Does Corporate Cook Book?

1. DOES CORPORATE COOK
BOOK?
V. Nam ita
Stude nt
Institute o f Co m pany Se cre tarie s
o f India ICSI
Hyde rabad
Mobile No : 9989654516

2. CHARACTERISTICS OF A COMPANY
• Legal Entity
• Large Pooling of funds - Shares
• Ownership and Management are different
• Voting Rights
• Benefits to society

3. HOW A COMPANY OPERATES
• Provisions of Companies Act, 1956
• General body meetings – decisions are
taken – voting rights are vested with
members
• Powers are delegated to the Board of
Directors
• Directors meet frequently to discuss iddues
• Shares are issued – Public Issue is done
• People literally become owners of the
company

4. HOW TRANSPARENCY IS ENSURED
• Independent Directors
• Position of Interested Directors is
disclosed
• Annual statements are published in
the leading newspapers
• Inspection of the Central Government
when necessary

5. 3 THINGS TO LOOK OUT FOR
SUCCESS OF A COMPANY
LIQUIDITY SOLVENCY PROFITABILITY

6. LIQUIDITY
• Day-day needs of the company
• Working capital
• Is it a liquid company?

7. SOLVENCY
• Is the firm able to pay off its debts in
time?
• Activity or turnover ratios are
calculated
• Is the company able to collect the
debts in time?
• What is the solvency position with
regard to certain parameters?

8. PROFITABILITY
• Is the company able to get a profitable
return on investments?
• Is it able to service its long debt
obligations?
• Overall efficiency of the company is
studied
• Are shareholder’s funds being put to
proper use?

9. THEN WHY COOK BOOK ?
• A company may be very profitable but
Liquidity wise, it is poor.
LIQUIDITY V/S PROFITABILITY
Ex : A man has various sources like credit
card, debit card etc.
But, he does’nt have a Rs 5 coin to pay
for a bus ticket!

10. • So, in order to pump in funds, they
have to show high inflow of funds
• So solution is – inflate accounts, do
window dressing and present a
satisfactory statement to wannabe
lenders!
• This is how corporate cook book!

11. GLOBALISATION
• Advent of globalisation – MNC’s have set
shop here in INDIA
• Dependence on foreign funds
• Dealing with dollar dreams
• Offshore assignments for employees
• Why would foreigners invest ?
• Basis on balance sheet figures keeping in
mind Liquidity position of the company.
• Hence cook book is the solution!