American Home Products Corporation Essay

1. How much business risk does American Home Products face? How much financial risk would American Home Products face at each of the proposed levels of debt shown in case Exhibit 3? How much potential value, if any can American Home Products create for its shareholders at each of the proposed levels of debt? A combination of business risk and financial risk shows the risk of an organization’s future return on equity. Business risk is related to make a firm’s operation without any debt, whereas financial risk requires that the firm’s common stockholders make a decision to finance it with debt. a) American Home Products has been operating on four main lines of business that are less uncertainty about product demand; for example, one of its business lines is food products because whenever people buy foods. It means that AHP’s business risk is low. As mentioned above, if a firm does its operation activities regularly without leverage, it means that its busines s risk is not significant high. Thus, ratio of cash to total assets is calculated by following: According to Figure 1, AHP’s cash was about 23% of total assets, rose constantly since 1978 to 1981, and reached 28.2% in 1981; thus, it has enough cash flow to finance its daily operation.  Also, return on assets can show that a firm’s ability to cover its operating cost by generating income. According to the calculation below, American Home Products Corporation’s ROA was stable and approximately 19.2 % in 1981; consequently, AHP earned sufficient amount of income to cover its operating cost. Figure 2 Return on Assets of Amercan Home Products Corporation, 1972-1981 ($ in millions) Add to these above explanations, Exhibit 1 shows that AHP’s peak annual growth in sales was 14.1% in 1978 and compare to it, annual growth in sales decreased by 5.3% in 1981; as a result, it became disadvantage to AHP because consumers started to interest into competitors’ products. Risk aversion was the most fundamental component of AHP’s culture; consequently, they prefer to acquire or take license of previously developed goods or produce similar products with its competitors rather than to develop new-products. Although it seems to save R&D expenses, acquisition cost or a cost of time response to steal other’s innovation would be still appeared. Thus, AHP should try to improve its sales. b) Financial risk is related to business risk, so we measured NOPAT, ROIC, ROE whose uncertainty future can determine a firm’s business risk in Figure 3. Figure 3 Pro Forma 1981 Results for Alternative Capital Structures ($ in millions except ratios) Above pro forma illustrates that total debt and financial risk have straight correlation with each other and AHP’s total debt increased, so its financial risk would rise. Then if American Home Products Corporation could not pay its loan and interest by schedule, it would meet the financial risk and the risk of bankruptcy. According to Exhibit 4, AHP used excess cash of 233 million dollars on each of the proposed levels to repurchase stocks and remaining amounts were financed by debt; thus, its common shares outstanding would decreased by 19.8 million shares on 30% dept ratio and 36.6 million shares on 70% debt ratio. It means that equity will goes down, so its return on equity will rise. AHP should consider about financial risk to change the capital structure. American Home Products Corporation can save taxes to pay by increasing debt. Figure 4 illustrates that its taxes savings can be advantage to AHP if it uses heavier capital structure. Figure 4 Pro Forma 1981 Taxes Savings ($ in millions) According to Figure 4, if the company’s capital structure is 70% debt to total capital, comparing to 30 % debt to total capital structure, it can save approximately 1.9 times greater money; thus, its shareholders would benefit from it. 2. What capital structure would you recommend as appropriate for AHP? What are the advantages of leveraging this company? The disadvantages? How would leveraging up affect the company’s taxes? How would the capital markets react to a decision by the company to increase the use of debt in its capital structure? Most appropriate capital structure for American Home Products is 30% debt to total capital. Several reasons will explain the reason why this structure gives advantage to AHP. The first, as using 30% debt ratio, the company would be able to be recapitalized; hence, common shares outstanding of 19.8 million can be repurchased. The second, according to Figure 4, AHP would have advantage to save taxes of 37.8 million dollars and its sha reholders benefit by getting more values. Exhibit 2 shows that Warner Lambert company’s debt ratio is approximately 32% and its bond rating is AAA or AA. It means that if AHP uses 30% debt and 70% equity, its bond rating will be same as Warner Lambert; consequently, bond interest to pay will not increase much due to bond rating. Addition to these reasons, AHP would face less risk to compare heavier capital structures. Finally, AHP’s annual growth in sales decreased in 1981 by 2.9% from previous year, so getting debt could be helpful to manage its operation effectively and increase its sales growth. Besides above advantages, using 30% debt and 70% equity capital structure has disadvantages. First of all, if a firm has a loan, it has to be responsible to pay its principle and interest as a schedule; otherwise, it would be reason to bankruptcy; thus, same rule works on case of AHP. In addition to the risk of bankruptcy, if the company’s daily operation requires more investment after recapitalization, gettin g new loan for it would be more difficult. In final, using debt can be reason to increase its financial risk, so it has to be more careful to manage its operation. According to Figure 4, leveraging the company by using 30% debt to capital structure would decrease its taxes of 37.8 million dollars to pay. The capital market would react positively to a decision by the company to use of 30% debt in its capital structure. The company had almost no debt and had excess of cash or higher liquidity and Mr. Laborte who was chief executive of the company was near to give his position because of retirement, so most analysts expected the company to change its conservative capital structure. Also, Figure 5 shows the market positive reaction on the stock price. Figure 5 Stock Price of AHP ($ in millions except per share datas and ratios) According to Figure 5, AHP’s stock price will increase to 31.5. In order to calculate new stock price, we used average price/earnings ratio of both American Home Products Corporation and Warner Lambert Company in Exhibit 2 because exhibit 2 illustrates that while P/E ratio of AHP is 10.6%, 8% for Warner Lambert and unlike Warner Lambert, AHP has less financial risk. All though AHP’s risk will increase after getting leverage and its P/E ratio will decrease, AHP would have better financial position than Warner Lambert, so investors would be interested to buy AHP’s stock rather than stock of Warner Lambert. 3. How might AHP implement a more aggressive capital structure policy? What are the alternative methods for leveraging up? AHP should use heavier capital structure which means that increase to use more debt instead of conservative capital structure; consequently, AHP’s capital structure might be more effective and aggressive. The alternative methods for leveraging up are innovating new products, using better technology, and motivating labor. 4. In view of AHP’s unique corporate culture, what arguments would you advance to persuade Mr. Laporte or his successor to adopt your recommendation? According to Mr. Laporte, his company works in order to increase shareholders wealth, so as using 30% debt to capital would give possibility to save 37.8 million dollars from taxes; thus, its shareholders would benefit getting higher dividends per share. Even though after using debt, its price/earnings ratio might be decreased, its attraction of investors will be still powerful because of stock price increase. Also, if the company uses more debt to the operation, it will be possible to repurchase common stocks of 19.8 millions of shares from market.

National Push for Accountability in Schools

The pace of change dictates that schools should provide high quality learning standards to students. It requires that the school system should improve their learning approaches to enhance academic achievements of students. In this connection policymakers at the federal, state, and local levels have worked to increase accountability of the school system on the premise that the same plays a vital role in improving learning standards of students and society as well. This then pave the way to the recognition of evaluation of school performance to improve standards of learning and achievements of students.The system of accountability requires schools to define what students should know and be able to do and to measure progress and gaps in students’ achievement. It facilitates the attainment of the desired education standards anchored on quality content and high learning standards. Developing appropriate content and student achievement standards are accordingly important part of sho wing policymakers and the public a return on their educational investment. However, accountability of schools for students learning and achievement is impossible without a clear, focused road map on the achievement standards and what and how well students are to learn from kindergarten through graduation.Many states have developed content and achievement standards without involving stakeholders and teachers. They also have not considered how their standards are to be implemented, measured and tied to accountability. Developing content and student achievement standards without considerable contribution and input from a variety of sources is fatal as there is no sense of ownership as well as responsibility from the stakeholders and agencies not represented. The standards set are then viewed as bias and one-sided thereby defeating its purpose and rendering weak implementation of the system.Accountability system utilizes results from standardized tests to evaluate performance of student s and schools, and provide sanctions, rewards or interventions for schools, educators or students. This system involves consistent monitoring and evaluation of the students’ and schools’ performance that it requires active participation of the educators, parents, stakeholders, and policy makers. The ripple effect of the system requires that these concerned people and stakeholders should be consistently committed to the purpose, implementation, and evaluation in order to keep track of students and schools’ performance and eventually facilitate desired continuous improvement of schools’ performance standards.According to Kate Nolan (2002), â€Å"it is not enough to believe that all children can learn. All elements of the system must be held accountable for the success of all children†.   The effect of the accountability system in school is all encompassing that Kate Nolan further noted that, â€Å"the improvement in school performance requires imp rovement in all stakeholders’ performance†. Thus change in the system should not be an isolated case for the school sector but also on the part of the stakeholders as accountability requires their active participation and commitment for the system to work.It is noted that the accountability system is designed to be a tool for instituting changes in schools that would positively benefit the students, parents, community and the country in general. This system provides opportunities and avenues for joint effort of all people and agencies concerned to raise the standards of the education system thereby improving school performance and learning of the students. The intention of the program is indeed noble and reflects an effort to bring education system to respond to the fast changing demands of the learning community, yet a lot of areas need thorough consideration and re-evaluation.According to Chuch Poochigian, â€Å"the education system reforms undertaken in the past yea rs have greatly enhanced the ability of the parents to monitor the performance of their children as well as of the school where they are enrolled, however, the only way that the drive for accountability in education will be truly successful is if parents utilize the new tools offered to them to ensure that their children receive quality education.† This statement should give one an idea that accountability should not be limited to the school sector only.According to Douglas B. Reeves (2002), â€Å"accountability must be viewed in a different way. It must consider and address the issues in congruence of the objectives and the strategies, specificity, relevance, respect for diversity, continuous improvement, and focus on achievement, not norms.† Accountability system is highly complex and involves a range of interconnected issues and design as well as technical issues on the implementation and evaluation aspect that needs further thorough study and reconsideration.Also it must be noted that no matter how enlightened or elegant the assessment devices, if the focus is limited to gathering and reporting data rather than skillful use of those data for learning and achievement enhancement of students, little improvement to school performance will result. Thus, the best way to know whether an accountability system is working is to see whether the school system it accounts for is moving from where it was to where it wants to be. From its first implementation, an accountability system requires not only internal implementation but also external monitoring.Indeed the national push for accountability dignifies the need to improve standards of school performance and would greatly benefit the students but the approach is insufficient and has undesirable side effects. Schools do not per se reject accountability as the same is an intrinsic responsibility, but an authentic approach to accountability must be formulated. A new set of principles must be created to gui de the reconstruction of accountability systems to better meet the needs of education and students, and to avoid the dangers often associated with current accountability systems. Further, collaboration and supportive effort of the school, stakeholders and policymakers must be promoted.Reference ListNolan, K. (2002). Excerpts from using accountability to build strong schools. EducationCommission of States. Retrieved February 20, 2007 from http://www.ecs.orgPoochigian, C. School accountability reforms. Retrieved February 23, 2007 fromhttp://www.reasons.org/pb34.pdf.Reeves, D. (2002). Accountability based-reforms should lead to a better teaching andlearning-period. Harvard Education System. Retrieved February 20, 2007 fromhttp://www.edletter.org/past/issues2002-ma/reeves.shtml.

County profilenoxubee county(second part) Essay

County profilenoxubee county(second part) - Essay Example The population living below poverty is relatively around 28.6%, as per the 2004 statistics. Either, education is highly of looming standards due to the poverty standards which cannot provide adequate structures for child learning. With the various structures to reduce poverty however, the same continues to become exclusively growing from the various rigidities and inequalities. The school dropout is as low as 64% which continues to worsen the future state of the county. Either, the county depicts poor standards of housing and compounds of health inadequacies. There are street houses and other form of temporary and low standard housing structures which cannot provide better standards of living. High poverty has also been a threat for medical uprightness with the people suffering from various ill-health conditions. There is very little distinction between the urban and the rural population. However, they are both mixed with various structures of the society been shared by both the urban and the rural communities. The general economic activity is however supported by practicing low manufacturing mainly in agricultural products. The same output is however allied to various inadequacies such as low scale quality products above that of lack of production efficiencies. The mushrooming of poverty continues to increase in intensity as poverty conditions and inequal ities for the support of better living standards become a disadvantage. However, an adequate strategy would perhaps provide a support for the long held desire of out doing the poverty burden. The most appropriate strategy should not look down the resource dispensation of this area. The basic contributing factor towards this high poverty level is the scale with which the economic activity operates in. The community is compounded by both high scale poverty situation and substantially medium state economic standards. SWOT Analysis Strengths Current education system, increasing rate of employment Opportunities International trade relations, high consumption rate. Weaknesses High School drop outs, single motherhoods, risk of health problems Threats Poverty, possible disease outbreaks. Increase in manufacturing as a development strategy Manufacturing industry plays a predominant role in the growth and development of the county. Other economic boosters are the transportation and the retail trade. The manufacturing industry shows a high development where, various industries such as food industry, textile, accessories and others form a basic contributor to its economic activity. With the current trend of changing economic activity, various economic attributes such as change in technology for more exploitation of the available resources and growth in human resource capital form basic factors for the growth of this industry. Manufacturing industry is the biggest contributor in terms of provision of jobs for this county. Its contribution to the total employment population is 5.4% which is equivalent of 1227 people who are directly and indirectly employed by this industry. The best strategy for increased economic development would be through more rationalized modes of activity in this industry. Other major contributors of economic developm

Historical evolution of psychology Assignment Example | Topics and Well Written Essays - 1000 words

Historical evolution of psychology - Assignment Example With the coming of modern psychologist and philosopher soon science replaced religion to became the modern day philosophy, with the ‘quest for truth’ becoming the ultimate God. Psychology, a discipline in the modern day branch of science, is a study of the human mind and its behavioral aspects. As Angell (1973) defines it â€Å"Psychology is commonly defined as the science of consciousness† (Angell, 1973). It is derived from the Greek words psukhe meaning the mind, the spirit or the soul and logia meaning, the study of. This study of the soul or mind goes long back into history and its origin can be traced back to the ancient Greek, Chinese and Indian philosophy. Psychology had always been a part of Philosophy from times long past, however in 1879 it became a separate science. In 1874 Wilhelm Wundt a German physiologist published a book known as Principles of Physiological Psychology, where he related the two branches of science, Physiology and Psychology. In 1879 when he first started a psychology lab in the University of Leipzig, it marked the official separation of Psychology from Philosophy. Psychology which is a study of the mind, deals with something that cannot be applied or felt by the physical senses of a human being. From the very start of civilization man has been contemplating on the very nature of human soul or the spirit. There was also the urge to explain many of the natural phenomenons like the lightning, the storm, the rains, the different phases of the moon and many other similar occurrences that affected the lives of the ancient people. The various questions and the urge to find an answer to all of them soon brought in the concept of animism and anthropomorphism, where nature was attributed with certain human characteristics. Often the term ‘ghost’ or spirit was used, that was granted to be present in all animate or inanimate objects, and was assumed to be the

Chose and research an organisation with a particular focus on a Essay

Chose and research an organisation with a particular focus on a current HRM issue or process - Essay Example It is based in Japan but has spread its business to many countries in the wave of globalization. It has strong presence in United States and North America. Sales in these regions provide more than 70% of the profit worldwide. This increasing market share and rapid growth is not without its drawbacks. I have selected Toyota motors because of the recent disaster the company faced. Toyota automobile is famous for its quality but had to recall nine million cars worldwide. In addition to the obvious financial loss there was also huge loss of public image as well. The issue was mismanaged and handled poorly which tarnished the brand reputation in the public eye. It caused the company to touch the lowest ever sales in more than a decade. According to business week estimates because of this recent recall Toyota is facing $ 155 million per week and Toyota has lost almost $30 billion in stocks. In the long run the company can lose hundreds of billions of dollars because of this problem. So who is responsible for such a huge loss? On the outset it seems a great technical fault. Engineers, technicians, quality assurance people seems to be the most obvious people responsible for this disaster. The mechanical issue which affected eight models of Toyota is not the sole responsibility of the people associate with the design department, or technical staff producing faulty pedals and onboard computers. Can only technical staff be blamed for this disaster? Were Toyota leaders unaware of this mechanical fault? If they were unaware shouldn’t they be blamed for their unawareness? However, this is not the scenario. With the much hyped up Toyota production system (TPS) how such negligence is possible. TPS is known all over the world for its quality. Toyota production system (TPS) is also defined as the lean production system which emphasizes on cost cutting. It utilizes half the human capital, investment in machinery, manufacturing space and engineering hours as compared to mas s production system. Toyota production system brought the current Japan economic preeminence. This production system developed by Toyota was followed by many other industries and organizations which brought the economic profits for Japan. Just in time (JIT) production was the rationale behind Toyota production system. The major goal of TPS was cost cutting with sub goals like quality control, quality assurance and respect for humanity in terms of utilizing human resource to achieve cost objective. 2(Alavudeen & Venkateshwaran, 2008) With such renowned and successful TPS such mechanical fault was not expected. There is enough evidence that the Toyota leaders were aware of this mechanical fault long before any action was taken. This behavior suggests that the managers were actually trying to hide the issue which resulted in such disaster. With so much emphasis on cost cutting and setting it as the primary objective in TPS was probably the root cause for this disaster. If the root caus e of this failure is bad decisions by employees, ignoring a known issue, mishandling it in public then instead of just blaming the technical staff we should try to identify what made them behave like this. And the question arises to justify the rationale behind such decisions. If we make an attempt to understand the behavior then the role of HR becomes prominent. What was lacking or deficient or simply

Qualitative 2 Essay Example | Topics and Well Written Essays - 750 words

Qualitative 2 - Essay Example There is particular method taken towards describing the basic elements within the data analysis and interpretation of the narratives retrieved from the interviews. The initial step entails reading and re-reading of the text provided to facilitate a better understanding of the provided data. This is the part where one has to consider the quality of the data via identifying key aspects, for example, impressions or any limitations. This is vital to the analysis to aid in eliminating any chance of collecting irrelevant data that does not make any meaning or add any value to the qualitative analysis The next step entails a directive that focuses on the analysis of the data findings via reviewing the purpose of the qualitative evaluation. The evaluation defines how one intends to use the results of the study by applying common approaches like looking into how the involved entities in all the readings related and in turn organize them to identify the similarities, consistencies and even the differences in the information. This process can also be referred to as categorization of information, which involves placing data according to identified themes or patterns that represent ideas having relevant information of coherent categories. The main focus of the data gathered and being analyzed are to aid in the re-engineering and re-development of Business Take On (BTO) and the client billing process. The readings from the data sets provided highlight on how business is conducted within the organization. The process map provided showcase how the various department or sections of the business are contingent or dependent on each other for the day to day execution of business operations. The findings in the qualitative study of the passages are sustained by the presence of the supporting conditions which show relation between all the

Critically consider the challenges and opportunities that social and Essay - 1

Critically consider the challenges and opportunities that social and community enterprises face in their pursuit to affect social change - Essay Example Such new generation of entrepreneurs uses new approaches from the commercial world and employ new types of  technology  to embrace the greater amount of social  and  environmental  problems that occurred recently. Now enterprises are socially and environmentally oriented and it does not matter whether it is a for-profit or a non-profit organization, its entrepreneurial solutions propose more engagement, jobs and hope in those areas where until today there were none of such enterprises (Branson, 2013). There appeared entrepreneurs with social passion, whose creativity skills and entrepreneurial frame is deeply in mind, those who are ready to create and implement â€Å"something out of nothing† (Praszkier & Nowak, 2011). These individuals are the social entrepreneurs and these are their businesses, which have already created a phenomenon of social entrepreneurship in practice. Social entrepreneurs are aimed to address their activities to the unsolvable social problems and that is how these modern companies have earned a considerable success in motivating a people to generate a huge impact on the society (Defourny & Nyssens, 2010). By the time that social entrepreneurs became well known type of business makers, they have grown into a global movement earning the name of those who bring social- value creations to people and thus are appreciated by more and more people. However, due to the limited research in this sphere, there is no single opinion whether social entrepreneurs bring mainly good things to the society or whether their activities are underestimated (Short, Moss & Lumpkin, 2009). The following paper will try to analyze the challenges and opportunities that social enterprises face today and if it impacts social change. Due to many researches that were studied, there are several definitions of social entrepreneurship. One of such definitions claims that its aim is the ability of