In preparing these financial statements, the Directors are required to:
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select suitable accounting policies and then apply them consistently
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make judgements and estimates that are reasonable and prudent
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prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business
Typically, an annual report will contain the following sections: -Financial Highlights -Letter to the Shareholders -Narrative Text, Graphics and Photos -Management's Discussion and Analysis -Financial Statements -Notes to Financial Statements -Auditor's Report -Summary Financial Data -Corporate Information
Other information deemed relevant to stakeholders may be included, such as a report on operations for manufacturing firms or corporate social responsibility reports for companies with environmentally or socially sensitive operations. In the case of larger companies, it is usually a sleek, colorful, high-gloss publication.
The details provided in the report are of use to investors to understand the company's financial position and future direction. The financial statements are usually compiled in compliance with IFRS and/or the domestic GAAP, as well as domestic legislation (e.g. the SOX in the U.S.).
In the United States, a more-detailed version of the report, called a Form 10-K, is submitted to the U.S. Securities and Exchange Commission. A publicly held company may also issue a much more limited version of an annual report, which is known as a "wrap report." A wrap report is a Form 10-K with an annual report cover wrapped around it.
6. Banking: The banking sector in Great Britain is made up of a variety of institutions. What are the main types of banks in the United Kingdom and what services do they provide to general public? Describe in detail two bank services that you have used and found helpful.
Banks in the UK can be divided into two groups: commercial banks and merchant banks.
Merchant banks specialize in areas of international trade and finance, discounting bills, confirming credit status of overseas customers through confirming houses, acting in the new issue market and in the bullion and Eurobond market. They are also involved in shipping, insurance and foreign exchange markets.
Commercial banks offer similar services but are especially interested in private customer’s accounts, encouraging them to use their current account, deposit account, saving account and credit facilities. They lend money against securities, in the form of overdrafts and loans, pay accounts regularly by standing orders, and transfer credits through the bank Giro system. The ‘big four’ commercial banks in the UK are Barclays, Lloyds, Midland and Westminster.
Customers can keep different types of accounts with the bank. Current account is an account into which a client pays his trading receipts and on which he draws his checks. As a rule no interest is paid on this type of account and banks made charges for handling these accounts unless an agreed minimum balance is kept in over or agreed period of time. A lot of companies have more than one current account, for example No.1 current account for paying wages and overheads and No.2 account for paying suppliers.
Deposit accounts pay interest to a maximum established by the bank, but the customer can be asked to give notice of withdrawal. Banks offer various types of other accounts. There are numerous savings accounts on which interest is paid according to the credit balance in the account and the period it is left for. With these accounts there are penalties for withdrawing money before the agreed date.
Customers making regular payments, such as rent or mortgage payments, can ask the bank to transfer the money to the payee on a particular day every month. A standing order or direct debit is one of the methods of doing this.
Customers can apply to the bank for loans or overdrafts. A loan is usually covered by a negotiable security, for example, shares, with repayment specified on the agreement. With an overdraft the customer is given the permission to overdraw an account up to a certain limit.
bank services that are helpful:
-transfer money between accounts
- draw and withdraw money
-pay by credit card
-open current account, deposit account, savings account
-make payments by standing orders
7. International Banking: What services do the banks offer to importers and exporters? What are the main methods of payment in international trade? If you were a businessman what method of payment would you prefer?
When doing business with companies abroad, it is not always possible to use the terms of payment customary in domestic trade. This is because the seller needs to have more control over payment.
There are different methods of payment accepted in foreign trade:
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In cash
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In advance
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By banker’s transfer
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By International GIRO
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On open account
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Payment for collection
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By Bill of Exchange
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By Letter of Credit
Payment in cash is used in small transactions and usually on receipt of the goods. It is usually called cash on delivery (COD) when payment is made within three – five working days after the delivery and is usually used in home trade.
Payment in advance may be helpful to a buyer in urgent need or where the buyer is unknown to the seller, or in case of single isolated transaction. The actual method of payment in such cases would probably be by banker’s draft or banker’s transfer.
Banker’s transfer is transfer of money from the bank account of a debtor to the bank account of his creditor by order of the debtor. The transfer is made at the current rate of exchange.
International Giro is payment by International Giro, which replaced Money Orders, can be made whether the buyer has an account or not, to the supplier whether he has an account or not. The International Giro form is obtained from any post office, filled in, then handed to the Post Office who forwards the order to the Giro centre which will send the amount to a Post Office in the beneficiary’s country where the supplier will receive a postal cheque which can be cashed or paid into the bank account.
Payment on an open account is usually effected against documents in full or by installments if agreed between the parties. Open account terms would be granted by a seller to a buyer of unquestioned standing or to a customer in whom he has complete confidence. In this case payments can be made monthly or quarterly by bill of exchange or banker’s transfer.
Documentary collection is a means of carrying out transactions when the parties signing an agreement trust each other sufficiently to decline the security offered by the letter of credit. With the help of documentary collection, the seller entrusts his bank with receiving a specified sum of money from the buyer on the transfer of the shipping documents. The payment can be made in cash or by acceptance of the draft.
A Letter of Credit is a very important document in international trade. It is ideal for individual transactions and for a series, makes trade with unknown buyers easy, gives protection to both sellers and buyers and overcomes the credit gap.
The buyer instructs his bank to issue the L/C for the amount of the purchase and in favor of the seller. This is usually done by special printed form. (See the specimen below). The form contains full details of the transaction as agreed between buyer and seller. The buyer’s bank sends the instructions to its agent or correspondent bank in the seller’s country. On receiving these instructions, the agent bank writes to advise the seller of the credit. In foreign trade it is normal for the agent bank to confirm the credit. This means that the agent bank undertakes to pay the seller the money due to him on the conditions given in the L/C. The seller can execute the order knowing that when he has done so the money will be paid at once by the agent bank.
It is not essential that a L/C be paid to seller immediately on the execution of the order. If agreed between seller and buyer the arrangement could be for the agent bank to accept a B/E drawn by the seller on the agent bank. This gives the buyer credit and is absolutely safe for the seller, who can discount the bill for ready cash if he needs it.
A letter of credit is a promise made by the buyer’s bank (the opening or issuing bank) to send a certain amount of money to the seller’s bank (the advising bank), to be credited to the seller, known as a beneficiary, provided he fulfills his part of the sales contract. It is also known as a documentary credit.
There are several types of credit:
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A revocable letter of credit can be cancelled or changed without the seller’s agreement. As this doesn’t offer the seller much control over payment, this type of letter is rarely used.
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An irrevocable letter of credit can be cancelled or changed, but only with the agreement of all parties. All letters of credit are irrevocable unless expressly stared otherwise.
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A confirmed letter of credit is always irrevocable. If the seller feels that the risk of not receiving payment is still too high, for example the buyer’s country’s economy is unstable, he can arrange for a bank in his own country to confirm the letter of credit (this bank is then known as the confirming bank; it can be the same bank as the advising bank). This means that the seller will receive his money from the confirming bank, regardless of whether or not his invoice is paid in the buyer’s country.
8. Insurance: Lloyd’s is the greatest insurance organization in the world. How much do you know about this well-known syndicate? Insurance in business and what it can cover.
Insurance has become more and more important as commerce has developed. The idea of insurance is to obtain indemnity in the event of any happening that may cause loss of money. In other words the insurance is against risk. Some of the risks against which it is possible to take out insurance are as follows:
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So called Act of God such as fire, floods, earthquakes etc.
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Loss of the goods during transportation
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Damage to the goods e.g. by breaking, bending etc.
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Loss of the goods through theft or non-delivery.
General
Putting an effective business insurance plan in place involves determining the type of insurance coverage needed to minimize any potential risks to the business. If the public frequently visits the business premises, liability insurance and property insurance are beneficial. When company employees, officers or independent contractors are entrusted with important company information, fidelity insurance will cover any theft or embezzlement by these parties. Most insurance carriers offer comprehensive insurance plans designed for different types of businesses.
Commercial Liability Insurance
Commercial liability insurance covers claims against the business by third parties. The claims generally stem from accidents that occur on the business premises or injuries to third parties for which the company becomes legally liable. The business owner must be legally responsible for the injury, typically depending on the location of the accident. In addition to insurance coverage for injuries to third parties, commercial liability policies may cover damage to the property and company products and may provide independent contractor coverage.
Fidelity Insurance
Fidelity insurance protects business owners against dishonest employees. Companies that allow certain employees access to confidential information, such as financial institutions, benefit from obtaining fidelity insurance. Fidelity insurance covers unauthorized activities on the part of employees, asset protection, external fraud and technology risks. Fidelity insurance is also called bonding because the fidelity bond reimburses the business owner for damages caused by dishonest employees. For instance, cashiers, bank tellers, corporate officers and directors are generally covered under the employer’s fidelity insurance.
Another classification:
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Insurance of liability, which covers employers’ liabilities for industrial accidents, accidents to people attending functions on company business, and motor insurance.
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Property insurance, which is part of the service fire offices provide, but also includes a wide range of protection against riots, terrorism, gas explosions, etc. Usually, the client takes out an all risk policy offering full protection.
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Insurance of interest protects firms against making costly mistakes. For example, publishers might want to cover themselves against libel, i.e. being sued for publishing smth which damages someone’s reputation. Accountants and lawyers protect themselves with insurance of interest. We can also include under this head Fidelity Bonds, under which firms insure against their employees defrauding them, or stealing from them.
Lloyd’s is not an insurance company, but an international insurance market consisting of over 260 approved insurance brokers’ firms and more than 20,000 underwriters whose activities are controlled by Lloyd’s Council and whose appointments are confirmed by the Governor of the Bank of England.
If insurance is to be effected through a Lloyd’s underwriter the transaction has to go through a Lloyd’s broker who, working on commission basis, will one of the underwriters on behalf of the client to get a competitive rate. Underwriters finance the insurance, which means they will pay the claims, and take the premiums as their fees. They usually work in syndicates, spreading the risk. There are more than four hundred syndicates with over 160 involved in marine insurance, 170 in non-marine, 50 in aviation, and 46 in UK motor insurance. Members of syndicates write the insurance details on a Lloyd’s slip which is sent to the Lloyd’s Policy Signing Office where it is checked and signed on behalf of the syndicate concerned. The underwriter gets a percentage of the premium he guarantees.
To become a Lloyd’s underwriter it is necessary to be approved by the Committee and to pay a very large sum as entrance fee as well as an annual subscription. Insuring with a Lloyd’s member guarantees reliability as all members, like those of the Stock Exchange, have unlimited liability, and there is a fund that will compensate in the event of a member’s bankruptcy.
Lloyd’s List, a daily newspaper read throughout the world, gives details of shipping movements, marine and aviation casualties, fires, strikes, etc., and essential information concerning shopping and dry cargo markets.
Структура
Современный Ллойд не является страховой компанией в обычном понимании этого слова, а представляет собой страховой рынок, на котором встречаются члены корпорации «Ллойд».
Сама по себе корпорация «Ллойд» не берёт на себя ответственность по договорам страхования, предоставляя это членам синдикатов Ллойда.
Управление
Управляется Ллойд т. н. Советом Ллойда (Council of Lloyd’s), который регулирует и управляет страховым рынком внутри Ллойда, определяя правила и процедуры заключения договоров страхования. В Совет Ллойда входят 6 рабочих (working), 6 внешних (external) и 6 номинальных (nominated) членов. Рабочих и внешних членов выбирают члены Ллойда. Шесть номинальных членов Совета, в том числе CEO согласовывает правление Банка Англии.
Работа Ллойда
В корпорации Ллойд имеется два типа людей и фирм. Первые называются членами корпорации (members). Вторые являются агентами, брокерами, профессионалами, помогающими членам корпорации заключить договоры страхования и перестрахования, представляя клиентов Ллойда.
Если в прежние времена членами Ллойда были только богатые физические лица (около 34 000), то после кризиса начала 1990-х гг членами корпорации стали компании. Многие физические лица (names) разорились и им на смену пришли компании. В настоящее время на долю физических лиц приходится 10 % всего объёма договоров Ллойда. И количество физических лиц постоянно снижается в силу естественных причин, а также вследствие их объединения в товарищества.
Клиенты не могут заключать договоры напрямую с синдикатами Ллойда, а только через сертифицированных брокеров Ллойда. Брокеры стараются найти для клиентов наилучшие условия среди синдикатов Ллойда
9. Franchising: If you took out a franchise, what sort of product or service would you choose? Why? What are the main responsibilities of franchisor and franchisee? What are the main things a franchisee should pay special attention to in order to run a franchise successfully? Is franchising a kind of monopoly and therefore contrary to the spirit of free competition?