Diwali Essay Example for Free

Diwali Essay Deepavali or Diwali, popularly known as the festival of lights, is a five-day Hindu festival[3] which starts on Dhanteras, celebrated on the thirteenth lunar day of Krishna paksha (dark fortnight) of the Hindu calendar month Ashwin and ends on Bhaubeej, celebrated on second lunar day of Shukla paksha of the Hindu calendar month Kartik. Dhanteras usually falls eighteen days after Dussehra. In the Gregorian calendar, Diwali falls between mid-October and mid-November. Diwali is an official holiday in India,[4] Nepal, Sri Lanka, Myanmar, Mauritius, Guyana, Trinidad Tobago, Suriname, Malaysia, Singapore and Fiji. For Hindus, Diwali is one of the most important festivals of the year and is celebrated in families by performing traditional activities together in their homes. For Jains, Diwali marks the attainment of moksha or nirvana by Mahavira in 527 BC.[5][6] Arya Samajists, celebrate this day as Death Anniversary of Swami Dayanand Saraswati. They also celebrate this day as Shardiya Nav-Shasyeshti. The name Diwali or Divali is a contraction of deepavali which translates into row of lamps.[7] Diwali involves the lighting of small clay lamps filled with oil to signify the triumph of good over evil.[8] These lamps are kept on during the night and ones house is cleaned, both done in order to make the goddess Lakshmi feel welcome.[9] Firecrackers are burst because it is believed that it drives away evil spirits.[10][11][12] During Diwali, all the celebrants wear new clothes and share sweets and snacks with family members and friends. The festival starts with Dhanteras on which most Indian business communities begin their financial year. The second day of the festival is called the Naraka Chaturdasi. Amavasya, the third day of Diwali, marks the worship of Lakshmi, the goddess of wealth. The fourth day of Diwali is known as Kartika Shudda Padyami. The fifth day is referred to as Yama Dvitiya, and on this day sisters invite their brothers to their homes. Deepavali or Diwali, popularly known as the festival of lights, is a five-day Hindu festival[3] which starts on Dhanteras, celebrated on the thirteenth lunar day of Krishna  paksha (dark fortnight) of the Hindu calendar month Ashwin and ends on Bhaubeej, celebrated on second lunar day of Shukla paksha of the Hindu calendar month Kartik. Dhanteras usually falls eighteen days after Dussehra. In the Gregorian calendar, Diwali falls between mid-October and mid-November. Diwali is an official holiday in India,[4] Nepal, Sri Lanka, Myanmar, Mauritius, Guyana, Trinidad Tobago, Suriname, Malaysia, Singapore and Fiji. For Hindus, Diwali is one of the most important festivals of the year and is celebrated in families by performing traditional activities together in their homes. For Jains, Diwali marks the attainment of moksha or nirvana by Mahavira in 527 BC.[5][6] Arya Samajists, celebrate this day as Death Anniversary of Swami Dayanand Saraswati. They also celebrate this day as Shardiya Nav-Shasyeshti. The name Diwali or Divali is a contraction of deepavali which translates into row of lamps.[7] Diwali involves the lighting of small clay lamps filled with oil to signify the triumph of good over evil.[8] These lamps are kept on during the night and ones house is cleaned, both done in order to make the goddess Lakshmi feel welcome.[9] Firecrackers are burst because it is believed that it drives away evil spirits.[10][11][12] During Diwali, all the celebrants wear new clothes and share sweets and snacks with family members and friends. The festival starts with Dhanteras on which most Indian business communities begin their financial year. The second day of the festival is called the Naraka Chaturdasi. Amavasya, the third day of Diwali, marks the worship of Lakshmi, the goddess of wealth. The fourth day of Diwali is known as Kartika Shudda Padyami. The fifth day is referred to as Yama Dvitiya, and on this day sisters invite their brothers to their homes. It begins in late Ashvin (between September and October) and ends in early Kartika (between October and November). The days in Ashvin are in the Krishna Paksha (dark fortnight) of that month, while the days in Kartik are in its Shukla Paksha (bright fortnight). The first day is Dhan Teras. The last day is Yama  Dvitiya, which signifies the second day of the light half of Kartika. Each day of Diwali marks one celebration of the six principal stories associated with the festival. Hindus have several significant events associated with Diwali: The return of Rama after 14 years of Vanvas (exile). To welcome his return, diyas (ghee lamps) are lit in total of 14. The killing of Narakasura: Celebrated as Naraka Chaturdashi, one day before Diwali, it commemorates the killing of the evil demon Narakasura, who wreaked havoc. In different versions, either Krishna or Krishnas wife Satyabhama killed Narakasura during the Dwapara yuga. Other events associated with Diwali include: Return of Pandavas after 12 years of Vanvas and one year of agyatavas (living incognito). Diwali being the festival of lights, across India people celebrate it via symbolic diyas or kandils (colourful paper lanterns) as an integral part of Diwali decorations. Diwali celebrations are spread over five days, from Dhanteras to Bhaiduj. In some places like Maharashtra it starts with Vasu Baras. All the days except Diwali are named according to their designation in the Hindu calendar. The days are: 1.Govatsa Dwadashi or Vasu Baras (27 Ashvin or 12 Krishna Paksha Ashvin): Go means cow and vatsa means calf. Dwadashi or Baras means the 12th day. On this day the cow and calf are worshiped. The story associated with this day is that of King Prithu, son of the tyrant King Vena. Due to the ill rule of Vena, there was a terrible famine and earth stopped being fruitful. Prithu chased the earth, who is usually represented as cow, and ‘milked’ her, meaning that he brought prosperity to the land. 2.Dhanatrayodashi or Dhan teras or Dhanwantari Triodasi (28 Ashvin or 13 Krishna Paksha Ashvin): Dhana means wealth and Trayodashi means 13th day. This day falls on the 13th day of the second half of the lunar month. It is considered an auspicious day for buying utensils and gold, hence the name ‘Dhana’. This day is regarded as the Jayanti (Birth Anniversary) of God Dhanvantari, the Physician of Gods, who came out during Samudra manthan, the churning of the great ocean by the gods and the demons. 3.Naraka Chaturdashi (29 Ashvin or 14 Krishna Paksha Ashvin): Chaturdashi is the 14th day This was the day on which the demon Narakasura was killed by Krishna – an incarnation of Vishnu. It signifies the victory of good over evil and light over darkness (Gujarati: Kali Chaudas, Rajasthan : Roop Chaudas). In southern India, this is the actual day of festivities. Hindus wake up before dawn, have a fragrant oil bath and dress in new clothes. They light small lamps all around the house and draw elaborate kolams /rangolis outside their homes. They perform a special puja with offerings to Krishna or Vishnu, as he liberated the world from the demon Narakasura on this day. It is believed that taking a bath before sunrise, when the stars are still visible in the sky is equivalent to taking a bath in the holy Ganges. After the puja, children burst firecrackers heralding the defeat of the demon. As this is a day of rejoicing, many will have very elaborate breakfasts and lunches and meet family and friends. 4.Lakshmi Puja (30 Ashvin or 15 Krishna Paksha Ashvin): Lakshmi Puja marks the most important day of Diwali celebrations in North India. Hindu homes worship Lakshmi, the goddess of wealth, and Ganesh, the God of auspicious beginnings also known as the remover of obastacles, and then light deeyas (little clay pots) in the streets and homes to welcome prosperity and well-being. 5.Bali Pratipada and Govardhan Puja (1 Kartika or 1 Shukla Paksha Kartika) : In North India, this day is celebrated as Govardhan Puja, also called Annakoot, and is celebrated as the day Krishna – an incarnation of god Vishnu – defeated Indra and by the lifting of Govardhana hill to save his kinsmen and cattle from rain and floods. For Annakoot, large quantities of food are decorated symbolising the Govardhan hill lifted by Krishna. In Maharashtra, Tamil Nadu and Karnataka, it is celebrated as Bali-Pratipada or Bali Padyami. The day commemorates the victory of Vishnu in his dwarf form Vamana over the demon-king Bali, who was pushed into the patala. In Maharashtra, it is called Padava or Nava Diwas (new day). Men present gifts to thei r wives on this day. It is celebrated as the first day of the Vikram Samvat calendar, in Gujarat. 6.Yama Dwitiya or Bhaiduj (also Bhayyaduj, Bhaubeej or Bhayitika) (2 Kartika or 2 Shukla Paksha Kartika): on this day, brothers and sisters meet to express love and affection for each other (Gujarati: Bhai Bij, Bengali: Bhai Phota). It is based on a story when Yama, lord of Death, visited his sister Yami (the river Yamuna). Yami welcomed Yama with an Aarti  and they had a feast together. Yama gave a gift to Yami while leaving as a token of his appreciation. So, the day is also called YAMA DWITIYA. Brothers visit their sisters’ place on this day and usually have a meal there, and also give gifts to their sisters Goddess Lakshmi Puja[edit source] Main article: Lakshmi Puja Diwali marks the end of the harvest season in most of India. Farmers give thanks for the bounty of the year gone by, and pray for a good harvest for the year to come. Traditionally this marked the closing of accounts for businesses dependent on the agrarian cycle, and is the last major celebration before winter. Lakshmi symbolises wealth and prosperity, and her blessings are invoked for a good year ahead. There are two legends that associate the worship of Lakshmi on this day. According to the first legend, on this day, Lakshmi emerged from Kshira Sagar, the Ocean of Milk, during the great churning of the oceans, Samudra manthan. The second legend (more popular in western India) relates to the Vamana avatar of the big three Vishnu, the incarnation he assumed to kill the king Bali. On this day, Vishnu came back to his abode the Vaikuntha; so those who worship Lakshmi receive the benefit of her benevolent mood, and are blessed with mental, physical and material well-being.[13] As per spiritual references, on this day Lakshmi-panchayatan enters the Universe. Vishnu, Indra, Kubera, Gajendra and Lakshmi are elements of this panchayatan (a group of five). The tasks of these elements are: Lakshmi: Divine Energy (Shakti) which provides energy to all the above activities. Vishnu: Happiness (happiness and satisfaction) Kubera: Wealth (generosity; one who shares wealth) Indra: Opulence (satisfaction due to wealth) Gajendra: Carries the wealth Saraswati: Knowledge Diwali is not only celebrated by Hindus; it is somewhat also a Sikh festival as it marks the Bandi Chhor Divas festival. Spiritual significance[edit source] While Diwali is popularly known as the festival of lights, the most significant spiritual meaning behind it is the awareness of the inner light. Central to Hindu mythology is the belief that there is something beyond the physical body and mind which is pure, infinite, and eternal, called the Atman. The celebration of Diwali as the victory of good over evil, refers to the light of higher knowledge dispelling all ignorance, the ignorance that masks ones true nature, not as the body, but as the unchanging, infinite, immanent and transcendent reality. With this awakening comes compassion and the awareness of the oneness of all things (higher knowledge). This brings anand (joy or peace). Just as we celebrate the birth of our physical being, Diwali is the celebration of this Inner Light. While the story behind Diwali and the manner of celebration varies from region to region (festive fireworks, worship, lights, sharing of sweets), the essence is the same – to rejoice in the Inner Light (Atman) or the underlying Reality of all things (Brahman).

Commercial company Essay Example for Free

Commercial company Essay Select a major industrial or commercial company based in the United States and listed on one of the major stock exchanges in the United States. Each student should select a different company. Avoid selecting an insurance company or a bank, because the financial ratios for these financial businesses are different. Write a seven-to-eight-page double-spaced paper answering and demonstrating with calculations and financial data the following questions. 1. What is the name of the company? What is the industry sector? Starbucks Corporation is in the Food and Beverage industry 2. What are the operating risks of the company? Economic conditions in the US and certain international markets could adversely affect Starbucks’ business and financial results. – as a retailer Starbucks is dependent upon the customer’s discretionary spending. Customers may have less money for discretionary purchases as a result of job losses, foreclosures, bankruptcies, increased fuel and energy costs, higher interest rates and taxes. Decreases in customer traffic will negatively impact financial performance. Starbucks may not be successful in implementing important strategic initiatives or effectively managing growth, which may have an adverse impact on our business and financial results. – there is no assurance that Starbucks will be able to implement strategic initiatives and achieve the results that are within management’s expectations. These initiatives are designed to create growth, improve operations and drive long-term shareholder value. Starbucks face intense competition in each of our channels and markets, which could lead to reduced profitability. Starbucks is highly dependent on the financial performance of the America’s operating segment – the Americas operating segment contributes 74% of the total net revenues in fiscal 2013. Starbucks is relying on the success in the European/ Middle East, China/Asia Pacific operating segments to achieve overall growth targets. Other international operations are also subject to additional inherent risk when conducting business abroad. Of which, include: Forex rate fluctuations. Changes or uncertainties in economic, legal, regulatory, social and political conditions in international markets. Restrictive actions of foreign or US governments affecting trade. Enforceability of intellectual and contract rights. Local laws Disruption in energy supplies. Delays in store opening beyond the control of management. Increases in the cost of high-quality Arabica coffee beans or other commodities. Disruption in the supply chain, which will impact the ability to deliver Starbucks’ products. The loss if key personnel or difficulties in recruiting and retaining qualified personnel Adverse public or medical opinions about the health effects of consuming Starbucks’s products, as well as reports of incidents involving food-borne illnesses, food tampering or food contamination. Starbucks relies heavily on information technology in operations, and any material failure, inadequacy, interruption or security failure of that technology could harm Starbucks’ ability to effectively operate the business. Failure to comply with local laws and regulations. 3. What is the financial risk of the company (the debt to total capitalization ratio)? Market Cap: 56.69 BN Debt: 2.05BN Debt/total cap ratio = 0.036 (yahoo.com, 2014) 4. Does the company have any preferred stock? The company does not have preferred stock. 5. What is the capital structure of the company: short-term portion of long-term debt, long-term debt, preferred stock (if any), and market value of common stock issued and outstanding? short-term portion of long-term debt 357.7 Million Long-term debt 1,299 Million Preferred Stock 0 Market value of common stock 56.69 Billion 6. What is the company’s current actual beta? 0.95 7. What would the beta of this company be if it had no long-term debt in its capital structure? Unlevered Beta using Hamada equation = Beta /[1+(1-T) x (D/E)] Beta : 0.95 Marginal Tax Rate, T: 32.8% D/E: 0.036 Unlevered Beta = 0.96 / [1+(1 -0.328)*0.036] =0.937 8. What is the company’s current marginal tax rate? Income taxes for the fiscal year ended 2012 resulted in an effective tax rate of 32.8% compared to 31.1% for fiscal year 2011. (Starbucks Coffee Company, 2013) 9. What is the price earnings multiple of the company? Price to earnings ration. This ratio is used in conjunction with other metrics to give analyst and investors are quick initial impression of whether a company would make a good investment. (investopedia, 2014) Starbucks P/E ratio is 385.05 10. How has the company’s stock been performing in the last 5 years? Starbucks share price 282.32% in the last 5 yrs. 11. Would you invest in this company? Why or why not? I would invest in Starbucks. SBUX has the highest P/E ratio among its competitors. Their cost of debt is low compared to their cost of equity. That is why they are relying on debt for their expansion. Their dividends per share have been increasing yearly. 18. The last page of your paper should be a Bibliography of the sources you used to prepare this paper. Bibliography investopedia. (2011, feb). Cost of Equity. (investopedia) Retrieved septmeber 2014, from Investopedia: www.investopedia.com/terms/c/costofeqquity.asp investopedia. (2014). Definition of Prince Multiple. Retrieved from www.investopedia.com: www.investopedia.com/terms/p/princemultiles.asp Starbucks Coffee Company. (2013). Fiscal 2013 Annual Report. Investor Relations. Seattle: Starbucks Coffee Company. yahoo.com. (2014, september). Yahoo Finance. (Yahoo.com, Producer) Retrieved september 2014, from Yahoo finance: finance.yahoo.com/q/ks?s=SBUX+Key+Statistics

Earnings Management and Accrual Accounting

Earnings Management and Accrual Accounting Contents (Jump to) Introduction Motivations for Earnings Management   Techniques 11 Groups to Manage Earnings Modified Jones Model   Limitations of the Earnings Management Models Implications and Application of Earnings Management References EARNINGS MANAGEMENT Introduction There has been significant attention placed on earnings management from regulators, the financial press, and academic researchers in recent years. Most are in agreement that earnings management does occur; however, there is no uniform definition for what it is or how to detect it. What are earnings and what is earnings management? Simply stated, earnings are the accounting profits of a company. Stakeholders (current or potential providers of debt and equity capital, employees, suppliers, customers, auditors, analysts, rating agencies, and regulators) use earnings to make important financial decisions. Many investors view earnings as value relevant data that is more informative than cash flow data. (Healy and Wahlen 1999) Others have suggested that current earnings are better predictors of future cash flows than are current cash flows. (Dechow 1994) In the US, these profits are derived using Generally Accepted Accounting Principles (GAAP) a system based on the accrual method, which measures the performance and position of a company by recognizing economic events regardless of when cash transactions occur. The generalidea is thateconomic events are recognized by matching revenues to expensesat the time in which the transactionoccurs rather than when payment is made (or received). This methodallows the current cashinflows/outflowsto be combined withfuture expected cash inflows/outflowsto give a more accurate picture of a companys current financial condition.The objectives of financial reporting and how these relate to the definition of accrual accounting, as laid out by the FASB in various Statement of Financial Accounting Concepts: The primary focus of financial reporting is information about an enterprises performance provided by measures of earnings and its components [CON1, para. 43]. Accrual accounting attempts to record the financial effects on an entity of transactions, events, and circumstances that have cash consequences for the entity in the periods in which those transactions, events, and circumstances occur rather than only in the periods in which cash is received or paid by the entity [CON6, para. 139]. It uses accrual, deferral, and allocation procedures whose goal is to relate revenues, expenses, gains, and losses to periods to reflect an entitys performance during a period instead of merely listing its cash receipts and outlays. Thus, recognition of revenues, expenses, gains, and losses and the related increments or decrements in assets and liabilities including matching of costs and revenues, allocation, and amortization is the essence of using accrual accounting to measure performance of enti ties [CON6, para. 145]. The principal goal of accrual accounting is to help investors assess the entitys economic performance during a period through the use of basic accounting principles such as revenue recognition and matching. There is evidence that as a result of the accruals process, reported earnings tend to be smoother than underlying cash flows (accruals tend to be negatively related to cash flows) and that earnings provide better information about economic performance to investors than cash flows (Dechow 1994) This idea raises the following key questions: What is the objective of accrual accounting? How far should management go in helping investors form rational expectations about the firms performance through their accruals choices and when does this activity become earnings management? To the extent that these accruals choices often operate to smooth reported earnings relative to the underlying cash flows, when does the appropriate exercise of managerial discretion become earnings management? Perhaps by its very nature, accrual accounting dampens the fluctuations in an entitys underlying cash flows to generate a number that is more useful to investors (for assessing economic performance and predicting future cash flows) than current-period operating cash flows. To characterize this as earnings management, we need to define the point at which managers accrual decisions result in too much smoothing and becomes earnings management. To think more generally about how earnings management is defined, consider the following representative definitions from the academic literature: a purposeful intervention in the external financial reporting process, with the intent of obtaining some private gain Schipper (1989) Earnings management occurs when managers use judgment in financial reporting and in structuring transactions to alter financial reports to either mislead some stakeholders about the underlying economic performance of the company, or to influence contractual outcomes that depend on reported accounting numbers. Healy and Wahlen (1999) Although widely accepted, these definitions are difficult to operationalize directly using attributes of reported accounting numbers since they center on managerial intent, which is unobservable. Turning to the professional literature, clear definitions of earnings management are just as difficult to discern from pronouncements, statements, and speeches by regulators. An extreme form of earnings management, financial fraud, is well-defined (again in terms of managerial intent) as: the deliberate misrepresentation of the financial condition of an enterprise accomplished through the intentional misstatement or omission of amounts or disclosures in the financial statements to deceive financial statement users. (Certified Fraud Examiners, 1993) In recent speeches and writings, regulators at the SEC seem to have a broader concept in mind than financial fraud when they talk about earnings management, although a strict definition has not been made explicit. In particular, while financial reporting choices that explicitly violate GAAP can clearly constitute both fraud and earnings management, it also seems that systematic choices made within GAAP can also constitute earnings management according to recent SEC discussions. The notion that earnings management can occur within the bounds of GAAP is consistent with the academic definitions described above but is somewhat startling if the idea is that this type of earnings management will lead to explicit adverse consequences for managers and firms (in the form of SEC enforcement activity) in the same way as financial fraud. This is an important point because of the question as to whether income smoothing and other similar processes constitute earnings management and whether they ar e to be treated in the same manner as fraud. Former SEC Chairman Levitt indicated that flexibility in accounting allows firms to keep pace with business innovations. Abuses such as earnings management occur when people exploit this pliancy. Trickery is employed to obscure actual financial volatility. This in turn, masks the true consequences of managements decisions. (1998). This implies that within-GAAP choices can be considered to be earnings management if they are used to obscure or mask true economic performance, bringing us back again to managerial intent. This idea is reinforced by our reading of SAB 99, which also points to the intent to deceive. As accounting researchers have discovered, implementing this type of definition requires a reliable measure of the true consequences of managements decisions that is, the earnings number that would have resulted from a neutral operation of the process (absent some form of managerial intent). The crucial issues seems to be why firms choose to manage earnings, how do firms manage their earnings, how do we measure earnings management given that implementing GAAP requires management to make judgments and estimates, and what are the implications of earnings management. Motivation Management can have many motivations for managing their earnings. The ultimate motive for earnings management, however, is to aesthetically enhance the performance of a company in the eyes of its stakeholders. The literature cites motives such as stock market incentives, signaling or concealing private information, political cost, internal motives, lending contracts, management compensation contracts, and regulatory issues. A primary purpose of earnings management is to enhance the wealth of its stakeholders such as owners since they are hired by the board of directors and the board of directors is hired by the owners.   To enhance the benefits of the owners of a firm, management may manage earnings in order to meet analyst forecasts for present and future periods (Burgstahler and Eames 1998). An owner of that firms stock may be rewarded by the appreciation of its stock value which directly relates to the owners wealth. Meeting earnings forecast is an important factor on the stocks price. The more consensuses among analysts forecasts, the stronger incentive management has to meet those forecasts (Payne and Robb 2000).   Moreover, the direction of analysts recommendation (buy or sell) about a company can bias managements decision to manage earnings. If the company misses its earnings this can have a negative impact on stock returns and negatively impact managements compensation (Matsunaga and Park 2001).   However, if management can meet or beat analyst expectations, then this can result in higher stock returns (Bartov et al., 2002). The management of earnings has also been seen prior to a firms equity offering such as seasoned equity offers (Teoh, Welch, and Wong 1998b), initial public offerings (Teoh, Welch, and Wong 1998a; Teoh, Wong, and Rao 1998), and stock financed acquisitions (Erickson and Wang 1999). Management may have the incentive to signal positive information or to conceal negative information.   If a firm is performing poorly or having financial struggles, management may conceal this performance using earnings management (Rosner 2003). On the other hand, management may want to signal the firms future performance by revealing more information about a companys future earnings and cash flow prospects (Tucker and Zarowin 2006). Earnings management can also be used to shift earnings to other periods for optimal tax planning (Shane and Stock 2006). The shifting of earnings for tax purposes can be a sign of strength. Other reasons to manage earnings can include meeting bank loan covenants. In order to maintain bank loan covenants, management may have to achieve a certain level of earnings. Failure to reach the requisite earnings can cause the lender to call the loans due, creating liquidity problems for the firm and signaling firm weakness to the bank and other creditors. The li terature finds that firms that have violated covenants are more likely to manage earnings, possibly to prevent future defaults (Sweeney 1994).   When earnings management is conducted, managers use it as a tool to enhance perception of their management capabilities during the current reporting period, implying that this type of performance will continue in future reporting periods. They expect to be compensated handsomely for their business acumen.   However, Guidry et al. (1998) found that divisional managers for large multinational firms are likely to defer income when the earnings target in their bonus plan will not be met. This indicates that management is willing to take a bath in the current period in order to reap the benefits in a future period.   Moreover, it was found in Murphy (2001) that management is more likely to smooth earnings when using internal performance standards (budget goals and prior year) than external standards. Another form of compensation manipulation happens when there is a cap on the bonus awards. Then management is more likely to report an accrual that defers income when the cap is reached ( Healy 1985 and Hotausen et al, 1995). Furthermore, management may manage earnings depending on whether they are joining or leaving the firm. A new CEO may be inclined to downwards earnings management (transferring the benefit to future periods), while a retiring CEO may use upward earnings management (reaping the benefits in the current period) (Godfrey et al., 2003). Certain businesses have regulatory requirements to stay in business. A popular study of earnings management in the literature is the application by banks to manage earnings in order to meet capital requirements and by insurance companies to manage earnings to meet risk regulatory requirements. The literature supports evidence that when banks are close to minimum capital requirements they overstate loan loss provisions, understate loan write-offs, and recognize abnormal realized gains on securities portfolios (Moyer 1990; Scholes et al. 1990; Beatty et al. 1995; Collins et al. 1995). Additionally, financially weak property casualty insurers that risk regulatory attention understate claim loss reserves (Petroni 1992). The literature has also shown that firms facing anti-trust or potential anti-trust scrutiny are likely to use earnings management. These firms or others vulnerable to adverse political consequences have incentives to manage earnings to appear less profitable (Watts and Zi mmerman 1978). Moreover, firms under investigation for anti-trust violations reported income decreasing abnormal accruals in investigation years (Cahan 1992). Techniques Earnings Management can take place by underestimating or overestimating either revenues or expenses. It can be done to affect future earnings as well as current earnings. There are two main types: Cosmetic Earnings Management using accounting choices from GAAP: also called accrual based earnings management. It happens when managers use their judgment and discretion to make choices related to accounting principles that can alter earnings in the current or a future period. An example is the modification of depreciation rates, where an increase (decrease) in the expense may occur in the current period leading to a decrease (increase) in the future (Nelson et. al. 2003). Real-Activity Earnings Management using operating decisions: this type of earnings management is when managers make decisions that affect the real operations in the firm. This type is more dangerous both to the firm and to the managers. Managers would be at a higher risk of being caught. As for the firms, real activities earnings management affects the cash flow, and consequently has a higher impact on the companys future. For example, a manager can give discounted sales prices in order to boost sales and consequently meet some target revenues (Roychowdhury 2006). The most popular and successful techniques used to manage earnings can be categorized into 11 groups: 1. Cookie jar (Cosmetic): managers create a reserve or a financial slack to boost earnings in future periods by recording more expenses in the present. For example, when the manager reports higher inventory cost in the current period, it will allow him to reduce this in the future. (Levitt 1998) 2. Big bath (Cosmetic): when the management decides to eliminate or restructure a subsidiary or an operation, GAAP permits the management to record an estimate charge against the income. Managers can record higher charges to dissimulate other charges. (Levitt 1998) 3. Big bet on the future (Cosmetic): when a company acquires another one, managers can get an immediate earnings boost by including the acquired companys earnings in consolidated earnings. On the other hand, to boost future earnings, managers can write-off the acquired in-progress RD costs against present earnings, and thus protecting future earnings from these charges. (Levitt 1998) 4. Flushing of investment portfolio (Real): passive investments (less than 20% ownership) can be classified as trading securities (reported in operating income) or available-for-sale securities (not reported in operating income until sold). Earnings can be managed by timing sales (sell securities that gained (lost) value to increase (decrease) earnings) or reclassifying the security portfolio (from trading security to available for sale to move gain or loss from or to the income statement) 5. Throw out a problem child (Real): When a subsidiary underperforms, it decreases the overall company earnings. It is usually expected to cause a bigger decrease in the future. Managers may act in several ways to counter that: sell the underperforming subsidiary and consequently report a gain or a loss (based on the managers discretion). Another way is to spin-off the subsidiary by distributing or exchanging the shares with current shareholders and in this way the burden is transferred to the latter. 6. Change in GAAP (Cosmetic): Management can manage earnings by undergoing changes to the present accounting standards. For example, it may volunteer for early adoption of new accounting standards, such as the 1985s standard, which allowed companies whose pension assets exceeded their pension liabilities to count the difference as income (Lev 1989). This technique allows for improved revenue and improved expense recognition. 7. Amortization, Depreciation, and Depletion (Cosmetic): Writing-off long-term assets can be managed by selecting write-off method and period, estimating salvage value, or reclassifying as non-operating use. 8. Sale/Leaseback and asset exchange (Real): selling a long-term asset that has unrealized gain (loss) can be used to manage earnings. For example, selling a building, which is carried in the balance sheet at $25 million, for $40 million, will give a boost to the current earnings by $15 million (not considering tax and transaction costs). Another way is to sell the building and lease it back (recording gains or losses). However, if the management wishes not to record any gains or losses, the long-term asset could be exchanged with a similar one (for example for exchanging a warehouse for another one that is nearer to a production site) 9. Operating vs. Non-operating Income (Cosmetic): Income items can be classified as Operating income (recurring or core income, expected to continue in the future) or non-operating income (non-recurring, not expected to affect future). GAAP permits to management to classify an item as one or the other. The managers judgment will then affect the financial analysts forecasts, which are based on the operating or core earnings. For instance, disposition of a major manufacturing plant can be classified either as special charges (Operating income) or discontinued charges (non-operating income) based on the managers discretion. 10.Early Retirement of Corporate Debt (Real): Managers may decide to prematurely sell long-term corporate debts (bonds) which are usually recorded at an amortized value. The timing of the sale may lead to gains or losses due to the difference between the amortized value and the book value. 11.Stock buybacks (Real): This technique does not affect earnings, however it does affect earnings per share. By repurchasing their own shares, an act that is considered internal and thus not required to be reported under GAAP, companies will report higher EPS. Consider a company with 1 million shares. If the earnings are $4 million, EPS = $4 million/1million shares = $4 per share. Now if the company buys back 100,000 shares, the same earnings would have to be divided by 900,000 shares, the reported EPS would be $4.44 per share. Earnings Management Models and The Accrual Generation Process Accruals have the desirable traits of giving summary measures of firms income and accounting choice.   In earnings management research, accruals are divided into discretionary (DA) and non-discretionary (NDA). Most research has focused on the detection of DA. It is customary to start earnings management studies with the study of behavior of sales over time. First, in the budgeting process, sales determine the firms production and inventory levels, which in turn determine cost of goods sold, operating expenses, and investment decisions. Second, sales have the highest persistence of any component of the income statement. Therefore, sales are an efficient statistic for describing the characteristics of the firm. The fundamental element of any test for earnings management is a measure of management discretion over earnings. Most studies use DA as a proxy for earnings management. Because DA cannot be observed directly from the financial statement, they have to be estimated using some kind of model. The literature has followed different approaches. According to McNichols (2000), the models can be broadly classified into 3 groups: aggregate accrual models, specific accrual models, and frequency distribution models.   Because of their wide use, we discuss the aggregate accrual models as follows: Models Starting with the first and simplest models, both Healy (1985) and DeAngelo (1986) used total accruals (TA) as the proxy for DA to test earnings management in the context of bonus and management buyouts respectively. However, DeAngelo (1986) used first differencing to correct for serial correlation, therefore his NDA will be less contaminated by past accruals that are irrelevant in estimating current DA. The most popular earnings management model is the Jones Model (1991). It has model has been modified in several ways. Analysis is conducted in 2 stages. In the estimation stage, the DA is assumed to be zero and firm specific coefficients of NDA will be determined. These coefficients are assumed to be stationary and are used to in the event period to determine the DA. In her model, unlike the previous models, NDA are expected to vary with the level of business activity, and revenues and property, plant, and equipment (PPE) are used as proxies to control for NDA. All the variables are deflated by lagged total assets to correct for heteroskedasticity. Dechow et al (1995) argued that earnings can be managed by inflating revenue via receivables. As a result, revenue should be adjusted for change in receivables. This adjusted model is known as the Modified Jones Model. The Modified Jones Model (1995) is: The Industry Model (1991) was developed by Deschow and Sloan when they dealt with RD spending during the last year of the tenure of an outgoing CEO. They assumed that the variation in NDA is common across all firms in the same industry and formulated a model of how the normal item under investigation behaves. However, this model applies only to event studies in which not all firms experience the same event and it cannot capture firm specific characteristics. The Industry Model is: NDA t+1 = ?1 + ? Median (TA t+1) Limitations All models come with limitations. The limitations of the earnings management models are: Strong assumptions that may not hold. These include the absence of earnings management in the estimation period, stationarity of firm specific characteristics over such a longer time horizon, and orthogonality of NDA with the error term (i.e.DA). All the models assume that abnormal accruals are discretionary. Variation in accrual could be the result of performance or business strategy. The consequence is that it produces a Type II error. The solution is to add variables to control for performance and business strategy (Hansen 1999), however, some performance and growth variables may have non-linear properties. Small samples sizes. Small samples generate higher standard error which can weaken the power for the tests (type II errors). Measurement error. Since DA cannot be observed, it has to be estimated. This produces biased estimate of coefficients. The Balance Sheet approach generates more measurement error than the Cash Flow approach. (Hirbar and Collins 2002) Omission of variables. Most models miss some important variables and this induces a bias on the included variables and higher standard errors. The obviously omitted variable is an expense. This can cause an accrual conundrum (Ronen et al, 2007). Efficiency of the existing models. Research has shown that most of these models wrongly identify abnormal but NDA as DA (Type I error) and fail to identify higher amount of induced earnings management (Type II errors). This is partly due to the linearity of the models and the non-linear behavior of the variables studied. Moreover, there are many endogenous factors that affect earnings management and it may not be captured by single equations. As a result, a shift to linear specification and non-linear specification of the models could improve the efficiency of the earnings management models. Further decomposition of accruals. The starting point for most earnings management studies is decomposition of TA and most studies decomposed TA into NDA and DA. However, accruals have reversal property that ensures the change in accrued balance to add up to zero. Therefore, reversal of accrued balance limits the opportunity of managed earnings. As a result, further decomposition of TA accrual could provide more information on the exact change in TA. Implications and Application of Earnings Management Literature related to earnings management implies that earnings management could not be completely eliminated. As long as managements can benefit from managing earnings, they would attempt to expand use of it. Earnings management could be reduced while public eyes such as regulators spend many resources to detect it. However, if they lower guard due to lack of perfect restriction methods, earnings management could be re-flourished since it is surely useful for management to achieve their goals. Therefore, firms earnings management activities continually are reiterated. This continued action without a complete elimination can cause various effects on our society. Firms which purposefully manage their earnings for their own good could negatively impact public well-fare. According to Beaver (1998), financial reporting can generate different kinds of economic consequences, mostly related to resource allocation such as wealth distribution, aggregate consumption and aggregate production, a nd resources devoted to private search for information. Since earnings management could affect the quality of information by producing less reliable financial statement, eventually it could cause various negative economic results. In other words, less reliable information produced because of earnings management may not only make the public worse-off, but may also make the overall economy less stable. For example, because of earnings management, if many investors believe that financial reporting has poor quality and less reliability, they would spend more of their resources to search for better information or private information. It could mean that society wastes resources or re-allocates them to inappropriate places. Several studies provide evidences of earnings management by testing various types of accruals. Teoh, Wong, and Rao (1998) found that depreciation estimates and bad debt provisions are used for earnings management surrounding initial public offers. Many other studies found proof of earnings management through bank loan loss provisions (Beaver, et al., 1989; Moyer, 1990; Scholes, et al., 1990; Wahlen, 1994; Beatty et al. (1995), Collins et al. (1995), Beaver and Engel (1996), Liu and Ryan (1995), Liu et al. (1997). Studies of insurance claim loss reserves, including Petroni (1992), Anthony and Petroni (1992), Beaver and McNichols (1998), Penalva (1998), Petroni et al. (1999), have provided evidence of earnings management among insurers. Visvanathan (1998), Miller and Skinner (1998), Ayers (1998) test the use of deferred tax assets as a tool of earnings management, but they only present little evidence of it. While research indicates evidence of earnings management in a few accruals, numerous studies suggest different methods which could contribute to reduce pervasiveness of earnings management. Such restriction methods could be broadly cauterized in three parts. The first proposed way is to restrict earnings management through the regulatory process. Tan and Jamal (2006) found that strict accounting standards relating to discretionary accruals may reduce earnings management through. However, they also emphasize that too much restriction for cosmetic earnings management could increase real activity earnings management. As such, restriction through regulation would not completely eliminate earnings management because there are trade-offs. Secondly, another method is an appropriate and effective audit procedure. Past studies have shown evidence that various factors related to audit procedure can help constrain earnings management (Krishnan, 2003; Van Caneghem, 2004; Van Caneghem, 2004; Vand er Bauwhede Whillekens, 2004; Kim, et al., 2003; Frankel, 2002; Ferguson, 2004; Carey Simnet, 2006). According to Kim, et al. (2003), Big 5 auditors were more effective in deterring earnings management when there was an income increasing accrual choice. The last suggested restriction method is effective and efficient corporate governance. This is associated with the firms structure. For example, if a firm is inclined to highlight effective corporate governance, this firm could make an effort to prohibit earnings management.   It is important to understand that these three methods correlate with each other. For instance, by requiring additional audit procedures or firm policies, regulation would affect audit procedure or corporate governance and would reduce earnings management. On the other hand, auditors or firms could propose new regulations to reduce earnings management. Hence, earnings management could possibly be reduced not through one method but through a combination of a ll three methods. References: Ayers, B. C. 1998. Deferred tax accounting under SFAS No. 109: An empirical investigation of its incremental value-relevance relative to APB No. 11. The Accounting Review 73 (2): 195-212 Bartov, E., Givoly, D. Hayn, C. (2002) The rewards to meeting or beating earnings expectations.  Journal of Accounting and Economics, 33,173-204 Beatty, A., S. Chamberlain, and J. Magliolo. 1995. Managing financial reports of commercial banks: The influence of taxes, regulatory capital and earnings. Journal of Accounting Research 33 (2): 231-261 Beaver, W., C. Eger, S. Ryan, and M. Wolfson. 1989. Financial reporting, supplemental disclosures and bank share prices. Journal of Accounting Research (Autumn): 157-178 Beaver, W., and E. Engel. 1996. Discretionary behavior with respect to allowances for loan losses and the behavior of security prices. Journal of Accounting and Economics 22: 177-206 Beaver, and M. McNichols. 1998. The characteristics and valuation of loss reserves of property-casualty insurers. Working paper, Stanford University. Burgstahl

The Definition of Success :: Definition Essays 2014

"Success entails having a positive outlook and good work ethic to help you pursue your dreams and goals throughout your entire life. Success is achieving intellectual growth for your own personal enrichment. Success is making the best of the opportunities that are presented to us in order to do good things for ourselves and for those around us." – Aarron Hedlock – What is success and how can you achieve it? I’d like to to propose a new definition of success that isn’t about landing a job; it’s about believing that the job you will do is the job you should be doing. In other words, success must come from you, and the support—whether from family, professors, or career counselors—is what will help you to get there. There are some difficult steps along the way, the first of which is to know thyself. You might not be visiting the oracle at Delphi, even though having your future told might be nice in an age of endless options. As entrepreneur Bo Bennett explains: â€Å"Success is not what you have, but who you are.† Who am I? How’d I get here? Okay, Descartes, relax. There are some modern day tools that will help you bypass the existential crisis. Many of these, from Strong Interest Inventory to the StrengthsFinder, can help you gain perspective on all those hidden talents you may not have realized you had. What could be better? Are you â€Å"The Inspirer?† â€Å"The Executive?† â€Å"The Scientist?† Myers Briggs, also available at Career Services can help you find out. Of course, everyone has a pretty good sense of what they are good at. But finding out more, you might gain a language for talking about your abilities—and how that can translate into your own personal definition of success. But for anyone who has taken the SAT, you know there’s only so much multiple choice can say. The next step is getting to know you. Listen to your tendencies. Do you like risk or stability? High energy tasks or a steady pace? Engaging with new people or working with a small, tight group? This streamlines right into step two: know thy options. It’s like an exit on an airplane: look for a job â€Å"keeping in mind that it might be behind you.

United Nations Millennium Goal Essay -- World Issues, Interventions

Target C of the seventh United Nations Millennium Development Goal is to ‘halve, by 2015, the proportion of the population without sustainable access to safe drinking water and basic sanitation’ (UN, 2000). With our current model of sanitation, the flush toilet, we are simply unable to provide sanitation to everyone as the flush toilets are grossly inefficient, requiring large amounts of water and sewer infrastructure to function, two things increasing hard to possess in the developing world (Bill and Melinda Gates Foundation, 2011). This lack of possession leads to defecation and urination into unsafe sources, such as nearby streams and rivers which also provide drinking water for these people. The unsafe urination and defecation increases the incidence of fecal-oral contamination and occurrences of other communicable diseases. It also forces the poor villagers to walk farther in search of uncontaminated water sources. Interventions and the redevelopment of the sanitation system can bring about many positive changes in developing countries where present knowledge and present development of sanitation is poor. Optimum benefit from water sanitation interventions can be achieved if the communities are made aware of the links between hygiene practices, poor sanitation, polluted water, and disease (UNHRC, 2011). The redevelopment of the sanitation system is essential for the third world countries; however, the global community must overcome challenges before implementation to ensure lasting success. The redevelopment of the sanitation system, particularly the reinvention of the toilet is an efficient and significant way of improving health and hygiene, and women’s education and personal safety. Currently, 40% of the world’s populati... ...blem of implementation by spending more money on education and actual procurement of the reinvented toilets rather than the administration. It is great to take the increased education of the developing country to our advantage by using the school children to spread the message about sanitation to their families and deep into their communities. School Environment and Sanitation and Rural India states that â€Å" The best way to break bad practices is to cultivate good practices and childhood is the best time for that as children are receptive to all influences† (Majra and Gur, 2010). From these two suggestions for implementation, it seems very logical that the global community should focus on providing access to proper sanitation facilities at schools and on providing water, hygiene, and environment education at primary schools to further spread the reinvented toilet.

Negotiations and Decision-making Essay -- Negotiating

A multitude of data can be found online when searching for material on decision-making. Likewise, the same can be stated regarding the search for information pertaining to negotiations and decision-making. For example, a Google search of the key words â€Å"negotiations/decision-making† garnered over ten million results! Reviewing a tenth of that information would take a great deal of time and energy, so this paper will narrow the scope and focus on four negotiation/decision-making types: zero-sum game, win-win, satisficing solutions and fixed pie. In addition, a brief discussion on how each of the types has been applied will ensue. Prior to this class I had never heard of the zero-sum negotiation type. When researching the ideology, I came across a website created by Robert Korn (Korn, 2010) called Truth Pizza, and I found his take on the subject quite interesting. He explained the zero-sum games negotiations type as one party pursuing an action that satisfies their needs while a comparable party equally misses an opportunity. Korn offered several examples to explain the method in a way that was easy to understand and relatable. To convey a couple of scenarios Korn disclosed, he wrote about the zero-sum game as it relates to insurance companies. Each month people pay premiums to provide protection from what may come. People buy flood insurance to protect from rising water, auto insurance to protect from accidents and theft, life insurance to pay out in an untimely demise, and so forth. Society-at-large pays monthly, semi-annual or annual premiums in hopes that they will never need the services they are paying for. â€Å"For the most part, the money we get back from insurance is considerably less than what we pay in† (Korn, 20... ... negotiation feeling as though their issues were addressed and important to the compromise. This fosters better relations and improved camaraderie for those involved. Works Cited Business Dictionary. (2010). Satisficing. Retrieved November 15, 2010, from Business Dictionary: http://www.businessdictionary.com/definition/satisficing.html Korn, R. (2010, April 25). Zero-sum Games. Retrieved November 15, 2010, from TruthPizza.org: http://www.truthpizza.org/logic/zerosum.htm Menard, R. (2009, November 17). What Does Win-Win Negotiation Mean? Retrieved November 15, 2010, from Ezine Articles: http://ezinearticles.com/?What-Does-Win-Win- Negotiation-Mean?&id=3281520 Spangler, B. (2003, October). Positive-Sum, Zero-Sum, and Negative-Sum Situations. Retrieved November 17, 2010, from Beyond Intractability: http://www.beyondintractability.org/essay/sum/

Rather the officials should have spoken

In the essay the author is attempting to protect the rights of free speech through persuasion rather than through threats and intimidations. In promoting his views, the author cites the example of an incident that took place at Harvard.It is the author’s contention that the university officials should not have enforced their rules on the offending students. Rather the officials should have spoken with the students in order to help them understand the effect that their action would have on the rest of the community. In developing his perspective, the author brings to light the dilemma that the first amendment presents in allowing such displays. However the author also suggests a way out. He is asking the university officials not to enforce any kind of rules on such displays.It is his contention that such a course of action will only generate more interest in such behaviors and therefore a vicious cycle will result. In other words, the author is suggesting that the university of ficial should not create too much publicity in dealing with such an issue.The author’s purpose in the essay is to explore the different ways in which arguments over free speech can be resolved. The incident that he mentions has to do with some students hanging a confederate flag in view.The First Amendment permits this. However it offends other members of the community. Therefore this is a difficult issue to resolve. On the one hand, university officials should not restrict the expression of free speech. On the other hand, they cannot allow freedom of speech to offend other members of the community.The author also mentions that some communities have enacted codes to resolve such situations while others have refused to impose such restrictions. The author’s purpose in this essay is to find a middle way. This is because enacting codes will only generate more interest in the area so that people will resort to more extreme forms of free speech.Refusing to impose restrictio ns will also not solve the problem because in this case the rights of free speech will be abused. The purpose of the author in this essay is to suggest a different way in which the issues raised can be resolved.In promoting his views, the author is citing examples of an incident that occurred at Harvard. This incident forms the core of this essay. Resolving the issues raised in this situation forms the structure of the essay. In developing the structure, the author draws upon the First Amendment to resolve the issue.However he brings to light how the First Amendment fails to resolve the situation that arose at Harvard. Therefore he argues for a greater level of communication with the students in order to help them decide for themselves whether what they did was right or wrong. The author believes that this is the only way for the university officials to resolve the situation with the minimum of publicity.The author believes that the publicity that will result from enforcing restrict ions will have the opposite effect. Therefore the university officials should try to resolve the issue internally by talking to the students. In presenting his views, the author argued the validity of imposing restrictions when such restrictions will only create more interest in the problem.The author clearly sympathizes with the students’ right to do what they did. However he seeks to communicate the importance of talking to the students in order to help them understand why what they could be considered subversive. He brings to light the fact that the students are clearly in their rights to hang the flag as it is permitted by the First Amendment.However he also argues over the inappropriateness of this action. He advises against enforcing restrictions. He believes that this will only create more awareness of this problem so that other students will be interested to create similar situations.Clearly it is in the university officials’ interest to minimize the number of these incidents and to that end, the university officials should resolve such situations privately by discussing the issues with the students.Therefore the author seeks to find a third way other than enforcing codes or doing nothing. In this respect, he stresses the importance of maintaining the balance between free speech and mutual respect. He says that this objective can be met through education and persuasion.