The Effect of Rmb Internationalization

Effects on China Advantages : Enterprises in China Enterprises in China may benefit a lot from the internationalization of Renmibi. First of all, the cost of currency exchange can be saved and the risk of exchange rate of using of other currencies can be reduced, if Renminbi become a trade settlement. Also, RMB as an investment currency, if foreign assets increased demand of it ,China can reduce the interest rates of RMB assets, thereby reducing their financing costs, and further, companies can go overseas to issue RMB-denominated bonds, thereby expanding the scope of financing and address the problem of currency mismatch. Furthermore, Domestic firms can use the RMB to invest abroad, to achieve Chinese enterprises â€Å"going out† strategy, integrating into the global economy. People’s Republic of China China may have quite a lot of advantages from it too. First, it may enhance the international status of China through internationalization of Renminbi by increasing China's voice in the international community and the influence of China in international economy, as the internationalization of its currency may promote the expansion of China’s financial service sector. Also, China may collect ‘ seigniorage’from the rest of world, which ‘ seigniorage’ defined as the margin between the denomination of the notes and the cost of issuing the notes obtained by the note issuer, if RMB get commodity pricing, which can use it to buy the worldwide resources and avoid U. S. dollar liquidity constraints, that leads to expansion of seigniorage revenue. More, China has accumulated foreign exchange reserves to ease the pressure, reduce the risk of reserve assets shrink, reducing the dependence of other countries (mainly U. S. ). China's foreign exchange reserves, mostly are U. S. overnment bonds, which makes China and U. S. in a delicate state. After global financial crisis , the Chinese foreign exchange reserves shrink every moments, but China is not found in other better investment options, holding dollar debt is the best choice for China at this moment. Financial organizations The financial organization may also take advantages throug h RMB internationalization. First, the import and export trade companies for RMB provide clearing services and financing for foreign importers to provide support to the RMB business so as to expand the scope of commercial banks and to increase the profits of commercial banks. Furthermore, The existence of economies of scope to improve the competitiveness of financial institutions, and the increased use of offshore yuan to improve market liquidity, more importantly, the central bank can protect the lender of last resort to provide liquidity for financial institutions to protect, Chinese financial institutions to reduce foreign exchange liquidity risk, which together with the economies of scope to improve the overseas Chinese financial institutions to conduct renminbi business competitiveness. Also, RMB overseas demand also contributed to the innovation of financial instruments and the development of renminbi derivatives market. Last nut not the least, it may benefit from increasing the influence of China's financial markets, and promote international financial center , like Shanghai, as well as an offshore financial center, Hong Kong, the development of renminbi, the Chinese financial markets and further integrate into the international financial markets. Disadvantages PRC government The PRC government , however, still has to face some challenges in order to achieve RMB internationalization. First of all, as China’s capital markets are still too shallow, any significant changes in cross-border capital flows may easily lead to large fluctuations in China’s asset prices. Overseas demand challenges the RMB of China's monetary policy , while people who holds the RMB assets may cause the increase of cross-border capital flows and exchange rate fluctuations, and thus affects the stability of China's financial system. Also, if a currency is fully internationalized, which means that it can easily be obtained in international financial markets, the country with an internationalized currency will be very vulnerable to speculative attacks from international speculators. More, â€Å"hot money† will enter China causing economic crisis. As Hot money will lead to economic crisis in China's property market and the stock market, as investors consider more to invest their money in high-return business. Like Guangzhou Tang Hang Metal Materials Co. , Ltd. eferred payment for imported goods in China so as to profit from the appreciation of the renminbi. Experts said that China's foreign exchange regulations, the RMB settlement may make this form of arbitrage is more profitable, because the company can enjoy a more favorable foreign exchange rate. According to the monetary policy report from the central bank( page 16), China was trying to fix the problem of hot money. ‘ â€Å" † , 2010 ? 11 ,2011 ? 3 , ?2011 ’ From Second quarter of the monetary policy report from People’s bank of China Last but not the least, it is more difficult for China to control the inflation rate. China's battle to curb inflation even more difficult, because People Bank of China must print more RMB to buy dollars flowing into the country. China has more than 6% inflation. And Beijing want to precisely control the level to curb the appreciation of the yuan revaluation, but the internationalization of the RMB has given tremendous upward pressure. Brookings Institution China scholar Prasad (Eswar Prasad) said that the management and increase appreciation of the RMB yuan in international trade and financial transactions of the importance, both in the short term this is a contradiction. According to the monetary policy report from the central bank, (page 1 ), there is still pressure in controlling the amount of RMB. ‘ , , 5 ,M2 M1 4. 6 8. 5 6 , ,M2 M1 0. 8 0. 4 , †¦.. ’ From Second quarter of the monetary policy report from People’s bank of China

Of Mice and Men – How Does the Writer Show the Frustration and Tension of the Men’s Lives in This Section?

How does the writer show the frustration and tension of the men's lives in this section? (Page 57 – 63) In this section the men are constantly in frustration which creates a tense atmosphere because of the fear of becoming â€Å"sacked† by Curly’s old man, although the only place that enables the men on the ranch to repose whilst still working on the ranch is by going to â€Å"Susy’s place†. The brothel is strongly depended on by the men because it gives the men happiness; their attachment with the brothel is displayed by announcing what the brothel consists of.George is dependant on the brothel because all he wants is a place where â€Å"A guy can go in an’ get drunk and get ever’thing outta his system all at once,† now narrowing this quote down to just, â€Å"and get ever’thing outta his system all at once†, we are shown that all George wants is to be away from is the ranch and going to the brothel allows him to simply forget all his problems for the duration of one night.The fact that George is desperately willing to escape life on the ranch shows an idea of frustration because George is aware that he’s going to be on there for a long period of time, but in the same situation, he is in desperation to leave work to become his own boss. The determination becomes frustration due to the possibility that George’s dream is becoming further and further away from his grasp.Although in this section, the tension is mostly created by Curley; when Curley enters the ranch the majority of the men change their behaviour to an awkward characteristic, because the main focus is on Curley and his wife, and the men know that Curley’s wife can cause trouble due to her flirtatious inner nature. Curley enters the ranch in search of his wife which gets the men get frustrated because when Curley is present he always insists on starting a fight with someone which leads to Curley trying to build up the tension between the men. Curley bust into the room† shows the anxiety that Curley has towards the men and his wife being around everywhere he also â€Å"looked threateningly about the room† in attempt to cause a fight with one of the men. The men also claim â€Å"Curley’s just spoiling it† by trying to threaten all the men he is causing hatred within the rest of the ranch workers to go against him.

Migration, Immigration, and Emigration, and Their Effects

Vietnam has a wide variety of religions practiced in their country. Nine point three percent of Vietnams population are Buddhist, six point seven percent are Catholic, One point five percent are Hoa Hao, one point one percent are Cao Dai. Less than one percent are Protestant and Muslim. Even though Vietnam has a lot of variety of religions over eighty percent claim no religion (East and Southeast Asia, 2012). Even thought there is a wide variety of religions in Vietnam, most of the people who live there have a sense of the richness and variety of traditional Vietnamese religion.In older tradition the majority of Vietnamese people believed they inhabited a world alive with gods and spirits. They didn't make a distinction of the living world and the spirit or dead world. They also didn't make a distinction between the world human beings, nature, vegetable, an animal. the believed that the energy of these worlds are all connected. Because of this religion plays a big part in the daily l ife of a Vietnamese person. In addition, your social status also affects how and what you believe. or example, Confucian scholars, who prided themselves for their rationality, often scoffed at what they considered the superstitious nature of peasant religion. But they, also had religious believes that they lived by. Where you work also determines what you believe. Fishermen, were notorious for the variety and richness of their beliefs. Some beliefs were shared by all Vietnamese. Others were adhered to only in one region or a small locality. Some were so deeply embedded in the culture as to be considered a part of tradition, holding sway over believers and non-believers alike.Maybe because of the many religions or the way the Vietnamese people think, religion doesn't play a big part in their country as a whole, but it does play a big part in the lives of the citizens of Vietnam. Even though, half of the world's population lives in The Asia region people aren't migrating to Vietnam (S tephen Castles, 2009). Vietnam is a very traditional country with allot of different ethnic groups. Vietnam is home to fifty-four official ethnic groups, the majority of which live in highland areas. Although some large groups such as, the Cham or Chinese, live in lowlands or urban areas.I will go over a couple of the most known ethnic groups. There are eighty-five point seven percent of the Vietnamese are Kinh, which is said to be the native people of Vietnam. There are one point nine percent Tay people, who originates from the Chinese side of the Vietnamese – Chinese border. One point eight percent are Thai and are from Thailand. One point five percent are Muong which are the people who live in the mountains in Vietnam, and Khmer who come from Cambodia. One point two percent are Mong and they come from Mongolia. Less than one percent are Nung which are considered to be the â€Å"poor† people of Vietnam.The last five point three percent are labeled as other (East and Southeast Asia, 2012). Most people in Vietnam are natives to that land but their ancestors migrated from china long ago. Because of this migration doesn't play a big part in Vietnams present but it does play a big part in its history. Even though they have been ruled by other countries most of the time, they kept a strong belief in their country and culture. Migration in Asia isn't a new thing for them. Asians from these regions have been migrating for centuries. But in the 1970s and 1980s, international migration from Asia grew dramatically.The main destinations were North America, Australia, and the oil economies of the Middle East. Since the 1990s, migration within Asia has grown, particularly from less-developed countries with massive labor surpluses to fast-growing newly industrializing countries (Stephen Castles, 2009). In today's society migration has dropped. The reason for this is the Asian government wanted to control migration and migration rights were limited. They also made migration temporary in that region so people were prohibited to have family reunions.Even though migration has dropped, emigration has risen six percent over the past ten years (Stephen Castles, 2009). There are about 2. 6 million people leaving Asia to look for work. In the 21st century over 6 million Asians are employed outside of their own countries within the Asian region. This has grown a great deal since the 1980s and has helped the Asian region grow. A lot of Asia's were able to find work in the Middle East after the oil prices rose in 1973. This also contributed to the migration and emigration in Vietnam. The referred to these workers as contract labor.The companies that employed them made it clear that they couldn't bring family with them. In the 70s most of the works who migrated were male so the men of the house had to leave their families just to find work and provide for them. In the 1980s the economy was growing so rapidly and fertility was declining it cause a st rong demand for labor workers. Even though they in Asia, most of the workers aren't Asian. While existing flows from countries like Bangladesh, Indonesia, and the Philippines have continued, new source countries like Vietnam, Cambodia, Laos, and Burma have become more significant (Stephen Castles, 2009).In the 1990s there was a demand for female domestic workers that started in the Middle East and then Asia. If women didn't work in the domestic sector they often had the â€Å"typical female† jobs. Some examples of these jobs are entertainers(mostly prostitutes), restaurant and hotel staff, and assembly line workers in clothing or electronics. These jobs were poor paying and had terrible conditions. They were also associated with patriarchal stereotypes of female docility, obedience, and willingness to give personal services (Stephen Castles, 2009).Another big form of female migration in Asia is female migration marriage. Since the 1900s, foreign brides have been sought out by farmers in areas likes Japan and Taiwan. This is one of the only permanent forms of immigration in Asia that is permitted. From the Asian government sand point it seem that these practices with women help their country, but it is sexist and will put the government in a terrible situation with women rights groups. The diversity in the religion and culture have shaped the Vietnamese people into who they are today.Even though it doesn't play a big part in the economy or government, religion is still a big part of the lives of the Vietnamese citizen. The religion is mixed in with their culture which makes the citizens of Vietnam a pride people. With the ever growing Asian economy Vietnam is in a good place to grow also. Even though the country has had allot of adversity, it has overcome it all. In the future maybe they will work on their women's rights issues and continue to grow its economy. If that is done I have no doubt that the citizens of Vietnam will be happy and the economy wil l grow. ?

The Kurds A Stateless Nation Essay Example | Topics and Well Written Essays - 1250 words

The Kurds A Stateless Nation - Essay Example Studies indicate that, the political and social-economic changes witnessed by the rural Kurds in the 1950s such as industrialization, rural-urban migration, mechanization of farming and agriculture, and political mobilization destabilized the tribal structure of their tribal structure (Romano 66). For instance, over 35% of the Kurdish population in Turkey lives in Izmir, Ankara, Istanbul, and other parts of Turkish cities. Many of these people left Kurdistan forcibly because of political and state terror or voluntarily because of economic and social purposes. This essay will explore more on the language, religion, and other cultural and economic aspects of Kurdish identity. According to Zulal (146), the Kurds continues to speak many languages of the Kurdish commonly categorized into two groups. The first language group is Kurmanji spoken by over 75% of the Kurds, composed of two branches; North Kurmanji the most widely used language among the Kurds and South Kurmanji. The second lang uage group is the Pahlawani spoken by the 25% of the Kurds population and composed of two branches; Dimili and Gurani. Kurdish language serves as the cementing power of the Kurdish nationalism. For the past decades, conflicts have emerged within different tribes as many attempt to differentiate languages used by the Kurds. For instance, in the early 1920s, Ataturk substituted the alphabet words used in Turkish from the Arabic and Latin alphabet. As a result, the Kurds from turkey were forced to embrace and adapt the Latin alphabet for their language. In 1924, strict measures were imposed in Turkey to suppress the Kurds’ language (Entessar 66). The measures involved banning both written and spoken word of Kurdish language and ensuring that only those who speak and understand Turkish are provided with information and education. During that period, possession and distribution of written materials in Kurdish language became a severe crime liable to be punished by long prison sent ence. However, in the early 1990s, Kurds within Turkey began to use their language. Many Kurds have had the opportunity to express their thoughts in writings and readings. In terms of religion, two thirds of the Kurds’ population are Sunni Muslims who adhere mostly to the Shafi’i legal schools. However, the Arab and Turkish adhere to the Hanafi schools while Persian and Azeri to the Shi’ite schools. The remaining population of Kurds adhere to heterodox and rituals and beliefs that are somehow influenced by Islam, but more influenced by other Iranian religion. The Syncretistic sects include the Ahle-e Haqq also known as people of truth, the Alevis, and Ahl-e Haqq. Still, there a few thousands Christians Kurds and Jewish Kurds living in and outside Kurdistan. In the 18th and 19th century, religion played a significant role in the Kurdish community. It dictates the way people lived and perceived things. For instance, most of the Kurdish rebellions that broke out be tween 1880 and 1940 were initiated by Sheikhs (Gunter 539). At this point, the rebellion was affected by the religious differences of the Kurds. For example, Sunnis divided into two religious diversities; the Naqshbandi and Qadiri that never cooperated with each other effectively. The religion diversities between the two religions instigated rebellious. In regard to education, the ban of the Kurdish language and shortages of teachers and schools in Kurdish community have hindered education development. A study

Public administration work placement Essay Example | Topics and Well Written Essays - 750 words

Public administration work placement - Essay Example rrent models of knowledge and models within Public Sector administration are largely considered as robust and effective in terms of helping to achieve the required level of professional practice as well as others. These models and body of knowledge include many important elements such as publicity as the tool to achieve the desired level of accountability and transparency in the public administrative processes can effectively serve as one of the strong knowledge based tools to inform the practioners of public administration and others of the possible outcome of their behaviors while on the job. These models focus on bringing transparency and accountability for those who practice it whereas for others, this may not seem to be the direct purpose of the models and body of knowledge therefore in that sense, public administration models may not inform properly to others especially about how they can produce a reflexive capability to view and inform. Public administration provides many skills and competencies which can be effectively transferred to other in the field. Take an example of Publicity- Nordic countries almost many years ago have initiated the publicity as one of the most effective tools to bring in transparency into the public officials. By openly circulating the details of Parliamentary proceedings, they developed a system where the public administrators were effectively held accountable by the general public regarding their actions. Therefore publicity is one such very important transferable skill and competency within public administration which can help achieve the necessary communication into the academic communication and other fields. It must also be noted that public administration tends to have a beurucratic outlook as it mainly deals with the organizations which are bureactic in nature therefore dissemination of knowledge through effective communication is different from the mainstream administrative models and practices however â€Å"This type of

Surrogate motherhood Dissertation Example | Topics and Well Written Essays - 1500 words

Surrogate motherhood - Dissertation Example Surrogate motherhood is a theme that evokes numerous opinions. There are many supporters of surrogate motherhood as well as many opponents. Neither of them is right or either of them is right in their own way. This research project is not focused on considerations of opponents or proponents. The literature review presented further on is focused on a current paradigm of surrogate motherhood. It is supposed that it is relevant to pay for surrogate motherhood to women who have already given birth to their own children. Physical and emotional load of surrogate motherhood is evident and it is not an easy labor. There should be no commercial spirit of surrogate motherhood, but it should be paid like any other kind of labor. Legal aspect of surrogate motherhood A common surrogate motherhood criticism is determined by the claim that it is impossible to buy or to sell a child. A child is not a commodity and money relationship is irrelevant from this perspective. In the New York State Task For ce on Life and the Law it is concluded that â€Å"the exchange of money for possession or control of children.., threatens to erode the way that society thinks about and values children, and by extension all human life†Ã'Ž Thus, from this perspective, a child’s birth is the natural outcome of a certain deal and it can be transferred from one party to another for money. A supposition that children in this case are treated like commodities can be contradicted by the fact that sometimes parts of a human body are treated like objects (Meehan, 2000). It can be argued that commodities require cleaning, cherishing etc, so it is not wrong in this context to treat children as commodities or objects. Thus, it is relevant to consider in this context people who pay money to buy a child from a surrogate mother. A good treatment is usually guaranteed to a child who is bought. From another perspective, such kind of an immoral treatment is irrelevant, because children are not commodi ties from the very beginning. Babies are given by God and it is not proper to sell or too buy them. With this respect one may argue that for example, when an individual wants to meet his spouse he pays for a matrimonial agency. But in this case a future spouse is not bought; it is just a money transfer to a matrimonial agency. Thus, it can be said that not a child is bought, but services of a surrogate mother are bought. Moreover, the services of a commercial surrogacy agency are bought. At this point it is relevant to talk about surrogacy arrangement. It is a cruel reality of the modern world that parents want to become legal parents and receive custody rights and for this purpose they have to pay a certain sum of money. A surrogate mother wants to get money for her services of bearing a child since it is a hard work to bear a child. An interesting suggestion is provided by†¦: â€Å"In a commercial surrogacy agreement, the commissioning couple could be thought of as buying pa rticular services from the surrogate mother. But it is not necessary to suppose that anything at all is bought or sold† (Mitchell, Pellegrino, Elshtain, Kilner & Rae, 2006). In this case obligations of one party imply that it gives money to another party in case obligations are fulfilled. This is a pragmatic paradigm that is often discussed in the contemporary researches and studies in this field. Therefore, we can surely claim that no illegal basis lies in terms of these contracts. There is a well-known paradigm suggested by Blyth and Potter, who claim that surrogacy does not imply buying or selling children, because future parents â€Å"might even imagine that they have purchased a particular baby.., what they have paid for is not necessarily the same as what they think they have paid for† (Mclachlan&Swales, 2009). This is an interesting claim and it is worth considering. There is such kind of cases, when future parents rejected to take the baby from a surrogate mothe r when it has already come into the world. Therefore, a legal

Impacts of Roman Civilization Essay Example | Topics and Well Written Essays - 750 words

Impacts of Roman Civilization - Essay Example Meanwhile, Roman law created the division between open law, whereby the state is straightforwardly included, for example, with issues of treachery and assessment as well as private law that is directed to the debate between individuals, for example, over contracts (Lord, 13-17). This framework was the support for what is currently referred to civil law that governed the West. Roman law likewise impacted the improvement of private worldwide law. Romans had arraignments and jury trials, like today's practices. Numerous guard procedures at present utilized can likewise be followed over to Roman techniques. The thought of "blameless until demonstrated blameworthy," which emphasizes United States immoral equity framework, it is believed to have originated from aged Roman plans. Likewise, the reason for composed law as an approach to secure people from each one in turn and from the state force is an intrinsically Roman thought. Writing is an alternate region where Roman impact is outstandi ng. Roman writers took after the renowned Greek writers, frequently creating and expanding upon Greek composing. Numerous journalists have been affected by Romans, Shakespeare being among these curtails. Roman Art has additionally affected today’s social order (Cline, 23-27). Specifically, utilization of prevailing images of Emperors on the nation coins and models was an intrinsically Roman thought Roman impacts in advanced social order can additionally be seen in framework frameworks. Roman ways utilized three levels of substructure underneath the clearing stones, and an endorsed plot to inspire the inside way, permitting rainwater to empty off. They utilized numbered signposts each Roman mile, which demonstrated such things as the separation of the following town and which development unit had manufactured the way. They additionally had far reaching systems of underground lead channel, supplying  clean water.  

Letters of credit have been described '' as the lifeblood of Essay

Letters of credit have been described '' as the lifeblood of international commerce'' . ( Kerr L J in R D Harbottle ( Mercant - Essay Example They are Open Account, Bill of Exchange, Documentary Bill and Letter of Credit.1 Open Account is a type of practice whereby contracting parties agree on payment of cash against order. This means the importer has to make advance payment along with his order. The risk for the importer is at a maximum. On the other hand, exporter assumes equal risk if he agrees to ship the goods and receive payment at a later date on or after delivery. Secondly, bill of exchange is an arrangement by which the exporter obtains an undertaking that the importer shall pay the value of goods received after a certain period from the date of supply, delivery or against despatch as the case may be. This is a negotiable instrument just as a cheque or promissory note and it is governed by the Bills of Exchange Act 1882. In case of default by the importer in payment, the exporter acquires legal rights to proceed against the importer. This arrangement is safer than an open account type of payments. The third type o f payment Documentary bill refers to Bill of Exchange accompanied by the bill of lading which is document of title to goods. The Bill of exchange drawn by the exporter along with the bill of lading for the goods shipped is accepted by the importer for payment as per the negotiated terms as to whether it is payable at sight or after a period of say 30 to 90 days. These three types of payment do not guarantee payment or shipment (in case of advance payment by the importer) to the respective party. The last of the above said types is the letter of credit. This form of payment removes difficulties encountered by the parties in the first three types of payment. The letter of credit has therefore been regarded as life blood of business as rightly said by Kerr L.J.2 This type of payment wherein third parties step in to guarantee payment thus lubricating the wheels of commerce is however not without problems that would affect the interests of either party.3 This paper discusses the importan ce of letter of credit as the lifeblood of international commerce in the following pages. Letter of Credit The letter of credit opened by a bank on behalf of an importer guarantees payment to the exporter in a foreign country through his nominated bank. Thus, the importer’s bank after satisfying with the credentials of the importer who may be its long standing client and taking necessary precautions to collect payment from its client, sends an irrevocable letter of credit as per the terms and conditions agreed upon between the importer and the exporter to the exporter’s bank. The exporter’s bank in turn forwards the letter of credit to the exporter and intimates the fact to the importer’s bank. The exporter ensures the compliance of stipulated terms and conditions and ships the goods to the importer. The bill of lading which evidences the shipment of goods and becomes the document of title to goods, is submitted to the exporter’s bank along with ot her documents such as invoice, certificate of insurance, certificate of origin etc and the bank is instructed to collect payment for the goods shipped against delivery of the said documents to the importer’

Film, Fashion and Food in India Essay Example | Topics and Well Written Essays - 3250 words

Film, Fashion and Food in India - Essay Example The paper "Film, Fashion and Food in India" discovers the Indian fashion, food and film. The Indian film industry encompasses other language film industries because of the high number of languages spoken by most Indians hence most portions of the Indian film industry are fragmented. Although Bollywood leads India in the production of the film, its specialty is mainly Hindu movies other regions such as Chennai that was formally known as Madras produces films in Tamil and Kolkata is the Bengali movie capital. English, Hindu, and Urdu are among the popular languages in most Bollywood movies where you find an amalgamation of these languages in a single film be it a dialog, soundtracks or subtitles. Of significance however in these Indian films is the art of music that makes the films typically musicals that have catchy music interwoven in the script. Typically the plot of the Indian films is always melodramatic with features like unlucky lovers, love triangles, sacrifice, family attachme nts, devious villains, crooked politicians, and kidnappers, courtesans with golden hearts, theatrical rehearsals of destiny, opportune coincidences and siblings estranged by fate. However, the pattern is changing with the industry advancing to the production of technically advanced films with hilarious stunts in line with global changes in the movie industry. The major part of the creative isolation of early Indian cinema and development of their rules largely differ from the rest of worldly film.

Competition Bikes, Inc. (CBI) Financial Analysis Report Essay Example for Free

Competition Bikes, Inc. (CBI) Financial Analysis Report Essay In order to determine a company’s performance, analysis must be done for key metrics, including the ability to pay debts, how much cash or other liquid assets are available, and the company’s viability to continue operations. These analyses involve the review of income statements and balance sheets, where current and past performance will be studied with the goal of predicting how the company will perform in the future. Upper-level management at CBI can use this information to make decisions in line with the company’s goals. This report for CBI will include four sections. First, I’ll analyze the company’s financial strengths and weaknesses by doing a horizontal analysis, vertical analysis, trend analysis, and ratio analysis of CBI financial results for years 6, 7, and 8. The second section will include an analysis of the company’s working capital, including suggestions on ways to improve working capital and use excess working capital to increase profits. The third section will note any weaknesses in the company’s internal controls, and how those can be corrected. The fourth and final section details Sarbanes–Oxley requirements and how the company can mitigate risk and ensure compliance with the requirements within that legislation. A1a. Horizontal Analysis Horizontal analysis is defined as the â€Å"comparative study of a balance sheet or income statement for two or more accounting periods, to compute both total and relative variances for each line item† (businessdictionary.com, n.d.). For CBI, we will be comparing years 6 and 7, then years 7 and 8. This will allow us to gauge the performance over a three year period of time to see if the organization’s business is rising, staying steady or falling. Net sales for CBI products increased 33.8 percent between years 6 and 7. This is a sign of strength for the company and a signal that their bikes are well received by customers. However, net sales dropped by 15% between years 7 and 8. This is a weakness for CBI, as net sales affect the bottom line, and they will have to find a way to make up for this sales shortfall elsewhere in their budget (such as cutting expenses). This shortfall is due to the fact that the niche market that purchases the majority of the bikes, professional riders, experienced a reduction in sponsorships due to the economic situation. Therefore they purchased fewer bikes than in previous years. The company expects to recover from the current year sales decline within three years. The cost of goods sold includes all direct costs attributable to the production of goods sold by the company. Cost of goods sold and sales revenue move in tandem. In this case, the cost of goods sold increased 31.8 % between years 6 and 7. The cost of goods sold increase was slightly lower than the net sales increase of 33.3%, which is a sign of strength for CBI as it indicates that management is doing a good job keeping production costs at a manageable level. In years 7 and 8, the cost of goods sold decreased by 14.5%, which is similar to the decrease in net sales, down 15% in that same time period. Gross profits, which is net sales less the cost of goods sold, increased by 37.5% between years 6 and 7. This is a strength for CBI. An increase such as this signals that management has made a strong commitment to growth while at the same time controlling the operational and production costs. Gross profit was down by 16.3% between years 7 and 8. This is a result of falling sales in the current year. Under General and Administrative expenses, there are two areas of interest that warrant further analysis executive compensation and utilities. Executive compensation rose by 29.4% in years 6 and 7, which makes sense given the strong sales increase during that period. Executives made good business decisions during this time and should be compensated for these results. However, executive compensation stayed flat during years 7 and 8. Granted, sales and profits were down for the year, so a large increase would not be warranted. However, no increase in compensation could be considered a weakness for CBI, as salaries and compensation are a significant tool to keep talent. Morale may suffer if after a year’s worth of hard work, they get no increase at all. Utilities were up a modest 3.8% between years 6 and 7, with an increase to 11% between years 7 and 8. With CBI building fewer bikes in year 8, a reasonable assumption is that utility usage would decrease also. Therefore this increase in utilities should be examined further. Some of this increase could be beyond CBI’s control (such as rate adjustments by the utility company) but a couple of options for the company to explore to manage this expense and be more efficient would be an energy audit, and/or negotiating with the utility company to pre-pay their utilities for a certain time period to get a discount. Operating income is the amount of profit realized from operations after removing operating expenses such as the cost of goods sold and employee salaries. For CBI, operating income increased strongly (154.6%) between years 6 and 7. However, operating income between years 7 and 8 is strongly negative, with a 69.1% decrease. This is due to the fact that gross profits dropped by 16.3% during this time period, but total operating expenses decreased by only 3.6%. This is not sustainable over the long term and is a weakness for CBI. They need to reduce their production expenses wherever possible, become more efficient in their operations, and find ways to increase sales revenue – ideally, a combination of these. The last item on the income statement is net earnings – the so-called ‘bottom line’ both as a reference to its position on the income statement, and a reflection of the fact that total revenues minus total expenses. CBI’s net earnings rose a remarkable 313.4% between years 6 and 7, which is a reflection of the fact that profits grew at a much higher rate than expenses during that period. Net earnings declined by 81.6% between years 7 and 8, which is due to total revenues dropping to a greater extent than total expenses. This is a weakness for CBI as it is not sustainable for long before the company runs out of money. As mentioned previously in the operating income section, this is an issue that CBI’s management team must address if they want to stay in business. Cash and cash equivalents declined 64.6% between year 6 and year 7. This is a weakness for CBI, particularly in light of the fact that sales were up during that period. The company should have more cash or cash equivalents on hand, not less. In years 7 and 8, cash and cash equivalents increased by 348.2% this during a period where net sales were down by 15% compared to the previous period. While this appears on the surface to be a positive – as cash and cash equivalents help with the company’s liquidity – it can actually be interpreted as a weakness as CBI’s large amount of cash and cash equivalents may make some analysts question the company’s ability to manage their cash flow in a way that maximizes profits and efficiency. CBI’s accounts receivable, which represents money owed to them by their customers, increased by 164.3% in years 6 and 7. While accounts receivable are classified as assets, this is a potential weakness for CBI as it signals that a lot of the assets they are claiming on the balance sheet are tied up in receivables that are not as liquid – they have not yet received payment. Accounts receivable was -15% in years 7 and 8. This reduction is a strength for CBI as it signals that they are improving their cash flow by more effectively collecting money owed to them. The large scale change in numbers year over year for both cash/cash equivalents and accounts receivable at CBI signal volatility year over year. This could be a red flag for investors looking for consistent levels of performance. CBI also might find it difficult to continue to hire the best salespeople, who work on commission and are likely looking for a company with solid sales that will provide a steady paycheck. Total current assets, or those that are reasonably expected to be converted to cash within one year in the course of business, include cash, inventory, accounts receivable, marketable securities, prepaid expenses and other liquid assets. CBI’s current assets rose 31.5 percent from year 6 to year 7. Growth in current assets is generally regarded as a strength and a sign the company is growing. However the picture changes when current liabilities for the same period are analyzed, which I will do in the next section. Total assets represent total current assets plus net property and equipment and give a complete picture of all short term and long term assets. Total assets for CBI increased by 2.2% between years 6 and 7, due in large part to the large increases in accounts receivable and work in process inventory. When a large amount of accumulated depreciation was factored into assets, it brought the total assets figure down substantially. Between years 7 and 8, total assets decreased by 0.2%. After reviewing the balance sheets I noted that while current assets decreased substantially between years 6 and 7, then 7 and 8 (down 15%), long term assets stayed flat (down 0.5% over the same period). Overall, assets, liabilities and stockholder’s equity were all down between years 6 and 7. This is a weakness for CBI as investors will review these negative numbers and question the company’s ability to be profitable and grow. Total current liabilities are debts that are due within one year in the course of business. They include accounts and notes payable, accrued salaries, and other accrued expenses. Current liabilities increased by a whopping 122.4% between years 6 and 7, largely in part to the large increase (192%) increase in accounts and notes payable. Between years 7 and 8, accounts and notes payable increased by 33.3%.This is a serious weakness for CBI, as it signals that they are taking on a disproportionate amount of debt compared to their sales growth rate. CBI would need to generate substantial sales increases in future years to pay the interest on this debt and continue to cover their expenses. The fact that total current liabilities continue to trend upward year over year while sales actually went down between years 7 and 8 is a warning sign. CBI could have trouble meeting its debt obligations (and getting any further funding from creditors) if sales are flat or continue to trend downward. Total long term liabilities – those that come due more than one year in the future – are holding steady at CBI, decreasing 5.6% between years 6 and 7, and decreasing by 5.9% between years 7 and 8. This is a sign of strength for CBI as it shows they are managing their long term debt responsibly. Retained earnings represent the amount of assets created through profits that are retained in the business and are part of owner’s equity. Retained earnings increased by a healthy 17.4% between years 6 and 7, which makes sense given the strong sales results. Retained earnings rose by only 2.7% between years 7 and 8, which is not surprising in light of the fact that sales are down in the current year. This decrease is a weakness for CBI, as retained earnings is part of stockholder’s equity. Those invested in the company (or those considering doing so) will note the sharp decrease in funds available for reinvestment in the company and possibly question the prospects for growth unless the company can turn things around quickly. A1b. Vertical Analysis Through a vertical analysis, we review entries for assets, liabilities and equities. These are represented as a percentage of the totals for any given year. The main advantage of a vertical analysis is that it is easy to read, clearly understandable and charts changes in the operations of a business on a yearly basis. By reviewing vertical analysis data, a person can see financial performance over a set period of time. Cost of goods sold decreased from 73.4% of net sales in year 6 to 72.6% in year 7. This is a strength for CBI because a reduction in CGS leads to higher profit. This is evidence that management is doing a good job controlling product costs. In year 8, CGS increased slightly to 73% a minor increase but this could be considered a weakness for CBI as it signals that the costs to produce their bikes are going up. Gross profit was 26.6% of net sales in year 6, and increased to 27.4% in year 7. This is a strength for CBI as it signals that the company is doing a good job of selling their product and keeping costs at a manageable level. In year 8, Gross Profit dipped slightly to 27%. This is because the cost of goods sold went up slightly during this time, and sales were down. A gross profit reduction is normally a weakness; however, in light of the 15% decrease in sales in year 8, the fact that gross profit only decreased by 0.4% from the previous year should be considered a strength for CBI as it indicates that the company has minimized the impact of the sales downturn on their gross profit margins. Upon reviewing the general and administrative expenses, all of the line items followed the trend of decreasing as a percentage of the total in year 7, and then increasing as a percentage of the total in year 8. This makes sense given that these expenses are part of the cost of goods sold figure. One example is the ‘Other general and admin expenses’ which was 2.7% of the operating expenses total in year 6, decreasing to 2.6% in year 7 and then increasing to 3.3% in year 8. While these make up small percentages in the company’s overall operations budget, this is a weakness for CBI, as these types of expenses should not be going up if there are not sufficient sales to support the increase. CBI management should keep an eye on these expenses to ensure they do not creep up year over year, which would have a negative effect on their profit margins. When looking at the individual numbers, for example administrative salaries, we see that there is no change in the percenta ge of the total between year 7 and year 8. Administrative salaries did not increase at all in year eight, and neither was executive compensation. This could be a weakness from an employee morale standpoint, as they worked hard all year and did not see any raise in their pay. However, this data is not surprising given the difficult economic conditions in year 8. There was a purchase of 25,000 shares treasury stock in year 7, and it’s possible that management offered this stock to employees in lieu of a pay increase. Operating income was 2.8% of the total in year 6, increased to 5.3% in year 7 and decreased to 1.9% of the total in year 8. The decrease in year 8 is largely due to the increase in operating expenses, which factors into the operating income equation. The fact that CBI’s operating expenses are trending up year over year without accompanying sales increases is a negative trend for CBI and should be considered a weakness. This is something the company’s management should be monitoring closely and taking action to control expenses and promote sales. Net earnings were 0.9% of the total in year 6, rising to 2.8% in year 7 (not surprising given the increase in sales) and decreasing to a three year low of 0.6% in year 8. Since this bottom line number is a key indicator of a company’s profitability, this decrease should be something that the company’s management should make a top priority to fix. Cash/cash equivalents were 6.2% of total assets in year 6, decreasing to 2.2% in year 7. This is a weakness for CBI as this is a sign that the company may have trouble paying their debts and expenses. In year 8 this figure improved substantially to 9.7% of total assets. However, the company needs to make sure they are not sitting on too much cash, but investing it to grow the company and maximize profits. Accounts receivable represented 6.5% of total assets in year 6, and increased dramatically to 16.7% in year 7. Although accounts receivable is considered an asset, it should be noted that the cash is not collected right away. This asset is less liquid than cash or other short term assets and CBI should ensure that they are collecting payment from customers in a timely manner. Accounts receivable decreased slightly to 14.2% in year 8, which would be interpreted as strength as it indicates that CBI is doing a good job collecting payments from customers. Total current assets represented 24.5% of total assets in year 6, rising to 31.5% in year 7 and 36.8% in year 8. Reviewing the line items for current assets, this increase is attributable to the increase in accounts receivable as well as cash/cash equivalents. This could be interpreted as a strength for CBI, as an increase in current assets means the company is in a better position to pay debt obligations and use assets to grow the company. However, it’s worth noting that the majority of CBI’s current assets are tied up in less liquid assets – accounts receivable and inventory. These are more difficult to convert to cash should the need arise. Total long term liabilities (mortgage payable and other long-term liabilities) decreased steadily year over year at CBI. In year 6 they represented 45% of total liabilities and equity, decreasing to 41.6% in year 7 and 39.2% in year 8. This is a strength for CBI as it shows they are paying down their long-term liabilities. A reduction in liabilities improves liquidity ratios and the company’s ability to pay operational expenses as well as their debt obligations. Total current liabilities for CBI followed the trend of current assets and rose steadily year over year – 2.5% of total liabilities and equity in year 6, 5.4% of total liabilities and equity in year 7, and 7% of total liabilities and equity in year 8. Looking more in-depth at CBI’s current liabilities shows that this increase year over year is due to the rise in accounts and notes payable. The other line items (accrued salaries and other accrued expenses) held steady. I interpret this as a weakness for CBI, and should analyze why their current liabilities were rising when they were collecting more cash, particularly in year 8. The cash flow increase in year 8 was substantial and could have been used for accounts payable obligations. It’s possible that the company was holding on to cash/cash equivalents in year 8 to weather the economic downturn. Retained earnings represent earnings not paid out as dividends, but retained by CBI for reinvestment in the company. Retained earnings represented 23.3% of total liabilities and equity in year 6, rising to 26.8% in year 7 and 27.5% in year 8. This is a strength for CBI as it shows that management is committed to retaining earnings in order to grow the company. A1c. Trend Analysis Trend analysis involves the usage of past figures for comparison. For trend analysis, information for a number of years is compared to a base year. Each item of the base year is represented as 100% and on that base, the percentage for the other years are computed. This analysis determines the percentage of increase or decrease in each item with respect to the base year and helps analysts make forecasts for future years. For CBI, net sales have been provided for year 6 (the base year) as well as years 7 and 8. The historical trend analysis figures for CBI are shown below, based on net sales and establishing year 6 as the base year. Year 6: $4,485,000 (100% trend percentage) Year 7: $5,980,000 (133.3% trend percentage) Year 8: $5,083,000 (113.3% trend percentage) This trend analysis does not show any surprises. The horizontal and vertical analysis clearly showed that various metrics (net sales, operational expenses, net income, etc.) showed a large increase from year 6 to year 7, followed by a decrease between years 7 and 8. The trend here shows a large net sales increase, followed by a decrease. The large swings in sales seem to indicate volatility for CBI. This is a weakness because it’s more difficult to forecast accurately, which can lead to inaccurate resource planning and negative stock price impacts if performance does not meet stated expectations. The forecasted trend analysis for CBI, using year 8 as the base year is shown below: Year 8: $5,083,000 (100%) Year 9: $5,247,450 (103.2%) Year 10: $5,471, 000 (107.6%) Year 11: $5,681,000 (111.8%) There’s no information given on how these forecasted trend numbers were calculated. It’s a positive sign that the sales increases are only a few percentage points each year, as this is much more sustainable and likely than a large increase such as between years 6 and 7 (which is generally not sustainable in the long run). This forecast would seem to indicate that the outlook is positive for CBI for the next few years. It’s likely that one of the underlying assumptions is that the economic situation will improve, and the company will sell more bikes. However, given the operational weaknesses pointed out in the horizontal, vertical and ratio analysis, if I were an investor or analyst I would want to know more about the company’s plans to address the se weaknesses before taking these figures at face value. A1d. Ratio Analysis As part of the ratio analysis, two important ratios to consider when analyzing a company’s liquidity are: Current Ratio Acid-Test Ratio The current ratio is current assets divided by current liabilities, and measures a company’s ability to pay their short-term liabilities. In theory, the higher the ratio the better. However, there are some limitations to the current ratio as I’ll note in the next section. CBI’s current ratio in year 7 was 5.79, and in year 8 was 5.25. Stated another way, CBI could use their current assets to pay their current liabilities 5.25 times over in year 8. This would seem to be a strength for CBI, and in fact this ratio is higher than their competitor Two Wheel Racing (with a ratio of 4.20). However, this ratio has one fundamental flaw its conceptually based on the liquidation of all of a companys current assets to meet all of its current liabilities. In reality, this is not likely to occur. Its the time it takes to convert a companys working capital assets into cash to pay its current obligations that is the key to its liquidity. Much of CBI’s current assets are tied up in accounts receivable, as well as work in progress inventory and raw inventory. These assets are not as liquid as cash, but are figured into the current ratio calculation. So CBI’s high current ratio looks strong on the surface, but upon further analysis there is a weakn ess in the somewhat large proportion of less liquid assets CBI holds that factor into the equation. The acid test ratio is another measure of liquidity, and more stringent than the current ratio in that it measures a company’s ability to cover their short term liabilities without selling inventory to do so. Looking at CBI’s numbers, the acid test ratio in year 7 was 4.41, and in year 8 it was 4.14. These numbers are higher than that of their competitor Two Wheel Racing (3.40) and that represents strength for CBI. However, I’ll note once again that the company will need to monitor and manage their current assets to ensure that the proportion of less liquid assets (accounts receivable and inventory) does not greatly outweigh their more liquid assets (such as cash). Average collection period is the time that it takes CBI to collect accounts receivable payment from customers. This number held steady at 43.8 days in years 7 and 8. However, it’s higher than that of competitor Two Wheel Bikes (32.5 days). This is a weakness for CBI, as it signals that the company may be too lax in collecting what’s owed to them and may eventually have difficulties meeting their short-term and long-term obligations. CBI should focus on strategies to reduce the time it takes to collect on accounts receivable. The debt ratio represents the total percent of assets financed by debt, and is calculated by dividing total liabilities by total assets. In year 7, 47% of CBI assets were financed by debt, which decreased slightly in year 8 to 46.2%. However this number is still substantially higher than that of their competitor, Two Wheel Bikes, at 38%. This is a weakness for CBI, and if they cannot bring this ratio down by increasing sales and profits to pay down some of their debts, they may have trouble paying their debt obligations. Gross profit margin for CBI was 27.4% in year 7 and 27% in year 8. This is lower than that of their competition, Two Wheel Racing at 32.1%. This is a weakness for CBI, as it signals that they are not as efficient as their competitors. CBI could improve this ratio by decreasing expenses, which would in turn decrease the cost of goods sold. Another way to improve this ratio would be to increase revenues. The operating profit margin for CBI differed substantially from year 7 to year 8. In year seven the figure was a healthy 5.3%, but in year 8 it dropped sharply to 1.9%. This is a weakness for CBI as this is a lot lower than that of Two Wheel Bikes (5.2%) and this signals that CBI is not doing a good job generating cash flow and providing shareholder value. One way CBI could improve their operating profit margins is by auditing their operating expenses and trimming costs wherever possible. An example would be adopting lean work processes with as little waste as possible. The raw materials inventory in particular should be reviewed to see if efficiencies could be gained by improved internal controls for inventory. Net profit margin is the percentage of each dollar earned that is translated into profits. CBI’s net profit margin in year 7 was 2.8%, and a dismal 0.6% in year 8. These numbers are much lower than those of the competition (Two Wheel Racing had a margin of 5.2% in year 8) and are a definite weakness for CBI, as companies with low net profits can go bankrupt in the event of a sustained downturn. This low number signals that the company is not running their operations efficiently and would be a red flag for investors. Earnings per share is an indicator of a company’s profitability and ability to generate shareholder wealth, and is the most important factor when determining the company’s share price. As the name suggests, it’s the earnings that the company generates per share outstanding. In year 7, CBI’s EPS was 0.17, or 17%. In year 8 that figure declined to 0.03%, which is nearly zero. This is a serious weakness for CBI as it suggests that the company is not doing a good job of generating wealth for shareholders, and this could lead to a selloff of the stock. In a worst case scenario, the stock price would decrease and the company could go out of business. Return on total assets is an indicator of how effectively a company is using its assets to generate earnings before contractual obligations must be paid (Investopedia.com, n.d). In year 7 CBI had a 4% return on assets, slightly lower than that of their competitor Two Wheel Bikes (at 4.8%). In a year where sales were up 33.3% from the year before, investors might expect a higher return. As I’ve pointed out in other sections, the reason this number is not higher is because CBI did not do the best job keeping their expenses under control. In year 8 the number is even worse – a dismal 0.7%. This is a weakness for CBI overall as it shows the company has some work to do to control expenses and use their assets effectively. Return on common equity measures how much profit a company generates with the equity shareholders have invested. This ratio is calculated by subtracting preferred dividends from net income, then dividing that number by common equity. CBI’s return on common equity was 7.5% in year 7, and decreased sharply to 1.4% in year 8. This is much lower than that of the competition – Two Wheel Racing’s ratio was 8.1% and is a weakness for CBI. This signals that the CBI is not doing a good job generating profit from the equity shareholders have invested, and it could lead to a stock sell off or investors demanding that measures be taken to increase equity returns. Financial analysts and investors would likely not have much confidence in these numbers. The price/earnings (P/E) ratio is a measure of the valuation of a company’s share price compared to its per-share earnings. Price/earnings ratios are tied to investor expectations. Investors are willing to pay more if they believe that future earnings will be substantially higher. On the other hand, if a company is stagnant and investors dont believe that future earnings will be going up, they will not want to pay as much and the P/E ratio will be lower. CBI’s P/E ratio in year 7 was 29.41. This means that investors would be willing to pay $29.41 in share price for every $1 in earnings. This is a strength for CBI because it suggest investor confidence in the company, which typically leads to an increase in share price. However, in year 8, the P/E ratio declined to 23.33. This is due to the company’s lackluster sales and operational performance in year 8. This is definitely a weakness for CBI – if investor confidence continues to decline, the share price will decline also. Times interest earned represents the number of times operating income can cover interest expense. CBI generated enough profits in year 7 to cover their interest expense 5.27 times. This number is a strength for CBI as it demonstrates that the company is doing a good job of generating income while keeping expenses at a manageable level, and is higher than the 4.24 figure from their competitor, Two Wheel Racing. However, the times earned interest ratio in year 8 is only 1.77, mainly due to the large drop in net income in year 8. This is a weakness for CBI as sales and profits decreased, while interest expenses did not drop in proportion. CBI needs to do a better job managing their operating expenses, which will improve this ratio. A2. Working Capital Analysis for CBI An important measure of a company’s efficiency and short-term financial health is the amount of working capital they have on hand. This is one measure of the company’s liquidity, and the ability to meet short-term (current) debt obligations with current assets. Working capital is used for day to day operational expenditures to pay bills of the business including employee wages, utilities, and rent, among others. This number is calculated by subtracting current liabilities from current assets. Investors view working capital as measure of a company’s operational efficiency. In general, companies with greater amounts of working capital are better able to achieve success by investing assets back into the business, rather than hanging on to non-cash assets in large amounts. While a business may have a large amount of assets, it may be very difficult to convert them into cash in order to take advantage of opportunities that require fast action – an example of this is an asset such as land or buildings. If current liabilities are greater than current assets, a working capital deficit is created, and a business cannot survive long-term in this scenario. Working capital numbers for CBI: Year 6 1,029,303 – 105,080 = 924,223 (9.79 current ratio) Year 7 1,353,044 – 233,700 = 1,119,344 (5.79 current ratio) Year 8 1,575,831– 300,200 = 1,275,631 (5.25 current ratio) CBI has been steadily increasing their working capital in years 6-8, with a 21.1% increase from year 6 to year 7, and a 14% increase from year 7 to year 8. This consistent rise in working capital confirms that the business has sufficient working capital to cover their short-term liabilities and invest for future growth of the company. One thing to note here is the large increase in current liabilities from year 6 to year 7 (82%) when assets rose by only 21.1%. This is largely due to the large increase in accounts and notes payable. Large increases in liabilities such as this are not a negative per se and can signal that the company is investing for growth, but should be monitored over time to make sure the company does not become overleveraged. The ideal scenario is if the increases in assets and liabilities are more proportionate (rising at a similar rate). Working capital is related to the current ratio, which measures the company’s ability to pay current liabilities with current assets. It’s calculated by dividing total current assets by total current liabilities. This ratio should be at least 1, which means the company has exactly enough capital to pay its short term liabilities, with no excess cash. It’s preferable if the ratio is higher than 1. However, a ratio that is much higher than the average could be considered a weakness, as it may signal that the company has too much inventory on hand, is slow to collect on accounts receivable, or that they are hanging on their excess cash rather than investing it for future growth. It’s important to note that working capital ratios vary widely between industries; when analyzing a company’s working capital ratio, a comparison to the average ratios for the overall industry should be included in the analysis. CBI’s current ratio was very high in year 6 – 9.79. This means for every $1 in liabilities, the company had $9.79 in assets. On the surface this appears to signal strength, but this could actually be considered a weakness for CBI as it suggests that they are holding on to cash and liquid assets and not investing to grow the company to its full potential. In years 7 and 8, the current ratios decreased to 5.79 and 5.25, respectively. This is largely due to taking on additional short term liabilities (accounts and notes payable). The ratio in years 7 and 8 is much closer to the ratio of their closest competitor, Two Wheel Racing and suggests that the company is moving toward using their current assets more effectively. If CBI can keep operating and goods costs under control and not overleverage themselves, the taking on of additional debt could be considered part of the cost of doing business and part of their growth strategy, i.e. a positive development. Working capital could be improved in the following ways: 1. Decreasing the amount of liabilities in short term debts such as accounts and notes payable. 2. Converting short term debt to long term debt to free up funds for investment. 3. Increasing efficiency via internal process improvements, thereby reducing expenses and increasing profits. Examples include shortening accounts receivable collection periods (CBI’s are longer than that of their closest competitor) and consolidating sales offices. 4. Issuing stock to generate capital for investment in assets that will help the company grow, such as the purchase of a new distribution center or bike assembly location. Excess working capital (liquid assets) could be invested in the following ways to increase profits: 1. Internal systems updates such as new, faster computer systems for employees or manufacturing equipment. This investment has the benefit of improving efficiency. 2. Investing in people – hiring new talent as well as training the salespeople already working for the company. 3. Investing in marketing and advertising to create compelling sales promotions and get the word out about CBI. Since the company’s sales are largely through word of mouth advertising, there is considerable untapped sales potential. A3. Evaluation of the internal controls for the purchasing system at CBI After reviewing the purchasing system for CBI, there are a few weaknesses in the internal controls that the company should address to mitigate risk and increase efficiency. 1. No receiving department currently exists to monitor incoming shipments from suppliers. Having no internal controls in place for this step in the supply chain is a weakness for CBI. This can result in an increased risk of incorrect orders being processed, resulting in unused parts being sent to the raw materials inventory stores as noted in the storyline. These parts must be written off the books if they are not used in the current year, and this costs the company money. The other impact is damaged orders being accepted by the company. If orders are monitored upon arrival and found to be damaged, CBI can contact the supplier immediately to remedy the situation. This will minimize costly delays in production since errors are caught earlier in the supply chain, and the company can save money if they have ensured that all orders are accurate and undamaged before payment is sent to the supplier. 2. The purchasing department’s procedure for selecting suppliers is not as robust as it should be. Checking for three sources of similar quality, as noted in the storyline, is a good start but not sufficient to ensure good internal controls. Suppliers should be vetted in a selection process using criteria defined and documented by CBI. If this is not done, it could lead to increased risk of fraud (collusion between the CBI Purchasing manager and the supplier, for example). 3. The purchasing manager is responsible for multiple related responsibilities; in this example, selecting the supplier, placing the order and sending the supplier’s invoice to the accounting department. There is not sufficient separation of duties throughout the purchasing process. A3a. Weakness Corrective Actions The following scenario illustrates what a purchasing procedure policy with good internal control procedures in place could look like for CBI. 1. The production department evaluates existing inventory of raw materials, then creates a list of raw materials they need for the next month and sends it to the purchasing manager. 2. The purchasing manager gets the list and consults with the policies and procedures manual for the raw materials. The manual instructs the purchasing manager to consult the trade journal for the industry, which contains a list of suppliers for the raw materials requested. 3. The purchasing manager should review the supplier list to ensure there’s no conflict of interest (such as close friends/relatives working for any of the suppliers on the list, stock ownership in any of the companies, no gifts accepted from the companies). If there are conflict(s) of interest for any of the suppliers, they should be removed from the list. 4. The purchasing manager should then review the Better Business Bureau (BBB) list for the remaining suppliers to see if any complaints have been registered during the past y ear. Suppliers with complaints registered with the BBB should be removed from the list. 5. The purchasing manager should contact the remaining suppliers to request competitive bids. Once they are submitted, the bids should be reviewed and the lowest competitive bid selected. 6. Once the bid is selected, the purchasing manager should send a purchase order to the selected bidder. Once this is done, the purchasing manager’s job is complete. 7. The supplier sends the shipment to the company; upon arrival it is taken in by the CBI receiving department for inspection and documentation. A shipping note is generated by the receiving department which details each item and can be used to confirm that all items that were ordered actually arrived. 8. A copy of the shipping note is sent from the receiving department to the accounting department, and accounting will compare that note with the invoice from the supplier requesting payment. They cross check these two documents to ensure they match. 9. Once accounting has ensure these documents match, they write a check to the supplier and the process is complete. A3b. Risks All of the weaknesses, if not remedied, increase the risk of fraud. An example of this would be the purchasing manager colluding with the supplier to send an invoice with inflated numbers to accounting, which would result in overpayment to the supplier that does not reflect an accurate order. In a worst case scenario, if the record keeping is weak and the employees are able to subvert the system and falsify the documents, then financial statements based on numbers in these documents are no longer accurate. Experienced financial analysts who review the company’s financial statements will immediately know that something isnt right with the numbers, and will sell the stock, leading to a drop in stock price. If this is left unchecked it can result in the downfall of the company and/or criminal prosecution of the company’s financial executives. Given these risks, it would be very prudent for CBI’s management team to take an in-depth look at the internal controls for p urchasing and make adjustments to correct the weaknesses. A3bi. Risk Mitigation In the proposed purchasing system in section A3a, there are two ways that the identified internal control risks are mitigated. First, there’s a good separation of duties – this avoids the situation where one employee is responsible for multiple related responsibilities (which can lead to greater temptation for fraud). An example of this is in step #7. The purchasing manager is not involved in this step; they were directly involved in the placement of the order and so should not also be in charge of receiving the order or generating the shipping note (therefore maintaining separation of duties). Second, there are also multiple checks and balances to ensure accuracy for orders, as well as documentation for each step to ensure good records are kept. Accounting will then have accurate numbers on which to base their financial reporting, minimizing the risk of material misstatements on their annual or interim financial statements. A4. Analysis of compliance with Sarbanes–Oxley requirements An important piece of legislation related to financial reporting and internal controls for publicly traded companies is the Sarbanes-Oxley Act (SOX). After several highly publicized accounting scandals among corporations in the US in the 1990s, SOX was enacted to â€Å"reform companies’ financial reporting processes, as well as the internal and external auditing of the financial reporting process† (Hilton, 2011). It’s very important that companies understand and comply with the rules laid out within this legislation, as the penalties for not doing so are severe. Top executives including the CEO and CFO can be held criminally responsible and go to prison if their company’s financial statements are fraudulent or misstate the firm’s financial condition. There are two sections within SOX that are of particular relevance – sections 302 and 404. Section 302 requires the signing officers of a company’s financial reports (such as the CEO and CFO) to establish, maintain, and monitor the effectiveness of internal controls over financial reporting. In other words, these executives are ultimately responsible for the accuracy of the company’s financial documents, and must disclose to the company’s auditors any weaknesses or changes in the company’s internal control system. Section 404 requires a company include an internal control report for financial reporting within its annual report. This internal control report must contain two key elements – a statement of managerial responsibility for establishing and maintaining an effective internal control structure for financial reporting, as well as an assessment of the effectiveness of the defined internal control structure. A4. Compliance In regard to CBI and its compliance with SOX, the company believes they are adequately addressing the requirements of the legislation. CBI’s internal audit stated that internal controls over financial reporting are accurate based on criteria set forth by the Committee of the Sponsoring Organizations of the Treadway Commission (COSO). However, the annual report issued by the auditors to the shareholders noted that the company’s internal control over financial reporting could lead to a possibility of a misstatement in the company’s annual or interim financial statements that would not be detected or corrected in a timely manner. This will be noticed by financial analysts and investors, and could affect the company’s stock prices as well as the increase the likelihood of close financial scrutiny and audits by the Public Company Accounting Oversight Board (PCAOB), whose mission is to â€Å"oversee and investigate the audits and auditors of public companies, and sanction both firms and individuals for violations of laws, rules, and regulations† (Hilton, 2011). A4a. Noncompliance Corrective Actions Based on this information, CBI should take immediate actions to ensure compliance with SOX, including reassessing and addressing weaknesses in their internal controls over financial reporting, possibly consulting with the Public Company Accounting Oversight Board to do so. When CBI’s annual report is published, it should include an internal control report with the elements noted in Section 404 (statement of managerial responsibility over financial reporting internal controls, and an assessment of the effectiveness of the defined internal structure). The statement should clearly state any and all corrective action taken to bring the company’s financial reporting into compliance with SOX regulations. The company’s auditors need to be able to vouch for the effectiveness of the implemented internal controls. RESOURCES Hilton, R. (2011). Managerial accounting: Creating value in a dynamic business environment (9th ed.). McGraw-Hill. Hardcover ISBN: 9780073526928. What is Horizontal Analysis? Definition and Meaning (n.d.). Retrieved from Business Dictionary: http://www.businessdictionary.com/definition/horizontal-analysis.html Definition of ‘Return on Total Assets – ROTA (n.d.). Retrieved from Investopedia: http://www.investopedia.com/terms/r/return_on_total_assets.asp

Radio as a Medium of Mass Communication

Radio as a Medium of Mass Communication LESSON 1 RADIO AS A MEDIUM OF MASS COMMUNICATION IN TODAY’S CONTEXT Introduction Communicators use several media to transmit a message (a thought, idea, opinion, and attitude) to the readers, listeners and or viewers. These media: film, print, broadcasting, are used differently by people for various purposes. Each mass medium has its own distinct nature and characteristics. For example, print medium (newspapers, magazines, etc.) provide detailed information which can be kept for a longer period; accessed whenever needed and used by many persons at a convenient time. Films can be watched and enjoyed at one single place (cinema hall) by many people in large or small groups, or at homes through television sets. Broadcasting on radio and television can bring voices and pictures to a large number of listeners and viewers from long distance. Thus, we see every medium of mass communication works in its own unique way and carries the message far and wide. Each medium has its advantages and limitations in the areas of operation, influence and impact. For instance, print depends on the ability to read. For communicating a message to a child or an illiterate person, television, film or radio would be effective while the print medium will not be relevant. Every medium uses its strengths to provide information, education and entertainment to the public. 1.2 Meaning and Definition In order to appreciate the role of radio as a medium of mass communication, we need to understand what is the concept of communication, what are the various functions and types of communication. The word Communication is derived from the Latin word cornmunis, which means, to make common or to share. There are numerous definitions of communication, and there is yet no agreement on any single definition. Some of the more functional definitions of communication describe it as the transfer or conveying of meaning (Oxford dictionary), transrnission of stimuli (Colin Cherry), one mind affecting another (Claude Shannon); one system influences another (Charles E. Osgood), the mechanism through which human relations exist and develop, or sharing of experience on the basis of commonness (Wilbur Schramm). â€Å"Thus, communication is, a process of sharing or exchange of ideas, information, knowledge, attitude or feeling among two or more persons through certain signs and symbols†. 1.3 Functions of Communication Communication is vital for human existence, and for the progress of humanity. No person, group or society can exist without interaction with others. Think for a moment what would happen to us if we did not talk with anyone at home; didnt listen to lectures at School or college; didnt speak to friends and co-workers; or didnt play games or watch TV or films? Essentially, the primary function of communication is to inform, instruct/educate, entertain influence and persuade people to make them function smoothly and effectively. Besides, communication has a secondary function to perform as well: through debate and discussion it promotes cultural integration, it fosters consensus, creativity, and understanding among people, groups and societies enabling them to live in peace and harmony. 1.4 Types of Communication Human beings are engaged in a variety of communication acts. Although each type of Communication appears-to have distinctive features, they are all much alike in the senses that are enters into a meaningful relationship with one or more persons by means of signs and symbols. These are: Intrapersonal Communication Interpersonal Communication Group Communication Mass Communication. 1.4.1 Intrapersonal Communication refers to communication that leaks inside a person; and this happens all the time. It is like conversation to oneself, listening to oneself and linking with oneself. It is important in anticipating, abstracting and communicating our thoughts or ideas before we actually treat in open communication. 1.4.2 Interpersonal Communication is the world-wide form of communication that takes place between two people. In interpersonal communication, there is face-to-face interaction between two persons, that is, both are sending and receiving messages. This is an ideal and effective communication situation because you can elucidate and highlight many points through your expressions, nods and voice can get instant feedback. 1.4.3 Group Communication is an addition of interpersonal communication where more than two individuals are involved in discussion of ideas. Communication in a group helps many goals including collective decision making, self-expression, increasing ones effect, uplifting ones status, and relaxation. Group communication provides a chance for direct interface among the members of the group; it helps in bringing about changes in attitudes and opinions. 1.4.4 Mass Communication outside the realm of interpersonal communication exists another form of communication which involves communication with mass audiences and hence the nomenclature mass communication. The channels through which this kind of communication takes place are referred to as mass media. Mass communication and mass media, are generally considered synonymous. Mass communication is unique and different from interpersonal communication as is evident from the following definition: Any mechanical device that multiplies messages and takes them to a large number of people simultaneously is called mass communication. The media through which messages are being transmitted include: radio, TV, newspapers, magazines, films, records, tape recorders, video cassette recorders, etc., and require large organizations and electronic devices to put across the messages. Radio as a Mass Medium Radio is the transmission of signals by modulation of electromagnetic waves with frequencies below those of visible light. In electronics, modulation is the process of varying one or more properties of high frequency periodic waveform, called the carrier signal, with respect to a modulating signal. This is done in a similar fashion as a musician may modulate the tone from a musical instrument by varying its volume, timing and pitch. The three key parameters of a periodic waveform are its amplitude (volume), its phase (timing) and its frequency (pitch), all of which can be modified in accordance with a low frequency signal to obtain the modulated signal. During the 1930s, radio was considered an intimate and credible medium. The public used it as a news source and expected it to provide factual information. Radio was the first truly mass medium of communication, reaching millions of people instantly and altering social attitudes, family relationships, and how people related to their environment. Radio is an attractive medium among the various mass communication media because of its special characteristics. It continues to be as relevant and potent as it was in the early years despite the emergence of more glamorous media. It is a truism that in the first phase of broadcasting spanning three decades from the early twenties, radio reigned alone or was the dominant player. However, over a period of time, the media scene has changed drastically. Television with its inherent strength of audio-visual component has captured the imagination of the people. The advent of satellite television, the Internet and the convergence of technology have added further dimensions in media utilization patterns. However, despite the presence of a plethora of media, there is room and scope for each medium. Experience has revealed that new technologies add things on but they dont replace. One medium is not displaced by another each medium reinvents itself in the context of changes in the communicati on environment. In the changed media scenario, radio is reorienting itself with more innovative programmes and formats.