Analytic Report - Outsourcing Essay Example for Free

Analytic Report Outsourcing Essay Offshore outsourcing, the sending of jobs to lower wage countries, has become a very popular practice amongst U. S. companies seeking ways to cut back on their operating costs. The idea of outsourcing has made for a highly emotional situation because of two dramatically different effects: it leads to layoffs and dislocations for workers. Well-educated workers in other countries are willing to work for a fraction of the wages paid to Americans, resulting in massive savings for American companies. The U. S. mports goods that would cost higher to produce domestically, and it creates and sells to other countries goods that would cost more for them to create on their own. The immediate problem resulting from outsourcing jobs is workers in the U. S. can become unemployed. The problem that causes a debate over outsourcing is even though it promises a better life for all involved; it causes hardships on the American workers when they are laid off. Economists argue that outsourcing is a bad choice because of the workers that are being laid off and displaced. In analyzing the Case Study IV-3 IT Infrastructure Outsourcing at Schaeffer (A): The Outsourcing Decision, both sides of the outsourcing debate are well represented. Once the Schaeffer board assigned the highly ambitious growth goals to Reitzel, the Vice President of Human Resources made the recommendation that they outsource some of its IT processes and resources. During the initial evaluation of the possibility of outsourcing, Schaeffer determined what the benefits would be of having a vendor manage their IT. They determined that they would be able to focus on core activities during growth periods, which would help them to meet the goals set forth by the board. Outsourcing IT will allow them to remain focused on those business activities that are important without sacrificing quality or service to their customers. Next, they would be able to achieve reduced overhead costs and better operational control. An outsourcing company could bring better management skills to a company than what would otherwise be unavailable to them. Another added benefit would be staffing flexibility. Outsourcing will allow operations that have seasonal or cyclical demands to bring in additional resources when needed and release them when they are finished. Outsourcing these functions can provide the additional resources for a fixed period of time at a consistent cost. Continuity and risk management would also be greatly improved because when you have periods of high employee turnover which add uncertainty and inconsistency to the operations, outsourcing would provide a level of continuity while reducing the risk that a substandard level of operation would impact the company and its customers. They also determined that outsourcing could help diversify and develop the staff by bringing in people with skills that are needed within the company and by providing training opportunities that had not previously been available for current staff. Once the idea of outsourcing was presented, a task force was created to analyze their current processes and map them in as great a detail as possible. This would help them to determine exactly what their outsourcing needs were going to be. They brought on an outside consultant who provided them with advice on how to proceed as well as detailed templates to assist them in gathering the necessary information to help them create the Request for Proposal (RFP). They determined that they wanted to outsource the data center, distributed computing (all desktops), voice (telephones), data networks, and the helpdesk. It was also determined that they did not want to outsource their development resources. The task force spent a year gathering data and filling out the templates so that they had a complete picture of their current services to better understand their outsourcing needs. They then spent several months preparing a 200-page RFP that could be provided to possible outsourcing vendors. After receiving two strong proposal responses, it was determined that ABC Corporation would be the best fit for Schaeffer’s outsourcing needs. There was a lot of negotiation to be able to bring the price within the needs of the company, but after several weeks of back and forth an agreement was reached. The next step was to get Schaeffer’s top management’s buy-in to the task force’s recommended solution. However, once the task force report was circulated internally, there were a lot of perceived disadvantages raised by its managers. One of the first concerns that was brought up with the consistency and priority of service that Schaeffer would receive. Most outsourced IT contracts are for a relatively long time-period. This is because of the high cost of transferring assets and employees as well as maintaining technological investment. The long time-period of the contract can cause three particular problems. One, difficulties in getting out of a contract if the supplier turns out to be unsuitable; two, problems in foreseeing what the business will need over the life of the contract hence creating difficulties in negotiating new services; and three, almost insurmountable problems in re-creating an internal IT department after the contract period is over or the relationship is terminated. Another major concern that was discussed was the impact to employee morale with the inevitable reduction in Schaeffer IT personnel, where some would be absorbed by the vendor but most would be given a severance package and laid off. And the employees who remain may distrust management after outsourcing because they will become fearful that their position could be targeted next. Administration should treat morale problems seriously and will need to work with staff to rebuild their trust and loyalty. The company is a major employer in the area so the decision to outsource could also have a ripple effect in the community by damaging their reputation. The vice president for finance of the Colbert division brought up the concern that the major benefits of outsourcing would only be beneficial to the Reitzel division whereas the other two divisions would incur additional costs without additional benefits. This concern led to a third alternative being suggested; outsource the IT infrastructure just for the Reitzel division. Based on the information included in the case study for all three alternatives, outsourcing should be the chosen solution. It is the most flexible solution for their growth goals. Outsourcing would allow for them to expand in areas more quickly without all of the time and costs associated with startups. The vendor already has the infrastructure to support the areas that they most want to expand into, allowing for quicker turnaround times in meeting customer needs and wants, especially for new business growth. If they kept the IT in-house, they would need to make a substantial investment of both time and money in expanding their services and support that would be needed for new business and it would need to be done very quickly to be able to meet the goals set by the Board of Directors. If they tried to adopt the third alternative, of only outsourcing the IT for the Reitzel division, it would negate all of the time and cost savings of the consolidation of the divisional IT groups into a shared services solution. It would then cause duplication of work and processes between the in-house IT team and the outsourced group, which would be impactful to the overall costs for all divisions. Each solution had its own pro’s and con’s, and needed to be evaluated against the best interest in achieving Schaeffer’s overall goals in the marketplace. Like it or not, change is an integral part of todays business climate. In the workplace, changes can occur as a result of new thinking, advances in technology, innovation and progress, knowledge and communication, as well as mergers, takeovers, layoffs, and downsizing. A lot of the concerns and disadvantages were voiced after the task force’s recommendation had been developed, presented, and circulated within the company. Communication is key! This could have been avoided by having better communication throughout the life cycle of the whole process, from the information gathering, to the development of the RFP, and the presenting of the final recommendations. A lot of people probably felt blindsided by the proposed solution to outsource the IT infrastructure because they have been conditioned to fear change. We must not lose sight of the fact that change is normal, and most of us will experience unpredictable changes throughout our professional lives. However, there is no doubt that everyone views change from a different perspective than everyone else. Many employees believe that management doesnt understand their side of the story, and managers often feel it is the employees who dont understand why the change is necessary. This is why communication is so vital during any change circumstance. Its been said that lack of communication is the number one reason why relationships deteriorate between employers and employees. Change will require open communication on both sides. None of us want to acknowledge that we doubt our ability to integrate new ideas, use new technology, or adapt to new organizations. We dont even want to think about whats ahead when outsourcing a whole department: new management structure, new processes and procedures, new terminology, new titles and job descriptions, not to mention the loss of longtime co-workers, friends, and family. The more we fight and resist the change, the more painful and frightening the changes will be. Resisting doesnt keep a new idea from taking hold; it simply makes the process longer and more painful. Change will happen no matter what. We will handle it better when we learn to move with the change – not against it. Its natural to fear the unknown and lack of control when it comes to embracing a new concept such as outsourcing that goes completely against the traditional workplace structure. There will be a lot of struggle during the transition period. We know we will have to work a lot harder. Are we willing to let go of the present to embrace the future? We may not know what the future will bring, but we are responsible for what we bring to the future.

The efficient market hypothesis and behavioral finance

The efficient market hypothesis and behavioral finance The efficient market hypothesis is directly related to the behaviour of prices in asset markets. Initially the term efficient market applied only to the stock market, but later it was generalised to other asset markets. The efficient market hypothesis is seen as the turning point of the modern finance (Fama, 1965) and in his classic paper, Fama (1970) defined efficient market as one in which security always fully reflect the available information [p.383]. Market efficiency is known as the speed and accuracy where the current market prices reflect the investor expectations. When the market is efficient, all the available information is fully and automatically reflected in the price, gaining profit by using this information is seen impossible. Efficient market hypothesis predicts that market price should incorporate all available information at any point in time. According to Pesaran, Hashem M (2010) The efficient market hypothesis (EMH) evolved in the 1960s from the random walk theory of asset prices advanced by Samuelson (1965). Samuelson showed that in an informationally efficient market hypothesis, price changes must be unforecastable. Kendall (1953), Cowles (1960), Osborne (1959), Osborne (1962), and many others had already provided statistical evidence on the random nature of equity price changes. Samuel-sons contribution was, however, instrumental in providing academic respectability for the hypothesis, despite the fact that the random walk model had been around for many years; having been originally discovered by Louis Bachelier, a French statistician, back in 1900. One important implication is that security prices will change only when there is arrival of new information that was not considered during the formation of current market prices. Yet the information will be evaluate and process this information efficiently and immediately incorporate into the security prices. The crucial questions here is the relevant information because it needs careful analysis and the conclusion about market efficiency could be there or extracted from the information set. A standard classification for different compositions or information set was outlined by Fama (1970) as weak form, semi-strong form and strong form. On the other hand, new empirical studies of security prices have reversed some of the earlier findings related to EMH. The traditional finance school named these observation anomalies due to the unexplainable in the neoclassical framework. Due to the increasing numbers of puzzles, the new approach of behavioural finance emerged. This approach focus on the investors behaviour in making decision in investment. This approach assumes that agents may be unreasonable during interpreting new information and thus lead to making wrong judgement in investment. This paper will discuss the definition and concept of efficient market hypothesis and behavior finance in general. I will be look into market issues for countries of Malaysia, USA, Africa and Jordan. I would then like to highlight the issues on this area for future research. Efficient Market Hypothesis Definition and Concept The Efficient Market Hypothesis (EMH) is an investment theory that stated it is impossible to compete with the market when stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. According to the EMH, stocks are always trade at their fair value on stock exchanges. Investors will face difficulties or even impossible in either purchase undervalued stocks or sell stocks for inflated prices. The possible way for investors to obtain higher returns is by purchasing riskier investment and they have to outperform the overall market through expert stock selection or market timing. Forms of Efficient Market Hypothesis There are three forms of Efficient Market Hypothesis where the key to all the three forms remain that is intense competition among investors to gain profit from any new information. There are three versions of EMH, namely the Weak From EMH, Semi Strong EMH and Strong EMH. The weak form EMH is based on past history of prices where the past information is used to analyze for profit return. This method is called technical analysis. The value retrieved from technical analysis is strong and consistent. On the other hand in semi strong form, the current stock price has fully taken into consideration all publicly information that is available. However, the information in the semi strong form is available to all the investors; one is expected not to gain much profit with such information. But this form is stronger than the weak form. Whereas strong form of EMH is taking the current price fully incorporates all existing inside information, both public and private. When the information set us limited to past price and return, the market is said to be weak-from efficient and there is correlation between current return on security and the return over a previous period. However the return is purely unpredictable from the past information. In semi strong Efficient Market Hypothesis, all publicly available information is reflected in the stock market. Investment Managers claim that mutual fund managers are skilled in analyzing publicly available information but empirical evidence do not support. Market Efficiency and security prices reflect all available information whereas new information is expected to be converted into price changes. Efficient Capital Market participants will react immediately and in an unbiased manner. Important of Efficient Market Hypothesis There are common misconceptions of Efficient Market Hypothesis (EMH). EMH claims that investors cannot outperform the market but there are analysts who have succeed in outperformed. So EMH is seen to be incorrect. EMH claims that one should not be expected to outperform the market predictably or consistently. EMH said that financial analysis is pointless and investors are wasting time if doing research in security price. But everyone knows that financial analyst is still needed in the market. Again EMH is found to be incorrect. EMH sees new information as always fully reflected in market places and yet prices fluctuated every day, every hour and minutes. EMH must be incorrect. EMH presumes that all investors are technically expert but in reality it is otherwise. EMH is incorrect again. Criticism towards Efficient Market Hypothesis There are several opinions against the EMH. First is the over reaction and under reaction of investors. EMH claims that the investor react quickly and in an unbiased manner to new information but it was contradicted to De Bont and Thaler. EMH claims that investors react very fast and in an unbiased manner when they received information but De Bond and Thaler said otherwise. They said that stock with long term past return tend to have a higher future returns and vice versa and empirical observation shows that stock prices respond to earning about a year after the announcement. Secondly, the value versus growth where value strategy is able to outperform the market consistently. Finally is the small firm effects where average return on small stocks were too large to be justified by the CAPM while the average returns on large stocks were too low. There are also implications of Market Efficient for Investors where the EM, investors have little to gain from active management strategies; should follow passive investment strategy and no attempts to beat the market but to optimize returns through diversification and asset allocation. Behavioral Finance Definition and Concept The behavioural finance is an area in finance that highlighted on the investors behaviour and how they make their decision in understanding the pricing of assets and also explain the decisions of investors as rational actors. The rational actors are seeking for their self-interest, given the sometimes inefficient nature of the market. EMH revolves around the preferences and behaviour. Psychologist and also experiment economics found out that there is a departure from the normal paradigm of the investors in making their investments. Behaviour finance emerged since 1980 where it incorporates more behaviour science into finance decision making. Due to the excess volatility, dividend puzzle, equity premium and future returns in the capital market is seen as consistent in an efficient market but the truth is inconsistency do happen. According to behaviour finance good year performance may not lead to another good year but it could be otherwise. Issues in Behavioral Finance Behavioral finance has emerged due to the problems faced in the traditional theory in explaining why some financial phenomena happened. It is said that agents may be irrational in with their own reactions to new information and investment decisions. To undo mispricing created by the irrational investors may be difficult. Due to that, market is seen to inefficient. Psychological sees these in many views. People make mistakes when they perceive information and form their belief. Extensive evidence shows that individuals are overconfident in their judgement (Odean (1998), Barber ODean (2001)). When investors are overconfident, they tend to invest more and intensively. Due to greed, overconfident and also overreact to new information, investors would tend to make heavy losses. What make it difficult it when investors stick to their own conclusion interpreting the information. Once people have formed an opinion, they often stick to it and inadequately update their beliefs in the lieu of new information (Edwards (1968)). Human emotions and moods are also said to influence investors behavior. When investors are in the good mood they are willing to take higher risks compared to when they are in bad mood. In fact market returns are found to be higher on days of good weather than on days with heavy clouds and rain. Social influence and interaction with other investors are also coherent to th e behavior. Investors tend to follow others in making their investment, they tend to follow each other like in a herd. Herding leads more on the situation when an investor focuses more on other investors participation rather than evaluating the information of the particular security. Behavior finance changes the way how we look at capital markets. It is a new approach that has direct impact not only to investors but also others such as corporate finance, market regulators and policy makers. In behavior finance, the investors should not consistently expect to beat the market even at times when they succeed in getting abnormal returns from their investment. According to behavior finance, market is not always efficient. Good return may due to the available information. However, it is advised to actually spend some of the return and study the cause of mispricing that have cause the market to fluctuates. It is said that achieving higher returns is not only due to good analysis strategies but a better self control. Primary contribution of behavior finance is its potential help in beating the market. Summary of Researches This section will discuss the research finding from Malaysia ( KP Lim., Liew KS., and Wong HT, 2003), Africa (C Mlambo and N Biekpe, 2007) United States America (Jae H. Kim 2009) and Jordan (Mahdi M. Hadi, 2006) The first research which was done by Lim et. al, 2003 was the weak form EMH that generally holds in KLSE Malaysia and the existence of the linear and the non-linear dependencies. These dependencies appear at very random intervals for a short of time but then disappear again even before investors have the chance to exploit it. As we know efficient market hypothesis is a fair game where the prices changes in the security is reflected by any new information which was not taken into consideration earlier during the forming of current market price. The paper by Lim et al, 2003 focused on the weak form EMH where the historical price is the only determinant of the security prices. The price movement in a weak form occur randomly and successive price changes are independent of one another, i.e. random walk theory. Past price analysis has no meaning since the patterns observed in the past occurred purely by chance. The weak form Efficient Market Hypothesis has been studied since many years in KLSE. Malaysian stock market is inefficient in the weak form when weekly data were used but efficiency exist when monthly data were used. Test done by Von Nehmanns suggested that information that is based on historical prices is fully reflected in current price within a week but may not be fully impounded in current price within a day which conclude that Second Board of KLSE is weak form efficient with respect to weekly data. But when weekly data were used the efficiency of the Malaysian stock market has improved from a weak form inefficient market in mid 1980s to weak form efficient by late 80s and early 90s. Empirical evidence from various statistical test found out that the low trading volumes in most stocks and the possible price manipulations by those investors who own majority of the stocks might help to explain the findings of the runs test. The reason for departure from random walk is due to the presence of non-linear dependencies in the underlying data generating process which is now widely accepted as a salient feature of financial returns in general and stock returns series in particular. Non linearity has strong implication on the weak form EMH for it implies the potential of predictability in financial returns. Lim et. al (2003b.d) and Lim and Tan (2003) provided convincing evidence that non-linearity has a high effect in the underlying dynamics of the Malaysian stock market. Ko and Lee (1991:224) If the Random Walk Theory hypothesis holds, the weak form of efficient market but not vice versa. Thus evidence supporting the random walk model is the evidence of market efficiency. But violation of the random walk model need not be evidence of market inefficiency in the weak form. Kok and Lee (1994) and Kok and Goh (1995) argued that though daily price series are found to be serially correlated, the magnitude of their c orrelations is not large enough for any mechanical trading rules to be devised for profitable investment timing. In connection to the existence of linear/non-linear dependency structures to the concept of information arrival and market reactions to that information will prove to enlightening. It is said that if the market is efficient and the new information is useful then it shall be reflected quickly and unbiasedly into market prices. There is a rationalization the correlation between the weak-form EMH and behavioural finance in KLSE. The statistical properties of random walk, linear and non-linear dependencies are interpreted in the context of information arrival and how the market react to that information. The second research was done by C Mlambo and N Biekpe, 2007 with regard the weak form in the African Stock Market. Johannesburg Stock Exchange is found to be weak form efficient but using weekly data it is not weak form efficient. Studies that have used data on individual stocks used either monthly or weekly data rather than daily data due to non availability of computerised databases. Another argument for using data measured over longer time intervals in the problem of thin trading. Increasing the time interval is argued to reduce the potential biases associated with thin-trading by increasing the probability of having at least one trade in the interval. (Dickinson and Muragu, 1994). This paper studies the weak form efficiency of ten African stock markets using the serial correlation and runs tests African stock market emerged in the late 1980s and early 1990s and the latest in 2003. African stock exchanges are also the smallest in the world in terms of both number of listed stocks and market capitalisation. The majority of stock markets in Africa trade daily from Monday to Friday. The portfolio inflows to Africa have been disappointing due to unfavourable scenario is that acquisition of shares by foreigners is limited on some African stock markets. The Market Regulator was established on the back of poor regulatory and legislative frameworks. African stock markets are also known to be illiquid and characterised by thin trading (Mlambo and Biekpe, 2005) in comparison to stock markets in other regions. The delay market is perceived by African governments to be an indication of integration into the global economy. It is considered to be a sign of international legitimacy and a measure of a countrys modernisation and commitment to private sector-led development (Moss, 2004). The d ata used in this study are daily closing stock prices and volume traded for individual stocks. The markets in this study exhibit serious thin-trading for the periods under investigation. Positive serial correlation is usually considered to be a predictability phenomenon of the short run, while negative serial correlation is mostly a long run predictability phenomenon. The positive serial correlation on African Stock markets might also be a result of institutions imitating spreading their trades over several days to lessen the impact of trades in large volumes on the market (Asal, 2000). The weak market form efficiency if the NSX can probably be explained by the markets positive correlation with the JSE due to the significant number of stocks that are dual-listed on both markets. The efficiency of the NSX can thus be said to be spill over from, or a reflection of, the weak-form efficiency of the JSE. The weak form efficiency of the NSX was attributed to its correlation with the JSE. Kenya and Zimbabwe were also concluded as generally weak form efficient, since a significant number of stocks conformed to the random walk. The stock prices on the Mauritius market tend to deviate from the random walk hypothesis. The same conclusion was made for Ghana. The run test used here only tests for the existence of a linear relationship which makes it inadequate as a testing method on African stock markets where the return generating processes are assumed to be nonlinear. The use of linear models would thus lead to wrong inferences being drawn. Thus further research is required to test the random walk hypothesis. The third research that I would like to discuss is the market hypothesis in the United States America. Kim et al., (2009), study return predictability of the daily and weekly Dow-Jones Industrial Average indices from 1900 to 2009. The degree of return predictability is estimated using two autocorrelation test (variance ratio and portmanteau) statistics, implementing moving sub-sample windows of different lengths. They found strong evidence that changing of market condition has lead to return predictability. In particular, during market crashes (1929 and 1987), it was observed that return in unpredictable and when it is predictable it is very much associate with high level of doubt. When there is economic crisis, the return from the stock is very predictable even with moderate degree of uncertainty. Whereas during economic bubbles, return predictability and its uncertainty have been smaller than normal times. Our results are in strong support of the adaptive markets hypothesis, which claim that changing market conditions drive the key market features such as the return predictability. They examine the degree of return predictability of the U.S. stock market using the century-long Dow-Jones industrial index. As measures of return predictability, they used their findings and complements with the recent study by Neely et al. (2009) who report the evidence in favour of the adaptive markets hypothesis for the foreign exchange market in the context of profitability of technical trading rules. The statistics from the automatic variance ratio and automatic portmanteau tests. To detect possible non-linear dependence in stock return, the generalized spectral test has been implemented. They obtain monthly time-varying measures of return predictability by applying these tests to moving sub-sample windows over monthly grids. A regression analysis is conducted to determine how these measures of return predictability are related to changing market conditions and economic fundamentals. They also find evidence for cyclical evolution of return predictability, in which changing market conditions are important factors for the degree of return predictability. It is found that, during market crashes, no return predictability is evident but its uncertainty has been exceptionally high. However, during economic and political crises, a high degree of return predictability is observed, but only with moderate degree of uncertainty. During bubble times, the return predictability and its uncertainty are found to be lower than normal times. Contrary to the general findings of past empirical and survey studies, we have found evidence the U.S. market has become more efficient after 1980. This is convincing given that the U.S. market has implemented a various measures of market innovations in the 1960s and 19070s, and that US macroeconomic fundamentals have become much more stable since 1980. In addition, there have been fewer occurrences of economic and political crises after 1980 than before. Our finding is a manifestation of the adaptive markets hypothesis, which argues that dynamic market conditions govern the degree of stock market efficiency. Finally this paper will discuss on efficient market hypothesis in Jordan capital market. This paper by M. Hadi (2006) noted that the objective of accounting numbers is to provide the financial data about the performance of certain enterprise in order to help the managers, investors, shareholders and government authorities in making their decisions. On the other hand, the purpose of accounting research is to estimate the value of accounting data to all investors and other users. Furthermore, the purpose of capital market research is to examine the association between accounting numbers and security return and to test whether or not accounting data carry any information content to security market, and if so it should be impounded in the security price, the results show the security market reacted with mixed signal on releasing profitability, liquidly, and solvency information. This paper identified EMH and provided some detail on the types of EMH, as well as identifying the empirical research that tested weak, semi-strong and strong forms of market efficiency. Accounting market based research more often assumes that market is efficient in semi-strong form, and the reason for this is that financial reports are considered public information once they are released to the market. In this paper empirical evidence has been provided from Jordanian market, and it shows the security market reacted with mixed signal on releasing profitability, liquidly, and solvency information. The selection of the relevant pricing model is very critical in market-based research. Brown and Warner (1980) investigate how different methods performed when some abnormal performance was present. They conclude that There is no evidence that more complicated methodology conveys any benefit. (Brown and Warner, 1980). Also, they argue that using more complicated models will make the researc her worse off. Furthermore, the use of the market model or even simple models such as mean adjusted return is better than more complicated models like control portfolio. 5.0 Conclusion The relationship between finance and other social sciences that has become known as behavioural finance has led to a strong and deepen of our knowledge of financial market. In judging the impact of behavioural finance to date, there is still no exact one method that can make an investors gain high profit. For instance in situation where efficient markets theory may lead to drastically incorrect interpretations of events such as major stock market bubbles. . Indeed, we have to divert our presumption that financial markets always work well and that price changes always reflect genuine information. Evidence from behavioral finance helps us to understand, for example, that the recent worldwide stock market boom, and then crash after 2000, had its origins in human foibles and arbitrary feedback relations and must have generated a real and substantial misallocation of resources. The challenge for economists is to make this reality a better part of their models. It is found that in Malaysia, there is co existence of weak form EMH and behavioural finance. Unlike in Africa, there are mix of two findings where conforms to the random walk theory and also deviate from the theory. Whereas in United States, it is claim that return predictability and market efficiency and investors behaviour are considered as highly context dependent and dynamic by changing market conditions. Whereas in Jordanian market shows the security market reacted with mixed signal on releasing profitability, liquidly, and solvency information. Further research is suggested in Malaysia to incorporate the issue of model adequacy where the characteristic was found in the returns series and can be used to construct a better economic model. Whereas in Africa it is suggested to test on the existence of linear relationship in the stock markets where the return generating processes are assumed to be linear. In Kuwait, a few research has been investigated in market efficiency in strong form, it is suggested that for future research test for insider information should be investigated.

Life at an All Boys School Essay -- Personal Narrative, essay about my

I hadn't planned on going to a private school; in fact the idea disgusted me. My sister tried it for an entire four days, then she quit and went to a public school with all of her friends and never looked back. I guess that I thought the same thing would happen to me if I ever went to a private school. Â   In the spring of seventh grade, my parents made me take the acceptance test for McCallie, the all boys private school full of rich snobs, nerds, and especially queers. I didn't know much about the school except that none of my friends went there and all of the gossip(which turned out to be false)from my friends about turnng gay from being around only boys and no girls. Nevertheless I took the test and was excepted much to my dismay. Â   The first question that came to mind was what it would be like to go through the entire school day without seeing a single member of the opposite sex. My entire career as a student involved girls, from when I was real little and hated being chased by them on the playground, until I was the one doing the chasing. Having a girlfriend meant seeing her all day, everyday. You could really tell the boys who had girlfriends because they always came to school looking their best for their girl, the single boys came looking sloppy. Â   Before school started, I went to a McCallie-GPS dance that an old friend invited me to. Here was my chance to meet the new set of girls that I would get to know for the rest of my high school life. What a disappointment. They were nothing in comparison to the pretty Signal Mountain girls that I had grown up with since I was three. Not that they were that much more unattractive, but that their personalities were so much dif... ... of gays at McCallie as there are at these other schools, but they keep it to themselves for their own good. I guess it's more excepted when you go to a co-ed school of thousands. Â   It's hard to imagine McCallie as a co-ed school. I would probably do more staring than studying. Boys would come to school actually caring about their appearance. Perhaps the worst that would happen would be that level of learning would go down. Â   Life at an all boys school is a real learning experience. Classes without girls, boys who are different from the excepted norm are afraid to be themselves because people like me wouldn't want to be around them, and an easier and better way of learning is what a boy will find at an all boys private school. So if your a boy who plans to attend an all boys private school, don't believe everything that people say.

Multiculturalism In Canada :: Immigration, Ethnic Diversity

Multiculturalism In Canada Canada has long been called "The Mosaic", due to the fact that it is made up of a varied mix of races, cultures and ethnicities. As more and more immigrants come to Canada searching for a better life, the population naturally becomes more diverse. This has, in turn, spun a great debate over multiculturalism. Some of the issues under fire are the political state's policies concerning multiculturalism, the attitudes of Canadians around these policies, immigration, the global market, and a central point is the education and how to present the material in a way so as to offend the least amount of people. There are many variations on these themes as will be discussed in this paper. In the 1930's several educators called for programs of cultural diversity that encouraged ethnic and minority students to study their respective heritages. This is not a simple feat due to the fact that there is much diversity within individual cultures. A look at the 1991 Canadian census shows that the population has changed more noticeable in the last ten years than in any other time in the twentieth century, with one out of four Canadians identifying themselves as black, Hispanic, Asian, Pacific Islander, Metis or Native. (Gould 1995: 198)Most people, from educators to philosophers, agree that an important first step in successfully joining multiple cultures is to develop an understanding of each others background. However, the similarities stip there. One problem is defining the tem "multiculturalism". When it is looked at simply as meaning the existence of a culturally integrated society, many people have no problems. However, when you go beyond that and try to suggest a different way of arriving at theat culturally integrated society, everyone seems to have a different opinion on what will work. Since education is at the root of the problem, it might be appropriate to use an example in that context. In 1980, the American school, Stanford University came up with a program - later known as the "Stanford-style multicultural curriculum" which aimed to familiarize students with traditions, philosophy, literature and history of the West. The program consisted of fifteen required books by writers such as Plato, Aristotle, Homer, Aquinas, Marx and Freud. By 1987, a group called the Rainbow Coalition argued the fact that the books were all written by DWEM's or Dead White European Males. They felt that this type of teaching denied student s the knowledge of contributions by people of colour, women, and other oppressed groups.

Charles Dickens Hard Times and David Lodges Nice Work Essay -- Lodge

Charles Dickens' Hard Times and David Lodge's Nice Work ----â€Å"Fact, fact, fact, everywhere in the material aspect of the town; fact, fact, fact everywhere in the immaterial.† – Charles Dickens In the early 1851, London staged the Great Exhibition to show the world, the achievements and inventions of the Industrial Revolution. Many people believed that this showed how much better, safer and healthier Britain was than its neighbours in Europe. People living in mansions amid lawns and fountains, with horse drawn carriages certainly felt that life couldn’t be better. However behind the publicity and the royal occasions there was another England, not so glorious. Benjamin Disraeli wrote that Britain was really â€Å"two nations†, Dickens wanted to show his readers what was behind the glittering faà §ade of Victorian industry. He wanted to show his readers the factual monotony behind the sulky blotch towns of industrial Britain. As the essay title suggests, both Lodge and Dickens have portrayed their format of an industrial landscape. Both authors’ coddle in a crestfallen environment of the industrial world: one at the height of a revolution, the other at the height of a decline. Dickens is keen to depict his Victorian contemporary world of Coketown in an essentially satirical context. It is emblemed with certain thematic issues including religion, the nature of employment and education, which follow course throughout the book. This surreal caricature of the Victorian landscape contrasts with Lodge’s realistically styled piece. Lodge’s passage, which holds a fictional veil over the names of â€Å"Rummidge and the Dark Country†, is clearly intended to represent Birmingham and the Black Country. In Hard Times it ca... ...o hold no target. In his account he mainly adopts an educational style prose to mirror the thoughts of his subject Vic Wilcox whilst also using a slightly more creative passage towards the end of the description to reveal political opinion and sentiment. Overall it is credible to say that the sources examined are quite detached in similarity. This maybe due to the large disparity of time between time periods. In view of success I think though Lodge’s modern style of writing should be recognized as playing games with the reader, I judge that the tone is overtly mundane and dreary. It is impossible to give a comprehensive argument on Lodge’s point of view due to his modern isolated style from the writing. Dickens is appealingly aggressive, motivating and quite favourably figurative. He leaves his readers without a shadow of a doubt of whom he is attacking. Charles Dickens' Hard Times and David Lodge's Nice Work Essay -- Lodge Charles Dickens' Hard Times and David Lodge's Nice Work ----â€Å"Fact, fact, fact, everywhere in the material aspect of the town; fact, fact, fact everywhere in the immaterial.† – Charles Dickens In the early 1851, London staged the Great Exhibition to show the world, the achievements and inventions of the Industrial Revolution. Many people believed that this showed how much better, safer and healthier Britain was than its neighbours in Europe. People living in mansions amid lawns and fountains, with horse drawn carriages certainly felt that life couldn’t be better. However behind the publicity and the royal occasions there was another England, not so glorious. Benjamin Disraeli wrote that Britain was really â€Å"two nations†, Dickens wanted to show his readers what was behind the glittering faà §ade of Victorian industry. He wanted to show his readers the factual monotony behind the sulky blotch towns of industrial Britain. As the essay title suggests, both Lodge and Dickens have portrayed their format of an industrial landscape. Both authors’ coddle in a crestfallen environment of the industrial world: one at the height of a revolution, the other at the height of a decline. Dickens is keen to depict his Victorian contemporary world of Coketown in an essentially satirical context. It is emblemed with certain thematic issues including religion, the nature of employment and education, which follow course throughout the book. This surreal caricature of the Victorian landscape contrasts with Lodge’s realistically styled piece. Lodge’s passage, which holds a fictional veil over the names of â€Å"Rummidge and the Dark Country†, is clearly intended to represent Birmingham and the Black Country. In Hard Times it ca... ...o hold no target. In his account he mainly adopts an educational style prose to mirror the thoughts of his subject Vic Wilcox whilst also using a slightly more creative passage towards the end of the description to reveal political opinion and sentiment. Overall it is credible to say that the sources examined are quite detached in similarity. This maybe due to the large disparity of time between time periods. In view of success I think though Lodge’s modern style of writing should be recognized as playing games with the reader, I judge that the tone is overtly mundane and dreary. It is impossible to give a comprehensive argument on Lodge’s point of view due to his modern isolated style from the writing. Dickens is appealingly aggressive, motivating and quite favourably figurative. He leaves his readers without a shadow of a doubt of whom he is attacking.

Harnischfeger Corp Essay

I. Introduction In 1984 Harnischfeger Corporation was a leading producer of construction equipment. During the decade of the 1970s the company experienced tremendous growth. Annual sales grew from $150 million in 1970 to $646 million in 1981. However the company began to experience financial trouble in 1979. This was caused by a variety of factors: the company wasted a large amount of resources on an unsuccessful merger, the government of Iran defaulted on a $20 million order of equipment after the fall of the Shah, and the U.S. economy was in a period of recession with double digit rates of inflation. The company posted an operating loss in 1979 for the first time since 1938. The company’s financial difficulties continued until 1984. At this time management decided that restructuring was necessary if the company wanted to survive. (Harnischfeger, 1985) II. Restructuring Strategy The overriding objective of restructuring the company was to return to sustained profitability. The goals of the plan were four-fold: managerial/personnel changes, production cost reduction, change in overall business focus (e.g. in foreign joint ventures, and high technology areas), and a restructuring of debt (Palepu, 2000). The new executive position of Chief Operating Officer was created. Two new members of the executive team were hired in order to help push the company in a new strategic direction. As a result, engineering, manufacturing, and marketing divisions underwent significant changes in order to cut costs and reorient the company’s product offerings toward more profitable markets. (Palepu, 2000). The company started to focus its business on more overseas markets, where demand for mining and construction equipment remained strong. A relationship was established with Kobe Steel, Ltd., in which Harnischfeger agreed to source all of its construction cranes for sale in the US through the Japanese company. In addition, a contract to sell $60 million worth of mining shovels was entered into with the People’s Republic of China (Harnischfeger, 1985). Lastly, the company restructured its debt into three-year loans that required the company to maintain certain levels of cash, receivables, and net worth (Palepu, 2000). Accounting Strategy The new management at Harnischfeger implemented aggressive changes in accounting policy in an effort to make the company appear more profitable. The major areas in which accounting policy was substantially effected were in: changes in depreciation methods on assets, the use of LIFO liquidation in inventory valuation, the restructuring of the employees’ pension plan, a change in the way some types of sales were recognized, and a change in the fiscal year for foreign subsidiaries. (Palepu, 2000). In addition, management significantly altered the percentage of sales allocated to allowance for bad debt. Analysis shows that management exercised a great deal of flexibility allowed under GAAP in order to raise net income for 1985. Motivation for Accounting Strategy The new management has two long-term goals in mind. First, to increase the company’s presence in high-tech areas such as aerospace and pharmaceuticals and second, to make the company more global. These goals seem to require the company to pursue an aggressive earnings management strategy. In the short term the company needs joint ventures to survive. These joint ventures will provide Harnischfeger access to many new foreign markets and could be a potential source for cheaper labor. Effective earnings management could convince partners like Kobe Steel to be more receptive to investment in Harnischfeger. In addition the company needs cash to be able to participate in joint ventures that may require cross investment to build factories, hire foreign employees etc. Cash is also needed to invest in high tech industries which usually require large capital outlays in research and development. Management had strong motivation to show a profit in 1984. First, the company was preparing for its 100th anniversary celebration, and therefore needed a quick turnaround. As trivial as it sounds, this consideration probably sped up the timetable to recovery via aggressive accounting policy. Second, and more tangible, the restructuring plan included a provision which would award top executives an additional 40% of their base salary if the company achieved its financial goals for the year. Amazingly, management could receive another 40% of salary if the company outperformed those goals! III. Accounting Changes Effect of change in Sales Calculation Effective November 1, 1983, Harnischfeger incorporated products purchased from Kobe Steel, Limited and then re-sold by the company, into its net sales. During previous accounting periods, only the gross margin on these products was recognized as sales. As a result, both aggregate sales and cost of sales increased by $28 million. This accounting change did not have material impact on the overall net operating income as stated in the financial statement, however, it did have an influence on the quality of earnings, which is reflected by profit margin. Profit margin dropped to 1.44% from 1.55%, reflecting a 7.1% change in profit margin, after such a change was in place. The management claimed that this change â€Å"reflected more effectively the nature of the Corporation’s transaction with Kobe,† (Palepu, 2000, p.3-39) and we agree with the management’s view for two major reasons. First, Harnischfeger was operating in a macro business environment in which the company had to significantly reduce cost to survive. Outsourcing, an effective way of transferring production cost to more effective producers, could make the Harnischfeger focus on its core strength in product development capability and high brand power penetration. Second, Harnischfeger did phase out its own manufacture of construction cranes in Michigan and enter into a long-term agreement, under which Kobe would supply construction cranes. Also, effective November 1, 1983, Harnischfeger adjusted some subsidiaries’ ending period to September 30 instead of the previous ending July 31. This had the effect of lengthening the 1984 reporting period for these companies from 12 months, to 14 months, and increased sales by $5.4 million. Assuming these companies had the same profit margin as the parent, the change increased cost of sales by $4.3 million. We agree that the influence on net income is immaterial and that this change reflects more effectively the subsidiary’s business operation. But it does represent a one-time event which should be corrected for during analysis of the company’s potential for future profitability. Effect of Changes in Depreciation Method In 1984, Harnischfeger changed its depreciation policy for financial reporting purposes to a straight-line method from a principally accelerated method. A net income of $11 million was realized for 1984 when the straight-line method was applied retroactively to all assets depreciated under the accelerated method. The management viewed this as an approach to match the company’s standard with that of industry peers. We agree with the management in a way that this approach provides comparable standard. However, the timing of this action is questionable. This approach artificially improved the company’s financial strength in the short run and helped Harnischfeger negotiate its debt restructuring process with bankers. In the long run, however, the straight-line method will reduce profit in the years to come. Also, it was too aggressive to realize this income just in a one-year period, which reflected the incentive for management to achieve profit. In addition, Harnischfeger extended its estimated depreciation lives on certain US plants, machinery and equipment, and increased residual value on certain machinery and equipment. These changes resulted in an increase of $3.2 million in net income in 1984. Again, this reflected incentive for profit realization. The then-current high interest rate environment was supportive for residual value upward-adjustment, however, there were great risks involved. First, interest rate was on a down-trend after it peaked in 1982. Second, the liquidity of Harnischfeger machinery, for heavy-machinery manufacture, was low. Also, extension of depreciation lives would increase the maintenance costs and reduce profit in the years to come. Therefore, we suggest that Harnischfeger’s depreciation policies be closely watched when the economic environment changes Effect of LIFO Inventory Liquidation Harnischfeger reduced its inventory level in 1984, 1983 and 1982, resulting in a liquidation of LIFO inventory. This liquidation process led to gains when inventory, acquired at a lower cost in the earlier years, were sold at a higher price, resulting from higher inflation. Net income in 1984 increased by $2.4 million (in the form of gains), and liquidity was improved on the balance sheet. We view this as a sound business decision when the management can reduce operating cost by decreasing inventory level. Effect of Changes in Allowance for Doubtful Accounts Harnischfeger, for some reasons, adjusted its allowance for doubtful accounts to 6.7% of sales for 1984 from 10% of sales in 1983, resulting in $2.9 million in operating income for 1984. The company might try to increase sales by aggressively extending credit to doubtful customers, risking losing all of relevant sales. This is very skeptical as Harnischfeger gives no explanation. Effect of Changes in R&D Expenses Harnischfeger significantly cut its research and development expenses to $5.1 million in 1984, from $12.1 million in 1983 and $14.1 million in 1982. In 1984, operating profit was pumped up by $9.1 million when Harnischfeger didn’t follow the same level of R&D activities in 1983, reflected in the percentage of R&D as of sales. This is controversial to management’s strategy of focusing on the high technology part of its business and will damage its strength in the future. We conclude, therefore, that the management managed to increase profit by reducing R&D expenses on purpose. Effect of Changes in Pension Plan The company states, in the footnotes of its 1984 financials, that its salaried employee pension plan was well over-funded. The policy of Harnischfeger was to â€Å"fund at a minimum the amount required under the Employee Retirement Income Security Act of 1974.† (Palepu, 2000, p.3-38) This probably meant, in light of recent financial difficulties, that the company intended to fund at the minimum. Over-funding most likely came about as a result of the company reducing its workforce by about 45% in 1983. Harnischfeger terminated its Salaried Employee Retirement Plan in 1984, and created a new plan. This new plan included in increased minimum pension benefit, which probably served to make the pension restructuring more appetizing to employees. Cash resulting from the liquidation of the original plan was divided into two groups: $36.7 million went toward purchasing individual annuities in order to cover the obligations of the original plan, and $39.3 million went into an account called â€Å"Accrued Pension Costs†¦[to be] amortized to income over a ten-year period†¦Ã¢â‚¬  (Palepu, 2000, p.3.42) This pension plan change has three significant effects on the financial statements. First, pension expense was reduced in 1984 by $4 million. Second, net income increased by $3.9 million. Third, and most importantly, the company was able to show a positive cash flow for the year. Without this one-time injection, cash flow would have been ($7.6 million). Bottom Line: Financial Performance, Net of Accounting Changes The purpose of our analysis is to arrive at an estimated net income based only on the company’s core operations. That is, to determine its financial health without the distraction of one-time events and earnings management. The first step is arrive at a revised sales figure. The next step is to construct a table summarizing our estimation of Harnischfeger’s net income, net of the effects of all the accounting policy changes: Note that our analysis has tax-affected the result of changes in the fiscal year of subsidiaries, and the annual amortization amount for pension fund gains. Critique of Accounting Changes Our issue is not with the fact that Harnischfeger management now has an aggressive accounting strategy and is engaged in earnings management. Indeed, it seems perfectly reasonable to bring all subsidiaries under one fiscal year timetable. This will result in administrative efficiency. Also, the change in recognition of costs and revenues of Kobe Steel equipment is logical. Next, the company claims that all changes in depreciation policy are made to conform with other manufacturers in the industry. Further, the pension plan restructuring was authorized by the Pension Benefit Guaranty Corporation, and we have no other sources of information which cast the move in doubt. It seems logical that cutting the number of employees by 50% should cause a similar change in pension plan funding. In short, these accounting changes may be largely justifiable even though they represent aggressive earnings management. We do take issue with the fact that all of these accounting changes occurred in one year. That is, it seems suspicious that financial stability is neatly restored just in time for the 100th anniversary of the company, when executives stand to make an additional 80% of their salaries if goals are surpassed. As further proof of the validity of this concern, we see a contradiction between the decrease in R&D spending, and the company’s new strategy to explore different high technology product lines and services. Further, extension of depreciation lives for plant and equipment seems like a shameless way to increase net income. Finally, a dramatic decrease in the percentage allowance for doubtful accounts is difficult to justify, especially in a period of rising receivables. In conclusion, it seems that the company is taking a huge risk by betting that this one-time boost in income and cash will allow the company to successfully expand internationally and grow in new high tech areas and become profitable once again. IV. Financial Outlook Rather than a full recovery, it seems 1984 performance may be simply an aberration. Management cannot hide the effects of operations inefficiencies and uncooperative markets for long. We are encouraged by the fact that our estimated net $.41 loss per share far outshines the 1983 loss of $3.49. But we expect to see a negative cash flow in 1985, brought on by the absence of the one-time pension plan change. Contributing to this is a high balance in accounts receivable, which rose by 37.5% from 1983 to 1984. And at the onset of a decreasing interest rate environment, we expect the company to be burdened with high interest expense well into the future. Note, too, that the aggregate effect of the changes in depreciation policy will mean higher depreciation costs in future years. This, coupled with higher maintenance costs as equipment ages, will mean significantly higher operating costs. Finally, we expect the company to show a loss for 1985.

Investment: Time Value of Money Essay

Investment is the use of money for a future financial gain. Investments may come in the form of shares of stock, life insurance, government bonds, or putting up a savings account. Every investment decision has its underlying risks and uncertainties. Various factors can affect investment decisions and outcomes such as annuities and time value of money. Money has a time value. A dollar now is worth more than a dollar to be received at any later date. Many economic decisions involve investing money now in the hope of receiving more money later on. Various economic factors affect the time value of money such as risk, inflation, opportunity cost, and others. According to Robert C. Higgins (1999), â€Å"time value of money exists for at least three reasons†. Robert C. Higgins (1999) stated that â€Å"inflation reduces the purchasing power of future dollars relative to current ones, uncertainties surrounding the receipt of dollar increases as the date of receipt draw away, and because of the presence of opportunity cost†. In economics, inflation is a decline in the value of money in relation to the goods and services it can buy. Inflation can affect time value of money and investment decisions. Due to inflation, borrowers usually benefit while lenders suffer, because mortgage, personal, business, and government loans are paid with money that loses purchasing power over time (Encarta, 2004). It is important to understand however, that borrowers only benefit when the inflation is unexpected, when inflation is expected by creditors, the interest rate they charges rises to compensate for the unexpected decline in the purchasing power of the principal loan (Encarta, 1999). Risk or financial risk is defined as the possibility of loss in an investment. Investment decisions involve some type of risk because of the time value of money. Lenders should take into consideration various factors before extending credit such as the borrower’s ability to pay or collaterals. Interest rates on loans can also be based on the degree of risk involved. The higher the risk involved the higher interest rate. On the other hand, lower interest is imposed on low-risk loans. As mentioned above, investment decisions has its underlying risk and uncertainties, therefore before making investment decisions it is important to understand the risks and uncertainties involved. Opportunity cost is defined as the expected income on the next best alternative or the income foregone if an investor chooses one action over another (Higgins, 1999). A dollar today is worth more than a dollar in the future since money today can be invested for it to double in the future. Opportunity cost depends on what action is to be considered. Before making decisions, an investor must first look for and obtain an understanding of all the available alternative courses of action. After determining the various alternatives, the differential effects of each alternative should be considered to avoid potential problems in the future. Interest is the payment made for the use of another person’s money and is regarded as a payment made for capital (Encarta, 2004). Interest can be affected by economic factors such as inflation. When interest is computed based on the principal amount, it is called simple interest. However, when interest is computed not only on the principal amount but also on the cumulative total of past interest payments, the process of interest computation is now called compounding. Compounding is the process of determining the future value of a present sum (Higgins, 1999). The interest rate used on compounding is called the compound interest rate.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Discounting, on the other hand is the exact opposite of compounding. Discounting is the process of finding the present value of a future sum (Higgins, 1999). The interest rate used in discounting is called the discount rate. The amount of money to be received in a future date is usually a combination of the original investment and the interest on that investment. Discounts are rewards or considerations given on the purchase of negotiable instruments such as bills of exchange and promissory notes in advance of their maturity date. When these negotiable instruments are said to be discounted, discounts are regarded as advance collection of interest on the loans. An annuity is a type of investment that can provide a steady stream of income over along period of time (Understanding annuities, 2006). Annuity is an annual allowance, payment, or income derived from funds especially designated for the purpose (Encarta, 2004). At times, it is required to compute for the present value of a series of equal amounts to be received at the end of a series of years. Annuity earnings grow tax-deferred and are usually purchased by investors who are primarily concerned with limiting their taxes (Understanding annuities, 2006). The rule of 72 is a method of estimating an investment’s doubling time or halving time (Rule of 72, 2006). The Rule of 72 estimates the number of years it takes for an investment’s value to double at a specific interest rate or rate of return and the result can be obtained by dividing the expected growth rate into 72 to determine the number of years it will take to double. By taking into consideration the rule of 72, investors can assess the length of time in which their investment can double and to determine if their investments are feasible. Investing involves the decision of committing resources such as money for a period of time. Evaluating investment decisions involve the determination and assessment of the possible inherent risks and uncertainties. An effective investing decision requires a consideration of the time value of money. References Encarta Reference Library 2004. Microsoft Corporation Higgins, R. (1999). Analysis for financial management. Evaluating investment opportunities (pp 231-266). Washington. Irwin McGraw Hill. Rule of 72 (2006). Wikipedia, the free encyclopedia. Retrieved December 3, 2006 from: http://en.wikipedia.org/wiki/Ruleof72 Understanding annuities (2006). Retrieved December 3, 2006 from: http://www.tdi.state.tx.us/consumer/cb078.html