Britton Essay Example | Topics and Well Written Essays - 1000 words

Britton - Essay Example Then again, created nations are characterized as ‘technologically and biologically progressed, appreciate moderately exclusive expectations of living and have current social and political establishments and structures’ (Huybers, 2007, p. 28). Britton communicates his own view on immature nations by citing ‘third word nations are believed to experience the ill effects of a progression of regular basic contortions in their financial and social association. Britton makes stresses that underdeveloped nations are portrayed by types of ward advancement. Britton claims that reliance is conceptualized as the procedure of verifiable molding that changes the interior working of social and financial sub-framework inside an immature nation. He further blueprints that outside gatherings have an inheritance of political, ideological and monetary change in the underdeveloped nations (Britton, 1982, p. 333). He explains that reliance involves the subjection of the national financi al freedom, which needs to meet the prerequisites of outside people and high society as a substitute of political needs. As indicated by his investigation, Britton accepts that auxiliary changes incorporate absence of essential framework like air space, streets and legitimate information on the travel industry are the fundamental driver of the underdevelopment. Telfer and Sharpley likewise credits this underdevelopment to sexual orientation issues like absence of human wellbeing, rights and security (Sharpley and Telfer, 2008, p.4). Britton through his diary draws the way that expansionism is a significant key in how much advancement happens in a specific nation. Colonization is characterized as the intrusion and control of different people’s assets and land. During colonization, the first populace is kicked out of enormous plots of land and pilgrims from another nation possessing their territory (Mowforth and Munt, 2003, p. 73). Britton likewise contends that, pioneer and su preme control has generally added to the defeat of many immature nations particularly during the post-provincial period. Many post-colonized nations have close binds with the administration of the nations that colonized them. In any case, as indicated by Britton, this advantages the immature nations and offers them an opportunity to prosper because of these advantages since individuals from the decision class bear the force required in managing the outside government agents and authorities of the business itself. As per Britton, many immature countries use the travel industry in creating remote trade just as expanding work openings that pull being developed capital. In this way, these immature nations chiefly target sightseers from these created nations since they are viewed as higher esteemed as far as the travel industry (Kunkel, 2008, p. 37). All together for the immature countries, to build up a solid vacationer economy they must be depend on the created countries since capital from remote the travel industry is fundamental and helpful to any creating country. Along these lines, post-provincial nations consistently look for abroad interests so as to help them in creating the travel industry plans. Because of this, many immature countries have created business attaches with created nations that are their significant visitors since they to a great extent help them in raising income (Lea, 1988, p. 27). Also, Briton expresses the way that underdeveloped nations don't have a decision yet to acknowledge the high degree

Society and Family Conflict in A Raisin in the Sun by Lorraine Hansberr

Society and Family Conflict in A Raisin in the Sun by Lorraine Hansberry   â â Within the setting of some random crossroads ever, the progression of time permits reflection on the mentalities and feelings of individuals. The political climate, business crazes, social patterns or strict intensity of the time we watch, all loan zest to the perspectives that we will discover there. A few parts of our human instinct are as immortal as eating or resting, for example, the obligations of a family or the contentions which destroy them. In Lorraine Hansberry's work A Raisin in the Sun we can see plainly not just the dramatization every one of us survives in the ties of family and love, yet it gives us an undying cut of history of the occasions wherein it was composed.  â â â â â â â A great part of the political activity that happened during the time depicted inside this play is explicit to the time which it depicts. In Chicago and somewhere else, the financial torment of minority families was ... ... Carlisle, David K. 1998. Dark Combat Units In Korean War Action. [Online] Available:â http://members.aol.com/warlib/dkc2.htm [2000, June 12]. Hansberry, Lorraine. A Raisin in the Sun. Beatty, J., Hunter, J. P. (Eds.)(1998) Norton Introduction to Literature (seventh Ed.). New York: Norton (pp.â 1381-1485). MSN Microsoft Network. Encarta. W.E.B. DuBois. [Online] Available: http://encarta.msn.com/list/conciseindex/2E/02E91000.htm?z=1&pg=2&br=1 [2000, June 11]. Â

Marketing Analysis Paper

Marketing Analysis Paper Marketing Analysis Paper Home›Marketing Posts›Marketing Analysis Paper Marketing PostsMarketing has been known to be a way of promoting and selling of products. In this essay, we are critically going to focus on the different types used by marketers to determine product positioning, competitive positioning, customer’s perception and distribution-channel analysis. In addition, we will focus on the comparison on the strengths weaknesses of each method and finally assessing different types of marketing analysis required to develop marketing strategy.Product positioning has been known to be the act of coming up with an image of what a given client or company is offering so as to make the consumer or the target customer to have the full knowledge needed about the product that is being marketed in relation to competitors. Having the image of the product to be marketed then some analysis which determines the product positioning needs to be used for the better marketing.These analyses are such as factor analysis, discriminate analysis and multidimensional scaling. Factor analysis has been known to represent the attributes in terms of smaller number of underlying factors after which the brand ratings are then used to position the brands while discriminate analysis also requires respondents to provide attribute ratings even though like factor analysis its objective is to minimize the required number of attributes to a smaller number of underlying dimensions.Despite having the almost the same characteristics as such of those of factor analysis, they tend to differ whereby discriminate analysis tries to focus on those attributes which has got different brands and it also tends to assume those attributes which shows a large variations within the products themselves. That is why, in product positioning, this analysis identifies the underlying dimensions among those groups.   Finally, Multidimensional Scaling was seen to enable the products to be mapped spatially so th at the relative positions in the mapped space should reflect the degree of the perceived similarity between the products (Kohli Leuthesser, 2011).With the analysis discussed above, it’s important for one to note the strengths and weaknesses of each and every analysis when it comes to marketing the product. Some of the strengths of the factor analysis technique are, it reduces the complexity of the data through the means of reducing the number of variables (Kotler, et al. 2008). Apart from the reduction of the number of the analysis, it can be also be used to identify the hidden dimensions or even construct those dimensions which may tend to look apparent to the target market from the direct market and finally, it easy and ensures the right decision are made.As much as it posses those strengths, factor analysis also posses some weaknesses in it whereby the usefulness of the products entirely depends on the originator of the product. it is ability to collect the enough set of produ ct attributes needed and if the important attributes becomes unavailable, then the value of the procedure are reduced (Joshi, 2005). Incase there is any similarities in variables, then the factor analysis takes the responsibility of assigning single factor on it hence making it harder when it comes to identifications of factors that capture more interesting relationships and finally, naming of any factor may require the background knowledge because more attributes may lead to more correlation for no apparent reason.It will be of important if we happen to know the strengths of those factor analysis also, for instance, if we compare multidimensional scaling with factor analysis, in multidimensional scaling analysis, despite its strength in desirability, at the same time it has less products which may lead to unstable condition due to the consumer’s needs. That’s why it is recommended that more products should be available. Another weakness that may be experienced with multidimensi onal scaling is the same brand on the same products. This may lead to some customers not being considered when it comes to product wants of which might be found unavailable due to the same brand in the market.An advantage the product may have under multidimensional scaling is the allowance of the product to be reversed when it comes to ranking order among the subjects. It has also shown to be robust to embedding an existing set with new stimuli as long as the new stimuli are unlike and also multidimensional scaling has also become robust when it comes to metric and finally it has got an easy interpretation, in multidimensional scaling analysis, fewer dimensions are generated as compared to factor analysis due to factor analysis including those dimensions allowing for significant amount of the total variations.But when it comes to factor analysis with discriminate analysis, it defines dimensions which shows bigger differences between groups who pretend to ignore those dimensions of p roducts which have got the likelihood of showing the bigger variations. It can also be used as a complementary technique to highlight the dimensions which may tend to differ before as agreed among the customers.All the above kept into consideration, then there is a need for the company involved in the product to position the product based upon some opportunities provided. First, the originator of the product should consider the customer’s need and make sure the product is available, then he should identify the strengths that are both unique and important of which he should also determine on how incase the product develops some weaknesses, on how to correct it and making it look more appealing (Kotler, et al. 2008). There is also some need to change the consumer usage patterns by including some different or adding more products in the market and finally identifying those place that determine the best target for the product.Finally, there is need for the distribution channel so as t o develop a market strategy, this are the existing distribution channel which should focus on the relationship between the consumer and the manufacturer. Another one is the trend and the emerging channels which mean new opportunities can be offered to develop competitive market and the channel powered structure whereby if the product happens to have the little brand equity, then the retailers have negotiating power over manufacturers and can capture more margins.

Eastern New Mexico University Tuition, Acceptance Rate

Nanotechnology And Its Effects On Our Future - 1587 Words

Imagine that, in the near future, you need surgery in your lungs. Currently, it would be very invasive and very risky to do surgery on your lungs. But, with advances in nanotechnology, the surgery could be quick and painless. There could be almost no risk attributed to surgeries like nowadays, and it would not be nearly as invasive either. Nanotechnology is something that isn’t necessarily new, it has been talked about and worked upon for many years. However, there have been advances in this field that have led to new and also exciting discoveries. Surgeries, for example, are one of the things that nanotechnology has seen a promising future for. There is, however, a dark side of this. While there are many innovations that have launched this technology to the forefront of many scientists’ minds, there are also skeptics and nonbelievers that say this technology could do more harm than it could good. There are many pros, but there are even more cons to this technology. Thi s reason is why so many people say that we should not be pushing this technology as far and as hard as we currently are. If there is not a change in the rapid growth of this technology, there could be some undesirable consequences. There is a nearly universal belief that cancer is horrible. There is also nearly universal belief that the treatments we have today for cancer are not effective at all, and they are also not safe. Chemotherapy is one of the most widespread treatment options, and it clearlyShow MoreRelatedThe Impact of Nanotechnology in Our Lives1523 Words   |  7 PagesThe Impact of Nanotechnology in Our LivesNanotechnology is science and engineering at the scale of atoms and molecules. It is the manipulation and use of materials and devices so tiny that nothing can be built any smaller. It refers to the use of materials with nanoscale dimensions, ranging from 1-100 nanometers. Nanotechnology impacts our lives today in many ways, such as economically, socially, environm entally, ethically, and more. Nanotechnology is used broadly in many ones daily life. ManyRead MoreIntegration of Nanotechnology and Biotechnology882 Words   |  3 PagesTechnology has changed our lives tremendously, when we see the things that we can do with a simple computer or cell phone if we were to go back into time just a few years no one would believe that this technology is possible. Innovative minds of the 21st century have made life a lot easier for us. The advances seen in the 21st century alone are astounding. Advances in technology are even more evident in sciences fields, especially medicine. When we look at technologies such as Medical Robots thatRead MoreAnalysis Of Michio Kaku s Physics Of The Future1406 Words   |  6 PagesMichio Kaku’s, Physics of the Future (2011) is about the forthcoming technology and the beneficial uses we will have for them. Nanotechnology is one of the technologies Kaku illustrates. The government’s National Science Foundation Nanotechnology Report sta tes: â€Å"Nanotechnology has the potential to enhance human performance, to bring sustainable development for materials, water, energy, and foods, to protect against unknown bacteria and viruses†¦.† (p. 200). Nanotechnology will be a huge factor in theRead MoreThe Wide Possibilities of Nanotechnology Essay953 Words   |  4 Pagesand flourished with many inventions and advancements. Everyday, our science community continues to come up with new ideas to improve the world, especially in nanotechnology industry. The technologies that scientists have developed have greatly impacted the world. New technological discoveries are constantly being made in this this field, and projects are underway that will soon be used in the future years. The expansion of nanotechnology will improve the lives of many citizens because scientists areRead MoreThe Impact of Technology on the US Economy: The Development of Nanotechnology1725 Words   |  7 Pagesof technological development. A s a result, United States technological development has made a significant contribution to its robust economy. Since the technological development continues to rapidly grow to the present date, specifically the nanotechnology sector, the United States is pursuing to develop and expand its appropriate institutional mechanisms and policies to better manage the technological development. Currently, there are debates to whether the free market mechanism or government interventionRead MoreThe Effect Of Nanoparticles On Lung Cancer1323 Words   |  6 PagesThe Effect of Nanoparticles on Lung Cancer As time has gone on, the search to find a cure to lung cancer continues to this day. Researchers and scientists have spent years constructing numerous labs and tests trying to find an answer to the age old disease that has taken the lives of thousands. Lung cancer involves the rapid growth of unknown cells in the lung region. Unfortunately, similar to many other forms of cancer, it is difficult to detect symptoms at an early stage. In most cases, patientsRead MoreThe Impacts Coal-Fired Power Plants on the Environment 1878 Words   |  7 Pagesrenewable ways to generate electricity including recent studies in using Nanomaterial as a future option. (World Nuclear Association, 2014). Why is it a problem? Our human race is currently dangerously dependent on coal and various other fossil fuels for our electricity needs. The widespread use of coal has produced significant and harmful levels of pollutants that degrade our environment and adversely impact our health. (Union of Concerned Scientists, 2014) Although, scientists have only recently discoveredRead MoreImagine This, YouRe At The Doctor’S Office For A Visit1585 Words   |  7 Pagesif we could use modern nanotechnology to help overcome the disease by detecting it earlier? According to Joshua Smith, the speaker of New Nanotech to Detect Cancer Early., and his team has created a nanodevice to detect cancer early in a much less expensive way. Technology is ever changing in ways to become a method to detect cancer early, resulting in a large decrease in the percentage that have to fight the disease for years on end. With the creation of nanotechnology, the world can start toRead MoreAntimicrobial Potency Of Silver Nanopartic les1691 Words   |  7 Pagesbacteria. Silver nanoparticles have been also known to possess antimicrobial properties that aid in the fight against various bacteria. The use of plants as well as silver nanoparticles to fight against bacteria has caused much interest in the nanotechnology and medicine fields, and has been the basis of many studies. The purpose of this paper is to scrutinize the antimicrobial potency of silver nanoparticles, and how they may be utilized to fight against various harmful bacteria. â€Æ' Bacteria:Read MoreIs Technology a Solution or a Danger to Our Health and Society?1428 Words   |  6 Pages Is Technology A Solution Or A Danger To Our Health And Society? Over the last few years of my life, technology evolved in an abrupt manner. Science and its inventions over the centuries have made life easier and enjoyable. The future of genetics, neuroscience, and biotechnology bear the potential to transform our world for the better. Any technology that offers benefits will usually come with risks as well. In order to make wise decisions about using a technology, we must understand its potential

Pollution in New York Free Essays

Alberto A. Ortiz Bio 112 May 13, 2010 Pollution is all around us, everywhere we go, every day we experience some sort of pollution. Babies in the womb are more vulnerable than their mothers to DNA harm from air pollution, in spite of the additional protection that the placenta is thought to supply in removing toxins. We will write a custom essay sample on Pollution in New York or any similar topic only for you Order Now In a study of babies and their mothers in New York City, scientists found that babies had accumulated a relatively high amount of mutations, and they connected the mutations to vehicle emissions. The babies also had more toxins from secondhand smoke than their mothers, who didn’t even smoke. This information is listed in Environmental Health Perspectives. For many years, scientists have believed that a fetus may be more susceptible to toxins than an adult. Yet, new research among a handful of large studies has analyzed the genetic effects of pollution. It is not known what the health effects of this DNA damage, if any, are for newborns. Exposure to these types of pollutants and tobacco smoke has been linked to increased risk for cancer in adults. This finding raises concern about fetal susceptibility and underscores the importance of reducing air pollution,† says Frederica Perera, who led the study at the Columbia Center for Children’s Environmental Health in New York City. The study included 265 pairs of nonsmoking African-American and Latina mothers and newborns in New York City. The researchers collected cord blood samples from the babies at the time of delivery and blood samples from the mothers a day after giving birth. Mothers and newborns had the same level of DNA damage from air pollutants, but the researchers estimate that the fetus is exposed to a ten-fold lower dose of pollutants than the mother because the placenta serves as a filter. Thus, fetuses appear to be particularly susceptible to environmental toxins and may not be able to clear them from their bodies or repair damaged DNA. The finding that newborns had higher levels of cotinine, a byproduct of nicotine, in their blood than did their mothers reinforces he concern that babies are more affected by secondhand smoke. The scientists were able to measure the level of DNA damage from air pollutants in mothers and newborns by analyzing stretches of mutated DNA, called biomarkers, that have been associated with exposure to diesel emissions and other air pollutants. In a previous study of Caucasian women and their newborns in Krakow, Poland, Perera and her colleagues found similar prenatal susceptibility to air pollution. Because New York City has much lower levels of pollution than Krakow, they wanted to see if the same damage occurred. New York City Mayor Michael Bloomberg has put forward legislation, which will provide the first comprehensive overhaul of the New York City Noise Code in over 30 years. Noise is the number one complaint to the City’s 311 citizen service hotline, currently averaging nearly 1,000 calls a day. The proposal provides a flexible environment to keep New York’s businesses thriving while addressing the number one quality of life complaint in New York. Mayor Bloomberg said that his new proposal, which was announced in June 2004, was the first overhaul of the Noise Code in over 30 years and would maintain the City’s vibrancy by balancing the need for construction, development and an exciting nightlife with New Yorker’s well deserved right to peace and quiet. â€Å"Building on the success of our enforcement initiative, Operation Silent Night, we are proposing a comprehensive revision to the noise code that will make New York quieter and more livable without stifling growth,† the Mayor added. The new Noise Code will remove outdated code sections and replace them with ones that use the latest acoustic technology and will provide for flexible and reasonable enforcement. The new code provides updated and sensible means of limiting noise from construction sites located near residential neighborhoods. By establishing uniform best management practices for all work sites, using greater discretion in granting permits for night and weekend work and mandating ‘noise management plans’ that include portable sound barriers, noise jackets for jackhammers at all construction sites the code will decrease noise pollution. Neighbors apply special lotions after showering because their skin burns. Tests show that their tap water contains arsenic, barium, lead, manganese and other chemicals at concentrations federal regulators say could contribute to cancer and damage the kidneys and nervous system. â€Å"How can we get digital cable and Internet in our homes, but not clean water? † said Mrs. Hall-Massey, a senior accountant at one of the state’s largest banks. She and her husband, Charles, do not live in some remote corner of Appalachia. Charleston, the state capital, is less than 17 miles from her home. â€Å"How is this still happening today? † she asked. When Mrs. Hall-Massey and 264 neighbors sued nine nearby coal companies, accusing them of putting dangerous waste into local water supplies, their lawyer did not have to look far for evidence. As required by state law, some of the companies had disclosed in reports to regulators that they were pumping into the ground illegal concentrations of chemicals — the same pollutants that flowed from residents’ taps. But state regulators never fined or punished those companies for breaking those pollution laws. The vast majority of those polluters have escaped punishment. State officials have repeatedly ignored obvious illegal dumping, and the Environmental Protection Agency, which can prosecute polluters when states fail to act, has often declined to intervene. Because it is difficult to determine what causes diseases like cancer, it is impossible to know how many illnesses are the results of water pollution, or contaminants’ role in the health problems of specific individuals. But concerns over these toxins are great enough that Congress and the E. P. A. regulate more than 100 pollutants through the Clean Water Act and strictly limit 91 chemicals or contaminants in tap water through the Safe Drinking Water Act. Research shows that an estimated one in 10 Americans have been exposed to drinking water that contains dangerous chemicals or fails to meet a federal health benchmark in other ways. Those exposures include carcinogens in the tap water of major American cities and unsafe chemicals in drinking-water wells. Wells, which are not typically regulated by the Safe Drinking Water Act, are more likely to contain contaminants than municipal water systems. Because most of today’s water pollution has no scent or taste, many people who consume dangerous chemicals do not realize it, even after they become sick, researchers say. The broadest definition of thermal pollution is the degradation of water quality by any process that changes ambient water temperature. Thermal pollution is usually associated with increases of water temperatures in a stream, lake, or ocean due to the discharge of heated water from industrial processes, such as the generation of electricity. Increases in ambient water temperature also occur in streams where shading vegetation along the banks is removed or where sediments have made the water more turbid. Both of these effects allow more energy from the sun to be absorbed by the water and thereby increase its temperature. There are also situations in which the effects of colder-than-normal water temperatures may be observed. For example, the discharge of cold bottom water from deep-water reservoirs behind large dams has changed the downstream biological communities in systems such as the Colorado River. http://www. controllingpollution. com/pollution/thermal-pollution/ http://www. nydailynews. com/topics/Noise+Pollution http://www. dec. ny. gov/chemical/281. html http://www. nytimes. com/2009/12/17/us/17water. html How to cite Pollution in New York, Papers

Solutions Edition Essay Example

Solutions Edition Paper What information could Amazons management provide to investors to clarify the change in inventory turnover? What are the costs and benefits to Amazon from disclosing this information? What issues does this change raise for the auditor? What additional tests would you want to conduct as Amazons auditor? Amazon had annulled sales of $51. 6 billion and an implied annulled inventory turnover rate Of 16. 1 at the end Of 2010 and $696 billion and 13. , respectively, at the end of 2011 Analysts could view this change in a positive manner if they anticipate that the increase in inventory is a signal that Amazon expects higher sales in the future. Once these higher sales are realized, the turnover rate will return to its prior level (unless the company anticipates notational sales increases, which certainly is a possibility with a company such as Amazon). Analysts could also view this change in a negative way. While sales have increased, inventories have increased faster, suggesting that Amazon is not managing its inventories well. Because Amazon has more resources tied up in inventory, it will have to cut back on spending related to improving its operations and developing new products such as the Kindle series to readers. To Clarita/ the reasons for changes in inventory turnover, Amazon could provide information about: ;The types of products in inventory. Is the inventory mainly old products that have not sold and will have to be deeply discounted or written- off or is it new, popular products that have not yet been released to the public? We will write a custom essay sample on Solutions Edition specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Solutions Edition specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Solutions Edition specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Forecasts of sales by product liana ; Technical specifications, marketing strategies and release dates for new product introductions. ; Changes in overall firm strategy that might be related to the increase in inventory. The costs of providing this type of additional information include: ; Disclosure Of proprietary information about the firm. Amazons competitors could use this information to adjust their business plans; ; Loss Of credibility if Amazons forecasts turn out to be incorrect. Investors and analysts will be more skeptical in the future; and ; Potential legal liability if Amazons forecasts turn out to be incorrect and disgruntled shareholders sue. The benefits of providing this type of additional information include: ; Provide analysts and investors with a better understanding of the firms plans: and ; Added credibility for the firm in the future if the current forecasts and information turn out to be correct. The firms auditors would be interested in answering the same types of questions as outside analysts. They would be especially concerned about whether the slower turns are attributable to old obsolete inventory that may have to be Mitten Off. This Will require tests that help clarify what type of inventory has increased, whether that inventory is for older lines or for new lines that are expected to be strong sellers next quarter/ year. 2. A. What are likely to be the long-term critical success factors for the following types Of firms? a high-technology company, such as Microsoft ; a large, low-cost retailer such as Wall-Mart Critical success factors for a high firm, such as Microsoft: ; Investment in search and development of new technologies and applications; ; Continual improvement of existing products to keep ahead of competitors: and ; Large installed base of customers, Provides a ready market for compatible products and upgrades and makes it harder for competitors to build market share. Critical success factors for a large, low-cost retailer, such as Wall-Mart: ;Maintenance of its low cost structure; ; Growth in sales per store; and ; Ability to open new stores in untapped markets. 2. B. How useful is financial accounting data for evaluating how well these two companies are managing their critical success factors? What other types of information would be useful in your evaluation? What are the costs and benefits to these companies from disclosing this bye of information to investors? For a high-tech firm, non-financial accounting types of useful information could include: ; Long-term strategy for the firm; ; Market share by product; ; Introduction schedules for new products and updates of existing ones; ; Profitability Of individual products: ; Forecasts of future performance; ; Third-party evaluations Of firms products; and ; Estimates of switching between firms products and those of its competitors. For a large, low-cost retailer, types of useful non-financial accounting information could include: ; Long. ERM strategy of the firm; ; Sales and profitability per store, per existing store, per new store, and by region of the country: Number and locations of new stores; ; Number and locations of closed stores; ; Management initiatives to reduce costs; ; Disclosure of volume discounts negotiated with major suppliers; ; Understanding to how firm manages its value chain through use of technology; and ; Sales and cost projections. In general, both types of firms will benefit from greater disclosure by increasing analysts and investors understandings of the firm. They Will both bear costs related to the release of proprietary information to competitors, decreased credibility if subsequent actions and results do not match the disclosure, and legal liability from dissatisfied investors. Overall, the benefits and costs of disclosing this type of information are likely to be greater for the high-technology firm than for the low-cost retailer. Financial statement information will typically provide a better understanding of the low-cost retailer than the high-tech firm. Most of the retailers assets are tangible and its costs and performance re reasonably well captured by financial statements. A high-tech firms most significant assets are often intangible (e. G. , RD, patents, trade secrets, etc. L and financial statements have a more difficult time capturing these values. Thus, voluntary disclosure is likely more important to the understanding of the high-tech firm rather than the low-cost retailer. Of course, voluntary disclosure is also likely to be more costly for high-tech firms, since their key information is more likely to be proprietary. In addition, higher business uncertainty for high-tech firms potentially increases the risk of legal liability arising from laundry disclosure. 3. Management frequently objects to disclosing additional information on the grounds that it is proprietary. For instance, when the FAST proposed to expand disclosures on (a) accounting for stock-based employee compensation (issued in December 2002) and (b) business segment performance (issued in June 1997), many corporate managers expressed strong opposition to both proposals. What are the potential proprietary costs from expanded disclosures in each to these areas? It you conclude that proprietary costs are relatively low for either, what alternative explanations do you have for managements opposition? Expanded disclosure standards require firms to report using the same segments used for internal reporting and organization. This information potentially provides additional information to a companys competitors. More detailed business segment data offers a better picture of performance and profitability across a companys various business segments. It also provides insight into differences in cost Structures across components. Using this information, competitors could choose to compete head to head With the firms most profitable segments or where the firm was most alienable due to high costs. Thus, additional business segment disclosures are potentially quite costly to a company. It is more difficult to identify any significant proprietary costs related to expanded disclosure of executive stock compensation. Managements opposition to the ongoing debates about whether to record an expense for stock options can probably be better explained by managements concerns about providing stockholders with information about its stock compensation. Managements concerns are likely to he most severe when its compensation is difficult to justify given the performance of the firm. . In contrast to U. S. GAP, FIRS permits management to reverse impairment on fixed assets which have increased in value since the time toothier impairment. Revaluations are typically based on estimates of realizable value made why management or independent values. Do you expect that these accounting standards will make earnings and book values more or less useful to investors? Explain why or why not. How can management make these types of disclosures more credible? The usefulness of earnings and book values will depend on any information asymmetry between management and investors as well as managements incentives to manage reported performance using fixed asset revaluations. Consider the case where management has more precise information on the value of certain key assets than investors. Asset revaluations are one way for them to provide information to investors on these values. Of course, information asymmetry also provides management with the opportunity to use discretion in making revaluations to conceal poor performance, perhaps to increase compensation or job security, or to reduce the risk Of violating debt contracts. Hence, if there are effective institutional constraints on the abuse of management reporting discretion, such as monitoring by independent auditors and values, the press, the board of directors, and financial analysts, permitting management discretion in financial reporting Will increase the usefulness Of financial accounting reports. However, fetishes institutional constraints are ineffective, discretion will actually reduce the value of accounting data. S. Under a management buyout, the top management of a firm offers to buy the company from its stockholders, usually at a premium over its current stock price. The management team puts up its own capital to finance the acquisition, with additional financing typically coming from a private buyout firm and private debt, If management is interested in making such an offer for its firm in the near future, what are its financial reporting incentives? How do these differ from the incentives of management that are not interested in a buyout? Hove would you respond to a proposed management buyout it you were the firms auditor? What about if you were a member of the audit committee? If management is interested in making a buyout offer for the firm, its primary concern may be paying as low a price as possible, This goal may give management an incentive o use accounting discretion to make the firm appear to be under-performing. This bad news might lower the stock price and eventual purchase price. As a result, management may be able to arrange to purchase the firm at a price that is lower than its economic value. Of course, management interested in a buyout also has to be concerned about audiences other than current stockholders, such as bankers and bond investors. These parties Will be asked to lend management funds to buy the firm, and Will demand higher interest rates if they believe the firm is a poor performer. In contrast, if management is not interested in buyout, it probably has incentives to make financial reporting assumptions that increase earnings, thereby increasing its own compensation job security. Alternatively, if management is concerned about establishing credibility in the capital market, it may report in an unbiased fashion, or perhaps even smooth performance, to ensure earnings reports do not surprise investors. Management incentives for reporting prior too management buyout should be of interest to the external auditor and audit committee because they could affect the firms reporting. If management has incentives to understate performance, to e able to acquire the firm at a low price, the auditors and audit committee would want to pay close attention to those areas where managers have room to manage earnings, 6, You are approached by the management of a small start- up company that is planning to go public. The founders are unsure about how aggressive they should be in their accounting decisions as they come to the market. John Smith, the CEO, asserts: We might as well take full advantage of any discretion offered by accounting rules, since the market will be expecting us to do so. What are the pros and cons of this strategy? As the partner of a major audit firm, what type of analysis would you perform before deciding to take on a new start-up that is planning to go public? Pros Generate better-looking financial statements. More aggressive accounting decisions could make the firms performance appear better than it would otherwise. Facilitate a future initial public Offering. If aggressive accounting decisions lead to higher earnings, etc. , it may be easier for the company to go public With higher earnings than lower, all Other things equal. Promote interest in the firm. With higher earnings due to aggressive accounting decisions, the company may capture a higher profile in the media. Press coverage about the firm could lead to greater investor interest in the company and facilitate a subsequent initial public offering. Cons Difficulties with auditors. The firms auditors would have to approve the aggressive accounting decisions by the firm. If the auditors did not sign off on some of the firms choices, then the firm would have to make less aggressive accounting choices or change accounting firms. Either of these changes could serve as a warning about the firm to potential investors. Difficulties with underwriters. Even it auditors approved to the firms accounting decisions, the rims underwriters will also evaluate their accounting choices during the due diligence process before the firm goes public. An underwriter that is not confident about a firms accounting may delay or cancel an underwriting rather than be embarrassed by poor firm performance subsequent to an underwriting. Less accounting discretion going forward. By making the most aggressive accounting choices today, the firm will have less flexibility in the future to change its accounting without generating considerable investor scrutiny. Increasingly skeptical investors. Firms that make more aggressive accounting choices may appear riskier to investors. As a result, underwriters and investors Will require greater compensation for that risk, increasing the firms cost of going public. 7. TWO years after a successful public offering, the CEO Of a biotechnology company is concerned about stock market uncertainty surrounding the potential of new drugs in the development pipeline. In his discussion With you, the CEO notes that even though they have recently made significant progress in their internal R efforts, the stock has performed poorly. What options does he have to help convince investors of the value of the new products? Which of these options are likely to be feasible? The CEO could potentially take advantage of the following options to provide information about the value of the firms new projects: ; Analysts meetings ; Voluntary disclosure of internal efforts ; Initiating or increasing its dividend ; Stock repurchases ; Sale to a block of stock to a pharmaceutical company or other knowledgeable firm While each of these options could he used to communicate directly or signal managements private information about the value of the firms new projects, the firm may be either unable or unwilling to undertake some of these options. Stock purchases and initiating/increasing the dividend are likely to be infeasible. Both of these strategies require cash that the firm probably does not have. The typical biotech firm does not turn a profit for several years after going public. In fact, it often returns to the capital markets for additional resources to support it while products are developed and the firm waits for regulatory approval. Hence, these high-cost strategies are probably not realistic options for the firm. Analysts meetings and increased voluntary disclosure are more likely actions for the firm. These represent efficient ways for the firm to provide detailed information about its new projects. If management information is not considered to be credible, investors and analysts may not pay attention to information provided in this manner. Furthermore, management may be reluctant to provide detailed information to the diverse group Of shareholders and analysts because of critical information it could provide to competitors. Sale off block of stock to a pharmaceutical company or other knowledgeable firm would also be feasible for the firm to do. It would signal to outsider investors and analysts that a very knowledgeable player with access to sensitive company information about the rims new projects has decided to make a substantial investment in the firm. The firm may prefer not to sell a block of stock in this manner for reasons of corporate control, If the potential placeholder sees the private information and decides that the firm is undervalued, it may decide to try to acquire the firm outright. Furthermore, the firer may not want to disclose the information to a potential competitor. However, there may be legal arrangements between the fir-n and a potential placeholder that could limit the likelihood of any of these events. 8. Why might the CEO of the biotechnology firm discussed in Question be concerned about the firm being undervalued? Would the CEO be equally concerned if the stock were overvalued? Do you believe that the CEO would attempt to correct the markets perception in this overvaluation case? How valued you react to company concern about market under- or overvaluation if you were the firms auditor? Or if you were a member of the audit committee? The CEO could be concerned about the firm being undervalued for several reasons. First, an undervalued firm makes a good takeover target. Once another firm discovers that the firm is undervalued, it may try to acquire the firm. If successful, the acquiring firm may fire the CEO. Second, undervaluation makes raising equity capital more expensive. Fifth firms shares are trading below their true value, the firm will have to sell a larger portion of the company to raise the same amount of new equity capital. Finally, the Coos compensation may be tied to firm value. It is unlikely if the firm is undervalued that the CEO will earn a substantial bonus. Moreover, the CEO may be rewarded if the stock price moves from being undervalued to being fairly valued. The CEO has different incentives to take action if he believes that the firm is overvalued, Equity capital is less expensive to asses it the firm is overvalued. Academic research suggests that there are more equity issues during periods when firms are likely to be overvalued. In addition, the Coos bonus may depend on the firms value. It the stock price falls as result of his actions, the CEO could lose his bonus as well as put his job at risk. The CEO also has an incentive to correct the overvaluation to reduce the firms legal liability, Assume the CEO has private information that suggests that his company is overvalued. Even if the CEO never discloses the information, at some point the market Avail learn the information and adjust the firms stock price. Dissatisfied shareholders may sue the company with the belief that the CEO manipulated the market by not revealing his private information sooner. Top management may also lose credibility with the market if they delay reporting bad news. Thus, it is unclear whether the CEO would attempt to correct the markets overvalued perception of the firm. 9. When companies decide to shift from private to public financing by making an initial public offering for their stock, they are likely to face increased costs of investor communications. Given this additional cost, why would firms opt to go public? Despite the increased costs Of investor communications, firms go public for many reasons, including: ;Improved access to capital markets. Some quickly growing firms find their growth outstrips the ability of their private funding sources. Some firms find it easier and less expensive to raise capital in public markets. Some investors (some types of mutual funds, retirement funds, trusts, etc. ) cannot invest in privately held companies. Thus, for a variety of reasons, firms go public to take advantage of greater access to public capital markets, ; A significant portion of employees wealth is the firms stock. Just like publicly held firms, many private firms compensate employees with stock or stock options. Over time, an employees stockholders may represent a large portion to her personal wealth. Illness the stock is publicly traded, it is difficult for employees to sell their stock to diversify their holdings, to raise cash to purchase a house, etc. , or even just to leave the fir-n for another job, ; Current owners want to cash out or reduce their holdings in the firm. This category could include managers of an LOBO who want to take the firm public again and receive compensation for their work. It could also include family-owned businesses where the family is no longer interested in running the company. Provide outside value for the firm. It is difficult to value the equity of a privately held firm. A company will often sell a share of its equity to get better information about the value of the remaining equity. Until Microsoft went public, it was almost impossible, even for people working within the firm, to begin to value the intangible assets that the firm had developed. It allows people Who owned stock when the firm was privately held to place a better value on their holdings. Easier evaluation Of firm performance. A firms publicly traded stock price provides one measure of its performance. Stock price and performance measures based on it can be used to compare the firm with itself, others in its industry, and the market as a whole. This information may be valuable to a firms managers as they make operating decisions and form plans for the future. Old. German firms are traditionally financed by banks, which have representatives on the companies boards. How would communication challenges differ for these firms relative to U. S. Firms, which rely more on public financing? German firms face a different set to communications challenges than American firms, due to variations in the ownership structure. Relative to American firms, German firms tend to have tar fewer individual investors and a greater level of holdings by financial institutions. In addition to their equity holdings, financial institutions are often represented on these companies boards of directors. These differences in ownership imply that German firms can communicate with their major owners through board meetings and informal channels, so that the major owners do not have to rely on published financial information. This reduces the information available to German firms competitors, a potential advantage over broad dissemination of information. As a result, major shareholders of German companies have the opportunity to have access to more detailed and proprietary information than LLC. S_ public shareholders. An interesting question is whether German firms actually take advantage of this opportunity. Some have argued that the German model Of capital market creates a COZY relationship between financial institutions and their clients, and that the board of directors provides limited oversight Of a firms management. Solutions Edition Essay Example Solutions Edition Paper What information could Amazons management provide to investors to clarify the change in inventory turnover? What are the costs and benefits to Amazon from disclosing this information? What issues does this change raise for the auditor? What additional tests would you want to conduct as Amazons auditor? Amazon had annulled sales of $51. 6 billion and an implied annulled inventory turnover rate Of 16. 1 at the end Of 2010 and $696 billion and 13. , respectively, at the end of 2011 Analysts could view this change in a positive manner if they anticipate that the increase in inventory is a signal that Amazon expects higher sales in the future. Once these higher sales are realized, the turnover rate will return to its prior level (unless the company anticipates notational sales increases, which certainly is a possibility with a company such as Amazon). Analysts could also view this change in a negative way. While sales have increased, inventories have increased faster, suggesting that Amazon is not managing its inventories well. Because Amazon has more resources tied up in inventory, it will have to cut back on spending related to improving its operations and developing new products such as the Kindle series to readers. To Clarita/ the reasons for changes in inventory turnover, Amazon could provide information about: ;The types of products in inventory. Is the inventory mainly old products that have not sold and will have to be deeply discounted or written- off or is it new, popular products that have not yet been released to the public? We will write a custom essay sample on Solutions Edition specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Solutions Edition specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Solutions Edition specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Forecasts of sales by product liana ; Technical specifications, marketing strategies and release dates for new product introductions. ; Changes in overall firm strategy that might be related to the increase in inventory. The costs of providing this type of additional information include: ; Disclosure Of proprietary information about the firm. Amazons competitors could use this information to adjust their business plans; ; Loss Of credibility if Amazons forecasts turn out to be incorrect. Investors and analysts will be more skeptical in the future; and ; Potential legal liability if Amazons forecasts turn out to be incorrect and disgruntled shareholders sue. The benefits of providing this type of additional information include: ; Provide analysts and investors with a better understanding of the firms plans: and ; Added credibility for the firm in the future if the current forecasts and information turn out to be correct. The firms auditors would be interested in answering the same types of questions as outside analysts. They would be especially concerned about whether the slower turns are attributable to old obsolete inventory that may have to be Mitten Off. This Will require tests that help clarify what type of inventory has increased, whether that inventory is for older lines or for new lines that are expected to be strong sellers next quarter/ year. 2. A. What are likely to be the long-term critical success factors for the following types Of firms? a high-technology company, such as Microsoft ; a large, low-cost retailer such as Wall-Mart Critical success factors for a high firm, such as Microsoft: ; Investment in search and development of new technologies and applications; ; Continual improvement of existing products to keep ahead of competitors: and ; Large installed base of customers, Provides a ready market for compatible products and upgrades and makes it harder for competitors to build market share. Critical success factors for a large, low-cost retailer, such as Wall-Mart: ;Maintenance of its low cost structure; ; Growth in sales per store; and ; Ability to open new stores in untapped markets. 2. B. How useful is financial accounting data for evaluating how well these two companies are managing their critical success factors? What other types of information would be useful in your evaluation? What are the costs and benefits to these companies from disclosing this bye of information to investors? For a high-tech firm, non-financial accounting types of useful information could include: ; Long-term strategy for the firm; ; Market share by product; ; Introduction schedules for new products and updates of existing ones; ; Profitability Of individual products: ; Forecasts of future performance; ; Third-party evaluations Of firms products; and ; Estimates of switching between firms products and those of its competitors. For a large, low-cost retailer, types of useful non-financial accounting information could include: ; Long. ERM strategy of the firm; ; Sales and profitability per store, per existing store, per new store, and by region of the country: Number and locations of new stores; ; Number and locations of closed stores; ; Management initiatives to reduce costs; ; Disclosure of volume discounts negotiated with major suppliers; ; Understanding to how firm manages its value chain through use of technology; and ; Sales and cost projections. In general, both types of firms will benefit from greater disclosure by increasing analysts and investors understandings of the firm. They Will both bear costs related to the release of proprietary information to competitors, decreased credibility if subsequent actions and results do not match the disclosure, and legal liability from dissatisfied investors. Overall, the benefits and costs of disclosing this type of information are likely to be greater for the high-technology firm than for the low-cost retailer. Financial statement information will typically provide a better understanding of the low-cost retailer than the high-tech firm. Most of the retailers assets are tangible and its costs and performance re reasonably well captured by financial statements. A high-tech firms most significant assets are often intangible (e. G. , RD, patents, trade secrets, etc. L and financial statements have a more difficult time capturing these values. Thus, voluntary disclosure is likely more important to the understanding of the high-tech firm rather than the low-cost retailer. Of course, voluntary disclosure is also likely to be more costly for high-tech firms, since their key information is more likely to be proprietary. In addition, higher business uncertainty for high-tech firms potentially increases the risk of legal liability arising from laundry disclosure. 3. Management frequently objects to disclosing additional information on the grounds that it is proprietary. For instance, when the FAST proposed to expand disclosures on (a) accounting for stock-based employee compensation (issued in December 2002) and (b) business segment performance (issued in June 1997), many corporate managers expressed strong opposition to both proposals. What are the potential proprietary costs from expanded disclosures in each to these areas? It you conclude that proprietary costs are relatively low for either, what alternative explanations do you have for managements opposition? Expanded disclosure standards require firms to report using the same segments used for internal reporting and organization. This information potentially provides additional information to a companys competitors. More detailed business segment data offers a better picture of performance and profitability across a companys various business segments. It also provides insight into differences in cost Structures across components. Using this information, competitors could choose to compete head to head With the firms most profitable segments or where the firm was most alienable due to high costs. Thus, additional business segment disclosures are potentially quite costly to a company. It is more difficult to identify any significant proprietary costs related to expanded disclosure of executive stock compensation. Managements opposition to the ongoing debates about whether to record an expense for stock options can probably be better explained by managements concerns about providing stockholders with information about its stock compensation. Managements concerns are likely to he most severe when its compensation is difficult to justify given the performance of the firm. . In contrast to U. S. GAP, FIRS permits management to reverse impairment on fixed assets which have increased in value since the time toothier impairment. Revaluations are typically based on estimates of realizable value made why management or independent values. Do you expect that these accounting standards will make earnings and book values more or less useful to investors? Explain why or why not. How can management make these types of disclosures more credible? The usefulness of earnings and book values will depend on any information asymmetry between management and investors as well as managements incentives to manage reported performance using fixed asset revaluations. Consider the case where management has more precise information on the value of certain key assets than investors. Asset revaluations are one way for them to provide information to investors on these values. Of course, information asymmetry also provides management with the opportunity to use discretion in making revaluations to conceal poor performance, perhaps to increase compensation or job security, or to reduce the risk Of violating debt contracts. Hence, if there are effective institutional constraints on the abuse of management reporting discretion, such as monitoring by independent auditors and values, the press, the board of directors, and financial analysts, permitting management discretion in financial reporting Will increase the usefulness Of financial accounting reports. However, fetishes institutional constraints are ineffective, discretion will actually reduce the value of accounting data. S. Under a management buyout, the top management of a firm offers to buy the company from its stockholders, usually at a premium over its current stock price. The management team puts up its own capital to finance the acquisition, with additional financing typically coming from a private buyout firm and private debt, If management is interested in making such an offer for its firm in the near future, what are its financial reporting incentives? How do these differ from the incentives of management that are not interested in a buyout? Hove would you respond to a proposed management buyout it you were the firms auditor? What about if you were a member of the audit committee? If management is interested in making a buyout offer for the firm, its primary concern may be paying as low a price as possible, This goal may give management an incentive o use accounting discretion to make the firm appear to be under-performing. This bad news might lower the stock price and eventual purchase price. As a result, management may be able to arrange to purchase the firm at a price that is lower than its economic value. Of course, management interested in a buyout also has to be concerned about audiences other than current stockholders, such as bankers and bond investors. These parties Will be asked to lend management funds to buy the firm, and Will demand higher interest rates if they believe the firm is a poor performer. In contrast, if management is not interested in buyout, it probably has incentives to make financial reporting assumptions that increase earnings, thereby increasing its own compensation job security. Alternatively, if management is concerned about establishing credibility in the capital market, it may report in an unbiased fashion, or perhaps even smooth performance, to ensure earnings reports do not surprise investors. Management incentives for reporting prior too management buyout should be of interest to the external auditor and audit committee because they could affect the firms reporting. If management has incentives to understate performance, to e able to acquire the firm at a low price, the auditors and audit committee would want to pay close attention to those areas where managers have room to manage earnings, 6, You are approached by the management of a small start- up company that is planning to go public. The founders are unsure about how aggressive they should be in their accounting decisions as they come to the market. John Smith, the CEO, asserts: We might as well take full advantage of any discretion offered by accounting rules, since the market will be expecting us to do so. What are the pros and cons of this strategy? As the partner of a major audit firm, what type of analysis would you perform before deciding to take on a new start-up that is planning to go public? Pros Generate better-looking financial statements. More aggressive accounting decisions could make the firms performance appear better than it would otherwise. Facilitate a future initial public Offering. If aggressive accounting decisions lead to higher earnings, etc. , it may be easier for the company to go public With higher earnings than lower, all Other things equal. Promote interest in the firm. With higher earnings due to aggressive accounting decisions, the company may capture a higher profile in the media. Press coverage about the firm could lead to greater investor interest in the company and facilitate a subsequent initial public offering. Cons Difficulties with auditors. The firms auditors would have to approve the aggressive accounting decisions by the firm. If the auditors did not sign off on some of the firms choices, then the firm would have to make less aggressive accounting choices or change accounting firms. Either of these changes could serve as a warning about the firm to potential investors. Difficulties with underwriters. Even it auditors approved to the firms accounting decisions, the rims underwriters will also evaluate their accounting choices during the due diligence process before the firm goes public. An underwriter that is not confident about a firms accounting may delay or cancel an underwriting rather than be embarrassed by poor firm performance subsequent to an underwriting. Less accounting discretion going forward. By making the most aggressive accounting choices today, the firm will have less flexibility in the future to change its accounting without generating considerable investor scrutiny. Increasingly skeptical investors. Firms that make more aggressive accounting choices may appear riskier to investors. As a result, underwriters and investors Will require greater compensation for that risk, increasing the firms cost of going public. 7. TWO years after a successful public offering, the CEO Of a biotechnology company is concerned about stock market uncertainty surrounding the potential of new drugs in the development pipeline. In his discussion With you, the CEO notes that even though they have recently made significant progress in their internal R efforts, the stock has performed poorly. What options does he have to help convince investors of the value of the new products? Which of these options are likely to be feasible? The CEO could potentially take advantage of the following options to provide information about the value of the firms new projects: ; Analysts meetings ; Voluntary disclosure of internal efforts ; Initiating or increasing its dividend ; Stock repurchases ; Sale to a block of stock to a pharmaceutical company or other knowledgeable firm While each of these options could he used to communicate directly or signal managements private information about the value of the firms new projects, the firm may be either unable or unwilling to undertake some of these options. Stock purchases and initiating/increasing the dividend are likely to be infeasible. Both of these strategies require cash that the firm probably does not have. The typical biotech firm does not turn a profit for several years after going public. In fact, it often returns to the capital markets for additional resources to support it while products are developed and the firm waits for regulatory approval. Hence, these high-cost strategies are probably not realistic options for the firm. Analysts meetings and increased voluntary disclosure are more likely actions for the firm. These represent efficient ways for the firm to provide detailed information about its new projects. If management information is not considered to be credible, investors and analysts may not pay attention to information provided in this manner. Furthermore, management may be reluctant to provide detailed information to the diverse group Of shareholders and analysts because of critical information it could provide to competitors. Sale off block of stock to a pharmaceutical company or other knowledgeable firm would also be feasible for the firm to do. It would signal to outsider investors and analysts that a very knowledgeable player with access to sensitive company information about the rims new projects has decided to make a substantial investment in the firm. The firm may prefer not to sell a block of stock in this manner for reasons of corporate control, If the potential placeholder sees the private information and decides that the firm is undervalued, it may decide to try to acquire the firm outright. Furthermore, the firer may not want to disclose the information to a potential competitor. However, there may be legal arrangements between the fir-n and a potential placeholder that could limit the likelihood of any of these events. 8. Why might the CEO of the biotechnology firm discussed in Question be concerned about the firm being undervalued? Would the CEO be equally concerned if the stock were overvalued? Do you believe that the CEO would attempt to correct the markets perception in this overvaluation case? How valued you react to company concern about market under- or overvaluation if you were the firms auditor? Or if you were a member of the audit committee? The CEO could be concerned about the firm being undervalued for several reasons. First, an undervalued firm makes a good takeover target. Once another firm discovers that the firm is undervalued, it may try to acquire the firm. If successful, the acquiring firm may fire the CEO. Second, undervaluation makes raising equity capital more expensive. Fifth firms shares are trading below their true value, the firm will have to sell a larger portion of the company to raise the same amount of new equity capital. Finally, the Coos compensation may be tied to firm value. It is unlikely if the firm is undervalued that the CEO will earn a substantial bonus. Moreover, the CEO may be rewarded if the stock price moves from being undervalued to being fairly valued. The CEO has different incentives to take action if he believes that the firm is overvalued, Equity capital is less expensive to asses it the firm is overvalued. Academic research suggests that there are more equity issues during periods when firms are likely to be overvalued. In addition, the Coos bonus may depend on the firms value. It the stock price falls as result of his actions, the CEO could lose his bonus as well as put his job at risk. The CEO also has an incentive to correct the overvaluation to reduce the firms legal liability, Assume the CEO has private information that suggests that his company is overvalued. Even if the CEO never discloses the information, at some point the market Avail learn the information and adjust the firms stock price. Dissatisfied shareholders may sue the company with the belief that the CEO manipulated the market by not revealing his private information sooner. Top management may also lose credibility with the market if they delay reporting bad news. Thus, it is unclear whether the CEO would attempt to correct the markets overvalued perception of the firm. 9. When companies decide to shift from private to public financing by making an initial public offering for their stock, they are likely to face increased costs of investor communications. Given this additional cost, why would firms opt to go public? Despite the increased costs Of investor communications, firms go public for many reasons, including: ;Improved access to capital markets. Some quickly growing firms find their growth outstrips the ability of their private funding sources. Some firms find it easier and less expensive to raise capital in public markets. Some investors (some types of mutual funds, retirement funds, trusts, etc. ) cannot invest in privately held companies. Thus, for a variety of reasons, firms go public to take advantage of greater access to public capital markets, ; A significant portion of employees wealth is the firms stock. Just like publicly held firms, many private firms compensate employees with stock or stock options. Over time, an employees stockholders may represent a large portion to her personal wealth. Illness the stock is publicly traded, it is difficult for employees to sell their stock to diversify their holdings, to raise cash to purchase a house, etc. , or even just to leave the fir-n for another job, ; Current owners want to cash out or reduce their holdings in the firm. This category could include managers of an LOBO who want to take the firm public again and receive compensation for their work. It could also include family-owned businesses where the family is no longer interested in running the company. Provide outside value for the firm. It is difficult to value the equity of a privately held firm. A company will often sell a share of its equity to get better information about the value of the remaining equity. Until Microsoft went public, it was almost impossible, even for people working within the firm, to begin to value the intangible assets that the firm had developed. It allows people Who owned stock when the firm was privately held to place a better value on their holdings. Easier evaluation Of firm performance. A firms publicly traded stock price provides one measure of its performance. Stock price and performance measures based on it can be used to compare the firm with itself, others in its industry, and the market as a whole. This information may be valuable to a firms managers as they make operating decisions and form plans for the future. Old. German firms are traditionally financed by banks, which have representatives on the companies boards. How would communication challenges differ for these firms relative to U. S. Firms, which rely more on public financing? German firms face a different set to communications challenges than American firms, due to variations in the ownership structure. Relative to American firms, German firms tend to have tar fewer individual investors and a greater level of holdings by financial institutions. In addition to their equity holdings, financial institutions are often represented on these companies boards of directors. These differences in ownership imply that German firms can communicate with their major owners through board meetings and informal channels, so that the major owners do not have to rely on published financial information. This reduces the information available to German firms competitors, a potential advantage over broad dissemination of information. As a result, major shareholders of German companies have the opportunity to have access to more detailed and proprietary information than LLC. S_ public shareholders. An interesting question is whether German firms actually take advantage of this opportunity. Some have argued that the German model Of capital market creates a COZY relationship between financial institutions and their clients, and that the board of directors provides limited oversight Of a firms management.