Financial Engineering Class

Sesi 1

Ir. F. Parno Isworo MM. MBA

 The Corporate World – in Global Economy

Capital market Debt market Money market

NATIONAL

GLOBAL

Shareholders Corporation

Raw Materials market Product market Prod. Equipment market

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 Corporate Goal and Support Means
• Going concern
• Jack Welch :
“I’m here not to predict the world. I’m here to be sure I’ve got a
company that is strong enough to respond to whatever happens”
• Shareholders’ value
needs

COMMON MEASURES i.e.

Financial Reports based on internationally acknowledged standards

Risks Measures based by internationally acknowledged body

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 Topics to Discuss
ACCOUNTING and CORPORATE FINANCE
• Accounting
• Corporate Finance
ENVIRONMENT OF INTERNATIONAL FINANCIAL MANAGEMENT
• Balance of Payments and International Economic Linkages
• Determination of Exchange Rates and Foreign Exchange Market
• Currency Futures and Options Markets
• Parity Conditions in International Finance
EXCHANGE RATE BEHAVIOUR
• Government Influence
• International Arbitrage and Interest Rate Parity
• Inflation, Interest Rate and Exchange Rates
FOREIGN EXCHANGE RISK MANAGEMENT
• Transaction Exposure
• Economic and Translation Exposure
SHORT-TERM ASSET AND LIABILITY MANAGEMENT
LONG-TERM ASSET AND LIABILITY MANAGEMENT

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 Yang ingin anda ketahui tentang Perusahaan

CORPORATE INFORMATION

Non quantitative Info Quantitative Info

Accounting Info Non accounting Info

Operating Info Financial Accounting Management Accounting

Inside and outside parties Inside parties

- Shareholders - Planning
- Lenders - Implementation
- Tax office - Control

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 SIKLUS KEUANGAN USAHA

NVESTMENTS

OP & MAINTENANCE
CASH PRODUCTION Perusahaan “Produksi”
RAW MATERIALS

SALES

COGS

CASH SG&A DISTRIBUTION Perusahaan “Dagang”

SALES

PERUSAHAAN ‘GOING CONCERN’ KARENA MENERAPKAN PRINSIP

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 ARUS DANA KAS PERUSAHAAN

PEMERINTAH PEMEGANG SAHAM KREDITUR

EKUITAS HUTANG

PAJAK BUNGA CICILAN

DIVIDEN

PENDAPATAN
LUAR OPERASI DANA KAS PERUSAHAAN
INVESTASI
KREDIT

MATERIAL GAJI / UPAH ADM A.T A.T baru

PRODUKSI / OPERASI

A.T = Aktiva Tetap PENJUALAN

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 FINANCIAL STATEMENTS
• Accounting Standards – Principles
– Generally Accepted Accounting Principles (GAAP) oleh Financial Accounting
Standard Board (FASB)
– Peraturan Standar Akuntansi Keuangan (PSAK) – Indonesia oleh Ikatan Akuntan
Indonesia (IAI)
– International Financial Reporting Standard (IFRS)

• Accounting Policy
– Corporate policy
– Industry standard

• Financial Statement providing information :

– To present and potential investors and creditors
– Comprehensible to those who understand the business to study the information
with diligence
– About the resources of the company and the claim on those resources
– About the company’s financial performance during the period
– To help users assess the amounts, timing and uncertainty of prospective cash
receipts from dividends or interest and the proceeds of sale or redemption of
securities or loans

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 Basic Accounting Concepts
The Balance Sheet
1. Money Measurements
Accounting records only the facts that can be expressed in monetary terms
2. Entity
Accounts are kept for entities, as distinguished from the persons who are
associated with those entities
3. Going Concern
Accounting assumes that an entity will continue to operate indefinitely and that it is
not about to be liquidated
4. Cost
An asset is ordinarily entered in the accounts at the amount paid to acquire it, and
this cost rather than current market value is the basis for subsequent accounting for
the asset.
5. Dual Aspect
The total amount of assets equals to the total amount of liabilities and owner’s
equity

6. Accounting Period 9. Matching

7. Conservatism 10. Consistency
8. Realization 11. Materiality

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 Basic Accounting Concepts
The Income Statement
1. Money Measurements 4. Cost
2. Entity 5. Dual Aspect
3. Going Concern

6. Accounting Period
Accounting measures activities for a specified interval of time, usually one year
7. Conservatism
Revenues are recognized when they are reasonably certain, where as expenses are recognized
when they are reasonably possible

8. Realization
The amount recognized as revenue is the amount that reasonably certain to be realized, that is,
paid by customers

9. Matching
When a given event affects both revenues and expenses, the effect on each should be recognized
in the same accounting period. ‘Matching cost against revenue

10. Consistency
Once an entity has decided on a certain accounting method, it should use the same method for all
subsequent events of the same character unless it has a sound reason to change methods.

11. Materiality
Insignificant events may be disregarded, but there must be full disclosure of all important
information

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 Other Accounting Concepts
The Income Statement

1. Accrual versus Cash-Basis Accounting

• Accrue means charged or accounted for although it may not
be cash receipt or outlay

2. Income Tax Accounting

• The use of accelerated depreciation for tax calculation
purpose, which is different from the straight line method for
financial reporting

3. Economic Income
• Economic Income measures intangibles, values,
adjustments for transaction with owner(s) in dividend,
additional paid-in capital and return on equity

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OS Distributors Balance Sheet
31 Dec 1998 31 Dec 1999 31 Dec 2000
Income Statement
1998 1999 2000
Assets
Current Assets
Cash 1* 6,0 12,0 8,0 Net Sales 390,0 420,0 480,0
Accounts Receivable 44,0 48,0 56,0 Cost of Goods Sold 328,0 353,0 400,0
Inventories 52,0 57,0 72,0 Gross Profit 62,0 67,0 80,0
Prepaid expense 2* 2,0 2,0 1,0 Selling, General and Admin. 39,8 43,7 48,0
Total Current Assets 104,0 119,0 137,0 Depreciation Expenses 5,0 5,0 8,0
Operating Profit 17,2 18,3 24,0
Non current Assets
Financial Assets & intangibles - - - Extra Ordinary Items - - -
Property Plant and Equipment 56,0 51,0 53,0
Gross Value 3* 90,0 90,0 93,0 Earning Before Interest & Tax (EBIT) 17,2 18,3 24,0
less : Accumulated Depreciation (34,0) (39,0) (40,0)
Total Non Current Assets 56,0 51,0 53,0 Net Interest Expense 5,5 5,0 7,0
TOTAL ASSETS 160,0 170,0 190,0
Earnings Before tax (EBT) 11,7 13,3 17,0
Liabilities and Owners' Equity
Income Tax Expense 4,7 5,3 6,8
Current Liabilities
Short term debt 15,0 22,0 23,0 Earnings After Tax (EAT) 7,0 8,0 10,2
Owed to Banks 7,0 14,0 15,0
Current portion of long-term debt 8,0 8,0 8,0 Dividends 2,0 2,0 3,2
Accounts Payable 37,0 40,0 48,0
Accrued expenses 4* 2,0 4,0 4,0 Retained Earnings 5,0 6,0 7,0
Total Current Liabilities 54,0 66,0 75,0
Non current liabilities Preliminary Cash flow Statement
Long Term Debt 5* 42,0 34,0 38,0 1999 2000
Total Non Current Liabilities 42,0 34,0 38,0
Cash flow from operating activities
Owners' Equity 6* 64,0 70,0 77,0 (+) Net Sales 420,0 480,0
Paid in Capital 64,0 64,0 64,0 (-) Cost of Goods Sold (353,0) (400,0)
Cummulative Retained Earnings 6,0 13,0 (-) Selling, General & Admin. (43,7) (48,0)
Total Owners' Equity 64,0 70,0 77,0 (-) Tax Expense (5,3) (6,8)
TOTAL LIABILITIES AND OWNERS' EQUITY 160,0 170,0 190,0 (-) Change in Working capital Requirement (4,0) (14,0)
A. Net Operating cash flow 14,0 11,2
Managerial Balance Sheet Cash flow from investing activities
(+) Sale of Fixed Assets - 2,0
Invested capital or Net Assets 31-12-'98 31-12-'99 31-12-'00
(-) Capital Expenditure & Acquisitions - (12,0)
Cash 6,0 12,0 8,0 B. Net cash flow from investing activities - (10,0)
Working Capital Requirement (WCR) 59,0 63,0 77,0
Cash flow from financing activities
Net Fixed Assets 56,0 51,0 53,0 (+) Increase in long-term debt - 12,0
Total Invested capital or Net Assets 121,0 126,0 138,0 (+) Increase in short-term debt 7,0 1,0
(-) Long-term debt repayment (8,0) (8,0)
(-) Interest payment (5,0) (7,0)
Capital Employed (-) Dividend payment (2,0) (3,2)
Short term debt 15,0 22,0 23,0 C. Net cash flow from financing activities (8,0) (5,2)
Long-term financing
Total Net Cash flow ( A + B + C ) 6,0 (4,0)
Long-term debt 42,0 34,0 38,0 Opening Cash 6,0 12,0
Owners' Equity 64,0 70,0 77,0 Closing Cash 12,0 8,0
Total capital employed 121,0 126,0 138,0
 Penjelasan
1* Terdiri dari kas di brankas dan rekening giro di bank
2* Umumnya berupa sea yang dibayar di muka (dalam Income Statement ini
berupa Selling , General and Administration (SG&A)
3* Tahun 1999 tidak ada penjualan asset yang dimiliki atau perolehan asset
baru. Tahun 2000 gudang diperluas dengan biaya US$ 12 juta dan asset
yang dulu dibeli senilai US$ 9 juta dijual pada nilai buku US$ 2 juta
4* Accrued expenses terdiri dari wages dan taxes payable
5* long-term debt dibayar kembali dengan cicilan US$ 8 juta per tahun. Tahun
1999 tidak ada long-term debt baru, tetapi dalam tahun 2000 diperoleh
pinjaman jangka pendek dari bak untuk membiayai perluasan gudang pada
butir 3*
6* Selama 3 tahun itu tidak ada saham baru diterbitkan dan tidak ada saham
yang dibeli kembali.

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 Contoh Penyusunan Neraca dan Laba Rugi

• Buka Accounting Examples.xls.

• Tentang pembangunan PLTD sampai ber-operasi

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 Analysis of Monetary Assets
Calculated based on Balance Sheet

• Current Ratio
– Current Assets divided by Current Liabilities

• Acid Test Ratio or Quick Ratio

– Monetary Current Assets divided by Current Liabilities

• Days’ Cash
– Cash cost per day

• Days’ Receivables or Collection Period

– Account Receivables divided by Sales per day

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 Reference Material for
Financial Engineering and Regulatory Issues

• Acounting Text and Cases - Anthony, Reese, Hertenstein, IRWIN

• Understanding Return on Investment – George T. FriedLob and
Franklin J. Plewa, Jr. - JOHN WILEY
• Financial Management Theory and Practice – Eugen Brigham and
Louis Gapensky – DRYDEN PRESS
• International Finance an Analytical Approach – Imad Moosa, - MC
GRAW HILL
• Foundations of Multinational Financial Management – Alan C.,
Saphiro – ALLYN AND BACON
• Finance for Executives, Managing for Value Creation – Hawawini,
Viallet - SOUTH WESTERN THOMSON LEARNING
• Valas untuk Manager – DR. Hamdy Hady – GHALIA INDONESIA
• Pasar Uang dan Valas – Jose Rizal joesoef – SALEMBA EMPAT

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