2.1 Krakatau Steel’s History and It’s Positive Economic Performance In The Healing Situation

Krakatau steel is an Indonesian public mainly steel manufacturing company founded in 1960 with the firstly signed contract between the republic of Indonesia and Tjazpromex part (all union export import corporation) from Moskow. In 1962, there was the first stone laying of the Trikora steel iron project. In 1967, the government encouraged the change of the company status to be a “PT” based on the legal presidential decision no 17, Descember 28, 1967.  Three years later, the government formally established PT. Krakatau Steel, based on the governmental regulation number of 35, August 31, 1970. This public company has been given very broad mandates to build the steel industry of Indonesia. In 1975 the company started the first step of building with the production capacity of 500 thousand ton yearly (Krakatau, 2020).    

            The economic status of the company evolved from time to time. The last financial status of the company during the healing progress of covid outbreak reveals the current efficient financial situation. The cost efficiency has been continuing from 2020 to 2021. Financial report of the first semester of 2021 reveals 13.1 variable cost reduction and 22.8 fixed cost reduction. In detail, 18,1 % of reduction in operational cost from 2 million/ton to be 1.7 million / ton. This number is by comparison with the same period of the previous year of 2020. More detail of this operational cost reduction can be classified as 12 % energy cost reduction, 17.6 % spare part reduction, and up to 24.7 % employee’s salary reduction (Liputan6, 2021). Moreover, the company also reveals significant increase in revenues with the percentage of 46.6 % which become 4.7 trillion IDR compared to the same period of 2020 with the amount of 3.2 trillion IDR. This calculation results in 20.2 % increase in net profits which become 397 billion IDR compared to the same period of the previous year with the amount of 327 billion IDR. Therefore, we can conclude the Krakatau steel Krakatau steel has optimistic sustainable positive performance until the end of 2021 

 

References

Krakatau, S. (2020). History. https://krakatausteel.com/history.

Liputan6. (2021).Krakatau Steel Optimis Kinerja Positif Berlanjut Hingga Akhir 2021. https://www.liputan6.com/saham/read/4614822/krakatau-steel-optimistis-kinerja-positif-berlanjut-hingga-akhir-2021

Idx.(2020).Financial reports of Krakatau steel emiten in 2020.                                                         https://www.idx.co.id/perusahaan-tercatat/laporan-keuangan-dan-tahunan/

 

 

 

1.3 The Financial Statement User’s Contribution to Economic Stability

 

Some resources brightly mention the main users of financial statements in a nut shell. They are the investors or owners, management of the company, lenders, trade creditors/suppliers, government, employees, customers, and the general public. (Anonimous, 2021).

In practice, it is well-known that the ratio of liabilities to asset in financial statements data is useful for giving the information to the investor whether it’s good or not to buy the company’s shares (Ross, 2021), (Elgari, n.d.). In fact, managers also become the user of this financial statements. The use of financial statements for a manager has 6 reasons, including for measurement of company’s impact on the performance, budgeting determination, reducing unneeded costs, thinking on the big picture for decision making, aligning across departments in the same organization to verify current financial condition, and one more important thing is driving the team works and motivation (Cote, 2020).

The reason of lenders to be the user of financial statements is to get the fundamental data related to the business risks and health (Elabed, 2018). The lending institution such as banking will usually give assessment to applying companies. Based on my own observation, there exist two different ways of lending in current economic activities. Lending objects/goods and money. People in general and Islamic based institution agree to credit goods such as cars, homes, furniture, etc. Different opinion happens between general people and muslim people on the loan of money. Muslim believe that selling money with money, or the same objects with profits is a forbidden usury. This law has a very good logical thinking for humanity and really socially beneficial to all people since the reason why this usury is forbidden explains that if money can be a commodity to sell than only can people who have big money be able buy it and it’s spread is only in the people who have more money in such a way that the economic system will be unstable. The poor will get poorer and the rich will get richer.

In the matter of trade creditors/suppliers, they also need the financial statements to make sure that the companies which are dealing with them can pay the credit smoothly without any difficulty to pay. Big demands from the companies to buy products in credit payments are not always related to the easiness of the company to pay. The better way to see if buyers can pay or not is by looking at their financial statements especially the how big their income is and of course the credit ability information can be easily extracted from their liabilities to asset ratio in the balance sheet.

A very important party of public and private company’s financial statements is the government as the regulator and tax collector. Controlling the financial statements, Governments should make sure that the public and even private companies should not rely their liabilities on to the interest based loan. In fact, every government likes to get tax payments from the companies more likely than supervising the effect of the financial activities in global and national trading activities done by a lot of the company employees.

Employees also should be aware of their company’s financial statements. They should know how big the company's profit compared to the number of workers and their own salaries. Is the salary too small or proportional to their own calculation? If they feel their income is not as big as their effort is and the benefit is too low compared to the benefits the company gets, then they should communicate it to the managements and if their proposal is not accepted then they should try to find another career in other good companies or should try building their own companies. Another thing employees should be aware of it is that how much is the debt to equity ratio of the company they are working. If there are so many interest in it by looking at greater than a third then the employees also should resign no matter how close their relation with their costumer is.

The customer should be aware of the financial statements of the companies where they buy the products. Especially, customers should think of the price of the product / service if it’s normal or logical or too high. Based on the financial statements, the price of products / service can be reflected by how much the revenues the companies generated. We can simply multiply the price with total number of sold products to get the revenues. In other words, the price is total revenues over the number of sold products. Moreover, similar with the previous discussion for other parties. The debt to equity ratio of the producer should be important consideration for the customer to buy products from them or not.

Last but not least, the general public should be aware of the company’s financial statements data. The reason is because of the fact that if the worst financial statements of them can’t be changed over a long period of time then it means the regulators can’t work properly. If they think too much interest based liabilities in the countries then they should make general campaign to make customer stop buying their products, to offer better working environments for the employees, to constructively criticize the governments so that the lenders can stop interest based loan, the creditors / suppliers can continue as long as they sell appropriate products, and finally the company’s managements and all parties as the users of financial statements can contribute to the local and global economic system stability.

References

Anonimous. (2021). Users of financial statements - accountingverse. accountingverse.com. https://www.accountingverse.com/accounting-basics/users-of-financial-statements.html.

Ross, S. (2021, August 10). What is a good debt ratio? Investopedia. https://www.investopedia.com/ask/answers/021215/what-good-debt-ratio-and-what-bad-debt-ratio.asp.

Elgari, M. A. (n.d.). Equity screening in Islamic finance. IslamicMarkets.com. https://islamicmarkets.com/education/equity-screening-in-islamic-finance.

Cote, C. (2020, June 16). How & why managers use financial statements: HBS Online. Business Insights - Blog. https://online.hbs.edu/blog/post/how-managers-use-financial-statements.

Elabed, A.A. (2018, February 7). Financial Statemeng lending. Skyline University College. University City of Sharjah.  https://www.skylineuniversity.ac.ae/knowledge-update/finance/financial-statement-lending

1.2 Financial statements of the Polly’s Pet Products

 

Financial statements of the Polly’s Pet Products

“The Financial statement consists of three main parts namely balance sheet (a photo of a company in certain amount of time), income statement (summaries of revenues and expenses generated), and cash flow statement (how much cash entered and left a company over a reporting period)” (one minute economics. 2016). In the cash flow statement, the correct balances of the blank accounts can be calculated with the following way,

-        Cash paid out to suppliers and employees

= cash received from costumer – net cash provided by operating activities - interest paid – taxes paid  

= 600000 -185000-5000-10000 = 400,000

-        Net cash provided by financing activities

= New loans - Repayments on loans + Issuance of common shares of stock

            = 50.000 - 45,000 + 5000 = 10,000

-        Net change in Cash

= net cash provided by operating activities - Net cash used in investing activities + Net cash provided by financing activities

= 185,000 -25,000 + 10,000 = 170,000

-        Cash balance at the end of year

= Cash balance at the beginning of year + Net change in Cash = 30,000 + 170,000 = 200000

In the income statement, the blank accounts can be calculated with the following rules:

-        Operating costs = Revenues – Gross profit  = 650000 – 205000 = 445000

-        Operating income =  Gross profit – General and administrative expenses = 205000-75000 = 130000

-        Income before provision of taxes = Operating – Other expense = 130000-60000 = 70000

-        Net income = Income before provision of taxes – Provision for income Taxes = 70000-5000 = 65000

-        Retained earnings, Ending balance = Net Income  + Retained Earnings at the beginning Balance = 65000 + 103500 = 168500

The relationship between the financial statements can be clearly detected by knowing the fact that the balance sheet needs the value of Cash from the cash flow data and needs the retained earnings, ending balances from the income statement data. Further analysis of the balance sheet blank accounts and balance analysis can be performed by following calculations:

-        Cash = Cash balance, end of year from cash flow data = 200000

-        Total current asset  = Cash + Accounts receivable + Other assets = 200000+ 50000+25000 =  275000

-        Total Asset =  Total current asset + Long term (fixed asset) = 275000 + 75000 = 350000

-        Accured expense = Total current liabilities – accounts payable – income tax payable – Current portion of notes payable – Deferred income taxes = 123500 – 75000 -5000 – 12000 – 1500 = 30000

-        Notes payable (long term) =  total liabilities – total current liabilities = 161500-123500 = 38,000

-        Retained earnings, ending balances from the income statement data = 168500

-        Total stockholder’s equity = Common stock + Additional paid-in capital + Retained earnings = 5000 + 15000 + 168500 = 188500

-        Total liabilities and stockholder’s equity = 161500 + 188500 = 350000     

Based on the balance sheet calculations of the company’s accounting data, it is proved that the three parts of the financial statements complement each other (one minute economics. 2016). The results show us that the total asset of the Polly’s pet product is exactly equal to the total liabilities and stockholder’s equity which is equal to 350000. Therefore the balance sheet has a really balanced values by this proof meaning that the accounting professionals perform the duties properly to improve the company’s performances.

A good way to find out the company’s performance is by calculating the Liabilities to Asset Ratio. The conventional criteria required that a good company should have the ratio of 0.4 or lower and some investors are prone to invest in companies having the ratio between 0.3 and 0.6 (Ross, 2021). In Islamic perspective, some Islamic scholars propose their thoughts that the ratio of less than 0.33 is tolerable (Elgari, n.d.) with the financial purification by quietly giving some amount of money to humanity or public facility such as toilet in some opinion. In my own opinion, the best company’s performance is the one that has zero zero debt to asset ratio which has zero usury.        

            In conclusion, based on the balance sheet data, since the ratio of liability to asset is = (161500/350000)*100 = 0.46 then the Polly’s pet product’s performance is good in conventional perspective, not tolerable in Islamic perspective and not good in my own opinion.

 

References

Donovan, T. (2020, November 26). The accounting equation: Assets = liabilities + equity. Fundbox. https://fundbox.com/blog/assets-liabilities-equity/.

One Minute Economics. (2016). Financial Statements Explained in One Minute: Balance Sheet, Income Statement, Cash Flow Statement [Video]. YouTube. 

Ross, S. (2021, August 10). What is a good debt ratio? Investopedia. https://www.investopedia.com/ask/answers/021215/what-good-debt-ratio-and-what-bad-debt-ratio.asp.

Elgari, M. A. (n.d.). Equity screening in Islamic finance. IslamicMarkets.com. https://islamicmarkets.com/education/equity-screening-in-islamic-finance.

 

Discussion forum unit 1 (Product/service, target market, competitors and propositional statements)

 

Around five years before the pension time of entrepreneurial activities of my father. He started up a newspaper company, namely Pilarindo News. He struggled with his close relatives and all colleagues of the villages to collect daily important news of our nations with simple tools of a CPU and printer, Started laying out the newspaper, distributed, spread it to the market one by one, people by people as well as by instituions  to sell the Pilarindo newspaper. It’s still in my dream to make it an online legal newspaper company with some millennial touching on the news production and sells to the public. 

This online newspaper and future TV show business should have a well-developed target market, segmenting the consumers who need the news (team, n.d). The segmented consumers can be mostly related with the topics of the online, and the language of news presentation. The topics may spread the serious news related to national and international religion, ideology, politics, economy, social and cultures, military and defense as well as daily happiness broadcasting, culinary choices, activities and information, sports, health, science and technology, industrial news, stock markets, etc. Based on the mentioned topics, the news is for mature consumers. Moreover, we also plan to build a content for kids with the topics they need and like. It can be a special rubric related to the innovative, smart and pleasant games making them intelligence. In general, educational contents can be further classified for all students in different levels. Starting from the playground, the elementary school, junior and senior high school with all tutorial of almost all subjects. It will be a good choice if we also try to spot a rubric for university students who want to contribute on writing the progress of the science and technology in their own expertise. In relation to the languages of our online media, The use of sunda language can be for Sundanese people of my tribes which mostly stay in west java province in Indonesia. The important point should be given in our national language using Bahasa Indonesia for whole Indonesian people segmentation and in international language using English and Arabic. As a matter of fact, in this target market statement, the news consumers should be unlimited in such a way that our competitors will be minimum.

To evaluate the competitors in a statement, the standards  consist of the list of the competitors, how they can solve costumer's problems, competitor’s rating based on price comparison between them and our company, based on leaderships of the product and based on how intimate customer is (Anonimous,2020). The current list of online news near to my operational work is Galuh.id, Ciamis.info which is considered as more formal and legal media of the local government. In national scope, they are much bigger companies than what I am just started with an idea or improve the Pilarindo brand. They are Tribun News, Detik, Liputan 6, Kompas.com, okezone.com, republika, sindonews, etc (Top, 2020). Related to solving problems, as far as we are concerned about our national news, detik.com is the most up to date online media giving really important and highly competitive news in seconds. About political news, Galuh.id, kompas, and republika always relatively present objective news. Some online platforms are considered in the hand of some politicians since they are the owner of the companies. Their political popularities also make their companies well rated. Therefore, the price is not only the key point of rating comparison since almost online news platforms give free access to all readers/customers. This price difference almost has the same behavior with the different number of subscribers or different number of statistics of online visitors reading the websites which are proportionally related with how many companies that want to pay for their product advertisements. The last one, product leaderships and customer intimacy can be greatly reflected by how much influenced the public issues are. As a start-up platform, my company’s best competitor for the moment can be Galuh.id and Ciamis.info since we are in the same region and they are relatively close to the local government. In this way, we should create a better value proposition.

In general, a value proposition should be like a jargon telling the people why they should do business with us rather than the competitors and making our products and services beneficial and clear in the people’s mindset (Shewan, (n.d.)). In my case the statement becomes why people should subscribe to Pilarindo news and why companies all over the world or at least near to my office should advertise their products and services in our platform. In contrast to the available local platforms, Pilarindo can serve multilingual news so it can promote the local people, companies and government’s products and service not only in Indonesia but also In all Countries. Therefore, the choice of the propositional statement should be “Pilarindo : The Global Existing pillar of Indonesia, the best news provider, your best advertising partner” 

 

 

 

References

Team, I. editorial. (n.d.). Examples of target markets. Indeed Career Guide. https://www.indeed.com/career-advice/career-development/target-market-examples.

Anonimous. (2020, May 27). Competitive positioning. Marketing MO. http://www.marketingmo.com/strategic-planning/competitive-positioning/.

Top. (n.d.). Top 30 Indonesia newspapers online. AllYouCanRead. https://www.allyoucanread.com/indonesia-newspapers/.

Shewan, D. (n.d.). 7 of the best value Proposition examples we've ever seen. WordStream. https://www.wordstream.com/blog/ws/2016/04/27/value-proposition-examples.

 

 

 

 

1.1 The Role Of Management accounting in relation to a company

In any kind of organizations or companies, management accounting support the stack holder's fully considered decision making after the professionals collect, process and communicate the information in the processes of planning, controlling and evaluating business strategies and processes of the company (Anonimous, (n.d.)).

In principles, every business organization must comply with four principles of managerial accounting. The principles are credibility, value, influence and relevance.  (Cogneesol, 2020). Based on the AICPA (American institute of public accountants) and CIMA (Chartered Institute Of Management Accountants) the practical application of the above four principles are significantly played by three primary aspects. The first aspect is the ability to find what is required by the business in the process to get the success in a long time. The second one is that relevancy of strategies and products that people use should be concerning with the practical use of the principles. The third one is that efficiency assessment of the operational management accounting and identification of the improvement scope influenced by competencies of all involved professionals in the office, performance of the platforms,  fundamentals or key areas of performances,                    

There are 13 specific management accounting activities available in the sources (Cogneesol, 2020). The activities include managing cost, external reporting, thinking of financial strategy, internal controlling, estimating investment cost, managing budgets, regulating the product price policies, administrating the project, complying with the regulations, managing the precious assets, thinking about the management of risk, planning the tax,  and forecasting the liquidity and cash . (Codjia, 2019) also mentioned some fundamentally essential management accounting activities. Some of them are budgeting, in house reporting of financial status of the company, analysis of all cost, and procedure, system and internal control monitoring.     

 

 

 

 

 

References

Anonimous. (n.d.). The Role of Management Accounting in the Organization. http://www.swlearning.com › expanded › exp_01 DOC.

Cogneesol. (2020, February 26). Four managerial accounting principles every business must comply with. Cogneesol Blog. https://www.cogneesol.com/blog/four-managerial-accounting-principles-to-comply-with/.

Codjia, M. (2019, February 11). The importance of budgetary control in management accounting. Bizfluent. https://bizfluent.com/facts-6750338-importance-budgetary-control-management-accounting.html.

 

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