Unit VII Essay Write an essay discussing how an obstruction co.docx

Unit VII Essay
Write an essay discussing how an obstruction could influence
the operation of a fire protection system in a large, indoor self-
storage facility. Discuss the differences between expected
outcomes if the notification system worked properly and if the
notification system failed and a fire did occur.
Your response must be at least three pages in length, double
spaced, and 12-point Times New Roman font. All sources used,
including the textbook, must be referenced; paraphrased and
quoted material must have accompanying APA citations.
Live Case One
LIVE CASE ONE
Covanta Holding Corp (CVA)
Anish Puri
Bryant University
Introduction
Covanta Holding Corporation is an American multinational firm

headquartered in Morristown, New Jersey and operates in the
renewable energy industry. The firm was incorporated in 1992
in Delaware. Covanta’s main business is to convert waste into
energy through its subsidiaries. The company operates in North
America and also holds interests in energy-from-waste facilities
in Italy and Ireland. In addition, the company owns
infrastructure business in China. Its corporate culture is
focused on the bottom line of sustainability which involves
people, planet, and prosperity. The objective of the study is to
analyze the financial and nonfinancial information and evaluate
the performance of the business management.A. Financial
Information about Covanta Holding Corp
The mission of the company is to provide sustainable waste
management and energy solutions to its clients. This is achieved
by offering waste management services and operating the
infrastructure required to generate energy. Energy-from-waste
(EfW) facilities generate power through the combustion of non-
hazardous waste. The combustion process converts the waste
into inert ash and at the same time extract both ferrous and
nonferrous metals for recycling.
Covanta trades at NYSE under the ticker symbol CVA, the
shares are currently trading at $15.20 (Reuters, 2018). In
addition, the common stock has a par value of $0.10 per share.
The company’s income statement analysis is as shown in Table
1 below;
2016 (millions)
Percentage change
2015 (millions)
Percentage change
2014 (millions)
Operating revenue
$1,699
3.28%
$1,645
-2.20%

$1,682
Operating expense
$1,590
3.52%
$1,536
2.01%
$1,528
Operating income
$109
0.00%
$109
-29.22%
$154
Net income/loss
-$4
-105.88%
$68
3500.00%
-$2
Table 1- Income statement analysis Source
(“Securities Exchange Commission,” 2017)
According to the income statement, the company’s operating
revenue reflects a positive trend from 2014 to 2016. Even
though the firm’s operating revenue decline in 2015 by -2.20%
it recovered in 2016 by posting a 3.38% increase in the
operating revenue. However, the operating expense increased at
a rate of 3.52% in 2016 than the operating income which
increased by 3.38% during the same period. On the other hand,
the operating income declined by -29.22% in 2015 and remained
the same ($109 million) in 2016. Also, the business recorded a
poor performance in terms of net income by posting net losses
of $2and $4 in 2014 and 2016 respectively. Generally, the net
income improved by 3500% in 2015 and later declined by -
105.88% in 2016. The decline in profitability can be attributed
to the rising operating expense.
Table 2 below shows a three-year trend in the statement of

financial position items.
2016 (millions)
Percentage change
2015 (millions)
Percentage change
2014 (millions)
Current assets
$544
-21.95%
$697
10.46%
$631
Fixed assets
$3,740
5.74%
$3,537
-1.01%
$3,573
Total assets
$4,284
1.18%
$4,234
0.71%
$4,204
Capital + Liabilities
Total liabilities
$3,815
6.15%
$3,594
10.93%

$3,240
Equity
$469
-26.49%
$638
-18.62%
$784
Total equity and liabilities
$4,284
1.18%
$4,234
0.71%
$4,204
Table 2- Statement of financial position analysis. Source
(“Securities Exchange Commission,” 2017).
The value of the current assets is declining by -21.95% from
2015 to 2016. Although the current assets increased by 10.46%
in 2015, the business was unable to maintain the trend. On the
other hand, the value of the fixed assets reduced by -1.01% in
2015 and increased by 5.74% in 2016. Subsequently, the total
assets increased by 0.71% and 1.18 % in 2015 and 2016
respectively.B. Energy Sector Analysis
The firm’s main competitors include Waste Management Inc.,
Republic Services Inc., Stericycle Inc., and Waste Connections
Inc. (“MorningStar”, 2018). Table 3 below compares the
business profitability to its peers.
Profitability ratios
Covanta Holding Corp
Sector
Gross margin ( five-year average)
35.90
29.20
Earnings before interest, tax, and dividend (five-year average)
24.47
19.18
Operating margin

5.13
11.74
Net profit margin
-3.97
9.39
Effective tax rate (five-year average)
11.84
29.89
Table 3-Profitability analysis
source (“Reuters,” 2018)
Covanta has a high five-year average gross margin ratio of
35.90 compared to 29.20 posted by the sector. This means that
the business generated higher gross profit than the average
gross profit of other firms in the sector. Also, the firm reported
higher earnings before interest-tax-and-dividend ratio of 24.47
that the sector’s ratio of 19.18. however, Covanta has a lower
operating margin ratio of 5.13 while the sector reported a higher
ratio of 11.74. In addition, the company recorded a loss of -3.97
while the sector reported a profit margin ratio of 9.39%. This
means that the business has cost management challenges. This is
due to the fact that the company has higher gross margin than
the sector but it is operating at a loss. On the other hand, the
sector has a lower gross margin but the firms are able to
generate a higher net profit margin. Table 4 below compares the
company performance in terms of revenue generation to the
sector.
Ratios
Covanta Holding Corp
Sector
Asset turnover
0.40
0.68
Revenue/employee
476,111
749,252,371
Net income/employee

-18,889
63,597,805
Return on investment
-1.72
7.73
Return on equity
-15.81
14.36
Table 4- Revenue analysis
source (“Reuters,” 2018)
The company performed poorly in terms of revenue generation
from the available resources. The utilization of the business
assets to generate revenue was below the sector. An asset
turnover of 0.40 means that the management was only able to
generate $0.4 from one dolllar invested in assets. On the other
hand, its peers were able to generate an average of $0.68 from
every dollar invested in assets. In addition, the sector had a
higher revenue/employee ratio compared to Covanta. Besides
this, the renewable energy company recorded a negative
income/employee of -18,889 while the sector posted a higher
ratio of 63,597,805. A negative revenue/employee ratio means
that the business paid the employees from borrowed funds.
Generally, the company reported a negative return of -1.72 on
investment while the sector performed better by posting average
ratio of 7.73. This means that other firms in the sector are able
to generate income from the amount invested (Farris et al.,
2017). Finally, the business recorded a negative return on equity
while the sector performed better by generating higher returns
on the owners’ equity.
The Overall Energy Industry
According to Motyka (2017), the renewable energy industry is
expected to perform well in 2018. However, the industry faces
unusual uncertainty from the proposed tax policies. The
proposed policies include the reduction of the production tax
credit which may affect the supply of equity in the industry

(Motyka, 2017). The policies have not yet been finalized and
they are expected to have a short-term impact in the industry.
Subsequently, the industry is expected to expand in the long-
term due to the rising demand for renewable energy. On the
other hand, the municipal solid waste is generated in vast
quantities and this means that Covanta will expand its
operations in future.C. Covanta’s Products, Management,
Operations, and Business Model
The company products are designed to provide environmental
solutions across a wide range of industries. Covanta operates a
nationwide network of liquid and solid recycling plants. Also,
the company converts approximately 20 million tons of waste
into energy and recycles approximately 0.5 million tons of
ferrous and nonferrous metals (“Covanta,” 2018).
The company operations reduce approximately one ton of
greenhouse gas emissions. The business sustainability report
focuses on various stakeholders including employees, clients,
community, and the investors. The business prioritizes
employees safety and health. Also, the management emphasizes
a good relationship with the community. The company invests
human and financial resources in areas where the plants are
located. On the other hand, the business ensures that their
clients have access ton sustainable waste management. The
services are tailored to meet customers’ demand. Finally, the
company value investors by providing a sustainable business to
the customers.
The company’s business model generates a high percentage of
the revenue from solid waste and liquid management. Covanta
charges fees for acquiring waste from municipalities. The
second source of revenue is energy generated from the waste.
The waste incineration process generates energy which powers
electric generators. Subsequently, the business sells electricity
through spot and contracts markets. In addition, the business
generates a small portion of revenue from recycling metals.
The performance of the management is below the sector
average. For example, the management was unable to generate a

return on equity by reporting a loss while the peers managed to
generate a positive return on equity. In addition, the dividend
payout is unstainable since the firm is highly leveraged.
According to “Reuters” (2017), Covanta’s total debt to equity
ratio is 851.04 while the sector has an average of 91.57. in
addition, the firm is operating below the S&P 500 and waste
management firms Conclusion
Covanta Holding Corp has positively impacted the
environment by reducing greenhouse gas emission by
approximately one ton annually. Also, the firm has developed a
sustainable business model with aim of converting waste to
energy for one million families. However, the business
profitability has declined from 2014 to 2016. This can be
attributed to the firm’s overreliance on external borrowing
which increases the interest expense. Finally, the management
performance is below the sector average.
References
Covanta. (2018, January). Energy-from-Waste. Retrieved from
Covanta: https://www.covanta.com/Sustainability/Energy-from-
Waste
Farris, P. (2017). Key Marketing Metrics: The 50+ metrics
every manager needs to know. London: Pearson UK.
Morningstar. (2018, January 7). Covanta Holding Corp.
Retrieved from MorningStar:
http://financials.morningstar.com/competitors/industry-
peer.action?t=CVA&region=usa&culture=en-US
Motyka, M. (2017). 2018 Outlook on Renewable Energy.
Washington, D.C.: Deloitte.
Reuters. (2018, January 7). Covanta Holding Corp (CVA).
Retrieved from Reuters:
https://www.reuters.com/finance/stocks/financial-
highlights/CVA
Securities Exchange Commission. (2017, February 17). Covanta
Corporation-form 10-K. Retrieved from Securities Exchange
Commission:
http://www.annualreports.com/HostedData/AnnualReports/PDF/

NYSE_CVA_2016.pdf
8
COVANTA HOLDING CORPORATION (CVA)
COVANTA HOLDING CORPORATION (CVA)
Anish Puri
Corporate Finance
2/21/2018
A good company has a competitive advantage over other firms
venturing the same line of business. This is contributed by good
leadership by management and proper marketing skills which
seeks both short term and long-term objectives of the company.
To achieve this, the company revenue has decreased as from
2014 to 2016 with the company seemingly have ventured into
different sectors of business it requires thorough investigation
and audit to identify the cause of decline in revenue
Earnings in a firm is basic in order to capture the worth of

investors especially average investors to be willing to invest in
the firm , the role of the owners of the company in their
supervision of the management of the company and the role they
play to ensure balancing of voting rights ,dividends pay out
,balance of debt and equity among the creditors of the company
and the stakeholders the role or interest of the Government in
terms of investing in the business the regulation policies .the
welfare of the community surrounding the company.
Earnings stability of the firm is also a key aspect it predicts the
firm's pattern of growth through cutting expenses through citing
the business venture that is collapsing or reduction of staff to
reduce salary cost. Organisation structure has evaluated its
business poorly through employees in job positions they cannot
manage effectively thus reducing the inventory turnover, poor
lines of communication politics and mismanagement that shifts
focus from engaging the competitors in the stock market
business and focusing on internal wrangles, lack of proper
control of capital, increased production cost poor human
resource performance thus labour are aggrieved party
Lack of innovation in the firm which leads to lack of engaging
the average investors in better product management. Macro-
economic risks such as the economy of the state such as
inflation of prices, fall of value of currency the management
should adopt measures to counter the challenges and
establishing of new opportunities
Level of interest rate of borrowing from creditors is fluctuating
and for a big company is preferable to reinstitute finance
through sell of bonds and shares to raise capital to service its
finance ,comparing the company’s market value for shares with
their rival competitors in order to attract more investors in the
firm, in this case, the majority shareholders have the higher
stake thus have superior voting rights than the ordinary
shareholder thus the average shareholder can easily sell their
shares for lack of participation in the company's activities thus

its stock market share drops significantly or stagnates
A marginal investor is one who invest or trades at the least and
sets prices if one of the stockholders is having a job in the firm
there is a higher chance of having conflict of interest during his
or her tenure at the job risk based on returns assume that the
marginal and average investor is highly diversified as opposed
to huge investors in terms of risks involved in market securities
especially in financial markets
The firm should ascertain its current value from market value of
the shares and debt it owes creditors i.e. long-term rates of
issuance of bonds which are payable and non-recoverable to
ascertain the current position of the firm and the long-term
objective of the firm can be planned through strategic planning
and management, steady realising the exchange rates of the firm
since it is based on different nationalities to predict the future
market value of their products
In terms of competitive advantage it has to compare its price per
earnings and dividends payable to the investors especially to
marginal investors in order to attract them to invest more in the
company, measure the company's overall performance and micro
performance in order to establish the previous return on stock
and compare it with the expected rate of return by the company
the stable growth rate as seen is fluctuating with time but it
should be at per or a little less than economy the company is
targeting which is realised through nominal or real valuation
and the strength of the currency being used if the company is
based on financial market not to exceed the risk-free rate in the
trade
New targets and vision should be formulated without
overstretching its resource through massaging book records to
archive exaggerated revenue for the purpose of earnings creates
budget shortage that results to excessive borrowings by the
company such that its debts ratio surpasses the equity ratio thus
investors are remunerated poorly due to the increased debts of
the company thus marginal investors will tend to withdraw their

shares thus its ratings in the public eyes will reduce.
Upholding transparency and accountability in the firm which the
weak perfuming firm should focus on the maturing market
situations of different states, the company should focus on
whether the controlling mechanisms encourages accountability,
effective ownership of the firm may reduce the agency problem
or conflict with an insider ownership creates a healthy firm
which ensures that ownership is separated from the executive
Employ strategists to run the firm better through realizing
emerging new markets
There is a separation of power in Covanta holding corporation
between the management and the owners; this is shown through
the company financial reports, where by the company has a
higher gross profit than industry averages but it ends up making
a net loss. This shows that the management is not pursuing the
owner's interest which is good returns on equity. It seems that
owner has limited powers to monitor the management because
the firm has been making loss consistently for three years and
the owners ought to have influenced the decision making in the
management to make sure that the management interest aligns
with their interest.
The company has borrowed money through issuing of bonds in
the stock market. It can be assumed that there is a conflict of
interest between the lenders and equity investors when the
company is using more borrowed funds to finance its operation
hence the high cost of interest ends up making the equity
investors have nothing to show at the end of a trading period.
The firm is listed in NYSE, and therefore the firm financial
information is readily available to enable an investor to evaluate
whether to invest in the company. It can be assumed that
investors may refrain from investing in Covanta Corporation
because of poor returns on equity.

The firm has multiple classes of share and this includes
ordinary shares, preference shares, and debentures. the voting
rights vary in different from one class to another where the
ordinary shareholder has more voting right over other
shareholders.
The company borrows money via the issue of bonds; the
company uses borrowed money to pay the employees this means
that the company was not able to generate enough revenue to
meet its cost of operation. The company is faced with a risk of
increase in cost of operation which leads to low return on equity
The company is also faced by a challenge of poor management
where the management is not able to control or put measures in
place to reduce the cost of operations or even used the borrowed
fund with lower interest rates. The performance of the
management is below the sector average. For example, the
management was unable to generate a return on equity by
reporting a loss while the peers managed to generate a positive
return on equity. Also, the dividend payout is unstainable since
the firm is highly leveraged. According to "Reuters" (2017),
Covanta's total debt to equity ratio is 851.04 while the sector
has an average of 91.57. In addition, the firm is operating below
the S&P 500 and waste management firms.
The company is faced by a risk of government policies such as
proposed tax policies that are uncertain where an increase in tax
would lead to increase in the cost of operation hence making it
difficult for the company to make profits.
In this company there is a low turnover of employees hence it
shows that there are satisfied in working in the corporation
despite the overall poor performance of the company compared
to the industry. The company goes a long way to satisfy the
employees it even pay them using borrowed money when they
revenue generated cannot meet all the expenses

Covanta Corporation is a socially responsible company as it
helps in utilization of waste materials to generate energy
ensures that their clients have access to sustainable waste
management
The company operations reduce approximately one ton of
greenhouse gas emissions. The business sustainability report
focuses on various stakeholders including employees, clients,
community, and the investors. The business prioritizes
employee’s safety and health. Also, the management emphasizes
a good relationship with the community. The company invests
human and financial resources in areas where the plants are
located. On the other hand, the business
In conclusion, the corporation has a high potential of regaining
profitability since their gross margin is higher than that of the
industry and there is increasing demand for renewable energy.
Therefore, the company should focus on reducing the cost of
operation and avoid unnecessary expense. The company should
also align the management interest with the owners such that
the company can focus on regaining profit. The company should
conduct an intensive audit that will go along way explain the
reason why the company has better gross profit than the
industry yet it has a net loss. finally, the management should
put in place strategy that will enable the company to embrace
and exploit the growing demand of renewable energy.

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