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The impact of blindly following a regulatory framework created decades ago to deal with problems observed years before then. The amorphous term "regulation" disaggregated into a simple taxonomy to facilitate analysis and communication. The enormous gap between today's regulation and the challenges posed by open blockchain technology. The challenges and opportunities of self-sovereign identity. Financial KYC's spaghetti problem and how to solve it. The opportunity to leverage the design features and crypto economics attributes of open blockchains for self-regulation. The leading thought leaders in regulation for the blockchain age.
In ways yet to be seen, cybersecurity has already affected the “agency of the future.” Today, the world is interconnected like never before. As a nation, we must work collaboratively to ensure that cyber defense strategies are robust and effective to secure our way of life.
President Obama said during remarks at the White House, “the cyber threat is one of the most serious economic and national security challenges we face as a nation” and that “America’s economic prosperity in the 21st century will depend on cybersecurity.”
Throughout his tenure, President Obama has directed agencies to conduct a thorough analysis of the Federal Government’s efforts to protect data, information, communication and critical infrastructure. Often, we forget that every day Americans rely on cyber defense for our economic viability and security.
Cyber includes much more than just our personal identity and social security numbers. Every day, cyber defense is used to protect:
Broadband networks
Information networks that power business, hospitals and schools
Critical infrastructure
Classified government intelligence and documents
http://www.govloop.com/profiles/blogs/the-govloop-guide-winning-the-cybersecurity-battle
The document discusses guerrilla marketing and social media marketing. It provides examples of guerrilla marketing techniques like graffiti, street art, and viral campaigns. It also discusses using various social media platforms like Facebook, Twitter, and Digg to engage customers, create buzz, and spread content virally. The conclusion states that guerrilla and social media marketing aim to access customers on a personal level outside of traditional advertising and can help brands find customers and develop their identity.
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The document discusses writing skills that are important for career success. It notes that writing is a key part of every job as it allows employees to communicate and businesses to function. The ability to write well determines one's success at work. Additionally, as employees advance, they will be expected to do more and higher quality writing. Effective writing involves identifying the audience, establishing the purpose, formulating the message, and selecting an appropriate style and tone. Examples of persuasive anti-smoking advertisements targeting different audiences are also provided to illustrate these principles.
This document discusses how the City of East Point uses social media. It defines social media as online media that allows for conversation rather than just content delivery. The city uses social media like Facebook, Twitter, YouTube and LinkedIn to showcase success stories, promote events, manage reputation during crises, share photos and videos, and communicate about outages and repairs. Social media helps the city connect with residents and be available everywhere residents want to communicate. It encourages residents to follow the city's social media pages to receive event announcements and updates.
Inflation creates uncertainty about the future purchasing power of money which can discourage productive activity, saving, and investing. While the effects of inflation may initially benefit some, over time it generally builds and undermines confidence as prices continue to rise unpredictably.
Whitepaper explores the issue of how governments can help citizens feel that it is "safe to play" in the connected world. It discusses the issues of trust and privacy and sets out a simple framework to help the public sector tackles these complex issues.
The document discusses the Dental Planning Information System (DPIS), a tool developed by the American Dental Association to help plan for dental workforce needs. DPIS uses statistical analysis of productivity and utilization data from dental offices to project the future supply and demand for dental services. Key factors in the model include the number of dentists and their productivity based on staffing levels and experience, as well as patient utilization rates based on demographics. While not a perfect system, DPIS aims to provide a more evidence-based approach to dental workforce planning than prior methods.
Johannesburg - South Africa Financial Blockchain Consortium - August 2017Juan Llanos
The impact of blindly following a regulatory framework created decades ago to deal with problems observed years before then. The amorphous term "regulation" disaggregated into a simple taxonomy to facilitate analysis and communication. The enormous gap between today's regulation and the challenges posed by open blockchain technology. The challenges and opportunities of self-sovereign identity. Financial KYC's spaghetti problem and how to solve it. The opportunity to leverage the design features and crypto economics attributes of open blockchains for self-regulation. The leading thought leaders in regulation for the blockchain age.
In ways yet to be seen, cybersecurity has already affected the “agency of the future.” Today, the world is interconnected like never before. As a nation, we must work collaboratively to ensure that cyber defense strategies are robust and effective to secure our way of life.
President Obama said during remarks at the White House, “the cyber threat is one of the most serious economic and national security challenges we face as a nation” and that “America’s economic prosperity in the 21st century will depend on cybersecurity.”
Throughout his tenure, President Obama has directed agencies to conduct a thorough analysis of the Federal Government’s efforts to protect data, information, communication and critical infrastructure. Often, we forget that every day Americans rely on cyber defense for our economic viability and security.
Cyber includes much more than just our personal identity and social security numbers. Every day, cyber defense is used to protect:
Broadband networks
Information networks that power business, hospitals and schools
Critical infrastructure
Classified government intelligence and documents
http://www.govloop.com/profiles/blogs/the-govloop-guide-winning-the-cybersecurity-battle
The document discusses guerrilla marketing and social media marketing. It provides examples of guerrilla marketing techniques like graffiti, street art, and viral campaigns. It also discusses using various social media platforms like Facebook, Twitter, and Digg to engage customers, create buzz, and spread content virally. The conclusion states that guerrilla and social media marketing aim to access customers on a personal level outside of traditional advertising and can help brands find customers and develop their identity.
Chapter 1: Getting Started (Kolin's Successful Writing at Work)Brooksie Lane
The document discusses writing skills that are important for career success. It notes that writing is a key part of every job as it allows employees to communicate and businesses to function. The ability to write well determines one's success at work. Additionally, as employees advance, they will be expected to do more and higher quality writing. Effective writing involves identifying the audience, establishing the purpose, formulating the message, and selecting an appropriate style and tone. Examples of persuasive anti-smoking advertisements targeting different audiences are also provided to illustrate these principles.
This document discusses how the City of East Point uses social media. It defines social media as online media that allows for conversation rather than just content delivery. The city uses social media like Facebook, Twitter, YouTube and LinkedIn to showcase success stories, promote events, manage reputation during crises, share photos and videos, and communicate about outages and repairs. Social media helps the city connect with residents and be available everywhere residents want to communicate. It encourages residents to follow the city's social media pages to receive event announcements and updates.
Inflation creates uncertainty about the future purchasing power of money which can discourage productive activity, saving, and investing. While the effects of inflation may initially benefit some, over time it generally builds and undermines confidence as prices continue to rise unpredictably.
This presentation describes the types and characteristics of regional phishing attacks. We also describe the limitations of the phishing defense system of global browsers such as Google Chrome, and suggest ways to overcome them.
This document provides a summary of the findings from Phase 1 of a public engagement project in Canada from 2011-2014. It describes the range of public engagement activities happening across Canada, the knowledge and barriers of practitioners. Key findings include that 91% of survey respondents conduct work considered public engagement, with the top audiences being students and individual donors. Common challenges included funding, reaching new audiences, and evaluating intangible outcomes. The report provides recommendations on collaboration to help overcome challenges of public engagement.
This document discusses different types of entrepreneurs. It begins by defining an entrepreneur as an individual who identifies needs in the marketplace and works to fulfill them. It then lists important qualities of entrepreneurs such as determination, initiative, risk-taking, and creativity. The main part of the document categorizes entrepreneurs into different types based on: the type of business (manufacturing, trading, agricultural, technical), use of technology (technical, non-technical), ownership (private, state), gender (men, women), and size of enterprise (small-scale, medium-scale, large-scale).
Logistics management is a critical imperative for organizations. It involves planning and coordinating the efficient movement of materials and resources. An effective logistics system can lower costs and improve customer service by ensuring the right products are delivered to the right places at the right time. Several forces such as globalization, supply chain management, and outsourcing of non-core functions have increased the importance of logistics.
Governments all over the world are increasingly becoming more digital to better meet the needs of their citizens. The rise of new technology such as Artifical Intelligence and Blockchain are creating a Fourth Industrial Revolution where we must adapt or become obsolete. As the world becomes increasingly more connected it will be critical to the economic future of a country to have and implement a digital strategy. This SlideShare shares how technology can shape how Canadians conduct business with their Government.
Skyals is a blog website is an online platform that serves as a regularly post written content in the form of articles, essays or posts. These entries, often arranged in reverse chronological order, cover a wide range of topics and are typically personalized with the blogger's unique perspective, expertise, or experiences, variety of purposes, including personal expression, sharing knowledge, building a professional online presence, promoting products or services, or engaging with a community of like-minded individuals. They have become a popular and accessible way for individuals and organizations to communicate and connect with a global audience on the internet.
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This document discusses innovations that matter for government and provides opportunities and upcoming trainings from GovLoop. It introduces GovLoop as the knowledge network for government and lists 12 opportunities for innovation, such as matching message to medium, virtual and blended learning, mandatory e-gov, and the internet of things. It also provides details on 4 upcoming GovLoop trainings in April, May, and July on topics like the future of digital public service, cybersecurity, and training from entry level to SES. It encourages signing up for trainings and provides contact information for the founder of GovLoop.
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Lodestar Battery Metals is exploring for battery metals like lithium and silver. It has acquired claims near a lithium discovery in Snow Lake, Manitoba. The presentation provides an overview of the company's strategy to focus on battery metal assets through exploration of its properties and potential acquisitions. It highlights the Peny property in Snow Lake which covers claims near a lithium deposit and has potential to provide shareholder value.
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This document discusses using the Nintendo Wii gaming system as an occupational therapy treatment for patients with Parkinson's disease. It summarizes evidence that physical activity, especially playing video games, can increase motor function and decrease Parkinson's symptoms. The study aims to determine if using the Wii can improve functional activities and motor skills for patients with Parkinson's in both the short-term and long-term following treatment. It hypothesizes that the Wii will increase patients' ability to perform daily tasks and functional movement, as well as decrease impairment, through interactive gaming sessions.
ADG Online Solutions is a full-service media agency that provides expertise in branding, advertising, interactive solutions, and integrated strategy. They have over 4 years of experience serving over 100 clients with a dedicated team of professionals. ADG builds and executes customized campaigns using research-based creative approaches to achieve clients' goals and cover wide audiences.
I begin by arguing that an important aspect of Bitcoin (value transmission) was already regulated before it was born. I present a review of the past few years with regards to how regulatory and law enforcement events have shaped (or will shape) the regulatory landscape for Bitcoin and virtual currencies in the future. I argue that the current policy goal priorities of national security, tax compliance and financial crime prevention, as well as the current identity paradigm (government-issued) are factors that contribute to financial exclusion and hamper innovation. I focus on the challenges to our mental models created by the advent of Bitcoin and crypto-currencies, and innovation opportunities in AML/CFT, privacy, identity and regulation. I invite all stakeholders to reflect on what side of history they would like to be.
Old material, but consolidated into one. “Financial inclusion and innovation are public policy choices that can be pursued by any nation of any size, as long as they have the courage to reinvent their regulatory frameworks.” I argue that any and all current efforts in FinTech and RegTech innovation, and the hope for financial inclusion of the underprivileged are futile. Another provocative keynote in which I present the roadblocks to financial inclusion and sustainable progress, and a vision of the transformative potential of open blockchains.
· The impact of blindly following a regulatory framework created decades ago to deal with problems observed years before then.
· The amorphous term "regulation" disaggregated into a simple taxonomy to facilitate analysis and communication.
· The enormous gap between today's regulation and the challenges posed by open blockchain technology.
· The challenges and opportunities of self-sovereign identity.
· The opportunity to leverage the design features and crypto economics attributes of open blockchains for self-regulation.
Immigration Compliance: How to keep the Government from knocking on the Door?jvelie
Immigration Compliance: How to keep the Government from knocking on the Door?
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Our team at Integrated Compliance Solutions LLC and Sterling Compliance, LLC has come together to provide our thoughts and insights about the SAFE Banking Act!
Many of our bank partners have requested our conclusions on the proposed legislation and we have included those in this paper.
If you would like a copy of the document, message me, Ralf Kaiser here on LinkedIn, and I will send it to you.
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The document outlines 11 critical areas of cybersecurity focus for financial institutions based on a cybersecurity roundtable discussion held in February 2015. The areas include: 1) corporate governance; 2) management of cybersecurity issues; 3) security and risk management resources; 4) shared infrastructure risks; 5) intrusion protection; 6) security testing and monitoring; 7) incident detection and response; 8) ongoing training; 9) management of third-party service providers; 10) business continuity and disaster recovery; and 11) cybersecurity insurance. The document emphasizes that cybersecurity should be viewed as an integral part of overall risk management rather than just an IT issue, and financial institutions should conduct thorough evaluations of their unique cyber threat profiles.
Mobile Analytics for Advertising_Michael HanleySara Quinn
Part of the Mobile Communications Resource Center, this is one of several presentations created by Michael Hanley for Ball State University's College of Communication, Information and Media. All rights are reserved.
KATIES POST The crisis case I chose to discuss this week is th.docxdonnajames55
KATIE'S POST:
The crisis case I chose to discuss this week is the Tennessee Valley and the Kingston ash slide. On December 22, 2008, Tennessee Valley Authority who uses coal to generate electricity, had one of their containment pods that holds sludge from the ash wall begin to leak. The leak then caused the wall to eventually crumble. The leak then flowed into the Emory River that is located nearby. The river flowed into a nearby community, destroyed several houses, and forced families to evacuate the area.
Chapter 5 discusses the importance of organization members accepting that crisis can start quickly and unexpectedly. Two months before the leak, TVA was informed of a wet spot located on one retaining wall that suggested a leak was present. The moisture was eroding the structure's integrity, but TVA continued to add ash to the pond. TVA organization leaders ignored the warning signs of a potential crisis. TVA then accepted blame for the spill and began dredging the Emory River shortly after the incident. No other independent party was allowed to assess the dredging plan before it launched. If TVA's plan failed, the organization would have been at fault once again.
Upon further investigation of the crisis, lawyers were able to identify six primary failures in TVA's systems, controls, standards, and culture. “Lack of clarity and accountability for ultimate responsibility, lack of standardization, training, and metrics, siloed responsibilities and poor communication, lack of checks and balances, lack of prevention priority and resources, and being reactive instead of proactive” (Ulmer, Sellnow,& Seeger, 87).
Unfortunately, this unintentional crises could have been avoided had the proper crisis management, quality assurance, and procedures been put in place. TVA's negligence cost people their homes, polluted the river, and the uncertainty of long-term health conditions from being exposed to the ash's toxins. "The community was not able to locate reliable information about potential short- and long-term health effects, uncertainty about the extent of environmental damage, and feared plummeting property values" (Ritchie, Little, & Campbell, 179). TVA was at fault for several things, but the most significant fault they did not consider is the risk of storing large volumes of fly ash near the Emory River that flowed into a nearby community.
Ulmer, R. R., Sellnow, T. L., & Seeger, M. W. (2017). Effective crisis communication: Moving from crisis to opportunity. Sage Publications.
Ritchie, L. A., Little, J., & Campbell, N. M. (2018). Resource Loss and Psychosocial Stress in the Aftermath of the 2008 Tennessee Valley Authority Coal Ash Spill. International journal of mass emergencies and disasters, 36(2), 179.
.
Kate Chopins concise The Story of an Hour. What does Joseph.docxdonnajames55
Kate Chopin's concise "The Story of an Hour".
* What does Josephine represent in the story? What does Richards represent?
*The doctors said Mrs. M. died of "heart disease - of joy that kills." How is this ironic?
* What are some themes in the story? What are some symbols?
.
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· The amorphous term "regulation" disaggregated into a simple taxonomy to facilitate analysis and communication.
· The enormous gap between today's regulation and the challenges posed by open blockchain technology.
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KATIES POST The crisis case I chose to discuss this week is th.docxdonnajames55
KATIE'S POST:
The crisis case I chose to discuss this week is the Tennessee Valley and the Kingston ash slide. On December 22, 2008, Tennessee Valley Authority who uses coal to generate electricity, had one of their containment pods that holds sludge from the ash wall begin to leak. The leak then caused the wall to eventually crumble. The leak then flowed into the Emory River that is located nearby. The river flowed into a nearby community, destroyed several houses, and forced families to evacuate the area.
Chapter 5 discusses the importance of organization members accepting that crisis can start quickly and unexpectedly. Two months before the leak, TVA was informed of a wet spot located on one retaining wall that suggested a leak was present. The moisture was eroding the structure's integrity, but TVA continued to add ash to the pond. TVA organization leaders ignored the warning signs of a potential crisis. TVA then accepted blame for the spill and began dredging the Emory River shortly after the incident. No other independent party was allowed to assess the dredging plan before it launched. If TVA's plan failed, the organization would have been at fault once again.
Upon further investigation of the crisis, lawyers were able to identify six primary failures in TVA's systems, controls, standards, and culture. “Lack of clarity and accountability for ultimate responsibility, lack of standardization, training, and metrics, siloed responsibilities and poor communication, lack of checks and balances, lack of prevention priority and resources, and being reactive instead of proactive” (Ulmer, Sellnow,& Seeger, 87).
Unfortunately, this unintentional crises could have been avoided had the proper crisis management, quality assurance, and procedures been put in place. TVA's negligence cost people their homes, polluted the river, and the uncertainty of long-term health conditions from being exposed to the ash's toxins. "The community was not able to locate reliable information about potential short- and long-term health effects, uncertainty about the extent of environmental damage, and feared plummeting property values" (Ritchie, Little, & Campbell, 179). TVA was at fault for several things, but the most significant fault they did not consider is the risk of storing large volumes of fly ash near the Emory River that flowed into a nearby community.
Ulmer, R. R., Sellnow, T. L., & Seeger, M. W. (2017). Effective crisis communication: Moving from crisis to opportunity. Sage Publications.
Ritchie, L. A., Little, J., & Campbell, N. M. (2018). Resource Loss and Psychosocial Stress in the Aftermath of the 2008 Tennessee Valley Authority Coal Ash Spill. International journal of mass emergencies and disasters, 36(2), 179.
.
Kate Chopins concise The Story of an Hour. What does Joseph.docxdonnajames55
Kate Chopin's concise "The Story of an Hour".
* What does Josephine represent in the story? What does Richards represent?
*The doctors said Mrs. M. died of "heart disease - of joy that kills." How is this ironic?
* What are some themes in the story? What are some symbols?
.
K-2nd Grade
3rd-5th Grade
6th-8th Grade
Major Concepts, Principles, and Learning Theories (To be completed in Topic 3)
Cognitive
Linguistic
Social
Emotional
Physical
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Just Walk on By by Brent Staples My firs.docxdonnajames55
Just Walk on By
by Brent Staples
My first victim was a woman—white, well dressed, probably in
her early twenties. I came upon her late one evening on a deserted street
in Hyde Park, a relatively affluent neighborhood in an otherwise mean,
impoverished section of Chicago. As I swung onto the avenue behind her,
there seemed to be a discreet, uninflammatory distance between us. Not so.
She cast back a worried glance. To her, the youngish black man—a broad
six feet two inches with a beard and billowing hair, both hands shoved
into the pockets of a bulky military jacket—seemed menacingly close.
After a few more quick glimpses, she picked up her pace and was soon
running in earnest. Within seconds she disappeared into a cross street.
That was more than a decade ago. I was 23 years old, a graduate
student newly arrived at the University of Chicago. It was in the echo of
that terrified woman’s footfalls that I first began to know the unwieldy
inheritance I’d come into—the ability to alter public space in ugly ways. It
was clear that she thought herself the quarry of a mugger, a rapist, or
worse. Suffering a bout of insomnia, however, I was stalking sleep, not
defenseless wayfarers. As a softy who is scarcely able to take a knife
to raw chicken—let alone hold it to a person’s throat—I was surprised,
embarrassed, and dismayed all at once. Her flight made me feel like an
accomplice in tyranny. It also made it clear that I was indistinguishable
from the muggers who occasionally seeped into the area from the
surrounding ghetto. That first encounter, and those that followed signified
that a vast unnerving gulf lay between nighttime pedestrians—particularly
women—and me. And I soon gathered that being perceived as dangerous
is a hazard in itself. I only needed to turn a corner into a dicey situation,
or crowd some frightened, armed person in a foyer somewhere, or make
an errant move after being pulled over by a policeman. Where fear and
weapons meet—and they often do in urban America—there is always the
possibility of death.
In that first year, my first away from my hometown, I was to
become thoroughly familiar with the language of fear. At dark, shadowy
intersections in Chicago, I could cross in front of a car stopped at a traffic
light and elicit the thunk, thunk, thunk, thunk of the driver—black, white,
male, or female—hammering down the door locks. On less traveled streets
after dark, I grew accustomed to but never comfortable with people who
crossed to the other side of the street rather than pass me. Then there were
the standard unpleasantries with police, doormen, bouncers, cab drivers,
and others whose business it is to screen out troublesome individuals
before there is any nastiness.
I moved to New York nearly two years ago and I have remained an
avid night walker. In central Manhattan, the near-constant crowd cover
minimizes tense one-on-one stre.
Just make it simple. and not have to be good, its the first draft. .docxdonnajames55
Just make it simple. and not have to be good, it's the first draft.
I want it a complete essay of 2 pages before 10 am on Sunday.
The instructions in the second file. There is a picture in the third file.
CDT (Central Daylight Time)
UTC/GMT -5 hours
.
JUST 497 Senior Seminar and Internship ExperienceInternationa.docxdonnajames55
JUST 497: Senior Seminar and Internship Experience
International Film Critique: The Whistleblower
· Due: April 3
· Reaction Paper: 10 Points
· Presentation: 5 Points
Your first written assignment was to critique a newspaper article dealing with misconduct and/or corruption at a local level within the United States. The capstone essay asks you to consider a social injustice and its consequences that occur on a national level. The International film assignment asks you to consider issues of international law and justice.
The Whistleblower based on a true story depicts the horrors of human trafficking and human rights violations across international borders.
Please choose Assignment A or B.
Assignment A
Write a 3-4 page Reaction Paper to the above film. Summarize the producer’s main message in no more than a half page. The remainder of the paper should reflect your opinion of the content of the film based on your knowledge of international law. Make specific references to scenes in the film that correlate with information you have gained in previous or current coursework. Cite all sources in-text according to the Hacker & Sommers APA Manual of Style.
Cautionary Notes
· Do not summarize the video.
· Cite specific information from the film using the required APA Manual of style.
· Use 12 font, double spacing and 1 inch margins.
Students who need a special accommodation and cannot find a copy of a closed caption video, must meet with their instructor to design an alternative assignment.
Assignment B
The Whistleblower implicates the United Nations, the U.S. State Department, and private contractors in post war Bosnia in an organized human trafficking scheme. Kathryn Bolkovac discovers a lucrative, far-reaching operation involving the local police and United Nations peacekeepers, many of them protected by diplomatic immunity. This film is based on a true story and reflects the international concern with corruption and human trafficking.
Cast
· Kathryn Bolkovac: Nebraska police officer who accepts an offer to work with the U.N. International Police in Bosnia run by a private company in the U.K., Democra Security
· Madeleine Rees: Head of the United Nations Human Rights Commission
· Nick Kaufman: Kathryn’s Field Commander
· Peter Ward: Internal Affairs Specialist
· Luba, Raya and Irka: teenagers sold to the sex trafficking ring
· Fred Murray: Democra Security Officer
· John Blakely: Head of Human Resources
Based on the movie, address the following questions. Answers should be in a Question and Answer format and not essay style.
1. Discuss the suffering and oppression witnessed by (not experienced by) the main character. Cite specific scenes from the movie to support your discussion.
2. In whatspecific ways does Kathryn advocate for the victims she encounters? Cite scenes from the movie to support your answer.
3. Discuss how both local citizens and higher ranking officials contribute to organized corruption in post-war Bosn.
July 2002, Vol 92, No. 7 American Journal of Public Health E.docxdonnajames55
July 2002, Vol 92, No. 7 | American Journal of Public Health Editorial | 1057
⏐ EDITORIAL
A Code of
Ethics for
Public Health
The mandate to ensure and pro-
tect the health of the public is an
inherently moral one. It carries
with it an obligation to care for
the well-being of communities,
and it implies the possession of an
element of power to carry out
that mandate. The need to exer-
cise power to ensure the health of
populations and, at the same time,
to avoid abuses of such power are
at the crux of public health ethics.
Until recently, the ethical na-
ture of public health has been im-
plicitly assumed rather than ex-
plicitly stated. Increasingly,
however, society is demanding ex-
plicit attention to ethics. This de-
mand arises from technological
advances that create new possibil-
ities and, with them, new ethical
dilemmas; new challenges to
health, such as the advent of HIV;
and abuses of power, such as the
Tuskegee study of syphilis.
Medical institutions have been
more explicit about the ethical
elements of their practice than
have public health institutions.
However, the concerns of public
health are not fully consonant
with those of medicine. Thus, we
cannot simply translate the princi-
ples of medical ethics to public
health. In contrast to medicine,
public health is concerned more
with populations than with indi-
viduals, and more with prevention
than with cure. The need to artic-
ulate a distinct ethic for public
health has been noted by a num-
ber of public health professionals
and ethicists.1–5
A code of ethics for public
health can clarify the distinctive
elements of public health and the
ethical principles that follow from
or respond to those elements. It
can make clear to populations and
communities the ideals of the pub-
lic health institutions that serve
them, ideals for which the institu-
tions can be held accountable.
THE PROCESS OF
WRITING THE CODE
The backgrounds and perspec-
tives of people who identify
themselves as public health pro-
fessionals are as diverse as the
multitude of factors affecting the
health of populations. Articulating
a common ethic for this diverse
group is a formidable challenge.
In the spring of 2000, the gradu-
ating class of the Public Health
Leadership Institute chose writing
a code of ethics for public health
as a group project. The institute
provides advanced leadership
training to people who are al-
ready in leadership roles in pub-
lic health. Because the fellows
bring a wealth of experience from
a wide variety of public health in-
stitutions, they are uniquely able
to represent diverse perspectives
and identify ethical issues com-
mon in public health.
At the 2000 meeting of the Na-
tional Association of City and
County Health Officers, the group
added a non-institute member
( J. C. Thomas) and charted a plan
for working toward a code. The
plan included receiving a formal
charge as the code of ethics work-
ing group at the annual meeting of
the American Public Health Asso-
c.
Journals are to be 2 pages long with an introduction, discussion and.docxdonnajames55
Journals are to be 2 pages long with an introduction, discussion and conclusion. They must be double spaced. Your formatting, sentence structure, spell checking, etc., will all be taken into account.
Utilizing YouTube, do a search for and listen to at least two perspectives from CNN, Fox News and/or MSNBC regarding culture wars. Provide me with an analysis that discusses two different perspectives. I typed in CNN/Fox News/MSNBC and then culture war, and was able to find quite a few 5 minute vignettes with regard to the topic. If you find a discussion of the culture wars either in written form or at another site, you must insure that it is a legitimate source and provide a link to the site.
Make sure to first provide your understanding of the definition of culture wars as outlined in the text readings, then provide me with your analysis obtained from the news outlets.
.
Judgement in Managerial Decision MakingBased on examples fro.docxdonnajames55
Judgement in Managerial Decision Making
Based on examples from one of the recommended articles selected by you, the lecture notes, the text, and other sources, discuss one or several of the themes: the nature of managerial decision making, the steps in the managerial decision making, organizational learning and creativity, judgmental heuristics, common biases in managerial decision making, bounds of human judgment, strategies for making better decisions.
.
Joyce is a 34-year-old woman who has been married 10 years. She .docxdonnajames55
Joyce is a 34-year-old woman who has been married 10 years. She has three children, all less than 10 years old: Sheena (age 9), Jack (age 6), and Beth (age 2). Her husband is a prominent attorney. They present an ideal picture of an upper-middle-class family. They live in a fashionable suburb. The husband has been successful to the extent that he has been made a full partner in a large law firm. The family is very active in church, the country club, and various other social organizations. Joyce is an active member of several charitable, civic, and social groups. Joyce’s initial call to the abuse center was vague and guarded. She expressed an interest in inquiring for “another woman” in regard to the purpose of the center. After she had received information and an invitation to call back, a number of weeks elapsed. Joyce’s second call occurred after receiving a severe beating from her husband.
Joyce tells the crisis worker in the phone:"Well, last night he beat me worse than ever. I thought he was really going to kill me this time. It had been building up for the past few weeks. His fuse was getting shorter and shorter, both with me and the kids. It’s his work, I guess. Finally he came home late last night. Dinner was cold. We were supposed to go out, and I guess it was my fault . . . I complained about his being late, and he blew up. Started yelling that he was gonna teach me a lesson. He started hitting me with his fists . . .knocked me down . . . and then started kicking me. I got up and ran into the bathroom. The kids were yelling for him to stop and he cuffed Sheena . . . God, it was horrible! (Wracked with sobs for more than a minute. CW waits.) I’m sorry, I just can’t seem to keep control."
As the crisis worker:
1-What typical dynamics did you see occurring—denial, guilt, fear, rationalization, withdrawal, and so on—in the victim? How would you as the crisis worker handle them?
What are some of the domestic violence intervention strategies? Pick one and how would you apply it to the scenario
.
Journal Write in 300-500 words about the following topic.After .docxdonnajames55
Journal: Write in 300-500 words about the following topic.
After watching some news and some television shows, including movies and anime. What are some portrayals of sexual harassment and rape myths that are perpetuated by social media, entertainment media, and news outlets?
What is the motivation of rapists on TV and in the movies?
What “types” of women get raped or sexually assaulted and harassed in movies and television?
Some research suggests that on TV and in the movies nontraditional women get raped more often than traditional women as a means of putting nontraditional women “in their place.”
How does what you saw compare to the research? How do gender stereotypes perpetuate rape and harassment culture?
In your experience or opinion, what are some ways society can address some of these issues around sexual assault and sexual battery, especially on college campuses and workplaces?
.
Journal Supervision and Management StyleWhen it comes to superv.docxdonnajames55
Journal: Supervision and Management Style
When it comes to supervising and managing personnel in human services organizations, everyone has his or her own leadership style. Some styles are effective and supportive; others may be ineffectual and unhelpful. When supervising and managing staff, it is important for human services administrators to first identify their leadership style and examine personal strengths and weaknesses related to their leadership style. Understanding how to utilize strengths and address weaknesses in leadership style is important for administrators to be both effective and supportive when supervising and managing.
In order to complete the Application Assignment, you must first complete the "Types of Leadership and Patterns of Management" interactive graphic provided in the Learning Resources. Once you have done so, take note of your leadership style and think about your areas of strengths and weaknesses.
After completing the self-assessment tool in this week’s Learning Resources, reflect on the results.
RESULTS:
I am very good at executing the work of a task, though I like clarity about the desired outcome.
1.
Engaging
2.
I really prefer to be peaceful and calm, finding ways to help others achieve their goals
3.
Achieving consensus among followers assures the best success
4.
It is ok to breech boundaries if we can all move in the same direction
5.
Being a change agent is never easy, but it is very stimulating for me
6.
I really prefer to be in control, though it does not have to be out in public
7.
Challenges should be addressed head on
8.
I like predictability
9.
I like to always put my best foot forward
10.
I am known to sometimes be argumentative, I believe it is the way new ideas emerge
11.
The best way to succeed is to trust oneself
12.
When determining goals to reach, we should always challenge ourselves a little beyond what we can see ourselves accomplishing
13.
The best way for me to relax is to spend some time alone quietly.
14.
When decisions are necessary my primary concern is its effect on the persons involved
15.
I am confident and assertive
16.
I am a compassionate person and there is significant value in the person (s) knowing where it comes from
17.
I am a very consistent person and am guided by my values
18.
I am a compassionate person but would rather show it behind the scenes
19.
I am conscientious and organized
20.Next
I like to focus on group cohesion
21.
When decisions are necessary I can make them easily and quickly as circumstances demand it
22.
My strong ability to envision the future makes me a result oriented leader
23.
Building and sustaining a strong image is a principle contributor to progress
24.
I see the big picture
25.
The best way for me to relax is to be reflective with a friend
26.
I am known to create harmony among others as it creates an optimal working environment. I am unimpressed with conflict
27.
Realistic
28.
I lik.
Journal of Social Work Values & Ethics, Fall 2018, Vol. 15, No.docxdonnajames55
Journal of Social Work Values & Ethics, Fall 2018, Vol. 15, No. 2 - page 37
Ethnicity, Values, and Value Conflicts of African
American and White Social Service Professionals
Andrew Edwards, MSW, Ph.D.
Cleveland State University, Emeritus
[email protected]
Mamadou M. Seck, Ph.D.
Cleveland State University
[email protected]
Journal of Social Work Values and Ethics, Volume 15, Number 2 (2018)
Copyright 2018, ASWB
This text may be freely shared among individuals, but it may not be republished in any medium without
express written consent from the authors and advance notification of ASWB.
Abstract
This aspect of a broader study included 110 (68
White/European American and 42 Black/African
American) social service professionals. The primary
focus of this aspect of the study was to verify the
value orientation or core beliefs of the practitioners
who deliver services to clients through social service
agencies and programs. The conceptualization
of the core beliefs explored the values and value
conflicts in relation to professional practice. The
participants were employed in a Midwestern
metropolitan region. They responded to a survey
instrument that included vignettes, closed-ended
items, scaled responses, as well as either-or type
items. Major categories of the exploration included:
life and death issues, lifestyle, domestic and
social perspectives, value conflicts with the social
work profession, and personal responses to value
conflicts. Specific items measuring values related
to abortion, homosexuality, religiosity, euthanasia,
and corporal punishment were included. Study
results showed statistical significance on 26 issues
as African American participants were compared
with White participants.
Keywords: value conflicts, social work, ethical
dilemmas, ethnicity, professional relationship
Introduction
The complexity of American society (Jarrett,
2000), specifically due to its historic, economic,
social, and ethnic makeup, requires that social
work professionals take their clients’ ethnicity,
values, and professional-client value conflicts
into consideration. Historical dynamics, such as
unproductive treatment, have contributed to the
reluctance of various population groups to engage
with professional service providers. This history
(Barker, 2014) has influenced the adoption of
guidelines that require social workers to be culturally
aware during interventions and recognizing that
diversity-related characteristics have influence upon
an individual’s thoughts, feelings, and behaviors.
Barker (2014) further noted that the concept of
values is influenced by one’s perceptions of what
comprises appropriate principles, practices, and
behaviors. An individual’s personal values are often
considered as a representation of one’s core beliefs
and what an individual may perceive as right.
Therefore, these beliefs do not require supporting
evidence for those who embrace them and may
result in behavio.
Journal of Personality 862, April 2018VC 2016 Wiley Perio.docxdonnajames55
Journal of Personality 86:2, April 2018
VC 2016 Wiley Periodicals, Inc.
DOI: 10.1111/jopy.12301Unique Associations Between Big
Five Personality Aspects and
Multiple Dimensions of Well-Being
Jessie Sun ,
1,2
Scott Barry Kaufman,
3
and
Luke D. Smillie
1
1
The University of Melbourne
2
University of California, Davis
3
University of Pennsylvania
Abstract
Objective: Personality traits are associated with well-being, but the precise correlates vary across well-being dimensions and
within each Big Five domain. This study is the first to examine the unique associations between the Big Five aspects (rather
than facets) and multiple well-being dimensions.
Method: Two samples of U.S. participants (total N 5 706; Mage 5 36.17; 54% female) recruited via Amazon’s Mechanical Turk
completed measures of the Big Five aspects and subjective, psychological, and PERMA well-being.
Results: One aspect within each domain was more strongly associated with well-being variables. Enthusiasm and Withdrawal
were strongly associated with a broad range of well-being variables, but other aspects of personality also had idiosyncratic
associations with distinct forms of positive functioning (e.g., Compassion with positive relationships, Industriousness with
accomplishment, and Intellect with personal growth).
Conclusions: An aspect-level analysis provides an optimal (i.e., parsimonious yet sufficiently comprehensive) framework for
describing the relation between personality traits and multiple ways of thriving in life.
Keywords: Personality, aspects, Big Five, subjective well-being, psychological well-being
When multiple positive end states are examined, it becomes
apparent that aspects of psychological well-being may be
achieved by more people than just the nonneurotic, extra-
verted members of society. (Schmutte & Ryff, 1997, p. 558)
The large literature describing the associations between person-
ality traits and well-being suggests that Extraversion (the tendency
to be bold, talkative, enthusiastic, and sociable) and Neuroticism
(the tendency to be emotionally unstable and prone to negative
emotions) are especially strong predictors of well-being (e.g.,
Steel, Schmidt, & Shultz, 2008). But is well-being only accessible
to the extraverted and non-neurotic? We propose that more
nuanced insights can be revealed by examining the relation
between narrower traits and a broader spectrum of well-being
dimensions. The goal of the current study is to comprehensively
describe the unique associations between personality aspects and
dimensions of well-being across three well-being taxonomies.
Personality Traits and Three Taxonomies
of Well-Being
Personality traits and well-being dimensions can each be
described at different levels of resolution. The Big Five domains
provide a relatively comprehensive framework for organizing
differential patterns of affect, behavior, and cognition (John,
Naumann, & Soto, 2008). These broad traits can be further bro-
ken dow.
Journal of Personality and Social Psychology1977, Vol. 35, N.docxdonnajames55
Journal of Personality and Social Psychology
1977, Vol. 35, No. 9, 677-688
Self-Reference and the Encoding of Personal Information
T. B. Rogers, N. A. Kuiper, and W. S. Kirker
University of Calgary, Canada
The degree to which the self is implicated in processing personal information
was investigated. Subjects rated adjectives on four tasks designed to force
varying kinds of encoding: structural, phonemic, semantic, and self-reference.
In two experiments, incidental recall of the rated words indicated that adjec-
tives rated under the self-reference task were recalled the best. These results
indicate that self-reference is a rich and powerful encoding process. As an
aspect of the human information-processing system, the self appears to func-
tion as a superordinate schema that is deeply involved in the processing, inter-
pretation, and memory of personal information.
Present research and theory in personality
appear to be placing more and more empha-
sis on how a person has organized his or her
psychological world. Starting with Kelly's
(1955) formulation of personal constructs,
we see a gradual emergence of a number of
avenues of inquiry that use this as their focal
point. In person perception, the concept of
lay personality theory stresses that the ob-
server's analytic network of expected trait
covariations is an integral part of how he
processes (and generates) interpersonal data
(Hastorf, Schneider, & Polefka, 1970). Bern
and Allen (1974), in their embellishment of
Allport's (1937) idiographic position, argue
that an important determinant of predictive
utility of trait measurement is the manner
in which the respondent has organized his or
her view of the trait being measured. These
authors see the overlap between the respond-
ent's and the experimenter's concept of the
trait as a necessary prerequisite of predic-
tion. Attribution theory (Jones et al., 1971)
is another example of this increased accent
on personal organization. Here the emphasis
is on how the subject explains past behavior
This research was supported by a grant from the
Canada Council. We would like to thank the fol-
lowing persons for their useful ideas and comments
on earlier drafts: F. I. M. Craik, E. J. Rowe, P. J.
Rogers, H. Lytton, J. Clark, J. Ells, C. G. Costello,
and especially one anonymous reviewer.
Requests for reprints should be sent to T. B.
Rogers, Department of Psychology, The University
of Calgary, Calgary, Alberta, Canada, T2N 1N4.
and how these explanations are organized in
an attributional network. The common
thread in all of these contemporary research
areas is the notion that the cognitions of a
person, particularly their manner of organ-
ization, should be an integral part of our
attempts to explain personality and behavior.
Of concern in the present article is the
construct of self and how it is implicated in
the organization of personal data. Our gen-
eral position is that the self is an extremely
active and powerful agent in the organizati.
Journal of Pcnonaluy and Social Psychology1»M. Vd 47, No 6. .docxdonnajames55
Journal of Pcnonaluy and Social Psychology
1»M. Vd 47, No 6. 1292-1302
Copynghi I9S4 by the
American Psychological Association. Inc
Influence of Gender Constancy and Social Power
on Sex-Linked Modeling
Kay Bussey
Macquarie University
New South Wales, Australia
Albert Bandura
Stanford University
Competing predictions derived from cognitive-developmental theory and social
learning theory concerning sex-linked modeling were tested. In cognitive-develop-
mental theory, gender constancy is considered a necessary prerequisite for the
emulation of same-sex models, whereas according to social learning theory, sex-
role development is promoted through a vast system of social influences with
modeling serving as a major conveyor of sex role information. In accord with
social learning theory, even children at a lower level of gender conception emulated
same-sex models in preference to opposite-sex ones. Level of gender constancy
was associated with higher emulation of both male and female models rather
than operating as a selective determinant of modeling. This finding corroborates
modeling as a basic mechanism in the sex-typing process. In a second experiment
we explored the limits of same-sex modeling by pitting social power against the
force of collective modeling of different patterns of behavior by male and female
models. Social power over activities and rewarding resources produced cross-sex
modeling in boys, but not in girls. This unexpected pattern of cross-sex modeling
is explained by the differential sex-typing pressures that exist for boys and girls
and socialization experiences that heighten the attractiveness of social power
for boys.
Most theories of sex role development as-
sign a major role to modeling as a basic
mechanism of sex role learning (Bandura,
1969; Kagan, 1964; Mischel, 1970; Sears,
Rau & Alpert, 1965). Maccoby and Jacklin
(1974) have questioned whether social prac-
tices or modeling processes are influential in
the development of sex-linked roles. They
point to findings that in laboratory situations
children do not consistently pattern their
This research was supported by Research Grant No.
M-S162-21 from the National Institute of Mental Health,
U.S. Public Health Services, and by the Lewis S. Haas
Child Development Research Fund, Stanford University.
We thank Martin Curland, Brad Carpenter, Brent Sha-
phren, Deborah Skriba, Erin Dignam, and Pamela Minet
for serving as models. We are indebted to Marilyn
Waterman for filming and editing the videotape modeling
sequence, to Eileen Lynch and Sara Buxton, who acted
as experimenters, and to Nancy Adams, who assisted in
collecting the data. Finally, we also thank the staff and
children from Bing Nursery School, Stanford University.
Requests for reprints should be sent to either Kay
Bussey, School of Behavioral Sciences, Macquarie Uni-
versity, North Ryde, Australia, 2113, or to Albert Bandura,
Department of Psychology, Stanford University, Building
420 Jordan Hall, Stanford,.
বাংলাদেশের অর্থনৈতিক সমীক্ষা ২০২৪ [Bangladesh Economic Review 2024 Bangla.pdf] কম্পিউটার , ট্যাব ও স্মার্ট ফোন ভার্সন সহ সম্পূর্ণ বাংলা ই-বুক বা pdf বই " সুচিপত্র ...বুকমার্ক মেনু 🔖 ও হাইপার লিংক মেনু 📝👆 যুক্ত ..
আমাদের সবার জন্য খুব খুব গুরুত্বপূর্ণ একটি বই ..বিসিএস, ব্যাংক, ইউনিভার্সিটি ভর্তি ও যে কোন প্রতিযোগিতা মূলক পরীক্ষার জন্য এর খুব ইম্পরট্যান্ট একটি বিষয় ...তাছাড়া বাংলাদেশের সাম্প্রতিক যে কোন ডাটা বা তথ্য এই বইতে পাবেন ...
তাই একজন নাগরিক হিসাবে এই তথ্য গুলো আপনার জানা প্রয়োজন ...।
বিসিএস ও ব্যাংক এর লিখিত পরীক্ষা ...+এছাড়া মাধ্যমিক ও উচ্চমাধ্যমিকের স্টুডেন্টদের জন্য অনেক কাজে আসবে ...
Exploiting Artificial Intelligence for Empowering Researchers and Faculty, In...Dr. Vinod Kumar Kanvaria
Exploiting Artificial Intelligence for Empowering Researchers and Faculty,
International FDP on Fundamentals of Research in Social Sciences
at Integral University, Lucknow, 06.06.2024
By Dr. Vinod Kumar Kanvaria
Chapter wise All Notes of First year Basic Civil Engineering.pptxDenish Jangid
Chapter wise All Notes of First year Basic Civil Engineering
Syllabus
Chapter-1
Introduction to objective, scope and outcome the subject
Chapter 2
Introduction: Scope and Specialization of Civil Engineering, Role of civil Engineer in Society, Impact of infrastructural development on economy of country.
Chapter 3
Surveying: Object Principles & Types of Surveying; Site Plans, Plans & Maps; Scales & Unit of different Measurements.
Linear Measurements: Instruments used. Linear Measurement by Tape, Ranging out Survey Lines and overcoming Obstructions; Measurements on sloping ground; Tape corrections, conventional symbols. Angular Measurements: Instruments used; Introduction to Compass Surveying, Bearings and Longitude & Latitude of a Line, Introduction to total station.
Levelling: Instrument used Object of levelling, Methods of levelling in brief, and Contour maps.
Chapter 4
Buildings: Selection of site for Buildings, Layout of Building Plan, Types of buildings, Plinth area, carpet area, floor space index, Introduction to building byelaws, concept of sun light & ventilation. Components of Buildings & their functions, Basic concept of R.C.C., Introduction to types of foundation
Chapter 5
Transportation: Introduction to Transportation Engineering; Traffic and Road Safety: Types and Characteristics of Various Modes of Transportation; Various Road Traffic Signs, Causes of Accidents and Road Safety Measures.
Chapter 6
Environmental Engineering: Environmental Pollution, Environmental Acts and Regulations, Functional Concepts of Ecology, Basics of Species, Biodiversity, Ecosystem, Hydrological Cycle; Chemical Cycles: Carbon, Nitrogen & Phosphorus; Energy Flow in Ecosystems.
Water Pollution: Water Quality standards, Introduction to Treatment & Disposal of Waste Water. Reuse and Saving of Water, Rain Water Harvesting. Solid Waste Management: Classification of Solid Waste, Collection, Transportation and Disposal of Solid. Recycling of Solid Waste: Energy Recovery, Sanitary Landfill, On-Site Sanitation. Air & Noise Pollution: Primary and Secondary air pollutants, Harmful effects of Air Pollution, Control of Air Pollution. . Noise Pollution Harmful Effects of noise pollution, control of noise pollution, Global warming & Climate Change, Ozone depletion, Greenhouse effect
Text Books:
1. Palancharmy, Basic Civil Engineering, McGraw Hill publishers.
2. Satheesh Gopi, Basic Civil Engineering, Pearson Publishers.
3. Ketki Rangwala Dalal, Essentials of Civil Engineering, Charotar Publishing House.
4. BCP, Surveying volume 1
How to Build a Module in Odoo 17 Using the Scaffold MethodCeline George
Odoo provides an option for creating a module by using a single line command. By using this command the user can make a whole structure of a module. It is very easy for a beginner to make a module. There is no need to make each file manually. This slide will show how to create a module using the scaffold method.
This slide is special for master students (MIBS & MIFB) in UUM. Also useful for readers who are interested in the topic of contemporary Islamic banking.
How to Setup Warehouse & Location in Odoo 17 InventoryCeline George
In this slide, we'll explore how to set up warehouses and locations in Odoo 17 Inventory. This will help us manage our stock effectively, track inventory levels, and streamline warehouse operations.
Reimagining Your Library Space: How to Increase the Vibes in Your Library No ...Diana Rendina
Librarians are leading the way in creating future-ready citizens – now we need to update our spaces to match. In this session, attendees will get inspiration for transforming their library spaces. You’ll learn how to survey students and patrons, create a focus group, and use design thinking to brainstorm ideas for your space. We’ll discuss budget friendly ways to change your space as well as how to find funding. No matter where you’re at, you’ll find ideas for reimagining your space in this session.
Main Java[All of the Base Concepts}.docxadhitya5119
This is part 1 of my Java Learning Journey. This Contains Custom methods, classes, constructors, packages, multithreading , try- catch block, finally block and more.
Strategies for Effective Upskilling is a presentation by Chinwendu Peace in a Your Skill Boost Masterclass organisation by the Excellence Foundation for South Sudan on 08th and 09th June 2024 from 1 PM to 3 PM on each day.
How to Manage Your Lost Opportunities in Odoo 17 CRMCeline George
Odoo 17 CRM allows us to track why we lose sales opportunities with "Lost Reasons." This helps analyze our sales process and identify areas for improvement. Here's how to configure lost reasons in Odoo 17 CRM
2. side with the private/public sector to help deter,
detect and identify terrorist activity in New York
City through information sharing as the head of
NYPD Shield programme. Lt. Amadeo has a BA
in Political Science, a Graduate Certificate in
Police Studies and will be completing a Master
o f Science degree in Security Management
in 2016. He is also a graduate o f the 231st
Session FBI National Academy.
Detective Sergeant Steve lannone has over
27 years with the NYPD. He began his career
in 1989 in Brooklyn and served in several com-
mands around the City in uniform and plain
clothes both as an Officer and a Supervisor.
He was promoted to Sergeant in 2002 and was
assigned to Manhattan’s West side. In 2005 he
was offered a position with the Counterterrorism
Division and tasked with developing the NYPD
Shield Unit. Because of his successful efforts,
he was promoted to Detective Sergeant and
has remained with the Shield programme since
its inception. Detective Sergeant lannone has
an Associate’s Degree in Electrical Technology,
numerous certifications in Emergency
Preparedness from The Department of
Homeland Security and is a Certified Business
Continuity Professional through the Disaster
Recovery Institute International.
A bstract
This article will identify the challenges that post
9/ 11 law enforcement faces regarding private-
public partnerships and describe in detail the
N Y P D Shield programme, created to combat
3. those challenges. Recommendations made by the
911 Commission included the incorporation of
the private sector into future homeland security
strategies. One such strategy is N Y P D Shield.
This programme is a nationally recognized
award-winning public-private partnership dedi-
cated to providing counterterrorism training and
information sharing with government agencies,
non-government organizations, private busi-
nesses, and the community. Information is
shared through several platforms that include a
dedicated website, instruction of counterterrorism
training curricula, e-mail alerts, intelligence
assessments and the hosting of quarterly confer-
ences. This article also details how the N Y P D
Shield is providing its successful template to
other law enforcement agencies enabling them
Page 106
mailto:[email protected]
mailto:[email protected]
to initiate similar programmes in their respective
jurisdictions, and in doing so joining a National
Shield Network.
Keywords: NYPD Shield, counterter-
rorism training, information sharing,
public-private partnership, force multi-
plier, National Shield Network
INTRODUCTION
B efo re th e te rr o ris t attacks in N e w Y ork
C ity in S e p te m b e r 2 0 0 1 , th e N e w Y ork
4. C ity P olice D e p a r tm e n t (N Y P D ) was
c o n fid e n t in its ability to h a n d le any an d
all c r im e i n th e city. A lready to u tin g re c o rd
re d u c tio n s in c rim e u n d e r past ad m in is-
trations, N e w Y ork C ity was b e c o m in g
th e safest larg e city in th e U S A . B efore
1 1 th S e p tem b er. 2001 fig h tin g te r r o r was
largely c o n sid e re d th e responsibility o f
federal p a rtn e rs. A fte r lo sin g 23 p o lice
officers in th e fine o f d u ty an d m an y m o re
in th e years to c o m e, th e N Y P D d e c id e d
to d o w h a t it can to e n te r th e fig h t against
te rr o ris m in N e w Y ork City. S ince 9 /1 1 ,
th e global w a r o n te r r o r has n o w b e c o m e
th e resp o n sib ility o f law e n fo rc e m e n t as
w ell as th e p riv ate se c u rity profession
across th e c o u n try .
K n o w in g th a t ap p ro x im a te ly 85 p e r c e n t
o f critica l in fra stru c tu re , in telle ctu al p ro p -
e rty an d sensitive c o rp o ra te in fo rm a tio n
in th e U S A are p ro te c te d b y th e alm ost
1 m illio n s e c u rity officers in th e p rivate
se c to r s e c u rity in d u stry (U S G o v e rn m e n t
A c c o u n ta b ility O ffice, 2006), th e N Y P D
realised th a t it n e e d e d to engage this valu-
able reso u rce. T h e b en e fits o f p a r tn e rin g
w ith th e p riv a te se c u rity in d u stry can
b e tallied exponentially. As an exam ple,
after re c e iv in g N Y P D S hield train in g ,
se c u rity officers w h o have b e e n ed u c ated
o n th e N e w Y o rk C ity te rro ris m tip
h o t-lin e (1 -8 8 8 -N Y C -S A F E ) have re p eat-
edly called to r e p o rt suspicious activity
a ro u n d th e city. In o n e case, a serial b a n k
5. ro b b e r was a p p re h e n d e d after a S hield
m e m b e r receiv ed a ‘w a n te d b u lle tin ’ in
a S hield e -m a il alert. W o rk in g to g eth er,
th e N Y P D ca n m o re th a n d o u b le its eyes
a n d ears in th e c o m m u n itie s it is sw o rn
to p ro te c t. L aw e n fo rc e m e n t across th e
co u n try , especially th e N Y P D , does this
b ecau se it has seen th a t w o rk in g to g e th e r
w ith its c o m m u n ity o n ly increases its
stren g th a n d ability, n o t o n ly to c o m b a t
c o m m o n v arie ty crim e , b u t also to p ro v id e
a substantial h e ig h te n e d aw areness level fo r
re p o rtin g w h a t is c o n sid ered u n u su al to th e
c o m m u n ity b e in g p a rtn e re d w ith . T h is is
th e essence o f p u b lic—p riv ate partn ersh ip s:
e m p o w e rin g th e p riv ate se c to r to act o n
w h a t it sees as u n u su al o r o u t o f th e o u t o f
th e ordinary. W h e th e r p a r tn e rin g directly
w ith p o lice a n d re ceiv in g tra in in g fro m
professional law e n fo rc e m e n t officers, o r
a p riv ate citizen th a t engages p ro g ram m e s
like ‘See S o m e th in g , Say S o m e th in g ’ to
in f o r m local au th o ritie s, g e ttin g th e in fo r-
m a tio n to an investigative b o d y is essential.
T h e N Y P D ’s answ er to creatin g n e w
a n d lasting p artn e rsh ip s in th e fig h t against
te rro ris m is th e N Y P D S hield p ro g ra m m e .
N Y P D S hield is a m e m b e rsh ip -b a se d
liaison p ro g ra m m e b e tw e e n th e N Y P D
a n d N e w Y ork C ity ’s p riv ate a n d p u b lic
sectors. Its m ission is to s tre n g th e n th e
N Y P D ’s p a rtn e rsh ip w ith p riv ate sec u rity
professionals a n d to serve as th e N Y P D ’s
p ro g ra m m e fo r c o m m u n ic a tio n w ith
th ese p riv ate se c to r entities o n m atters
6. o f c o u n te rte rro ris m . S hield provides m u l-
tip le p latfo rm s fo r th e p riv ate se c to r to
access in fo rm a tio n a n d resources w ith in
th e N Y P D to address e m e rg in g threats
an d ev o lv in g c o n d itio n s w ith in N e w
Y ork C ity a n d addresses p riv a te se c to r
in fo rm a tio n n eeds o n b o th a g eo g rap h ic
an d in d u stry secto r-sp ecific basis in a
n u m b e r o f specific ways. T h e se p latfo rm s
in c lu d e co n feren ces, tra in in g sem inars, th e
w ebsite, e -m a il alerts, in tellig e n ce analysis
briefs an d professional liaisons. W ith over
Successful public-private partnerships: The NYPD shield model
17,000 m e m b e rs, N Y P D S hield is b ro k e n
d o w n in to 2 2 ‘sec to rs’, allo w in g fo r m o re
d ire c te d a n d specific c o m m u n ic a tio n
a m o n g th e c o m m u n ity o f professionals
in each sector. T h e se in clu d e: business
im p ro v e m e n t districts (BIDs); c h e m ic a l/
p e tro le u m ; cultural; ed u c a tio n ; e n e rg y /
utilities; e n te rta in m e n t; fin an c e an d
b an k in g ; g o v e rn m e n ta l agencies; h e a lth
a n d hospitals; h o sp itality a n d to u rism ; law
e n fo rc e m e n t; m a ritim e ; m edia; p o sta l/
parcel; professional services; real estate an d
p ro p e rty m a n a g e m e n t; religious; retail an d
m erc h a n t; security; te le c o m m u n ic a tio n s /
IT ; tra n sp o rta tio n ; an d o th e r. T h e u ltim a te
goal o f th e S hield p ro g ra m m e is to create
ad d itio n al ‘eyes an d ears’ w ith in th e secu
rity c o m m u n ity to assist in a tte m p tin g to
th w a rt p o te n tia l te rro ris t plots a n d attacks.
7. S hield serves as a fo rce m u ltip lier, tak in g
advantage o f th e h ig h n u m b e rs o f se c u rity
p e rso n n e l em p lo y ed th r o u g h o u t th e city.
‘Public an d p rivate secto r p artn e rs can
lo o k to an ex cellen t exam ple o f h o w
expectations can b e clearly established in
a public—private p artn ersh ip : th e N e w
York Police D e p a rtm e n t’s (N Y P D ) Shield
program . T h e N Y P D Shield program
b rings to g e th e r p ublic an d p rivate secto r
entities to facilitate in fo rm a tio n sharing
fo r security purposes. F or instance, i f a
N e w Y ork C ity business o w n e r w ishes
to b e c o m e p a rt o f th e p rogram , he
o r she can apply to be a m e m b e r o f
N Y P D Shield online. N Y P D Shield is
a tw o -w a y street; th e key to success is
fo r in fo rm a tio n to flow in tw o direc-
tions. W e ask y o u r assistance in th e fight
against terro rism by re p o rtin g suspicious
b eh a v io r as soon as possible.’1
HISTORY
N Y P D S hield b eg a n in 2 005 after th e
D e p u ty C o m m issio n e r o f C o u n te rte r ro ris m
at th e tim e, M ik e S h eeh a n , b e c a m e aw are
o f th e F ed eral B u rea u o f Investigation
(F B I)’s In fraG u a rd p ro g ra m m e . In fra G u a rd
is a p a rtn e rsh ip b e tw e e n th e FBI a n d th e
p u b lic /p riv a te sector, a n d is d e sc rib e d as
an association th a t represents businesses,
academ ic in stitu tio n s, state an d local law
e n fo rc e m e n t agencies, a n d o th e r p a rtic i-
8. pants. In fraG u a rd is d e d ic a te d to sh a rin g
in fo rm a tio n an d in tellig e n ce to p re v en t
h o stile acts against th e U S A . T h e th e n
P olice C o m m is s io n e r R a y m o n d K elly an d
D e p u ty C o m m is s io n e r S h e e h a n d e c id e d
th a t th e N Y P D sh o u ld b e g in its o w n p ro -
g ra m m e .2 T h e N Y P D S h ie ld was p u rp o s e d
in 2005 w h e n it ab so rb ed th e m e m b e rsh ip
database fro m a n o th e r N Y P D p ro g ra n u n e
called th e A rea P olice—P riv ate S e c u rity
L iaison (A PPL). T h e A P P L p ro g ra m m e
co n sisted o f N Y P D executives a n d se c u rity
d irec to rs w ith in N e w Y ork C ity w h o se
goal was ‘to e n h a n c e p o lic e a n d se c u rity
c o o p e ra tio n in th e p r o te c tio n o f p e o p le
an d property, to e x c h an g e in fo rm a tio n ,
an d to h elp elim in a te th e cred ib ility gap
b e tw e e n p o lic e an d p riv a te security.’
INFORMATION-SHARING
PLATFORMS
T h e N Y P D S hield m o tto , ‘C o u n te r in g
te rr o ris m th ro u g h in fo rm a tio n s h a rin g ’,
is a c co m p lish e d by e n g a g in g w ith th e
p u b lic /p riv a te se c to r th ro u g h m u ltip le
p latform s. O n e o f these p latfo rm s is
th ro u g h th e N Y P D S h ield w ebsite (w w w .
n y p d sh ield .o rg ). T h e w eb site serves as a
ce n tral d e p o sito ry fo r m e m b e rs to share
a n d receive in fo rm a tio n . T h e w eb site p r o -
vides n u m e ro u s resources fo r its m e m b e rs
th a t in c lu d e in te llig e n c e assessments a n d
in fo rm a tio n a l b u lletin s, w e ek ly re p o rts,
th e ‘A ro u n d th e W o rld ’ videos, a reso u rce
lib rary an d v ario u s p u b licatio n s.
9. Intelligence assessments
T h e C o u n te r te r r o r is m B u re a u ’s T e rro rism
T h re a t Analysis G ro u p (T T A G ) consists o f
Page 108
highly educated civilian intelligence ana-
lysts that prepare intelligence assessment
reports based on terrorist attacks both
at home and abroad. These non-classi-
fied open source assessments are posted
on the website for security directors and
managers to read, providing them with
information that can assist in deciding
whether adjustments are required to their
organisations’ security posture based on
the type o f attack. ‘Within hours o f a
major incident abroad, Shield makes
its intelligence products available via its
website. Actionable and filling a need
for basic information, these briefs enable
the private sector to quickly take steps
to protect its assets.’3 These intelligence
assessments are widely redistributed within
security industry circles because they are
highly digestible 2—3-page documents that
always conclude by tying in whether the
incident or attack has ‘implications for
New York City’. Some examples of recent
intelligence assessments are the Paris and
San Bernardino attacks as well as the attack
on the art exhibit in Garland, TX.
‘Analytical briefings are provided on
10. a weekly basis, but they can be pro-
vided sooner on an event-specific
incident basis. The analytical briefs
are researched and prepared by intel-
ligence research specialists assigned to
the Counterterrorism Division. Those
specialists prepare and make available
to members sector-specific briefings
(cyber security, C B R N [chemical, bio-
logical, radiological and nuclear], etc),
weekly regional reports (Iran, Iraq,
Arabian Peninsula, Africa, etc), inci-
dent-specific reports (Times Square
bombing, Mumbai, etc), and they also
prepare reports on trends and analysis.’4
Informational bulletins
The NYPD Shield website also posts
informational bulletins that are prepared
by TTAG. These bulletins provide specific
information about events throughout the
city, such as parades, the New York City
Marathon, special dignitary visits such
as that by Pope Francis, major sporting
events, New Year’s Eve and the 4th o f July
celebrations to name a few. These bulletins
offer information to security directors and
managers, informing them o f event details
and providing a threat assessment that
includes possible disruptions relating to
the event that will assist them in informing
members o f their particular organisations.
Weekly reports
Weekly reports focusing on various
11. regions o f the world are posted on the
website. These reports discuss terrorism-
related attacks, tradecraft and also highlight
political and governmental issues in those
regions. The weekly cyber reports are
pertinent and informative briefings that
discuss cyber threats and breaches to
assist security directors and managers in
providing basic understandings o f these
technological attacks and shed light on
security measures and law enforcement
efforts to mitigate these threats. October
has been designated National Cyber
Awareness Month. In October 2015, the
NYPD Shield website posted a daily cyber
tip, culminating with the ‘Myth-Busting
Cyber Security Tips R eport’. These tips
are archived and still available to view.
Videos
The NYPD Shield website also hosts a
series o f posted videos titled, ‘Around the
World’. These productions are arranged
into a newscast-style format and provide
information on terrorism-related news
and information.
Reports and publications
Under the NYPD Reports and Publications
tab, members have access to various docu-
ments, including ‘Engineering Security
Successful public-private partnerships: The NYPD shield model
12. — P rotective D esign for H ig h -R is k
B u ild in g s’, w h ic h was developed by the
N Y P D to ‘aid th e N e w York C ity b u ild in g
c o m m u n ity by pro v id in g in fo rm a tio n o n
h o w to prev en t an d m itigate th e effects o f
a te rro rist attack o n a b u ild in g ’.5 M o st o f
the re co m m en d atio n s in this p u b licatio n
address traditional threats from explosive
devices, in clu d in g guidelines o n en h a n c in g
p e rim e te r security; achieving robust
b u ild in g design; designing effective access
co n tro l, screening an d m o n ito r in g systems;
and developing fire-resistance, em erg en cy
egress an d c o m m u n ic a tio n system solu-
tions. ‘T h e re co m m en d atio n s also address
e m e rg in g threats fro m chem ical, b io lo g -
ical an d radiological w eapons, in clu d in g
guidelines o n d eploying and using heating,
ventilation and air c o n d itio n in g systems and
associated d e te c tio n devices’.6
A n o th e r w id ely v iew e d a n d d istrib -
u te d d o c u m e n t is th e N e w Y ork C ity
P olice D e p a rtm e n t study, ‘A ctive S h o o te r:
R e c o m m e n d a tio n s a n d Analysis fo r R is k
M itig a tio n ’. T h e N Y P D d ev e lo p e d this
p u b lic a tio n based o n analysis o f past active
s h o o te r in cid en ts an d careful review s o f
p re v io u s studies. Last u p d a te d in 2 0 1 2 a n d
c u rre n tly u n d e rw a y fo r u p d a te th ro u g h
2 0 1 5 , this p u b lic a tio n was d ev e lo p e d to
p ro v id e re c o m m e n d a tio n s to m itig a te
th e ev e r-p re v alen t an d frig h te n in g active
s h o o te r threat.
‘T h e N Y P D p e rfo rm e d a statistical
13. analysis o n a subset o f 3 2 4 active s h o o te r
in c id e n ts fro m 1966 to 2 012 to id en tify
c o m m o n characteristics a m o n g active
s h o o te r attacks. T h is d o c u m e n t provides
re c o m m e n d a tio n s fo r b u ild in g se c u rity
p e rso n n e l to ed u c ate th e m a n d m em b ers
o f th e ir organisations to m itig ate th e
risk fro m active s h o o te r attacks.’7
Resource library
A c e n tre p ie c e o f tools at th e disposal o f
N Y P D S hield m e m b e rs is th e w e b site ’s
reso u rce library. T h is lib rary includes
in fo rm a tio n a n d e x te rn a l links to w e b -
sites th a t are b ro k e n d o w n in to m u ltip le
categ o ries, w ith exam ples th a t in c lu d e
best practices fo r physical sec u rity ; crisis
a n d risks; facility security; e m e rg e n c y
p lan n in g ; sch o o l te rro rism ; chem ical, b io -
logical, radiological an d n u c le a r (C B R N )
th re a t security, a n d m a ritim e security,
to n a m e a few. T h is se c tio n provides a
p le th o ra o f in fo rm a tio n th a t can prove
useful to b o th p riv ate se c to r se c u rity m a n -
agers a n d d irec to rs as w ell as m e m b e rs o f
th e law e n fo rc e m e n t c o m m u n ity .
Quarterly conferences
N Y P D S h ie ld hosts co n fe re n c e s
th r o u g h o u t th e year. T h e s e events prove
to b e a n effective m ean s to c o n v e y rel-
ev a n t te r r o r is m in f o r m a tio n a n d c u r r e n t
P o lic e D e p a r tm e n t in itiativ es to in v ite d
s e c u rity d ire c to rs, m an ag e rs a n d o th e r law
e n f o rc e m e n t a g e n c y p a rtn e rs. T h e c o n -
14. fe ren c es allow th e S h ie ld te a m to solidify
re la tio n sh ip s w ith se c u rity d ire c to rs an d
m an a g e rs as w e ll as to e n c o u ra g e th e m to
tak e ad v a n ta g e o f S h ie ld reso u rces. ‘T h e
b rie fin g s b e tw e e n th ese e n titie s address
in d u s try a n d g e o g ra p h ic -sp e c ific c o n -
c e rn s w h ile p ro v id in g fe e d b a c k fro m th e
s e c u rity field o n p o licies in s titu te d by
th e D e p a r tm e n t’.8 T opics p re s e n te d at
th e c o n fe re n c e s fro m P o lic e D e p a r tm e n t
s u b je c t m a tte r e x p e rts ra n g e fro m in -
d e p th assessm ents o f w e ll- k n o w n attacks,
te rr o ris t trad e cra ft, b rie fin g s o n large-scale
events affec tin g N e w Y ork C ity, N Y P D
c o u n te r te r r o r is m p ro g ra m m e s, re c o m -
m e n d a tio n s to m itig a te th e active s h o o te r
th re a t, explosive effects, c y b e r te rr o ris m
a n d assessm ents o n specific te rr o ris t o rg a n -
isations.9 In a d d itio n , th e co n fe re n c e s have
h o s te d n o ta b le speakers fro m g o v e rn -
m e n ta l o rg a n isa tio n s, in c lu d in g M ic h a e l
M o re ll, f o r m e r D e p u ty D ir e c to r o f th e
C e n tra l In te llig e n c e A g e n cy ; N ic h o la s
J. R a sm u sse n , D ire c to r o f th e N a tio n a l
Page 110
Amadeo and lannone
C o u n te r te r r o r is m C e n te r ; E d w a rd F.
D avis III, f o r m e r P o lic e C o m m is s io n e r
o f th e B o s to n P olice D e p a r tm e n t; J e h C .
J o h n s o n , S e c re ta ry o f th e D e p a r tm e n t
o f H o m e la n d S e c u rity ; J a n e t N a p o lita n o ,
15. f o r m e r S e c re ta ry o f th e D e p a r tm e n t o f
H o m e la n d S e c u rity ; a n d , m o s t recently,
Jam es C o m e y , D ir e c to r o f th e FBI.
S in ce J u ly 2 0 0 5 , 3 6 S h ie ld c o n fere n ces
have b e e n h e ld , w ith a to ta l o f 12,951
a tte n d e e s .10
E-mail alerts
W h e n S h ie ld approves a n e w m e m b e r,
th a t in d iv id u a l is g iv en th e o p tio n to
receive e -m a il alerts. T h e s e alerts p ro v id e
m e m b e rsh ip w ith re a l-tim e in fo rm a tio n
re g a rd in g te rr o ris m events th ro u g h o u t th e
w o rld . T h e alerts fall in to a n u m b e r o f ca t-
eg o ries, in c lu d in g m a jo r in cid en ts; p o lice
activity; traffic a n d transit; b a n k robberies;
b u ild in g evacuations; b u ild in g em e rg e n c y
drills; w e e k e n d events; lo catio n s o f p ro test
th r o u g h o u t th e city; b re a k in g new s and
te rr o ris m a n d / o r active s h o o te r in cid en ts
b o th n atio n ally a n d globally.
Training
C o n s id e re d th e b re a d a n d b u tte r o f th e
S h ie ld p ro g r a m m e w ith n ea rly 8 5 ,0 0 0
m e m b e rs a n d n o n - m e m b e r s tra in e d , th e
S h ie ld p ro g r a m m e c u r r ic u lu m offers
12 tra in in g o p p o r tu n itie s fo r p e rs o n n e l
w ith in th e c o rp o ra te , p riv a te se c u rity
a n d m a n a g e m e n t sectors. T h is enables
face to -fa c e in te ra c tio n w ith th e p u b lic /
p riv a te sector, c re a tin g th e m o st im p a c t
in th e in fo rm a tio n -s h a rin g relationship.
T h is tra in in g is p ro v id e d to m e m b e rs
at n o co st a n d ca n b e ta ilo re d specifi-
cally tow ards tn e ir o rg a n is a tio n s needs.
16. T ra in in g is c o n d u c te d at th e ir respective
facility, w h ile all S h ie ld in s tru c to rs are
c e rtifie d b y N e w Y ork S tate. A n y se c u rity
d ir e c to r /m a n a g e r m e m b e rs ca n re q u est
tra in in g th r o u g h th e w e b site b y calling
th e office o r via e-m a il.
Seven o f these courses are c o n d u c te d
b y S hield p e rso n n e l, w h ile five o th ers
are c o n d u c te d b y th e C o u n te rte r ro ris m
D iv isio n ’s T ra in in g S ectio n . A lth o u g h
tra in in g is given u p o n req u est, th e re are
o fte n in c id e n ts o r attacks th a t cause S hield
to engage th e affected sec to r proactively.
F o r instance, after th e re c e n t attacks in
Paris, S hield c o n d u c te d tra in in g specifically
d ire c te d to w ard ‘soft targ ets’ in th e e n te r
ta in m e n t sector, su ch as restaurants, bars
a n d n ig h tclu b s. T h e S hield p ro g ra m m e
is a free in fo rm a tio n -s h a rin g a n d train in g
p ro g ra m m e w h e re N Y P D officers visit
businesses to tra in staff. A fte r th e m u rd ers
o f an o n - a ir television re p o rte r an d h e r
ca m e ram a n by a fo r m e r colleague, N Y P D
S hield h e ld an active s h o o te r tra in in g
sem in ar at P olice H e a d q u a rte rs specifically
fo r m e m b e rs o f th e m edia. ‘P olice offi
cials said th e sy m p o siu m was n o t so m u c h
a b o u t h o w to p re v e n t mass sh o otings b u t
h o w to b e ready “i f ” . W e w a n t to give y o u
so m e ideas a b o u t h o w y o u ca n survive an
in c id e n t like th is’.11
NYPD SHIELD COURSES
Recommendations for active shooter
17. incidents
T h is is th e m o st re q u e ste d c o u rse o ffered by
Shield, an d it explores re c o m m e n d a tio n s
to m itig ate th e risks fro m active s h o o te r
attacks. T h is tra in in g is g eared to w ard
b u ild in g se c u rity p erso n n el; how ever,
it also provides g u id an ce to individuals,
in c lu d in g m anagers an d em ployees, so th ey
can p re p are to re sp o n d to an active s h o o te r
situ atio n . It is also th e o n ly co u rse th a t is
offered to all em ployees o f an o rg a n isa tio n
a n d n o t lim ite d to se c u rity p e rso n n el. T h e
N Y P D d ev e lo p e d this p ro g ra m m e based
o n analysis o f past active s h o o te r in cid en ts
a n d careful review s o f prev io u s studies
by p ro v id in g statistics, histo rical exam ples,
a n d th e th re e re c o m m e n d a tio n s o n h o w
Page 111
Successful public-private partnerships: The NYPD shield model
to act w h e n faced w ith an active sh o o ter:
avoid, b a rric a d e o r c o n fro n t (literally, the
‘A B C ’s o f an active s h o o te r event). It also
in fo rm s a b o u t w h a t to e x p e c t w h e n law
e n fo rc e m e n t responds to th e scene. A t th e
c o n c lu sio n o f th e course, stu d en ts have
th e o p p o rtu n ity to b r in g to g e th e r w h a t
has b e e n ta u g h t by w a tc h in g a tra in in g aid
v id eo th a t provides a visual o f th e in s tru c -
tio n al p o in ts ta u g h t d u rin g th e class.
Terrorism awareness for the security
18. professional
T h is co u rse is in te n d e d to p ro v id e secu-
rity p e rso n n e l w ith th e tools to deter,
d e te c t a n d id en tify p o te n tia l te rro rist
activity. O v e r e ith e r tw o o r fo u r h o u rs,
th e in s tru c to r an d class discuss h o w to
recognise an d identify te rro rist-re la te d
physical a n d b eh a v io u ral in d icato rs, co llect
an d process in fo rm a tio n , m ake a p p ro p ria te
n o tificatio n s an d , w h e n necessary, take
a c tio n d u rin g a te rro ris t attack. Topics
th a t are co v ered in th e c o u rse in clu d e
an in tro d u c tio n to te rro rism , im p ro v ised
explosive devices, in d ic a to rs o f suicide
attacks a n d v e h ic le -b o rn e im provised
explosive devices.
It is o n e th in g to desc rib e to a stu d e n t
a b o u t w h a t explosive devices are an d
a n o th e r to actually sh o w th e m . To this
en d , in stru c to rs display in e r t explosive
th a t allows th e stu d e n t to visually inspect
an d feel these c o m p o n e n ts. E xam ples
in c lu d e types o f p ip e b o m b s, blasting caps,
igniters, sw itches and differen t ch em ical
c o m p o n e n ts u sed to c o n s tru c t explosive
devices.
Detecting hostile surveillance
D u r in g th e p re-stages o f an attack, terro rists
o fte n c o n d u c t p re -o p e ra tio n a l surveil-
lan ce o n a target. ‘T h e a l-Q a e d a m an u al
“ M ilita ry Studies in th e Jih a d against th e
T yrants” an d its o n lin e tra in in g m agazines
n o t o n ly in s tru c t operatives p la n n in g an
attac k to c o n d u c t surveillance, th e y also
20. were up, profits were up, and our return on equity was a
respectable 15 percent. In fact,” he continued,
“the only dark spot
I can find in our whole annual report is the profit margin, which
is only 2.25 percent. Seems like we
ought to be making more than that, don’t you think, Tim?” He
looked across the table at the vice
president for finance, Timothy Baggit, age 28.
“I agree,” replied Tim, “and I’m glad you brought it up, because
I have a suggestion on how to improve
that situation.” He leaned forward in his chair as he realized he
had captured the interest of the others.
“The problem is, we have too many expenses on our income
statement that are eating up the profits.
Now, I’ve done some checking, and the expenses all seem to be
legitimate except for interest expense.
Look here, we paid over $250,000 last year to the bank just to
finance our short-term borrowing. If we
could have kept that money instead, our profit margin ratio
would have been 4.01 percent, which is
higher than any other firm in the industry.”
“But, Tim, we have to borrow like that,” responded Roy (“Pop”)
Thomas, age 35, the vice president for
production. “After all, our sales are seasonal, with almost all
occurring between March and September.
Since we don’t have much money coming in from October to
February, we have to borrow to keep the
production line going.”
“Right,” Tim replied, “and it’s the production line that’s the
problem. We produce the same number of
products every month, no matter what we expect sales to be.
This causes inventory to build up when
25. October, then we only make 150. That way we avoid borrowing
to make the 250 more that we don’t
expect to sell, anyway. Over the course of an entire year the
savings in interest expense could really add
up.”
“Hold on, now,” Pop responded, feeling that his territory was
being threatened. “That kind of scheduling
really fouls up things in the shop where it counts. It causes a
feast or famine environment—nothing to
do for one month, then a deluge the next. It’s terrible for the
employees, not to mention the supervisors
who are trying to run an efficient operation. Your idea may
make the income statements look good for
now, but the whole company will suffer in the long run.”
Chuck intervened. “OK, you guys, calm down. Tim may have a
good idea or he may not, but at least it’s
worth looking into. I propose that you all work up two sets of
figures, one assuming level production and
one matching production with sales. We’ll look at them both
and see if Tim’s idea really does produce
better results. If it does, we’ll check it further against other
issues Pop is concerned about and then
make a decision on which alternative is better for the firm.”
Table 3 (continued)
April May June July August September
Sales Forecast
Sales (units) ................................. 500 1,000 1,000 1,000 500
250
Sales (unit price: $3,000) ............. $1,500,000 $3,000,000
$3,000,000 $3,000,000 $1,500,000 $ 750,000
Cash Receipts Schedule
30. 2. Reference table 5 to calculate how much Tim’s suggestion
would save in interest expense in a year.
A. Use your recomputed figures in Table 5 from question 1 to
summarize what the change
would offer as a savings from the total interest expense. Justify
your perspective on
whether those findings would be a positive point for Tim’s
suggestion or a positive point for
Roy (“Pop”).
3. Assume that there is an added expense for each sales dollar
of .5 percent (.005). Based on this fact
and the information computed in question 2, is seasonal
production justified?
A. Compute the total sales using table 3 ( original or
recomputed table can be sued)
B. Apply the added expense and identify what the expense
amount will do (increase/decrease
and by how much).
C. Compare the rate of the added expense burden to the interest
savings computed in
question 2 of table5.
D. Write a one paragraph summary of your findings. Include if
you feel the seasonal production
plan is justified or not and why you are making the formal
recommendation to implement
the change or not.
Sales Forecast, Cash Receipts and Payments, and Cash
BudgetSales ForecastCash Receipts ScheduleCash Payments
31. ScheduleCash Budget; Required Minimum Balance is
$125,000Table 3(continued)Sales ForecastCash Receipts
ScheduleCash Payments ScheduleCash Budget; Required
Minimum Balance is $125,000Table 5
6
Working Capital and the Financing Decision
LEARNING OBJECTIVES
LO 6-1
Working capital management involves financing and controlling
the current assets of the firm.
LO 6-2
Management must distinguish between current assets that are
easily converted to cash and those that are more permanent.
LO 6-3
The financing of an asset should be tied to how long the asset is
likely to be on the balance sheet.
LO 6-4
Long-term financing is usually more expensive than short-term
financing based on the theory of the term structure of interest
rates.
LO 6-5
Risk, as well as profitability, determines the financing plan for
current assets.
LO 6-6
Expected value analysis may sometimes be employed in
working capital management.
The rapid growth of business firms in the last two decades has
challenged the ingenuity of financial managers to provide
adequate financing. Rapidly expanding sales may cause intense
pressure for inventory and receivables buildup—draining the
cash resources of the firm. As indicated in , “Financial
Forecasting,” a large sales increase creates an expansion of
current assets, especially accounts receivable and inventory.
Some of the increased current assets can be financed through
the firm’s retained earnings, but in most cases internal funds
32. will not provide enough financing and some external sources of
funds must be found. In fact, the faster the growth in sales, the
more likely it is that an increasing percentage of financing will
be external to the firm. These funds could come from the sale of
common stock, preferred stock, long-term bonds, short-term
securities, and bank loans, or from a combination of short- and
long-term sources of funds.
There is also the problem of seasonal sales that affects many
industries such as soft drinks, toys, retail sales, and textbook
publishing. Seasonal demand for products makes forecasting
cash flows and receivables and inventory management difficult.
The Internet and cloud computing are beginning to alleviate
some of these problems and help management make better
plans.
Page 159
If you have had a marketing course, you have heard about
supply chain management. Well, financial executives are also
interested in the supply chain as an area where the Internet can
help control working capital through online software.
McDonald’s Corporation of Big Mac fame formed eMac Digital
to explore opportunities in business-to-business (B2B) online
ventures. One of the first things on the agenda was to have
eMac Digital help McDonald’s reduce costs. McDonald’s
wanted to create an online marketplace where restaurants can
buy supplies online from food companies. McDonald’s, like
Walmart, Harley-Davidson, and Ericsson, has embraced supply
chain management using web-based procedures. The goal is to
squeeze out inefficiencies in the supply chain and thereby lower
costs. One of the big benefits is a reduction in inventory
through online communications between the buyer and supplier,
which speeds up the ordering and delivery process and reduces
the amount of inventory needed on hand. These systems may
also be able to attract a large number of suppliers to bid on the
company’s business at more competitive prices.
Retailers like Walmart require suppliers to ship their goods with
radio frequency identification chips (RFID) embedded in their
33. shipments. These chips eliminate processing delays, reduce
theft, and result in better inventory management. From the
financial manager’s viewpoint, anything that can reduce
inventory levels without creating out-of-stock situations will
reduce the amount of money needed to finance inventory. You
can read more about Walmart and RFID chips in the nearby
Finance in Action box.
Working capital management involves the financing and
management of the current assets of the firm. The financial
executive probably devotes more time to working capital
management than to any other activity. Current assets, by their
very nature, are changing daily, if not hourly, and managerial
decisions must be made. “How much inventory is to be carried,
and how do we get the funds to pay for it?” Unlike long-term
decisions, there can be no deferral of action. While long-term
decisions involving plant and equipment or market strategy may
well determine the eventual success of the firm, short-term
decisions on working capital determine whether the firm gets to
the long term.
In this chapter, we examine the nature of asset growth, the
process of matching sales and production, financial aspects of
working capital management, and the factors that go into
development of an optimum policy.
The Nature of Asset Growth
Any company that produces and sells a product, whether the
product is consumer or manufacturer oriented, will have current
assets and fixed assets. If a firm grows, those assets are likely
to increase over time. The key to current asset planning is the
ability of management to forecast sales accurately and then to
match the production schedules with the sales forecast.
Whenever actual sales are different from forecast sales,
unexpected buildups or reductions in inventory will occur that
will eventually affect receivables and cash flow.
In the simplest case, all of the firm’s current assets will be self-
liquidating assets (sold at the end of a specified time period).
Assume that at the start of the summer you buy 100 tires to be
34. disposed of by September. It is your intention that all tires will
be sold, receivables collected, and bills paid over this time
period. In this case, your working capital (current asset) needs
are truly short term.
Now let us begin to expand the business. In stage two, you add
radios, seat covers, and batteries to your operation. Some of
your inventory will again be completely liquidated, while other
items will form the basic stock for your operation. To stay in
business, you must maintain floor displays and multiple items
for selection. Furthermore, not all items will sell. As you
eventually grow to more than one store, this “permanent”
aggregate stock of current assets will continue to increase.
Problems of inadequate financing arrangements are often the
result of the businessperson’s failure to realize the firm is
carrying not only self-liquidating inventory, but also the
anomaly of “permanent” current assets.
Page 160
Finance in ACTION Technology A Great Inventory Tracking
System May Be Helping You
RFID (radio frequency identification technology), a system that
has been around since World War II and was used by the
military to keep track of airplanes, continues to gain traction in
inventory/supply chain management. RFID chips have been used
in trains, ships, and trucks to track shipment containers. They
are also used in automatic toll systems that allow drivers to pass
through tolling areas without stopping. The state of Michigan
has used these chips to track livestock; marathon officials have
used them to track a runner’s time; and the Defense Department
has used them to track the shelf life of their food rations.
Additionally, they are now being used to make sure that
shipping containers entering U.S. ports have not been tampered
with after inspection.
Hewlett-Packard, in a business briefing paper, indicates that
there may be as much as $45 billion of excess inventory in the
retail supply chain that is unaccounted for at any given time. In
short, RFID chips can help a company track goods and make
35. sure that the right goods get to the right places on time. More
sophisticated chips can be reused and can even record a sale.
For example, if an expensive piece of jewelry is sold with a
chip attached, when the chip is decommissioned, the sale
automatically shows up in the store’s computer system.
In 2005, Walmart mandated that by the end of 2007, its 300
largest suppliers must have RFID chips in each pallet of goods
shipped to its distribution centers. Procter & Gamble was one of
the first companies to comply and found the system beneficial
in managing its own inventory, reducing out-of-stock inventory
levels, and preventing inventory theft or theft of goods in
transit. For manufacturers of expensive products such as
pharmaceuticals, theft reduction can be a significant cost
saving. P&G noted that when comparing bar codes to RFID
chips, it took 20 seconds to manually tally bar-code data on a
pallet versus five seconds to read RFID technology. P&G states
that it earned a return on its RFID investment in the millions of
dollars.
According to the RFID Journal’s January 7, 2013, issue, 19 of
the top 30 U.S. retailers are involved at some level with RFID
chips, but full utilization of these chips has a long way to go
before they are used throughout their stores for all products.
Many specialty retailers are beginning to use RFID technology;
American Apparel has adopted RFID technology at all 280 of its
stores.
A rather unique use of these chips is for high-value poker chips
at casinos. In 2010, a robber came into the Bellagio in Las
Vegas and left with $1.5 million in poker chips. Little did he
know that the chips had embedded RFID chips, and as soon as
he walked out of the casino, the chips became worthless and
unable to be used anywhere.
The movement from stage one to stage two of growth for a
typical business is depicted in . In panel A, the buildup in
current assets is temporary—while in panel B, part of the
growth in current assets is temporary and part is permanent.
(Fixed assets are included in the illustrations, but they are not
36. directly related to the present discussion.)
Controlling Assets—Matching Sales and Production
In most firms, fixed assets grow slowly as productive capacity
is increased and old equipment is replaced, but current assets
fluctuate in the short run, depending on the level of production
versus the level of sales. When the firm produces more than it
sells, inventory rises. When sales rise faster than production,
inventory declines and receivables rise.
Page 161
Figure 6-1 The nature of asset growth
A. Stage I: Limited or no growth
B. Stage II: Growth
As discussed in the treatment of the cash budgeting process in ,
some firms employ level production methods to smooth
production schedules and use manpower and equipment
efficiently at a lower cost. One consequence of level production
is that current assets go up and down when sales and production
are not equal. Other firms may try to match sales and
production as closely as possible in the short run. This allows
current assets to increase or decrease with the level of sales and
eliminates the large seasonal bulges or sharp reductions in
current assets that occur under level production.
Seasonal industries can be found in manufacturing, retailing,
electricity, and natural gas. Demand is uneven in these
industries, and many exhibit a seasonal demand. For example,
electricity producers have more demand in the summer for air
conditioning while natural gas companies have more demand in
the winter for heating. One small manufacturing company that
exhibits this type of seasonal demand is Briggs and Stratton
Corporation from Wauwatosa, Wisconsin.
Page 162
Briggs and Stratton is the largest maker of 3.5 to 25 horsepower
air-cooled gasoline engines. Chances are if you’ve ever mowed
a lawn, your lawnmower had a Briggs and Stratton engine. Their
37. motors can be found in pressure washers, compressors and
pumps, garden tillers, generators, small tractors, lawnmowers,
and outboard marine engines, and about 30 percent of the
company’s overall sales are in the international market.
Briggs and Stratton’s fiscal year ends in June,
and demonstrates both the seasonality of sales and the leverage
impact on earnings per share that we discussed in . Because
Briggs sells most of its products to other manufacturers who use
the engines as part of their finished products, a large percentage
of sales must occur early in the year in order to produce the
garden equipment that would be in demand in spring and
summer. We can see from that sales are lowest in the July to
September quarter, followed by the September–December
quarter. Peak sales are in the third quarter, beginning in January
and ending in March. There are carryover sales in the April to
June quarter, which is the second best period for Briggs and
Stratton.
Figure 6-2 Quarterly sales and earnings per share for Briggs
and Stratton
Page 163
Notice that the first quarter of the year always generates
negative earnings per share as the costs of production outweigh
the revenue produced. This is most likely caused by the costs of
building inventory. Earnings in the second and fourth quarter
are small, with most of the earnings coming in the peak sales
period of the third quarter. For example in 2013, Briggs and
Stratton earned $0.90 billion for the year with $0.89 billion
coming in the third quarter; in 2014 the firm earned $0.82
billion with $0.81 billion coming in the third quarter. The
seasonal nature of the company’s sales can be exacerbated by
inventory buildup at the end user and a fall in orders for the
next season. The company has made acquisitions in recent years
to diversify its product line and to smooth out sales and
earnings. The future will tell if these acquisitions succeed.
38. Retail firms such as Target and Macy’s also have seasonal sales
patterns. on the next page shows the quarterly sales and
earnings per share of these two companies, with the quarters
ending in April, July, October, and January. These retail
companies do not stock a year or more of inventory at one time.
They are selling products that are either manufactured for them
by others or manufactured by their subsidiaries. Most retail
stores are not involved in deciding on level versus seasonal
production but rather in matching sales and inventory. Their
suppliers must make the decision to produce on either a level or
a seasonal basis. Since the selling seasons are very much
affected by the weather and holiday periods, the suppliers and
retailers cannot avoid inventory risk. The fourth quarter for
retailers, which begins in November and ends in January, is
their biggest quarter and accounts for as much as half of their
earnings. You can be sure that inventory not sold during the
Christmas season will be put on sale during January.
Both Target and Macy’s show seasonal peaks and troughs in
sales that will also be reflected in their cash balances, accounts
receivable, and inventory. Notice in that Target is growing
slightly faster than Macy’s, which has a rather flat trendline.
Even so, Macy’s peak earnings per share are higher than
Target’s earnings per share when the fourth quarter sales peak
out. Both companies illustrate the impact of leverage on
earnings as discussed in , but we can tell that Macy’s has higher
leverage because its EPS rises and falls with sales more than
Target’s EPS (bottom of ). We shall see as we go through the
chapter that seasonal sales can cause asset management
problems. A financial manager must be aware of these problems
to avoid getting caught short of cash or unprepared to borrow
when necessary.
Many retail-oriented firms have been more successful in
matching sales and orders in recent years because of new,
computerized inventory control systems linked to online point-
of-sales terminals. These point-of-sales terminals allow either
digital input or use of optical scanners to record the inventory
39. code numbers and the amount of each item sold. At the end of
the day, managers can examine sales and inventory levels item
by item and, if need be, adjust orders or production schedules.
The predictability of the market will influence the speed with
which the manager reacts to this information, while the length
and complexity of the production process will dictate how fast
production levels can be changed.
Page 164
Figure 6-3 Quarterly sales and earnings per share, Target and
Macy’s
Temporary Assets under Level Production—An Example
Page 165
To get a better understanding of how current assets fluctuate, let
us use the example of the Yawakuzi Motorcycle Company,
which manufactures and sells in the snowy U.S. Midwest. Not
too many people will be buying motorcycles during October
through March, but sales will pick up in early spring and
summer and will again trail off during the fall. Because of the
fixed assets and the skilled labor involved in the production
process, Yawakuzi decides that level production is the least
expensive and the most efficient production method. The
marketing department provides a 12-month sales forecast for
October through September ().
Table 6-1 Yawakuzi sales forecast (in units)
Total sales of 9,600 units at $3,000 each = $28,800,000 in sales.
After reviewing the sales forecast, Yawakuzi decides to produce
800 motorcycles per month, or one year’s production of 9,600
divided by 12. A look at shows how level production and
seasonal sales combine to create fluctuating inventory. Assume
that October’s beginning inventory is one month’s production of
800 units. The ending inventory level is computed for each
month and then multiplied by the production cost per unit of
$2,000.
40. Table 6-2 Yawakuzi’s production schedule and inventory
The inventory level at cost fluctuates from a high of $9 million
in March, the last consecutive month in which production is
greater than sales, to a low of $1 million in August, the last
month in which sales are greater than production. combines a
sales forecast, a cash receipts schedule, a cash payments
schedule, and a brief cash budget to examine the buildup in
accounts receivable and cash.
In , the sales forecast is based on assumptions in . The unit
volume of sales is multiplied by a sales price of $3,000 to get
sales dollars in millions. Next, cash receipts represent 50
percent collected in cash during the month of sale and 50
percent from the prior month’s sales. For example, in October
this would represent $0.45 million from the current month plus
$0.75 million from the prior month’s sales.
Page 166
Table 6-3 Sales forecast, cash receipts and payments, and cash
budget
*Assumes a cash balance of $0.25 million at the beginning of
October and that this is the desired minimum cash balance.
Cash payments in are based on an assumption of level
production of 800 units per month at a cost of $2,000 per unit,
or $1.6 million, plus payments for overhead, dividends, interest,
and taxes.
Page 167
Finally, the cash budget in represents a comparison of the cash
receipts and cash payments schedules to determine cash flow.
We further assume the firm desires a minimum cash balance of
$0.25 million. Thus in October, a negative cash flow of $1.1
million brings the cumulative cash balance to a negative $0.85
million and $1.1 million must be borrowed to provide an ending
cash balance of $0.25 million. Similar negative cash flows in
subsequent months necessitate expanding the bank loan. For
example, in November there is a negative cash flow of $1.325
41. million. This brings the cumulative cash balance to −$1.075
million, requiring additional borrowings of $1.325 million to
ensure a minimum cash balance of $0.25 million. The
cumulative loan through November (October and November
borrowings) now adds up to $2.425 million. Our cumulative
bank loan is highest in the month of March.
We now wish to ascertain our total current asset buildup as a
result of level production and fluctuating sales for October
through September. The analysis is presented in . The cash
figures come directly from the last line of . The accounts
receivable balance is based on the assumption that accounts
receivable represent 50 percent of sales in a given month, as the
other 50 percent is paid for in cash. Thus the accounts
receivable figure in represents 50 percent of the sales figure
from the second numerical line in . Finally, the inventory figure
in is taken directly from the last column of , which presented
the production schedule and inventory data.
Table 6-4 Total current assets, first year ($ millions)
Total current assets (last column in ) start at $3.3 million in
October and rise to $10.35 million in the peak month of April.
From April through August, sales are larger than production,
and inventory falls to its low of $1 million in August, but
accounts receivable peak at $3 million in the highest sales
months of May, June, and July. The cash budget in explains the
cash flows and external funds borrowed to finance asset
accumulation. From October to March, Yawakuzi borrows more
and more money to finance the inventory buildup, but from
April forward it eliminates all borrowing as inventory is
liquidated and cash balances rise to complete the cycle. In
October, the cycle starts over again; but now the firm has
accumulated cash it can use to finance next year’s asset
accumulation, pay a larger dividend, replace old equipment,
or—if growth in sales is anticipated—invest in new equipment
to increase productive capacity. presents the cash budget and
total current assets for the second year. Under a simplified no-
42. growth assumption, the monthly cash flow is the same as that of
the first year, but beginning cash in October is much higher
than the first year’s beginning cash balance, and this lowers the
borrowing requirement and increases the ending cash balance
and total current assets at year-end. Higher current assets are
present despite the fact that accounts receivable and inventory
do not change.
Page 168
Table 6-5 Cash budget and assets for second year with no
growth in sales ($ millions)
on the next page is a graphic presentation of the current asset
cycle. It includes the two years covered in and assuming level
production and no sales growth.
Patterns of Financing
The financial manager’s selection of external sources of funds
to finance assets may be one of the firm’s most important
decisions. The axiom that all current assets should be financed
by current liabilities (accounts payable, bank loans, commercial
paper, etc.) is subject to challenge when one sees the permanent
buildup that can occur in current assets. In the Yawakuzi
example, the buildup in inventory was substantial at $9 million.
The example had a logical conclusion in that the motorcycles
were sold, cash was generated, and current assets became very
liquid. What if a much smaller level of sales had occurred?
Yawakuzi would be sitting on a large inventory that needed to
be financed and would be generating no cash. Theoretically, the
firm could be declared technically insolvent (bankrupt) if short-
term sources of funds were used but were unable to be renewed
when they came due. How would the interest and principal be
paid without cash flow from inventory liquidation? The most
appropriate financing pattern would be one in which asset
buildup and length of financing terms are perfectly matched, as
indicated in .
Page 169
Figure 6-4 The nature of asset growth (Yawakuzi)
43. In the upper part of we see that the temporary buildup in
current assets (represented by teal) is financed by short-term
funds. More importantly, however, permanent current assets and
fixed assets (both represented by blue) are financed with long-
term funds from the sale of stock, the issuance of bonds, or
retention of earnings.
Figure 6-5 Matching long-term and short-term needs
Page 170
Alternative Plans
Only a financial manager with unusual insight and timing could
construct a financial plan for working capital that adhered
perfectly to the design in . The difficulty rests in determining
precisely what part of current assets is temporary and what part
is permanent. Even if dollar amounts could be ascertained, the
exact timing of asset liquidation is a difficult matter. To
compound the problem, we are never quite sure how much
short-term or long-term financing is available at a given time.
While the precise synchronization of temporary current assets
and short-term financing depicted in may be the most desirable
and logical plan, other alternatives must be considered.
Long-Term Financing
To protect against the danger of not being able to provide
adequate short-term financing in tight money periods, the
financial manager may rely on long-term funds to cover some
short-term needs. As indicated in , long-term capital is now
being used to finance fixed assets, permanent current assets, and
part of temporary current assets.
Figure 6-6 Using long-term financing for part of short-term
needs
By using long-term capital to cover part of short-term needs, the
firm virtually assures itself of having adequate capital at all
times. The firm may prefer to borrow a million dollars for 10
years—rather than attempt to borrow a million dollars at the
44. beginning of each year for 10 years and pay it back at the end of
each year.
Short-Term Financing (Opposite Approach)
Page 171
This is not to say that all financial managers utilize long-term
financing on a large scale. To acquire long-term funds, the firm
must generally go to the capital markets with a bond or stock
offering or must privately place longer-term obligations with
insurance companies, wealthy individuals, and so forth. Many
small businesses do not have access to such long-term capital
and are forced to rely heavily on short-term bank and trade
credit.
Furthermore, short-term financing offers some advantages over
more extended financial arrangements. As a general rule, the
interest rate on short-term funds is lower than that on long-term
funds. We might surmise then that a firm could develop a
working capital financing plan in which short-term funds are
used to finance not only temporary current assets, but also part
of the permanent working capital needs of the firm. As depicted
in , bank and trade credit as well as other sources of short-term
financing are now supporting part of the permanent capital asset
needs of the firm.
Figure 6-7 Using short-term financing for part of long-term
needs
The Financing Decision
Some corporations are more flexible than others because they
are not locked into a few available sources of funds.
Corporations would like many financing alternatives in order to
minimize their cost of funds at any point. Unfortunately, not
many firms are in this enviable position through the duration of
a business cycle. During an economic boom period, a shortage
of low-cost alternatives exists, and firms often minimize their
financing costs by raising funds in advance of forecast asset
needs.
Not only does the financial manager encounter a timing
45. problem, but he or she also needs to select the right type of
financing. Even for companies having many alternative sources
of funds, there may be only one or two decisions that will look
good in retrospect. At the time the financing decision is made,
the financial manager is never sure it is the right one. Should
the financing be long term or short term, debt or equity, and so
on?
Page 172
is a decision-tree diagram that shows many of the financing
choices available to a chief financial officer. A decision is made
at each point until a final financing method is chosen. In most
cases, a corporation will use a combination of these financing
methods. At all times the financial manager will balance short-
term versus long-term considerations against the composition of
the firm’s assets and the firm’s willingness to accept risk. The
ratio of long-term financing to short-term financing at any point
in time will be greatly influenced by the term structure of
interest rates.
Figure 6-8 Decision tree of the financing decision
Page 173
Term Structure of Interest Rates
The term structure of interest rates is often referred to as a yield
curve. It shows the relative level of short-term and long-term
interest rates at a point in time. Knowledge of changing interest
rates and interest rate theory is extremely valuable to corporate
executives making decisions about how to time and structure
their borrowing between short- and long-term debt. Generally,
U.S. government securities are used to construct yield curves
because they are free of default risk and the large number of
maturities creates a fairly continuous curve. Yields on corporate
debt securities will move in the same direction as government
securities, but will have higher interest rates because of their
greater financial risk. Yield curves for both corporations and
government securities change daily to reflect current
competitive conditions in the money and capital markets,
46. expected inflation, and changes in economic conditions.
Three basic theories describe the shape of the yield curve. The
first theory is called the liquidity premium theory and states
that long-term rates should be higher than short-term rates. This
premium of long-term rates over short-term rates exists because
short-term securities have greater liquidity and, therefore,
higher rates have to be offered to potential long-term bond
buyers to entice them to hold these less …
5
Operating and Financial Leverage
LEARNING OBJECTIVES
LO 5-1
Leverage represents the use of fixed cost items to magnify the
firm’s results.
LO 5-2
Break-even analysis allows the firm to determine the magnitude
of operations necessary to avoid loss.
LO 5-3
Operating leverage indicates the extent to which fixed assets
(plant and equipment) are utilized by the firm.
LO 5-4
Financial leverage shows how much debt the firm employs in its
capital structure.
LO 5-5
Combined leverage takes into account both the use of fixed
assets and debt.
LO 5-6
By increasing leverage, the firm increases its profit potential,
but also its risk of failure.
In the physical sciences as well as in politics, the
term leverage has been popularized to mean the use of special
force and effects to produce more than normal results from a
given course of action. In business the same concept is applied,
with the emphasis on the employment of fixed cost items in
anticipation of magnifying returns at high levels of operation.
47. You should recognize that leverage is a two-edged sword—
producing highly favorable results when things go well and
quite the opposite under negative conditions.
Just ask the airline industry. Firms such as American Airlines,
Delta, Southwest, and UAL were all flying high before the turn
of the century because of favorable economic conditions, high
capacity utilization, and relatively low interest rates on debt.
Such was not the case in the next decade when high leverage in
the form of high-cost fixed assets (airplanes) and high-cost debt
was causing severe consequences in a weak economy. A series
of bankruptcies followed as high fixed costs could not be
overcome. TWA filed for bankruptcy in 2001, United Airlines
and U.S. Airways in 2002, Northwest and Delta in 2005,
Frontier in 2008, and finally American Airlines in 2011.
Between 2000 and 2005, Delta saw its EPS go from $6.87 to a
negative $12.80. In 2007, American Airlines had a profit of
$504 million but lost close to $6 billion over the next four
years. As we noted, the company finally bit the bullet and
declared bankruptcy in 2011. In all cases (TWA was bought by
American), the airlines continued to operate; they restructured
under the supervision of the bankruptcy court and eventually
emerged as publicly traded companies again. By early 2015, the
airlines were flying high again. Their planes were full, profits
soared, and they were taking delivery of new fuel-efficient
planes. Oil prices collapsed from over $100 per barrel to under
$50 per barrel in less than three months, and because fuel makes
up over 30 percent of an airline’s cost, 2015 profits were
expected to be close to $6.0 billion. Reflecting this improved
environment, American Airlines’ stock price increased from
$14.63 on January 16, 2013, to $49.58 on January 12, 2015.
It is widely believed that massive consolidations (mergers)
between the weak and the strong within the airline industry are
necessary to create the profitability required for the purchase of
new planes. The risk of being highly leveraged both
operationally and financially remains a problem.
Page 126
48. Leverage in a Business
Assume you are approached with an opportunity to start your
own business. You are to manufacture and market industrial
parts, such as ball bearings, wheels, and casters. You face two
primary decisions.
First, you must determine the amount of fixed cost plant and
equipment you wish to use in the production process. By
installing modern, sophisticated equipment, you can virtually
eliminate labor in the production of inventory. At high volume,
you will do quite well, as most of your costs are fixed. At low
volume, however, you could face difficulty in making your
fixed payments for plant and equipment. If you decide to use
expensive labor rather than machinery, you will lessen your
opportunity for profit, but at the same time you will lower your
exposure to risk (you can lay off part of the workforce).
Second, you must determine how you will finance the business.
If you rely on debt financing and the business is successful, you
will generate substantial profits as an owner, paying only the
fixed interest costs of debt. Of course, if the business starts off
poorly, the contractual obligations related to debt could mean
bankruptcy. As an alternative, you might decide to sell equity
rather than borrow, a step that will lower your own profit
potential (you must share with others) but minimize your risk
exposure.
In both decisions, you are making explicit decisions about the
use of leverage. To the extent that you go with a heavy
commitment to fixed costs in the manufacturing process, you
are employing operating leverage. To the extent that you use
debt in financing the firm, you are engaging in financial
leverage. We shall carefully examine each type of leverage and
then show the combined effect of both.
Operating Leverage
Operating leverage reflects the extent to which fixed assets and
associated fixed costs are utilized in the business. As indicated
in , a firm’s operational costs may be classified as fixed,
variable, or semivariable.
49. Table 5-1 Classification of costs
Fixed
Variable
Semivariable
Lease
Raw material
Utilities
Depreciation
Factory labor
Repairs and maintenance
Executive salaries
Sales commissions
Property taxes
For purposes of analysis, variable and semivariable costs will
be combined. To evaluate the implications of heavy fixed asset
use, we employ the technique of break-even analysis.
Break-Even Analysis
Page 127
How much will changes in volume affect cost and profit? At
what point does the firm break even? What is the most efficient
level of fixed assets to employ in the firm? A break-even chart
is presented in to answer some of these questions. The number
of units produced and sold is shown along the horizontal axis,
and revenue and costs are shown along the vertical axis.
Figure 5-1 Break-even chart: Leveraged firm
Note, first of all, that our fixed costs are $60,000, regardless of
volume, and that our variable costs (at $0.80 per unit) are added
to fixed costs to determine total costs at any point. The total
revenue line is determined by multiplying price ($2) times
volume.
Of particular interest is the break-even (BE) point at 50,000
units, where the total costs and total revenue lines intersect. The
50. numbers are as follows:
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The break-even point for the company may also be determined
by use of a simple formula—in which we divide fixed costs by
the contribution margin on each unit sold, with the contribution
margin defined as price minus variable cost per unit. The
formula is as follows:
Since we are getting a $1.20 contribution toward covering fixed
costs from each unit sold, minimum sales of 50,000 units will
allow us to cover our fixed costs (50,000 units × $1.20 =
$60,000 fixed costs). Beyond this point, we move into a highly
profitable range in which each unit of sales brings a profit of
$1.20 to the company. As sales increase from 50,000 to 60,000
units, operating profits increase by $12,000 as indicated in ; as
sales increase from 60,000 to 80,000 units, profits increase by
another $24,000; and so on. As further indicated in , at low
volumes such as 40,000 or 20,000 units our losses are
substantial ($12,000 and $36,000 in the red).
Table 5-2 Volume-cost-profit analysis: Leveraged firm
It is assumed that the firm depicted in is operating with a high
degree of leverage. The situation is analogous to that of an
airline that must carry a certain number of people to break even,
but beyond that point is in a very profitable range. This has
certainly been the case with Southwest Airlines, which has its
home office in Dallas, Texas, but also flies to many other states.
The airline systematically offers lower fares than American,
Delta, and other airlines to ensure maximum capacity
utilization.
A More Conservative Approach
Page 129
Not all firms would choose to operate at the high degree of
operating leverage exhibited in . Fear of not reaching the
51. 50,000-unit break-even level might discourage some companies
from heavy utilization of fixed assets. More expensive variable
costs might be substituted for automated plant and equipment.
Assume fixed costs for a more conservative firm can be reduced
to $12,000—but variable costs will go from $0.80 to $1.60. If
the same price assumption of $2 per unit is employed, the
break-even level is 30,000 units, as shown here:
With fixed costs reduced from $60,000 to $12,000, the loss
potential is small. Furthermore, the break-even level of
operations is a comparatively low 30,000 units. Nevertheless,
the use of a virtually unleveraged approach has cut into the
potential profitability of the more conservative firm, as
indicated in .
Figure 5-2 Break-even chart: Conservative firm
Even at high levels of operation, the potential profit in is small.
As indicated in , at a 100,000-unit volume, operating income is
only $28,000—some $32,000 less than that for the “leveraged”
firm previously analyzed in .
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Table 5-3 Volume-cost-profit analysis: Conservative firm
The Risk Factor
Whether management follows the path of the leveraged firm or
of the more conservative firm depends on its perceptions of the
future. If the vice president of finance is apprehensive about
economic conditions, the conservative plan may be undertaken.
For a growing business in times of relative prosperity,
management might maintain a more aggressive, leveraged
position. The firm’s competitive position within its industry
will also be a factor. Does the firm desire to merely maintain
stability or to become a market leader? To a certain extent,
management should tailor the use of leverage to meet its own
risk-taking desires. Those who are risk averse (prefer less risk
to more risk) should anticipate a particularly high return before
52. contracting for heavy fixed costs. Others, less averse to risk,
may be willing to leverage under more normal conditions.
Simply taking risks is not a virtue—our prisons are full of risk
takers. The important idea, which is stressed throughout the
text, is to match an acceptable return with the desired level of
risk.
Cash Break-Even Analysis
Our discussion to this point has dealt with break-even analysis
in terms of accounting flows rather than cash flows. For
example, depreciation has been implicitly included in fixed
expenses, but it represents a noncash accounting entry rather
than an explicit expenditure of funds. To the extent that we
were doing break-even analysis on a strictly cash basis,
depreciation would be excluded from fixed expenses. In the
previous example of the leveraged firm in on , if we eliminate
$20,000 of “assumed” depreciation from fixed costs, the break-
even level is reduced from 50,000 units to 33,333 units.
Other adjustments could also be made for noncash items. For
example, sales may initially take the form of accounts
receivable rather than cash, and the same can be said for the
purchase of materials and accounts payable. An actual weekly
or monthly cash budget would be necessary to isolate these
items.
Page 131
While cash break-even analysis is helpful in analyzing the
short-term outlook of the firm, particularly when it may be in
trouble, break-even analysis is normally conducted on the basis
of accounting flows rather than strictly cash flows. Most of the
assumptions throughout this chapter are based on concepts
broader than pure cash flows.
Degree of Operating Leverage
Degree of operating leverage (DOL) may be defined as the
percentage change in operating income that occurs as a result of
a percentage change in units sold.
53. Highly leveraged firms, such as Ford Motor Company or Dow
Chemical, are likely to enjoy a substantial increase in income as
volume expands, while more conservative firms will participate
in an increase to a lesser extent. Degree of operating leverage
should be computed only over a profitable range of operations.
However, the closer DOL is computed to the company break-
even point, the higher the number will be due to a large
percentage increase in operating income.
Let us apply the formula to the leveraged and conservative
firms previously discussed. Their income or losses at various
levels of operation are summarized in .
Table 5-4 Operating income or loss
Units
Leveraged Firm ()
Conservative Firm ()
0
$(60,000)
$(12,000)
20,000
(36,000)
(4,000)
40,000
(12,000)
4,000
60,000
12,000
12,000
80,000
36,000
20,000
100,000
60,000
28,000
We will now consider what happens to operating income as
volume moves from 80,000 to 100,000 units for each firm. We
will compute the degree of operating leverage (DOL) using .
54. Leveraged Firm
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Conservative Firm
We see that the DOL is much greater for the leveraged firm,
indicating at 80,000 units a 1 percent increase in volume will
produce a 2.7 percent change in operating income, versus a 1.6
percent increase for the conservative firm.
The formula for degree of operating leverage may be
algebraically manipulated to read:
where
Q =
Quantity at which DOL is computed.
P =
Price per unit.
VC =
Variable costs per unit.
FC =
Fixed costs.
Using the newly stated formula for the first firm at Q = 80,000,
with P = $2, VC = $0.80, and FC = $60,000,
we once again derive an answer of 2.7. The same type of
calculation could also be performed for the conservative firm.
Page 133
Limitations of Analysis
Throughout our analysis of operating leverage, we have
assumed that a constant or linear function exists for revenues
and costs as volume changes. For example, we have used $2 as
the hypothetical sales price at all levels of operation. In the
“real world,” however, we may face price weakness as we
attempt to capture an increasing market for our product, or we
may face cost overruns as we move beyond an optimum-size
operation. Relationships are not so fixed as we have assumed.
55. Nevertheless, the basic patterns we have studied are reasonably
valid for most firms over an extended operating range (in our
example, that might be between 20,000 and 100,000 units). It is
only at the extreme levels that linear assumptions fully break
down, as indicated in .
Figure 5-3 Nonlinear break-even analysis
Financial Leverage
Having discussed the effect of fixed costs on the operations of
the firm (operating leverage), we now turn to the second form
of leverage. Financial leverage reflects the amount of debt used
in the capital structure of the firm. Because debt carries a fixed
obligation of interest payments, we have the opportunity to
greatly magnify our results at various levels of operations. You
may have heard of the real estate developer who borrows 100
percent of the costs of his project and will enjoy an infinite
return on his zero investment if all goes well. If it doesn’t, then
he is in serious trouble or bankruptcy.
Page 134
It is helpful to think of operating leverage as primarily affecting
the left-hand side of the balance sheet and financial leverage as
affecting the right-hand side.
Whereas operating leverage influences the mix of plant and
equipment, financial leverage determines how the operation is
to be financed. It is possible for two firms to have equal
operating capabilities and yet show widely different results
because of the use of financial leverage.
Impact on Earnings
In studying the impact of financial leverage, we shall examine
two financial plans for a firm, each employing a significantly
different amount of debt in the capital structure. Financing
totaling $200,000 is required to carry the assets of the firm.
Here are the facts:
Under leveraged Plan A we will borrow $150,000 and sell 8,000
56. shares of stock at $6.25 to raise an additional $50,000,
whereas conservative Plan B calls for borrowing only $50,000
and acquiring an additional $150,000 in stock with 24,000
shares.
In , we compute earnings per share for the two plans at various
levels of “earnings before interest and taxes” (EBIT). These
earnings (EBIT) represent the operating income of the firm—
before deductions have been made for financial charges or
taxes. We assume EBIT levels of 0, $12,000, $16,000, $36,000,
and $60,000.
The impact of the two financing plans is dramatic. Although
both plans assume the same operating income, or EBIT, for
comparative purposes at each level (say $36,000 in calculation
4), the reported income per share is vastly different ($1.50
versus $0.67). It is also evident that the conservative Plan A
will produce better results at low income levels—but
the leveraged Plan B will generate much better earnings per
share as operating income, or EBIT, goes up. The firm would be
indifferent between the two plans at an EBIT level of $16,000
as shown in .
In on , we graphically demonstrate the effect of the two
financing plans on earnings per share and the indifference point
at an EBIT of $16 (thousand).
With an EBIT of $16,000, we are earning 8 percent on total
assets of $200,000—precisely the percentage cost of borrowed
funds to the firm. The use or nonuse of debt does not influence
the answer. Beyond $16,000, Plan A, employing heavy financial
leverage, really goes to work, allowing the firm to expand
earnings per share as a result of a change in EBIT. For example,
at the EBIT level of $36,000, an 18 percent return on assets of
$200,000 takes place—and financial leverage is clearly working
to our benefit as earnings greatly expand.
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Table 5-5 Impact of financing plan on earnings per share
Page 136
57. Figure 5-4 Financing plans and earnings per share
Degree of Financial Leverage
As was true of operating leverage, degree of financial leverage
measures the effect of a change in one variable on another
variable. Degree of financial leverage (DFL) may be defined as
the percentage change in earnings (EPS) that occurs as a result
of a percentage change in earnings before interest and taxes
(EBIT).
For computation, the formula for DFL may be conveniently
restated:
Let’s compute the degrees of financial leverage for Plan A and
Plan B, previously presented in , at an EBIT level of $36,000.
Plan A calls for $12,000 of interest at all levels of financing,
and Plan B requires $4,000.
Page 137
Plan A (Leveraged)
Plan B (Conservative)
As expected, Plan A has a much higher degree of financial
leverage. At an EBIT level of $36,000, a 1 percent increase in
earnings will produce a 1.5 percent increase in earnings per
share under Plan A, but only a 1.1 percent increase under Plan
B. DFL may be computed for any level of operation, and it will
change from point to point, but Plan A will always exceed Plan
B.
Limitations to Use of Financial Leverage
Alert students may quickly observe that if debt is such a good
thing, why sell any stock? (Perhaps one share to yourself.) With
exclusive debt financing at an EBIT level of $36,000, we would
have a degree of financial leverage factor (DFL) of 1.8.
(With no stock, we would borrow the full $200,000.)
58. (8% × $200,000 = $16,000 interest)
As stressed throughout the text, debt financing and financial
leverage offer unique advantages, but only up to a point—
beyond that point, debt financing may be detrimental to the
firm. For example, as we expand the use of debt in our capital
structure, lenders will perceive a greater financial risk for the
firm. For that reason, they may raise the average interest rate to
be paid and they may demand that certain restrictions be placed
on the corporation. Furthermore, concerned common
stockholders may drive down the price of the stock—forcing us
away from the objective of maximizing the firm’s overall
value in the market. The impact of financial leverage must be
carefully weighed by firms with high debt such as UAL (United
Airlines).
This is not to say that financial leverage does not work to the
benefit of the firm—it does if properly used. Further discussion
of appropriate debt-equity mixes is covered in , “Cost of
Capital.” For now, we accept the virtues of financial leverage,
knowing that all good things must be used in moderation. For
firms that are in industries that offer some degree of stability,
are in a positive stage of growth, and are operating in favorable
economic conditions, the use of debt is recommended.
Combining Operating and Financial Leverage
Page 138
If both operating and financial leverage allow us to magnify our
returns, then we will get maximum leverage through their
combined use in the form of combined leverage. We have said
that operating leverage affects primarily the asset structure of
the firm, while financial leverage affects the debt-equity mix.
From an income statement viewpoint, operating leverage
determines return from operations, while financial leverage
determines how the “fruits of our labor” will be allocated to
debt holders and, more importantly, to stockholders in the form
of earnings per share. shows the combined influence of
operating and financial leverage on the income statement. The
values in are drawn from earlier material in the chapter ( and ).
59. We assumed in both cases a high degree of operating and
financial leverage (i.e., the leveraged firm). The sales volume is
80,000 units.
Table 5-6 Income statement
Page 139
You will observe, first, that operating leverage influences the
top half of the income statement—determining operating
income. The last item under operating leverage, operating
income, then becomes the initial item for determining financial
leverage. “Operating income” and “Earnings before interest and
taxes” are one and the same, representing the return to the
corporation after production, marketing, and so forth—but
before interest and taxes are paid. In the second half of the
income statement, we show the extent to which earnings before
interest and taxes are translated into earnings per share. A
graphical representation of these points is presented in .
Figure 5-5 Combining operating and financial leverage
Degree of Combined Leverage
Degree of combined leverage (DCL) uses the entire income
statement and shows the impact of a change in sales or volume
on bottom-line earnings per share. Degree of operating leverage
and degree of financial leverage are, in effect, being
combined. shows what happens to profitability as the firm’s
sales go from $160,000 (80,000 units) to $200,000 (100,000
units).
Table 5-7 Operating and financial leverage
80,000 units
100,000 units
Sales—$2 per unit
$160,000
$200,000
− Fixed costs
60,000
60. 60,000
− Variable costs ($0.80 per unit)
Operating income = EBIT
$ 36,000
$ 60,000
− Interest
Earnings before taxes
$ 24,000
$ 48,000
− Taxes
Earnings after taxes
$ 12,000
$ 24,000
Shares
8,000
8,000
Earnings per share
$ 1.50
$ 3.00
The formula for degree of combined leverage is stated as:
Using data from :
we find that every percentage point change in sales will be
reflected in a 4 percent change in earnings per share at this
level of operation (quite an impact).
An algebraic statement of the formula is:
From : Beginning Q (Quantity) = 80,000; P (Price per unit) =
$2.00; VC (Variable costs per unit) = $0.80; FC (Fixed costs) =
61. $60,000; and I (Interest) = $12,000.
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The answer is once again shown to be 4.
A Word of Caution
In a sense, we are piling risk on risk as the two different forms
of leverage are combined. Perhaps a firm carrying heavy
operating leverage may wish to moderate its position
financially, and vice versa. One thing is certain—the decision
will have a major impact on the operations of the firm.
Finance in ACTION Managerial Intel Corporation—Leverage in
the Real World
To calculate the degree of operating and degree of financial
leverage, the analyst needs sales or revenues, operating income
(EBIT), net income (NI), and earnings per share (EPS). This
information is available to external analysts from the income
statement and statement of cash flows. The calculations are
based on year-end data and are not stable from year to year. If
operating costs rise or fall during the next year, the profit
margin will rise or fall with that change, and the degree of
operating leverage will be affected.
The degree of financial leverage is also based on year-end data
and assumes that variables such as interest expense and interest
rates, the amount of debt, and the number of shares stay
constant from year to year. However, in the real world, when
these variables change from year to year, so do the leverage
ratios. Let’s look at an example using real data from Intel
Corporation, the company with 85 percent of the computer chip
market.
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Between 2012 and 2013, Intel’s sales decreased 1.19 percent
and operating income went down 15.75 percent for a degree of
operating leverage 13.27 times. Notice that because both the
change in sales and operating income were negative, the
leverage number is positive. This simply means that for every 1
62. percent sales declined, operating income went down 15.75
percent. Intel’s debt to equity ratio was low, so you wouldn’t
expect a high degree of financial leverage, and this is borne out
by a degree of financial leverage of 0.72 times. This indicates
that for every 1 percent that operating income declined,
earnings per share declined 0.72 percent. You can check this
calculation by dividing the change in EPS of −11.27 percent by
the change in EBIT of −15.75 percent. Combined leverage
compares the percentage change in sales to the percentage
change in EPS; so in the case of Intel for 2013, a −1.19 percent
change in sales resulted in a −11.27 percent change in EPS for a
combined leverage of 9.49 times.
If an analyst had predicted that these leverage factors could be
used to forecast performance for 2014, she would have been
sorely disappointed. Leverage on the downside (declines in
sales and earnings) was much higher than leverage on the upside
(increasing sales and earnings). Intel had a 6.06 percent
increase in sales that resulted in a 24.39 percent increase in
operating income for a DOL of 4.03 times. Notice that debt
declined from 2013 to 2014 and Intel bought back 332 million
shares of stock. The combined effect increased the DFL to 0.91
times. This can be computed by dividing the 22.22 percent
change in EPS to the percentage change in operating income of
24.39 percent. Given that 2014 had a lower DOL and DFL than
2013, the degree of combined leverage was also much smaller at
3.67 times. So for every 1 percent sales went up, earnings per
share increased by only 3.67 percent.
This example is intended to show the impact on leverage
calculations when a company does not exhibit consistency from
year to year. We should also reiterate that the farther away from
the breakeven point, the lower the leverage numbers will be: so
a lower base of sales like 2012 to 2013 will inflate the leverage
ratios because at lower sales a company is closer to its
breakeven point. The semiconductor industry is very cyclical,
so when a company like Intel moves up from a low point in the
cycle, the degree of leverage is likely to be high. In this case
63. the shares of common stock declined, had a positive impact on
earnings per share, and helped to increase the firm’s financial
leverage.
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SUMMARY
Leverage may be defined as the use of fixed cost items to
magnify returns at high levels of operation. Operating leverage
primarily affects fixed versus variable cost utilization in the
operation of the firm. An important concept—degree of
operating leverage (DOL)—measures the percentage change in
operating income as a result of a percentage change in volume.
The heavier the utilization of fixed cost assets, the higher DOL
is likely to be.
Financial leverage reflects the extent to which debt is used in
the capital structure of the firm. Substantial use of debt will
place a great burden on the firm at low levels of profitability,
but it will help to magnify earnings per share as volume or
operating income increases. We combine operating leverage and
financial leverage to assess the impact of all types of fixed
costs on the firm. There is a multiplier effect when we use the
two different types of leverage.
Because leverage is a two-edged sword, management must be
sure the level of risk assumed is in accord with its desires for
risk and its perceptions of the future. High operating leverage
may be balanced off against lower financial leverage if this is
deemed desirable, and vice versa.
REVIEW OF FORMULAS
1.
BE
is break-even point
Table1TABLE 1 SALES FORECAST (in units) NO Changes
need to be made to this tableFirst QuarterSecond QuarterThird
QuarterFourth QuarterOctober
2014150January0April500July1,000November75February0May1
,000August500December25March300June1,000September250St