Financial Management Essay

Part A There are three main areas of decision making for the corporate financial manager: Investment: The choice of projects or assets in which to invest company funds. Competing alternatives have to be assessed using a number of techniques. This type of decision will also be of concern to the private individual when making choices about which shares to buy. Finance: How these investments should be financed. It is necessary to evaluate the possible sources, external and internal, and the effect they will have on the capital structure of the company. Dividend: Whether corporate earnings should be retained or paid out in the form of dividends, and if the latter, when the dividends should be paid. Otherwise, we will cover the risk management as well as the management of a company’s assets and liabilities in its working capital cycle. Assets must be managed effectively so that they generate income and profits, and so that funds are available to pay creditors and take up opportunities for investment. In summary ,therefore, we can say that financial management involves the following areas as investment decisions, funding decisions, including the capital structure of the company, dividend decisions, risk management. This implies that dividend payments and gains made when selling a shareholding are better indicators of shareholder wealth than profits. However, if the dividend payments are not consistent over a period of time, this will not increase confidence in the company shares, and their market price will reflect the variability of dividend payments. When the shareholder sells their investment, they may lose money. The prime objective of the company therefore needs to be adjusted slightly to the maximization of long-term shareholder wealth. This will be indicated by maximisation of dividends over time and reflected in the market value of the ordinary shares. If the share price reflects shareholder wealth, then we can say that any financial decision taken to increase the value of shares will be a decision that maximises shareholder wealth, and will be in keeping with the prime objective of the company, such a decision can involve are using appraisal techniques to assess investment projects and sourcing funding to provide for the company the most appropriate capital structure that can be serviced from available funds and paying dividends that the company can afford, while leaving sufficient retained earnings for investment and managing the risks associated with these decisions. This may leave you with the impression that the managers of a company will carry out its day to day functions efficiently and effectively on behalf of the owners, always asking themselves about the result of the decision maximise shareholder wealth, this is a realistic view because of the tension between ownership and control of company. That is limitations of shareholder wealth maximisation as concern to agency theory. Agency theory is based in the separation of ownership and control that distinguishes the limited liability company from the other two business entities of the sole trader and the partnership. The relationship between shareholders and management is the principal agent relationship, and has given reis to agency theory. Where an agent was defined as a person used to effect a contract between their principal and a third party. The agency problem is that managers may not always act in the best interest of the shareholders, to maximise the latter’s wealth. Offering incentives, such as share options, to managers may reduce this problem. Solving the agency problem When the agency problem exits, therefore, when managers or directors do not act in the best interest of the shareholders to maxmise the latter’s wealth. Management goals could include increasing their rewards. It was suggested in an earlier activity that two ways to ensure that management act in shareholders interests are to vote unacceptable directors off the board, or to offer share options. Shareholder could monitor the actions of managers using independently audited accounts, backed up by additional reporting requirements and external analysts. The managers may not act in the best interest of the shareholders, so they may be offering other such as share options. However, the share options also have some things to consider as the advantages is encourage managers to maximise shareholder wealth since the option may result in their being able to sell shares at a higher price. But the disadvantages is the price of shares is influenced by some factors outside the control of management, so the benefits may accrue despite management actions. Managers may also change accounting polices to improve the performance of the company and influence the share price deliberately. Otherwise, Capital structure refers to the way an entity finances its assets through a combination of equity and debt. An entity’s capital structure is then the composition or structure of its liabilities. Capital structure ratios show an entity’s capital structure and measure its ability to meet its long term obligations. If the entity appears unable to meet its long term obligations, it will be in serious danger of collapse or takeover. Further, long term financial position depends much on an entity’s profitability since, in the long run, the entity will not be able to repay its debts unless it is profitable. The capital gearing ratio is a measure of the financial risk of an entity because of the prior claim that debt capital has on the profits and assets of the entity in the event of liquidation. Also, if the profits are low, the entity may not have sufficient funds available to make dividend payments to the ordinary shareholders. Capital gearing ratio: (preference shares + long term loans) / (shareholder’s funds + long term loans) X 100 The difficulty is the inclusion of preference shares, since they take many different forms. If a company’s preference shares are of the standard type, that is, having no voting rights and conveying nothing but the right to a fixed rate of dividend, they should be included as debt funding. The higher the percentage, the higher the level of gearing. It is advisable to include short term debt such as overdraft if it is used to fund long term investments and is not, therefore, of a temporary nature and bears a financial risk. A highly geared company may also experience difficulties in attracting funds from investors, who are not attracted by the risks involved in a high geared company. In this event, the market price of the company’s shares will fall. The more debt, the more risk for ordinary shareholders and ultimately for everyone, if the company faces liquidation. However, the more debt, the lower the WACC because debt is cheaper than equity. At very high levels of debt, however, the WACC will rise because of the higher levels of risk involved. Reference: Notes of the University of Sunderland APC308 Financial Management Conclusion The areas of corporate financial management are the decisions concerning investment, funding, dividend and working capital. And the company will use the gearing ratio to express the debt funding as a percentage of the total funding, because the high gearing ratio also brings problems associated with the interest rates and the main objective in financial management is the maximisation of long term shareholder wealth that is the market value of the ordinary shares, because it is related to the how many dividends will pay to shareholders. However, the agency problem is a main problem on the managers may not act in the best interest of the shareholders, so they may be offering other such as share options. Part B In Part A, i have explored two of three main areas of decision making for corporate financial managers: the investment decision (NPV) and the finance, or funding, decision. In this part i am concerned with the third area, the dividend decision. The basis for the discussion in this part is the need for dividend policy and the relevance of dividend policies to investors. NPV is a net present value is the present value of the future recipts from a project less any investment made in the project. Modigliani and Miller’s theory: dividends are irrelevant but almost is not quite. MM’s theory of dividend irrelevancy refers not to the payment of the dividends but to the timing of their payment. According to MM, if a company has an investment opportunity giving a positive NPV, it should be taken up using retained earnings rather than paying out a dividend. The company’s value will go up, since share value is a function of the level of earnings, which reflect a company’s investment policy, rather than a function of dividend payments. Similarly, in their theory of dividend irrelevancy they say that shareholders can create their own dividend, if they want to, by selling some of their theory of dividend, if they want to, by selling some of their shares. In a perfect market, shareholders can create a dividend stream to suit themselves, so it works in reverse too: if the company does pay a dividend and the shareholder does not want one, they can reinvest by buying more shares. Otherwise, MM’s view is that it is not the company but the individual shareholder who should decide dividend policy. Therefore, there is no such thing as an optimal dividend policy for a company, only an optimal investment policy. This would be a policy of investing in all projects with a positive NPV. In a perfect capital market, a company with insufficient internal funds could raise the funds required for investment externally. If a company had surplus internal funds, there could be distributed as dividends.

French and English

Many philosophers with their struggle in understanding the behavior of human beings developed different means in which ethics can be approached and this leads to various conclusions. According to Palatal (2006), ethics is involve with the systematizing, defending and recommending concepts of right and wrong behavior. Thus, it could be said to be the principles, norm, values which indicates what is fair or unfair, true or false. This could be argued that the right is seen to be ethical and the wrong is seen as unethical.Hence, when it comes to being ethical doing the right thing is the best action that serves the idea of honesty, integrity, morality and good management practices (Palatal, 2006) The nature of ethics can be liken to deal with individual induct which is voluntarily carried out and not because of the circumstances in which one find themselves. Hence, there is total choice of freedom and freewill attached to any of their decision making. In any organization, ethical practi ces should be applicable to any organizational behaviors because there are rules which governs the activities of the organization which may be Judged.The moral standard of any organization can be applied to the organizational policies, behavior and institutions. Milton Friedman had believed that the â€Å"primary and the only responsibility is making profit† while abiding by the law. Others argued that any company with self-interest pursuing profit will automatically benefit the whole society. Edward freeman in his argument said shareholders should not only benefit from the business but the benefit should be extended to the employees, customers and suppliers, families and also the operations of this businesses.Ethical businesses offers the company a competitive advantage and also makes the consumers loyal to ethical brands no matter the situation. Building customers' loyalty is one of the source to a long-term business. Thus, the reputation for an organizations' ethical behav ior can help to create an image that is positive in the marketplace and can also serve as an advertisement for the company. On the other hand, bad reputation due to unethical act may hurts the company. The societies in which we live in has a big influence on moral, customs and values by passing on to next generations their culture through the process of acculturation.Hence, this leading to a distinctive set of morals surrounded by every social group: relativism. Although it is sometimes argued that moral varies. So many times, there are question as to whether the societal morals being absolute can be Judged or not: absolutism. In trying to analyses the context of ethical relativism, ethical absolutism and ethical pluralism. Moral absolutism sees its culture to be right and the best which cannot be challenged. In other words, there is no right nor good culture at which could be preserved.In this context following this morality could be dangerous and this could lead an organization or someone into radicalism. For example, Muslims in some part of the world who either killed or punished people who are not Muslims. Moral relativism says you believe in your culture and I believe in my culture. Here, there is no right or rang, because different has a different moral, in other words if a culture is seen as valid or invalid, this will totally depend on that time in which the culture had existed.For example, the biblical Jesus which is seen as the son of God by the Christians and also Mohammed which is also seen by Islam as God's messenger. There is absolutely nothing wrong in this, the main issue here is, respect should be given to all culture without trying to consider if or not harm will be done to someone or not. Another example is the tradition of circumcising women in most part of Africa or the Hinduism tradition which allows women to burn themselves after the death of their husband. In moral pluralism, it is believe that every culture should be given limited room to exist.For example people from different backgrounds no matter their ethnicity all over the world is permitted to live in Canada and also maintain their culture and languages peacefully, although Canada has its official language as French and English. Pluralism believes that we cannot be 100% right as human beings. The concept of pluralism respects and value other opinion which will lead to he enrichment of the society. However, as earlier stated, there is limits to pluralism. A harmful culture to a person is not allowed in pluralism.An example will be the circumcision of women and women burning themselves is not acceptable in Canada. A UTILITARIAN PERSPECTIVE: this concept was developed by Jeremy Beneath and John Stuart Mill. Its main goal is to provide the greatest number which is guided by the value, â€Å"utility'. ( Mullahs, 2010). Here, making decisions is purely on the basis of outcomes or consequences. Utility perspective take a look at action as right if it rings happin ess to the people involve. Although there are some issues involve with this view, utilitarian perspective is also concerned with the costs of a particular action.It thus, tries to make the evaluation of ethics precise by way of accumulating every ones happiness and thereby taking away their unhappiness. As seen in the case of Swiss Bank, the credit Issue had admitted guilt and plead guilty for their action, thus, this serves as a form of moral reasoning. Utilitarian perspectives believes that the moral right of any action course in any situation should generates infinite above harm to every person affected. The management of Swiss bank did not care if the profit the bank was making was as made under lies and deceit to the general public or not.Thus, utilitarian perspective does not consider that so long as it is beneficial to all the party involve. Using utilitarianism perspective in the case of credit Issue, Swiss Bank was acting in a way that will maximize the benefit of their cus tomers. A practice is good or bad if it leads to the best possible balance of good consequences over bad ones (Bà ©chamel and Bowie, 1997:22) cited in Camel Mullahs t al (2010). Many philosophers has argued about the utilitarian perspective as it involve the substantial reproduction of a better society is being maximized.The utilitarianism assumption centers on when difficult choice is being face, the right thing to do is trying to ensure that the possible best outcome is affected by bulk people so long as it is not resulting to being suffered by the minority. In the case study given, the entire organization takes blame for the act by resulting to pay fine given. In business world today, and the frequent operation of utility today, the odder neo-classical economists tend to refer to expected utility as the key mechanism that drives individual choice. Mullahs, 2010). Organizational choices should be that each of its decision should help in the minimization of the organizational util ity. Human resource managers view consumers as utility and the become self-centered. The case of credit Issue, their basic aim was to maximize their utility whether as citizens, consumers, shareholders or organization in competition in the marketplace. THE RIGHT PERSPECTIVE: this perspective hold that individual has certain basic entitlement. (Mullahs, 2010). This perspective has to do with the language of rights.They are right to freedom of association, free speech, and employees' rights and so on. The USA independence declaration emphasized that every man is given unalienable rights (Velasquez, 2014). According to Velasquez, (2014), moral right are Justified by moral standards in which most people acknowledge, but which are not necessarily codified in law. Thus this standards are being interpreted differently by different people. To some the idea to rely on right as a guide to ethical action could not be match. Right in other words can be negative, Hereford pacing more emphasize o n moral right rather than legal rights.In Cant's philosophy, morals together with notion rights gives a theoretical foundation in which human resources in other to evaluate and reformulate ethical practices. According to Karma and Seed (2012), what a person deserves or is entitle to can be evaluated using rules or law that is related to the principles of equality, fairness and retribution, and non-discrimination. It has been argued that, many do not have the fundamental freedom to exercise their right which means that there is need for some right to be limited. As in the case of Swiss bank, THE VIRTUE PERSPECTIVE: virtue perspective is also use in resolving issues in workplace.According to Karma and Seed (2012), virtue ethics is concern with the actor rather than the action. The word virtue could not be mention without linking to the Greek philosopher Aristotle. It is believe that every human being has potential virtue in them. This approach, ethically tried to over rid the criticis m of people knowing what to do but choose not to as in the case study. Human resource managers sometimes trying to use this framework may face difficult choice to make. In relation to the case study, the managers has the right to protect customer's asset and wealth, and also being loyal to is one of the bankers/ customers right.The virtue perspective, once its in the organization, it will enable the workers to compete favorably without thinking of unethical practices. THE CARE PERSPECTIVES: this approach is distinct from the moral philosophy of Kant together with others. This framework is used as an alternative approach to solve problems and it recognizes, response to the well-being of other's needs. In analyzing the Swiss case, there is equal treatment for all the customers. The customers and the employers were treated in the same way. There was no discrimination among the customer as the case did not mention.The Swiss bank, plead guilty and was charge with a fine and did not discl ose the information of the customers involve. This is like the example of the case of the one eye mother who gave her one eye to the son and the child grew up hating her because she has Just an eye. A NON-ESSENTIALIST PERSPECTIVE: there is need for ethical operations in workplaces. Although sometimes organization which operates under ethics can be associated with less profit and still ill like to stay in the competition whereas large organization has large profit which will enhance their reputations.Still there is needs for ethical behavior and also understanding the culture different is paramount in the society. Swiss bank helping their customer might be ethical in some part of the society an unethical in other part. As managers views for moral being different in the organization the find themselves so is their decision making policies different. Ethical practices should be more focus, once this is achieve, there will be positive returns. What goes around comes around (Brattiest , T. Lass lectures. CONCLUSION: Business ethics as earlier discuss are said to be issues which are said to be identifying problems or identifying situation or opportunity and looking for means actions which could be used in solving them. This is also seen as set values norms and responsibility in which members of the same organization recognizes and share same. This also relate to the way business owners conduct their business in order to make profit. A business is said to be ethical when it gives positive contribution to the society without causing any damage to its environment or in any case exploiting it Rockford.In the corporate business world, culture and tradition and strong value are being taken under condition. Corporate business organizations are part of the society, so there are certain expectations in which people are willing to see. There are corporate ethics trend in the world today, business which are socially liable respond quick to public demand in order to improve eff iciency. RECOMMENDATION: As an international human resource manager there is need for the organization to adopt ethical code of conduct which will help the organizational development.The ethical code of the organization will help the organization to obtain the organizational core values and meet it objectives. This will bring about transparency and a true and fair value. Thus giving the organization respect in the society. Leaders in organization should also understand the different in culture, language, trade union of the environment in which the business operate. There is need to improve motivation in order to achieve goals and objective of the organization.In international resource management, different culture sees and perceive thing fervently, so there is need for organization to always try to improve their brand and image in other to attract new and retain old customers. International managers has different views when it comes to moral principle, also hiring of good manager is advice. This principle should be inculcate into the workforce and strive ethically for increase and put more focus on the organizational corporate level strategies. The organization should be able to fish out bad eggs in workplaces, it is normally said a journey of hundred miles begins with a step.

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The Oil Spill in The Gulf of Mexico Research Paper

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Sustainability Essay Example | Topics and Well Written Essays - 2000 words - 2

Sustainability - Essay Example The multidimensional perspectives of a business should therefore encompass several environmental and ecological issues and factors. In other words, in any analysis of a business’ performance, the social, cultural, health-related and monetary/financial aspects of its operations must be integrated. Thus, the idea of sustainability surpasses sustained business yields of welfare, resources and profit and touches on social and communal effects (Farley & Daly, 2004). This paper explores the benefits that Janssen UK, a medium-sized leading transnational research-based pharmaceutical company with its headquarters in High Wycombe might enjoy from sustainability, the leadership initiatives by which the company may become a leader in sustainability and how the organisation’s leadership might effect the sustainability change. The Benefits of Sustainability The big question that many people, especially company managers and CEOs ask is whether sustainability really works. In other wo rds, are there real benefits of sustainability? For Janssen UK, the general and simplest response to this question is yes. This answer is supported by the fact that other top-ranking small-, medium- and large-sized organisations in the world are either practicing or introducing sustainability to their operations and practices. In addition, more workers now choose organisations or employers based on their environmental credentials, friendliness and corporate citizenship (Hawken & Lovins, 1999). Nonetheless, owners, CEOs and managers continue to question the costs and financial benefits even as they enjoy the benefits of sustainability. It is however generally supported that businesses that seek to reduce the amount of resources or materials used in the production of the same amount of goods and services or that seek to reduce cases of sick leave while improving staff retention rates definitely enjoy the financial benefits of sustainability (Von Weizsacker, 1998). That sustainability has immense personal and professional benefits is evidenced by the reports of organisations that successfully implement sustainability programs. The benefits of sustainability for Janssen UK may be largely categorised as financial, brand and reputation, human resources and employee engagement and environmental benefits. Under the financial benefits, Janssen UK may enjoy reduced energy and water usage, hence reduced production costs (Daly & Cobb, 1999). In addition, Janssen UK could enjoy reduced paper, waste and associated costs as well as reduced use of production materials. In some cases, the company may receive grants due to its improved sustainability practices. The other likely financial benefit of sustainability to Janssen UK is visibility of business performance as a result of mandatory reporting. As mentioned earlier, businesses that implement sustainability programs have numerous human resources and employee engagement benefits. For Janssen UK, these benefits include but ar e not limited to improved working conditions, increase productivity, improved attraction and retention of labourers, increased staff loyalty and lowered costs associated with improved human resource outcomes (Jackson et al., 2008). The third category of the benefits of sustainability, the brand and reputation benefits include better corporate social responsibility performance, lowered liability and risk management, improved competitiveness and market positioning and increased