Unit 8 Finance

Unit 8 – Finance
Part1
1. Overview of U8?
Preview: Profit and Loss Account
Reading: Text about corporate governance (Europe’s Enron)
Language: Adjectives and adverbs
Vocabulary: Corporate governance
Career skills: Referring to visuals (Formal and informal presentations. Phrases to
draw attention to details on charts.)
Dilemma: Counting the cost
Unit 8, focused on finance, delves into various aspects such as different types of
financial statements, Creative Accounting, and the Ahold financial scandal. This
scandal, similar to the Enron scandal, sent shockwaves across Europe, prompting
scrutiny into accounting and corporate governance practices. Ahold's CEO played
a central role in overstating the company's profit by incorporating potential future
earnings in financial accounts, aiming to secure more discounts during bulk
purchases. The revelation of the scandal led to investigations by multiple
authorities, including the SEC. Notably, the Ahold scandal highlighted a
misconception that corporate wrongdoing was primarily a U.S. issue. This belief
raised significant questions regarding the roles of auditors and the responsibilities
of CEOs. In essence, it underscores the need for stricter corporate governance laws
imposed by the government and a restructuring effort among European companies
to enhance their corporate governance practices.
Part2
2. If you were a potential shareholder would you feel confident in investing in
a company which has a promising retained profit? Why or why not?
As a prospective investor, I would be confident in investing in a company with a
strong retained profit and there are several reasons why. First, it shows the
company financial state, Retained profit is an indication that the company is
generating more revenue than it is paying out in dividends. This financial stability
can be reassuring for shareholders, as it suggests the company has a consistent
income stream. Second, it indicates dividend potential, while retained profits are
not immediately distributed as dividends, they can be an indicator of a company's
ability to sustain and potentially increase dividend payments in the future.
Shareholders who value regular income in the form of dividends may find this
appealing. Last but not least, it displays the competitiveness. Companies with
strong retained profits may be better positioned to weather economic downturns or
industry challenges. This financial strength can provide a competitive advantage
and consolidate confidence in shareholders. In conclusion, as an investor I would
feel very confident in investing a company that has a promising retained profit.
3. Do you think of any other famous financial scandals?

There have been several well-known financial scandals that have gained significant
public attention. One notable financial scandal in Vietnam involved the state-
owned company Vinashin in 2010. Due to mismanagement, corruption, and
excessive borrowing, Vinashin faced a severe financial crisis, resulting in the arrest
and prosecution of top executives. Another significant scandal was the OceanBank
case in 2017, where high-profile individuals, including the former chairman and
CEO, were sentenced to death for embezzlement and economic mismanagement.
Another notable financial scandal in Vietnam was the case involving the banking
tycoon Nguyen Duc Kien in 2012. Nguyen Duc Kien, founder of ACB (Asia
Commercial Bank) and a prominent businessman, was arrested for financial
wrongdoing and tax evasion. The arrest led to a temporary crisis in the banking
sector, with concerns about the stability of ACB and the broader impact on
Vietnam's financial system. This incident highlighted issues of corporate
governance and financial transparency in the country.
4.Do you think CEOs who falsify accounts are criminals and shoud go to jail
or is it an acceptable risk to falsify accounts if it helps to safeguard the
company’s future and jobs?
CEOs who falsify accounts engage in illegal and unethical behavior. Falsifying
financial statements is a criminal act, as it involves providing false information to
investors, regulators, and the public. Such actions not only undermine trust in
financial markets but also have serious consequences for shareholders, employees,
and other stakeholders.
While there may be pressure on CEOs to safeguard the company's future and jobs,
resorting to illegal activities is never an acceptable or justifiable solution. The
ethical and legal obligations of corporate leaders include transparent and honest
reporting. Engaging in fraudulent activities can lead to severe legal consequences,
including fines, imprisonment, and lasting damage to personal and professional
reputations.
Companies facing financial challenges should explore legal and ethical means to
address their issues, such as restructuring, cost-cutting, seeking investment, or
implementing strategic changes. Turning to illegal activities not only violates the
law but can also escalate problems and lead to more significant consequences in
the long run.
In summary, CEOs who falsify accounts are considered criminals, and their actions
are not acceptable under any circumstances. Upholding ethical standards,
transparency, and legal compliance is fundamental to maintaining the integrity of
financial markets and protecting the interests of all stakeholders.
Part 3
1. What does ‘The bottom line’ refer to?
- "The bottom line" is a common business and financial term that is often used to
refer to the final or ultimate result or conclusion.
- “Bottom line” is the term for net income or a company’s total revenue less its
operating expenses, interest paid, depreciation and taxes.
2. What are the common ways to falsify financial documents?

There are 4 common ways to falsify FDs:
+ Inventing revenues from companies that don’t exist
+ Not including debts of subsidiaries and acquisitions
+ Hiding debts on the books of subsidiaries
+ Overstating current profits by including possible future earnings
3. What would you do if your boss asked you to falsify your company’s
financial statement?
If your boss asks you to falsify your company's financial statements, it puts you in
a challenging and ethically compromising position. Falsifying financial statements
is not only unethical but also illegal. Engaging in such activities can have severe
legal consequences, including fines and imprisonment, and it can irreparably
damage your personal and professional reputation. So that, you should refuse it and
seek for protection and legal advice and uphold the principles of ethical business
behavior.
4. Why is it necessary for companies to have stricter corporate governance?

- Bad corporate governance.
- Irregularities in accounting practice.
5. Do you think CEOs who falsify accounts are criminals and should go to jail
or is it an acceptable risk to falsify accounts if it helps to safeguard the
company’s future jobs?
Executives who fabricate financial statements are seen as lawbreakers, and their
behavior is never justified. It is essential to uphold moral principles, openness, and
legal compliance in order to preserve the integrity of the financial system and
safeguard the interests of all parties involved.

Unit 8 Finance

Uploaded by

Copyright:

Available Formats

Unit 8 Finance

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Unit 8 Finance

Uploaded by

Copyright:

Available Formats

Unit 8 – Finance

3. Do you think of any other famous financial scandals?

2. What are the common ways to falsify financial documents?

4. Why is it necessary for companies to have stricter corporate governance?

You might also like