Non Financial Performance

The non- financial performance items in the proxy statements include the customer, operations and humans resources aspects. The issue of customers plays a crucial role while making decisions about investments including customer collaboration and customer satisfaction.  Collaboration with customers makes it possible to know and understand their needs beyond what is the normal expectation in the market. Measuring the extent to which customer satisfaction is improved can be measured using special surveys and online platforms. These tools are unique and easy in measuring the level of customer satisfaction. CEOs must also consider the concerns raised by customers because dealing with even the seemingly insignificant complaints will improve the brand.

 The improvement of global online process will go a long way in ensuring that orders are effectively fulfilled and this will streamline the entire shipping process around the globe.  An improved performance in ordering process will help in increase the maker share, since customers will be able to place their orders easily. Moreover, streamlined processes have the capability to enhance customers’ online experience.  Every CEO should understand the need for a streamlined online processing of orders if they are keen to expand market share around the globe. The CEO should strategize on how to fulfill customer needs through the online platform as a basis attracting more customers.

Improved productivity will be achieved if employees’ capabilities are enhanced, and if such capabilities are aligned with the goals of the company. The enhancement can be done through high quality training that will not only attract skilled employees but will ensure they are retained in the firm. Employee retention is possible with highly motivated employees. CEOs performance will be evaluated on the basis of employee satisfaction.

Ethics in Accounting

 Linbarger Company is facing a cash flow problem arising from offering too much credit to customers and whose payment is late.  Giving too much credit may get the company in problems relating to failure to maintain the agreed level of cash balance (Porter & Norton, 2014). This means that too much credit to customers or the failure of customers to pay their debts on time makes the firm not to maintain the agreed $200,000 or more. The late payment by customers is indicated when the firm has to reach out to Oconto Distributors, one of the customers who agreed to send a $150,000 check. Late payment is a problem to a business because it strains the cash flow. In addition, there is a likelihood of the debt going bad of customers default payment.

Integrity is an ethical issue that arises from this case, and this involves choosing to be straight forward with the stakeholders such as the insurance company which is a creditor to Linbarger Company.  As the accountant one has to choose between providing cash receipts book with the updated actual balance of $ 80,000 or considering delaying providing the book after the $150,000 cheque has matured. Failure to submit the actual cash balance when it is duly required is tantamount to obscuring information that is required to be included in the accounting book. In case the promised cheque bounces, so that the $ 150,000 cash is not received, the information provided by the accountant will contrast to the reality. Integrity is an essential and basic element in accounting profession and accountants are required to be honest and forthright when presenting financial information to stakeholders (Porter & Norton, 2014).  This is because investors need to be confident that the financial information maintained is straightforward, honest and observing the required standards. Maintaining the cash book open as requested by Lisa so as to overstate the available cash balance equals to being fraudulent and hence , an unethical action. Such a behavior should not be discouraged by the Vice president and her instructions should not be followed.

Failure to follow Lisa’s instruction to keep the cash receipt book open may results to lender’s taking legal actions on the firm. This would involve the lender exercise of the related contractual remedies that are stipulated in the agreement. The lender may also pursue a resolution through a court order leading to closure of the firm on the basis of such loan defaults.  Other actions that the lender may take involve declining offering more loans in future and charging a default interest rate on the firm. The loan agreement is a contract, and its default may make the lender to accelerate the repayment obligations of the firm. The default on the set conditions on the loan agreement destroys the business relationship between the company and the lender, so that the future loan facilities cannot be provided (O'Regan, 2015). The legal actions that the lender may take upon the failure to honor the conditions may dent the image of the business in terms of credit worthiness.

The accountant is the one likely to suffer more of the negative effects in case he complies with the instructions issued by Lisa Infante. If the accountant complies by falsifying on June 30 balance of the cash book, he will be sacrificing his integrity as a professional. This means that he can be prosecuted for preparing and presenting a report that is fraudulent to the uses. The insurance company may choose to review the terms of the agreement with the firm, which may save the Linbarger Company from dissolution. However, the accountant may never have an opportunity to salvage his professional image since he is already labeled as lack independence. Independence requires that accountants should not compromise on their integrity or their professional judgment due to influence from other people. Failure to maintain ones independence may results to failure to provide true honest financial information to the users and this dent the trust the clients have with the accountant (O'Regan, 2015).

Following the request made by the Vice president would mean that mistakes could be made in misrepresenting the cash balance, and this is unethical. The best alternative is to advice Lisa about the need to maintain integrity while stating the actual balance in the books. Holding the cash receipt book open would lead to severe consequences to the organization and this may destroy its credit worthiness. The alternative would involve sensitizing the vice-president on the need to prepare a report that is timely and accurate so that to safeguard the relationship between the two firms and avoiding any loss of trust. The vice-president can then have a discussion with the insurance company about the situation, and explain the cash balance problem is temporary and would be corrected ones the cash is collected from debtors. Honest is an important policy that ensures that users of financial information have confidence with what is prepared (O'Regan, 2015).

 Reference

O'Regan, P. (2015). Financial Information Analysis: The Role of Accounting Information in Modern Society. Routledge. 466-469

Porter, G. A., & Norton, C. L. (2014). Financial accounting: The impact on decision makers. 57

Making choices guide

Financial resources involve the ability of an individual to cater for their social, economic and health needs and determine their access to various amenities. A person financial resource is also related to their ability to access health insurance policies which would assist them in obtaining the required health care (National Research Council, 2010). The affluent people are able to choose living in environments that are health and where accessibility to quality health care is ensured especially in private health care facilities with personalized services.  In such areas, the financial stable families, individuals and even the aging people can easily access the services of health care professionals and facilities, hence their choice of this residence. In addition, the individuals, couples or families with sufficient financial resources are empowered economically to choose residential places that are clean with efficient waste disposal programs, effective sewerage systems and with minimal pollutions. This means that such individuals will rare by exposed to contagious diseases and are able to observe their nutrition (National Research Council, 2010). Since their can easily pay for insurance policies, their medical costs are majorly catered for so that they are able to obtain the best health care services. However, those people with little financial resources are limited on the choice of their living environments. The poor can only afford to live in poor neighborhoods whose environment is generally unhygienic comparative to the affluent suburbs.  Such an environment mostly has poor conditions in terms of cleanliness, social amenities and especially good health care facilities. Few people can afford insurance policies which further make the situation worse.  The people have few choices on their living environment since they are forced to live in low priced houses that they can afford (Ball, 2004).

Traditions, cultural beliefs and religion influences determine people’s social lives and social relations.  Family, friends and the community and the experiences acquired by a person why associating with them affects how their choices for residential locations. People would like to live in environments where social and religious values are upheld and where they feel that their living standards are improved by their association with others (National Research Council, 2010). Culture plays an important role in every aspect of human behavior, preferences and even cognition.  Culture is therefore, an inescapable aspect of all human phenomena, including their choices for the environment in which they want to live. Lifestyles and different activities in human life are determined by the culture in which people life and associate with. Traditions involve activities or rituals that are generally held by people of the same community and which brings them together. People will choose to live in areas where their culture is appreciated and where they can freely carry perform their rituals.  Environments that threaten to dismantle people’s way of life are frowned upon and thus people will prefer living in places where no threat to their traditions and culture is. Religion is also an important aspect of human life and it’s central to the way they relate to others (National Research Council, 2010). A religion establishes values and principles under which people should live and guides the association with others in the society. An environment where people are allowed to hold their religious beliefs and exercise their religious practices will be preferable. In addition, people will rarely live in areas where their religious freedom is threatened and opt for an environment that encourages their religion to thrive.

These variables are important to for both individuals and couples since they need the support of others in their health care. This is especially true for the elderly people who need supports of their families while they are undergoing tough periods due to poor health. In addition, couples need to be in environment that encourages social support and eve offer support to their children when assistance is needed. Those people with substantial financial resources should consider the environments that will allow them to access the best health care services they can afford, or where insurances policies can largely cover their medical costs (Ball, 2004). Moreover, the couples should consider the environment in which their families can easily access the best health care facilities and where care givers are willing to access. People with few financial resources are more likely to depend on public health care services or other community based programs that cater for their needs.  Government insurance programs such as Medicaid are very important to members from low income families and an environment where costs for nursing and health care facilities are catered for the public should be of interest to low them. In addition, a healthy environment is important in promoting good health and hygiene, and this means that individuals and families have to consider the living conditions in their choice (Ball, 2004).  Moreover, families should consider the variables when making decisions that involves another individual. When taking care of sick family members it is important to get the services such as from legal advisor who will offer recommendation in medial issues encountered by their loved ones (Meiner, 2014). For instances, Medicaid may provide exemptions for such people.

 Health care providers should consider the financial resources and insurance resources available to a patient when making decisions that will affect them. To some individuals or spouses seeking health care services, enough financial resources may be available to them, so that payment of related costs is not a problem. Moreover, in case of Medicaid programs, individual assets for every spouse may extend past the set cost limits based in Spousal Impoverished Law (Ball et al. 2004).  Such law makes sure that housing and supportive services are available for the elderly adults. It is important for caregivers to deal with the required formalities, while resources and income that can ensure a spouse is cared for at home should also be considered.  In addition, cultural, traditional and religious aspects involving the patients should be of great importance to the caregiver.  The aforesaid rituals and customs can be cultural or religious and in most cases, they are personally defined. They provide ways for people to connect with others and with any framework that may offer meaning to their lives (Ball, 2004).  Studies have shown that some practices like social religiosity, prayer and meditation positively affect some specific mental and health indicators (Meiner, 2014). This means that they can directly promote the wellbeing of a person and their quality of life by influencing the perceptions, hope, stress and relaxation.  It is, therefore, crucial for health care givers to pay attention to the importance of these rituals to families and patient .This is also calls for respect if such practices and offering any support required whenever possible.

References

Meiner, S. E. (2014). Gerontologic Nursing - E-Book. 132-135

National Research Council. (2010). The role of human factors in home health care: Workshop summary. National Academies Press. 247-275

Ball, M. M., Perkins, M. M., Whittington, F. J., Connell, B. R., Hollingsworth, C., King, S. V., ... & Combs, B. L. (2004). Managing decline in assisted living: The key to aging in place. The Journals of Gerontology Series B: Psychological Sciences and Social Sciences, 59(4), S202-S212.

Global Financial Crisis – 2008

Introduction

Since the 20th century, Great Depression the Global Financial Crisis of 2008 (GFC) is classified as the most destructive financial problem to have faced nations (Fackler, 2008 1). The financial crisis was headed by an economic flourishing of some degree and utmost investment rates globally. In fact, prior to the occurrence, most economists had raised their worries in regard to the rate of credit flow in America along with high rate of investment which is not healthy for any economy regardless of its size. The crisis commenced in the united states prior to spreading rather rapidly to the rest of the world not sparing even some of the well-developed economies. This led to huge economic losses thus affecting the well-being of some of the largest banks across the globe (Fukuo and Yuan, 2009 1). Japan which holds one of the largest economy and maet and industry both for supply and receiving goods was affected the most. In the attempt to reverse and stop the crisis which was rapidly affecting the economy, in general, most governments including that of Japan developed a range of strategies with the aim of securing their banks and all other financial organizations being the heart of the economies and ensure that they never collapsed (Fackler, 2008 1). This attempt and the fact that the issue had long developed led to the lengthy recession which ended in 2008. This report will seek to analyze the effects of the GFC on Japan’s economy and society along with the effectiveness and challenges faced by the policies developed to revert the issue and stabilize the country.

Despite the fact that Japan unlike Europe and the united states was not affected heavily from the housing downfall and toxic properties, its economy was affected even more by the crisis compared to both continents (Fukuo and Yuan, 2009 1). Japan’s shrinkage is mainly based on the steep downfall of its external products demands. with the economic and demand decrease in the united states and Europe, these created an intense impact on Japan because its export net was drastically decreased in addition to its exports in the Asian states where good were previously been assembled prior to the ultimate export to the united states. The general GDP decrease in Japan within the fourth quarter of the financial year 2008 was close to double digits in regard to that of the United States which revolved around 12.1 percent versus 6.2 percent of US (Fukuo and Yuan, 2009 1). Most economies, in general, were mainly affected by the fact that their domestic demand had decreased drastically but for Japan, it was affected harder given that its economy is dependent on the exports which were no longer being demanded.

Prior to the financial crisis there was an already stable economic set up where most of the advanced nations amongst them Japan where involved in the export of major components to most of the developing states such as China which would in turn play part in the assembling and exporting of the final products to Europe and the united states in exchange of finances and economic treasures from the market (Fukuo and Yuan, 2009 1). However, with the sudden reduction in regard to exporting products to the United States affected the stability of these markets. America’s imports decreased by more than 19.6 percent by the fourth quarter of 2008 and as the exports to the developing states decreased imports lowered thus Japan, South Korea among other states suffered heavily based on the loss of exports (Fukuo and Yuan, 2009 1).

The largest share of Japan’s exports is made of capital and resilient consumer products such as machines and vehicles. In this context, it is probable that the manufacturers suffered from decreased products demand from the global setting (Savona, Kirton & Oldani, 2016 33). Consequently, most households resulted in holding their purchases based on the limitation of liquidity and decreased expectations. In other words, the demand mainly reduced since consumer’s demands mainly shifted from products that are characterized by high prices to inexpensive goods a trend that particularly benefited certain companies such as Walmart. Given that Japan is particularly involved in the production of high-end goods this crisis created a disruption and a major shift in reference to demand which hurt the economy severely. With the heightening of the crisis Yen which is Japan’s currency appreciated rather drastically. Previously in 2007, it stood at 106 but by September 2008 the appreciation n was about 136 (Fukuo and Yuan, 2009 1). The appreciation appeared to be positive in regard to import since the earning was higher but the net of exports decreased drastically. With such an impact such an operation resulted in a major lag thus contributed to the country’s economic drop. Japan economy dropped into the recession during the second last quarter of 2008 based on the fact that businesses began to limit their spending while the general exports were characterized by a negative contribution to this growth. Prior to the recession, Japan was the seconding economy after the United States globally but slipped into the decline and was mainly affected by weak export development and decreased corporates spending. Within the first two months of the crisis, the GDP of the country had decreased by close to 0.5 percent. Japan was mainly affected by the swings in general because the economy was mainly dependent on its large sales to the international markets which had decreased greatly (Fackler, 2008 1). With the international and local consumption has decreased in the society the comprehensive growth of the state remained low.

In addition to the decreased demands for its products in the international markets, this was heightened further by increased prices in regard to imported commodities. With less spending by the companies, the economy was devastated and the spending power of the society, in general, was minimal. It is worth noting that the economy was not only affected in terms of corporate spending and exports decrease but also the rate of employment rose to close to 50 percent (Savona, Kirton & Oldani, 2016 33). Financial flow and consumption were close to being flat an aspect that pressured most companies to reduce the employees thus adding up to the already existing unemployment thus creating a worse situation. This resulted in less income generation and revenue for the government as the number of those that were to be taxed remained minimal. In addition, the government had to low its spending and budgets that had been set aside for development as revenue sources had severely been harmed (Savona, Kirton & Oldani, 2016 33).

With respect to the financial crisis that resulted in high financial reduction led to major effects on the society. In that with more and more individuals being subjected to poverty based on the high reliance rate on those that were already earning (Forrest, 2011 199). As most of the companies were suffering due to bankruptcy banks were no longer willing to continue lending more money to the firms based to the concerns that they would fail and end their operations and would thus not be able to repay the debts. Unlike other nations that were forced to suffer from the economic crisis based on the limited purchasing power, it became evident that Japan would not be able to sustain its economy without acquiring funds from its exports sales which it does in large quantity. This is evident based on the fact that the economy decreased its growth by 3.5 percent in the financial year 2008 amid April and March 2008 up to 2009. Japan’s trade deficit increased from 223 billion Yen in three months up to 952.6 billion Yens in the beginning of 2009 (Savona, Kirton & Oldani, 2016 34). It was in February the same year that IMF declared that the country had already fallen to a huge recession with a GDP decrease of close to 12.1 percent which remains to be the highest decrease since the late 20th century when the state was affected by the oil crisis. The economy began to rise rather gradually by the end of 2009 but more than 5 percent decrease had already been experienced with the rate of unemployment raising further by 5.7 percent (Savona, Kirton & Oldani, 2016 34). For one of the largest economy, this decrease was not a favorable one particularly for the locals and the society in general. The rate of unemployment affected the ability for individuals to pursue high education, access to quality healthcare and even food. The general statements in the country were not even favorable since the country which was focused on upgrading individuals living state would no longer support such projects. The earning of the economy was not adequate to support the growing populace with increased needs leading to increased debts which meant that the country would take even longer to recover from this state (Fackler, 2008 1).

It is not surprising that Japan remains to be among the top most influential and dominant economies across the globe. Japan’s economic anguishes extend far before the occurrence of the 2008 financial crisis. In that, the country was already experiencing fiscal policy had already been implemented in the 90s leading to the evolution of the lengthiest Keynesian global experiment (Shaw & Liu, 2011 8). With the recession further worsening the situation the debt owed by the country increased to about 240 percent of its whole GDP prior to 2014. This resulted in the current economic recovery that is being envied across the globe not based on its abilities but based on the policies that it set in place to ensure that the situation will never rise again in the future. Japan got into 2015 with a negative GDP as its efforts to increase the wage rate had failed based on the instability of most companies thus pressuring them to raise the prices associated with essential commodities, high taxation and the need to balance its demographic populace (Shaw & Liu, 2011 8).

The government began by asserting on major banks to continue lending money to some of the existing firms regardless of their bankruptcy state as a way of boosting the economy. Some of the leading central financial institutions have focused on Zero Interest Rate Policy which is widely regarded as ZIRP and this has led to the creation of more credit (Shaw & Liu, 2011 8). In response to the crisis, the government concentrated on lowering the interest rate up to Zero to increase the borrowing. This did not only permit more companies to acquire funds but also facilitated the objective of increasing their spending as the means of sustaining the economy. With this, the government was also forced to focus more on spending in the attempt to increase demand from within and abroad. This move proved successful because most countries were already recovering by the end of 2009 which means that they were fully able to afford commodities even though it was happening in the low and gradual rate (Shaw & Liu, 2011 8). Despite the consistent efforts by the government to increase financial flow through spending and low interest for the borrowed funds, reluctance in regard to increasing money supply in the market was still high based on the fact that even when the country was stable the fear of such a crisis was still dominant which forced most individuals to withhold their funds. In that, it was only in 2005 from the 90s that the country had been able to attain positive inflation anticipation via quantitive facilitation which supported the achievement of a desirable growth but did not last as the financial crisis would arrive three years later. As the government attempted to reduce commodities prices to encourage buying people opted for buying delays but with prices increase they had no option but to play a part. The zero charges policy was the most effective in encouraging buyers to make more purchases not understanding that they were assisting the economy to rise (Shaw & Liu, 2011 18).

However, it remains evident that the efforts by the government and the leading financial institutions to stimulate the economy have been successful but the economy has not been able to attain the level that it was in the 80s prior to the occurrence of the seconding World War (Yang & Heng, 2012 64). In that, the country lost is the second position to other major economies such as China. Some of the most dominant effects of the crisis remain to be the extensive period of immobile growth as the country has been able to recover from the recession but has not reached the level that it was prior. This is based on the limited abilities to stretch its operations to different sectors based on fear of such an effect. In addition, the rate of unemployment has continued to increase rather gradually which was very low in the previous periods with figures suggesting that in the 80s the unemployment level was about 5 percent while it rose up to 50 percent due to the severe recession (Yang & Heng, 2012 64). It has been noted that the figures might have decreased in general but there is still a substantial number that has not been accounted for. Also, another dominant issue is the general rise in regard to inequality. In that, as resources become scarce the distribution was affected by corruption thus subjecting most of the families to great losses and poverty. In addition, this created inequality in housing with more than 15 percent increase in homelessness which is a major issue even today in the country. With this most individuals are unable to access affordable houses or even quality services that they need an issue that intensified during the stressful period (Yang & Heng, 2012 64). Also, the country’s debt remains high even though most of it has given covered in the recent two or three years.

The policies implemented to encourage the general spending through minimizing the interest rates and ensuring that companies are given funds even though they are collapsing have acquired substantial success (Savona, Kirton & Oldani, 2016 36). In that the rate of inflation in the country in the last three years has decreased by close to 20 percent and the country is currently experiencing a positive growth and the rise of its GDP even though still struggling to recover from its debts. In addition, the unemployment rate has decreased by 15 percent from 50 percent in 2009 up to close to 35 percent which demonstrates that the economy is growing desirably (Savona, Kirton & Oldani, 2016 35). However, the fact that the policies have not been able to meet the set expectations is based on certain issues and challenges. In that, the policies have been challenges by reluctance to spending based on the fear of another occurrence. In addition, the limitation of the economy because it is in the recovery state has been a challenge as well since the export has not been regained fully.

Conclusion

It is evident from the above analysis that the 2008 Global Financial Crisis remains to be the most destructive depression that has ever occurred. The crisis mainly began in the United States because of the high investment and increased economic growth but spread to the global rapidly based on the fact that most economies are connected. Japan is among the states that were severely affected by the crisis based on the fact the economy is dependent on export sales which decreased greatly in the period along with local demand. With this, the economy would not be able to fully support itself leading to increased unemployment, inflation, inequality and decreased spending. The country has recovered due to the implemented policies that encourage low-interest rates and high spending even though the success is a progressive one.

References

Fackler, M. (2008). In japan, Financial Crisis is just a Ripple. Retrieved from http://www.nytimes.com/2008/09/20/business/worldbusiness/20yen.html

FORREST, R. (2011). Housing markets and the global financial crisis. Cheltenham, Elgar.

Fukuo, K. and Yuan, T. (2009). Why is Japan so heavily affected by the global economic crisis? An analysis based on the Asian international input-output tables. Retrieved from http://voxeu.org/article/why-has-japan-been-so-hard-hit-global-crisis

SAVONA, P., KIRTON, J. J., & OLDANI, C. (2016). Global financial crisis: global impact and solutions. London, Routledge. http://www.tandfebooks.com/isbn/9781315584843.

SHAW, D., & LIU, B. J. (2011). The impact of the economic crisis on East Asia: policy responses from four economies. Cheltenham, U.K., Edward Elgar Pub. http://public.eblib.com/choice/publicfullrecord.aspx?p=730814.

YANG, M., & HENG, M. S. H. (2012). Global financial crisis and challenges for China. Hackensack, NJ, World Scientific Pub.

Bottom of Form

Bottom of Form

Financial Crisis of 2008

The financial crisis of 2008 was not only an American issue but also a global financial crisis. The 2008 financial crisis is significantly considered by many; mostly economists to have encompassed severe financial constraints similar to those of the Great Depression. Great Depression characterized more fiscal tightening by the government and low provision of liquidity value by the central bank to the public. However, it is true that in addition to the fiscal tightening in liquidity facilities, the later innovations and developments in regulation responses had significant roles to the financial crisis of 2008. The crisis is commonly associated with the collapse of the Lehman brothers and meltdown of subprime mortgage owing to the adverse effects it had in the market of financial-backed securities.

The Bankruptcy of the Lehman Brothers

The bankruptcy of the Lehman investment bank can be stated as the most prominent event to the expansiveness of the crisis worldwide. The Lehman’s was a primary investment bank and its collapse brought about significant impacts to the economy since it owned many debts in the sub-prime mortgage market at the time of its fall (BBC n.p). Lehman’s collapse was a major impact to the global economy because it influenced significant deterioration in the market capitalization of equity markets globally.

The fall of the Lehman’s was associated with varied factors. For instance, the U.S government lacked the authority to add in the investment bank into its conservatorship like the Treasury had previously incorporated the Fannie and Freddie Mac to facilitate their functioning (BBC n.p). Moreover, it is true that the bailout of Bear Steams signaled the expansion of the government safety network from the banking system to investment institutions not only in U.S but also internationally. For that reason, the Treasury and also the Federal Reserve had much concerns on the need to increase morality of hazard incentives on excessive risk taking in a saturated market of financial borrowing. However, the Lehman’s was reluctant to disclose its leveraging systems thus the Treasury and Federal Reserve allowed its failure to serve as an example when addressing the need to regulate risk taking to other financial institutions.

Subprime Mortgage Crisis

The disturbance of the credit markets in the crisis of 2008 started in 2007 when BNP Paribas bank suspended clients from redeeming shares which were in its money market funds due a reduction of the collateral value (BBC n.p). Prior to the downturn, in 2005, the U.S registered a boom in the housing prices and as the housing prices through 2007 into 2008, so did the mortgage-backed financial securities. The variety securities especially of residential subprime mortgage started experiencing huge losses. The period characterized systemic decline of financial institutions where it had higher impact on shadow banking than on the classic bank. This was facilitated by the fact that the shadow banking system uses short-term borrowing, like, repurchase agreements as its short-term liabilities and long-term assets, like in this case, mortgage-backed products as collateral. Subsequently, the value of collaterals (mortgage-backed products) declined whereas uncertainties regarding chances for retrieval of their value increased.

What followed was that the shadow banking was forced to sell off the collaterals to support less loaning at a deleveraging value. Further, the value of the mortgage-backed securities continued to lower with high levels of uncertainties to stability while increasing the collateral requirements for further borrowing and so, the financial institutions responded by deleveraging and selling off more mortgage debts.

THE AGE OF RISK

The history of the crisis begins by the decline of securitized financial products, particularly, subprime mortgage market and consequently, expanding to the entire banking system worldwide. The development of the crisis from the mortgage market to the banking sector is actually noted by the bankruptcy of the Lehman Brothers. The crisis underlines the role of risk management in the baking system, through which, imperative concepts on the primary causes to the spread of this crisis are deduced.  Notably, the specific reason that facilitated its pervasiveness globally is associated with the huge risk taking on common financial-backed securities by banks including Lehman’s investment bank.

It is arguable that the macroeconomic factors of the global markets and U.S monetary policy influenced a series of adverse effects on the financial system. The two intermediaries created an environment where financial organizations enjoyed increased profitability and development and in due cause facilitating systemic risks in the banking market. The privileges elevated perceptions on risk management along the financial and banking sector, confidence, and allowed financial innovation. Advancements in information technology were inaugurated to characterize financial innovation where it was used to perform all marketable securities. The innovation enhanced practices within the Subprime mortgage markets while facilitating the linking of banking to markets. In return, the innovations on security management increased risks in the financial landscape and finally the threats imposed higher unpredictable evasions, which were relative to the failures in investments thus developing an enormous financial crisis.

The most significant underlying concept of the crisis defines the enormous failure of social risk management, triggered by a long-period of profitable growth within the banking sector thus creating an unreasoned sense of financial security. The idea that banks were able to endure the busting of technological innovations further validated the false belief that they had the potential to regulate threats while maintaining continued profitability. Subsequent to the belief, policies were enacted by politicians allowing further ownership of universal homes and so, encouraging banks to allow excessive borrowing by leveraged consumers. This was the cause to reduced capital in the banking system since the banks were giving out extended loans to huge groups of leveraged consumers, underestimating the real long-term risks whereas motivating investors to apply for idealistically low risk premium.

Back from the Brink

The beginning of this crisis was the investor’s withdrawals and escalation of risk premiums and collateral requirements counter to secure loaning. These developments were indicators of expanded liquidity crisis which triggered the initial regulatory and also, government initiatives to stabilize impacts of the crisis. The movements employed expanded bailouts of liquidity facilities for different institutions and other unsecured investor agencies. The bailouts of the institutions influenced declines in various markets including the stock market. Importantly, the rescue response reduced credit amounts whereas expanding borrowing requirements since financial institutions, particularly; the banks sliced back their short-term and also long-term credit facilities to both individual customers and investment groups. As a result, there were slow and less developments in the real sector, facilitated by reduced consumer loaning and low investment credits; linked to the downturn in revisions of the credit value of subprime mortgages and other debt-backed collaterals.

LEARNING CONCEPTS ABOUT THE CRISIS

Responding to the risk events that influenced systemic decline in the banking system and investment market, it is arguable that there were less complex alternative regulatory initiatives that may have minimized the impact of the crisis on the financial system. For instance, there was need to raise the capital requirements in both the financial and private banking systems during the prior years of increased profitability. Moreover, there was need to enact appropriate regulatory mechanisms, preferably, absolute prohibitions or price-based inducements, which would have enabled creating and inspecting mortgages only for creditworthy borrowers in regards to equity sufficiency.

Easily persuaded, the 2008 commercial crisis exemplifies the times of the Great Depression and lengthily, revealing newer growths within the financial system. The two crises, that is, the Great Depression and the 2008 crisis reveals that financial crises follows a recurrent pattern with two variables; high balance sheet leveraging of financial intermediaries and thriving capital price. However, the 2008 crisis notes inaugurates the preference of common causes including financial innovation that depends on continuous improvement of economic conditions for its returns, and unreasoned generosity and limited regulation of financial systems.

Bankruptcy and risk concerns between real banking system and the shadow system appear to be the primary causes of this crisis since the closeness of counterparty inclines to have influenced a series of risk defaults along the financial system. High leverage in the financial system facilitates occurrence of systemic risk and more influential when it engages a simultaneous trend of both consumers and financial institutions on the balance sheets. Limited regulation of depository agencies weakens regulatory measures in the shadow banking system especially in a highly complex controlling structure thus enhancing risk expansiveness. In addition, it is true that state and also federal regulators had significant roles to influencing the spreading of the crisis by implementing similar regulations through varied methods thus the uncertainty of the regulations to facilitating compliance. Also, compensation processes together with the factors of corporate culture within the financial sector may have fueled the impact of the crisis.

Work Cited

BBC, News (2009). Timeline: Credit crunch to downturn. BBC.

J&J financial analysis

The statement for J&J cash flow comprises of three major parts including cash flows used in or from operations, investments and financing activities.  For the period between 2013 and 2016, the net cash flow has not been consistent. The operating activities that have informed the cash flow over the last four years include addition to plant, property and equipment, disposal of business and assets, buying and selling of investments and other basic intangibles. The investing activities carried out by the firm over the last four years include capital expenditures on fixed and other assets , sales of various businesses and fixed assets , purchase and sale of investments.  Cash flow from various operating activities for the years between 2013 and 2016 increased consistently from $ 15.4 billion to $18.77(Morningstar, 2017). This indicates an increase in operating activities of the firm over the same period especially with cash generating activities. The cash flow related to financing activities for the 2013-2016 periods shows an inconsistent pattern and ranged between $20.56 billion 2012  and $ 6.08 B in 2013 with the other years falling in between. For the fiscal year ending in Dec. 2016 Free cash flow amounted to $ 15, 541(operations’ cash flow being $ 18,767 M and capital expenditure at $ 3,226 M (Johnson & Johnson, 2016). Free Cash Flow is among the major parameters  for measuring the earnings power – in terms of investors value – of a firm since it does not take into account DDA ( Depreciation , Depletion & Amortization) estimates. 

 The working capital for J& J has increased with time to $ 12,973 M in 2012 and there was a net increment in plant, property and equipment to $16,097M in the same year. Total assets for the firm increased to around $ 121, 347 M for the year 2012 (Morningstar, 2017). This shows increased financial operations for the company in the same year. For the year 2014, the financial operations in the company majorly consisted of current liabilities and non-current liabilities, business and assets related sales’ gain, inventories and account receivables. These amounted to $ 4.8 billion. In 2014, the financing operations included the usage of $12.3 billion for repurchase of stocks and shareholders, dividends. Also included was $ 0.8 billion as gains from debt, both long-term and short-term and $ 1.8 billion obtained from stock options and related tax benefits.   In the subsequent years, the firm financial operations have involved equity security issuer purchases where the firm was authorized to buy up to $ 5 billion of the common stock in 2014 (Johnson & Johnson, 2016).  The firm was able to purchase an aggregate of about 26.18 shares in open market transactions. In this case, 16,600,872 shares were bought in the same year.  In the same year, the sales of the products of the firm increased in the same year.  In 2016, the financial operations involved payment of & 8.6 billion as shareholders dividends and $9.0 as common stock repurchase, $7.9 billion as long-term and short-term debts proceeds and $1.2 as proceeds from other activities. There were also acquisition of $4.5 billion and $ 3.2 billion for assets. This firm had a healthy working capital base (Johnson & Johnson, 2016).

The balance sheet for the 2012 to 2016 financial periods shows a constant increase from $ 46, 116 million to $ 65,032 for the total current assets while the total non-current assets for the same period ranged from $ 75,231 M to $ 76,176. The amount decline increased in 2013 and 2015 while 2014 shows a decline. In addition, the intangible assets decreased in the same period and ranged from $ 28,752 million and & 26,876 million (Morningstar, 2017). Other assets that showed inconsistence in the same period includes other long-term assets and deferred income taxes.  In the same period, the current liabilities for the firm increased from $24,262 to $27747 million between 2012 and 2013 decline to $ 26,, 287 million in 2016. The long-term liabilities increased from $32,259 million to $ 44,503 million in the same period. The total liabilities increased consistently from $121,347 million to $ 141,208 million between 2012 and 2016 with non-current long-term liabilities taking increasing with the largest margin (Morningstar, 2017).

The revenue for J&J is shown to be almost consistent between 2012 and 2016, and ranging between $67,224 in 2012 and $74,331 million in 2014.  The little change in income over the years can be attributed to similar changes in sales of the firm’s products, such as the little change in consumer segment sales from 13.4 percent in 2014 and 13.2 percent in the following year (Morningstar, 2017).The various segments including consumer, pharmaceutical and medical devices segments also showed similar change over the same financial periods. In the same period, the cost of revenue also increased between $67,224 and $ 23,645 million. The operating expenses also increased from $ 29,697 and $ 30,234 million in the period, which can explain the lack small increment in operating income from $ 15,869 and $ 20482 million in the same period (Morningstar, 2017).

Conclusion

J&J continuous product innovation is informed by the firms increased competition in the market, and this can help the firm to retain its customers. The strong brands of the firm forms the basis of its strength and this provides an opportunity for the firm to overcomes its major weaknesses that include declining sales, increasing expenses and reduction in product prices.  The ethical values of the firm have been based on increased consumer protection and trust and the firm has been recognized and awarded for the same. The improvement of ethical standards, behavior and social responsibility arose from the 1982 incident that left people dead after they took the products of the firm. The firm has faced various law suits related to safety standards of its products which have threatened to significantly affect its market share. However, the public opinions of its products have remained fairly positive which helped the firm to overcome such challenges. The financial analysis shows that the Johnson & Johnson performance has been consistent over past period from2012 to 2016 buoyed by increasing investment activities. The working capital of the firm is quite strong given that the equity basically exceeds the liabilities

References

Export plan

Distribution refers to the method through which finished goods finally reach the buyer from the factory or warehouse through transportation. It involves the goods moving from the intermediary to the shelves of the retailers in the market.  There distribution of goods can be through direct channels, where a firm sells directly to other trading firms, distributors and retailers or indirect channels that involve local middlemen who transports the products into foreign markets (Seyoum, 86). There are various reasons for selecting direct channels as the best for distribution for these products. The products, Aluminum Alloys and engines, will be manufactured in the home country and then be exported to the various warehouses that will be rented in Bahrain. The renting of the warehouses will assist in shortening of various supply lines, and this will reduce costs that are incurred during freights and ensure that time involved will also be shortened.  In addition, the major competitor, Alba, has its operations in Bahrain which means that to have a good ground to compete; our base in the country will offer sufficient accessibility to meet the increasing market demand.

 The exportation of any products requires a business plan that is based on an export strategy will help a firm in achieving the set goals and objectives.  The strategy for this export plan is to use direct channels by use Sales representatives as the right channel to reach the Bahrain market and other regional markets. The use of this strategy will offer more control over the processes involved in export , can offer  higher profits and at the same time a close relationship between the marketplace and the oversee buyer(Seyoum, 94).  The use of sales representatives is strategic since such individuals are familiar with the market given that there are residents of that particular country (Seyoum, 95). This is informed by the fact that the Aluminum Alloys and Engines from Boeing are intended to be sold in small markets where there is not attraction for distributor interest and these products may be custom made for specific customers who include the airlines in the region. In addition, these products are heavy so that they cannot be stocked easily be retailers or the selling may involve a private –public bid between the firm and government airlines such as Gulf Airline.

In addition, these agents will be valuable to the firm since they provide intelligence and personal contacts in the airline industry which will assist in reaching Bahrain market which may be inaccessible without them. The representative who will be based in Bahrain will be from the company, and will have knowledge on the products, so that he can use the literatures and samples for the product in familiarizing the product to the any buyer in the market. The use of a sales representative is important for the export strategy for Boeing. The person will work as part of the firm with the assistance of various individuals on board, who can make contact with customers (Seyoum, 95). After they have solicited a sale of the product, they can pass it on to the firm. The merchandise will then be transported from the warehouse to the customers as per the sales agreement.  The rep may work as an agency with basic information and technical knowhow about the products and who can present the product in the right manner to the customer (Seyoum, 95).

Logistics

International logistics refers to a planning that involves the implementation and control of flow and storage of goods from the place of production to the point where they are consumed (Seyoum, 109). There are two types of business logistic that can be used for Boeing Company which includes material management and physical distribution. The material management involves the timely flow of product and materials from their suppliers to the manufacturing, assembling and distributing points. Physical distribution involves the flow of products from the point of manufacturing – at the firm – to the targeted consumers (Seyoum, 109). In case of Boeing Company , the aluminum alloys and engines will be manufactured at the home country and these products will then be distributed to Bahrain , which is the targeted point of consumption especially be the airline firms. This means that for the company, physical distribution is the type of logistics which will be used in the distribution of the products to the intended consumer. To have a successful distribution plan, the physical distribution logistics will have to be management properly while ensuring it works well in combination with materials management logistics. An effective logistic system involves a strategically combining packaging, handling, storage and transporting of various goods   in a way that they are made available to consumers at the appropriate place, when required and in the required condition (Seyoum, 110). 

The plan of this distribution is to ensure that two major functions are performed: the products’ demand is generated and the demand created is served by a sufficient and timely supply of the same. While the sales representative is expected to take part in these functions, the company will bear the primary responsibility.  Given the weight and bulky nature of the aluminum alloys and engines , shipments is the best mode that will be used in distribution , unless such products are urgently needed by the client in which case , they will be transported by air.  In the shipment process, containerization will be important since it allows for bulk transportation of various products in bulk which can greatly reduce the transportation cost. For products like engines whose components may involve rusty materials, it will be specified that such products will be placed below deck so as to prevent damages that may arise during transportation such as humidity and risk of rust. Moreover, containerization is considered because it offers extra protection and allows for more effective handling of shipments even though it may increase cost involved in transportation (Seyoum, 111). Moreover, where the containers are used, the plan will ensure that all space is filled with the company’s products and ensure that only full containers will be shipped. 

Risk involved in physical distribution

Since the operations will be carried out in a different country, there are political risks involved. This is because of government regulations, taxes policies that place custom duty on exports which may increase the cost of the products in the market (Seyoum, 117). In addition, the country has previously experienced political unrest which can affect the market especially the expanding aviation industry which means the expected sales level may not be attained. Risks may arise from fluctuation in foreign rates of exchange and this can lead to fluctuation in currency values (Seyoum, 118). In case the payment has to be made in U.S dollars, the change in currency value may lead to loss of export opportunities to local competitors especially the major competitor, Alba. These competitors will be willing to accommodate local customers by selling their products in local currency which favors them since Boeing may find it difficult to do the same.  Transportation risks may arises during the distribution of products and these may be related to external security threats, natural disasters and even accidents that may lead to destructions (Seyoum, 118). The transportation risks may arise from the fact that movement of the products involves a long distance over the sea or air which can affect the whole process. There is also the time factor and different changes occurring in transport conditions that can also affect timely distribution of goods to Bahrain. In addition, risks on foreign credit may also arise when the sale of the products is done on credit. A big percentage of exported trade is carried out on credit which may lead to delayed payment risks or non-payment at all.  The risks can have a significant impact on cash flows and profits of Boeing Company.  The delay in payment in developing countries may arise from shortages in foreign exchange and this in turn lead to delay by central banks to convert domestic currencies into foreign exchanges (Seyoum, 118). There is also the possibility of bad debt arising from some customers in Bahrain or regional countries. This is likely to cause difficulties in conducting the marketing and selling of the product in the local market due to default in payments or late payments.  Boeing will have to follow strict procedures to obtain payment from the customers.

Insurance

After assessing the risks the business is exposed to and the available options for insurance, open cover policy was selected especially for the sake of transportation risks. This policy provides the insured with coverage for all the cargo being shipped during the period of this policy. This policy will include insurance for marine cargo and freight insurance for related risks during shipping of the products (Seyoum, 119). The insurance against credit risks is also important and the database held by credit insurers can provide enough support that can assist Boeing in assessing the creditworthiness of customers who are already insured.  The firm is able to differentiate between buyers who have finances for immediate payment for orders and the ones likely to default or even delay payments.

Boeing pricing on export product to Bahrain

For Boeing to be able to compete favorably in the market pricing is a very important aspect and pricing policy will have to conform to the relevant market. The price will have to reflect the value placed on the products so that it is high enough allow for a reasonable profit and also low enough to allow the firm to compete favorably.  Pricing results from a complex calculations set, through research and understanding of the ability of the firm to take in risks (Seyoum, 137).  The strategy on pricing has to take into consideration the segment targeted, the customer’s ability to pay, existing market conditions, actions taken by competitors, input costs and the expected trade margins (Seyoum, 137).  The pricing for Boeing’s products is determined on the basis of target customers and the market prices.  After consideration of the various pricing strategies, competitive pricing has been considered the best due to the level of competition in the market.

The competitive pricing strategy is important considering that the firm has competitive advantage that can allow it to produce its products at a better price that can be afforded by customers. The firm enjoys large scale economies since it produces large variety of products which enables it to lower its price for the same product. This means it can generate more sales with a superior margin than Alba, its main competitor in the Bahrain market. The distribution strategy using the sales representative also forms a strong network that gives the firm a competitive advantage over its followers. The firm also enjoys comparative advantage driven by its innovation and modern technology which gives Boeing the ability to manufacture its products at lower cost than Alba, which means that the prices will be a bit lower than other products in the market. In a rational market, customers will choose the product that is cheaper than other substitutes as long as the quality remain the same or is even better. The superior returns for the firm will work well in ensuring that the goal of expanding operations in the Bahrain market is achieved by the firm regardless of increased competition. The pricing can also enable the firm to expand its market share in the region.

Calculation of export prices

Export Price Calculation

Itemized cost                                                                                                       $

Ex-works price                                                                                                            50,000

Freight from Boeing to Bahrain                                                                                     5,000

Insurance                                                                                                           1,000

Landing charges

Import duties                                                                                                  10,000

Marine tax                                                                                                            800

Warehousing tax                                                                                               1,000

Terminal handling tax                                                                                         700

Custom fees                                                                                                      2,000

Bank costs                                                                                                             750

Landed cost

Cost to Bahrain distributors                                                                            65,000

Cost to retailer                                                                                                              80,000

Prices to Bahrain consumers before local taxes                                                       135,000

Local taxes                                                                                                                  7,000

CISG- the Vienna Convention

In the calculation of prices, this export plan highly considers the existing trade terms that provide the required uniformity in the products exportation and importation contract practices. Such trade terms are important since they define the delivery methods for goods and the attendant responsibilities assumed by the involved parties. The United Nations Convention on Contracts for the International Sales of Goods is one such term that relates to goods sales contracts that involve parties to whose business operations are based in different countries. The CISG is a 1988 treaty and involves uniform terms of international sales (Flechtner, 1). It makes up a considerable percentage of World Trade and includes sales of products from national legal systems of different countries. The aim of entering into the treaty was to regulate how contracts of international sales could be formed, and establish the obligations and rights of parties entering into such contracts. The provisions of CISG are largely similar to those of U.S Uniform Commercial Code. The contracts that relate to this commercial term are those that involve trade between parties whose business operations are based in placed deemed to mean the country with the closest relationship to the contract and closest to where the trade will be performed. Moreover , the CISG  cannot be used for some specific contracts like consumer goods sales , securities ,  electricity, labor services , aircraft , ships or other vessels or to manufacturing goods supply if the party buying the goods offers a significant portion of materials required for  this kind of manufacturing(Flechtner, 2).

The adoption of CISG by Boeing is important since it makes it easy to carry out business operations in the Bahrain market and the entire Middle East region. This treaty has various benefits that Boeing can tap into during its operations. Among the tremendous benefits arising from its success is that it has created a uniform international sales body that has largely been accepted by different countries including Bahrain. It is a good law since it is a reflection of what the parties involved in a sales contract expects (Le, 9). The law also enhances fairness and effective solutions so that there are no hidden advantages to either of the sides involved in the trade. The parties involved in sales contract can also create and conclude their contract that is guided by rules that are even to them (Le, 11). In addition, in case the Boeing and its trading parties cannot agree on whether to use United States or Bahrain laws, they can chose a common law to which both agrees. The adoption of CISG may help the movement of products in an easy and free manner buoyed by effective interaction of various business interactions in Bahrain.

Documents for Export

There are many documents required in conducting Export- Import trade and which Boeing needs to complete and submit. The completion and submissions of such documents is important for the distribution of products through shipment and discharging of any cargo at the destined port. The documentation is necessary and normal for custom brokers and freight forwarders and can be gotten from embassies of foreign governments, oversee customers, consulates or different reference books (Seyoum, 179).  The following list is the documents required for Boeing exports to Bahrain.

• Air Waybill – refers to carriage contract between air carrier and shipper and aren’t particular to a certain airline.
• Bill of exchange – written communication between a debtor and creditor on payment to the creditor or another third party
• Bill of landing – Boeing needs this to communicate with trucking firm to ascertain that transportation of goods from US to Bahrain.
• Consular invoice – should be obtained from Bahrain consulate and prepared in Arabic, the country’s language
• Certificate of Origin – it is required to show whether the Boeing products qualify for preferential treatment in terms of import duty
• Inspection certificate – it is an attest to specifications of products shipped though a third party
• Insurance certificate – shows the terms, type and insurance coverage amount for Boeing’s products
• Dock Receipt

• Destination Control Statement

• Shipper’s Export Declaration

• Proforma Invoice

• Manifest

MODE OF TRANSPORTATION FOR BOEING

The main modes of transport that Boeing can use to export its products include water, air and land through truck and rail. Given the nature of Aluminum Alloys and engines products, the firm will majorly use water and air mode of transportation given the long distance between U.S and Bahrain. The use of shipment will be effective for the firm since it will enable for bulky transportation of products which will reduce the transportation cost. The use of containerization is specifically important since it offers the protection for the products. The use of air transport will assist the firm in delivering products on time when they are urgently needed and this will have effect on cost and speed. However, the use of air transport can be very costly but such can be offset by shipment.

Works cited

Seyoum, Belay. Export-Import theory, practices, and procedures. Routledge, 2013. 86

Le, Thu Minh. Measuring the Success of the United Nations Convention on Contracts for the International Sale of Goods (CISG): A Case Study on Vietnam. MS thesis. 2016.9-11

Flechtner, Harry M.THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS. (2009).1-3. Available at: http://legal.un.org/avl/pdf/ha/ccisg/ccisg_e.pdf

Money Laundering

Money laundering is the process of generating a large amount of money from illegal sources. People launder money because the process is a profitable business activity. Schaap (1998) informs the reader   that the term money-laundering was established in 1970s by US investigators. During this period, the term was used in the Watergate scandal and in 1980s, the term was internationally acceptable following the various scandals of drug-trafficking in the world.  This period marked the history of money laundering and the history of crime had never given an account of such cases before (Schaap, 1998). Even though criminals formed organized crimes which were related with money laundering, there is a big difference between traditional and modern organized crimes since in modernity; criminals have knowledge and skills on modern technology which allows them to become money-laundering professionals. Money laundering is a global threat which is affecting economy and security. According to ‘Financial Action  Task Force’ money laundering is a process where criminals conceals their illegal activities of generating money  and they  gains  an opportunity to spend them in legal economy (Turner, 2011). They conceal the acts so that they can retain control and enjoy a high income and wealth.  Money derived from illegal activities is referred to as ‘dirty money’ and criminal activities associated with money laundering include sexual exploitation, kidnapping, corruption, human trafficking, and drug trafficking among many (Turner, 2011). Criminals deposit money in foreign financial institutions to avoid taxing authorities. For example, criminal conceal the source of dirty money  through depositing the  dirty money in different financial  institution using fake names,  deposits  the money using  bearer  instrument and investing money in corporations (Hopton, 2016). Criminals are not interested in converting the money into property but rather they focus on concealing the illegal source.  Their aim is to generate a large profit and use a proportion of the amount   in proceeding with criminal activities. Money laundering is an activity which is done in different forms in terms of participants and settings. Criminals can use large respectable banks which serve customers well or small non-financial businesses (Hopton, 2016). In most cases, criminals do not conduct international transactions but they deal with domestic and national transactions. After laundering money, criminals carry out other procedures based on transfer and deals to make the money appear to be derived from legitimate source (Hopton, 2016).

Laundering Mechanisms

Placement

 Placement is the process of depositing a large amount of illegitimate fund in banks and financial systems. The fund may be derived through criminal activities such as drug trafficking, extortion among other forms of crime. The purpose of this process is to ensure that the illegal money is separated from the original sources and the criminals may decide to deposit the money in different financial institution in different volume (Booth, 2011). Criminals believe that the process is less suspicious and will allow them proceed with money laundering and avoid detection.  Criminals transport the cash using smuggling methods such as concealing money in cargo or use of mailing packages.They deposits money in financial institution using different methods such as smurfing- this involves depositing small amount of cash of less than 10,000 in different banks (Booth, 2011).  Different people will have named accounts where they access bank drafts which avoid transaction reporting. Another method which is used in depositing money is electronic wire transfer- this is a process where criminals use electronic payment where they can transfer money in different account. Next, investment related transaction is also used in placement where criminals request investment management services. They also do placement in Non-bank financial services where criminals are involved in currency exchange (Booth, 2011). 

Layering

  After placing funds in the financial system, financial operations are done to create a legal origin. Offshore mechanisms are needed to mislead the investigators in finding the origin source. The accumulated funds are converted into checks and orders and combined with assets to avoid suspicion. Apart from offshore corporations, other layering techniques include bank secrecy laws for shielding the foreign investors from conducting investigation (Hopton, 2016). Criminals use intermediaries such lawyers for the purpose of creating insulation, confidentiality and relationship. Layering involves the transfer of money in different financial institutions especially in countries where there is poor law enforcement. Corporate structures are used to conceal the real detains and show anonymity (Hopton, 2016). The purpose of this process is to break the bookkeeping trail and conceal the root source of the money.  In layering, consecutive electron transactions are done where large amount of money is reduced in volume.

 Integration

 The process involves the act of moving the washed money into financial institutions and in this process, criminals they can withdraw and spend it for economic purposes. The clean moneys appear to be normal business money where it can be used for long term or short term investment in legal economy. The ill-gotten money is recycled and put in the legal economy (Hopton, 2016). Criminals may conduct business operations such as purchasing real estate, luxury goods and more in the legal economy. When money is used in the legal economy, criminals tend to develop a legitimacy perception where it becomes hard to make out whether the money is legal or illegal. Criminals gain an opportunity to create wealth and proceed with money laundering (Hopton, 2016).  In integration, criminals use techniques such as Haven Bank, Credit Cards where they use these tools to repatriate funds while omitting the financial trail. They also arrange corporate loans where they give local business loans and expect return with interest. Real estate transactions is also a technique where criminals sells a property to offshore companies through in inflated cost and receives it as a capital gain (Hopton, 2016).

Money laundering and terrorist financing

 Terrorism is among the categories of offences and this is a type of offense which   converts both legitimate and illegitimate money into criminal use.  First, it is important to understand that the international law defines the ‘act of terrorism’ as the   intentional criminal act which causes violence to a target population for political purpose (Booth, 2011).  On the other hand, organized crime has the objective of gaining money but not causing coercion to the population. However, both require financial support to complete their activities as planned. Other thing to understand is that ‘financing of terrorism’ is the process of supporting terrorists in term of providing financial support (Booth, 2011).

Hopton (2016) asserts that terrorism objective is to cause coercion to the population and governmental organizations toward engaging or refraining from certain actions. The book states that the fund which supports terrorists’ activities is derived from two major sources.  The firs source is organizations and the second is source is legitimate or illegitimate sources such as charities and drug-trafficking (Hopton, 2016). First, terrorism acquires money from criminal assets-money derived from activities such as drug trafficking, kidnapping and more. They also derive money (clean fund) from political parties. Other source is money laundering- this means that money is raised from money laundering activities such as drug trafficking, prostitution and corruption to support the activities. Hopton (2016) Drug trafficking is known to be the major criminal activity which funds terrorism.  Nonetheless, there are also activities which funds the terrorism such as’ revolutionary tax’, human trafficking and more. During the period of cold war, terrorist organizations derived fund from government but the end of cold war terminated the governmental source and terrorists are forced to get support from other sources (Hopton, 2016). For example, The Irish Republican Army gets financial support from Irish community and other terrorists organizations such as Armenian terrorists, Al-Qaeda and others gets financial support from expatriates. Generally, organizations seek support from charitable organizations which allows individuals, private business and government to establish legitimate and illegitimate proceeds and this makes it hard for investigators to make out whether the money is clean or not (Hopton, 2016).

Example of terrorist groups

Jemaah Islamiyah is a militant Islamist group in Southeast Asia and it was established in 1993.   The group is an Indonesian Islamist and Indonesia is a country which has poor regulations on financial system, poor law enforcement and effective tactics of attacking targeted population.  Jemaah Islamiyah gets finance from money laundering and in specific activities such as corruption, prostitution, theft, credit card fraud and more World Bank. (2009). They offshore the illegal activities and the money is brought back for commercial needed. The second terrorist group which benefit from money laundering is an American organized group called The Sicilian mafia. The group gets support from drug trafficking. Since the U.S government has put regulations on illegal assets, the group conduct overseas drug trafficking to gain profit Savona, 2005).

Reference

Hopton D. (2016).  Money Laundering: A Concise Guide for All Business. CRC Press

Booth, R. (2011). Money laundering law and regulation: A practical guide. Oxford: Oxford University

Press.

Schaap, C. D., & Nederlands Instituut voor het Bank- en Effectenbedrijf. (1998). Fighting money

laundering: With comments on the legislation of the Netherlands Antilles and Aruba. London:

Kluwer Law International.

Turner, J. E. (2011). Money laundering prevention: Deterring, detecting, and resolving financial fraud.

Hoboken, N.J: Wiley.

Savona E.  (2005). Responding to Money Laundering. Routledge

World Bank. (2009). Combating money laundering and the financing of terrorism: A comprehensive

training guide. Washington, D.C: World Bank.

Comprehensive Annual Financial Report (CAFR) for Houston city, Texas (2015)

The CAFR for Houston city (2015) can be categorized as a comprehensive and methodical exhibition of the city’s monetarist status. It offers detailed information on the city’s accomplishments as well as monetary balances for every financial year. It is divided into three major sections which include the introduction, financial and statistical sections. Besides a transmittal letter, demographic, economic and monetary reports the CAFR has an independent auditor report that contains discussions, analysis, financial statements and evaluation reports for all the addressed sections (Green, 2015).

The CAFR for Huston city, Texas is particularly detailed and long given that it contains 338 pages of the content in general. This generally demonstrates the depth of the report which mainly deals with the fiscal status of the city including how the funds and distributed across differing activities. The two major funds after the general funds are debt service and capital projects funds (Green, 2015). This fund includes an analysis of the balance sheet funds, expenses, balances as well as the general financial budget when equated with the actual uses. These funds are therefore utilized in demonstrating the health or status of the city financially given that the expenditures determine the outcome of the balances and budget changes. After the government funds come to the nonmajor governmental and enterprise funds.

The total government assets as per the report account to 615,957 dollars which are higher than for the previous year which was 537, 693 dollars (Green, 2015). On the other hand, the enterprise assets account to 870, 791 dollars which seem to be particularly higher when equated to the government ones (Green, 2015). This is linked with the less spending within the sector while equated to the government expenditures.

Reference

Ronald C. Green. (2015). City of Houston, Texas. Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2015. Retrieved from https://www.houstontx.gov/controller/cafr/cafr2015.pdf

Assignment 2: Lending Institutions, Health Care, and Human Capital

The World Bank and the International Monetary Fund (IMF), have really helped in boosting development in developing countries, through providing financial support. Most developing countries depend on funds from these bodies, as they are responsible for working with young and developing nations, to make sure they provide the support they can, hence changing the lives of the people in developing countries (Hope, 2012). Kenya, a developing country in the East Africa region, has been able to benefit fully, from the IMF and World Bank, and this is evident through the developments which the country has seen over the years. In a bid to understand the effects of IMF and World Bank, this paper will critically analyse the social, economic and political situation of Kenya (World Bank, 2010).   

Impact of Lending Institutions to Kenya

Kenya adopted a new constitution in August 2010, which required the national government to devolve some of its functions to county governments (Carrin, 2011). This was a move which was aimed at improving the economic growth of the country, however, it came with a lot of economic challenges. This included a rise in the country’s wage bill, a move which required the country to seek international funding. The IMF, offered the country $630 million, to aid in devolution and preventing the country from any forms of shock (Norris et al, 2016). This allowed the country to devolve different functions to the counties, thus leading to economic growth.

Kenya’s economy has grown from 5.9% in the year 2016, to 6% in the year 2017, due to the development record which the country has seen (Carrin, 2011). This has consequently made the country to become one of the fastest growing sub-Saharan nations. This is a move which has been attributed to increased agricultural supply, low inflation, growth in the construction sector, and improved transport and communication systems. The World Bank has been on the forefront in supporting Kenya through its development records. For instance, World Bank offered the country $420 million, to aid in the supply and installation of electricity in homes (World Bank, 2010). Due to the electrification of most homes in the country, Kenya has turned into a 24 hour economy, whereby standards of living have been raised, a move which has led to a drop in inflation, thus leading to the growth of the economy (Hope, 2012).

Kenya as a country has reached some Millennium Development Goals (MDGs) objectives, and this includes reduced infant mortality rates, increased primary school enrolment, high spending on education and health, which results in the payment of dividends (Carrin, 2011). Even though the healthcare systems have faced a lot of challenges, devolution will help in improving maternal health care in different health institutions. This will consequently lead to a healthier nations, thus leading to developments and the growth of the economy (World Bank, 2010).

Impact of a Healthy Population to the Growth of Kenya’s Economy

A healthy population lives longer and is more productive than an unhealthy population. The growth of the economy depends on the efforts of its citizens. A country is able to fund its activities through the collection of taxes, from individuals living in the country (Norris et al, 2016). The economy of Kenya fully depends on agricultural produce, without healthy citizens, the country cannot be able to produce coffee for export. In addition, investors cannot invest in an unhealthy nation, because the levels of work output will be less, a move which will translate to low productivity (Carrin, 2011).

A healthy population saves more, and it is development oriented. Health comes first in a nation, since a country cannot operate when the levels of deaths attributed to diseases are high (Hope, 2012). Healthy people save more, due to less spending on medication, thus leading to high living standards. For instance, Kenya has benefitted heavily from improving the health standards, since this has led to the creation of job opportunities for medical doctors, thus saving the country the costs of shipping patients to other countries for medical purposes (Norris et al, 2016). Secondly, a healthy population is development oriented, and this implies being focused on providing the best services to the country. When people are healthy, they focus on improving their living standards, and providing the best services to their customers in their specific areas of specialization. This results to the growth of the economy, since most people are able to work hard, save more, and improve their living standards (Carrin, 2011).

Foreign Aid usage on Health Care Systems in Kenya

The leadership of Kenya through its president, President Uhuru Kenyatta has spent 60% of foreign aid on health care systems in the country (Carrin, 2011). The funds have been allocated to maternity wards in different public hospitals in the 47 counties in the country. In addition, the country has also invested in dialysis machines, which have been installed in the 47 public hospitals in the counties (Hope, 2012). This has consequently seen the health levels in Kenya growing drastically, since patients can easily access medical care from their counties, rather than travelling to the national hospital in the capital city of Kenya Nairobi. The government has also offered free maternity delivery in all public hospitals, a move which has helped in reducing infant mortality rates (Norris et al, 2016).    

Reference

World Bank. (2010). World development indicators 2010. Washington, D.C: World Bank.Retrieved from: https://books.google.co.ke/books?id=MW_ntT8hLqEC&pg=PA441&dq=Impact+of+IMF+and+World+Bank+funding+to+the+economy+of+Kenya&hl=en&sa=X&redir_esc=y#v=onepage&q=Impact%20of%20IMF%20and%20World%20Bank%20funding%20to%20the%20economy%20of%20Kenya&f=false

Norris, S. M. P., Forstag, E. H., Altevogt, B. M., Institute of Medicine (U.S.)., Providing Sustainable Mental Health Care in Kenya (Workshop), & Providing Sustainable Mental Health Care in Ghana (Workshop). (2016). Providing sustainable mental and neurological health care in Ghana and Kenya: Workshop summary. Retrieved from: https://books.google.co.ke/books?id=orKpCwAAQBAJ&pg=PA23&dq=Health+care+systems+funding+in+Kenya&hl=en&sa=X&redir_esc=y#v=onepage&q=Health%20care%20systems%20funding%20in%20Kenya&f=false

Carrin, G. (2011). Health financing in the developing world: Supporting countries' search for viable systems. Brussel: University Press Antwerp. Retrieved from: https://books.google.co.ke/books?id=j--AU-HS2ZEC&pg=PA395&dq=Health+care+systems+funding+in+Kenya&hl=en&sa=X&redir_esc=y#v=onepage&q=Health%20care%20systems%20funding%20in%20Kenya&f=false

The report: Kenya 2016. (2016). Retrieved from: https://books.google.co.ke/books?id=BZ4oDwAAQBAJ&pg=PA100&dq=World+Bank+electricity+supply+in+Kenya+and+its+costs&hl=en&sa=X&redir_esc=y#v=onepage&q=World%20Bank%20electricity%20supply%20in%20Kenya%20and%20its%20costs&f=false

Hope, K. R. (2012). The political economy of development in Kenya. New York: Continuum International Pub. Group. Retrieved from: https://books.google.co.ke/books?id=BhejMw4zb0wC&pg=PA3&dq=Impact+of+IMF+and+World+Bank+funding+to+the+economy+of+Kenya&hl=en&sa=X&redir_esc=y#v=onepage&q=Impact%20of%20IMF%20and%20World%20Bank%20funding%20to%20the%20economy%20of%20Kenya&f=false

Advantages and disadvantages of using ratios in financial analysis

Advantages

 Financial ratios help in presenting the financial statements in a simplified manner. When determining the value of the company, it is easy to use ratios to understand the financial statements of a firm since one can understand the reasons and premise for the basic analysis.  The ratios are mathematical indicators which are calculated through comparison of significant financial information in the statements (Wahlen, Bradshaw & Baginski, 2014).

On that note, ratios are useful in financial analysis because it makes it possible to compare financial information and position of two or more companies in the simplified way. Directly comparing financial statements is inefficient since the business are normally no of the same size. By using ratios, one is able to compare the statements of different firms and even across varying periods of one firm. Moreover, one can analyze different aspects of the financial position using separate ratios (Wahlen, Bradshaw & Baginski, 2014).

Disadvantages

A financial analysis that uses ratios does not consider outside factors that affect the performance of the company. This means that the analysis is usually not exhaustive since there are various factors that any firm will have to consider so as to get the complete view of the financial position (Wahlen, Bradshaw & Baginski, 2014). For instance, ratio analysis does not consider the effect of economic status, whether its boom or recession; competitors performance where a decline in the industry is likely to lead to poor rations and other factors such as job losses.

Information used in ratio analysis is normally gotten from the historical results, and historical results do not necessary get carried forward. The information contained in income statements is current while other aspects of balance sheet are historically stated and this variance may lead to abnormal ratio results (Wahlen, Bradshaw & Baginski, 2014).

Reference

Wahlen, J. M., Bradshaw, M. T., & Baginski, S. P. (2014). Financial reporting, financial statement analysis, and valuation. 295

Accounting and Finance Research Paper

Introduction

Financial reporting comprises of financial information disclosure to the management and public in regard to the company’s performance in a given period. For the company, the procedures used follows the basic guidelines established in preparation of various financial statements in businesses especially public companies. The reporting procedures are based primarily on accounting cycle, indicating the manner in which financial information including costs, sales and forecasts flows in the organization.

Reporting Procedures

The cost reports for the company are prepared on the basis of both direct and indirect costs.  Reporting cost for the company is done every time the overall reporting is being done at a specified period for the financial year. The various cost incurred in the operations of the company are prepared on cost statements that includes direct and indirect expenses. Such a statement is used to record cost of various items such as labor costs, sales and administration expenses and especially the cost of goods. In the income statement, the cost statement indicates the amounts paid during different periods to creditors including retailers and wholesalers. The preparation of such statements follows the basic guidelines and established standards. Following established standards while reporting on costs removes any hitches that may arise from incorrect or incomplete statements that may in turn affect provision of such information to users (Hribar, Kravet & Wilson, 2014). Reports on sales are done immediately and include the sales made, any returns and those orders that have been cancelled. Forecasts reports involve the expected futures sales for the products of the firm. These reports are prepared on monthly and yearly basis to show orders and value of sales made.

Payroll Policies and Procedures

The firm’s employees are paid on semi-monthly and monthly basis and this depends on their position. The payment method used in the company is direct deposit and all new employees have to sign up for this method. The employee’s portfolio contains information about the payroll statements.  The preparation of the statements is done in consideration of mandatory deductions and this includes optional deductions after taxation of the salary. Direct deposit system of payment is efficient since it saves on amount of time taken preparing payrolls (Bragg, 2011). The Human Resource manager administers the payroll for entire firm.

Budget Process

Developing an annual budget is usually among the most important activity of management since it has great impacts on employees, operational performance and equipment needs and development scope. This process starts with communication from managers on required objectives or goals and then matter is taken over by accounts department through budget director. The process starts in October and ends in November in every year. The process includes a forecast for the following year and this takes time. In budgeting process, time is a very costly aspect since an effective forecasting may take much of the time (Bierman & Smidt, 2014).

Measure of Financial success

The firm uses various factors to measure the financial success which includes liquidity, operations efficiency and profitability. Liquidity shows the firm can pay short-term debts while operating efficiency indicates ability to control costs during operations. Profitability is major indicator for success.

Conclusion

The procedure for financial reporting for the company involves preparation of statements on the basis of established accounting standards and internal policies. The annual budgeting process for the firm is initiated by management through communication of desired objectives. Financial success is measured through liquidity, operations efficiency and profitability.

Reference

Bierman Jr, H., & Smidt, S. (2014). Advanced capital budgeting: Refinements in the economic analysis of investment projects. Routledge. 67

Hribar, P., Kravet, T., & Wilson, R. (2014). A new measure of accounting quality. Review of Accounting Studies, 19(1), 506-538.

Bragg, S. M. (2011). The New CFO Financial Leadership Manual. New York, NY: John Wiley & Sons.