Doing Business in the Czech Republic and EU

Dates and Topics• May 17 Czech Republic 2011 – Economic Overview• May 19 Doing Business in the Czech Republic - Introduction• May 20 Global Company in the Czech Republic and Slovak

Republic-Case of McDonald• May 24 Financial Markets in the Czech Republic and their

Regulation in the Context of Global Crisis• May 25 Microsoft Business Activities in the Czech Republic• May 26 Public Finance/ Health Care Sector in CR• May 31 The Financial Aspects of doing Business in the EU 1• June 2 The Financial Aspects of doing Business in the EU 2• June 3 The Financial Aspects of doing Business in the EU 3• June 7 Solar Energy Business in the Central Europe• June 9 Prague Stock Exchange

Balance sheet

• ASSETS short term• Cash and Marketable securities• Account receivable• Inventory• ASSETS long term• Gross property, plant & equipment

– Accumulated depreciation• Net property, plant & equipment

• LIABILITIES short term• Account payable• Short term debt• Accruals• LIABILITIES long term• Long term debt• Preferred stock• Equity

Cash and Marketable Securities

• + enough alternative instruments to choose from.

• - relatively high fee structure

Receivables

• + Approaching level of standardization expected in modern business environment.

• + Financing of receivables through Pledging and Factoring available.

• - Cost is relatively high.• - Relatively large variability around

agreed terms of payments

Inventories

• + Introduction and use of modern methods of inventory financing (field warehouse financing, trust receipts, blanket inventory lien, etc.)

• - Cost of financing relatively high• - Modern methods of inventories

management (EOQ, etc.) are confined to large companies only.

Accounts Payables

• + heightened awareness of cost of trade credit if used as a source of financing.

• - too often misused as a source of financing with a disregard for buyer/ seller relationship.

• - Enforcing payment discipline costly and time consuming

Short term debt

• + Improvement in the variety of short term borrowing options from banking sector. Non Banking sector active as a lender to small and medium businesses, but costs are high.

• - banks don’t analyze borrower need and tend to concentrate only on large companies with good tracking record.

Acquisition of plants and equipment

• + Large companies use modern capital budgeting decision tools.

• + Market for leases relatively well developed

• - Recent government regulation intended to protect the lessee is slowing down expansion of market

• - Medium size and small companies use payback method at best, if at all.

Long term Debt

• + Corporate bond market is beginning to take off. Large corporation construct their offerings up to par with developed financial markets standards.

• - Market is still too thin a for many companies too expensive.

• + Needs for long term funds serviced trough bank loans

Equity source of financing

• + IPO’s done on the Prague stock exchange (Zentiva, ECM, Pegas, AAA Auto Group) in past four years. Hopefully, this trend will continue.

• - Unfortunately IPO’s are too few and far between, even as compared with equity markets in other “new market economies” (Poland).