2024 Business and Accountancy Catalog

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This textbook, Regulatory Framework and Legal Issues in Business, presents a comprehensive understanding of different commercial laws and their respective roles in the formation and operation of business. It discusses the vital concepts and principles regarding sales, credit transactions, and contracts of security and identifies the legal issues associated with the rights and obligations under pertinent commercial laws. A simplified approach is used in explaining the Civil Code provisions on sales, credit transactions, and contracts of security, the Personal Property Security Act, the Securities Regulation Code, the Revised Code of Corporate Governance, the Intellectual Property Code, the Anti-Money Laundering Act as amended, the Data Privacy Act, the Electronic Commerce Act, the Foreign Investment Act, the Financial Rehabilitation and Insolvency Act, and the different banking laws such as the General Banking Law of 2000, the New Central Bank Act, the Philippine Deposit Insurance Corporation (PDIC) Law, the Law on Secrecy of Bank Deposits, the Unclaimed Balances Law, and the Truth in Lending Act. Regulatory Framework and Legal Issues in Business

ABOUT THE AUTHOR

ROSALIE J. DELA CRUZ-CADA

Atty. dela Cruz-Cada is an active litigation lawyer and a certified public accountant. She holds a Master of Laws, obtained from San Beda College- Manila in 2013, a Master of Public Administration from the University of the Philippines-Diliman, obtained in 1995, and a Post-Graduate Diploma in International Humanitarian Law from NALSAR University in Hyderabad, India. She is pursuing her Doctor of Philosophy in Psychology major in Clinical Psychology at the Far Eastern University-Manila. She is a former bank examiner at the Central Bank of the Philippines, and thereafter, headed the legal department of four commercial banks before she joined the academe. She was also an independent director of a rural bank based in Laguna.

REGULATORY FRAMEWORK AND LEGAL ISSUES IN BUSINESS

2023 04-AC-00048-0 978-621-04-4500-8 BS Accountancy

SCAN ME

CONTENTS

RighttoRepurchase ................................................. 101 LegalRedemption................................................... 106

PREFACE .......................................................... xvii

UNIT I THE LAW ON SALES

CHAPTER 7: ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL RIGHTS

112

UNIT II CREDIT TRANSACTIONS AND CONTRACTS OF SECURITY

CHAPTER 1: NATURE AND FORM OF CONTRACT

Characteristics of a Contract of Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Contract of Sale Distinguished from Other Contracts . . . . . . . . . . . . . . . . . . . . . . 3 EssentialElementsofaContractofSale................................. 7 ObjectofaContractofSale........................................... 8 PriceinaContractofSale ............................................ 12 Consent or Meeting of the Minds in a Contract of Sale. . . . . . . . . . . . . . . . . . . . . 15 Formalities of a Contract of Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Recto Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

119

CHAPTER 1: COMMODATUM AND MUTUUM

121

Commodatum versusSimpleLoan;Perfection............................ 122 Nature of Commodatum .............................................. 122 ObligationsoftheBailee ............................................. 123 ObligationsoftheBailor.............................................. 125 Nature of Simple Loan or Mutuum ..................................... 127

CHAPTER 2: CAPACITY TO BUY OR SELL

CHAPTER 2: LETTERS OF CREDIT

133

Capacity to Contract ................................................. 32 Effects of the Contract When the Thing Sold Has Been Lost. . . . . . . . . . . . . . . . . 34

PartiestoaLetterofCredit........................................... 136 HowtheLetterofCreditOperates ..................................... 139 Doctrine of Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 Fraud Exception Principle ............................................. 143 DoctrineofStrictCompliance ......................................... 144

CHAPTER 3: OBLIGATIONS OF THE VENDOR

LESSON I: GENERAL PROVISIONS ..................................... 38 DeliveryoftheThingSold........................................ 42 PossessionorOwnershipinGoods................................. 43 NegotiableDocumentsofTitle.................................... 47 PlaceandTimeofDelivery ....................................... 52 Remedies of Unpaid Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Possessory Lien ..................................................... 55 Right of Stoppage in Transitu .......................................... 56 RightofResale...................................................... 58 RighttoRescindSale................................................. 59 Sale of Real Property by Unit of Measure or Number or for a Lump Sum . . . . . . 59 Double Sale ........................................................ 61 LESSON II: CONDITIONS AND WARRANTIES ........................... 66 WarrantyinCaseofEviction...................................... 69 Warranty against Hidden Defects of or Encumbrances upon the Thing Sold .................................................. 73

iii

CHAPTER 3: GUARANTY

150

v NatureandExtentofGuaranty........................................ 150 Effects of Guaranty between the Guarantor and the Creditor . . . . . . . . . . . . . . . 157 Effects of Guaranty between the Debtor and the Guarantor . . . . . . . . . . . . . . . . 161 Effects of Guaranty as Between Co-Guarantors. . . . . . . . . . . . . . . . . . . . . . . . . . . 163 Suretyship vs. Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 Extinguishment of Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 LegalandJudicialBonds.............................................. 169

CHAPTER 4: PERSONAL PROPERTY SECURITY ACT (REPUBLIC ACT NO. 11057)

172

Creation of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173 PerfectionofSecurityInterest......................................... 176 Continuity of Perfected Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 RegistrationandtheRegistry.......................................... 179 PriorityofSecurityInterest ........................................... 180 Amendment and Termination of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 Extinguishment of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 Enforcement of Security Interests and Secured Creditor’s Rights. . . . . . . . . . . . . 186 ExpeditedRepossessionoftheCollateral................................ 186

CHAPTER 4: OBLIGATIONS OF THE VENDEE

CHAPTER 5: ACTIONS FOR BREACH OF CONTRACT OF SALE OF GOODS

CHAPTER 6: EXTINGUISHMENT OF SALE

Conventional Redemption Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 Equitable Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

CHAPTER 5: MORTGAGE

194

UNIT III SECURITIES REGULATION CODE (REPUBLIC ACT NO. 8799)

206

PowersandFunctionsoftheSEC....................................... 207

Effects of Guaranty between the Debtor and the Guarantor . . . . . . . . . . . . . . . . 161 Effects of Guaranty as Between Co-Guarantors. . . . . . . . . . . . . . . . . . . . . . . . . . . 163 Suretyship vs. Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 Extinguishment of Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 LegalandJudicialBonds.............................................. 169

CHAPTER 4: PERSONAL PROPERTY SECURITY ACT (REPUBLIC ACT NO. 11057)

172

RightsConferredbyaPatent.......................................... 271 LimitationsofPatentRights........................................... 272 Patent Infringement; Exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274 Tests in Patent Infringement: Literal Infringement . . . . . . . . . . . . . . . . . . . . . . . . 276 Doctrine of Equivalents vs. Doctrine of File Wrapper Estoppel. . . . . . . . . . . . . . . 276 Remedies of the Owner of the Patent against Infringers. . . . . . . . . . . . . . . . . . . . 277 Assignment and Transmission of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280 Effect of an Assignment of a Patent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280

REGULATORY FRAMEWORK AND LEGAL ISSUES IN BUSINESS

CHAPTER 5: MORTGAGE

194

CHAPTER 2: TRADEMARKS

285

Marks,CollectiveMarks,TradeNames.................................. 285 PurposesofTrademark............................................... 286 AcquisitionofOwnershipofMark...................................... 287 Non-RegistrableMarks............................................... 289 Rights Conferred to the Owner of a Registered Mark . . . . . . . . . . . . . . . . . . . . . . 292 Test to Determine Confusing Similarity between Marks . . . . . . . . . . . . . . . . . . . . 292 Well-Known Marks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295 InternationallyWell-KnownMark...................................... 296 RightsConferredbyRegistration....................................... 297 IssuanceandPublicationofCertificate.................................. 297 Duration of a Certificate of Trademark Registration . . . . . . . . . . . . . . . . . . . . . . . 297 RightsofaRegisteredMarkOwner..................................... 298 CancellationofTrademarkRegistration ................................. 299 InfringementandRemedies........................................... 300 Elements to Be Established in Trademark Infringement . . . . . . . . . . . . . . . . . . . . 301 Remedies of the Owner of the Trademark against Infringers . . . . . . . . . . . . . . . . 301 LimitationsontheActionsforInfringement.............................. 302 UnfairCompetition ................................................. 302 Essential Elements of an Action for Unfair Competition . . . . . . . . . . . . . . . . . . . . 304 Trade Name or Business Name ........................................ 305 CollectiveMark..................................................... 307

UNIT III SECURITIES REGULATION CODE (REPUBLIC ACT NO. 8799)

206

PowersandFunctionsoftheSEC....................................... 207 Securities That Are Required to Be Registered . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 Exempt Securities ................................................... 212 Exempt Transactions ................................................. 214 ProcedureforRegistrationofSecurities................................. 216 Prohibitions on Fraud, Manipulation, and Insider Trading. . . . . . . . . . . . . . . . . . . 218 Fraudulent Transactions .............................................. 222 ProtectionofInvestors............................................... 225 Civil Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228 Settlements, Prescriptive Period, and Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . 229

UNIT IV CODES OF CORPORATE GOVERNANCE

234

LESSON I: CODE OF CORPORATE GOVERNANCE FOR PUBLICLY LISTED COMPANIES ................................ 238 LESSON II: CODE OF CORPORATE GOVERNANCE FOR PUBLIC COMPANIES AND REGISTERED ISSUERS ................. 248

viii

CHAPTER 3: COPYRIGHT

312

UNIT V INTELLECTUAL PROPERTY CODE OF THE PHILIPPINES (REPUBLIC ACT NO. 8293)

PrincipleofAutomaticProtection...................................... 313 Copyright as Distinct from Material Object . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314 CopyrightableWorks ................................................ 315 Non-CopyrightableWorks............................................ 317 Rights of a Copyright Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318 Rights of Copyright Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318 Rules on Ownership of Copyright . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320 Limitations on Copyright ............................................. 324 DoctrineofFairUse ................................................. 326 Copyright Infringement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 ActsofInfringement ................................................ 330

259

CHAPTER 1: PATENTS

260

vii Patentable vs. Non-Patentable Inventions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262 Novelty as Criterion for Patentability of a Product or Process . . . . . . . . . . . . . . . 264 Inventive Step as Criterion for Patentability of a Product or Process . . . . . . . . . 267 Industrial Applicability as Criterion for Patentability of a Product or Process . . . 267 First-to-FileRule .................................................... 268 Inventions Created Pursuant to a Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . . 268 RightofPriority..................................................... 269 EffectivityofaPatent................................................ 269 GroundsforCancellation............................................. 269 RemedyoftheTrueandActualInventor ................................ 270 RightsConferredbyaPatent.......................................... 271 LimitationsofPatentRights........................................... 272 Patent Infringement; Exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274 Tests in Patent Infringement: Literal Infringement . . . . . . . . . . . . . . . . . . . . . . . . 276 Doctrine of Equivalents vs. Doctrine of File Wrapper Estoppel. . . . . . . . . . . . . . . 276 Remedies of the Owner of the Patent against Infringers. . . . . . . . . . . . . . . . . . . . 277 Assignment and Transmission of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280 EffectofanAssignmentofaPatent .................................... 280

UNIT VI BANKING LAWS

333

CHAPTER 1: GENERAL BANKING LAW OF 2000 (REPUBLIC ACT NO. 8791)

334

Classification of Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334 Quasi-BanksandTrustEntities......................................... 336 Bank’sPowersandLiabilities.......................................... 337 NatureofBankFundsandDeposits .................................... 339 Organization, Administration, and Management . . . . . . . . . . . . . . . . . . . . . . . . . . 339 Grant of Loans and Security Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341

CHAPTER 2: TRADEMARKS

285

Exceptions ......................................................... 389 GarnishmentofDeposits ............................................. 392 Confidentiality of Foreign Currency Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 393 PenaltyforViolation................................................. 394

CHAPTER 5: UNCLAIMED BALANCES LAW (PRESIDENTIAL DECREE NO. 679)

398

RequirementtoReport............................................... 399 Procedure for Escheat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399 ReactivationofAccount.............................................. 400

REGULATORY FRAMEWORK AND LEGAL ISSUES IN BUSINESS

CHAPTER 6: TRUTH IN LENDING ACT (REPUBLIC ACT NO. 3765)

403

UNIT VII ANTI-MONEY LAUNDERING ACT (REPUBLIC ACT NO. 9160, AS AMENDED)

CHAPTER 2: THE NEW CENTRAL BANK ACT (REPUBLIC ACT NO. 7653)

349

Primary Objective and Other Responsibilities of the BSP . . . . . . . . . . . . . . . . . . . 349 Monetary Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350 WhenBanksAreinDistress........................................... 350 Conservatorship .................................................... 351 Closure ............................................................ 352 Receivership ....................................................... 354 Liquidation......................................................... 357 Procedure in Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358 Legal Tender Power .................................................. 359 RateofForeignExchange............................................. 360 Purchases and Sales of Foreign Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360 Acquisition of Inconvertible Currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 ReserveRequirements............................................... 361

408

xi FreezeOrder....................................................... 421 AuthoritytoInquireintoBankDeposits................................. 422 InquiryofBankDepositswithCourtOrder............................... 422 Inquiry of Bank Deposits without a Court Order . . . . . . . . . . . . . . . . . . . . . . . . . . 423 Stages of Money Laundering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409 CoveredInstitutionsandTheirObligations............................... 410 Suspicious Transactions and Suspicious Circumstances ..................... 413 HowMoneyLaunderingIsCommitted.................................. 415 Reporting of Covered and Suspicious Transactions . . . . . . . . . . . . . . . . . . . . . . . . 416 SafeHarborProvision................................................ 416 Anti-Money Laundering Council; Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 416 UnlawfulActivity(PredicateCrime)..................................... 419

CHAPTER 3: PHILIPPINE DEPOSIT INSURANCE CORPORATION LAW (REPUBLIC ACT NO. 3591, AS AMENDED)

UNIT VIII DATA PRIVACY ACT (REPUBLIC ACT NO. 10173)

366

Sanctions against Unsafe and Unsound Banking Practices . . . . . . . . . . . . . . . . . . 373 LiquidationunderthePDICCharter..................................... 374 Authorities of a Receiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375 Effects of Placement of a Bank under Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . 377

426

ScopeofDataPrivacyAct............................................. 428 ApplicationoftheLaw ............................................... 431 KindsofPersonalData............................................... 433 PersonalInformationController(PIC)................................... 434 Personal Information Processor (PIP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 435 GeneralDataPrivacyPrinciples........................................ 435 RightsofDataSubjects............................................... 436 RighttoBeInformed................................................. 437 Criteria for Lawful Processing of Personal Information . . . . . . . . . . . . . . . . . . . . . 438 Right to Object . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441 RighttoAccessuponDemand......................................... 441 Right to Rectify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 442 RighttoErasure .................................................... 442 RighttoDataPortability.............................................. 442 Right to Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 443 RighttoFileaComplaint ............................................. 443 TransmissibilityofDataSubjectRights.................................. 444 LimitationsonRightsofDataSubject................................... 444 PrincipleofAccountability............................................ 444

CHAPTER 4: LAW ON SECRECY OF BANK DEPOSITS (REPUBLIC ACT NO. 1405, AS AMENDED)

382

Prohibited Acts ..................................................... 382 Deposits Covered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 383 Exceptions ......................................................... 389 GarnishmentofDeposits ............................................. 392 Confidentiality of Foreign Currency Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 393 PenaltyforViolation................................................. 394

CHAPTER 5: UNCLAIMED BALANCES LAW (PRESIDENTIAL DECREE NO. 679)

398

CHAPTER 6: TRUTH IN LENDING ACT (REPUBLIC ACT NO. 3765)

403

xii

UNIT VII ANTI-MONEY LAUNDERING ACT (REPUBLIC ACT NO. 9160, AS AMENDED)

408

StagesofMoneyLaundering.......................................... 409 CoveredInstitutionsandTheirObligations............................... 410 Suspicious Transactions and Suspicious Circumstances ..................... 413 How Money Laundering Is Committed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415 Reporting of Covered and Suspicious Transactions . . . . . . . . . . . . . . . . . . . . . . . . 416 SafeHarborProvision................................................ 416 Anti-Money Laundering Council; Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 416 UnlawfulActivity(PredicateCrime)..................................... 419

UNIT X FOREIGN INVESTMENTS ACT, AS AMENDED (REPUBLIC ACT NO. 7042, AS AMENDED BY REPUBLIC ACT NO. 8179 AND REPUBLIC ACT NO. 11647) 466 Philippine National .................................................. 468 Doing Business ..................................................... 470 Registration of Investments of Non-Philippine National . . . . . . . . . . . . . . . . . . . . 474 Foreign Investments in Export Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 474 Foreign Investments in Domestic Market Enterprises . . . . . . . . . . . . . . . . . . . . . . 475

REGULATORY FRAMEWORK AND LEGAL ISSUES IN BUSINESS

UNIT XI FINANCIAL REHABILITATION AND INSOLVENCY LAW (REPUBLIC ACT NO. 10142)

PrincipleofLegitimatePurpose........................................ 444 PrincipleofProportionality ........................................... 445 Organizational, Physical, and Technical Security Measures . . . . . . . . . . . . . . . . . 445 PowersoftheNationalPrivacyCommission.............................. 447 Mandatory Personal Information Breach Notification. . . . . . . . . . . . . . . . . . . . . . 447 Requirements of Breach Notification (Sec. 38, IRR) . . . . . . . . . . . . . . . . . . . . . . . . 447 Sanctions .......................................................... 448

484

Rehabilitation and Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 485 Debtor and Creditor ................................................. 486 NatureofProceedingsunderFRIA...................................... 487 VoluntaryProceedings............................................... 489 InvoluntaryProceedings.............................................. 490 Pre-negotiated Rehabilitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 491 Out-of-Court or Informal Rehabilitation Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 492 Suspension of Payments by an Individual Debtor. . . . . . . . . . . . . . . . . . . . . . . . . . 495 RehabilitationReceiver............................................... 496 Objections to Rehabilitation Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 498 Effects of Confirmation of Rehabilitation Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 Liquidation......................................................... 501 VoluntaryLiquidation................................................ 501 InvoluntaryLiquidation .............................................. 501 Conversion of Rehabilitation Proceedings to Liquidation Proceedings. . . . . . . . . 502 Liquidation Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503 EffectsoftheLiquidationOrder ....................................... 504 TheLiquidator ..................................................... 504 Qualifications of the Liquidator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 505 Powers, Duties, and Responsibilities of the Liquidator . . . . . . . . . . . . . . . . . . . . . 505 Removal of the Liquidator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 506

UNIT IX ELECTRONIC COMMERCE ACT OF 2000 (REPUBLIC ACT NO. 8792) AND THE RULES ON ELECTRONIC EVIDENCE (A.M. NO. 01-7-01-SC) CHAPTER 1: ELECTRONIC COMMERCE ACT OF 2000 (REPUBLIC ACT NO. 8792)

453

454

Application ........................................................ 454 Legal Recognition of Electronic Writing or Document and Data Messages . . . . . 456 Presumption Relating to Electronic Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 457 Admissibility and Evidential Weight of Electronic Data Message or Electronic Document ......................................................... 457 FormationofContractsinElectronicForm............................... 458

xiv

CHAPTER 2: RULES ON ELECTRONIC EVIDENCE (A.M. NO. 01-7-01-SC)

460

xiii ApplicationoftheRules.............................................. 460 Electronic Data Message and Electronic Document. . . . . . . . . . . . . . . . . . . . . . . . 460 Admissibility in Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461 Authentication ..................................................... 462 UNIT X FOREIGN INVESTMENTS ACT, AS AMENDED (REPUBLIC ACT NO. 7042, AS AMENDED BY REPUBLIC ACT NO. 8179 AND REPUBLIC ACT NO. 11647) 466 Philippine National .................................................. 468 Doing Business ..................................................... 470 Registration of Investments of Non-Philippine National . . . . . . . . . . . . . . . . . . . . 474 Foreign Investments in Export Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 474 Foreign Investments in Domestic Market Enterprises . . . . . . . . . . . . . . . . . . . . . . 475

REFERENCES .................................................... 509

UNIT XI FINANCIAL REHABILITATION AND INSOLVENCY LAW (REPUBLIC ACT NO. 10142)

484

Strategic Business Analysis

This textbook, Strategic Business Analysis, progresses from an introduction to the key topics and themes in different functional areas of management to a discussion of the nuances of strategic management. The authors draw from examples of familiar companies and personalities to illustrate different strategies used by today’s firms and how they go about implementing those strategies. Students will learn how to conduct a case analysis, measure organizational performance, and conduct external and internal analyses, and thus be able to understand how organizations operate at the strategic level to be successful.

ABOUT THE AUTHORS

EUNICE MARETH Q. AREOLA, PHD, HSG

Dr. Areola was named UN Pioneer Professor of Sustainability, Diplomate in Business Education by the Philippine Academy of Professionals in Business Education (PAPBE), Outstanding Educator in Management by the Philippine Council of Deans and Educators in Business (PCDEB) and by the Commission on Higher Education (CHED), Luis I. Ablaza, Jr. Distinguished Professorial Chair in Entrepreneurship by the San Beda College Alumni Foundation (SBCAF), Outstanding Entrepreneurship Educator by the Entrepreneurship Educators Association of the Philippines (ENEDA), and Outstanding Alumni Awardee of the Pamantasan ng Lungsod ng Maynila (PLM). She is an international speaker, an innovation coach, a sustainability mentor, a consultancy entrepreneur, and an intrepid traveler. She earned her Doctor of Philosophy in Management from the University of St. Gallen in Switzerland. Her academic experience, which spans 30 years, includes being a department chair, an undergraduate and graduate school dean, and a vice president for academic affairs. She was recently appointed as a Distinguished Professor for International Affairs by the Seoul National University of Science and Technology, South Korea. Currently, she is the Director for Academic Affairs of UST Angelicum College.

RAMONCITO P. JAVIER, DBA

He is a businessman by profession and an educator by passion. He founded two companies that provide outsourcing services for payroll, finance and accounting, tax advisory, and business compliance. Dr. Javier also co-founded a distribution company for nanotechnology-based agricultural products during the 2020 pandemic. He is a part-time graduate school faculty member at Trinity University of Asia Graduate School and Colegio de San Juan de Letran. His areas of expertise are strategic management, strategic marketing, and human resource management. Dr. Javier obtained his graduate degrees from the Asia Pacific College, the Ateneo Graduate School of Business, and Colegio de San Juan de Letran.

FERNANDO V. TRINIDAD, DBA

He is the Dean of the College of Hospitality and Tourism Management at Trinity University of Asia. He is a member of the Commission on Higher Education-Regional Quality Assessment Team (CHED RQUAT) for BS Hospitality and Tourism Management and BS Entrepreneurship and of the Hospitality and Tourism Council of Deans of CHED-NCR. He finished his Bachelor of Science in Tourism Management at the University of the Philippines (UP)-Asian Institute of Tourism and completed various graduate degrees at the Asian Institute of Management, Boston University, the Graduate School of Colegio de San Juan de Letran, and Harvard University. He is a constant traveler, a gastronome, and an entrepreneur.

Performance Management . . . . . . . . . . 17

Lesson 3: Production and Operations

2023 04-MT-00038-0 978-621-04-5018-7 BS Accountancy Management Basics . . . . . . . . . . . . . . . 19 Production Management . . . . . . . . . . . . 20 Operations Management . . . . . . . . . . . . 21 Effectiveness and Efficiency . . . . . . . . . 21 Productivity . . . . . . . . . . . . . . . . . . . . . . 22 Product Design . . . . . . . . . . . . . . . . . . . 23 Production Planning and Control . . . . . . 23 Project Management . . . . . . . . . . . . . . . 24 Supply Chain Management . . . . . . . . . . 24 Warehouse Management . . . . . . . . . . . . 25 Lesson 4: Marketing Management Basics . . . . . . . 28 Concepts of Marketing . . . . . . . . . . . . . . 29 Marketing Variables . . . . . . . . . . . . . . . . 30 Lesson 5: Financial Management Basics . . . . . . . . 34

STRATEGIC BUSINESS ANALYSIS

SCAN ME

CONTENTS

TABLE OF CONTENTS

Elements of Financial Management . . . . 36 Financial Statements . . . . . . . . . . . . . . . 40 Cash Flow . . . . . . . . . . . . . . . . . . . . . . . 43 Financial Ratios . . . . . . . . . . . . . . . . . . . 46

PREFACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ix

CHAPTER 1

Business Management Review: Appreciating the Groundwork in Strategic Business Analysis Lesson 1: Economic Principles . . . . . . . . . . . . . . . . . 3 Rationalization . . . . . . . . . . . . . . . . . . . . . 5 Human Needs and Wants . . . . . . . . . . . . 5 Fixed and Variable Inputs . . . . . . . . . . . . 6 Diminishing Marginal Returns . . . . . . . . . 6 Identifying Goods and Services . . . . . . . . 7 Lesson 2: Human Resource Management Basics 12

Lesson 6: Introduction to Sustainability

Management . . . . . . . . . . . . . . . . . . . . . 49 Corporate Social Responsibility . . . . . . . 50 Shared Value . . . . . . . . . . . . . . . . . . . . . 51 Triple Bottom Line . . . . . . . . . . . . . . . . . 51

Basic Concepts of Strategic Management: Understanding Strategic Business Analysis

CHAPTER 2

Lesson 1: The Core of Strategic Management . . . . 59 Basic Elements of Strategic Management . . . . . . . . . . . . . . . . . . . . . 60 Environmental Scanning . . . . . . . . . . . . 60 Strategy Formulation . . . . . . . . . . . . . . . 60 Strategy Implementation . . . . . . . . . . . . 61 Evaluation and Control . . . . . . . . . . . . . . 61 Lesson 2: Strategic Management Model . . . . . . . . 64

Job Analysis . . . . . . . . . . . . . . . . . . . . . . 13 Job Description . . . . . . . . . . . . . . . . . . . 13 Designing Organizational Structures . . . 14 Staffing . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Selection . . . . . . . . . . . . . . . . . . . . . . . . 15 Placement . . . . . . . . . . . . . . . . . . . . . . . 15 Training and Development . . . . . . . . . . . 16 Performance Management . . . . . . . . . . 17

Identifying Competitive Advantage . . . . . 66 The Strategic Management Process . . . 67 Benefits of Strategic Planning . . . . . . . . 68 Drawbacks of Strategic Planning . . . . . . 68

iii

Lesson 3: Production and Operations

Management Basics . . . . . . . . . . . . . . . 19 Production Management . . . . . . . . . . . . 20 Operations Management . . . . . . . . . . . . 21 Effectiveness and Efficiency . . . . . . . . . 21 Productivity . . . . . . . . . . . . . . . . . . . . . . 22 Product Design . . . . . . . . . . . . . . . . . . . 23 Production Planning and Control . . . . . . 23 Project Management . . . . . . . . . . . . . . . 24 Supply Chain Management . . . . . . . . . . 24 Warehouse Management . . . . . . . . . . . . 25 Lesson 4: Marketing Management Basics . . . . . . . 28 Concepts of Marketing . . . . . . . . . . . . . . 29 Marketing Variables . . . . . . . . . . . . . . . . 30 Lesson 5: Financial Management Basics . . . . . . . . 34

Strategy Formulation: Understanding Different Strategies Lesson 1: Strategy Levels . . . . . . . . . . . . . . . . . . . 75 Corporate Level Strategy . . . . . . . . . . . . 77 Business Unit Strategy . . . . . . . . . . . . . . 78 Functional Strategy . . . . . . . . . . . . . . . . 79 Lesson 2: Cost Leadership Strategy . . . . . . . . . . . 83 Lesson 3: Differentiation Strategy . . . . . . . . . . . . . 89 Lesson4:FocusStrategy. . . . . . . . . . . . . . . . . . . . 95 Lesson 5: Stability Strategy . . . . . . . . . . . . . . . . . 100 Lesson 6: Growth Strategies . . . . . . . . . . . . . . . . 103 Market Penetration. . . . . . . . . . . . . . . . 104 Market Development . . . . . . . . . . . . . . 105 Product Development . . . . . . . . . . . . . 106 Diversification.................... 106 Horizontal Integration . . . . . . . . . . . . . . 109 Lesson 7: Integration Strategies . . . . . . . . . . . . . . 112

CHAPTER 3

Lesson 6: Introduction to Sustainability

Management . . . . . . . . . . . . . . . . . . . . . 49 Corporate Social Responsibility . . . . . . . 50 Shared Value . . . . . . . . . . . . . . . . . . . . . 51

Vertical Integration . . . . . . . . . . . . . . . . 113 Forward Integration . . . . . . . . . . . . . . . 113 Backward Integration . . . . . . . . . . . . . . 115

Lesson 6: Growth Strategies . . . . . . . . . . . . . . . . 103 Market Penetration. . . . . . . . . . . . . . . . 104 Market Development . . . . . . . . . . . . . . 105 Product Development . . . . . . . . . . . . . 106 Diversification.................... 106 Horizontal Integration . . . . . . . . . . . . . . 109 Lesson 7: Integration Strategies . . . . . . . . . . . . . . 112 Vertical Integration . . . . . . . . . . . . . . . . 113 Forward Integration . . . . . . . . . . . . . . . 113 Backward Integration . . . . . . . . . . . . . . 115 Lesson 8: Turnaround Strategies . . . . . . . . . . . . . 120 Revenue Increasing Strategies . . . . . . 123 Cost Cutting Strategies . . . . . . . . . . . . 123 Asset Reduction Strategies . . . . . . . . . 124 Downsizing Strategies . . . . . . . . . . . . . 124 Lesson 9: Exit Strategies . . . . . . . . . . . . . . . . . . . 127 Divestiture . . . . . . . . . . . . . . . . . . . . . . 127

STRATEGIC BUSINESS ANALYSIS

Liquidation . . . . . . . . . . . . . . . . . . . . . . 127

Lesson 10: Supplementing

the Chosen Strategies . . . . . . . . . . . . . 130 Strategic Alliances . . . . . . . . . . . . . . . . 130 Joint Ventures . . . . . . . . . . . . . . . . . . . 131 Licensing . . . . . . . . . . . . . . . . . . . . . . . 133

Outsourcing . . . . . . . . . . . . . . . . . . . . . 133

Strategy Implementation Preparing a Strategic Business Analysis Plan

CHAPTER 4

Lesson 1: Implementing a Business Strategy . . . 145 Lesson 2: Putting Strategies in Action . . . . . . . . . 155

Bibliography ............................................. 189 Index .................................................. 193

Statistical Analysis with Software Applications

This learning material covers fundamental concepts, principles, and techniques in statistics useful for various fields (e.g., business and management, humanities, social sciences, health, and engineering), research, and other practical applications. Its main learning objective is to develop students’ skills in statistics by demonstrating their ability to perform data management and analysis relevant to personal and professional decision-making and research. Through this textbook, students will learn and apply statistical concepts and tools to data obtained from various sources, which will allow them to formulate assumptions and hypotheses and then critically test them. Moreover, this textbook will cover statistical approaches to meet empirical questions that will foster scientific perspective and incite critical thinking. It will also utilize Microsoft Excel to help students analyze data. After rigorously working through this textbook, students are expected to: (1) reason and recognize patterns; (2) create, read, and interpret statistical visuals and tables; (3) collect, organize, and represent data; and recognize, describe, and justify their relationships; (4) understand and use basic measures of central tendency and language of probability; (5) compute probabilities using the basic rules of probability and understand their significance in the real world; (6) demonstrate problem-solving by implementing statistical techniques and acquire, organize, and synthesize information and creatively use them; and (7) understand and appreciate the significance of statistics and its applicability to their chosen fields.

ABOUT THE AUTHOR

JOHN PAOLO R. RIVERA, PHD

He is an economist with an extensive research portfolio in the areas of tourism development, poverty, remittances and migration, entrepreneurship, international trade, and development economics. This includes his attendance at a succession of both international and local academic conferences and authorship of numerous scientific and technical publications. He is also an educator who handles courses on basic, intermediate, and advanced economics; statistics and econometrics; management science; research methods; and strategic, financial, investment, and portfolio management at the undergraduate, graduate, and executive levels. Dr. Rivera is also a subject matter expert engaged in various research and management consultancy services with the private and public sectors. He obtained his Doctor of Philosophy in Economics, Master of Science in Economics, and Bachelor of Science in Applied Economics (magna cum laude) from De La Salle University School of Economics.

2 DESCRIPTIVE STATISTICS Chapter

1. Frequency Distribution . . . . . . . . . . . . . . . . . . . . . . . . .31 Constructing Frequency Distribution. . . . . . . . . . . . . . . . . . . .31 2. CrossTabulations.............................33 3. Cumulative Frequency Distribution. . . . . . . . . . . . . . . .36 a. Relative Frequency Distribution . . . . . . . . . . . . . . . . . . . .36 b. Absolute and Relative Cumulative Frequency Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . .36 4. Graphing Frequency Distribution . . . . . . . . . . . . . . . . .37 a. Histogram.....................................37 b. Charts and Graphs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39 i. BarChart...................................39 ii. Pareto Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40 iii. PieChart...................................41 iv. Time Series Graph . . . . . . . . . . . . . . . . . . . . . . . . . . .41 5. Misleading Charts and Graphs . . . . . . . . . . . . . . . . . . .42 6. Measures of Central Tendency (or Location) . . . . . . . .43 a. Mean.........................................43 b. Arithmetic Mean, Weighted Mean, and Geometric Mean . . . . . . . . . . . . . . . . . . . . . . . . . . . .44 c. Median . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 d. Mode.........................................48 e. Relative Positions of Mean, Median, and Mode. . . . . . . .49 7. Measures of Dispersion (or Variation). . . . . . . . . . . . . .49 a. Range........................................50 b. Mean Deviation (or Mean Dispersion) . . . . . . . . . . . . . . .51 c. Variance and Standard Deviation. . . . . . . . . . . . . . . . . . .51 d. Coefficient of Variation . . . . . . . . . . . . . . . . . . . . . . . . . . .54 8. Uses of Standard Deviation . . . . . . . . . . . . . . . . . . . . .55 a. Chebyshev’s Theorem . . . . . . . . . . . . . . . . . . . . . . . . . . .55 b. Empirical Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56 9. Measures of Position . . . . . . . . . . . . . . . . . . . . . . . . . .57 a. Quartiles......................................57 b. Deciles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58 c. Percentiles....................................58 10. Moments of Statistical Distribution . . . . . . . . . . . . . . . .60 a. Mean and Variance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60 b. Skewness.....................................60 c. Kurtosis.......................................62 1. Probability, Experiment, Outcome, and Event . . . . . . . .76 2. Conceptual Approaches to Probability . . . . . . . . . . . . .77 a. Objective Probability .............................77 b. SubjectiveProbability............................78 3. Addition and Multiplication Rules of Probability . . . . . .79 a. Addition Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79 b. Multiplication Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80 4. Contingency Tables. . . . . . . . . . . . . . . . . . . . . . . . . . . .82 5. CountingRules...............................84 a. ProductRule...................................84 b. Permutation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .84 c. Combination...................................85 d. Application of Counting Rules . . . . . . . . . . . . . . . . . . . . .86 6. Probability Distributions . . . . . . . . . . . . . . . . . . . . . . . .87 Random Variables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .87 7. Discrete Probability Distribution . . . . . . . . . . . . . . . . . .89 a. Mean, Variance, and Standard Deviation of a Discrete Probability Distribution . . . . . . . . . . . . . . . . . . . .89 b. Binomial Probability Distribution. . . . . . . . . . . . . . . . . . . .90 c. Poisson Probability Distribution . . . . . . . . . . . . . . . . . . . .92 8. Continuous Probability Distribution. . . . . . . . . . . . . . . .94 a. Mean, Variance, and Standard Deviation of a Continuous Probability Distribution. . . . . . . . . . . . . . . . . .94 b. Uniform Probability Distribution . . . . . . . . . . . . . . . . . . . .94 c. Normal Probability Distribution. . . . . . . . . . . . . . . . . . . . .96 d. Standard Normal Probability Distribution . . . . . . . . . . . . .97 e. Exponential Probability Distribution . . . . . . . . . . . . . . . .102 1. Sampling Methods . . . . . . . . . . . . . . . . . . . . . . . . . . .118 a. Non-probabilitySampling........................119 i. PurposiveSampling.........................119 ii. Convenience Sampling . . . . . . . . . . . . . . . . . . . . . .119 iii. QuotaSampling............................119 b. ProbabilitySampling............................120 i. Simple Random Sampling . . . . . . . . . . . . . . . . . . . .120 ii. Systematic Random Sampling. . . . . . . . . . . . . . . . .121 iii. Stratified Random Sampling . . . . . . . . . . . . . . . . . .121 iv. Cluster Random Sampling. . . . . . . . . . . . . . . . . . . .121 v. Multistage Random Sampling . . . . . . . . . . . . . . . . .121 2. Sample Size Determination . . . . . . . . . . . . . . . . . . . .121 3. Sampling Distribution of the Sample Means. . . . . . . .125 4. Central Limit Theorem. . . . . . . . . . . . . . . . . . . . . . . . .127 1. Point Estimates and Interval Estimates . . . . . . . . . . .142 a. Point Estimate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .142 b. Interval Estimate and Confidence Interval ...........143 i. Confidence Interval

STATISTICAL ANALYSIS WITH SOFTWARE APPLICATIONS

2023 04-AC-00055-0 978-621-04-4666-1 BS Accountancy

SCAN ME

CONTENTS

CONTENTS 1 FUNDAMENTALS OF STATISTICS Chapter

1. Definition of Statistics ...........................3 2. Division of Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 a. Descriptive Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 b. Inferential Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 3. Importance of Statistics. . . . . . . . . . . . . . . . . . . . . . . . . .4 4. Population and Sample. . . . . . . . . . . . . . . . . . . . . . . . . .4 5. Parameter and Statistic. . . . . . . . . . . . . . . . . . . . . . . . . .5 6. Quality of Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 7. Variables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 a. Construct and Variable. . . . . . . . . . . . . . . . . . . . . . . . . . . .7 b. Quantitative Variable and Qualitative Variable. . . . . . . . . .7 c. Discrete Variable and Continuous Variable . . . . . . . . . . . .8 d. Dummy Variable and Latent Variable. . . . . . . . . . . . . . . . .8 8. Levels of Measurement. . . . . . . . . . . . . . . . . . . . . . . . .10 a. Nominal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 b. Ordinal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 c. Interval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 d. Ratio.........................................12 9. Classification of Statistical Procedures . . . . . . . . . . . . .13 a. ParametricStatistics.............................13 b. NonparametricStatistics..........................13 10. Types of Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 a. Cross-Section..................................14 b. Time Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 c. PanelData....................................17 11. Ethical Use of Statistics . . . . . . . . . . . . . . . . . . . . . . . .19 1. Frequency Distribution . . . . . . . . . . . . . . . . . . . . . . . . .31 Constructing Frequency Distribution. . . . . . . . . . . . . . . . . . . .31 2. CrossTabulations.............................33 3. Cumulative Frequency Distribution. . . . . . . . . . . . . . . .36 a. Relative Frequency Distribution . . . . . . . . . . . . . . . . . . . .36 b. Absolute and Relative Cumulative Frequency Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . .36 4. Graphing Frequency Distribution . . . . . . . . . . . . . . . . .37 a. Histogram.....................................37 b. Charts and Graphs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39 i. BarChart...................................39 ii. Pareto Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40 iii. PieChart...................................41 iv. Time Series Graph . . . . . . . . . . . . . . . . . . . . . . . . . . .41 5. Misleading Charts and Graphs . . . . . . . . . . . . . . . . . . .42 6. Measures of Central Tendency (or Location) . . . . . . . .43 a. Mean.........................................43 b. Arithmetic Mean, Weighted Mean, and Geometric Mean . . . . . . . . . . . . . . . . . . . . . . . . . . . .44 c. Median . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 d. Mode.........................................48 e. Relative Positions of Mean, Median, and Mode. . . . . . . .49 7. Measures of Dispersion (or Variation). . . . . . . . . . . . . .49 a. Range........................................50 b. Mean Deviation (or Mean Dispersion) . . . . . . . . . . . . . . .51 c. Variance and Standard Deviation. . . . . . . . . . . . . . . . . . .51 d. Coefficient of Variation . . . . . . . . . . . . . . . . . . . . . . . . . . .54 8. Uses of Standard Deviation . . . . . . . . . . . . . . . . . . . . .55 a. Chebyshev’s Theorem . . . . . . . . . . . . . . . . . . . . . . . . . . .55 b. Empirical Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56 9. Measures of Position . . . . . . . . . . . . . . . . . . . . . . . . . .57 a. Quartiles......................................57

xiv

3 PROBABILITY THEORY Chapter

2 DESCRIPTIVE STATISTICS Chapter

xiii

4 SAMPLING DISTRIBUTION OF THE MEAN Chapter

5 Chapter

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