Academic journal article Journal of Financial Management & Analysis

Financial Management Indicators to Aid Decision Making (Statistics)

Academic journal article Journal of Financial Management & Analysis

Financial Management Indicators to Aid Decision Making (Statistics)

Article excerpt

Monitored by

Om Sai Ram Centre for Financial Management Research

Mumbai, INDIA


In 1 990, the 37 non-financial public corporations in Bangladesh generated revenue totalling U.S. $2.78 billion by employing assets of U.S. $1 1 .32 billion and 0.32 million personnel. The value additions of these corporations amounted to 3.33 per cent of GDP and 1 5.58 per cent of total savings of the economy. They absorbed 28.38 per cent of national investment and accounted for 6.45 per cent of nontax government revenue. The public enterprise imports and exports represented 15.32 per cent and 8.96 per cent of total imports and exports respectively. Public enterprises accounted for 46.68 per cent of the annual development expenditures in 1 990. Hence, to be successful any economic and public administration reforms should involve the public enterprises with no less emphasis than that placed on the private sector. The non-financial public enterprises alone accounted for 28.3 per cent of non-tax revenue in 1990.

* Standard Reporting Model

There is no standard reporting model for all the enterprises in Bangladesh. In order to collect the operational data on public enterprise, the Monitoring Cell uses a total of twelve standard input (SABRE) forms. There are ten subject areas which cover all aspects of public enterprise performance. These are: personnel, capital formation, foreign aid, use of foreign exchange flows, profit and loss, output and operating details, payments to the Government, cash and fund flows, debt and balance sheet Each of these is the subject of a form which is used for reporting budget data and actual data on quarterly and annual performance. The eleventh form is used for reporting significant developments, problems and actions taken on a quarterly basis. The twelfth form covers all the standing data on each public enterprise, such as name, address, legal, status, economic sector, ownership, board of directors, accounting of auditing status, etc.

* For the twelve corporations that have enterprises/subsidiaries, separate set of consolidated information on the activities of the enterprise under them is collected in addition to information collected from Corporation Head office. All these twelve input forms constitute the standard reporting model as far as public enterprise reporting to the Monitoring Cell is concerned.

* Most of the nationalized industrial enterprises began as public limited companies before they were placed under the sector corporations and followed the accounting practices prescribed by the Companies Act, 1913. The accountants in the corporations also usually followed the accounting practices prescribed under this Act. Brought up and trained in the British traditions, most of the public enterprise accountants tend to follow the pattern prescribed by the British for the then British colony. The Companies Act itself has become somewhat outdated and is too weak to cater for the present developmental needs. Those corporations which primarily grew out of government departments continued with the governmental accounting system, viz., income and expenditure accounts.

* The accounts and audit of banks used to be governed by the Banking Companies Ordinance, 1962. In May 1991 the Bank Company Act, 1991 was enacted and the previous Act repealed. The new Act includes certain provisions to improve the accounts and audit of public enterprises.

* Insurance companies are governed by the Insurance Act, 1938. Hence banks and insurance companies are relatively well prepared and informative but they still do not meet the International Accounting Standard (IAS).

* The non-financial public enterprises are technically the least satisfactory in the preparation of accounts and only a few attempt to meet IAS requirements.

The quality of accounts varies between public enterprises - while some annual reports provide extensive information, other are sketchy and almost useless. …

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