The paper "Current Issues in Finance" is a wonderful example of an assignment on finance and accounting. Part 1 (35% of total marks) (750 words. )Using a company of your choice answer the following question: Explain to someone who has no knowledge of corporate social reporting ‘ what is a silent and shadow account? Part 2 (65% of total marks) (parts A, B, and C- 1750 words). A. Risk disclosure (Word count guide: 550 words)*1.Identify three sentences* that represent voluntary disclosures of risk information sentences. (3 marks)2.Categorise the three sentences according to the Linsley and Shrives disclosure grid attached to this assignment and explain why you have chosen to categorize the sentences in this manner.
(6 marks)3.For each sentence critically discuss whether agency theory, signaling theory, or legitimacy theory could explain why the directors have chosen to voluntarily disclose this piece of risk information. (12 marks)*Note that you should not identify generalized statements of risk management policy. 1. Three sentencesTelecom Plus PlcSentence IThe Company received notification today that on 21 March 2007 Michael Pavia, a non-executive director, acquired 10,000 ordinary shares of 5p each at a price of 195 pence per share.
Mr Pavia has a beneficial interest in 10,000 shares, representing approximately 0.01 percent of the issued share capital of the Company. Source: Notification of Major Interest in Shares - 28 March 2007Sentence II“ The difficulties of last winter are now firmly behind us, and the business is now in excellentshape. We are confident of delivering results for the full year which exceed our previous bestpre-tax profits of £ 10.5m to 31 March 2005, and we look forward to the future with renewedconfidence. ” Source: Interim results for the six months ended 30 September 2006Sentence III“ Financial and business highlights” · Turnover up 32% to £ 68.5m (2005: £ 51.9m)· Profit before tax up 9% to £ 5.5m (2005: £ 5.1m)· Net cash balance up £ 18.7m during the period· Interim dividend of 2p per share (2005: Nil)· Services provided up 5% to 521,000 during the period· Launch of attractive new broadband packages· Positive contribution from energy, with Npower agreement protecting Telecom plus fromfluctuations in wholesale energy marketsSource: Interim results for the six months ended 30 September 20062.
Categorization of the three sentences according to the Linsley and Shrives disclosure gridFinancial RiskOperations Risk
Weir, C. (1997). Corporate governance, performance and take-overs: an empirical analysis of UK mergers. Applied Economics, 1997, 29, 1465- 1475
Fama, E. (1980) Agency problems and the theory of the firm, Journal of Political Economy, 88, 288-307.
Fama, E. and Jensen, M. C. (1983) Separation of ownership and control, Journal of Economics and L aw, 26, 301-25.
Cadbury Committee Report (1992) Report of the Cadbury Committee on the Financial Aspects of Corporate Governance, Gee, London.
Gray R.H., D.L. Owen & C. Adams (1996) Accounting and accountability: Changes and challenges in corporate social and environmental reporting (London: Prentice Hall) . See also SEAJ for reports on new initiatives and campaigns from time to time.