Chapter 394 - Debt Ratio (1) – Part 1
When Gun-Ho and Young-Eun finished their dinner, a waiter came to their table and asked, “Did you enjoy your dinner? Do you mind if I clean the table?”
“Of course not. Please do so.”
Once the waiter took empty plates from the table, Gun-Ho asked Young-Eun,
“Why don’t we take a walk? It will aid digestion.”
“I have to go back to the hospital. Since this restaurant is close to where I work, I might run across my colleagues on the street.”
“What about having a glass of beer?”
“Can we just stay here until we part?”
Young-Eun looked at her watch.
Gun-Ho wanted to spend more time with her, but she seemed to want to call it a night. Gun-Ho didn’t want to lose his chance to get closer to her.
Gun-Ho wondered. ‘Does she not like me?’
“Let’s at least have a cup of coffee before we call it a night.”
Gun-Ho quickly brought two cups of coffee from a vending machine inside the restaurant before Young-Eun could say no. While having a cup of coffee, Young-Eun asked Gun-Ho, “I heard you went to college in China.”
“That’s right. I went to Zhejiang University.”
“Did you study the Chinese language there?”
“No, I majored in Economics.”
“Huh? You came earlier than I expected, sir.”
“You ate, right?”
“Yes, I did. Sir, you seem to be feeling pleasant.”
“What are you talking about? Let’s go to my pleasant home!”
Gun-Ho felt good on the way home. He felt like everything would go very well.
It was the day when Gun-Ho was supposed to receive the third quarterly report of GH Mobile on its profit and loss.
All of the GH Mobile’s executive officers gathered in Gun-Ho’s office.
The internal auditor distributed relevant documents to the meeting attendees before he began to give the verbal report. Jong-Suk started fiddling with his cup of water in front of him. He must have felt bored when the internal auditor started talking with too many numbers.
Gun-Ho, who was looking at Jong-Suk, said, “Director Jong-Suk Park, please pay attention.”
“Huh? Oh, yes, sir. Of course.”
Director Jong-Suk Park sat straight and tried to focus on hearing the internal auditor’s report. When other people were present at work, Director Jong-Suk Park couldn’t talk to Gun-Ho in an informal way. He couldn’t even call him brother either.
After the meeting ended, everyone left the office except President Jang-Hwan Song.
After making sure that everyone was out, President Song started speaking while having a bottle of water, “Sir, when you acquired this company, you invested 2 billion won. And you added an additional 3 billion won later.”
“That’s correct.”
“As the internal auditor presented during the meeting, our debt has been reduced from 70 billion won to 60 billion won.”
“I heard that.”
“The paid-in capital of this company is 2.5 billion won. Mulpasaneop was left with 500 million won after its reduction of capital, and you added 2 billion to it when you acquired the company. That made its current paid-in capital 2.5 billion won.”
“That’s correct.”
“The president of Mulpasaneop left the company after collecting his shares of 500 million won and his investment fund of 1.5 billion won, a total of 2 billion won.”
“That’s right.”
“You then put your 3 billion won into this company in order to pay off bad and urgent debts. This fund of 3 billion won which was deposited from you as the president of this company is listed under the liability account. That’s why even though we paid off some of our outstanding balance to our vendors, our debt doesn’t appear to be reduced.”
“Hmm.”
“Our company doesn’t have much earned surplus yet. Accordingly, if we divide the total liabilities by the sum of the paid-capital and the earned surplus in order to calculate our debt ratio, we come up with more than 400%.”
“Hmm.”
“We will have to make more effort to reduce the debt ratio.”
“So, you are suggesting that I capitalize on the 3 billion won that I previously put into this company in order to reduce our debt ratio.”
“I’m sorry, sir. It’s not something I can suggest or ask you to do so since it’s your call as an investor to this company. I’m just telling you the current status of this company’s financial situation.”
“Hmm.”
“You could take your dividend at the end of each year along with your investment fund of 30 billion won. The company will still survive. However, it will prolong the preparation time to have this company go public.”
“Hmm.”
“The reason I’m telling you this now is that we failed to get a work from L Group yesterday. They determined that our company has financial stability issues because our debt ratio is way too high. I just want you to consider this current situation.”
“What is the average debt ratio in the industry?”
“It’s 160%.”
“Hmm. They require a company to keep its debt ratio 1.5 times lower than the industrial average debt ratio in order to successfully register with KOSDAQ, don’t they?”
“That’s correct.”