PowerPoint Presentation ara … · PPT file · Web view · 2008-12-16An Introduction into Business Administration and ... versus Process Organization 2.3 Line Organization 2.4 Divisional

An Introduction into Business Administration and An Introduction into Business Administration and Organization of Publishing CompaniesOrganization of Publishing Companies

Cairo, December 3rd- 5th 2008.Cairo, December 3rd- 5th 2008.

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By the „End of the Day (Workshop)“ you should have an impression on:

How You Will Lead your Publishing Company Organizationally and Economically into A successful

Future!!

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Table of Contents (1)Table of Contents (1)

I What you have learned so far and what is still to comeII Economical Basics 1. What is Business Administration about

2. Components of Decision Making3. The Relevance of Organization for Acting economically4. Tasks to be coordinated5. Business Organization as a Means of Optimizing Business Performance

III Basics of Organizational Theory1. Basics of Organizational Theory2. What is structural organization

2.1 Organization as a structured entity2.2 Structural Organization versus Process Organization2.3 Line Organization2.4 Divisional Organization2.5 Matrix Organization2.6 Organization of a Publisher2.7 Excercises I & II

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Table of Contents (2)

3. Organization Described as a Process3.1 Questions to be asked while optimizing processes3.2 Visualization of a Business Process3.3 Possible way of Optimizing Processes3.4 Phases of Optimizing your Process3.5 How the Process of an Order reaching you Process Organization is visualized

4. Process Organization of a Publisher4.1 Excercise III & IV:

IV Integrated Publishing Information System (IPIS): Connecting Information and Organization 1. Often seeked information in daily work

2. Often met situations in publishing companies3. Goals of an IPIS4. Summary of Goals5. Additional uses of IPIS6. Possible structure of a System7. Components of IPIS8. A publishers production process9. Strategic Programm-Planning10. Steps of realiziation

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V Organizational Management Principles1. Centralization vs. Decentralization2. Management by delegation3. Management by exception4. Management by objectives5. Excercise V

VI. Financial Reporting for Corporate Governance Purposes 1. Examples

1.1 Balance Sheet, Profit and Loss Account1.2 Precalculation sheet for an Author´s Right to be Purchased1.3 Comparing your Fiscal Year with the Previous Year and your Business Plan

2. What is accountancy 3. Purposes of Accountancy

3.1 External Recipients of Information3.2 Internal Recipients of Information

4. Focus of Information4.1 Usually externally focused information4.2 Usually internally focused information

5. Balance Sheets5.1 Purpose of a Balance sheet5.2 How to understand a balance sheet

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5.3 Comparisson of assets and liablitlities5.4 Balance Sheet Positions5.5 The Reliance of Balance Sheet Information5.6 The Connection between a Balance sheet and a Profit and Loss account5.7 Balance Sheet of a Big company5.8 Excercise VI: Set up a balance sheet for a newly founded company5.9 Depreciation 5.10 The Profit and Loss Account5.11 The Profit and Loss account of a Publishing Group

6. Excercise VI: Find out about the influence of the Balance sheet to the P&L Account and vice versa

VII Financials and the Balance Sheet1. Financial Rules

1.1 Vertical Structural Rule1.2 Golden Rule of Financing1.3 Golden Balance Sheet Rule

2. Types of Financing2.1 Internal and External Financing2.2 Owner´s equity and Loans2.3 Interdependencies between the 2

3. Planning your monthly liquidity4. Exercise VII

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VIII Figures and Ratios of Profitability1. Examples2. The Purpose of figures of probitability3. Productitvity4. Economic efficiency5. Profitability6. Return on Investement8. What may they really tell us9. The Balanced Score Card: Multiple Goals10. Exercise VIII

IX Internal Accounting is Cost Accounting1. The purpose of Cost-Accounting2. Three perspectives of Cost-Accounting3. Cost types4. Payments, Expenses, Costs5. The differences between direct (variable) and overhead (fix) costs6. Distinguishing direct costs and overhead costs7. Direct cost: the principle of causation8. Overhead costs9. Cost Centre Accounting

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10. Contribution Margin Accounting 11. The Break-even Analysis12. Contribution Margins: a permanent ex post calculation, example of a publisher13. How to keep your stock under control (it ties up your capital)14. Visualizing the different importance of your book segments: revenues, contribution absolutely and % 15. Exercises IX16. Scenarios of Precalculation

X Planning1. What needs to be planned2. Reasons for planning

XI Excercises

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I. What you have learned so far and what is still to come

Marketing for Publishers Sales for Publishers Programmplanning:A Strategic

Approach Production of Books Organization of a Publishing Company The Business Administration Tool Set Projectmanagement

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II. Economical Basics

1. What Business Administration is about2. Components of Good Decision Making3. The Relevance of Business

Organization for Acting Economically4. Tasks to be coordinated5. Business Organization as a Means of

Optimizing Business Performance

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AccountancyFinanancials

Money, cash

Personal

Inventory

Current assets

Manage- ment

Combina-tion of factors

„Produc-tion“

Financial

stockunfini-shed

products

Stock of finishedproducts

Sales of products

Money- and CapitalmarketsEquity (Eigenkapital) Dept capital (Femdkapital)

Capital contribution(Einlagen)

Withdrawal (Entnahm.)profits

credits Pay backsinterest

Purchase market

Employess

Machines

Material

Sales market

Other companies

House holds, privats

Government

TaxesFeesEtc.

Contributions

subentions

Flow of goodsFlow of finances

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1. What is Business Administration about?

Resources are Scarce! You need to d e c i d e on best possible allocation

of rare resources! (Economic principle: Reach maximum output with given resources or reach a given goal with minimum input.)

Decision Making always is a choice among alternatives!

Evaluation of alternatives depends on correct and good information!

Business Administration is the art of providing adaquate information and taking good decisions!

The ultimate goal is to act economically: to maximize profits or minimize losses (non profit organizations)!

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2. The Components of Good Decision Making

There is internal and external information necessary to take good decisions

Sources of internal information are: up-to-date information -flows between departments. Historical financial data including fiscal resources Decision Makers´ evaluation of future market development

Sources of external information are: Knowledge on marketconditions, both: sales and purchase Fiscal matters (taxes, fees, ...) Financial Information (Owners Capital, Banks, Insurances, Investors) Market data as to development of Consumption, Competition, income

available Relevant themes for publication of books Development of New Media

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3. The Relevance of Business Organization for Acting Economically (1)

To act economically you at least need to provide the following basic resources:

MONEY provided by revenues, bank, owners, supplier-credits

PERSONAL to fulfill all tasks and to carry the know how of transforming „material“ into goods (books): lecturers, sales personal, logistics, bookkeeping, …

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3. The Relevance of Business Organization for Acting Economically (2)

INVENTORY: machinery, computers, offices, …

STOCK finished products and „raw material“: Rights, Books, …

These resources need to be transferredinto an efficient internal and external process,

This is the task of BUSINESS ORGANIZATION.

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4. Tasks to be coordinated

The following tasks need to be coordinated for the Business participants to interact economically:

Managing including Planning, Organization, Controlling, SupervisionFinancing getting the money for operations (back)Investing getting the tools/ rights necessary to operatePurchasing getting the current assets to operateWarehousing getting material (digital data) and products (books) storedProducing getting the rights into a sellable book,e-books, licencesSelling finding and stimulating your customers and sell to them

advertising and marketingTransporting getting your books to the customer

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5. Business Administration as a Means of Optimizing Business Performance

In order to make the „economical priciple“ reality it isnecessary to use the information listed above. BusinessAdministration is to collect, organize and communicate this information to all decision makers, respectively, in order toachieve your strategic goals at the best possible. Thequality of your achievements, however, highly depends onhow strategic goals are postulated and communicated intoyour publishing company.

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III. Basics of Organizational Theory

1. Basics of Organizational Theory2. What is structural organization

2.1 Organization as a structured entity2.2 Structural Organization versus Process organization2.3 Line Organization2.4 Divisional Organization2.5 Matrix Organization2.6 Organization of a Publisher2.7 Excercises I & II

3. Organization Described as a Process3.1 Questions to be asked while optimizing processes3.2 Visualization of a Business Process3.3 Possible way of Optimizing Processes3.4 Phases of Optimizing your Process3.5 How the Process of an Order reaching you Process Organization is

visualized4. Process Organization of a Publisher

4.1 Excercise III & IV

Al-Qahira, Dec. 2 –Dec. 5 2008

2. What is structural Organization

There is no enterprise possible without organization.Organization ist the total of all rules, the management fixes in order to run a publishing company. These rules have to be followed while realizing plans. These rules determine what happens in a company in formal processes, giving concrete instruction to the members of the company.

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2.1 Organization as a structured Entity

Giving a structure to a company is to fix responsibilities. A hierarchie is determined by

Setting up hierarchies/ departments/ Positions fixing rules of cooperation and competencies Explaining who reports to who thus organizing information and product flows.


2.2 Structural Organization vs. Process organization

•The structural organization contains all rules which are relevant for the production process. They are „independent“ of time, they reflect to the structure of the company.

•Structural organization fixes all positions within a company, i.e. determining tasks of each employee in respective departments.

•Structural Organization is visualized via Task plans for employees, job discriptions, functional diagrammes


2.2 Structural Organization vs. Process Organization

•Process Organization fixes, what has to be done and in what order. It is to optimize the workflow

•It is visualized via processdiagrammes working rules. Prior view is laid upon the business process of optimally, (as to the economic principal) putting out the products

•A business process is dependently showing the interaction of tasks to be fulfilled in order to reach the company´s output. The business process therefore is determined by the need to reach the anticipated customers´ requirements, i.e. to publish books, which well can be sold.

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2.3 Prototype: Line-Organization

Chief Publishing Officer Chief Sales Officer Chief Financial Officer

Chief Publishing Non Fiction Chief Bookstores Classical Chief of Bookkeeping

Publisher Biografies Key Account Manager Chief of Debtors Bookkeeping

Lector Sales Representative Bookkeeper

Chief Executive Officer


2.3 The Line-System

Executive officers

Chief Sales and Marketing Officer

Chief publishing officer

Chief Financial Officer

Lecturing fiction

Lecturing Non fiction

Chief Accountancy

ChiefControlling Chief Sales Chief

Marketing

1 2 3 4 1 2 3 4 1 2 3 4Lecturers bookkeepers Sales Advertising


2. 3 Line and Staff Organization2. 3 Line and Staff Organization

Publ. Director Financial DirectorLaw and Business

AdministrationDevelopment

Management Secretaray , PressOrganization

Chief Fiction Chief NonFiction Accountancy Sales Market exporation

etc.

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2.4 Prototype Divisional Organization2.4 Prototype Divisional Organization

Head of CompanyHead of Company

Division I:Division I:FictionFiction

Division II:Division II:Non FictionNon Fiction

Division III:Division III:Non BooksNon Books

PurchasePurchase

ProductionProduction

SalesSales

ControllingControlling


2.5 Matrix-Organisation2.5 Matrix-OrganisationPublishing Lines(objectorientiation)

Management Staff

ManagementFiction

ManagementNon Fiction

ManagementAudio

Purchase Rigths

Editorial

Financial

Productions

Marketing

Personal

Sales

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2.6 Typical Structure of a Book Publisher

Financial Department Sales and Marketing Publishing

Personal and Social Affaires Marketing PlanningSalaries Advertising Appearance datesemployees committee Sales Folders Structure

Controlling Telefon MarketingSalescontrolling Market Analysis FictionProductcontrolling Thriller

Bookkeeping CrimeDebtors Sales LoveCreditors Sales Bookstores EroticsInventory Sales Department Stores, Stations, Airports HistoricalRights Sales "Grosso, Barsortiment" Chick Lit

Production and purchase Sales Key Accounts HumorSoftcover Sales Electronic MediaHardcover Sales to Wholesalers NonfictionContent Management Press and Event Mangement Current AffairsAudio Books How to

Central Services Customer Relation Management Life AidMail Politicscar pool Distribution BiografieReception/ Telefone HistoryHousekeeping Foreign Rights Security Audio Books

Inormation Technology RewritingUser Support ProductionProgramming SpeakersRechenzentrum Sound StudioInternet/ CMS usually sourced out

sometimes sourced out

Board of Directors

Company OwnersSupervisory Board

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2.7 Exercise I: Structuring entities2.7 Exercise I: Structuring entities

Fix four groups. Each group put down an organizational model (the structure), the group-members are working in, using either one of the organizational model presented before.

Put your draft down on a flipchart. Explain how your company, as to your impression, is

organized. Time: 30 minutes

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2.7 Exercise II: Pros and Contras of 2.7 Exercise II: Pros and Contras of Organizational formsOrganizational forms

Please discuss in 4 groups the Pro´s and the Con´s of the before presented organizational forms.

Present your results. Time 15 minutes

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3. Organization described as defined 3. Organization described as defined Process of „How to“Process of „How to“

You may also describe „organization“ in means of a workflow, a process, putting down which tasks need to be fulfilled in their temporay and local order.

Designing processes you need to optimize speed and distances thus making the economical principle subject to the work flow.

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3.1 Questions to be asked while 3.1 Questions to be asked while optimizing processesoptimizing processes

Are

responsibilitiesClear?

are

systemsClear?

Is

workflowEfficient?

Do we

Keep DataTwice?

How

do we proceed today?

May we

saveTime?

May we

saveMoney?

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3.2 Visualization of a Business process3.2 Visualization of a Business process

Customer Customer

Presales Sales Product Development Execute After Sales

------

Service / Support

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------

------

------

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------

------

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Process view

F u n c t i o n a l V i e wF u n c t i o n a l V i e w

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3.3 Possible ways of optimizing processes3.3 Possible ways of optimizing processes

Methods forOptimizing processes

Clearify yourBusiness processes

Make processes easier

Integrated processes Department- and

company-wise

ShortIndepent

workflows

Optimize Segmentation

optimize(de-)centralizationClear definition

Of responsibilities

Integrate tasks into One if possible

Parallelizeof dependent processes

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3.4 Phases of Optimizing your Process3.4 Phases of Optimizing your Process

01 develop yourNon fiction strategy

02 Purchase rights ofBook segments to be covered

03 Buy licenses

04 Invest into new segments

Organize printig

05 Plan resultsAnd forecast for next years

06 Establish a currentReporting on goal achievements

07 organize sales

08Organize stock and logistics

09 Build up organization

Fix Strategy and Business Goals

Realize your Goals and Strategy

Control Strategy and Goal achievements

feed back

customers

Marketcustomers

Market


3.5 How the Process of an Order 3.5 How the Process of an Order reaching you Process Organization is reaching you Process Organization is visualizedvisualized

Financials

Product

Belongs to

Productionplan

orderist

Come in Fiscal check. Fiscalo.K. Technical

check

Technically

feasible

Offer tocustomer

ordercustomer

istassigned

(o,n) (o,n) (1,n)

(1,n)

IT

Company

Sales

ResourcesOrganizational View

Functional view

Dataview

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3.6 Processual Organization of a Publisher3.6 Processual Organization of a Publisher

NegotiateRights

Calculate Advance

Fix date of appearance

Sign Contract

Edit Manusscript

Layout/ TypoPrinting Finish

Negotiate Production

Sales Activities

Fix Retail Price Offer to the Retailer

Distribute to the Retailer

Collect Moneyfrom retailers

pay advance 1

Accept Ready Manuscirpt

pay advance 2

pay advance 3

Production Acitivites

Purchase activities

Check Manuscript

Set up marke-ting strategy

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4 Exercise III: Please design the workflow 4 Exercise III: Please design the workflow of your Company in total while exploiting of your Company in total while exploiting a publishing righta publishing right

What steps in terms of general (not detailed) activities does it take you, to publish a book, including the final decision, to take it out of your programme.

Consider the life cycle of the right, (not only the book), and different distribution channels.

1. Join to groups of 4.2. Please list at least 20 steps.3. Please put down, who is responsible for the steps,

respectively and maybe also, who she/he/they is (are) interacting with.

4. Take 30 minutes to put it down and be prepared to present (10 min.)

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3.5 Exercise IV: Please design the detail 3.5 Exercise IV: Please design the detail workflow for a task you choose, for workflow for a task you choose, for exampleexample

Purchasing paper, a right, Printing-services

Delivering a book to a Retailer Preparing your presence to a fair Collecting money from your customers

1. Please list at least 10 steps for the activity you chose.2. Remember to put down, who you interact with3. Take 15 minutes to put it down and be prepared to present

(5 min.)

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IV Integrated Publishing Information IV Integrated Publishing Information System (IPIS): Connecting Information and System (IPIS): Connecting Information and OrganizationOrganization

1. Often seeked information in daily work2. Often met situations in publishing companies3. Goals of an IPIS4. Summary of Goals5. Additional uses of IPIS6. Possible structure of a System7. Components of IPIS8. A publisher´s production process9. Strategic Programme-Planning10. Steps of realiziation

VI. The integrated Publishing VI. The integrated Publishing Information System iPISInformation System iPIS

Concept to Economize information flows and raising efficiency in Publishing Companies

Concept for a systematical analysis of profit contributions of titles, rights, customers and employees by using such information in the every-day´s publishing-work.

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1. Often seeked information in daily work (1)

What profit contribution comes from a certain title, author, genre or lable within a certain period?

Did our expectations in revenues, sales or profit fulfill in a certain period of planning/ of our precalculation?

How much may you offer as a guarantee for a certain author´s right?

How did certain segment of publishing develop over the time in respect of revenues and profits?

How is the today state of our next season´s programmes, are there gaps to be filled in your next book programme?

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1. Often seeked information in daily work (2)

What profit contributions stem from certain regions, customers, Chains, Sales people, Lectureres

How „risky“ are certain authors, single titles, programme segments in respect of stock and guarantees paid?

How may I systematically incorporate market know-how or know-how from market exploration into determining future programme?

Is there a systematic influence of certain factors like cover design, colour, prizing to be recognized concerning sales?

How is work in progress for certain titles?

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2. Often met situations in Publishing companies

Difficult or impossible aggregation of data, belonging together, low flexibility, differred keeping of data.

Heterogene IT-systems. Software-programming is too expensive. Information flow between departments isn´t satisfying.

Redundances in raising and keeping data, not up-to-date, many mistakes possible.

Decision making via tummy and seldomly based onreliable statistical data.

No transparency on Profit-Contributions of certain market-, programme- or sales-segments, of marketing -acitivities.

Planning of seasonal programmes often not systematically enough. Not enough inclusion of market factors, which determine succes of publishing-work.

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While getting a Publishing Information System into existence, up-to-date Information , which is important for decision-making and production purposes should be available at any time. Double work will be reduced, quality of decisions will become better, Programme-planning will gain more transparency earlier and processes will be speeded up.

Before set into action, processes and responsibilities need to be fixed. It therefore ist necessary to analyze processes and interfaces in process-organization. Helpfull may be an instrument, showing operations and consequencies of changes. This means, too, that optimizing processes and integration of strategic programme-planning becomes to be a permanent task.

In order to always be able to decide, you need a direct grip on contents of production and editing, which ideally also should be usable in Internet (CMS: Content Management System): bookcovers, flap copy (Klappentext), information on the author should also be usable for sales folders. Audio- and Video-data should as well be available as the manuscript (totally or in parts): E-books.

3. Goals of an IPIS

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4. Summary of Goals4. Summary of Goals

The Goal of implenting a Integrated Publishing Information System is to

integrated processes and data realize transparency on work in progress integrate information flow between the departments Gain transparency on profit contributions of products, customers and employees, Assist and speed up the decission making process. include employees into profit sharing Assist all business processes and thus reach

Higher Economical SuccessSystem users are all the employess who need to take decisions in their daily work!

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5. Additional Possibiltes of Using an iPIS (1)

Data-keeping is free of redundancies and up-to –date.

Optronically archived contracts as well as editorial data (Cover, flap copies (Klappentexte), Bookreviews, informationen on the author).

Negotiation: always be able to look at data of historical pre-calculation.

Always be able to look at authors´/ genres success in the past

Higher quality in decision making helps save guarantees.

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5. Additional possibilities of Using an iPIS (2)

Up-to-date transparancy on work in progress of different product forms (HC, AudioBool, PB, Licences) in departments: Editorial, Production, Coverdesign, Marketing und Sales.

Always available: news on economical development of a Right and early possibility to intervene, if not satisfactory

Periodical Plan/ Actual/ Previous Year comparisson on any level of aggregation: Right, Title, Author, Customer, …

Aid in strategic programme planning (see below) Systematically using advances to an author so far not paid in. First Priority: Adaquacy to the User and Easy to Handle

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6. The possible structure of the System

Accountancy royalty accountancy

Contracts archives (opt.)

Material/ Stock royalties,

Sales/ Revenues/ fees / stock

Distribution Employee- Profit- Sharing MS-Office-Tools

Publishing Informational System (incl. Worklows)

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7. Components of the total system

hardcover downloadspocket book Digitale Trägeraudio book Archiv

software systems Hardwareorganizational software Softwareeditorial systemQualitymanagement ("six sigma")

Strategy and Fixing Goals to be achieved

Employees and Organization

Philosphy/ strategy of Company: How will our company look in 5 years

Media

Inhalte

Means of Organization technique

Contents

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8. A Publisher´s production process

Market-analysys

Customer-attraction Product-

ideas

Lecturing Rights

Produktion Coverdesign

Sales Marketing

custo-mer

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9. Inclusion into the strategic Programme - Planning

Phase 1 Phase 2 Phase 3 Phase 4 Phase 5

item How will market develop?

Organizational structure

structure of programme for t +3 to 5

Planning of programme next to

seasons

Production and Marketing

goals

expected marketdevelopment to strategically plan your publ-shing-programme

market-orientated responsibilities in sales as well as

lectuters´ departmebt

strategic programmplan

ning

Planning of new titles (novelties) to

appear in next season

produce advertising publications

(Vorschauen)

Basis of Information, Procedures

Historical data, Media control, GFK, "tummy"

Fixing main tasks to lecturers as well as

to sales persons

fixing structure of

programme for t +3 to 5

Fixing of each title to appear next

season

list of titles to appear and current

status

aids statistics/ controlling-data organigramme Rights

availableRights pre- and post

calculation

T I M ET I M E

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10. Steps of Realisation10. Steps of Realisation

Give up ancient production lists Pre-calculation Profit-Contribution calculation Content Management System Also: Set up an employee profit participation model based

on a system of goals (Strategy) of the whole publishing company referring to data provided by iPIS!

Each period of realization needs to be accompanied by intensive traingings into the system!

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V Organizational Management Principles

1. Centralization vs. Decentralization2. Management by delegation3. Management by execption4. Management by objectives5. Excercise V


1. Centralization vs. 1. Centralization vs. DecentralizationDecentralization

Where are the decisions taken?

Centralisation, in its extreme, means, that all decisions are taken by only one person/ departement in a company. All others are just to fulfill the orders given. This principle only seems possible in very small companies. With its growth, a need for decentralisation becomes necessary!


2. Management by Delegation 2. Management by Delegation (MbD)(MbD)

•MdB delegates competencies and responsibilities to people below in the hierarchie. Task are to be fulfilled on a lower hierarchical level•Delegation needs decentralisation.•Advantages are

Higher elasticityLower working-burdens to the leading managements, respectively Higher feeling of responsibility and more fun at work


3. Management by Exception (MbE)3. Management by Exception (MbE)

•Only under exceptional circumstances the management is involved into the process. • Only if there are exceptionally important decisions to be taken or •in case of high deviations (Abweichungen) from goals given, the management acts into the area of responsibility of his employee.•Comptencies and responsibilities for „normal“ tasks are delegated to a lower level in hierarchie.


3. Management by Exception (MbE)3. Management by Exception (MbE)

Management by exception needs: Clear definitions of and compentencies to tasks delegated Real delegation of responsibilities for tasks transferred. Definition on what is routine and what is exceptional. Definition of tolerance area for deviations from goals clearly specified.


4. Management by Objectives (MbO)4. Management by Objectives (MbO)

•Managment and employees agree upon objectives to be reached. •Employees are responsible for reaching the objectives.•Employees are free in choice of instruments for reaching goals.•They are not judged for measures or decisions taken but only for realization of objectives given •Compensation (Salary and Boni) are determined by degree of goal achievement.•This Participation in Decision Making Process motivates and helps develop responsibilities and motivation.

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Exercises V:

Explain according to what Management prinicple your Organization works think about possibilities of improvement by changing principles

Think about what needs to be done in order to change way of cooperation within your company and put it down in a paper (which is just for your own use).

Give concrete examples on each one of the management principles

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VI. Financial Reporting for Corporate Governance Purposes

1. Examples1.1 Balance Sheet, Profit and Loss Account1.2 Precalculation sheet for an Authors Right to be

Purchased1.3 Comparing your Fiscal Year with the Previous Year

and your Business Plan2. What is accountancy 3 Purposes of Accountancy

3.1 External Recipients of Information3.2 Internal Recipients of Information

4. Focus of Information4.1 Usually externally focused information4.2 Usually internally focused information

5. Balance Sheets5.1 Purpose of a Balance sheet5.2 How to understand a balance sheet

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VI. Financial Reporting for Corporate Governance Purposes

5.3 Comparisson of asstes and liablitlities5.4 Balance Sheet Positions5.5 The Reliance of Balance Sheet Information 5.6 The Connection between a Balance sheet and a Profit and Loss account5.7 Balance Sheet of a Big company5.8 Excercise VI: Set up a balance sheet for a newly foundet company5.9 The Profit and Loss Account5.10 Depreciation 5.11 The Profit and Loss account of a Publishing Group

6. Excercise VI: Find out about the influence of the Balance sheet to the P&L Account and vice versa

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1.1 Example: Balance Sheet of 1.1 Example: Balance Sheet of Bertelsmann 12/07 (1)Bertelsmann 12/07 (1)

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1.1 Example: Balance Sheet of 1.1 Example: Balance Sheet of Bertelsmann 12/07 (2)Bertelsmann 12/07 (2)

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1.1 Profit and Loss account of 1.1 Profit and Loss account of Bertelsmann 12/07Bertelsmann 12/07

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1.2 Example for a Pre Calculation of a 1.2 Example for a Pre Calculation of a BookBookCAIRO publisher 0 Format 0 cm

Title number 11111 Date 40026 No Pages 300 P

Jusuf 0

Edit.1 in % Edit.2 in % Edit.3 in % Edit.4 in %

total printed 12.000 10.000 15.000 8000

retail price 29,95 € 34,95 € 24,95 € 39,95 €

Sales into retail 11.273 9.394 14.091 7.515

gross Revenues (Bruttoerlös) 337.631 100,0 328.331 100,0 351.582 100,0 300.242 100,0

Net Rev. (ex discount, tax Return 171.847 50,9 167.214 50,9 179.024 50,9 152.978 51,0

material cost per copy 4,00 5,00 3,50 6,00

material in total 48.000 27,9 50.000 29,9 52.500 29,3 48.000 31,4

Revenues from Licences 5.000 2,9 5.000 3,0 5.000 2,8 5.000 3,3

Absatz Festabnahme 0 0,0 0 0,0 0 0,0 0 0,0

Umsatz Festabnahme 0 0,0 0 0,0 0 0,0 0 0,0

Contributions (Zuschüsse) 0 0,0 0 0,0 0 0,0 0 0,0

fees total (incl. Sales fees to author) 31.705 17,9 30.367 17,6 33.589 18,3 28.155 17,8

Total revenues net 176.847 100,0 172.214 97,4 184.024 104,1 157.978 89,3

direct costs in total 79.705 45,1 80.367 46,7 86.089 46,8 76.155 48,2

Results before overhead 97.142 54,9 91.847 53,3 97.934 53,2 81.823 51,8

cost of sales (Prov. Auslieferung) 27.661 15,6 26.914 15,6 28.816 15,7 24.622 15,6

overhead inkl. advertising/ interest 51.120 28,9 49.764 28,9 53.224 28,9 44.033 27,9

Result after overhead 18.361 10,7 15.169 9,1 15.895 8,9 13.168 8,6

Break even No. Of copies 10.718 89,3 9.093 90,9 13.668 91,1 7.311 91,4

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2. What is accountancy?2. What is accountancy?

Accountancy : all methods of numerically collecting and presenting goods- and money -flows mainly accruing from a company´s acitvities (i.e. production and selling).

We usually differ among the following, however dependent, parts:

bookkeeping, balancing, profit and loss- accounting, liquidity-observation; the main focus is on periods

Controlling: profits and losses on a mainly product/rights and customer basis within periods to be specified

Planning the future development.

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3. Purposes of Accountancy3. Purposes of Accountancy

While interdependent, the parts of accountancy have different purposes:

Balancing: showing a period´s success to meet taxing-purposes; to assure creditors (law)

Controlling: mainly decision making- and supervising- purposes

Planning: forecasting the future and compare developments with past and plan.

Therefore the recipients of the information not necessarily aren´t identical: they are internal and/or external.

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3.1. External Recipients of Information

Who are the Recepients of External Information?

Financial Intermediary (Banks) Government (Tax) Suppliers (Stockholders) Owners of Capital Companies stock

companies Public (large Companies or Government owned

companies)

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3.2 Internal Recipients of Information3.2 Internal Recipients of Information

Who are the Recipients of internal Information? Capital owners Supervisory Board Management All decisions takers

Lecturers, Sales Personal, Producers, …

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4.1 Usually externally focused information

Providing External Information: The Profit and Loss-Account The Balance Sheet The Cash flow Business Report Balance Sheet, Profit and Loss-

Account and Liquidity-Report interact in a specific deterministic manner (to be explained later)!

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4.2 Usually internally focused information4.2 Usually internally focused information

Planning of Balance/ Profit and Loss/ Liquidity for a i.g. 3-years period of time.

Planning on a product or customer basis Pre-Calculation of Rights offered Pre-Calculation of an Edition to be (re-) printed Pre-Calculation of a Price offered

Comparing Pre-Calcs with Reality Optimizing Decision Making Process:

Feedback Interdependencies between internal and

external figures.

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5.1 Purpose of a Balance sheet5.1 Purpose of a Balance sheet

The purpose of a Balance Sheet is to report the financial position of a company at a certain point in time. It is divided into two columns. The first lists, what the company owns (assets) on the left. The second shows what the company owes (liabilities and net worth) on the right. At the bottom of each list is the total of that column. As the name implies, the bottom line of the balance sheet must always "balance." In other words, the total assets are equal to the total liabilities plus the net worth.

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5.2 How to understand a balance sheet5.2 How to understand a balance sheet

Sources and Uses A way to look at the balance sheet is in terms of the "sources"

and the "uses" of cash. Liabilities and net worth are sources of cash. They represent debt owed to creditors who have supplied cash or its equivalent. Assets are a use of cash. The company uses cash to purchase assets in order to make a profit.

A Balance Sheet represent Owns and Owes, i.e. the Use of Cash and Source of Cash.

Assets which are the most like cash Obligations which must be paid to keep creditors happy Assets which will turn into cash within one year Obligations which will be due and payable within one year Assets which may never mature into cash Obligations which are the least nervous and never due Total Assets Liabilities & Net Worth


5.3 Comparisson of assets and liabilities5.3 Comparisson of assets and liabilities

Die Gewin- und Verlustrechnung (Aufwand und Ertrag) ist eine Rechnung in der Stromgrößen berücksichtigt werden

Balance sheet

Assets LiabilitesHow is money used: OWNSground (asset) will turn into cash only when sold

• buildings (asset)

• machines (asset)

• stock (current asset): will turn into cash soon

• cash (current asset): most like cash

Where does money come from: OWES• owners´ equity

• liabilites due in more than a year

•Liablilities due in at least one year

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5.4 Explanation of Balance Sheet positons (1)

Current Assets: those assets which mature into cash in one year or less (CA). Accounts Receivable: dollars due from customers as a result of selling inventory or

services on terms which allow for delivery prior to the payment of cash. The transaction exists as a receivable on the balance sheet until cash is collected from the customer (A/R).

Inventory: the goods and materials a company sells to make a profit. Inventory exists in three forms: raw materials, work in progress, and finished goods. In the process of selling inventory, either cash is received or an account receivable is created (INV).

Prepaid Expenses: when cash is used to purchase a good or service, the benefits of which will be realized or received within the current year (12 months).

Fixed Assets: physical assets which have life in excess of one year. This includes land, buildings, machinery, equipment, furniture/fixtures, and leasehold improvements (FA).

Net Fixed Assets: Also known as the book value, the net fixed asset is calculated as the purchase price of the asset (gross fixed asset) less the accumulated depreciation (the sum of the annual amounts charged for the "wearing out" of the asset) (NFA).

Notes Receivable: a loan made by the company which is evidenced by a promissory note (N/R).

Intangibles: assets which have no physical properties or "set" values. Examples of intangibles include authors rights, research and development, and goodwill (INT).

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5.4 Balance Sheet positons (1)5.4 Balance Sheet positons (1)

Current Liabilities: what the company "owes" which must be paid within one year (CL).

Note Payable Bank: obligations evidenced by a promissory note from the bank which have maturity dates of less than one year (N/P).

Accounts Payable: amounts due to suppliers who have provided inventory to the company (A/P).

Accruals: obligations owed but not yet billed (ACCR). Current Portion of Long-Term Debt: the portion of a long-term loan

(principal only) which is due within the next 12 months (CDTD). Long Term Debt: the portion of a term loan which does not have to be paid

within the next year. Subordinated Officer Debt: Cash the officers have invested in the company

which is subordinated to any bank financing the company has received. Net Worth: The owner's investment or "equity" in the company which may

be either "purchased" or "earned." Purchased equity consists of preferred stock, common stock, and capital surplus. Simply put, the net worth is the difference between the assets and liabilities of a company (NW).

Retained Earnings: another term for earned equity; represents the profits of a company which have been reinvested within the business.

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5.5 Reliance of Balance Sheet information5.5 Reliance of Balance Sheet information

The particular elements of a balance sheet may vary significantly from day to day. Over time, these "snapshots" of a company, taken on a year-end or monthly basis, can reveal important information about the ability of the company to satisfy its creditors, manage inventory, and collect its receivables.

There are many possibilities to influence values in a balance sheet, for instance: depreciations or valuation adjustments

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5.6 The Connection between Balance Sheet 5.6 The Connection between Balance Sheet and its Connection to the P&L Accountand its Connection to the P&L Account

• Assets: shows structure of assets

• Debts: shows structure of debts and owners capital

• assets - debts = owners capital (OC)

• OC in t2008 - OC in t2007 = Profit t 008 = Profit from Profit + Loss Acc.

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asset accounts debt-accounts Aufwands-Konten

Costaccounts

Ertrags-Konten

Incomeaccounts

von

Changes in

assets

Changes in debts or

ownerscapital

Wert-reduction

In Value Wert-mehrungen

increaseIn value

BILANZ:

Vermögen = Kapital

BALANCEActive>Passiva = profitActiva<Passiva = loss

equitiy = capital

GuV-RECHNUNG:Ertrag Aufwand = JahresüberschußErtrag Aufwand = Jahresfehlbetrag

Profit and LossRevenues> Cost = SurplusRevenues< Cost = Loss

Types of acc.

Erfolgskonten Profit and Loss Acc

Asset Account+ + + +----

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Closing up of a P&L-Account with variable Closing up of a P&L-Account with variable Owners EquityOwners Equity

Income accountExpense account

Profit & loss acc.

Owners equityaccount

Final balancesheet

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5.7 Balance sheet structure of a Big Capital Company (1)5.7 Balance sheet structure of a Big Capital Company (1)

Assets:

I. Immaterielle Vermögensgegenstände:1. Konzessionen, gewerbliche Schutzrechte und ähnliche Rechte

und Werte sowie Lizenzen an solchen Rechten und Werten;2. Geschäfts- und Firmenwert;3. geleistete Anzahlungen;

II. Sachanlagen:1. Grundstücke, grundstücksgleiche Rechte und Bauten auf fremden

Grundstücken;2. technische Anlagen und Maschinen;3. andere Anlagen, Betriebs- und Geschäftsausstattung;4. geleistete Anzahlungen und Anlagen im Bau

III. Finanzanlagen:1. Anteile an verbundenen Unternehmen;2. Ausleihungen an verbundene Unternehmen;3. Beteiligungen;4. Ausleihungen an Unternehmen, mit denen ein Beteiligungs-

verhältnis besteht;5. Wertpapiere des Anlagevermögens;6. sonstige Ausleihungen.

A. Anlagevermögen:I. Vorräte:1. Roh-, Hilfs- und Betriebsstoffe;2. unfertige Erzeugnisse, unfertige Leistungen;3. fertige Erzeugnisse;4. geleistete Anzahlungen;

II. Forderungen und sonstige Vermögensgegenstände:1. Forderungen aus Lieferungen und Leistungen;2. Forderungen gegen verbundene Unternehmen,3. Forderungen gegen Unternehmen, mit denen ein Beteiligungs-

verhältnis besteht,4. sonstige Vermögensgegenstände;

III. Wertpapiere:1. Anteile an verbundenen Unternehmen;2. eigene Anteile;3. sonstige Wertpapiere;

IV. Schecks, Kassenbestand, Guthaben beiKreditinstituten.

B. Umlaufvermögen

C. Rechnungsabgrenzungsposten

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Passiva:

I. Gezeichnetes Kapital;

II. Kapitalrücklage;

III. Gewinnrücklagen:1. gesetzliche Rücklage;2. Rücklage für eigene Anteile;3. satzungsmäßige Rücklagen;4. andere Gewinnrücklagen.

IV. Gewinnvortrag/ Verlustvortrag;

V. Jahresüberschuß/ Jahresfehlbetrag.

A. Eigenkapital

1. Rückstellungen für Pensionen und ähnliche Verpflichtungen;2. Steuerrückstellungen;3. sonstige Rückstellungen.

B. Rückstellungen:

1. Anleihen, davon konvertibel;2. Verbindlichkeiten gegenüber Kreditinstituten;3. erhaltene Anzahlungen auf Bestellungen;4. Verbindlichkeiten aus Lieferungen und Leistungen;5. Verbindlichkeiten aus der Annahme gezogener Wechsel

und aus der Ausstellung eigener Wechsel;6. Verbindlichkeiten gegenüber verbundenen Unternehmen;7. Verbindlichkeiten gegenüber Unternehmen mit denen ein

Beteiligungsverhältnis besteht;8. sonstige Verbindlichkeiten, davon aus Steuern, davon im

Rahmen der sozialen Sicherheit.

C. Verbindlichkeiten:

D. Rechnungsabgrenzungsposten

5.7 Balance sheet structure of a Big Capital Company (2)5.7 Balance sheet structure of a Big Capital Company (2)


5.8 Excercise VI: Set up a Balance sheet 5.8 Excercise VI: Set up a Balance sheet for a newly founded companyfor a newly founded company

• You have got 23.000 Pounds and may loan another 10.000 from your bank.

• You put into your company several Personal Computers worth 4.000 Pounds

• You purchase an author´s right for 5.000

Owns Owes

Start Balance

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5.9 Profit and Loss Account (P&L)5.9 Profit and Loss Account (P&L)

The P&L- account sums up and compares expenses and incomes of a period.It explains how profits or losses have developed, while the balance sheet only shows its height (Höhe). Reason for Balancing: Documentation of changes of Stock (Bestandsgrößen) within a certain period of time

For tax reason one would not need a P&L-Account.

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The Balance Sheet is a snap shot in time of a company’ s overall worth. 5.9 The Profit and Loss Account (P&L)5.9 The Profit and Loss Account (P&L) is a report of the publisher´s profit on the sale of their books or the provision of their sales of licences over a trading period, normally one year

. PROFIT & LOSS ACCOUNT 2001/2000

Note 1 3050

1400650

20501000

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155

13Insurance 10Professional Fees 30Utilities 35Debt Write Off 30Salary 120Motor 80Interest Charges 50Depreciation 50

418427

01. Income02. Turnover 03. Cost of Sales04. Materials05. Wages06. Total [4+5] 07. GROSS PROFIT [2-6] 08. Distribution09. Marketing

11. Total [9+10] 12. Expenses13. Rent/Lease

10. Delivery Costs80

14. Total [All of 13]

15. NET PROFIT BEFORE TAX

(£000)

http://www.bizhelp24.com/accounting/the-balance-sheet-4.html

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5.9 Explanation of the Positions5.9 Explanation of the Positions

01. INCOME: (02)This is the total value of INVOICED books or licences sold, LESS vat, and trade discounts

over a one year period. The words 'Turnover' and 'Sales' would mean the same.03. COST OF SALES: (04, 05, 06)This is the direct cost of goods or licences SOLD. All other goods left at the end of the

accounting period are entered as 'Stock' in the Balance Sheet. So all finished and unfinished books´ value are to be found in the Balance Sheet..

07. GROSS PROFITThis figure is the total amount of profit on all sales after deducting the direct cost of

making the goods or supplying the service. Expenses, tax and interest are yet to be deducted.

08. DISTRIBUTION (09, 10, 11)This area covers postal and vehicle distribution, wages for sales and marketing staff,

agent commissions, sales outlets and anything that is clearly involved with sales promotion.

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5.9 Explanation of the Positions5.9 Explanation of the Positions

12. EXPENSES (13, 14)All costs outside of 03. and 08. are listed here. Again, as with all costs in the P&L,

figures exclude vat. Most of the expenses are self explanatory, however, depreciation is not so straight forward.

Depreciation is the reduction in value of a fixed asset.

When you buy a new machine the purchase value is added to the FIXED ASSET column in the Balance Sheet. At the end of each year the value of the machine reduces the FIXED ASSET amount in the Balance Sheet. For an equal five year period a compensating entry is needed in the P&L (this is 'double entry' bookkeeping). It is very similar to a write off entry.

15. NET PROFIT BEFORE TAXThis figure is the profit resulting from all sales in the period. Corporation Tax 20% (or

whatever the current rate if different) has to be deducted from this amount for a true figure.

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5.10 Depreciation: why pay outs not 5.10 Depreciation: why pay outs not directly are costsdirectly are costs

Purchasing publishing-rights, machines or inventory reduces your cash or raises your loans in the moment of purchase. But it does not in the same instant raise your cost: Using machines or rights of several fiscal years consume their value while being used. Reducing the value of Machines etc. in your balance is called depreciation.

The value may also be decreased because of a loss in marketability, i.e. when you see, that the money you paid for a machine or a right may not come in directly or indirectly via sales again. Then you do a special write of (depr.).

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5.10 Profit and loss account of a 5.10 Profit and loss account of a publishing grouppublishing group

in TDM in % in % in % in % in % in %Revenues retailers 19.336 100,0 2.460 100,0 1.318 100,0 1.591 100,0 734 100,0 12.324 100,0 705 100,0 204 100,0Material and Authors 12.225 63,2 1.351 54,9 850 64,5 870 54,7 460 62,7 8.380 68,0 288 40,9 26 12,7Distribution and Sales personal 1.946 10,1 320 13,0 171 13,0 175 11,0 66 9,0 1.033 8,4 113 16,0 68 33,3contribution margins Retail 5.164 26,7 789 32,1 297 22,5 546 34,3 208 28,3 2.911 23,6 304 43,1 110 53,9Adv. Press PR Fairs 1.147 5,9 190 7,7 25 1,9 178 11,2 34 4,6 319 2,6 117 16,6 284 139,2Depreciation on Stocks -2.055 -10,6 0 0,0 0 0,0 0 0,0 0 0,0 0 0,0 -55 -7,8 -2.000 -980,4Contribution after Depr. 6.072 31,4 599 24,4 272 20,6 368 23,1 174 23,7 2.592 21,0 242 34,3 1.826 895,1Sum Costs 13.264 68,6 1.861 75,6 1.046 79,4 1.223 76,9 560 76,3 9.732 79,0 463 65,7 -1.622 -795,1Wertschöpfung 6.072 31,4 599 24,4 272 20,6 368 23,1 174 23,7 2.592 21,0 242 34,3 1.826 895,1Personal 2.769 14,3 188 7,6 172 13,1 240 15,1 0 0,0 260 2,1 102 14,5 1.807 885,8Sachkosten 1.233 6,4 68 2,8 51 3,9 19 1,2 19 2,6 72 0,6 101 14,3 903 442,6Depreciation on Inventory 255 1,3 244 9,9 0,0 0,0 0,0 0,0 2 0,3 9 4,4Room Rents 321 1,7 41 1,7 40 3,0 12 0,8 12 1,6 14 0,1 6 0,9 196 96,1Cost of Overhead 4.578 23,7 541 22,0 263 20,0 271 17,0 31 4,2 346 2,8 211 29,9 2.915 1.428,9Results operatively 1.494 7,7 58 2,4 9 0,7 97 6,1 143 19,5 2.246 18,2 31 4,4 -1.089 -533,8Cost of Interest 633 3,3 0,0 0,0 0,0 0,0 0,0 2 0,3 631 309,3Revenues of interes 192 1,0 0,0 0,0 0,0 0,0 0,0 5 0,7 187 91,7extraordinary Earnings 383 2,0 0,0 0,0 0,0 0,0 0,0 1 0,1 382 187,3extraordinary Costs 1.100 5,7 0,0 0,0 0,0 0,0 0,0 0,0 1.100 539,2Result before Tax 336 1,7 58 2,4 9 0,7 97 6,1 143 19,5 2.246 18,2 35 5,0 -2.251 -1.103,4Tax 6 0,0 0,0 0,0 0,0 0,0 0,0 0,0 6 2,9Annual net profit 330 1,7 58 2,4 9 0,7 97 6,1 143 19,5 2.246 18,2 35 5,0 -2.257 -1.106,4

total company publ. 1 publ. 2 publ. 3 Overheadpubl. 4 publ. 5 publ.6

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Profit and Loss account per month x in year y This Year Diff. Diff. Total Month x in % Plan in % Ist in % P/I % I/I% plan in %

1 Revenues retail 206 100,0 1.250 100,0 1.104 100,0 -12 436 234 100,02 Material -176 -85,5 523 41,8 503 45,5 -4 -386 70 29,73 Authors fees 21 10,0 112 9,0 219 19,8 96 963 8 3,24 Cost of Distribution 23 11,3 100 8,0 185 16,7 85 691 9 3,85 Sales personal 26 12,5 49 3,9 14 1,3 -71 -45 -14 -6,06 Contribution retailing 312 151,6 466 37,3 183 16,6 -61 -41 162 69,47 Revenues special sales 246 100,0 190 100,0 238 100,0 26 -3 0 100,08 Material 85 34,6 33 17,2 85 35,8 162 0 0 -35,09 Authors fees 20 8,1 7 3,7 19 8,0 171 -5 0 0,0

10 Cost of Distribution 0 0,0 0 0,0 0 0,0 #### ### 0 0,011 Sales personal 15 6,1 16 8,4 14 5,9 -13 -7 -90 ######12 Contribution special sales 126 51,2 134 70,7 120 50,4 -11 -5 90 ######13 Remaindering sales 3 100,0 0 100,0 6 100,0 #### 117 0 100,014 Material, Distribution Salesfees 1 40,0 0 6,8 0 0,2 -314 -99 0 5,915 Contribution Remaindering 2 60,0 0 93,2 6 99,8 #### 261 0 94,119 Contribution License sales 30 100,0 18 100,0 -20 100,0 -210 -167 0 ######20 Adv. PR Press Fairs 151 31,2 196 13,4 204 15,3 4 35 0 0,021 Depreciation Debtors 0 0,0 0 0,0 0 0,0 #### ### 0 0,022 Depreciation Stocks 25 5,2 0 0,0 25 1,9 #### 0 0 0,023 Depreciation Gurantees to Others 0 0,0 0 0,0 0 0,0 #### ### 0 0,024 Contribution after Depreciation 293 60,6 422 29,0 61 4,6 -86 -79 252 107,7

26 Total Revenues 484 100,0 1.458 100,0 1.329 100,0 -9 174 234 100,0

27 Total Direct Costs 191 39,4 1.036 71,0 1.268 95,4 22 564 -18 -7,7

28 Economical Value Added 293 60,6 422 29,0 61 4,6 -86 -79 252 107,729 Personal Costs 128 26,4 511 35,0 263 19,8 -48 106 0 0,030 other Cost 49 10,0 213 14,6 143 10,8 -33 195 76 32,333 Umlagen 0 0,0 -7 -0,5 -58 -4,4 0 0,0 0 0,034 Total indirect costs 177 36,4 717 49,2 348 26,2 -51 97 76 32,335 interest costs 53 10,9 21 1,4 3 0,2 -84 -94 0 0,036 interest revenues 14 3,0 10 0,7 9 0,7 -8 -36 0 0,037 operative result 79 16,2 -306 -21,0 -282 -21,2 -8 -458 176 75,538 interest to the ow ner 43 8,9 50 3,4 41 3,1 -17 -5 0 0,039 Goodw ill-depreciation 26 5,4 27 1,8 27 2,0 2 3 0 0,140 special Results 28 5,7 0 0,0 56 4,2 #### 103 0 0,041 special costs 1 0,2 0 0,0 -1 -0,1 #### -234 0 0,042 Result before Tax 36 7,4 -382 -26,2 -293 -22,1 -23 -915 176 75,343 Tax 0 0,0 -2 -0,1 0 0,0 -105 ### 0 0,044 Annual net profit 36 7,4 -380 -26,1 -293 -22,1 -23 -915 176 75,345 dav. 0 0 0 046 Deprecition to goodw ill (+) 26 27 27 047 Deprecition to inventory (+) 18 115 33 048 Provisions (Rückstellungen) 0 0 0 049 Depreciatuibs (Wertberichtigungen) 107 80 140 75 31 050 Cash flow 187 38,7 -159 -10,9 -93 -7,0 -41 -150 176 75,5

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6. Excercise: Examining interdependencies between Balancing and P&L

taxIntangible Assets (i.e. rights) 19,0 Revenues 440,0Tangible Assets 7,0 Material -162,8Financial Assets 3,0 Personal -106,6Total Assets 29,0 Depreciation -1,6 Average time of use 4,5

Raw material (paper) 2,6 Marketing Sales -152,7Semi finished products (films) 4,7 Result 16,3Finished Products (Books) 29,0 Financial Revenues 0,2 interest 5% 5%

Debtors from Sales 33,2 Interest -3,2 interest 7 % 7%

Cash 1,5 Financial Result -3,0Current Assets 71,0 Tax -5,8 0,0 tax 45%

Assets 100,0 Surplus 7,5

Owners´ equity 24,9 EBITDA 12,1annual profit 7,5 EBIT 10,6Total owners´ equity 32,4Credits from Suppliers 22,0Bank credits up to one year 13,6Bank credits more than 1 year 32,0Liabilities 67,6total Liabilities 100,0

Delta due to changes in interest 0,0

Balance sheet Profit and Loss Account changechange

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6. Groupwork: What happens to Balance 6. Groupwork: What happens to Balance sheet and P&L, if yousheet and P&L, if you

1. loan 1 from your bank for 2 years put it in cash2. buy material on stock via bank: 23. sell products for 25 at a margin of 50 % on

credit4. Receive an invoice 5 for books you put on

stock, paying later5. Pay salaries at 56. pay an advance to an author at 107. pay 15 royalties to your authors, 50% of which

may be calculated against guarantees8. pay profit shares to your owners 2

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VII Financials and the Balance-sheet

1. Financial Rules1.1 Vertical Structural Rule1.2 Golden Rule of Financing1.3 Golden Balance Sheet Rule

2. Types of Financing2.1 Internal and External Financing2.2 Owner´s equity and Loans2.3 Interdependencies between the 2

3. Planning your monthly liquidity4. Exercise VII

95

1. Financial Rules1. Financial Rules

Vertical capital strucural rule

HorizontalCapital

Structural rule

Golden Financial

Rule

GoldenBalancing-

rule

.Financial rules

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1.11.1 Vertical structural ruleVertical structural rule

• Looks upon the „Liability“ side of the balance sheet

•Sets up relation between loaned money and equity capital ideally ratio of: loaned/ = 1:1

own money

Reduces risk in the eyes of capital loaners

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1.2 Golden Rule of Financing1.2 Golden Rule of Financing

• Connects assets and liabilities in a balance sheet-view

• Seeks congruency between period of time assets are in use and the time, equitiy-capital (EK) and long-term-loaned money is available.

• It is to assure liquidity and shows the ability of an publisher to always pay his debts in time

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1.3 Golden Balance sheet rule

• tightest view: assets (tangibel,intangibel, financial) = owners capital

• more generous view: assets = owners cap. + longterm loaned money

• most generous view: assets + longterm current ass. = OC + longterm liabilities

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Types of Financing

Depending onSource of Finances

Internal Financing

External Financing

Depending on Relation toto the enterprise

OwnersÉquity

Non-Ownerséquity

2. Types of Financing2. Types of Financing

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2.1 Internal- and External Financing2.1 Internal- and External Financing

Internal Financing´s sources mainly are Revenues. The money comes from external from the customers who pay back in money terms what the enterprise invested in the past into its products.

External Financing is Financing with the Money coming from outside the company. Capital does not come from the enterprise´s production process while selling products, but comes from credits by banks or from shareholders.

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Financing

External Financing Internal Financing

credits loans

Money from the share-holders

Financing out of retained earnings

Financing out of provisions (Rückst. /Rücklage)

2.1 Internal- and External Financing2.1 Internal- and External Financing

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2.2 Owner´s equity and Loans2.2 Owner´s equity and Loans

Financing via own resources is putting in capital by the shareholders, i.e. equity capital or loans by the owner.

If capital does not come from the owners but from outside creditors.

Examples are: current accounts, suppliersćredit, loans (Darlehen)

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2. 3 Interdependencies between the 22. 3 Interdependencies between the 2

According to sources of money

Types of financing Internal Financing Out of the enterprise´s production process

External financing Not directly connected to the enterprise process

Financing according to legal State (rechtl. Status)

Own Equity Financing

Self-financing out of profits Owners give money into the company either as credits or as share-money

State of who gives the capital

Outside Money Financing: Creditor Financing

Financing out of Provisions (Rückstellungen)

Financing from loans, credits

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3. Planning your monthly liquidity3. Planning your monthly liquidity

Liquidity Planning month 1 2 3 4 5 6 7 8 9 10 11 12

Incomefrom sales 900 1.100 1.000 1.100 1.200 1.300 1.100 1.100 1.100 1.100 1.100 1.100other income 0 100 0 0 100 0 200 100 0 0 200 0

total income 900 1.200 1.000 1.100 1.300 1.300 1.300 1.200 1.100 1.100 1.300 1.100expenditure

material 200 400 400 400 400 500 400 400 400 400 400 500external services 100 100 100 100 100 100 100 100 100 100 100 100salary 300 300 300 300 300 500 300 300 300 300 300 400energy 5 5 5 5 5 5 5 5 5 5 5 5Reparatur und Instandhaltung 0 0 100 0 0 0 0 0 100 0 80 0advertising and marketing 200 100 200 200 300 200 200 200 200 200 200 200interest (depend on loans needed) 0 0 10 0 0 12 0 0 10 0 0 10taxes and fees 0 0 0 0 0 0 0 0 0 0 0 0other expenditure 0 0 0 0 0 0 0 0 0 0 0 0

total expentidure 805 905 1.115 1.005 1.105 1.317 1.005 1.005 1.115 1.005 1.085 1.215

income- surplus / -deficit 95 295 -115 95 195 -17 295 195 -15 95 215 -115

Financials and Investmentscredits: repayment (-) / raising (+) -50 -100 -100 -100 -100 -50 Financial investm: increase (-) / decrease (+) 0Owners withdrawal (-) / contribution (+) 0Investitments (-) / Desinvestments (+) -100 -100 -100 -100 -100 -100 -100 20

Saldo -150 -100 -100 -100 -100 -100 -200 -100 20 -100 -100 -50

Change in Liquidity -55 195 -215 -5 95 -117 95 95 5 -5 115 -165

Liquid money by end of month StartLiquidity 1 (without short term bank credit) -10 -65 130 -85 -90 5 -112 -17 78 83 78 193 28short term credit Limit 100 100 100 100 100 100 100 100 100 100 100 100 100Liquidity (including short term reserves) 90 35 230 15 10 105 -12 83 178 183 178 293 128

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4. Exercises VII

Please set up a liquidity plan for the next Please set up a liquidity plan for the next 3 months as follows3 months as follows

Start credit at bankStart credit at bank -20-20Credit lineCredit line 50 50Monthly income: Monthly income: 100100Monthly expenditure: Monthly expenditure: -80-80You invest on machines in month 2You invest on machines in month 2 --5050Depreciation months 1 and 2, Depreciation months 1 and 2, 5 5Depreciation month 3Depreciation month 3 7 7Owners withdrawal in months 3Owners withdrawal in months 3 -20 -20

What kind of financing is deprecition/ is owners What kind of financing is deprecition/ is owners withdrawal?withdrawal?

106

VIII Figures and Ratios of VIII Figures and Ratios of ProfitabilityProfitability

1. Examples 2. The Purpose of figures of

probitability3. Productitvity4. Economic efficiency5. Profitability6. Liquidity7. Return on Investement8. What may they really tell us9. The Balanced Score Card: Multiple

Goals 10. Exercise VIII

107

1. Examples for Figures of Profitabilty1. Examples for Figures of Profitabilty

1. Creditors are concerned with the abiltiy of a company to pay its current obligations. So they seek information about the relationship of current assets to current liabilities

2. Stock holders are concerned with dividend3. Management is concerned with the activity of merchandising

inventory

So figures of interest are: Productivity Rentability

Profitability of shareholders capital Total capital employed Revenuerentability

Liquidity Return on Investment Balanced Score Card


2. The Purpose of Figures of Profitability2. The Purpose of Figures of Profitability

They are useful to judge economical behavior They are useful to judge economical behavior They give extremely condensed informationThey give extremely condensed informationThere are absolute and relative figures:There are absolute and relative figures:Absolut figures are: profit, operating result Absolut figures are: profit, operating result (Betriebsergebnis),(Betriebsergebnis),

Cash flow.Cash flow.Relative Figures are: productivity, economical Relative Figures are: productivity, economical efficiency, rentability, liquidity.efficiency, rentability, liquidity.

109

3. Productivity3. Productivity

Productivity is the ratio between input and output and usually refers to quantities

Productivity = OutputInput

110

4. Economic Efficiency 4. Economic Efficiency (Wirtschaftlichkeit)(Wirtschaftlichkeit)

Ratio between the values in input and output

Economic efficiency =Economic efficiency =

Revenue/ExpensesRevenue/Expenses

Revenue/ CostsRevenue/ Costs

Cost realized/ Cost Cost realized/ Cost plannedplanned

Kapitalumschlagshäufigkeit [%] = Umsatzerlöse .

(durchschn.) Gesamtkapital ohne Finanzanlagen

Turnover in capital = Revenues/ average total capital (except Fin. Turnover in capital = Revenues/ average total capital (except Fin. assets)assets)

111

5. Profitability5. Profitability

The Profitability, also called rate of return, is the most often used figure. It usually is a percentage of profit in relation to capital applied.

• share holders´ capital profitablity: profit/ equity (shareholders capital)• total capital´s profitability: (profit + interest) / total capital.

•EBIT: Earnings before interest and taxes•EBITDA: Earnings before interest taxes, depreciation and amortization

Profitability = profit/ capital appliedProfitability = profit/ capital appliedUmsatzrentabilität [%] = Betriebsergebnis (vor Steuern)

Umsatzerlöse

•revenue profitability: profit/ revenues

112

6. Liquidity6. Liquidity

Liquidity is the ability of an enterprise to always serve liabilities and debts in timeLiquidity always dominates profitability

There are different degrees of liquidity

Liquidity of 1st degree = cash + cash at bank + stocks in current assetsshort term loaned money

Liquidity 0f 2nd degree =above +

+ short term accounts receivable + stock short term loaned money

Liquidity of 3rd degree(Current Ratio) = current assets .

Short term loaned money

Short term loaned money = kurzfristiges FremdkapitalShort term loaned money = kurzfristiges Fremdkapital

113

7. Return on Investment7. Return on Investment

a) ROI = (profit/Revenues x revenues/total capital) *100(= Kapitalumschlag: turnover of

capital)

b) ROI = Profit x 100 / total capitalb) ROI = Profit x 100 / total capital

Profit = 50, revenues = 1000, capital = 400Profit = 50, revenues = 1000, capital = 400a)a) (50/1000x1000/400)*100 = 12,5%(50/1000x1000/400)*100 = 12,5%b)b) 50*100/400=12,5%50*100/400=12,5%


8. What may those figures really tell us8. What may those figures really tell us

Figures of Profitability are means of planning and controlling the processes of an enterprise

They may not be looked upon absolutely. So it is useful to compare those figures over a several periods in time or with those of other enterprises.

You often need a „healthy“ mix between the figures:Highest liquidity (all your money in cash) may cause lowest profitability. On the other hand highly profitable capital investments carry a danger of Illiquidity if the enterprise you gave money to becomes insolvent. To control this mix is the task of the enterprises

115

9. The Balanced Score Card: Multi Goal 9. The Balanced Score Card: Multi Goal Figure SystemFigure System

Balanced Scorecard

0

20

40

60

80

100Revenues

Return on Sales

capital profitabilty (ROI)

ratio of steady customers

how customers pay

Customer satisfaction

how orders are performed

quality managementVorschlagswesen

Satisfaction

qualification

motivation

quality of authors

No. Of Titles put out

foreign Authors

ZielIst

Financials

Customers

Processes

Employees

Authors

116

10. Excercise10. Excercise

2005 2006 2007Sales 100 100 100cost of sales 65 68 70Gross profit 35 32 30expenses 23 23 22depreciation 3 3 3interest 2 3 3operating profit 7 3 2Taxes 2 1 1profit 5 2 1

Balance sheet

Intangible Assets (i.e. rights) 19,0tangible Assets 7,0Financial Assets 3,0Total Assets 29,0Raw material (paper) 2,6Semi finished products (films) 4,7finsished Products (Books) 29,0Debtors from Sales 33,2Cash 1,5Current Assets 71,0Assets 100,0

Owners Capital 32,4Credits from Suppliers 22,0Bank credits up to one year 13,6Bank credits more than 1 year 32,0Capital 67,6Liabilities 100,0

In 4 groups find out (15 minutes):1. Ebit/ da2. Total capital´s profitability3. Share holder´s profitability4. Return on investment5. Vertical capital structure (see

below)

117

IX Internal Accounting is Cost Accounting

1. The purpose of Cost-Accounting2. Three perspectives of Cost-Accounting3. Cost types4. Payments, Expenses, Costs5. The differences between direct (variable) and overhead (fix) costs6. Distinguishing direct costs and overhead costs7. Direct cost: the principle of causation8. Overhead costs9. Cost Centre Accounting10. Contribution Margin Accounting


1. The purpose of Cost Accountint

Internal accounting is often called cost accounting. It is set up mainly for internal controlling purposes, i.e. to provide information for decission making. It is only set up to control (to steer) the company towards better performance.There are 3 Parts of cost accounting and results accounts (K&L):1. Analysis of cost by Type (how are costs structured): Kostenartenrechnung

2. Cost Centre Accouting: Where do costs occures Kostenstellenrechnung): 3. Cost allocation Accounting: what are the cost, each indiviual

product needs to carry. (Kostenträger):


2. The Three Perspectives of Cost 2. The Three Perspectives of Cost AccountingAccounting

Cost type-accounting

Cost centre-accounting

Unit cost-accounting

Fixes costs Variable cost Direct costs Overhead costs

Types of costs are allocated to the departments in which they occured. Cost centre costing is to show, where costs came into existence

Cost from cost centres are allocated to the products or other units, which earn the money to bear them.

Values come form book-keeping

Values stem from cost-type accounting

Values stem from cost-centre accounting

120

Personell expensesCost of materialCapital costsExternal servicesFiscal feesetc.

3. Cost Types3. Cost Types


4. Payments/ Expenses/ Costs4. Payments/ Expenses/ Costs

Normally the above categories are not identical, because they may refer to different periods of time:You buy a computer and pay 100 payment. You use it for 5 years. While your bank account will be reduced by 100, your profit will only be reduced by 20 but this for each of the next 5 years (costs).The same may be true for your sales: You sell books for 100 and realize revenues in your P&L account. Terms of trade are: payment within 30 days. So revenues are now, but cash in is only within 30 days.

Auszahlungen <> Ausgaben <>Aufwand <>KostenEinzahlungen = Einnahmen = Ertrag = Leistung

Payment<>expenses<>costsPay ins <> revenues <>earnings


5. Differences between direct 5. Differences between direct (variable) and overhead (fix) costs(variable) and overhead (fix) costs

Usually variable costs depend on the number of units put out. Overhead costs are (in a short period of time) independent of output, i.e. number of units produced.

Cost C CC

Output- Number of units

Total costs C

= C v

+ C f

Overhead costs f

variable portion Of total Costs C v

Overhead portion of Total Costs C f


6. Distinguishing Direct Costs and 6. Distinguishing Direct Costs and Overhead CostsOverhead Costs

While fixed an variable costs differ concerning their respective reagility to changes in output, the difference between Direct Costs an Overhead Cost refer to the decision why costs accrue and the posibility to allocate costs to an object depending on causality:

Direct Costs:are unit costs which would not have occured, if the object would not have been produced or a department would not exist. Direct cost are or will be caused by the decision to, for example, purchase an Authors´ right, print a book, set up an office in Alexandria. Without that decision the cost would not have occured or will not be occuring.

All other cost are overhead costs (concerning the unit looked upon). So with the change of perspective (looking upon different items) different costs may be allocated.

124

7. Direct Costs: The principle of Causation7. Direct Costs: The principle of Causation

Direct cost are costs which directly are or will be caused by a unit looked upon respectively.

Principle of causation

Examples of direct costs and overhead costs:Personell costs: are no direct costs to the product, but they are direct costs to the decision to set up a new department.Authors guarantee fee: is no direct cost postion to the pocket book, if there is also a hardcover to be published. Is direct costs of the decision process to purchase it

125

8. Overhead costs8. Overhead costs

Examples: insurances (if not for a specific event), electricity, salary of CEO (as long as not for the decision to set up a new plant and employ a new CEO; in this case his salary would be direct costs of the decision, to set up this plant).

Overhead costs may not be allocated directly to a product, department, sales person, customer, because they occure not only for this unit.


Cost centres are departments of a Company. They are units with different functions, and usually located in different rooms, in which costs occur or may be allocated to.

Cost Centre Accounting is to give transparency to how and where costs occur and a means to transfer cost-responsibility to the chief of specific departments or cost centres.

Cost Centre Accounting is an overhead accounting

9. Cost Centre9. Cost Centre Accounting


9. Cost Centre Accounting (CCA)9. Cost Centre Accounting (CCA)

CC CEO

CCPurchase

CCMarketing

CCProduction

CCAdministration

CCSales

CCDistribution

CCBilling/Invoices

CCSales

personellCRM

CCOffer-handling


10. Contribution Margin Accounting CMA10. Contribution Margin Accounting CMA

In a CMA only a part of the costs are considered while calculating a price, i.e. the direct part of total costs. Costs independent of the product or is sales efforts (fixed costs or overhead) stay out of consideration. The (positive) difference between price and direct cost is called contribution margin. This margin contributes to cover the indirect costs and to reach a profit. CM needs to reach a certain percentage of sales to also cover indirect costs and also take care of a profit, too.

cm = p -- cd

while cm = contribution margin per unit p = netprice to be acchieved cd = direct costs (costs per unit)

129

10. The contribution margin: an example10. The contribution margin: an example

in %Revenues per Unit 199,00 100,0 - cost dependent on revenues commision to sales personell 19,90 10,0 licences to the author 30,00 15,1 freight/ logistics 21,90 11,0 printing costs per unit 40,00 20,1 Marketing expense (give aways) 9,00 4,5total direct costs 120,80 60,7contribution Margin 78,20 39,3

With this contribution overhead and profits need to be finanancedWith this contribution overhead and profits need to be finananced


11. The Break-Even-Analysys11. The Break-Even-Analysys

Profit = cm • X - Cf oder Profit = (p-Cv) • X - Cf 0 = cm • X* - Cf or 0 = (p-Cv) • X* - Cf

p=price, C=Total costs

Output X

fixe costs Cf

Break-Even-Punkt

variable Cost Cv

Total costs

Area of loss

Area of profit

Revenue

X* = Cf

(p -Cv)= Break even quantity

131

12. Example of a Permanent ex post 12. Example of a Permanent ex post calculation by means of contribution calculation by means of contribution margin: calculationmargin: calculation

Contribution Margin Calculation

1 2 3 4 5 6 7 8 9 10

Titles Sales No. Price per Cpy variable Costs per Cpy CM per Cpy Fixed costs

per titleBreak-Even-

quantity Revenues variable Costs CM 1 CM 2

Grisham 120 9,95 0,60 9,35 100,00 11 1194,00 72,00 1.122,00 1.022,00

Parmuk 80 14,90 4,10 10,80 120,00 11 1192,00 328,00 864,00 744,00

Brown 220 3,20 1,90 1,30 150,00 115 704,00 418,00 286,00 136,00

Follett 150 4,90 0,80 4,10 60,00 15 735,00 120,00 615,00 555,00

Patterson 250 7,90 1,20 6,70 230,00 34 1975,00 300,00 1.675,00 1.445,00King 80 2,95 2,90 0,05 110,00 2200 236,00 232,00 4,00 -106,00

Perry 110 8,90 2,10 6,80 100,00 15 979,00 231,00 748,00 648,00

Meade 160 4,50 1,90 2,60 150,00 58 720,00 304,00 416,00 266,00

132

12. Example of a Permanent ex post 12. Example of a Permanent ex post calculation by means of contribution calculation by means of contribution margin: Graphicsmargin: Graphics

-500,00

0,00

500,00

1000,00

1500,00

2000,00

2500,00

Grisham Parmuk Brown Follett Patterson King Perry Meade

Revenues CM 1 CM 2

133

12. Example of a Permanent ex post 12. Example of a Permanent ex post calculation by means of contribution calculation by means of contribution margin: real case margin: real case

Title Nr Categorie Title Price

Cost of Mat./ p Cpy

Sales No. Cpies

Reve-nues in 2007

Returns in €

Reve-nues after returns

Dis-count

Cost of material in total

Veränd. WB Bestand

pro-visons to authors

contri-bution (DB)

Guaran-tee rest in %

on Stock cpies

100613 Architektur Title 1 19,90 3,93 1.583 8.784 -1.009 7.775 51,7 6.221 -3.252 1.420 4.314 0 28,37 4.116Familie und FreizeitTitle 120 19,90 3,07 2.469 13.328 -876 12.452 53,0 7.687 2.917 909 18.674 0 76,68 2.247Familie und FreizeitTitle 154 14,90 2,21 3.182 12.110 -53 12.057 53,2 7.032 -3.102 1.752 11.696 0 49,60 7.050Film und FernsehenTitle 179 58,00 7,72 102 1.575 -182 1.393 49,3 795 237 0 2.166 0 79,51 2.061Film und FernsehenTitle 198 39,90 6,00 3.007 26.667 -264 26.404 46,1 18.042 0 8.551 25.048 0 48,50 1.872Geschenk Title 199 24,00 5,52 84 910 -399 511 53,0 508 -292 88 112 0 11,21 354Geschenk Title 213 25,00 5,00 3.650 22.167 -328 21.839 50,1 18.250 0 5.817 18.646 984 43,65 2.390Gesundheit Title 214 29,90 3,85 2.500 20.822 -1.610 19.212 53,8 9.625 -565 4.849 22.536 0 59,98 3.285Gesundheit Title 296 3,85 2,00 12.643 24.887 0 24.887 107,0 25.286 0 0 23.390 0 48,05 0Glas Title 297 25,00 26,68 15 127 -30 97 54,0 454 -74 0 -338 0 ##### 94Glas Title 308 10,28 5,71 2.000 10.512 0 10.512 107,0 11.420 0 0 9.140 0 44,46 0Holz Title 309 19,90 5,41 827 4.271 -60 4.212 53,6 4.474 843 916 3.690 0 44,80 741Holz Title 336 78,00 11,03 1.599 24.499 -312 24.187 40,6 17.637 0 0 29.669 5.000 62,72 1.394Holz Title 337 19,90 3,66 187 681 0 681 38,3 684 -5.675 156 -5.183 0 ##### 3.153K u Gestalt Title 338 29,90 8,45 0 16 -75 -58 837 0 0 -950 0 836,18 2.318K u Gestalt Title 372 38,00 7,11 595 6.191 -61 6.130 56,7 4.230 0 0 7.758 0 64,71 52K u Gestalt Title 392 38,00 2,68 252 2.519 -62 2.457 53,7 675 0 528 3.603 0 74,96 3.066Katalog Title 393 19,90 5,83 261 1.308 0 1.308 52,7 2.454 1.238 0 1.342 0 52,45 429Katalog Title 467 2,20 0 11.628 9.417 0 9.417 393,7 0 0 0 94.119 0 100,00 0Körper u.GeistTitle 470 49,90 7,35 3.225 41.094 -2.128 38.966 50,7 23.704 0 11.470 41.037 0 53,85 492Kreative FreizeitTitle 471 2,50 1,16 -52 2 -139 -136 219,5 0 0 0 -267 0 100,00 0Kreative FreizeitTitle 550 12,90 2,17 766 2.479 -18 2.461 52,1 1.662 -6.084 299 -3.233 1.201 -67,17 6.337Kreatives GestaltenTitle 591 5,97 5,07 10.143 30.961 0 30.961 107,0 51.425 0 0 9.129 0 15,08 0Kunst Title 592 68,00 16,55 30 536 0 536 55,0 993 611 0 667 0 63,61 637Malen und ZeichnenTitle 740 24,90 4,30 3.356 21.075 -93 20.982 52,5 14.431 -1.978 2.969 21.660 31 52,78 4.599Meditation Title 741 24,00 3,80 63 483 -94 389 53,8 239 0 141 380 0 49,97 54Meditation Title 762 44,00 5,33 3.816 41.437 -746 40.691 50,7 20.339 -2.088 14.919 42.239 0 53,07 3.939Natur Title 882 490,00 0,00 8 917 0 917 49,0 0 -366 0 1.428 0 79,59 0Papier Title 894 29,90 7,90 984 8.772 -943 7.829 55,7 7.774 -21.293 1.067 -14.822 3.800 -96,79 6.455Papier Title 895 19,90 5,55 2.596 13.073 -72 13.000 52,7 14.408 -1.901 0 9.117 0 35,86 3.457Ratgeber FamilieTitle 896 24,90 1,83 276 1.911 -289 1.622 49,4 505 1.323 0 3.991 0 125,76 2.645Spiritualität Title 1046 25,00 5,00 1.609 9.987 -77 9.911 51,6 8.045 -4.477 2.565 4.297 0 22,17 4.477Textiles GestaltenTitle 1047 7,95 6,29 5.404 4.795 -453 4.342 21,1 34.293 24.153 13 -1.661 0 -19,56 0Textiles GestaltenTitle 1048 19,90 5,61 341 2.172 -364 1.807 55,7 1.919 774 375 2.016 0 57,02 1.673Tibetischer Buddh.Title 1150 49,90 6,00 376 4.615 -17 4.598 51,3 2.256 0 0 6.737 0 74,91 73Weisheit Title 1151 28,00 3,50 88 715 -104 611 51,9 333 67 225 703 0 58,87 241ZeitgeschichteTitle 1171 78,00 7,71 47 2.703 -1.982 721 41,2 625 34 144 676 9.830 47,91 1.727ZeitgeschichteTitle 1173 48,00 5,23 -73 692 -1.645 -952 56,9 -335 -47 -273 -1.302 40.456 69,92 3.989Zen Title 1191 29,90 3,02 1.497 10.530 -372 10.159 47,5 4.521 -1.392 2.283 11.672 0 58,75 2.117Zen Title 1193 78,00 14,60 423 8.490 -181 8.309 52,7 6.176 0 1.522 8.554 0 52,63 97

Total 9.045.268 -502.183 8.543.084 9.462.760 -178.237 1.174.429 6.636.979 674.685

134

14. How to keep your stock under control14. How to keep your stock under control

Nopubl.

Comp. Dat of app. Titel PriceMat.

Before depr.

Mat. Cost after dep.

Sales 2005

REMIL

Sales 2006

Returns 2006

Net Sales 2006

On StockReaches

until

3000 xxy 19951010 Title 34,00 11,38 3,60 115 56 18 38 1.345 Jun 293001 xxy 19950503 Title 28,00 3,50 1,21 174 39 16 22 541 Mrz 23

500073 xxy 19950510 Title 68,00 36,41 11,87 57 4 1 -2 520 ewig3002 xxy 19950904 Title 48,00 10,39 0,94 330 126 4 120 1.347 Mai 15

500075 xxy 19951010 Title 29,00 4,74 2,29 227 73 1 67 160 Mrz 11500074 xxy 19950803 Title 38,00 8,30 4,04 255 84 2 78 917 Sep 15

3003 xxy 19960328 Title 34,00 5,24 2,72 61 62 3 59 2.077 Mai 29500076 xxy 19960328 Title 39,90 7,61 4,76 302 138 13 124 1.030 Sep 13500075 xxy 19960328 Title 49,90 9,56 7,17 482 230 3 221 40 Jan 09

3004 xxy 19960328 Title 29,90 6,61 4,03 531 200 21 177 3.365 Dez 19500077 xxy 19980225 Title 36,00 4,25 4,25 971 154 22 131 1.103 Sep 13500076 xxy 19971020 Title 29,90 2,95 2,21 1.883 929 20 905 830 Okt 09

3005 xxy 19960228 Title 28,00 4,13 3,10 452 146 13 132 610 Jun 13500078 xxy 19960228 Title 28,00 3,69 2,77 635 263 50 207 213 Nov 09500077 xxy 19980205 Title 28,00 2,39 2,39 3.383 1.638 22 1.584 4.063 Mai 11

3006 xxy 19960328 Title 39,90 7,09 5,32 336 200 1 198 569 Sep 11500079 xxy 19960910 Title 39,90 7,94 3,29 179 117 7 110 1.704 Nov 17500078 xxy 19970318 Title 48,00 8,02 5,48 11 52 12 39 2.414 Dez 44

3007 xxy 19960910 Title 29,90 5,85 2,10 154 99 8 90 1.681 Sep 19500080 xxy 19970820 Title 24,00 5,52 4,14 495 295 4 255 1.650 Aug 12500079 xxy 19960709 Title 39,90 4,90 0,95 -11 29 5 22 4.248 Mai 21

135

14.1 Visualizing the relative importance of 14.1 Visualizing the relative importance of programme segments: revenues programme segments: revenues Contributions absolutely and by %Contributions absolutely and by %

209298

1.394

84473277

808879

6441.224

464468

662631

1.228

1.380148

610

0 200 400 600 800 1.000 1.200 1.400

Segment 1

Segment 3

Segment 5

Segment 7

Segment 9

Segment 11

Segment 13

Segment 15

Segment 17

Revenue per Programme segment

136

14.2 Visualizing importance of Segments 14.2 Visualizing importance of Segments because of their contributions in €because of their contributions in €

8392

190260

4499

429437

350710

171205

252223

617477

50235

0 100 200 300 400 500 600 700 800

Segment 1

Segment 3

Segment 5

Segment 7

Segment 9

Segment 11

Segment 13

Segment 15

Segment 17

Contribution per Segment in T-€

137

14.3 Visualizing importance of Segments 14.3 Visualizing importance of Segments because of their contributions in %because of their contributions in %

Contribution per Segment in % of Revenues

39,631,0

13,630,9

60,235,6

53,149,7

54,458,0

36,943,9

38,135,3

50,234,6

33,738,5

0,0 10,0 20,0 30,0 40,0 50,0 60,0 70,0

Segment 1

Segment 3

Segment 5

Segment 7

Segment 9

Segment 11

Segment 13

Segment 15

Segment 17

138

15. Excercises15. Excercises

Contribution Margin for Decision Making purposes: Discount 50 % Distribution costs 8 % Advertising Marketing 10 %Please Calculate if to purchase an Author´sright according to the following handout

139

16. Scenarios to Precalculation16. Scenarios to Precalculation

ScenarioAuthor- s guarantee

production fee

Author´s provision

Price per book

No. of cps.

returns in %

Printing cost Comment

1 10.000,00 3.000,00 10% 15,00 20.000 10% 5,002 10.000,00 3.000,00 10% 20,00 15.000 10% 6,003 10.000,00 3.000,00 10% 25,00 12.000 10% 7,004 10.000,00 3.000,00 10% 30,00 9.000 10% 8,00 The Contract with the Author has already been signed

140

X. PlanningX. Planning1. What needs to planned?1. What needs to planned?

Each year about a quarter before the end of the current year, planning process for the next fiscal year and the 2 trend years to follow starts

Elements of planning are for example (as to be seen from the p&l-account):

all books: frontlist and backlist: hardcover, softcover, audio books, e-books in terms of prices and quantitities as well as licences to be sold

Budgets for authors´ rigths to be purchased Budgets for investments in computers, cars, furniture etc. Overhead costs like salaries, additional personal (or also reductions) rents

for rooms, energy, journies, fairs to be attended, Cash flow in order to identify cash to be set free or money needed from

banks or owners and interest to be paid to banks or owners.

The best way to plan is: bottom up (and not top down), i.e. to collect product sales and costs and see what comes out and to adjust for deficits by deciding on reducing costs or raising sales

141

2. Reasons for planning2. Reasons for planning

Reasons for planning are: Anticipate future developments to act pro- actively Deligate (cost centre-) responsibilities to heads of departments Arrange for new activities like setting up a new book programme line Realize what budgets are available for different goals Banks and owners need a perspective on what is up with their money (Ratings as to „Basel 2“ in Europe are forcing banks

to look at plans) Decide on changes in the companies structure.

To set up good plans you need a To set up good plans you need a strategystrategy derived from derived from youryourvisionvision: What is my enterprise to look like in : What is my enterprise to look like in 5 or 10 5 or 10 yearsyears??WhatWhat strategic strategic goalsgoals must be reached to achieve this must be reached to achieve this vision?vision?HowHow are goals to be are goals to be realizerealized within individual fiscal d within individual fiscal year´s plans?year´s plans?

142

Exercise: Summary or I to XExercise: Summary or I to X

I I What you have learned so far and what is still to What you have learned so far and what is still to comecome

II II Economical BasicsEconomical BasicsIIIIII Basics of Organizational TheoryBasics of Organizational TheoryIVIV Integrated Publishing Information System (IPIS): Integrated Publishing Information System (IPIS):

Connecting Connecting Information and OrganizationInformation and OrganizationV V Organizational Management Principles Organizational Management Principles VIVI Financial Reporting for Corporate Governance Financial Reporting for Corporate Governance

PurposesPurposesVIIVII Financials and the Balance Sheet Financials and the Balance Sheet VIIIVIII Figures and Ratios of Profitability Figures and Ratios of Profitability IX IX Internal Accounting is Cost Accounting Internal Accounting is Cost Accounting X. X. PlanningPlanning

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