Managerial economics Essay Example for Free

Managerial economics Essay 1. If a firm raises its price for Product X, TR will increase. Uncertain, Total revenue = Price Ãâ€" Quantity Sold. The price elasticity of demand tells us there are two eï ¬â‚¬ects, first is price eï ¬â‚¬ect. If price increase, each unit sold sells for a higher price, which tends to raise revenue. Second is quantity eï ¬â‚¬ect. If price increase, fewer units are sold, which tends to lower revenue. This is determines by which price eï ¬â‚¬ect or the quantity eï ¬â‚¬ect is stronger 2. When MR MC, MP (marginal profit) will be positive.  True, for each unit sold, marginal profit equals marginal revenue (MR) minus marginal cost (MC). Then, if MR is greater than MC at some level of output, marginal profit is positive and thus a greater quantity should be produced. 3. If a 10% increase in price leads to a 5% increase in TR, demand must be elastic. False, if an increase in price causes an increase in total revenue, then demand can be said to be inelastic, since the increase in price does not have a large impact on quantity demanded. 4. If the cross price elasticity is positive for two goods X and Y, X and Y must be complements. False, if the goods are complements, the value will be negative because quantity demanded increases when the price of complement falls. Example, if the price of petrol decreases to RM2 a litre, sales of cars would increase. 5. Maximizing TR is never a desirable goal for a firm.  True, profit is the difference between a firms total revenue and its total opportunity cost. Total revenue is the amount of income earned by selling products. But it does not include the total opportunity costs of all inputs into the production process. Hence, it is never a desirable goal for a firm. Firm should consider maximizing Profit instead of TR. 6. The more inelastic the demand, the more likely it is that a firm can have regular price increases. True, if firm have regular increase in price (refer to Appendix 1) from P4 to P5, the decrease in the quantity demanded is relatively small (from Q4 to Q5). It means that, the more inelastic the  demand, the percentage change in quantity demanded is less than percentage change price. Hence, firm can have regular price increases. 7. If EP = -1.25 for Group A, and EP = -.375 for Group B, and a firm uses price discrimination, Group A should pay a higher price than Group B. False, Group A is elastic and Group B is inelastic. The consumers in the inelastic sub-market will be charged the higher price, and those in the elastic sub market will be charged the lower price. So Group B should pay higher price. Please refer to Appendix 2 for illustration. 8. A consumer spends 1% of her income on Good A and 25% on Good B. Price Elasticity of Demand should be greater for Good B. True, if the consumer spends less of her income, means that Good A is a necessity good and spends more of her income means that Good B is a luxury good. Luxuries tend to more elastic than necessities as there are more options for consumer. 9. Income elasticity for an inferior good is always negative. True, because quantity demand falls as income rises. Quantity demanded and income move opposite directions, inferior goods have negative elasticity. 10. The more inelastic the demand, the flatter the demand curve. False, inelastic demand have steeper curve because quantity demanded does not respond strongly to price changes. Please refer to Appendix 3 for illustration. For a inelastic demand product such as cigarettes, when price increase by 10%, the quantity demanded will fall by 3.8%. 11. If demand goes from P = 1850 .05Q to P = 1700 .05Q, Demand has increased. False. If P = 1850 .05Q then Qd= 37000-20P and if P = 1700 .05Q, then Qd= 34000-20P. The demand curve shift to left and hence, the demand decreases. Please refer to Appendix 4 for illustration 12. If TC goes from TC = 1250 + .5Q to TC = 1200 + .6Q, FC have gone up and VC have gone down. False, because TC=TFC+TVC. From the equation above shows that, the FC decreases leads TFC to fall from 1250 to 1200 and the VC increases leads TVC to gone up from 0.5 to 0.6. Part B (Explain in a short Essay (not more than 1 page each)) 1) Define demand, discuss various determinants of demand. Demand is the quantities of good or service that consumers are willing to buy at various prices within some given period of time. Holding all other factors constant, the price of a good or service increases as its demand increases and vice versa. When factors other than price changes, demand  curve will shift. There are 5 determinants of the demand curve. First factor is price of related goods. A good or service can be related to another by being a substitute or complement. If price of a substitute changes, we expect the demand for the good under consideration to change in the same direction as the change in the substitute’s price. For instance, if the price of coffee rises, the demand for tea should increase. The complement goods are the goods that can be used together. Price of complement and demand for the other good are negatively related. Example, if the price of sugar increases, the demand for coffee will fall. Second factor is income, as people’s income rises, it is reasonable to expect their demand for a good to increase and vice versa, the demand curve will shift right. A fall in income will lead to a decrease in demand for normal goods. Goods whose demand varies inversely with income are called inferior goods. Third determinant is future expectation. If enough, buyers expect the price of a good rises in future, the current demand will increase. Also, if consumers’ current demand will increase, they expect higher future income. For example, in 2005 housing prices rose, but people bought more because they expected the price to continue to go up. This drove prices even further, until the bubble burst in 2006 (Stafffullcoll.edu. n.d.). Forth factor is tastes and preferences. This is the desire, emotion, or preference for a good or service. If consumer preference is favorable change will leads to an increase in demand. Likewise, unfavorable change leads to a decrease in demand. Example, companies spend thousands on advertising to make you feel strongly that you want a product. Last determinant is number of buyer. If the number of buyers in market rises, the demand increases. For example, the housing bubble case. Low-cost mortgages increased the number of people who were told they could afford a house. The number of buyers actually increased, driving up the demand for housing. When they found they really couldnt afford the mortgage, especially when housing prices started to fall, they foreclosed. This reduced the number of buyers, and demand also fell. 2) Briefly explain the concept of Law of diminishing returns? Discuss its assumption and importance? The law of diminishing marginal returns means that the productivity of a variable input declines as more is used  in short-run production, holding one or more inputs fixed. This law has a direct behavior on market supply, the supply price, and the law of supply. The main reasons the marginal product (MP) of this variable input declines is the fixed input. The fixed input imposes a capacity constraint on short-run production. For example, in a sandwich production, the size of the sandwich-producing kitchen and equipment is fixed. The company employs additional workers, the kitchen becomes increasingly crowded. Only so many workers can use the sandwich-preparation counter to prepare sandwich. While adding additional workers do increase total sandwich production, the extra production attributable to these workers is certain to fall as the capacity of the fixed input is limited. In fact, adding too many workers actually results in a negative marginal product, hence, total product falls. The law of diminishing marginal returns is reflected in the shapes and slopes of the total product, marginal product, and average product curves. The most important of these being the negative slope of the marginal product curve. Appendix 5 shows the graph three product curves. The total product (TP) curve shows that the total number of Sandwich Company produced per hour for a given amount of labor. The increasingly flatter slope of the TP is attributable to the law of diminishing marginal returns. Also, the marginal product curve indicates how the total production of Sandwich Company changes when an extra worker is hired. The negatively-sloped portion of the MP curve is a direct embodiment of the law of diminishing marginal returns. Further, the average product curve indicates the average number of Sandwich Company produced by workers. The negatively-sloped portion of the AP curve is indirectly caused by the law of diminishing marginal returns. As marginal product declines, due to the law of diminishing marginal returns, it also causes a decrease in average product. 3) Explain the various economies and diseconomies of scale? Economies of scale are the cost advantages that a business can exploit by expanding the scale of production. The effect is to reduce the long run average (unit) costs of production. Economies of scale have brought down the unit costs of production and feeding through to lower prices for consumers (appendix 6). It could be achieved by buying new machinery, and build a bigger factory. There are two types of economy of scale and depending on the particular characteristics of an industry, some are more important than others. Firstly, internal economies of scale are a  product of how efficient a firm is at producing, that is specific to individual firm. Example, advantages are enjoyed by expansion. Next, external economies of scale occur outside of a firm but within an industry. Example, industry’s scope of operations expand due to better transportation network, will result a decrease in cost for a company working within industry, , external economies of scale have been achieved. Diseconomies of scale are the forces that cause larger firms to produce goods and services at increased per unit costs. The concept is the opposite of economies of scale to a situation which economies of scale no longer function for a firm. Rather than experiencing continued decreasing costs per increase in output, firms see an increase in marginal cost when output is increased (appendix 6). When a firm expands its production scale beyond a certain level, it suffers certain disadvantages. These disadvantages are called internal diseconomies of scale. The result of these diseconomies of scale is a fall run average cost. There are a number of factors that might give rise to inefficiencies as the size of the firm grows. As the size of the firm grows beyond a certain level, organization, control and planning is needed. This makes the managerial responsibilities more difficult. Delegation of the management functions to lower personnel becomes very common. Since the lower personnel lack the adequate experience to undertake the task, it may result in low output at higher cost. All these lead to an increase in the long-run average cost. Further, the external diseconomies of scale are beyond the control of a company increases its total costs, as output in the rest of the industry increases. The increase in costs can be associated with market prices increasing for some or all of the factors of production. For instance, high competition for labor, when there is more firms in industry, there will be increased demand for labor, making the best workers harder to keep (Keat and Young, 2009). References Stafffullcoll.edu. n.d. DETERMINANTS OF DEMAND. [online] Available at: http://staffwww.fullcoll.edu/fchan/macro/1determinants_of_demand.htm [Accessed: 28 Mar 2014]. Keat, P.G. and Young, P.K.Y., 2009 ‘Managerial Economics: 6th ed. Economic Tools for Today’s Decision Makers’. Pg. 266-268

Jennifer Hudson Essay Example for Free

Jennifer Hudson Essay Jennifer Hudsons I Got This is a personal memoir of her life, from her early childhood to her current life. Jennifer talks about her journey to stardom including her challenges, tragedies, and her triumphs. Throughout the book Jennifer continuously talks about how her weight had kept her from getting the parts she would audition for. However, once she lost the weight many doors were open for her. She also gives high praises to Weightwatchers for helping her lose over 80 pounds. Jennifer Hudson made it clear that she was always comfortable with her body and only lost the weight so that she could be a healthy mother for her son. She did not lose the weight for anybody else but for herself and her son. This book was published in January 2012. Jennifer Hudson was born September 12, 1981, in the Englewood area of Chicago. She was the third child of her parents of her parents, Darnell Hudson Donnerson and Samuel Simpson. She was raised in a single parent home with her brother, Jason Hudson, and her sister, Julia Hudson, by her mother. As a little girl Jennifer was very small, so small that you could see her ribs through her shirts. Her mother took her to the doctor because she thought something was wrong with her. Being skinny was not common in the Hudson family. You see food was a central focus for the majority of all the Hudson family gatherings. Jennifer’s best friend and personal assistant is a gay guy named Walter. She met Walter in the sixth grade and they have been best friends ever since. The first time he heard her sing was in music class and from that day he has been her number one fan. Walter made it his personal goal to make Jennifer a star. During her high school years she would sing in different contests and talent shows all over Chicago that Walter would sign her up for; soon thereafter he began booking performances ranging from weddings to funerals for Jennifer. At one point she was in a singing group, with two other girls called Final Notice, but this didn’t last long. They kept her around, as long as they did because she had the most talent, but they let her go because she had the most weight. By the age of nineteen she had reached her peak weight of 236 pounds. This is around the time she realized that her weight was out of control and she was getting passed over for singing gigs because she didn’t look the part. Needless to say, she was astonished that she was being judged on her appearance and not her talent. Jennifer was signed to her first record label, Righteous Records, a Chicago based independent label. It was during this time that she was first motivated to lose weight because the head of the company pitted her against another girl on the label to lose weight. He told them that whoever lost the most weight would win money and be able to release their album first. On this journey of losing weight, Jennifer stopped eating fried foods, red meat, pizza, carbonated soda, and ice cream; which were all of her favorites. She started working out every day and twice on some days. This went on for years. She would lose weight because someone said she needed to if she wanted the job, only to regain the weight upon completion of the part. In the summer of 2002 American Idol made its television debut, Jennifer was encouraged by her mother to audition for the show. Jennifer was not impressed and did not want to have anything to do with the show, that is, until Kelly Clarkson was named the first American Idol. Although the show had sparked something in Jennifer she still resisted auditioning for the second season since she had landed a job with Disney working on a cruise ship. After eight months, away from home, performing on the ship, Jennifer had had enough and went back home. To her surprise, when she got back to Chicago Walter had two airline tickets for Atlanta to go to the audition for season three of American Idol. Being on American Idol, Jennifer had gained a great deal of exposure, which opened the door for her next gig, which was a record deal to record her first album. While she was working on this album she started hearing rumors about a new movie, which was Dreamgirls; and that the producers wanted her for the role. After auditioning twice she was chosen to play the part of Effie in the movie. She had not done any professional acting until this role and the rest is history. For the first time in her career she was told she needed to gain weight, they wanted her to gain twenty pounds so she could really look like Effie. This was a total shock to Jennifer, especially after so many years of being passed over and judged on her appearance over her talent. Well, she gained the weight and starred in her first motion picture. After the production of Dreamgirls, Jennifer returned home and started her mission to lose the weight she had gained for the role. She went right back to the only way she knew to lose weight. Eating only brown rice, chicken, and broccoli, coupled with running every day. She worked hard the entire summer losing the extra pounds only to have the producers call her, near the end of the summer, needing to get some pickup shots of her to finish the film, and oh yeah telling her to regain the weight. She refused to succumb to their request and they found a way to work around it. In September of 2008, Jennifer’s mother, brother and nephew were killed in a shooting; Jennifer stepped out of the limelight for three months. After the birth of her son, Jennifer was again around 236 pounds. This was precisely the time she made the conscience decision to make a permanent change in her life to lose weight and keep it off. She initially began this quest the only way she knew how by limiting herself to very few food choices, but then she was introduced to Weightwatchers. Eighty plus pounds later, Jennifer is pleased with her decision to give Weightwatchers a try, and now she is a spokesperson for the program.

Review of TQM Concept from Quality Gurus

Review of TQM Concept from Quality Gurus An extensive literature review is done to explain the concept of TQM, which is extracted from four quality gurus namely; Deming, Juran, Crosby, and Ishikawa. Theories of these gurus are very essential in understanding the concept of TQM. Principles and practices of these gurus are explained in following section. 2.5.1 Deming Approach to TQM The main theory of Demings approach is to create an organizational system that wills faster cooperation and learning. This is to facilitate the process of management practices and implementation that leads to the improvement of the organizational process, products, and employee fulfillment, which are all essential to customer satisfaction (as cited in Zhang, 2000). According to Rvans and Dean (2000), Demings philosophy is aimed to improve products and service by reducing the uncertainty and variation in design and manufacturing processes. Researchers explained that high variation will lead to inconsistencies in performance and as a result will represent poor quality. Deming invented the plan, Do, Study, Act (PDSA) cycle or commonly known as Deming cycle to relate the production of a product with the consumers need and to utilize the resources within the organization to fulfill those needs (Goetsch and Davis, 2000). It is a continuous cycle that requires the addition of new knowledge. In addition, Demings 14 points of management also received good reviews from the research society over the years. Ross (1999) indicated that a company must adopt the 14 points of his system at all levels of an organization. In retrospect, Dr.Deming has tailored some of the principles to integrate into the current management style of organizations. Table 2.4 lists out the Demings 14 points of management. Table 2.4: Demings 14 Principle of Management No Principles 1 Create constancy of purpose toward the improvement of products and service in order to become competitive, stay in business, and provide jobs. 2 Adopt the new philosophy. Management must learn that it is a new economic age and awaken to the challenge, learn their responsibilities, and take on leadership for change 3 Stop depending on inspection to achieve quality. Build in quality from start. 4 Start awarding contracts on the basic of low bids. 5 Improve continuously and forever the system of production and service, to improve quality and productivity, and thus constantly reduce costs. 6 Institute training on the job 7 Institute leadership. The purpose of leadership should be to help people and technology work better 8 Drive out fear so that everyone may work effectively. 9 Break down barriers between departments so that people can work as a team. 10 Eliminate slogans, exhortations, and targets for the workforce. They create adversarial relationship. 11 Eliminate quotas and management by objectives. Substitute leadership. 12 Remove barriers that rob employees of their pride of workmanship. 13 Institute a vigorous of education and self improvement. 14 Make the transformation everyones job and put everyone to work on it. Goetsh and Davis, 2000 2.5.2 Juran Approach to TQM Jurans philosophy indicates that Total Quality Management is a system or activity that aims to delight customers, empower employees, increase the level of revenues, and reduce cost (as cited in Zhang, 2000). Demings, alternatively, focuses on the employees pride and their satisfaction. Juran posits that top-down management and technical methods are pertinent to manage organizations (Ross, 1999). Based on a special report published on Business week, an article entitled Dueling Pioneer, suggest that Juran contribution may be better than Demings theory in the long term, primarily owing to the fact that Juran has a broader concept while Deming focuses on statistical process control which is technical-oriented (as cited in Ross, 1999). In this study, Deming believes that customer focus is essential for a companys success and quality is defined as fitness for use. This is comprised of four categories which include quality of design, quality of conformance, availability, and field service. A famous prescription by Juran is quality Trilogy (A registered trademark of Juran Institute). Here, researcher illustrates that quality can be managed through three important processes: Quality Planning, Quality Control, and Quality Improvement. Researcher articulates that problems are traceable in an adequate planning process that will be sent trough a quality control process where a particular problem will be executed. This evidently will lead to the improvement process (Zhang, 2000). Figure 2.1 summarizes the three managerial processes. Figure 2.1: Juran Trilogy Quality Planning Establish quality goals Identify customers needs Develop product features that respond to the quality needs. Develop systems and process that allow organization to produce these features. Deploy the plans to operational levels. Quality Control Evaluate quality performance. Compare performance with goals. Act on the difference between performance and goals. Quality Improvement Develop the infrastructure necessary to make annual quality improvements. Identify specific areas in need of improvement and implement it. Establish a project team with responsibility for completing each improvement project. Provide the resources, motivation, and training needs by the teams to diagnose the causes, stimulate establishment of remedies, and establish controls to hold the gains. Zhang, 2000 2.5.3 Crosby Approach to TQM Crosbys theory is considered as an important theory that contributed to quality management. Researchers theory focuses on (1) Prevention of defect item; (2) Stress on individual conformance; (3) Clear customer focus and education for employee (Kanji, 1990). Crosbys theory also emphasizes on changing the organizational attitudes and behavior towards quality orientation. According to Taylor and Pearson (1994), Crosbys principles comprises of participation of all employees in the organization, stress on individual conformance, requirement and effective changes of corporate culture and motivation. Apart from that, Boaden (1997) also stated four important quality concepts from Crosby: Conformance to requirement is the definition of quality, not elegance. Prevention in the key to quality, not detection and assessment. Performance standard if zero defects. Price of non conformance is the measurement of quality. In addition, Crosby believes that a company would rather spend the lesser on prevention cost than bear the cost of detection and failure. As stipulated by Deming and Juran, Crosby also stressed the importance of quality improvement. Table 2.5 below listed out the Crosbys 14 steps to quality improvement. Table 2.5: Crosbys 14 steps to Quality Improvement Management Commitment Quality Improvement Team Measurement Cost of Quality Quality awareness Correction action Zero Defects plan Quality education Zero defects day Goal setting Error cause removed Recognition Quality councils Repeat Kanji, 1990 2.5.4 Ishikawa Approach to TQM Ishikawa is the quality expert that addressed TQM as TQC which is Total Quality Control. Since the terms management and Control are pronounced as Kanri in Japanese, it implies linguistic ambiguity between Quality Management and Quality Control in the above context (as cited in Boaden, 1997). Ishikawa is a quality tool expert that participated to develop tools such as the (1) Pareto Chart; (2) Cause and Effect Diagram or known as Ishikawa Diadram; (3) Stratification Chart; (4) Scatter Diagram; (5) Check Sheet; (6) Histogram; and (7) Control Chart (Evans and Dean, 2000) Ishikawa also stressed on continuous improvement and customer orientation where organization should keep a track log on what their customer like, their tastes, and applications (Dotchin and Oakland, 1992). As stipulated by Zhang (2000), the six concepts of Ishikawa are described as follows: Company should put quality in the first place, not short term profits. Company should focus on customer, not producer. Company should break down the barrier of sectionalism of customer. Company should use facts and data to make presentation by using statistical tools. Company should apply the cross functional management. 2.5.5 Summary on Quality Gurus Based on the concepts mentioned above, there remains on overarching idea that is shared by all of them, quality improvement. Quality improvement is necessary to lead a company to success. Although all of the experts mentioned above have different views on quality improvement, their intentions are the same. However, their fundamental approaches were slightly different. For instance, the approaches illustrated by Deming and Juran focus on detection and correction while Cosbys theory emphasizes on prevention than detection. All in all, all four theories are widely accepted and are still being used by many organizations. Theories like Demings PDSA Cycle, Juran Trilogy, Crosbys 14 Steps to improvement, and Ishikawas diagrams are still widely used to explain the fundamental concept of TQM. 2.6 Review of Knowledge Sharing Knowledge as a resource of value creation, allows for exceptional marginal rates of productivityà ¢Ã¢â€š ¬Ã‚ ¦., appreciating value with continuing use and sharing knowledge instead of depreciating value of tangible products or natural resources (As cited in Yang, 2007) As illustrated in the above phrase, knowledge has to be shared in order to maintain and appreciate the value it has to offer as it will depreciate and vanish over time. Knowledge sharing is a process where knowledge and skills are transferred from one individual to another (Lin, 2007). Pangil and Nasurdin (2005) posit that a number of discussions and research about knowledge sharing is studies to comprehend key element in knowledge management. According to Chua, (2003), a well managed company can capture knowledge from a segment of its organization, shared, and utilized in a completely different in its operations. Moreover, Nonaka (1994) stressed that the efficiency of knowledge sharing is based on the willingness of an individual to identify the knowledge he possess to the company and share it when it is required. However, knowledge sharing among companies throughout the world does not seem to be well accepted among employees and organizations. One of the reason has been notified; where knowledge is being codified and expressed, it is easy to leak the important codified knowledge to the outside world and results in damages especially to an organizations competitive advantage, (Michailova and Husted, 2003). In addition, Mivhailova and husted (2003) conducted a research the Russian and Chinese industries and found that the reason employees refuse to share their knowledge are due to (1) cost involved during knowledge sharing; (2) the psychological fear that their personal value will drop after sharing their knowledge; and (3) accepting and respecting a strong hierarchical and former power. Nevertheless, according to Arduchvili et.al (2002) on his empirical research, the trend that employees do not want to share knowledge has nothing to do with selfish attempts but fear of misleading their colleag ues. Despite the minor negative impact of knowledge sharing as above, many researchers have proven that knowledge sharing will bring more benefits than harm (Yang, 2007; Chua, 2003) Effective knowledge sharing among organizational employees is useful to increase the long term sustainable competitive advantage (Lin, 2007; Yang, 2007; Ruhi, 2003) of the company as it encourages creativity and innovation (Hong et.al.2004; Patrick and Dotsika, 2007). This creates a place that generates information for decision making. New knowledge will indirectly form while the old knowledge is shared through discussion, meetings, and informal chats (Fernie et.al.2003). Ruhi(2003) discovered a number of benefit on effective knowledge sharing which includes (1) increase responsiveness to changes in the economic landscape; (2) dynamic creation and application of custom content; and (3) better manage business partner relationships. Additionally, a successful knowledge sharing environment will strategically alter employee attitudes towards promoting willingness and reliability in sharing knowledge among employees (Connelly and Kelloway, 2003). As there are a myriad of benefits in knowl edge sharing, motivational programs should held frequently to encourage employees to share knowledge (Ardichvili et.al 2002) 2.7 Relationship between TQM Practices and Knowledge Sharing 2.7.1 Leadership Leadership in an organization can be defined as the ability of a role player to influence a team of employees to follow his instruction or missions that have been assigned to them in order to achieve the goals or objectives that been preset by the company (Bounds et. al. 1999). In addition, Zhang (2000) and House and Dessler (1974) illustrated leadership to commit the following: Clarification of vision Coaching management Change of participation within company Employee empowerment Planning as well implementation They implementing the organizational change to provide guidance and recognize employees input such as ideas and suggestion as valuable resources. In parallel, a leader should move away from command managing to control oriented I order to make knowledge sharing successful (Macneil, 2004). Knowledge sharing in an organization does not occur automatically. Thus, a leader plays an important role to ensure that it materializes (Ellinger and Bostrom, 1999). As mentioned above, team members are likely to be recognized by leaders due to their contribution and information, and this will indirectly motivate them to share their knowledge with others (Srivastava et.al. 2006). A leader should also empower and encourage employees to participate in the decision making process and organize meetings where team members are free to express their ideas and suggestions (Arnord et.al. 200). Through these avenues, employees will be aware that their knowledge shared is actually significant and indispensable. Moreover, Arnord et.al (2000) emphasized that leaders should always show censer to his or her team members well being. By doing this, a connection of trust is built between the employee and leader so that knowledge sharing will be easier to function. Based on the literature findings abo ve, the following hypothesis has been proposed: Hypothesis 1: Leadership is positively associated with knowledge sharing. 2.7.2 Organizational Culture As Gore Jr. (1999) mentioned in his research study, organizational culture is considered as key that leads to organizational success. It can create competitive advantage for a company by defining the boundaries of organization in a manner which will help in individual interaction such as sharing ideas and suggestion (Kefting and Frost, 1985). Holistically, organizational culture in the context of knowledge sharing can be described as a combination of theory, values, beliefs, ways of thinking, and acting that are shared by all the employees within the organization (Nor, 2005). In addition, researcher illustrate that a successful organizational environment is when the companys values are cultivated and glued into employees beliefs where their behaviors are derived from social pressure but not from formal procedures and policies. Kim and Lee Stipulate (2004). That there are three components in an organizational culture that cannot be neglected to affect knowledge management and his includes vision and goals, trust, and social network. As knowledge sharing is one of the key components is knowledge management, it is assumed that these three components are also significant. Clear organizational visions and goals will definitely help to encourage employees to share knowledge. This is due to the involvement and participation of employees that is essential to achieve the goals and missions of a company (ODell and Grayson, 1998). Alawi et.al (2007) and Von Krogh (1998) however, explained that interpersonal trust or trust between co -workers is very important in organizational cultures that have strong influence over knowledge sharing. Moreover, (Gruenfeld et.al. 1996) stated that the existence of trust among employees is necessary in order to respond openly and share their knowledge. ODell and Grayson (1998) also hi ghlighted that social interaction between individuals or groups ids helpful in knowledge sharing when different kinds of perspective and knowledge will be exchanged and transferred during the interaction. Based on this discussion, organizational culture is linked to with knowledge sharing and a hypothesis is formed. Hypothesis 2: Organizational Culture is positively with knowledge sharing 2.7.3 Teamwork Ideally, a company project would require a team of personnel that work together to accomplish the project goals. Thus, the composition of the team is crucial and leader needs to understand the abilities of each team member (Anderson, 1994). Generally, teamwork is defined as a work or project done by associates, where each member does a part in line with the efforts from subordinated in hierarchical levels (as cited in Macneil, 2003). However, Goh (2002) found that hierarchical levels of teamwork was obsolete and introduced a framework termed as horizontal communication. This goes beyond technology and encourages cress functional teamwork in the organization that will lead to knowledge transfer and exchange. She explained that employees can easily communication using horizontal cross-functional collaboration. Likewise, Lu et. Al. (2006) verified that good teamwork should contribute to knowledge sharing. Although many academicians and researchers elucidate such as the increase in operations productivity (Kirkman and Rosen, 1999), improvement in the level of customer satisfaction (Kirkman and Rosen, 1999), enhancement of jobs satisfaction among employees (Wall et.at. 1986), and development of a better organizational commitment, there is one fundamental benefit of framework that they disregarded, and this is complementary to the team members knowledge (as cited in Zarraga and Bonache, 2003). This can be clarified by analyzing the study of Wright et. Al.(1994) that explains in detail the idiosyncratic knowledge that is relevant to another member of the team and is transferred from an individual to that particular person. When this occurs a synergy is formed and results in a rise of a new knowledge to a higher level called group knowledge where combinations of unique skills of each team member are consolidated towards achieving missions and goals. Nevertheless, the social dilemma theory explains that knowledge sharing might arise from a problem called public- goods dilemma (Cabrera and Cabrera, 2002). Researcher explains that when knowledge is shared by a volunteers contribution to a team, every member in the team will benefit from it, whether they have made a contribution or not. In order to solve this problem, the company should plan rewarding strategy where people who share their knowledge will be rewarded. Therefore, a hypothesis is developed and stated as: Hypothesis 3: Teamwork is positively associated with knowledge sharing. 2.7.4 Training and Development Training and development is the development of new knowledge and skills as result of imparted knowledge (Goetsch and Davis, 2000). In relation to the context of knowledge sharing, Pangil and Nasurdin (2005) explained that training is crucial for knowledge sharing because it generates an opportunity for people gain new knowledge and share that knowledge. The role of training and development is expended to provide an environment that encourages and facilitates employees to share knowledge within the company. As discussed in the previous chapter, trust and motivation are very important in knowledge sharing. Thus, Goh (2002) stated that training in experimentation can help overcome constraints such as lack of increase an employees job satisfaction (Barli et.al. 2005) and organizational commitment (Ahmad and Bakar, 2003). A formal and successful training will encourage employees to share their knowledge (Lamoureux, 2006). Some options for formal and development programs can stem from hiring trainers and facilitators to provide in -house development programs, outstation training for employees, and e-learning courses that are provided by service providers (Lamourex, 2006). Researcher identified that formal training requires the trainee to perform after -action reviews and give suggestion. Thus, they will express, share and improve their knowledge to others during the training period. Apart from that, as the technology used is growing pervasively in todays corporate world, many tools are developed to faster information exchange. In this course, employee training is necessary get themselves familiarized the technological tools. Stoddart (2001) stated that a good internet management practice will improve the usability and knowledge sharing capability among employees. In addition, Curry and Stancich (2000) elucidated that knowledge sharing will only work if the culture of the organization promotes it and re al time applications such as computer conferencing are used. However, the most important element in accruing new knowledge is pointless without training. In short, training aids to ease the process of knowledge sharing. Surprisingly, there have been limited empirical evidences to prove that training can affect employees to share knowledge. With that reason, a hypothesis is formed. Hypothesis 4: Training and Development is positively associated with knowledge sharing. 2.7.5 Reward System It is irrefutable that a proper reward system in an organization is necessary to keep the working environment alive. In general, reward system comes in a monetary from or recognition which is awarded to employees that achieve the goals and mission that has been preset by the company. To elucidate, from a neurobiological perspective, it is a set of structures that can regulate and control behavior by inducing rewards. Pangil and Nasudin (2005), Mc Dermott and ODell (2001), and Sharatt and Usoro (2003) agreed that a companys reward system can effectively motivate people towards knowledge sharing. Knowledge sharing is so important that companies today have included them into performance assessments (McDermott and ODell, 2001). Pangil and Nasudin (2005) describe two purposes of a strategic reward system. Firstly, employee will be rewarded by performing knowledge sharing practices in the organization. Secondly, incentives will be given to those who continue perform desirable practices. Reward system for knowledge sharing can be segmented into: Individual Reward Group Reward Individual rewards are self -achieved where the company will award the individual who puts the most effort to share knowledge. According to Bartol and Srivastava (2002), value pay plans are suggested in individual award system to assess the performance of employees in knowledge sharing. In other words, financial enticement is used to motivate knowledge sharing (Hall, 2001). However, recognition sometimes can be more valuable than monetary rewards. For instance, the recognition of a journalist, researcher, or lecturer is considered as a reward to them after their efforts for publishing and teaching where knowledge sharing has created provocative change in the mindsets of people. Conversely, as discussed in the previous section, reward system is obligatory to ensure that every member in the team contributes to knowledge sharing (Zarraga and Bonache, 2003). Group reward system is slightly different from individual system, where rewards will be given based for group performance (Bartol a nd Srivastava, 2002). They explained that reward for group consist of profit sharing, gain sharing and stock ownership plans. As discussed above, reward system are crucial for practicing knowledge sharing, thus, following hypothesis is formed: Hypothesis 5: Reward System is positively associated with knowledge sharing. 2.7.6 Customer Focus Customer focus can be defines as the degree a company embarks to satisfy the customers needs and expectations in continues manner (Zhang, 2000). From a business perspective, it is a known fact that the customer solely determines the success of a company. To illustrate that notion, general Motors, AT T, and IBM had to reengineer their business function in order to meet the growing needs of their customers (Pinar, et.al. 2007). Thus, customer needs and expectations are considered as the baseline for any kind of business. Liao (2006) explained that sharing information on customer needs among co-workers or leaders could from as a competitive advantage to company. Apart from that, fast learning and knowledge transfer from an individual to another is what an organization must perform in order to maintain the products and services ahead of the needs and expectation of customers (Pfister, 2002) How do we get as many people as possible to create and transfer as much knowledge as possible in the best way possible in order to have a positive impact on our customer. (Buckman, 2004) Buckman in his book Building knowledge Driven Organization cited the above statement and explained that the full involvement, commitment, passion, to share and use the knowledge among employees are essential to satisfy customers (as cited in Buckman, 2004). Furthermore, requirements of customer can be tackled easily when knowledge is shared among team members. For an instance, Fang and Tsai (2005) illustrate and example; the intensive care unit is a place where fast decision making is necessary as patients lives are in danger. In this case, the customers need would be the treatment while the service team which includes surgeons and consulting doctors will share knowledge among themselves to make resourceful decisions to save a patients life. At present, there is a lack empirical research to examine the relationship between customer focus and knowledge sharing. Therefore, the following hypothesis is presented: Hypothesis 6: Customer Focus is positively associated with knowledge sharing. 2.7.7 Research Framework The relationship between the six dimensions of TQM and Knowledge Sharing is shown by Figure 2.2 below. Formulation of this research framework was based on the hypothesis thats discussed above. In this research framework, TQM practices are independent variables and knowledge sharing is a dependent variable. This study will focus on the relationship of each TQM practices to knowledge sharing. Figure 2.3: Research Framework Total Quality Management (TQM) Practices Leadership (H1) Organizational Culture (H2) Teamwork (H3) Training and Development (4) Reward System (5) Customer Focus (6) Knowledge Sharing

Water Management in Jordan Essay -- Environmental Management Science

Water shortage is a global problem and the consequences of water deficit can be a future crisis. According to Hasan Ali (2002, 1-3) the world large water deficient region is the Middle East. Jordan is one of the water-scarce countries in this area, Jordan is similarly in the top of ten water-deficient countries. The reasons of this problem are the features of nature such as semi-arid climate, few water sources and low precipitation. Because of that, the country has the lowest per head basis of water in the world. The other reasons are social effects namely rising population, resulting from a high degree of urbanization, gain of engineering systems and economic development (Akawwic et al. 2009, 197-198). The aim of this essay is to suggest the most effective solutions to avoid the future crisis in Jordan. Four solutions will be analysed in this essay: firstly, adoption of irrigation systems; secondly, water harvesting; thirdly, desalination; fourthly, water management. Initially, the largest customer of water resources is the agriculture sector. It is a really danger for Jordan because the statistics show that water consumption of agriculture is about 80 % of all water. Therefore, firstly, the suitable solution is to reduce water consumption of agriculture (Akawwic et al 2010, 201). It could be realized with using effective irrigation methods such as drip or micro irrigation (ibid.,202). The irrigation methods, in particular, â€Å"furrow and basin irrigation†, which were often used in past, required large quantities of water. Therefore, these approaches were substituted by micro irrigation, in order to economize water resources (Abbasi et al 2010, 337). Generally, micro irrigation is the favourable and effective method, but there is in... ...October 24, 2010 ) Beithou. N. 2006. Proposed water management and control device for water losses problem in Jordan. J.Environ. Eng. Sci. 5:443-446. EBSCOhost http://www.search.ebscohost.com / (accessed November 5, 2010) Hasan Ali, B. 2002. Modern and Traditional Irrigation Technologies in the Eastern Mediterranean: Water-demand management in the Mediterranean. 2nd ed. Ottawa, ON, CAN: IDRC Books. Ebrary http://site.ebrary.com/lib/astana/ (accessed ) Hassan,Y, F. Molle and J-P. Venot. 2008. Irrigation in the Jordan Valley: Are water pricing overly optimistic? Agricultural Water Management. 95:427-438. Science Direct http://www.sciencedirect.com/ (accessed October 24, 2010 ) Mohsen. S. 2007. Water strtegies and potential of desalination in Jordan. Desalination. 203: 27-46. Science Direct http://www.sciencedirect.com/ (accessed November 5, 2010 )

Orthopraxy In Islam Essay -- essays research papers fc

Orthopraxy in Islam   Ã‚  Ã‚  Ã‚  Ã‚  Islamic life is centered on the physical practice of prayer (salat). With that the religion of Islam itself is based in the methodical movement through which Muslims show their devotion to Allah. The prayer begins with the devotee standing, bending slowly into a sitting position and ending in full prostration. Bowing fully onto the ground is a practice that shows humility and represents the true devotion of members. Practice-centered religion differentiates itself from â€Å"orthodox† religion in that it focuses primarily on ritual practice, rather than theology or doctrine, orthodox meaning â€Å"correct opinion†. The most visible orthodox religion of America is Christianity. Christianity centers life around the opinions of the church with less emphasis on purity and behavior. Islamic life is distinctly based on what can be defined as â€Å"orthopraxy† or the importance of religious practice. The orthopraxy of Islam can be seen in at least th ree of the Five Pillars of Islam, salat, Ramadan and the hajj, which are also representative of Muslim faith and duties.   Ã‚  Ã‚  Ã‚  Ã‚  Salat, as mentioned earlier, is the performance of prayer five times a day. The prayer, which includes full prostration, is performed facing Mecca. In the The Meaning of the Glorious Koran, (the earliest source of Islamic writing as dictated to Mohammed), it is written, â€Å"Whencesoever thou comest forth (for prayer, O Mohammed) turn thy face toward the Inviolable Place of Worship. Lo! it is the Truth from thy Lord. Allah is not unaware of what ye do (Surah 2:149).† Implicit directions for prayer also display the amount of emphasis on practice. Salat must be performed five times daily, at specific times of the day: early morning, noon, mid-afternoon, sunset, and evening. Each Friday a congregational service is held at the mosque and every male is required to attend. Before prayer, four ritual aspects are required: ritual purification, proper covering of the body, proper intention, and facing Mecca, or qibla (1). The emphasis on purity is directly associated with prayer, as one must not be impure in any way when one prays. The ritual impurity associated with everyday living is known as najasa or hadath. Najasa is external impurity including but not limited to, urine, blood, pus, feces of animals and humans. Hadath is impurity of the soul... ...ractices of The Five Pillars of Islam, the original and continually practiced rituals of Muslims. The difference also involves the lifestyle of the Christians. In most Christian sects/denominations there is no encounter with personal circumambulation, prostration or ritual covering of the body. These physical aspects of Islam truly separate it from what can be considered orthodoxy. The faith and duties of Islam are inside of the practices performed. The Islamic people practice strict physical rituals that correspond directly with their belief system. The Five Pillars of Islam exemplify the practices of Islam in that they require physical practice including worship, behavior and ritual cleanliness. The practices are followed obediently by Muslims and are seen as enhancing the relationship one has with Allah. As Dr. Denny says, â€Å"Islam†¦on the other hand, view[s] religion as a way of life and a ritual patterning of that life under God’s lordship (1).† Works Cited 1.  Ã‚  Ã‚  Ã‚  Ã‚  See Frederick Denny’s book, An Introduction to Islam pages 112-136. 2.  Ã‚  Ã‚  Ã‚  Ã‚  Pickthall, Mohammed Marmaduke, ed. The Meaning of the Glorious Koran. Mentor, NY, NY.

Private Gun Ownership Should NOT be Banned Essay -- gun control laws

Would you choose to own a gun if your life depended on it? America has defended itself with guns since December 13, 1631 when the National Guard was born. We are a country that defends what we love. What do we defend ourselves with? Guns of course. Guns and America were discovered around the same time. Guns will forever be a part of America. Without guns the American Revolution would not have been won (Boehm). There have been some times in American history where guns have caused the loss of innocent Americans lives due to an unstable person, but there have also been multiple times where guns have defended each and every American’s freedom. Most people don’t think about a day-to-day basis and how guns can be beneficial to our lives. Private gun ownership should not be banned because guns provide protection, people are responsible for killing people, without guns, criminals will find other ways to kill, and it is our American right to own guns to protect ourselv es. Without guns, people would be running crazy in the streets. We all want to have that warm, fuzzy feeling of protection. Protection is now the top reason Americans own guns (Personal). Those who are against guns usually say there’s other ways to protect yourself such as calling 911 or the local police (Justice). Although that is true, it is an unrealistic way of protection. Police usually arrive after a crime is committed or when it is too late (Why). The first person to encounter a criminal with a gun is the victim and if the victim is armed, they can protect themselves on the spot and not have to hid or wait for the police to arrive. We call the police because they are armed with a firearm and can protect you. If used for protection, guns will save ... ... n.d. Web. 11 Dec. 2013. "Personal Safety Top Reason Americans Own Guns Today." Personal Safety Top Reason Americans Own Guns Today. N.p., n.d. Web. 11 Dec. 2013. "Statistics Prove: More Guns, Less Crime." Infowars Statistics Prove More Guns Less Crime Comments. N.p., n.d. Web. 11 Dec. 2013. "What Are the Gun Laws in Iowa?" About.com Crime / Punishment. N.p., n.d. Web. 11 Dec. 2013. "Why Own a Gun? Protection Is Now Top Reason." Pew Research Center for the People and the Press RSS. N.p., n.d. Web. 11 Dec. 2013. "Adam Lanza Wouldn't Have Been Stopped by Stricter Gun Control Laws." PolicyMic. N.p., n.d. Web. 11 Dec. 2013. "Justice Stevens: You Have the 'Constitutional Right' to Call 911, Not to Own a Gun | Outdoor Life." Outdoor Life. N.p., n.d. Web. 11 Dec. 2013. "Refuting Anti-Gun Control Arguments." The Progressive Cynic. N.p., n.d. Web. 11 Dec. 2013.

Financial Ratios for East Coast Yachts

Question 1: Financial ratios for East Coast Yachts: Current ratio| =| Current Assets| | | Debt-equity ratio| =| Total liabilities| | | Current Liabilities| | | | | Total equity| | =| $14,651,000 | | | | =| $19,539,000 + $33,735,000| | | $19,539,000 | | | | | $55,341,000 | | =| 0. 75| | | | =| 0. 96| | | | | | | | | | | | | | | | | Quick ratio| =| Current Assets – Inventory| | | Equity multiplier| =| Total assets| | | Current Liabilities| | | | | Total equity| | =| $14,651,000 – $6,136,000| | | | =| $108,615,000 | | | $19,539,000 | | | | | $55,341,000 | | =| 0. 44| | | | =| 1. 96| | | | | | | | | | | | | | | | Total asset turnover| =| Sales| | | Interest coverage| =| EBIT| | | Total Assets| | | | | Interest| | =| $167,310,000 | | | | =| $23,946,000 | | | $108,615,000 | | | | | $3,009,000 | | =| 1. 54| | | | =| 7. 96| | | | | | | | | | | | | | | | | Inventory turnover| =| COGS| | | Profit margin| =| Net Income| | | Inventory| | | | | Sales| | =| $117,910,000 | | | | =| $1 2,562,200 | | | $6,136,000 | | | | | $167,310,000 | | =| 19. 22| | | | =| 7. 51%| | | | | | | | | | | | | | | | | Receivables turnover| =| Sales| | | Return on assets| =| Net Income| | | Accounts receivable| | | | | Total assets| =| $167,310,000 | | | | =| $12,562,200 | | | $5,473,000 | | | | | $108,615,000 | | =| 30. 57| | | | =| 11. 57%| | | | | | | | | | | | | | | | | Debt ratio| =| Total assets – Total equity| | | Return on equity| =| Net Income| | | Total assets| | | | | Total equity| | =| $108,615,000 – $55,341,000| | | | =| $12,562,200 | | | $108,615,000 | | | | | $55,341,000 | | =| 0. 49| | | | =| 22. 70%| | | | | | | | | | | | | | | | | Question 2: | | East Coast Yachts| | Yacht Industry Ratios| | | | | Lower Quartile| Median| Upper Quartile| Current ratio| | 0. 75| | 0. 50| 1. 43| 1. 9| Quick ratio| | 0. 44| | 0. 21| 0. 38| 0. 62| Total asset turnover| | 1. 54| | 0. 68| 0. 85| 1. 38| Inventory turnover| | 19. 22| | 4. 89| 6. 15| 10. 89| Receivables turnover| | 30. 57| | 6. 27| 9. 82| 14. 11| Debt ratio| | 0. 49| | 0. 44| 0. 52| 0. 61| Debt-equity ratio| | 0. 96| | 0. 79| 1. 08| 1. 56| Equity multiplier| | 1. 96| | 1. 79| 2. 08| 2. 56| Interest coverage| | 7. 96| | 5. 18| 8. 06| 9. 83| Profit margin| | 7. 51%| | 4. 05%| 6. 98%| 9. 87%| Return on assets| | 11. 57%| | 6. 05%| 10. 53%| 13. 21%| Return on equity| | 22. 70%| | 9. 93%| 16. 54%| 26. 15%|The liquidity ratio shows that the company has less liquidity as compare to the whole industry. East Coast Yachts current ratio is below the median industry ratio and the quick ratio is positioned at the median industry ratio. This indicates that the company may access to short-term borrowing. Referring to the turnover ratio, all the three ratios, I. e. total asset turnover, inventory turnover and receivables turnover are higher than upper quartile industry ratio. This indicates that the company is more efficient among the whole industry in using its assets to generate sales.The financial levera ge ratios, which include the debt ratio, debt-equity ratio, equity multiplier and interest coverage, are all below the median industry ratio, but higher than the lower quartile. This shows that East Coast Yachts is having less debt than the other companies in the industry, but is still within the normal range. The profit margin, return on assets as well as return on equity of the company are higher than the industry median. This shows that the company’s profitability is performing well among the whole industry.As an overall, East Coast Yachts is performing well in the industry, while more concentration would only be required to be placed on the liquidity ratios. Question 3: Return on equity = 22. 70% Retention ratio (b)| =| Net income – Dividends| | | Net Income| | =| $12,562,200 – $7,537,320| | | $12,562,200 | | =| 40%| Sustainable growth rate (SGR) = Return on equity x Retention ratio = 22. 70% x 0. 4 = 9. 08% Increase in assets| =| Assets| x| ? Sales| | | Sal es| | | | =| $108,615,000 | x| (167,310,000 x 9. 08%)| | | $167,310,000 | | | | =| $9,862,242. 00 | | | | | | | |Increase in spontaneous liabilities| =| Spontaneous liabilities| x| ? Sales| | | Sales| | | | =| $6,461,000 | x| (167,310,000 x 9. 08%)| | | $167,310,000 | | | | =| $ 586,658. 80 | | | | | | | | Retention ratio (b)| =| Addition to RE| | | | | Net income| | | | =| $5,024,880 | | | | | $12,562,200 | | | | =| 40%| | | | | | | | Profit margin| =| Net income| | | | | Sales| | | | =| $12,562,200 | | | | | $167,310,000 | | | | =| 8%| | | | | | | | Increase in equity| =| PM x Projected sales x retention ratio| | =| 8% x ($167,310,000 x 1. 0908) x 0. 4| | =| $5,840,055. 94 | | | | | | | | External Funds Needed (EFN)| =| Increase in assets – Increase in spontaneous liabilities – Increase in equity| | =| $9,862,242. 00 – $586,658 – $5,840,056| | =| $3,435,527. 26 | | | | | | | | | | | | | East Coast Yachts| | | Pro forma Income Statement| | | Sales| | 182 ,501,748| | | Cost of goods sold| | 128,616,228| | | Other expenses| | 21,809,455| | | Depreciation| | 5,460,000| (Assume constant)| Earnings before interest and taxes (EBIT)| 26,616,065| | | Interest| | 3,009,000| (Assume constant)|Taxable income| | 23,607,065| | | Taxes (40%)| | 9,442,826| | | Net Income| | 14,164,239| | | Dividends| | 8,221,709| | | Addition to RE| | 5,481,139| | | | | | | | East Coast Yachts| | | Pro forma Balance Sheet| | | Assets| | | | | Current assets| | | | | Cash| | 3,318,214| | | Accounts receivable| | 5,969,948| | | Inventory| | 6,693,149| | | Total| | 15,981,311| | | Fixed assets| | | | | Net plant and equipment| | 102,495,931| | | | | | | | | | | | | Total assets| | 118,477,242| | | | | | | | Liabilities| | | | | Current liabilities| | | | | Accounts payable| | 7,047,659| | | Notes payable| | 14,265,482| | |Total| | 21,313,141| | | | | | | | Long term debt| | 33,735,000| | | | | | | | Shareholders' equity| | | | | Common stock| | 5,200,000| | | Retaine d earnings| | 54,693,803| | | Total equity| | 59,893,803| | | | | | | | Total liabilities and equity| | 114,941,944| | | | | | | | EFN| | 3,535,298| | | Current ratio| =| Current Assets| | Debt-equity ratio| =| Total liabilities| | | Current Liabilities| | | | Total equity| | =| $15,981,311 | | | =| $21,313,141 + $33,735,000| | | $21,313,141 | | | | 59,893,803 | | =| 0. 75| | | =| 0. 92| | | | | | | | | | | | | | |Quick ratio| =| Current Assets – Inventory| | Equity multiplier| =| Total assets| | | Current Liabilities| | | | Total equity| | =| $15,981,311 – $6,693,149| | | =| $118,477,242 | | | $21,313,141 | | | | $59,893,803 | | =| 0. 44| | | =| 1. 98| | | | | | | | | | | | | | | Total asset turnover| =| Sales| | Interest coverage| =| EBIT| | | Total Assets| | | | Interest| | =| $182,501,748 | | | =| $26,616,065 | | | $118,477,242 | | | | $3,009,000 | | =| 1. 54| | | =| 8. 85| | | | | | | | | | | | | | | Inventory turnover| =| COGS| | Profit margin| =| Net Income| | | Inventory| | | | Sales| =| $128,616,228 | | | =| $14,164,239 | | | $6,693,149 | | | | $182,501,748 | | =| 19. 22| | | =| 7. 76%| | | | | | | | | | | | | | | Receivables turnover| =| Sales| | Return on assets| =| Net Income| | | Accounts receivable| | | | Total assets| | =| $182,501,748 | | | =| $14,164,239 | | | $5,969,948 | | | | $118,477,242 | | =| 30. 57| | | =| 11. 96%| | | | | | | | | | | | | | | Debt ratio| =| Total assets – Total equity| | Return on equity| =| Net Income| | | Total assets| | | | Total equity| | =| $118,477,242 – $59,893,803| | | =| $14,164,239 | | | $118,477,242 | | | | $59,893,803 | | =| 0. 49| | | =| 23. 5%| | | East Coast Yachts| | | Original ratios| | Based on pro forma| Current ratio| | 0. 75| | 0. 75| Quick ratio| | 0. 44| | 0. 44| Total asset turnover| | 1. 54| | 1. 54| Inventory turnover| | 19. 22| | 19. 22| Receivables turnover| | 30. 57| | 30. 57| Debt ratio| | 0. 49| | 0. 49| Debt-equity ratio| | 0. 96| | 0. 92| Equity multiplier| | 1. 96| | 1. 98| Interest coverage| | 7. 96| | 8. 85| Profit margin| | 7. 51%| | 7. 76%| Return on assets| | 11. 57%| | 11. 96%| Return on equity| | 22. 70%| | 23. 65%| As noted from above, the liquidity and turnover ratio will remain constant assuming growth precisely at 9. 8%. Debt-equity ratio will decreased slightly while equity multiplier and interest coverage increased, assuming interest remain constant. Slight improvement also noted from profit margin, return on assets and return on equity. Question 4: Growth rate| | 20%| | | | | | | | Increase in assets| =| Assets| x| ? Sales| | | Sales| | | | =| $108,615,000 | x| (167,310,000 x 20%)| | | $167,310,000 | | | | =| 21,723,000. 00 | | | | | | | | Increase in spontaneous liabilities| =| Spontaneous liabilities| x| ? Sales| | | Sales| | | | =| $6,461,000 | x| (167,310,000 x 20%)| | $167,310,000 | | | | =| $1,292,200. 00 | | | | | | | | Retention ratio (b)| =| Addition to RE| | | | | Net income| | | | =| $5,024,880 | | | | | $12,562 ,200 | | | | =| 40%| | | | | | | | Profit margin| =| Net income| | | | | Sales| | | | =| $12,562,200 | | | | | $167,310,000 | | | | =| 8%| | | | | | | | Increase in equity| =| PM x Projected sales x retention ratio| | =| 8% x ($167,310,000 x 1. 2) x 0. 4| | | =| $6,424,704. 00| | | | | | | | External Funds Needed (EFN)| =| Increase in assets – Increase in spontaneous liabilities – Increase in equity| | =| $21,723,000. 0 – $1,292,200. 00 – $6,424,704. 00| | =| $14,006,096. 00| | | | | | | | | | | | | | | | | | East Coast Yachts| | | Pro forma Income Statement| | | Sales| | 200,772,000| | | Cost of goods sold| | 141,492,000| | | Other expenses| | 23,992,800| | | Depreciation| | 5,460,000| (Assuming constant)| Earnings before interest and taxes (EBIT)| 29,827,200| | | Interest| | 3,009,000| (Assuming constant)| Taxable income| | 26,818,200| | | Taxes (40%)| | 10,727,280| | | Net Income| | 16,090,920| | | Dividends| | 9,044,784| | | Addition to RE| | 6,029,85 6| | | | | | | | East Coast Yachts| | |Pro forma Balance Sheet| | | Assets| | | | | Current assets| | | | | Cash| | 3,650,400| | | Accounts receivable| | 6,567,600| | | Inventory| | 7,363,200| | | Total| | 17,581,200| | | Fixed assets| | | | | Net plant and equipment| | 112,756,800| | | | | | | | | | | | | Total assets| | 130,338,000| | | | | | | | Liabilities| | | | | Current liabilities| | | | | Accounts payable| | 7,753,200| | | Notes payable| | 15,693,600| | | Total| | 23,446,800| | | | | | | | Long term debt| | 33,735,000| | | | | | | | Shareholders' equity| | | | | Common stock| | 5,200,000| | |Retained earnings| | 60,169,200| | | Total equity| | 65,369,200| | | | | | | | Total liabilities and equity| | 122,551,000| | | | | | | | EFN| | 7,787,000| | | | | East Coast Yachts| | | Original ratios| | Growth @9. 08%| | Growth @20%| Debt-equity ratio| | 0. 96| | 0. 92| | 0. 87| Equity multiplier| | 1. 96| | 1. 98| | 1. 99| Interest coverage| | 7. 96| | 8. 85| | 9. 91| Profit margin| | 7. 51%| | 7. 76%| | 8. 01%| Return on assets| | 11. 57%| | 11. 96%| | 12. 35%| Return on equity| | 22. 70%| | 23. 65%| | 24. 62%| The growth rate of 20% indicates that the EFN is $7,787,000.Debt-equity ratio will decrease by 0. 05. The profit margin, return on assets and return on equity shows improvement if the expansion plan was taken up, assuming interest and depreciation remain constant. The further expansion may be taken up as it will bring improvement to the company’s profitability. Also, debt-equity ratio is still below 1 hence there is room for the expansion to be taken up. Question 5: Depreciation rate| =| Depreciation| | | | | PPE| | | | =| $5,460,000 | | | | | $93,964,000 | | | | =| 5. 81%| | | | | | | | Cost of new line| | 30,000,000| | |New depreciation charged| | 1,743,220. 81| | | | | | | | | | | | | East Coast Yachts| | | Pro forma Income Statement| | | Sales| | 200,772,000| (Assuming growth rate 20%)| Cost of goods sold| | 141,492,000| (Assuming growth rat e 20%)| Other expenses| | 23,992,800| (Assuming growth rate 20%)| Depreciation| | 1,743,221| | | Earnings before interest and taxes (EBIT)| | 33,543,979| | | Interest| | 3,009,000| (Assuming constant)| Taxable income| | 30,534,979| | | Taxes (40%)| | 12,213,992| | | Net Income| | 18,320,988| | | Dividends| | 9,044,784| | | Addition to RE| | 6,029,856| | | | | | | East Coast Yachts| | | Pro forma Balance Sheet| | | Assets| | | | | Current assets| | | | | Cash| | 3,650,400| | | Accounts receivable| | 6,567,600| | | Inventory| | 7,363,200| | | Total| | 17,581,200| | | Fixed assets| | | | | Net plant and equipment| | 141,013,579| | | | | | | | Total assets| | 158,594,779| | | | | | | | Liabilities| | | | | Current liabilities| | | | | Accounts payable| | 7,753,200| | | Notes payable| | 15,693,600| | | Total| | 23,446,800| | | | | | | | Long term debt| | 33,735,000| | | | | | | | Shareholders' equity| | | | | Common stock| | 5,200,000| | |Retained earnings| | 60,169,200| | | Total equity | | 65,369,200| | | | | | | | Total liabilities and equity| | 122,551,000| | | | | | | | New EFN| | 36,043,779| | | Existing EFN| | 7,787,000| | | Additional EFN| | 28,256,779| | | Depreciation charged from increase in fixed assets at SGR of 20% was $1,743,220. 81. The new plant would cost $30,000,000. The additional EFN would be $28,256,779. The total EFN would become $36,043,779. This would imply that the capacity utilization would be lower next year, since the new plant would expand capacity much more than the required under SGR.