Story of a Big Player from Gangnam

Huanle Shiji’s President Baogang Chen swallowed a lump in his throat before continuing his talk, “It is true that Huanle Shiji Production Company has been suffering from debt after failing with two previous TV dramas. However, when we started receiving investment funds from the Korean GH company and continuing our drama production with the money, our creditors seemed to be willing to give us a second chance. Fortunately, our current TV drama—Shiguang Ru Meng—became popular enough to earn their trust and hope again.”

“That is what I am already aware of, isn’t it?”

“Huanle Shiji Production Company actually started as a movie production company in the beginning. Ever since we failed to make enough money with two previous drama productions and suffered from our difficult financial situation, we’ve lost some of our crew; however, we still have a lot of competent and excellent production staff in our company.”

“Hmm.”

“There is this very fine lady author with whom I’ve been working for a long time. Her name is Ailing Feng. She recently gave me a movie scenario—Menghuan Yinghua. It’s a romance movie with a pinch of patriotism. As you are already well aware, patriotic movies are gaining more and more popularity in China. That’s the current movie trend in China right now. Look at the movie—Zhan Lang (wolf warrior), for example. More than 100 million people watched the movie.”

“Not every movie gains that much popularity, doesn’t it?”

“Ms. Ailing Feng’s movies have. Most movies made with her scenario were successful. A new movie in Korea is deemed to be successful if 10 million people came to the movie theater and watched it. With the large population of China, we can reach 100 million audiences if the movie is good. The Chinese movie industry is surpassing Hollywood.”

“Please go on.”

“So, I invited the creditors over to my office the other day and made an announcement that we are currently reviewing the possibility of producing a movie with the famous writer—Ailing Feng’s film scenario. And, when I asked them to defer our payment for the debts, the creditors gladly agreed to defer the payments. Some of them even offered more funding, so we could have money to produce the movie.”

Gun-Ho thought about it for a second.

‘He is not asking me to fund his movie production for 100%. He already found investors who would invest in his new movie. He is asking me to provide him an additional fund, maybe because what he collected so far is not enough. I will need more information about the movie like its contents and production plan before I could make my decision. I want to hear Seukang Li’s opinion on this as well.’

Gun-Ho said, “Okay. Well, here is what I will do. I will visit Shanghai City to meet with you within a few days. We will talk about this further then.”

“Sounds great. That’s all I need from you for now. I just need a chance to present my plan to you on the movie production. You might want to meet with Director Seukang Li as well during your visit here. I’m sure he has something that he wants to talk to you about.”

Gun-Ho went to work in GH Mobile, Jiksan Town. The CPA—Nak-Jong Lee—was supposed to visit Gun-Ho’s office at GH Mobile that day. It wasn’t unusual for the president of a company to receive their external audit report directly from the CPA who performed the audit, as it was a common practice among the presidents of many large companies.

Accountant Nak-Jong Lee came to Gun-Ho’s office in GH Mobile around 10 am.

“It has been a while since I saw you last time, sir.”

The accountant was carrying a lot of documents under his arms. He entered Gun-Ho’s office as he gave a bow to Gun-Ho.

“Please have a seat.”

Accountant Nak-Jong Lee placed a copy of the external audit report on the table in front of Gun-Ho as he sat on the sofa, facing Gun-Ho. It was the same document that GH Development’s Manager Hong gave to Gun-Ho as the year-end financial report the other day. The CPA was supposed to further give his opinion, analysis, and other information that was not shown on the document.

Gun-Ho called for Secretary Hee-Jeong Park.

“Please bring us two cups of tea.”

“Yes, sir.”

The CPA didn’t start his report right away, but he was making small talk on the weather and politics while waiting for the tea.

The secretary brought tea, and Accountant Nak-Jong Lee finally got into the report after taking a sip of his tea.

“Here is my overall opinion.”

“I’m listening.”

“You have reviewed the documents already, haven’t you?”

“I have.”

“The company made outstanding sales last year. Its sales increased by 35% compared to the previous year. Congratulations.”

“Thank you.”

“A public company is supposed to make an official announcement to the public about the cause of its sales increase if the sales increased by more than 35%. You are aware of it, aren’t you?”

“The volume of the product order from A Electronics has increased a lot.”

“We attribute the dramatic increase in sales to your exceptional sales ability as the president of this company, and also the excellent reputation in the industry on the company’s quality control conducted by the workers here. Is it correct?”

“Umm, yes. You can say that.”

Gun-Ho was a bit confused. He thought, ‘Does he know something? Is he suspicious of something?’

“The cost of sales to revenue ratio is 81%, which is higher than the average in the industry. You will need to start a program or training specifically designed to reduce it.”

“We actually already started our effort to reduce our product cost to lower that ratio.”

“I’ve noticed that the company has an in-house research center. You probably want to review the possibility that you include the research center’s labor cost and expenses in the research and development cost rather than in the product cost.”

“Okay, I will do that.”

“The business entertainment expenses for entertaining customers or employees at a social event, for example, is rather low compared to other companies in the same industry. I don’t see you play golf often. I believe that playing golf provides numerous health benefits. For that reason, I do recommend you playing golf more often.”

“I’m not pleased whenever I see a lot of business owners spend more time in a country club than in his company too often without any reasons that help their business.”

“I’ve seen many companies where their owner’s family members such as the president’s wife or child carry the company’s business card and use it for their personal expenses. I don’t see that happening with your companies, which is very good.”

“They shouldn’t do that. They absolutely need to keep their personal and business expenses separate.”

“Actually, I’ve seen that happen with Mulpasaneop occasionally. I had to tell President Se-Young Oh several times that they shouldn’t do that.”

“Hmm, is that right?”

“Also, I don’t see any signs of making slush fund with your companies either. I personally like a company like yours.”

“Thank you. I have no idea what slush fund means at all anyway.”

“Your accounting director—Ms. Min-Hwa Kim—often visits our office. She told me that GH Mobile’s profits from last year will be used to pay the company’s debt, and there will be no dividend distribution this year accordingly.”

“That’s right. We decided to do so.”

“GH Mobile’s debt ratio is getting close to the industrial average debt ratio. I guess the company will be reborn as a financially stable business soon.”

“Haha. Thank you.”

“I’ve also noticed that you increased the capital.”

“Umm, yes, we did.”

“GH Mobile was doing perfectly fine, but you still decided to receive the investment fund of 750 million won from the Beom-Sik Lee person and increased the capital and gave the company’s shares to him. I don’t think he is related to the company or you. Is there any reason for it?”

“I just wanted to lower the company’s debt ratio.”

The CPA—Nak-Jong Lee—smiled, and he said, “GH Mobile achieved its sales growth of 35% which is remarkable. I don’t understand why the company had to increase the capital by receiving 750 million won in an effort to reduce its debt under the circumstances. But, since you said so, I will take it as it is.”

‘I’m sure that this guy knows something or sensed something. What and why does he want to know about all these?’