of 47 ie over 25 and therefore bad.
The defects and mistakes were obvious and I had a lot to say about them. Autocratic CEO, unusually high operating gearing, entering a new area of business without the necessary expertise, potential failure of a large project.
There was less to say about symptoms. Declining morale and staff leaving was all there was to go on really.
b) Suggest changes to performance management systems in order to address the defects and mistakes
I thought this was quite hard to answer. On reflection, much of what I wrote was about what they should do to rectify the situation, as opposed to how performance management systems would need to be adjusted.
I said they should pay close attention to cash flow, as businesses fail when they run out of cash.
I wrote something about project management, as it was lacking.
I wrote something about adjusting employee targets to make sure the housing project was completed to time and within budget.
It might have been easier if the scenario had said what the existing performance management systems are designed to measure.
c) Evaluate the usefulness of qualitative models in predicting corporate failure
I wrote some fairly generic stuff about the pros and cons of Argenti’s model compared with Altman’s Z score.
As an aside, do you think it’s a coincidence that one is called the A score, and one is called the Z score?
Would like to ask whether if wrongly distribute of defect mistake and Symptoms will be given marks??
@sokty said:
Q3. Corporate failiureA. Argenti A score
It is qualitative measure. Score of 47 indicated at risk of failure.
The model cover 3 areas:
– Defect:
+ Management defect:
– Autocratic CEO
– Override control by bidding during FD I’ll and everyone in leave
+ Accounting defect: No– Mistakes:
+ High operational gearing 50%
+ Over trading: over use staff, long hours work
+ Failure of 1 big project: being sued by client and will result in big financial loss.– Symptoms:
+ Decreasing ratio: not known, only high gearing
+ Frozen salary: no
+ Decreasing morales: yes, as staff work long hours and some leave.B. How to improve:
– Change fixed salary to variable salary to avoid dismissal, so low gearing
– Convince staff to staff and go through tough situations together.C. Problem of Argenti model:
– not suitable for service provider like LP.* I don’t have much time for Q3 at all. So this is what I could answer.
Wish I pass!
@dota3310 said:
intra-group sales must be eliminated therefore debit (w5) retained earnings to reduce group”s sales & credit receivables to eliminate balance owed by parent”s subsidiary.
This should or should not be written in the csofp??
Or we just need to record
Dr….
Cr….
And that’s enough??@anon39 said:
HiNo there are no marks for explaining workings, besides there won’t be any time, marks are awarded for using correct technique to calculate & plugging in figure in correct section of consolidated statement.
The technique is to layout the template of whatever consolidated statement has been asked for.
Then to layout each working leaving space to plug the figures in, work through each paragraph in the question plugging in the relevant info into each working & ticking off once dealt with that bit of info.
Once you have finished dealing with all paragraphs & plugged all figures into each working, total them up & transfer them to the applicable heading on the consolidated statement.
DON’T add down & total statement, no marks for this & probably won’t balance.
If taking exam next month, likely to be an sofp so remember with this statement the double entries, e.g intra-group sales must be eliminated therefore debit (w5) retained earnings to reduce group”s sales & credit receivables to eliminate balance owed by parent”s subsidiary.
The explanations are needed for others sections to Q1, ethics & Section B questions.
Best of luck.
intra-group sales must be eliminated therefore debit (w5) retained earnings to reduce group”s sales & credit receivables to eliminate balance owed by parent”s subsidiary.
This should or should not be written in the csofp??
Or we just need to record
Dr….
Cr….
And that’s enough??