&8226;Read the article below about how to read annual report and the questions on the opposite page.
&8226;For each question 13-18, mark one letter (A, B, C or D) on your Answer Sheet for the answer you choose.
How to read annual reports
First, turn back to the report of the certified public accountant. This third-party auditor will tell you fight off the bat if Galaxy's report conforms with "generally accepted accounting principles". Then go to the footnotes. Check to see whether earnings are up or down. The footnotes often tell the whole story.
Then turn to the letter from the chairman, Usually addressed "to our shareholders," it's up front -- and should be in more ways than one. The chairman's tone reflects the personality, the well- being of the company. In this letter, the chairman should tell you how the company fared this year. But more important, the letter should tell you why. Keep an eye out for sentences that start with "Except for..." and "Despite the..." They're clues to problems. On the positive side, a chairman's letter should give you insights into the company's future and its stance on economic or political trends that may affect it.
Now begin digging into the numbers!
One source is the balance sheet. It is a snapshot of how the company stands at a single point in time. On the top are assets -- everything the company owns. Things that can quickly be turned into cash are current assets. On the bottom are liabilities -- everything the company owes. Current liabilities are the debts due in one year, which are paid out of current assets. The difference between current assets and current liabilities is working capital, a key figure to watch from one annual report to another. If working capital shrinks, it could mean trouble, one possibility: the company may not be able to keep dividends growing rapidly. Owners' equity is the difference between total assets and liabilities. It is the presumed dollar value of what the owners or shareholders own. You want it to grow.
The second basic source of numbers is the income statement. It shows how much money Galaxy made or lost over the year. Most people look at one figure first. It's in the income statement at the bottom: earnings per share. Watch out. It can fool you. Galaxy's management could boost earnings by selling off a plant. Or by cutting the budget for research and advertising. The number you .should look at first in the income statement is net sales. Ask yourself: are sales going up at a faster rate than the last time around? When sales increases start to slow, the company may be in trouble. Have sales gone down because the company is selling off a losing business? If so, profits may be soaring.
Another important thing to study is the company's debt. Turn to the balance, and divide long-term liabilities by owners' equity. That's the debt-to- equity ratio. A high ratio means the company borrows a lot of money to spark its growth. That's okay -- if sales grow too, and d there's enough cash on hand to meet the payments. A company doing well on borrowed money can earn big profits for its shareholders. But if sales fall, watch out. The whole enterprise may slowly sink. Some companies can handle high ratios; others can't.
Finally, you have to compare. Is the company's debt-to-equity ratio better or worse than it used to be? Better or worse than the industry norms? In company-watching, comparisons are all. They tell you if management is staying on top of things.
According to the writer, the most important element of the chairman's letter is
A.the expressions used.
B.the explanations given by the chairman.
C.the performance of the company during the year.
D.the company's future described by the chairman.
?Read the following extract from an article about what airline alliances will take to people and those airline companies, and the questions followed.
?For each question 15—20, mark one letter (A, B, C, or D) on your Answer Sheet for the answer you choose.
Cooperative cooperation. Competitive cooperation. Confused? Airline alliances have travelers scratching their heads over what's going on in the skies. Some folks view alliances as a blessing to travelers, offering seamless travel, reduced fares and enhanced frequent-flyer benefits. Others see a conspiracy of big business, causing decreased competition, increased fares and fewer choices. Whatever your opinion, there's no escaping airline alliances: the marketing hype is unrelenting, with each of the two megs-groupings, One world and Star Alliance, promoting itself as the best choice for all travelers. And, even if you turn away from their ads, chances are they will figure in any of your travel plans. By the end of the year, One world and Star Alliance will between them control more than 40% of the traffic in the sky. Some pundits predict that figure will be more like 75% in 10 years. But why, after years of often ferocious competition, have airlines decided to hand together? Let's just say the timing is mutually convenient. North American airlines, have exhausted all means of earning customer loyalty at home, have been looking for ways to reach out to foreign flyers. Asian carriers are still hurting from the region-wide economic downturn that began two years ago-just when some of the airlines were taking delivery of new aircraft. Alliances also allow carriers to cut costs and increase profits by pooling manpower resources on the ground and cede-sharing—the practice of two partners selling tickets and operating only one aircraft.
So alliances are terrific for airlines—but are they good for the passenger? Absolutely, say the airlines: think of the lounges, the joint FFP (frequent flyer program) benefits, the round-the-world fares, and the global service networks. Then there's the promise of "seamless" travel= the ability to, say, travel from Singapore to Rome to New York, all on one ticket, without having to wait hours for connections or worry about your hags. Sounds utopian? Peter Buecking, Cathay Pacific's director of sales and marketing, thinks that seamless travel is still evolving. "It's fair to say that these links are only in their infancy. The key to seamlessness rests in infrastructure and information sharing. We're working on this. n Henry Ma, spokesperson for Star Alliance in Hong Kong, lists some of the other benefits for consumers. "Global travelers have an easier time making connections and planning their itineraries. ' Ma claims alliances also assure passengers consistent service standards.
Critics of alliances say the much-touted benefits to the consumer are mostly pie in the sky, that alliances are all about reducing costs for the airlines, rationalizing services and running joint marketing programs. It is believed that alliances will ultimately result in decreased flight choices and increased costs for consumers. Instead of two airlines competing and each operating a flight on the same route at 70% capacity, the allied pair will share the route and run one full flight. Since fewer seats will be available, passengers will be obliged to pay more for tickets.
Those who've already made the elite grade in the FFP of a major airline stand to benefit the most when it joins an alliance: then they enjoy the PFP perks and advantages on any and all of the member carriers. For those who haven't made the top grade in any FFP, alliances might be a way of simplifying the earning of frequent flyer miles. For example, I belong to United Airline's Mileage Plus and generally fly less than 25,000 miles a year. But I earn miles with every flight I take on Star Alliance member-Ail Nippo
A.Delight.
B.Indifference.
C.Objection.
D.Puzzlement.