PRINCIPLES OF MACROECONOMICS (BBEK4203)

FACULTY OF BUSINESS & MANAGEMENT

SEMESTER 5 / 2013

BBEK4203

PRINCIPLES OF MACROECONOMICS

NAME : AMIR BIN TOMPONG

MATRICULATION NO : 860704495583001

IDENTITY CARD NO. : 860704495583

TELEPHONE NO. : 013-8899761

E-MAIL : [email protected]

LEARNING CENTRE : Tawau Learning Centre

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TABLE OF CONTENTS

Contents Page

1.0 INTRODUCTION 2
1.0.1 Definition of Accounting 2
1.0.2 Selected Company From Bursa Malaysia in 2011(Dutch Lady
Milk Industries Berhad) 2
1.0.2.1 Vision and Mission 3
1.0.2.2 Financial Highlight 4
1.0.2.3 Main Activities 5
1.0.2.4 Product or Services 5
2.0 EXTERNAL USER 6
2.0.1 Definition of External User 6
2.0.2 External User For Dutch Lady Milk Industries Berhad 7
3.0 FEEDBACK VALUE 10
4.0 FORECAST VALUE 11
5.0 CONCLUSION 13

REFRENCE 14

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1.0 INTRODUCTION
1.0.1 Definition of Macroeconomics

Macroeconomics is an analysis of a country economic structure and performance

and the government policies in affecting its economic conditions. Economists are
interested in knowing the factors that contribute towards a country economic growth
because if the economy progresses, it will provide more job opportunities, goods and
services and eventually raise the people standard of living. Macroeconomics can progress
as it tests a particular theory to see how the overall economy functions, whereby the
theory is used to forecast the effects of a particular policy or event.

Other than that, microeconomics is field of economics that studies the behavior of
the aggregate economy. Macroeconomics examines economy-wide phenomena such as
changes in unemployment, national income, rate of growth, gross domestic product,
inflation and price levels. Economists define macroeconomics as a field of economics
that studies the relationship between aggregate variables such as income, purchasing
power, price and money. This means macroeconomics examines the function of the
economy as a whole system, looking at how demand and supply of products, services and
resources are determined and factors that influence them.

Macroeconomists also study about the aggregated indicators such as GDP and
GNP. Macroeconomics encompasses a variety of concepts and variables, but there are
three central topics for macroeconomic research. Macroeconomic theories usually relate
the phenomena of output, unemployment, and inflation. Outside of macroeconomic
theory, these topics are also extremely important to all economic agents including
workers, consumers, and producers.

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1.0.2 Issues in Microeconomics

There is several issues in microeconomics. The issues are follows :

a) What are the Determinants of Economic Growth and Living Standards in

a Country?
Since a century ago, developed nations have achieved a high rate of
economic growth, which in turn has raised their people standard of living.
Macroeconomics examines the reasons behind the speedy economic growth in
the developed nations and understands the reason why this growth is different
between the various countries.

b) Productivity
The average labour productivity or the output of a single worker is
important to determine the standard of living. Macroeconomics will inquire
into the factors that decide on the growth rate of employee productivity.

c) What is the Cause of Decline and Growth in an Economy?

Any economy will surely go through decline and growth. In relation to

this, macroeconomics will look at the causes of these changes in the economy
and the government policies that can be implemented to overcome an
economic problem.

d) What Factors Affect Unemployment?

What does rate of unemployment mean? Rate of unemployment means

there is an available work force that wants to work but has no jobs. The rate of
unemployment will increase when there is a decline in the economy, but
unemployment also happens when the economic situation is good.
Macroeconomics will examine the reasons for unemployment, types of
unemployment and ways to overcome unemployment.

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e) What Factors Cause the General Price Levels or Inflation to Rise?

What does inflation mean? Inflation is an increase in the general price

level and is usually measured by looking at changes in the Consumer Price
Index. The questions asked in a macroeconomic analysis are:

(i) What factors affect inflation?

(ii) Why does the inflation rate differ from time to time?
(iii) Why does the inflation rate differ from one country to another?

1.0.3 Microeconomics policies

The study of macroeconomics relates to the economic growth of a country.

Although many factors, such as natural resources, human resources, capital stocks,
technology, and people choice of economy, contribute towards economic growth,
government policies also play an important role. Therefore, it is also important for you to
understand the effects of the many government policies on the economy and the need to
develop better policies as this is an important aim in macroeconomics. Macroeconomic
policies affect the overall performance of the economy. There are two main
macroeconomic policies, namely, the financial, or monetary policies, and fiscal policies.
However, there are also other policies that can be used by the government to influence
the economic performance of a country. They are income policies and supply side
policies.

a) Financial Policy/Monetary Policy

Economists believe that changes in the money supply will influence

important macroeconomic variables such as national output, labor force,
interest rate, inflation, share prices and foreign currency exchange. Financial
policy is controlled by the central bank, which acts as a government agency
(in Malaysia it is deal with Bank Negara)

b) Fiscal Policy

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The tools used in fiscal policy are taxes and government expenditure. A
good balance between government expenditure and government revenue is
important. When the government spends more than the income tax collected,
it suffers a budget deficit. Meanwhile, if the government revenue is more than
its expenditure, then the government will have a budget surplus.

c) Income Policy

This policy is used by the government to control prices and wages. The
government will specify the maximum amount by which prices and wages are
allowed to rise. Government and firms/labor unions sometimes negotiate on
the price and the wage-setting behavior.

d) Supply-Side Policy

This policy focuses on the aggregate supply and on how the production
could be increased. The main instrument of the supply side policy is the tax
system. With a reduction on personal taxes, workers are encouraged to work
more and therefore increase labor supply.

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1.0.4 Objectives of microeconomics

According to the economist, there is several objectives of microeconomics.

Microeconomics objectives are :-

a) Achieving full Employment

This does not mean that there will be no unemployment at all or that the
rate of unemployment will be zero in a country. Basically, economists agree
that there can still be unemployment although the economy is at a level where
it has achieved full employment, meaning that those who are able and willing
to have a job can get one.

b) Price Stability

Generally, price stability means there are no changes in general price

levels. This also means that the prices of some goods and services may
increase, while some other prices may drop at the same time. When prices
remain largely stable, there is no rapid inflation or deflation.

c) Good Economic Growth

Achieving good economic growth is also one of the aims of

macroeconomics. This would mean there is an increase in the real per capita
income from year to year.

d) Rapid International Trade Activities

All countries participating in international trade want to benefit from

specialization and trade. Empirical studies have shown that those countries
that are actively involved in international trade benefit in terms of more
production output and higher consumption levels.

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employs 600 Malaysians. Currently, Dutch Lady Malaysia is the market leader in
key milk categories such as UHT milk, Sterilised milk and Growing-Up Milk.

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1.0.4.1 Vision And Mission

The vision of this company is “To further strengthen our position as the
leading dairy company, driving growth.”
The Mission of this company is “Helping Malaysians move forward in life
with trusted dairy nutrition.”

1.0.4.2 Financial Highlights

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1.0.4.3 Main Activities

According to the history of this company, based on the figures of 2008, Dutch
Lady Industries Berhad annual revenue amounts to 9.5 billion euros. The
company employs 21,000 people and has about 100 production and sales
locations in 25 different countries. Dutch Lady Industries Berhad organized its
activities into four business groups: Consumer Products Europe, Consumer
Products International, Cheese & Butter and Ingredients.

1.0.4.4 Product or Services

The product range consists of consumer milk, milk in powder and

concentrated form, dairy drinks, yoghurts, desserts, cream, coffee creamers,
baby and infant food, cheese, butter and ingredients. Its most important brands
are Campina, Chocomel, Completa, Dutch Lady, Frisian Flag, Foremost,
Betagen, Friesche Vlag, Fruttis, Fristi, Vifit, Landliebe, Milli, Mona, Optimel,
Optiwell, Puddis, Pöttyös, Fruttis, NoyNoy, Peak, Rainbow, Yazoo,

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Appelsientje, DubbelFrisss, CoolBest, Debic, Frico, Milner, Buttergold,

Valess, DMV, Kievit, Domo, Creamy Creation and Nutrifeed.

2.0 EXTERNAL USER

2.0.1 Definition of External User

External users are people who do not have direct access to the resources of
the company and to not involved in the management of the company. Examples of
external users are investors, loan providers, Inland Revenue Board, government
agencies and the public. The types of decision made are different according to
user groups. For example, investors make decisions on whether to invest in a
company, loan providers make decisions on whether to approve loans while the
Inland Revenue Board decide on the total tax to be imposed. External users of
accounting information include the following:

Creditor: Determining the credit worthiness of the organization. Terms of credit

are set according to the assessment of their customers' financial health. Creditors
include suppliers as well as lenders of finance such as banks.

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Tax Authourities: Determining the credibility of the tax returns filed on behalf of
the company.

Investors: Analyzing the feasibility of investing in the company. Investors want

to make sure they can earn a reasonable return on their investment before they
commit any financial resources to the company.

Customers: Assessing the financial position of its supplier which is necessary for
a stable source of supply in the long term.

Regulatory Authorities: Ensuring that the company's disclosure of accounting

information is in accordance with the rules and regulations set in order to protect
the interests of the stakeholders who rely on such information in forming their
decisions.

2.0.2 External User For Dutch Lady Milk Industries Berhad

According to the Dutch Lady Milk Industries Annual Report 2011 The
information required for the external user are shown below :-
a) Financial Highlight

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b) Material Contract

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For the financial year, there were no material contracts entered into by
the Company (not being contracts entered into the ordinary course of
business) involving directors and substantial shareholders.

c) Share Buyback

During the financial year, there were no share buybacks by the

Company.

d) Options, Warrants or Convertible Securities

During the financial year, the Company did not issue any options,
warrants or convertible securities.

e) Imposition of Sanctions

There were no sanctions and / or penalties imposed on the Company,

Directors or management by any relevant regulatory bodies.

f) Non Audit Fees

During the financial year, the Company paid RM15,000 in non-audit

fees to the External Auditors.

g) Profit estimate, forecast or projection

There was no material variance between the results for the financial
year and the unaudited results previously announced. The Company
did not release any profit estimate, forecast or projection for the
financial year.

h) Profit Guarantees

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During the financial year, there were no profit guarantees given by the
Company.

i) Utilization of proceeds

The Company did not carry out any corporate exercise to raise funds
during the financial year.

j) Auditor Report

The auditor report is one of the important thing to make the external
user for this company to make an investment to this company

Other than that, according to the annual report of this company, there is about 30
largest external user which is invest to this company, for example :-

1) FrieslandCampina DLMI Malaysia Holding B.V.*

2) Amanahraya Trustees Berhad as 1Malaysia
3) Kumpulan Wang Simpanan Guru-Guru
4) Citigroup Nominees (Asing) Sdn Bhd - CBNY for DFA
Emerging Markets Small Cap Series
5) Amanahraya Trustees Berhad - Amanah Saham Malaysia

3.0 FEEDBACK VALUE

To make a difference in the decision process, information must possess by a
feedback value. Feedback value means relevant information must be able to assist users
in substantiating or correcting early expectations matters at hand. Relevance refers to the
capacity of information to influence the decision-making process of users. It enables user
to make predictions about the future. In order for information to be relevant, it should be
made available to the user before it loses its capacity to influence decisions. In other
words, it should be provided on a timely basis. The feedback value often receive less
prominence that other qualities in the conceptual framework. Feedback values allow the
enterprise and the user to reposition themselves in response to such change.
Feedback value also can be derive from what information tell about the past.

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The most important figure in financial statements with feedback value is the
earnings figure, which conveys information about the success of the ventures that have
been invested in and also about the performance of the manager who have been
responsible for running the business.
Feedback value is very important because it can be a reference by the investor to
get a confirmation and expectation about future cash generating ability by the company.
For example, when we want to invest in one of the company, and then the company did
not give us the information such as their financial highlight for example, we as the
investor, will be fear to invest, because we did not know about the cash generating ability
from that company. We also dot know how much the profit we will gain after we invest
in the chosen company.
The other example of the information which is can be assist user to make a
decision, and to attract user to make an investment in the Dutch Lady Industries
especially is Financial Highlight, Auditor report, Material contract, Non audit fees, Profit
guarantees, Utilization of proceeds and much more.

4.0 FORECAST VALUE

A forecast value is a projection of an entity's future revenues, expenses, and/or
asset acquisitions and dispositions. Forecast value also can be defined as relevant
information which is must be able to assist users in forecasting. It also can be known as
profit estimate by the investor. It’s a different with the feedback value, where the
feedback value, is the information which is given from the company, which can
convenience the investor to make the investment. After the investor look at the feedback
value from the company, the investor will be search whether the company give the
estimate profit to the investor or not. When the company give the estimate profit to the
investor, it can make the investor trust to the company and will be invest to the company.

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Other than that companies sometimes need to determine the value of inventory
when a physical count is impossible or impractical. For example, a company may need to
know how much inventory was destroyed in a fire. Companies using the perpetual system
simply report the inventory account balance in such situations, but companies using the
periodic system must estimate the value of inventory.

Effective sales forecast value help a business manage its supply chain more
economically and efficiently. Accurate predictions allow a business to purchase raw
materials, parts and services more favorably because it has sufficient time to shop for
prices. An accurate forecast enables a business owner to keep a lower inventory, thus
reducing costs. Raw materials efficiently become the right number of finished products
and move to the right locations.

Accurate predictions and smooth management of the supply chain help keep
materials and parts vendors happy because vendors have fewer problems with rush orders
or cancellations. In addition, customers receive timely deliveries of what they ordered,
rather than late deliveries or out-of-stock notices. Satisfied customers keep on buying
from the company in the future.

Other than that accurate long-term forecast value enable a business to better
manage financial and other planning. Valid sales forecasts give the company a
framework for setting realistic goals for its sales teams. Accurate forecasts help managers
foresee the need for more staff in time to recruit and train them. Management can plan
new facilities for production and storage when and where they will do the most good. A
forecast also gives the company time to arrange the financing needed for expansion.

We make an example for the forecast value according to the Annual Report of the
Dutch Lady Milk Industries Berhad. According to this company annual report 2011, in
additional compliance information, the report said “There was no material variance
between the results for the financial year and the unaudited results previously
announced. The Company did not release any profit estimate, forecast or projection for
the financial year”. Other than that, from this company report, in term of profit
guarantees, they said “During the financial year, there were no profit guarantees given

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by the Company”. From this statement it can make the investor feel fear to invest in this
company.

However, from this report also, they give the financial highlight for every year.
By given the good financial highlight or by showing good performance report the
investor will be more interested to invest in this company.

Forecast value also is very important in accounting. It is because its a purely

statistical approach to forecasting sees the object of the forecast as a drawing from a
conditional distribution, with the expected value given by transitional parameters applied
to current observables, and the risk (error) in the forecast given by distribution of
unpredictable realizations around this expectation. These features are referred to as a
generating “process”. The statistical exercise simply estimates the parameters of the
process from behavior in the data. But observables are often generated by nature, with the
process governed by laws of nature, albeit often not deterministically. So those laws are
utilized in the forecasting, such that tomorrow’s weather is forecasted based on the
principles of meteorology, albeit with error.

Other than that in accounting forecast value informs that the specification of
accounting for the future also specifies the accounting for the present; accounting
allocates to periods and, to the point, allocates between the present and the future.
Accordingly, accounting principles determine the transition from the present to the
future, so forecasting of future accounting numbers from current, observed numbers is
also a matter of accounting. Statistical forecasting specifies that evolution with
parameters from a process estimated from the data or dictated by nature. Accounting
specifies the evolution from the process dictated by the accounting principles employed.
Accounting is self-referential, with future numbers specified as the target for forecasting
determined in part by the accounting for the current numbers. That self-reference directs
the forecasting.

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5.0 CONCLUSION

For the conclusion, the company, especially Dutch Lady Milk Industries Berhad,
can make the investor more interested to invest in their company. It is because, the
feedback value and forecast value are given.

Other than that, from this we can know how important the feedback value and the
forecast value. This type of the relevant of decision characteristic are very important, to
make the investor make an investment to the chosen company.

Another that by it is very important to understanding about the accounting

information. It is because accounting plays an important role in our daily lives without us
realizing it, and the accounting is a financial information system that can helps us make
better economic decisions. It is sometimes referred to as the language of business since it
communicates the financial performance and well being of an organization. In fact, we
also need accounting in our daily lives. We need financial information to make economic
decisions. For example, when making a decision on buying a new car, we need to know
the total net revenue in a month (gross revenues minus all expenses) to know whether we
can afford to buy the car. We also need to estimate other costs that might be involved in
having a car.

REFFERENCE

Dutch Lady Milk Industries Berhad Annual Report 2011

http://www.dutchlady.com.my/sharedfiles/financial/files/DL_AnnualReport_2011.pdf

Accounting Information Systems: Information on Collection, Storage and Processing of

Financial and Accounting Data. Accounting Information Systems. Retrieved 7 December 2012.

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Romney, Marshall B., and Paul John. Steinbart. Accounting Information Systems. Upper Saddle
River, NJ: Pearson Prentice Hall, 2009

http://www.aicpa.org

Goodyear, Lloyd Earnest: Principles of Accountancy, Goodyear-Marshall Publishing

Co., Cedar Rapids, Iowa, 1913, p.7 Archive.org

Lo and Fisher: Intermediate Accounting, 2nd edition, Pearson, Toronto 2014, ISBN 978-0-13-
296588-0, p. 2

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