INFLATION IN THE MAKING

We have been shared with the latest news of revision of service tax from current 5% to 6% effectively 1st January 2011. The revised service tax is to ensure that the government will earn an extra income and further reduce the deficit. The implementation of revision is to temporarily 'calm the emotion' of the public of the implementation of GST of which pending for approval in Parliament.

The government also has announced the revision of retail price for RON95, RON97, flour, and LPG. All revision has take into effect on 4/12/2010 from 12 midnight, except RON97 was increased couple of days ago.

In any business nowadays, we will need transportation to deliver goods, services as well as products to consumers/customers. A mamak will get his supply of flour from retailer/wholesaler/supermarket. Definitely he will need to drive or at least get someone to buy the stock on his behalf.

The cost of transportation also will be borne by retailer/supermarket/wholesaler from the supplier/factory. What is the transportation cost here? We are talking about the price hike of petrol/diesel, a commodity used by the transporter to power up their prime mover/trucks to deliver the goods to the consumer (mamak, supermarket, retailer, wholesaler).

In this case, the transportation cost are being passed from one end to another end and the last effect is, the rakyat will pay the cost, i.e. an increase price of roti canai.

An increase of consumer goods will defitely impacted our inflation rate escalating, eventhough this is not the primary cause to the increase. The consumer price index for Oct 2010 114.7 an increase of 2% from 2009. An increase of CPI resulted to less buying power of the consumer as they need to fock-up extra 2% of their disposible income to spend their income on goods and services as compared to goods and services pricing in 2005.

The concerns on property bubble in Klang Valley has raised the concerns of BNM to increase OPR to 2.75% to curb the issue of property speculation. Most of the speculators are buying the middle and high end property for the purpose of rental or disposal at a later date. Speculation activity impacted the low and middle income group as they buying power has diminished as cost of living increased.

As a consumer/rakyat, it is time for us to reprioritise our expenditure and to make adjustments to suit with challenging economy landscape nowadays.

Financial Ratios

Just to share to those who is interested to know the common Financial Ratios formulae used in assessing financial health of an organization.

Financial Ratios

a.       Liquidity Ratios

a.       Current Ratio = Current Assets/Current Liabilities

b.      Net Working Capital = Current Asset – Current Liabilities

c.       Quick Ratio = (Current Assets – Inventories)/Current Liabilities

b.      Activity Ratios

a.       Receivable Ratios

                                                               i.      Account Receivable Ratios Turnover = Sales/Account Receivables

                                                             ii.      Average Collection Period = Account Receivables/(Credit Sales/Period)

b.      Inventory Turnover Ratios

                                                               i.      Inventory Turnover = Sales/Inventory

                                                             ii.      Days Sales Inventory = Inventory/(COGS/Period)

                                                            iii.      Total Assets Turnover = Sales/Total Assets

                                                           iv.      Fixed Assets Turnover = Sales/Fixed Assets

c.       Solvency Ratios

a.       Debt Ratio = Total Debt (CL + LTD)/Total Assets

b.      Debt to Equity Ratio = Total Debt (CL + LTD)/Equity

c.       Time Interest Earned = EBIT/Interest

d.      Long Term Debt to Equity = LTD/Equity

d.      Profitability Ratios

a.       Gross Profit Margin = Gross Profit/Sales

b.      Net Profit Margin = Net Profit/Sales

c.       Operating Profit Margin = EBIT/Sales

d.      Return on Assets = Net Income/Total Assets

e.      Return on Investments =Net Income/Equity

f.        Return on Equity = Net Income/Equity

e.      Ownership Ratios

a.       Earnings Per Share = Net Income / No. of Shares

b.      Dividend Per Share = Dividend Payout/No. of Shares

c.       Dividend Payout Ratios = Dividend Per Share/Earning Per Share

d.      Price Earning = Market Price/Earnings Per Share

e.      Book Value Per Share = Equity/No. of Shares

f.        Market Capitalization = Market Price X No. of Shares

g.       Dividend Yield = Dividend Per Share/Market Price Per Share

 See for more update/news later..

It's 20.10.2010

Wow, today I'm celebrating my coolest day, one in a life time, memorable date, i.e. my birthday.

Last week, people are vowing to celebrate special occassions such as registering marriage, delivering baby, etc. on 10.10.2010. Not to forget the most tragic accident for the year at PLUS highway not to far to Simpang Ampat, Melaka exit.

It is time for me recheck my current development in terms of Ibadah, health and wealth.

To all wishers, thanks for your greetings and may our friendship last forever.

Thank you.

Coding used in Airline Industry

I have attended a meeting with officials from one of local airline industry player recently. They have shared me the common coding used in the industry. For instance, if the aircraft number is MH1234, then the coding is Mike Hotel 1234.

The rest of the listing as follows:

A             -              Alpha

B             -              Beta

C             -              Charlie

D             -              Delta

E              -              Echo

F              -              Foxtrot

G             -              Golf

H             -              Hotel

I               -              India

J              -              Juliet

K             -              Kilo

L              -              Lima

M            -              Mike

N             -              November

O             -              Oscar

P             -              Papa

Q             -              Quebec

R             -              Romeo

S              -              Sierra

T              -              Tango

U             -              Uniform

V             -              Victor

W            -              Whiskey

X             -              X-Ray

Y              -              Yankee

Z              -              Zulu

Even Airlines are looking on how to reduce operational cost, what about Insurance/Takaful industry?

Airlines plan paperless cabins (The Star, 20/9/2010)

KUALA LUMPUR: Airlines are exploring the possibilities of running paperless cabins in an effort to move towards more environment-friendly operations and reducing the printing cost of inflight magazines.

Malaysia Airlines (MAS) general manager corporate safety, security, health and environment Dr Ooi Teong Siew said MAS had started separating and reducing cabin waste, and introducing an electronic version of its inflight magazine would be a natural extension of this initiative. “We are always looking for ways to reduce the plane’s weight to reduce fuel. Alternative means of providing reading materials will have to be considered,” he said.

Enhancements to inflight services and information technology systems would be required to support this initiative, he said, adding that MAS foresaw more airlines taking steps towards having paperless cabins going forward.

A Cathay Pacific Airways Ltd spokesman said: “Cathay Pacific has always practised an eco-friendly stance on all relevant activities and initiatives and we continue to instil this awareness in all colleagues and passengers.” Singapore Airlines (SIA) had on July 30 announced its commitment to introducing an electronic version of its magazines on its KrisWorld inflight entertainment system progressively.

News Article on BASEL III

Expert: Basel III needs to address three areas

BY DALJIT DHESI
daljit@thestar.com.my

Vital to ensure effective risk management to avert future financial crisis

KUALA LUMPUR: While the Basel III rules on the whole are positive, three things still need to be urgently addressed to ensure their effectiveness in managing risks to avert future financial crises, according to a financial and risk management expert.

Canada-based Black Ice Partners managing partner Mukhtar Kalyan said these included having a proper forward-looking framework of risk weights, more transparent rating of financial instruments and performance and accountability based on risk taking.

In terms of risk weights, the Basel Committee needs to take into account unforeseeable risk which is not measured by current risk management practices such as value at risk.

Mukhtar Kalyan... ‘If the risk measurement framework of (Basel III) does not become more holistic, I would not be surprised if another crisis happens.’

Mukhtar said banks should focus on the 1% or tail risk and not the 99% risk which it measured and also focus less on models based on probabilities but rather create new models built on possibilities.

“This was the key lesson of the recent financial crisis. Triple AAA-rated instruments can default. No asset should be assumed to be zero risk, like the sovereign risk of a country, to prevent any future debt defaults.

“At the moment Basel III framework attaches a zero risk weight on sovereign risks for almost all countries. Sovereign default is possible and needs to be addressed by Basel III.

“There needs to be some form of mechanism or framework to look into possible risk events and not just probabilistic risk events to avert future financial meltdowns,” he said during an interview.

“If the risk measurement framework of (Basel III) does not become more holistic, I would not be surprised if another crisis happens,” he said.

According to Mukhtar, lack of transparency in the financial instrument ratings by rating agencies was also another major reason for the global financial crisis of 2008. He said the framework should incorporate this requirement to make it clear how the ratings and due diligence were derived.
Bankers and chief credit officers should also be held accountable for the risks they took, he noted. At the same time, financial institutions should reward their staff who were prudent in risk management, he said.

The Basel Committee recently agreed that banks be required to hold more capital under the Basel III rules when they come into force in 2019. Banks are required to hold top quality capital totalling 7% of their risk-bearing assets, from 2% now. Of the 7%, 4.5% comprises core tier 1 capital, which consists of shares and retained earnings, and the balance 2.5% capital conservation buffer. Banks are required to meet the framework’s tier 1 capital requirement by 2015 and capital buffer by 2019. Without specifying the time frame, the rules also spelt out the need to set aside counter-cyclical capital buffer of zero to 2.5%, which central banks would use during periods of excess credit growth. Generally the rules would not impact Malaysian banks negatively as the banking system in the country was well capitalised, Mukhtar said, adding that Bank Negara had put proper risk management and surveillance system in place to avoid any future financial crisis.
He also said Basel III would not affect the banks’ risk-pricing and likelihood of undercutting in terms of pricing and profits.

“The rules are not trying to tell banks how they should run their businesses but instead require them to have sufficient capital to undertake risks,” he added. Black Ice Partners, which has offices worldwide, comprises a group of senior globally experienced financial experts, regulators and portfolio managers. Its clients are global and regional banks in North America and Asia.
An acknowledged industry specialist, Mukhtar has been extensively involved in several Basel rollouts in North America and Asia, and most recently in South Korea and Malaysia. He is considered by many as an industry veteran with a career spanning three decades in capital markets, finance and risk management. With an extensive knowledge of the regulatory and compliance environment in several G-20 countries, Mukhtar has acted in an advisory capacity to banks, central banks and regulatory agencies in both South East Asia and North East Asia.

Twitter games: Najib tops list with 33,000 followers (The Star, 18/9/2010)

This is an individual opinion on the topic discussed in class today.

Twitter, one of the simple, creative and on real time social networking being widely used today.

After the result announcement of General Election in 2004, the government has concluded that one of the critical factor for the opposition winning the states was because of the alternative media broadcasting (blog, social networking, etc.) to the general public.

Nowadays, it is uncommon to see the general public to have their own social networking media (facebook/twitter, etc). Policticians also does have their own accounts so that they can interact, updates, communicate with their followers.

However, there are disadvantages of using this media, enlisted, not limited to as follows:-

a) Sensitivity of races, cultural believes and religion needs to be observed at all times;
b) To much disclosure of the activities/update may distrupt personal leisure time and privacy;
c) An update for a good cause may sometimes 'backfires' you;
d) Writing style indirectly express your personalities.

Visit my blog at http://myspone.blogspot.com/

Circles

1. In 1994, I was asked by one of my colleague whilst I was in college. He is an engineering student, mechanical specifically and the recent news I heard he is with Petronas in Bintulu, Sarawak. He asked the exact definition for circle without using the word of 'circle'.
2. A circle is a simple shape of Euclidean geometry consisting of those points in a plane which are equidistant from a given point called the centre.
3. Spiral also is a subset to circle, or genetically altered circle.
4. Why I have to mentioned this? We will discuss this later since I have to go now.

Visit my blog at http://myspone.blogspot.com/

Porter's Five Forces and Insurance/Takaful Industry

In modern and challenging business environment, most of organizations may use Porter's Five Forces to analyse their industry analysis and to develop a proper business development plan. Developed by Michael Porter of Harvard Business School in 1979 and forces are listed as follows :-

a) Intensity of Competitive Rivalry
b) Bargaining Power of Suppliers
c) Bargaining Power of Customers
d) Threat of New Entrants
e) Threat of Substitute Products

In Insurance and Takaful Industry, In Malaysia for instance, the number of insurers are 46 (BNM Annual Insurance Statistic 2009) as compared to 49 companies in 2008. The number of Takaful Operators has increased to 8 (Takaful Annual Statistic 2009) as compared to 5 in 2005. These represents as the intensity of insurance and takaful providers in Malaysian market.

Bargaining power of the suppliers has been determined by the coverage availability by the reinsurers (insurer of the insurers/takaful operators). The negotiated terms and acceptable rating will enable direct insurer/takaful operators to offer competitive products and best terms to consumers.

Customers motives will be highly dependant by the competitiveness of the product offerings as well as service deliverables by the insurers/takaful operators. High pricing of products will make the consumer to switch to other insurance/takaful providers provided the switching costs is comparatively low. For instance an individual may renew his motor insurance from Insurer A to Insurer B if he finds that the later can offer the best rate and terms.

In Malaysian context, the emergence of the insurer/takaful operators are governed by BNM. BNM will issue the licenses and approval before a company can enroll and selling their products. With the corporate governance, Risk Based Capital structure in place, stringen compliance to Security Commission guidelines and procedures ensure the stability and reliability of the insurers/takaful operators. These has minimise the opportunity for the new entrants into the industry.

Substitute to the products is very scarce except for big corporation that might to have arranged the insurance needs through self insured or captive markets.

Quote of the day

Quote of the day :-

'The secret of success in life is for a man to be ready for his time when it comes'
- Benjamin Disraeli, British Prime Minister.

It is best for everyone to plan and equip yourself with knowledge before the opportunity comes. Always been said that golden opportunity come once and you might do not know whether you are ready for it. Hold on tight and JUST DO IT!!!

Secondly, I amazed with the concept ' Don't Make Your Boss Think for You'. It keeps remind me the reason why I'm employed. The trade secret is very simple, think before ask questions as your leader might have this perception towards you :-

• 'If they ask questions because they can't think, then we're in trouble.'
• 'If they ask questions because they are lazy, then they are in trouble.'
• 'If they ask questions so that everyone can move faster, then we're headed for success.'

While bad questions have a negative impact, good questions do several positive things: they clarify objectives, they speed up the process of completion, and they stimulate good thinking (John C. Maxwell, 2005). All of these is good for an organization and helps you stand out positively before your leader.

The History

We are in mood of celebrating our 53rd National Independance Day. One would like to ask, why we should celebrate it.

Well, my personal opinion, we should celebrate it due to the followings:-

a)  To refresh our memory how we was at one point of time has been colonised by others (it was in 1511),
b)  To study advantages (may be some) and disadvantages of being colonised,
c)  To study and appreciates the journey of the heroes and unsung heroes who help for the independance,
d)  To study and understand our diverse ethnic and cultures that shapes our country today,
e)  To understand what have been agreed upon the signing of independance,
f)  Having colonised for almost 446 years, how we can avoid ourselves being colonised for the second time,
g) We then should crave our own future based on our culture and values.

Selamat Hari Merdeka!!!

Monday Blues

It's Monday again and I fail to understand why people keep on saying 'Monday Blues'. For now, I feel I need to understand what caused the problem. Just an express toughts :-

a)  Another extension of one day leave, eventhough Saturday and Sunday is not enough for resting day??!,
b)  Boresome as peers accdently taking leave on the same day,
c)  No close monitoring by the supervisors so they can excuse themselves on monday, I wonder if they are actually the same,
d)  Unfinished assignments that caught them of undeliverables KPIs,
e)  Attitude manifesto, people/seniors are do it and one can't see why could not resist it!

For me, this is not right. Islamic values do not teaches us to treat Monday Blues just because of anything. Make yourself focus with daily objectives in order to achieve your strategic long term objectives. If can't understand, read and understand the worship in Azan, hopefully you'll understand.

That is my comment for the day, PEACE!!!

Cold and Cough

Having minor cold and heavy cough this few days. Doctor advised just to stay calm otherwise if could not hold it, break fasting...No way, agi idup agi ngelaban....

My MIS 750 Class

Assalamu 'alaikum and dear readers,
Last Saturday is my first class for MIS 750 for second module under 3rd semester for EMBA program, UiTM Shah Alam.

The subject is moderated by Associate Professor Dr Norzaidi Mohd Daud and the class scheduled to be completed by 25th September 2010. Our population has been trimmed from 18 to now 10 plus 1 new couple who took semester leave previously.

It is very interesting to know that the methodolgy in class is a mixture of presentation by individual student and application of theory with working environment as well as discussion within the class. I have found out it is very helpful and sharing ideas and experience among peers.

Well class, live it up and enjoy the journey!!