Friday, December 27, 2019

Current Global Financial Crisis And Islamic Financial System - Free Essay Example

Sample details Pages: 16 Words: 4733 Downloads: 5 Date added: 2017/06/26 Category Statistics Essay Did you like this example? The entire world is now in the grip of financial crisis which is most severe since the Great Depression 1930s. It has taken about $3 trillion of bailout and liquidity injecting by number of countries to lessen the intensity of the crisis. Hence, there is a need to restructure the financial world that would help in minimizing the frequency and severeness of such crises in future (Chapra, 2009). It could not be possible to build a new system without determining the primary causes for this financial crisis. The most important cause of all financial crises has been imprudent and excess lending by banks over many years, which has also been acknowledged by many financial institutes. Don’t waste time! Our writers will create an original "Current Global Financial Crisis And Islamic Financial System" essay for you Create order This raises the question that what make it possible for banks to involve in such devastating practice which is not only unstable the financial system but also not in their own long-term best interest. There are three main elements which make it possible. First of all inadequate market discipline in the financial system resulting from the absence of profit-and-loss sharing (PLS). The second is the huge expansion in the size of derivatives, especially credit default swaps (CDSs) and the third is assurance to big banks from the central bank that it will definitely come to their rescue and will not allow them to fail. Therefore, bank and financial institute have not undertaken a careful measure against risk, which has led the whole financial system in the excessive volume of credit, excessive leverage and to a volatile rise in asset prices and speculative investment. One of the foremost objectives of Islam is to realize greater justice in human Society. According to the Quran (57:25) à ¢Ã¢â€š ¬Ã…“a society where there is no justice will ultimately head towards decline and destructionà ¢Ã¢â€š ¬?. The financial system may be capable to promote justice if it meets at least two conditions. Firstly, the finance should also share the risk and not only shift the whole burden of losses to the entrepreneur and secondly an equitable share of finance resources should become available to the poor people of community to help eliminate poverty, consequently, expand employments opportunities and hence reduce inequalities of wealth. (Chapra, 2009). To meet the first condition, Islam requires both the financer and entrepreneur to share equally in profit and loss. This will help in introducing greater discipline into the financial system and motivate financial institutions to evaluate the risks prudently and monitor the use of funds by the borrowers. This assessment of risks by the financiers and as well as by the entrepreneur should help in putting greater discipline and reducing excessive lending. Islamic finance should ideally help raise significantly the share of equity and PLS in businesses; even mainstream economist supports the greater reliance on equity financing. Rogoff (1999) states that à ¢Ã¢â€š ¬Ã‹Å"in an ideal world equity lending and direct investment would play a much bigger roleà ¢Ã¢â€š ¬Ã¢â€ž ¢. On the debt side, Islamic financials system doesnà ¢Ã¢â€š ¬Ã¢â€ž ¢t permit the creation of debt through direct lending and direct borrowing but it allow the creation of debt through the sales / lease of real assets which means Islamic debt modes of financing (murabaha, ijara, salam, istisna and sukuk), but, it has, nevertheless, put down number of conditions. The asset sold or leased must be real à ¢Ã¢â€š ¬Ã¢â‚¬Å" this will eliminate a huge number of derivatives transactions which involving gambling by third parties who are mostly concerned to claim for compensation for losses which not actually been suffered by them but by principal party The goods being sold or leased must be owned / possessed by seller/lessor- this condition ascertain that the seller (lessor) also take a part in risk to get a share in the return The sale / leased transaction must be real trade transaction à ¢Ã¢â€š ¬Ã¢â‚¬Å" this ensure that the creditor take extra measures to evaluate the credit risk but also prevent unneeded explosion in the value and volume of transactions. The risk associated with sales / leased must be borne by lender / seller himself as debt canà ¢Ã¢â€š ¬Ã¢â€ž ¢t be sold- this prevent the debt from growing above the size of the real economy and also discharge significant volume of financial resources for real sector, hence expanding employment and production of goods and services. History is full with evidence of instability of the conventional financial system. Many prominent economists have argued that this system is inherently unstable and tends to severe financial crisis. They have regarded the interest rate the main cause of huge fluctuations in commodity and asset prices, a source of financial instability, cumulative inflation, and detrimental to long-term economic growth. They have also called for a separation of deposit and investment banking. (Mirakhor, 2009). The main objective of this study is three-fold; firstly understand the global financial crisis and what determinants have caused it; secondly understand Islamic finance in context of global financial crisis and some of its major differences with conventional financial system and thirdly built up a model to assess the compare the financial stability of Islamic and conventional financial system. LITERATURE REVIEW To analyze the determinants which have caused current global financial crisis: a) The TED Spread: Global Finances Thermometer   TED spread is the difference between the LIBOR (The London Interbank Offered Rate at which banks lend to each other) and short-term U.S. government debt (T-bills). It indicates a perceived credit risk in the economy. As T-bills are regarded as risk-free an LIBOR are riskier than T-bills, so LIBOR always exceed the T-Bills. The TED spread, often used as a measure of the general credit risk of an economy is used to decide which date to divide the time series. The original TEDà ¢Ã¢â€š ¬?spread was the difference between US Treasure bills and Eurodollar contracts represented by Libor (Brown and Smith, 2005). Marquardt (2008) says that à ¢Ã¢â€š ¬Ã…“TED Spread measures market stress by revealing the willingness (or reluctance) of banks to lend money to one anotherà ¢Ã¢â€š ¬?. à ¢Ã¢â€š ¬Ã…“A jump in the spread shows how panicky banks are, in that they are charging each other a bigger interest-rate premium than  money  lent to the U.S. government, (CNN Money, 2008). Realized and Expected Writedowns or Loss Provisions for Banks By Region (in billions of U.S. dollars) Source: IMF Global Financial Stability Report Oct 2009. TED speed has always been under 1%, however, it rocketed in 2007 to about 2.5% and in late 2008 moved to highest level of 4.5%. Mid of 2007, newspapers reported Northern Rock, UK Bank, collapsed because liquidity had disappeared and banks were reluctant to lend money to another bank because of the high risk of market after the rise in the TED spread to unprecedented level in the history, then an historical phrase à ¢Ã¢â€š ¬Ã‹Å"credit crunchà ¢Ã¢â€š ¬Ã¢â€ž ¢ emerged; an environment, where even a creditworthy borrower are unable to find funds. Consequently, the central banks had to supply a massive amount of money to the interbank market, but the limited impact of TED spread chart, that in September2008, Lehman Brothers collapsed and filed bankruptcy protection with massive reduction in assets ever. b) US sub-prime mortgage There is no consensus on the exact definition of subprime mortgages. The term subprime is often used to describe certain characteristics of the borrower. For example, a FICO score (a standard industry model to evaluate creditworthiness of a borrower) less than 620 is a common definition of a subprime borrower. Another definition is that a subprime mortgage does not usually need any down-payments and that little documentation is required. However, a broad definition is that a subprime loan entails a high risk of default (Demyanyk et al (2008)). The housing mortgage market in the U.S. has been well functioning over the past two centuries, enabling millions of people to fulfil the dream of home ownership. During this time there has been several periods of disruption in these markets, but none of them as severe as the episode, sometimes referred to as the à ¢Ã¢â€š ¬Ã…“subprime mortgage market meltdownà ¢Ã¢â€š ¬? that begun around the summer of 2007, with falling real-estate prices and increasing defaults. Today, economists fear that more than 2 million or more Americans might lose their homes to foreclosure in 2009 (Barth et al (2008)). The banking industry is facing huge losses as a result of the sub-prime crisis. Already banks have announced $60bn worth of losses as many of the mortgage bonds backed by sub-prime mortgages have fallen in value. The losses could be much greater, as many banks have concealed their holdings of sub-prime mortgages in exotic, off-balance sheet instruments such as structured investment vehicles or SIVs. Although the banks say they do not own these SIVs, and therefore are not liable for their losses, they may be forced to cover any bad debts that they accrue. (BBC News, 2007) Many years of strongly rising house prices caused lenders to relax their lending criteria. Loan-to-value ratios rose and low starter-interest rates were introduced (typically for the first two years of the mortgage) to be recouped by higher interest rates for the remaining 28 years of the typical 30 year US mortgage. In many cases the borrowers knew that they could not afford the monthly payments after the initial two-year low interest period expired; they were relying on rising house prices to enable a profit on sale or refinancing The mortgage default rates on these sub-prime mortgages were much higher than predicted by the lendersà ¢Ã¢â€š ¬Ã¢â€ž ¢ credit models. These models were based upon the historical behaviour of prime borrowers, not sub-prime borrowers who behaved differently. (Amin, 2009) c) Securitisation Securitization is often stated to be part of the originate-to-distribute model, where institutions that originate assets (in this example, mortgages) move them away from their balance sheet by distributing them to purchasers of ABSs (asset-backed securities). The advantages for institutions conducting in securitization is mainly that they are able to free up capital and liquidity by moving the assets away from the balance sheet. Furthermore, securitization is a way of providing liquidity and funding to mortgages à ¢Ã¢â€š ¬Ã¢â‚¬Å" by investing in an ABS, a Japanese asset manager (for example) might finance the real-estate mortgages of U.S. home owners (Criado and Rixtel (2008)). US mortgage market had moved away from a à ¢Ã¢â€š ¬Ã‹Å"lend and collectà ¢Ã¢â€š ¬Ã¢â€ž ¢ model (the bank lends on a mortgage and collect it back over 30 years) to an à ¢Ã¢â€š ¬Ã‹Å"originate to distributeà ¢Ã¢â€š ¬Ã¢â€ž ¢ model (the bank makes a mortgage loan in order to sell it on.) Originating loans and selling them on means that banks make profits from lending as much as possible, provided that the loans can be sold on; once the loan has been sold the bank is relatively indifferent to its collectability. d) Collateralized Debt Obligations CDOs are ABSs that are constructed by pooling and securitizing in particular higher risk assets such as risky loans or tranches of other ABSs (Criado and Rixtel (2008)). There are different types of classifications for CDOs and one of the most common is cash flow CDOs, a term relating to the scenario where the trust (special purpose vehicle or special purpose entity) involved in the securitization owns the underlying debt posted as collateral in the CDO. A synthetic CDO refers to the scenario where the trust does not own the underlying debt, and instead invests in CDSs (credit default swaps) to synthetically track their performance. The hybrid CDO combines cash flow CDOs and synthetic CDOs. There is also the CDO squared (CDO2) which is a CDO that has securitized the tranches of another CDO. ABS CDOs and CDOs squared thus consist of a à ¢Ã¢â€š ¬Ã…“double layered securitizationà ¢Ã¢â€š ¬? (Criado and Rixtel (2008)). Here CDO securities created by Bank 1 and Bank 2 selling their customer loans are purchased by Special Purpose Entity (SPE) 3 which pays for them by issuing CDO securities to investors. As these are CDOs based on other CDOs, they are called CDO2. The challenge with such complex structures is that it becomes almost impossible to accurately project likely defaults on the original customer loans to the likely defaults on the securities issued by SPE 3. In many cases, complex CDO structures involved some sub-prime mortgages being blended with prime mortgages to boost the yield of the overall package of assets. Accordingly, once defaults started happening in the relatively small sub-prime market, that led to a collapse in the market value of a much larger amount of CDOs. The creation of collateralized debt obligations (CDOs) by mixing prime and subprime debt made it possible for mortgage originators to pass the entire risk of default of even subprime debt to the ultimate purchasers who would have normally been reluctant to bear such a risk. Mortgage originators had, therefore, less incentive to undertake careful underwriting.   Estimates of Global Bank Writedowns by Domicile, 2007-10 (in billions of U.S dollars) Source: IMF Global Financial Stability Report Oct 2009. e) Credit Derivatives The credit default swap originally thought as a way for bondholders to protect against a bond default can also be used for speculation on the creditworthiness of a company. One key difference between a regular insurance policy and a CDS contract is that the buyer of credit protection does not have to own the underlying instrument. Like most derivative instruments credit default swaps can be used for hedging, speculation and arbitrage. Under a credit default swap contract (CDS) the seller is paid a regular amount each year by the buyer of the CDS. If a credit event occurs in relation to the underlying asset which is referenced by the CDS, the seller pays the buyer for the fall in value of the reference asset. However, the buyer does not need to own the reference asset; in that case the CDS buyer is simply speculating that the reference asset will fall into default. When there is excessive and imprudent lending and lenders are not confident of repayment, there is an excessive resort to derivatives like CDSs to seek protection against default. The buyer of the swap (creditor) pays a premium to the seller (a hedge fund) for the compensation he will receive in case the debtor defaults. If this protection had been confined to the actual creditor, there may not have been any problem. What happened, however, was that hedge funds sold the swaps not to just the actual lending bank but also to a large number of others who were willing to bet on the default of the debtor. These swap holders, in turn, resold the swaps to others. The whole process continued several times.   While a genuine insurance contract indemnifies only the actually insured party, in the case of CDSs there were several swap holders who had to be compensated. This accentuated the risk and made it difficult for the hedge funds and banks to honour their commitments. The notional amount of all outstanding derivatives (including CDSs of $54.6 trillion) is currently estimated by the BIS to be over $600 trillion, more than ten times the size of the world economy. No wonder George Soros described derivatives as à ¢Ã¢â€š ¬Ã‹Å"hydrogen bombsà ¢Ã¢â€š ¬Ã¢â€ž ¢, and Warren Buffett called them à ¢Ã¢â€š ¬Ã‹Å"financial weapons of mass destructionà ¢Ã¢â€š ¬Ã¢â€ž ¢. The well known American economist Joseph Stiglitz has summarised the role of credit default swaps in the crises: With this complicated intertwining of bets of great magnitude, no one could be sure of the financial position of anyone elseà ¢Ã¢â€š ¬?or even of ones own position. Not surprisingly, the credit markets froze. (Stiglitz, 2009) f) General over-leveraging   The economies of the UK and US had not suffered a serious recession for many years. In these benign business conditions, companies had gradually increased their gearing, as interest on debt is tax deductible whereas dividends on share capital are not tax deductible. The high gearing was particularly striking in companies owned by private equity firms, which were typically very highly leveraged. If economic conditions worsened, such firms would risk insolvency. To assess the difference between Islamic and conventional finance in context of global financial crisis: Islamic finance is defined as a financial system based on Islamic law known as Sharià ¢Ã¢â€š ¬Ã¢â€ž ¢ah Islamic finance is limited to financial relationships involving entrepreneurial investment, subject to the moral prohibition of following (i) interest earnings or usury (riba) and money lending, (ii) haram (sinful activity), such as direct or indirect association with lines of business involving alcohol, pork products, firearms, tobacco, and adult entertainment, (iii) speculation, betting, and gambling (maysir), including the speculative trade or exchange of money for debt without an underlying asset transfer, (iv) the trading of the same object between buyer and seller (bayà ¢Ã¢â€š ¬Ã¢â€ž ¢ al-inah), as well as (v) preventable uncertainty (gharar), such as all financial derivative instruments, forward contracts, and futures agreements. As opposed to conventional finance, where interest represents the contractible cost for funds tied to the amount of principal over a pre-specified lending period, the central tenet of the Islamic financial system is the prohibition of riba, whose literal meaning à ¢Ã¢â€š ¬Ã…“an excessà ¢Ã¢â€š ¬? is interpreted as any unjustifiable increase of capital whether through loans or sales. The general consensus among Islamic scholars is that riba covers not only usury but also the charging of interest and any positive, fixed, predetermined rate of return that are guaranteed regardless of the performance of an investment (Iqbal and Tsubota, 2006; Iqbal and Mirakhor, 2006; Iqbal and Llewellyn, 2000). Since only interest-free forms of finance are considered permissible in Islamic finance, financial relationships between financiers and borrowers are governed by shared business risk (and returns) from investment in lawful activities (halal). Islamic law does not object to payment for the use of an asset, and the earning of profits or returns from assets are indeed encouraged as long as both lender and borrower share the investment risk together. Profits must not be guaranteed ex ante, and can only accrue if the investment itself yields income. Any financial transaction under Islamic law assigns to investors clearly identifiable rights and obligations for which they are entitled to receive commensurate return. Hence, Islamic finance literally à ¢Ã¢â€š ¬Ã…“outlawsà ¢Ã¢â€š ¬? capital-based investment gains without entrepreneurial risk. In light of these moral impediments to à ¢Ã¢â€š ¬Ã…“passiveà ¢Ã¢â€š ¬? investment and secured interest as form of compensation, shariah-complian t lending in Islamic finance requires the replication of interest-bearing, conventional finance via more complex structural arrangements of contingent claims (Mirakhor and Iqbal, 1988). The permissibility of risky capital investment without explicit interest earning has spawned several finance techniques under Islamic law. We distinguish among three basic forms of Islamic financing methods for both investment and trade finance: synthetic loans (debt-based) through a sale-repurchase agreement or back-to-back sale of borrower- or third party-held assets. lease contracts (asset-based) through a sale-lease-back agreement (operating lease) or the lease of third-party acquired assets with purchase obligation components (financing lease), and profit-sharing contracts (equity-based) of future assets. As opposed to equity-based contracts, both debt- and asset-based contracts are initiated by a temporary transfer of existing assets from the borrower to the lender or the acquisition of third-party assets by the lender on behalf of the borrower. Islamic à ¢Ã¢â€š ¬Ã…“loansà ¢Ã¢â€š ¬? create borrower indebtedness from the purchase and resale contract of an (existing or future) asset in lieu of interest payments. The most prominent form of such a à ¢Ã¢â€š ¬Ã…“debt-basedà ¢Ã¢â€š ¬? structural arrangement is the murabaha (or murabahah) (à ¢Ã¢â€š ¬Ã…“cost-plus saleà ¢Ã¢â€š ¬?) contract. Interest payments are implicit in an installment sale with instantaneous (or deferred) title transfer for the promised payment of an agreed sales price in the future. The purchase price of the underlying asset effectively limits the degree of debt creation. A murabaha contract either involves (i) the sale-repurchase agreement of a borrower-held asset (à ¢Ã¢â€š ¬Ã…“negative short saleà ¢Ã¢â€š ¬?) or (ii) the lenderà ¢Ã¢â€š ¬Ã¢â€ž ¢s purchase of a tangible asset from a third party on behalf of the borrower (à ¢Ã¢â€š ¬Ã…“back-to-back saleà ¢Ã¢â€š ¬?). The resale price is based on original cost (i.e., purchase price) plus a pre-spe cified profit markup imposed by the lender, so that the borrowerà ¢Ã¢â€š ¬Ã¢â€ž ¢s repurchase of the asset amounts to a à ¢Ã¢â€š ¬Ã…“loss-generating contract.à ¢Ã¢â€š ¬? Different installment rates and repayment and asset-delivery schedules create variations to the standard murabaha cost-plus sale. The most prominent examples are salam (deferred delivery sale), bai bithaman ajil (BBA) (deferred payment sale), istina (or istisna, istisnaà ¢Ã¢â€š ¬Ã¢â€ž ¢a) (purchase order), quard al-hasan (benevolent loan), and musawama (negotiable sale). As opposed to the concurrent purchase and delivery of an asset in murabaha, asset purchases under a salam or a bai bithaman ajil contract allow deferred delivery or payment of existing assets. Salam closely synthesizes a conventional futures contract and is sometimes also considered an independent asset class outside the asset spectrum of murabaha (Batchvarov and Gakwaya, 2006). An istina contract provides pre-delivery (project) finance for future assets, such as long-term projects, which the borrower promises to complete over the term of the lending agreement according to contractual specifications. A quard al-hasa n signifies an interest-free loan contract that is usually collateralized. Finally, a muswama contract represents a negotiable sale, where the profit margin is hidden from the buyer. Analogous to conventional operating and finance leases, al-ijarah leasing notes (à ¢Ã¢â€š ¬Ã…“asset-basedà ¢Ã¢â€š ¬?) provide credit in return for rental payments over the term of the temporary use of an (existing) asset, conditional on the future (re-)purchase of the assets by the borrower. The lease cash flow is the primary component of debt service. The lessor (i.e., financier) acquires the asset either from the borrower (operating lease or à ¢Ã¢â€š ¬Ã…“sale-leasebackà ¢Ã¢â€š ¬?/à ¢Ã¢â€š ¬Ã…“lease-buybackà ¢Ã¢â€š ¬?) or a third party at the request of the borrower (financing lease or à ¢Ã¢â€š ¬Ã…“lease-purchaseà ¢Ã¢â€š ¬?) and leases it to the borrower (or a third party) for an agreed sum of rental payable in installments according to an agreed schedule. The legal title of the asset remains with the financier for the duration of the transaction. The financier bears all the costs associated with the ownership of the asset, whereas the costs from the use of the asset have to be defrayed by the lessee. If the ijarah transaction is a financing lease (ijarah wa iqtina), such as an Islamic mortgage, the repayment through lease payments might also include a portion of the agreed resale price (in the form of a call option premium), which allows borrowers to gradually acquire total equity ownership for a predetermined sales price.15 If the lessee does not exercise the call option at maturity, the lender disposes of it in order to realize the salvage value (put option).16 In an operating lease with a repurchase obligation, the asset is returned to the borrower for the original sale price or the negotiated market price17 unless otherwise agreed.18 In this case, the lenderà ¢Ã¢â€š ¬Ã¢â€ž ¢s put option represents a repurchase obligation19 by the borrower (at the current value of outstanding payments), which is triggered upon certain conditions, such as delinquent payments or outright default. In Islamic profit-sharing contracts (equity-based), lenders (i.e.,, investors) and borrowers (i.e.,, entrepreneurs) agree to share any gains of profitable projects based on the degree of funding or ownership of the asset by each party. In a trustee-type mudharaba (or mudarabah) financing contract, the financier (rab ul maal) provides all capital to fund an investment, which is exclusively managed by the entrepreneur (mudarib) in accordance with agreed business objectives. The borrower shares equity ownership with the financier (i.e. a call option on the reference assets) and might promise to buy-out the investor after completion of the project. At the end of the financing period, the entrepreneur repays the original amount of borrowed funds only if the investment was sufficiently profitable. Profits are distributed according to a pre-agreed rate between the two parties. Investors are not entitled to a guaranteed payment and bear all losses unless they have occurred due to misconduct, negligence, or violation of the conditions mutually agreed by both financier and entrepreneur. The equity participation and loss sharing in a musharakah contract is similar to a joint venture, where both lender/investor and borrower (or asset manager/agent) jointly contribute funds to an existing or future project, either in form of capital or in kind, and ownership is shared according to each partyà ¢Ã¢â€š ¬Ã¢â€ž ¢s financial contribution. Although profit sharing is similar to a mudharaba contract, losses are generally borne according to equity participation. Overall, the different basic types of Islamic finance combine two or more contingent claims to replicate the risk-return trade-off of conventional lending contracts or equity investment without contractual guarantees of investment return or secured payments in reference to an interest rate as time-dependent cost of funds. Such arrangements may become complicated in practice, once they are combined to meet specific investor requirements under Islamic law (El-Qorchi, 2005). Although both Islamic and conventional finance are in substance equivalent to conventional finance and yield the same lender and investor pay-offs at the inception of the transaction, they differ in legal form and might require a different valuation due to dissimilar transaction structures (and associated legal enforceability of investor claims) and/or security design (Jobst, 2006d). Most importantly, Islamic finance substitutes a temporary use of assets by the lender for a permanent transfer of funds to the borrowe r as a source of indebtedness in conventional lending. Retained asset ownership by the lender under this arrangement constitutes entrepreneurial investment. The financier receives returns from the direct participation in asset performance in the form of state-contingent payments according to an agreed schedule and amount. RESEARCH METHODOLOGY: Z-score for Emerging Markets The z-score measures the degree of vulnerability of a particular business or an industry segment by categorising firms into two distinct clusters, namely strong and vulnerable firms, based on the historical default experience. The construction of the z-score used by the Bank is referenced on the model developed by Altman for emerging markets and employs the multiple discriminant analysis as an underlying statistical tool to derive a linear combination of financial ratios that best discriminate between the two categories. The multiple discriminant analysis improves on the traditional approach of individual or sequential analysis of financial ratios by reducing the reliance on rules of thumb and subjective judgment in determining the threshold levels and relative importance of the ratios. Selected key financial ratios are subsequently consolidated into a composite score to provide a snapshot of a firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s financial health. The discriminant function for the z-score for em erging markets based on the study conducted by Altman is given by the following equation: Z = Based on the z-score, both strong and vulnerable firms can be identified, whereby a higher z-score indicates a lower likelihood of the firm encountering financial distress. Working Capital/Total Assets (WC/TA) The working capital/total assets ratio is a measure of the net liquid assets of the firm relative to the total capitalization. Working capital is defined as the difference between current assets and current liabilities. Liquidity and size characteristics are explicitly considered. This ratio was the least important contributor to discrimination between the two groups. In all cases, tangible assets, not including intangibles, are used. Retained Earnings/Total Assets (RE/TA) Retained earnings (RE) is the total amount of reinvested earnings and/or losses of a firm over its entire life. The account is also referred to as earned surplus. This is a measure of cumulative profitability over the life of the company. The age of a firm is implicitly considered in this ratio. It is likely that a bias would be created by a substantial reorganization or stock dividend, and appropriate readjustments should, in the event of this happening, be made to the accounts. In addition, the RE/TA ratio measures the leverage of a firm. Those firms with high RE relative to TA have financed their assets through retention of profits and have not utilized as much debt. This ratio highlights the use of either internally generated funds for growth (low-risk capital) or OPM (other peopleà ¢Ã¢â€š ¬Ã¢â€ž ¢s money)à ¢Ã¢â€š ¬Ã¢â‚¬ higher-risk capital. This variable has shown a marked deterioration in the average values of non-distressed firms in the past 20 years and, in subsequent model updates, we utilized a transformation structure in order to make its negative impact less dramatic on current Z-Scores. Earnings before Interest and Taxes/Total Assets (EBIT/TA) This is a measure of the productivity of the firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s assets, independent of any tax or leverage factors. Since a firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s ultimate existence is based on the earning power of its assets, this ratio appears to be particularly appropriate for studies dealing with credit risk. We have found that this profitability measure, despite its reliance on earnings, which are subject to manipulation, consistently is at least as predictive as cash flow measures. Market Value of Equity/Book Value of Total Liabilities (MVE/TL) Equity is measured by the combined market value of all shares of stock, preferred and common, while liabilities include both current and long-term obligations. The measure shows how much the firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s assets can decline in value (measured by market value of equity plus debt) before the liabilities exceed the assets and the firm becomes insolvent. (Altman and Hotchkis (2006))

Thursday, December 19, 2019

Annotated Bibliography Sexual Violence Against Women and...

Sexual Violence: Rape Demonstrations (1) Walthen, CN, Harriet, MA, and Macmillan, L (2003) Interventions for Violence Against Women: Scientific Review. JAMA. 5 Feb 2003. Vol. 289, No.5. Retrieved from: http://jama.jamanetwork.com/article.aspx?articleid=195898 The work of Walthen, Harriet, and Macmillan (2003) examines intimate partner violence and how it is prevalent and associated with significant impairment however, the report states that it is not clear which interventions if any serve to reduce the rates of abuse and reabuse of women. The objective of the study reported is to conduct a systematic review from the view of primary health care of the evidence available on interventions focused at the prevention of abuse or reabuse of women. Data sources reviewed in the study include MEDLINE, PsycINFO, CINAHL, HealthStar, and Sociological Abstracts were searched from the database start dates to March 2001 using database-specific key words such as domestic violence, spouse abuse, partner abuse, shelters, and battered women. (p.1) Conclusion of the study report that a great deal has been learned about the epidemiology of violence against women however, there is a serious gap in the knowledge about evidence-based approaches in the primary car e setting toward the prevention of intimate partner violence. The study concludes by stating that a primary research priority is the evaluations of interventions focused on improving the health and well-being of women who has sufferedShow MoreRelatedThesis: Domestic Violence and Credible Source1677 Words   |  7 Pagesï » ¿Thesis Statement Studies have shown that an increasing trend of domestic violence is being perpetrated in heterosexual households. Many of these cases involve the male abusing the female, and the female actively attempting to maintain an outward appearance of normalcy despite the silent suffering. This outward image is nothing but a cover to maintain an illusion to the world that everything is good in the relationship, and also in many cases for fear of further abuse for drawing attention toRead MoreI Am Not My Sexuality2343 Words   |  10 PagesI Am Not My Sexuality: Annotated Bibliography and Outline Unit 5 Course 5334 Annotated Bibliography Aldrich, R. (2004). Homosexuality and the city: an historical overview. Urban Studies, 41(9), 1719-1737. Aldrich gives a historical overview of the history of homosexuality. He goes back to the Roman times and discusses Sodom and Gomorrah and continues to the present day. He makes mention of how homosexuals left various cities to escape the traditional life constraints and went to other citiesRead MoreAbortion Essay1645 Words   |  7 Pagesunintended pregnancy, social and economic factors cannot support the baby, and the body conditions do not allow the woman to be properly pregnant. But in the end, women have the decision and right to do what she wishes with her body. A woman along with others challenged the Texas restriction on abortion. The law forcing women to have children makes women have no rights whatsoever for their own lives. She said an unborn baby is not eligible for legal protection. The different states of the US each have theirRead MoreIs The Cause Really Worth Fighting For?3566 Words   |  15 PagesNicole Kola Ms.Lagesse AP Eng. Annotated Bibliography 09/04/2015 Is the Cause Really Worth Fighting For? Over the centuries, fervent beliefs have caused many wars. Throughout history, differences between social propaganda have separated and formulated prejudiced ideas about different religions. All across the world, there are people, on all ranks of the social hierarchy, who are being deprived of their rights and are not being heard by their local governments, so they bear up arms and create subversiveRead MoreHunyango Sa Bato - Abdon Balde Jr.6135 Words   |  25 PagesDomestic violence, also known as  domestic abuse,  spousal abuse,  battering,  family violence, and  intimate partner violence (IPV), is defined as a pattern of abusive behaviors by one partner against another in an  intimate relationship  such as marriage, dating, family, or cohabitation.[1]  Domestic violence, so defined, has many forms, including physical aggression or assault (hitting, kicking, biting, shoving, restraining, slapping, throwing objects), or threats thereof;  sexual abuse;  emotiona l abuse;Read MoreAnnotated Bibliography Agars, M. D. (2004). Reconsidering the Impact of Gender Stereotypes on the1800 Words   |  8 PagesAnnotated Bibliography Agars, M. D. (2004). Reconsidering the Impact of Gender Stereotypes on the Advancement of Women in Organizations. Psychology of Women Quarterly, 28(2), 103-111. doi:10.1111/j.1471-6402.2004.00127.x This article reveals the disparities in the workplace due to gender stereotypes favoring men over women in executive positions. Women have a much more difficult path to obtain executive positions, and maintain them. This article helps by showing the number of high-level womenRead More Legalize Prostitution Essay2912 Words   |  12 Pageslegalizing or at least decriminalizing prostitution. The following questions should be addressed. Would legalization reduce some of the inequalities and abuse suffered by the women involved? On the other hand, by legitimizing prostitution, would society reverse decades of work to promote human rights and improve the status of women? On the surface, this looks like a rehashing of a timeless debate. However, it is not. The question is no longer about morality -- is prostitution a vice and are those involvedRead MoreEssay about African American Male Feminist2019 Words   |  9 PagesFredrick Douglass’s â€Å"The Rights of Women†, Alexand er Crummell’s â€Å"The Black Woman of the South: Her Neglects Her Needs† and Langston Hughes’s â€Å"Madam Poems† along with some other works to support my response. Exploring the theory of the early and modern feminist as well as the changes that took place that created the black feminist or the black womanist and lead up to the male feminist. 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Retrieved January 10, 2014, from http://web.ebscohost.com/src/detail?sid=48dacef8-9126-4b87-9d13-3d736a97643d%40sessionmgr4004vid=1hid=4101bdata=JnNpdGU9c3JjLWxpdmU%3d#db=mihAN=31381859 †¢ This article from theRead MoreLibrary Management204752 Words   |  820 Pages. . . . . . . . . . . . . . . 279 Violence and Crime in the Workplace . . . . . . . . . . . . . 280 External Impacts on Human Resources—Legal Protections . . . . . . . . . . . . . . . . . . . 282 Equal Employment Opportunities . . . . . . . . . . . . . . . . 283 The Civil Rights Act of 1964 and Other Important Federal Legislation . . . . . . . . . . . . . . . . . . . 284 Affirmative Action and Comparable Worth . . . . . . . . . 285 xii Contents Sexual Harassment . . . . . . . . . . . .

Tuesday, December 10, 2019

Elixirs For Your Memory Essay Research Paper free essay sample

Elixirs For You Memory Essay, Research Paper ? Elixirs For Your Memory: The blitz is on for gingko and other herbal merchandises, but are they panaceas or placebos? ? -Time Magazine September 13,1999 Recently, everyplace you turn, you see or hear about new herbal redresss used for bettering one? s memory and concentration. One more often discussed is Ginkgo Biloba. It is an herbal substance that offers hope for bettering memory, concentration and encephalon maps. Ginkgo Biloba is a derivative of a leafy cosmetic tree that originated in eastern China. It is said to increase blood flow to the encephalon, bettering watchfulness and concentration ( Drummond, September 13,1999 ) . Although many people who are presently taking this medicine swear by it, who truly knows if it does better encephalon maps or if it is merely a placebo? The article? Elixirs For Your Memory? discusses the latest information sing Gingko Biloba. At big, most research workers are still diffident about the medicine. We will write a custom essay sample on Elixirs For Your Memory Essay Research Paper or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Many feel that extended probe and experimentation is still needed before trusty consequences can be established. Yet, on the other side, traditional therapists have no uncertainties about Gingko Biloba and believe that it has been used in Chinese medical specialty for old ages working admirations for it? s receiving systems. Obviously, the makers of these medicines besides believe that the medical specialty is a success for bettering encephalon maps. If you were to inquire a memory expert his or her sentiment about Gingko Biloba, the most likely reply would be that they are disbelieving about it and other encephalon supporters ( Drummond, September 13,1999 ) . ? Most of these merchandises have non be investigated to any important extent that would justify the claims that are being made, ? says Doctor Ronald Peterson, a neuroscientist at the Mayo Clinic in Rochester, Minn. ? Other research workers are even more to the point. All the media, they say is simply a instance of a placebo consequence run amok: people want their memories to acquire better, so they do. Give them a sugar pill, and they likely wouldn? T know the difference? ( Drummond, September 13, 1999 ) . Many persons are concerned with the recent liking taken toward these medical specialties. One concern comes from authorities research workers. Their concern is that 1000000s of people are steeping addendums without any thought what the substance side effects are, whether positive or negative. ? The National Institutes of Health is set abouting a survey of the effects of Gingko Biloba on aged people with mild memory damage, but it will be old ages before consequences are in? ( Drummond, September 13, 1999 ) . Consumers of such merchandises have small to travel on other than the maker? s claims and inconclusive research. Even more alarming, Gingko Biloba and other substances are non regulated by the Food and Drug Administration. The authority and pureness of the merchandises vary from trade name to trade name. At that, who reads labels any longer before starting foreign substances into their oral cavities? Many utilizations of these substances haven? t the slightest thought what they are devouring and what the does and wear? Ts are while taking the medical specialty. One Don? Ts involved with Gingko Biloba is that persons who are taking acetylsalicylic acid or other blood dilutants should foremost confer with their doctor before get downing the merchandise. The ground is because Gingko Biloba contains anticlotting features ; when it is taken in combination with blood dilutants it can do internal hemorrhage ( Drummond, September 13, 1999 ) . One facet is by and large agreed on, there is non plenty known about memory substances to measure the possible hazards. Most research so far has been conducted on worlds enduring from Alzheimer? s disease or on laboratory animate beings such as mice. Scientists are now merely get downing to carry on research on how the memory reacts to the natural ripening procedure. It is a batch more complex than people assume and it is traveling to take a batch of clip inorder to happen replies to memory loss and ways to forbid it. One twenty-four hours it possibly rather possible to take a medicine to forestall memory loss or Alzheimer? s disease. Until so, ? Experts suggest following the phrase Use it or Lose it. By merely reading a book or work outing a crossword mystifier on a regular footing can make admirations, even if it is non clear why? ( Drummond, September 13, 1999 ) . In drumhead, the article suggests that taking substances may non be the best thing to make at this point in clip. Much more research and probe is needed before jumping into a substance dependence. The best advice is to merely utilize your memory so that it doesn? t fade off. Medical Diaries sometimes tend to differ with what information the general public receives from the media refering medical informations and finds. As it relates to the article about Ginkgo Biloba, the medical diaries seem to hold a somewhat different sentiment about the utilizations of herbal substances. The general thought in the medical diaries is that there is non adequate information on these herbal substances to do an educational determination. Having the cognition of the substance uses and its possible side effects is indispensable to enable doctors to order medicines that are most effectual for his or her patients. Yet, one facet that was non included in the article is informations sing the latest surveies being conducted to better understand herbal substances. Many surveies that are presently being conducted in the USA and Europe suggest assuring consequences refering the usage of Gingko Biloba. The consequences are uncovering that Gingko Biloba infusion is an effectual therapy for a assortment of perturbations of intellectual maps. Some bettering consequences from these surveies are improved memory loss, attending and watchfulness. Another survey suggests that Gingko Biloba infusion may assist grownups get by with the emphasis that they face on a day-to-day footing in their lives. Harmonizing to yet another survey, the hereafter of Gingko Biloba is doubtless in the promise of decelerating down Alzheimer? s disease. So far, scientists have been able to decelerate down Alzheimer? s disease by six months clip in clinical trails ( Clostre F, July 1999 ) . In comparing the media article? Elixirs For Your Memory? and the medical diaries, it can be concluded that the information provided by the media is true. The article suggests that Gingko Biloba may hold assuring consequences as does the medical diaries. However, one facet that is different between the two is that the media article does non incorporate many animating properties that are found in the medical diaries. If the reader were merely to read the article, he or she would likely be convinced that Gingko Biloba doesn? T hold much hope in the hereafter. It doesn? t include any information about the current surveies that are taking topographic point that suggest that Gingko Biloba will hold a promising consequence in the hereafter. The medical diaries portion penetrations on remedies, utilizations and benefits that Gingko Biloba may convey approximately, such as bettering emphasis degrees that grownup? s face in their day-to-day lives and on decelerating down the effects of Alzheim er? s disease. The media article concentrates more on the ruins of taking the medicine at this point in clip. What is says though is non false. From both the media article and the medical diaries, it is suggested that it is likely non the best thought to take any substances at this point in clip, unless a physician prescribes it. Both agree more clip and research is needed before consumers begin taking any medicines. Overall, the media article is a small unjust as it regards to devouring Gingko Biloba. Alternatively of merely discoursing the substance at big and speaking about the possible ruins of taking the medicine, the article should hold included some information about the current undergoing surveies. It would let people to hold a broader thought of what is traveling on in the medical universe. It would likely put people? s heads at easiness cognizing that there is assuring hope in the hereafter for interventions that will assist the ineluctable memory loss that unluckily comes with old age. Many persons are greatly concerned and scared about memory loss such as Alzheimer? s disease. Knowing that possibly, if merely a little opportunity, these persons will non hold to meet it sets many heads at easiness. Hopefully the hereafter holds many finds and remedies for memory loss and mental stableness. But until so, one? s best stake is likely to loosen up, utilize your memory every bit much as possible and bask it. The manner people worry themselves about issues that are out of their control merely makes things more hard on the head and organic structure. Drummond, Tammerlin. ? Elixirs For Your Mind: The blitz is on for gingko and other herb tea merchandises, but are they panaceas or placebos? ? Time Magazine 154 ( 1999 ) : 60-61. Clostre, F. ? Ginkgo biloba infusion ( Egb 761 ) . State of cognition in the morning of the twelvemonth 2000. ? Ann Pharm Fr 1999 July ; 57 Suppl 1: 1S8-88. Ness J, Sherman FT, Pan CX. ? Alternate medical specialty: what the informations say about common herb tea therapies. ? Geriatricss 1999 Oct ; 54 ( 10 ) : 33-8, 40, 43.

Tuesday, December 3, 2019

The Whole

Leadership is essential to organizations and as such, a leader has to define his/her core competencies before getting to know those of his/her followers. Some of the core competencies that a leader should possess for effective leadership include vision and adaptability, priority setting, passion and intuition, competitive spirit, being a good listener, influencing, and trusting. One of the key leadership approaches is the use of the whole-person approach.Advertising We will write a custom critical writing sample on The Whole-Person Approach of Leadership specifically for you for only $16.05 $11/page Learn More The approach requires the use of the head, heart, feet and hands (Bruce and Montanezm 18). The benefits associated with this form of leadership are such as motivation, competencies, caring, inspiration, improved performance and production, expertise, values, expertise, integrity, and development of a an organizational culture. Moreover, the approac h is a reflection of the human side of leadership. Under the whole-person approach, each of the parts (head, heart, hands, and feet) plays different roles although they are intertwined. They also represent different components associated with organizational leadership. The leader’s head stands for the unique expertise, knowledge, values, character, motivation, and competencies possessed by the leader (Bruce and Montanezm 18). It may also present the intellectual property, attitude, integrity and the education of the leader. The hands of the leader represent the skills, customer service, hand-on coaching, follow-through, implementation, and manufacturing (Bruce and Montanezm 20) The leader’s feet may represent the foundation upon which the leaders and the organizations were built, organizational stability, organizational culture, its growth, tradition, history, and the founders of the organization (Bruce and Montanezm 18). Lastly, the heart of the leader is the center s tage of leadership. Particularly, it may represent hope, team spirit, emotional; intelligence, pride, core values, and feelings. When the four components are combined, they form the humanness in leadership. Therefore, an organization should treat its employees as human/whole person rather than mechanical producers. This approach ensures that an organization comes to terms with the real-world individual challenges that employees face in and outside the organization. Success in an organization is an attribute of those in charge. A successful organization is able to achieve its organizational objectives and develop a culture that incorporates the beliefs, culture, and values of different parties. Leaders are basically change agents endowed with power and influence. They are required to empower and influence their followers. Power is a form of control that a leader exercises over other people.Advertising Looking for critical writing on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More It makes people more strong and invincible. However some people are scared of it while others feel impotent without it. When power is used well in an organization, it inspires and uplifts others into achieving their dreams or targets. It is influential and empowers other people in the workplace to realize their goals while they reach organizational objectives. Power can be ranked in form of coercive power, utility power, and principled power. In my view, leaders should encourage the use of the whole- people to create wholeness rather than individualism. This creates team spirit as different aspects of employees are explored. Among the three paths of power, I believe that the principled power is the most appropriate one because its foundation is trust, respect, honor, and belief in other people. It creates interdependence, synergy, and mutual respect. To realize what one wants, the path of principled power is most encouraged because it is more fulfilling compared to the other paths of power listed earlier. Works Cited Bruce, Anne and Stephanie Montanez.  Leaders Start to Finish: A Road Map for Developing Top Performers. Alexandria, VA: ASTD Press, 2012. Print This critical writing on The Whole-Person Approach of Leadership was written and submitted by user Carlee U. to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.