I. Economics

Czech Republic macroeconomic indicators

The table below describes the development of some key macroeconomic indicators of the Czech Republic for period 2014 – 2018.

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With regard to the data contained in the table, provide the following information:

1) Gross domestic product

a. Describe the development of GDP in the Czech Republic in 2018 using the expenditure approach.

b. Briefly explain a relatively high growth of household’s expenditure during last 5 years.

2) Unemployment

a. Explain the difference between General Unemployment rate and the Share of Unemployed persons.

b. Explain key factors of the development of the General Unemployment Rate of the Czech Republic in a given time period.

3) Inflation rate

a. Evaluate the development of inflation in the Czech Republic based on data contained in the table.

b. Explain the development of real wage in a given time period.

4) Exchange rate

What was the exchange rate commitment of the Czech National Bank?

5) Fiscal situation

Evaluate the fiscal indicators of the Czech Republic with regard to the Maastricht criteria.

6) Oligopoly and monopolistic competition

a. Explain the differences between oligopoly and monopolistic competition.

b. Using graphs, explain how optimal price and quantity are set by a firm in monopolistic competition in a short time (in the case of maximization of profit).

7) Elasticity of demand

a. Explain an income elasticity of demand.

b. Explain a price elasticity of demand.

c. Explain a cross elasticity of demand.

II. Finance

The Coca-Cola Company

The Coca-Cola Company, a beverage company, manufactures and distributes various nonalcoholic beverages worldwide. The company provides sparkling soft drinks; water, enhanced water, and sports drinks; juice, dairy, and plant-based beverages; teas and coffees; and energy drinks. It also offers

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concentrates, syrups, beverage bases, source waters, and powders/minerals, as well as fountain syrups to fountain retailers, such as restaurants and convenience stores. The company sells its products primarily under the Coca-Cola, Diet Coke/Coca-Cola Light, Coca-Cola Zero Sugar, Fanta, Schweppes, Sprite, Thums Up, Aquarius, Dasani, glacéau smartwater, glacéau vitaminwater, Ice Dew, I LOHAS, Powerade, AdeS, Del Valle, innocent, Minute Maid, Minute Maid Pulpy, Simply, ZICO, Ayataka, Costa, FUZE TEA, Georgia, Gold Peak, and HONEST TEA brands. The Coca-Cola Company offers its beverage products through a network of company-owned or controlled bottling and distribution operators, as well as through independent bottling partners, distributors, wholesalers, and retailers. The company was founded in 1886 and is headquartered in Atlanta, Georgia.

Please answer these questions1:

1. Present in a table(s) The Coca-Cola Company general financial data (incl. Balance Sheet and Income Statement important items) between 2014 and 2018.

2. Break down (analyse) the structure of The Coca-Cola Company Balance Sheet (important) items between 2014 and 2018.

3. Describe the sources of The Coca-Cola Company Revenues.

4. Analyse the development of The Coca-Cola Company main Income statement and Balance Sheet items between 2014 and 2018.

5. Find at least 2 competitors of The Coca-Cola Company and make a reasoning for your choice.

6. What was the profitability of The Coca-Cola Company? Compare to the competitors.

7. What was the company’s market capitalization as of the end of each year? If you were financial

investor, would you currently suggest to buy/sell The Coca-Cola Company shares and why?

8. Discuss the reasons for price turns of The Coca-Cola Company shares within last 5 years.

1 You are free to find and use any sources of The Coca-Cola Company information.

III. Accounting

Preparation of financial statements

YOJ is preparing its annual financial statements as at 31 December 2X15. The following trial balance has been extracted from its general ledger:

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To complete the preparation of financial statements, several year‐end closing transactions have

to be accounted for yet. The relevant information is as follows:

1. Depreciation:

a) building is straight‐line depreciated at 5 % per annum on its acquisition cost

b) accelerated depreciation is applied for transport vehicles at 20 % per year using the diminishing balance method

2. Impairment of receivables:

a) based on past experience, YOJ estimates that 8% of the closing balance of trade receivables will be never collected

b) impairment of uncollectible receivables is classified as other operating expense/income

3. Inventory:

a) YOJ applies the periodic inventory system

b) the closing balance of inventory as at 31 December 2X15 is 75,000 €

4. Borrowings:

a) 25% of the loan is repayable on 1 June 2X16; the remaining balance shall be repaid three years later on 1 June 2X19

b) all interest charges for 2X15 are already accounted for, shown on trial balance and paid

5. Income tax:

a) statutory tax rate applicable in the country of YOJ’s domicile is 20 %

b) company’s tax advisor has prepared the tax‐filling, according to which income tax

expense for 2X15 is 12,800 €

c) liability from current income tax is due on 1 April 2X16; no advance payments have been made in 2X15

d) do not consider the deferred income tax

Tasks required

Financial statements

1. Work out all calculations relating to the year‐end closing transactions described above

2. Prepare Balance sheet statement and Income statement of YOJ as at 31 December 2X15 following generally accepted accounting principles, including closing transactions

Supplementary questions

3. Inventory

The acquisition cost of inventory has been steadily increasing throughout 2X15. Let us suppose that YOJ could apply either FIFO or LIFO formula for expensing of goods sold. Compare hypothetical impact of the selection of the first or the latter method on:

a) cost of goods sold in 2X15

b) total cash flows in 2X15

c) closing balance for inventory as at 31 December 2X15

4. Accounting and taxation

a) What is the current income tax and what is the deferred income tax? What are the main principles of both categories?

b) Can the negative pre-tax accounting profit be subject to taxation, resulting in current income tax expense? Under which conditions can this happen?

5. Financial statements

a) What is the difference between individual (separate) financial statements and consolidated financial statements? Why consolidated statements are important for users?

b) What is the distinction between public and private firm? What are the main differences in financial reporting of public and private firms?

Study areas and Literature

Study areas from Economics:

1. Consumer and demand

2. Theory of the firm

3. Market structures

4. Inputs markets

5. Market failures and microeconomic state policy

6. Gross domestic product and its development

7. Money and Monetary policy

8. Aggregate supply and demand model

9. Inflation and Unemployment

10. Open economy

[1] MANKIW, N G. Principles of economics. South‐Western/Cengage Learning, 2012. 978‐0‐538‐ 45342‐4 (or later issue)

[2] FRANK, R H. ‐‐ BERNANKE, B. Principles of macroeconomics, brief edition. New York: McGraw‐ Hill/Irwin, 2011. 978‐0‐07‐731676‐1 (or later issue)

[3] FRANK, R H. ‐‐ BERNANKE, B. ‐‐ JOHNSTON, L. Principles of microeconomics. Boston: McGraw‐ Hill/Irwin, 2009. 978‐0‐07‐128540‐7 (or later issue)

Study areas from Accounting:

1. Objectives of financial accounting, scope of financial reporting, users of financial statements. Accounting harmonisation (IFRS; US GAAP; EU)

2. Balance sheet statement: structure and main elements

3. Income statement: structure and main elements

4. Cash flow statement: structure and methods of presentation

5. Equity: classification, features of different types of companies, capital contribution and distribution

6. Notes to financial statements. Annual Report. Audit of financial statements

7. Non‐current assets: definition, classification, measurement, depreciation and amortisation.

8. Inventory: definition, classification, measurement.

9. Receivables and revenues: recognition, measurement, accruals and deferrals

10. Liabilities and provisions: recognition, measurement, accruals and deferrals

Note: Topics are in compliance with ACCA F3 (The Association of Chartered Certified Accountants)

[1] Wood Frank & Sangster Alan: Business Accounting 1, 2012, 978‐0‐273‐75918‐8 Collins, McKekeith: Financial accounting and reporting, 2010, 9780077114527 (or later issue) Study areas from Finance:

1. Time value of money

2. Risk, its concept, types, measurements methods and its influence on corporate finance decision making.

3. Relation of corporate finance to financial markets. Valuation of shares and bonds.

4. Financial analysis.

5. Short‐term financial management.

6. Long‐term financial management. Capital budgeting. Financial structure management.

7. Income distribution. Dividend policy.

8. Corporate financial planning, principles, coordination and methods.

9. Business valuation methods.

Brealey, R.; Myers, S.; Marcus, A.: Fundamentals of Corporate Finance, New York, McGraw‐Hill, 2014,

9780077861629 (or later issue)