Candide in El Dorado

The Meaning of El Dorado and its stand out from the remainder of the world: El Dorado gives off an impression of being the ideal world, for other people, it speaks to a ridiculous spot to live. For Voltaire this world implied his whole want and dream about the ideal society. Numerous pundits note that El Dorado is just a gigantic spectacle since it comprised of conflicting explanations. The significance of El Dorado is a dream of the ideal society and speaks to a bogus heaven difficult to achieve or approach by the dangerous human nature.El Dorado appears differently in relation to the remainder of the world on the grounds that at the time Candide was composed by Voltaire He lived in one significant times of the mankind, â€Å"The enlightenment†. Around him, he saw numerous shameful acts executed by the guideline establishments that lead the general public around then. The own craving of Candide to leave El Dorado was forced by something that he knew; In El Dorado, everyone is by all accounts equivalent and a fortune in El Dorado amounts to nothing contrast with a fortune on the planet where they came from.Furthermore, he expected to recoup Miss Cunegonde. The predominance and the financial influence that he will pick up with the fortune from El Dorado will assist him with getting her back. A few parts of El Dorado show up extremely alluring. The deistic religion that the elderly person depicts, the conspicuous monetary matchless quality, the populist practices of the lord and the nonattendance of open experiences appear to be the ideal society to imitate. El Dorado is the ideal society for Voltaire however the genuine push is that an ideal society like El Dorado is extremely difficult to attain.The over the top distortion that Voltaire communicates in Candide makes a few pundits to think. Why if Candide consistently searched for the ideal world portrays by his tutor Pangloss him and his hireling didn’t stay in El Dorado. The appropriate response portrayed for some is that the Perfect Utopia absence of the truth. Shanley and Stillman call attention to that Voltaire utilizes embellishment to propose the overabundance of El Dorado: Building reach to mists. The gateway of the king’s royal residence is 220 feet high and 100 feet wide.Food served at the hotel incorporates a 200-pound condor, 300 colibri hummingbirds on one platter and 600 hummingbirds on another. Such overstated sizes seem silly; they likewise balance forcefully with Voltaire’s beginning explanation that the nation is developed for joy just as for need and that â€Å"everywhere the valuable is alluring. † As we can see the distortion by Voltaire has no restriction and in a genuine world most likely can't exist with such overabundance. The dreams of El Dorado of an ideal society differentiate in light of the fact that there are outrageous inequalities.For occasion, Candide and Cacambo converse with the elderly person, and this give them a carr iage with twelve workers that show a misrepresentation and furthermore demonstrate the distinctive social disparities, if everyone is equivalent for what reason does a man has numerous hireling. Then again, the damaging human instinct could never exist together ideally, for example, El Dorado. All life creatures in the nature absences of presence of mind. This is clear in the idea of creatures. They battle for their domain and attempts to be predominant in any part of its life.Moreover, Shanley and Stillman accept that El Dorado contains numerous genuine deformities. These imperfections are set apart by a superfluous financial and social imbalance, material party, and hindered human passionate and scholarly capacities. They likewise state it is neither a totally decent society nor one that individuals can reproduce somewhere else. In this manner, El Dorado is by all accounts the ideal spot to live in spite of the pundits for some creators. In any case, El Dorado is a straight pundit to the general public where Voltaire lived.The genuine society in which Voltaire lived is created for some foundations that he assaults in different open doors, for example, the congregation and the government. For instance, when Candide showed up to El Dorado and he sees that all the individuals have confidence in something very similar and there’s not a cleric, no progression, and all the individuals are equivalent. That’s a decent strike from Voltaire to the congregation guaranteeing that everyone must be equivalent. Agreeing with Dalnekoff, â€Å"El Dorado is a foil to the social orders through which Candide has passed and will pass where the investigation forces a rule of dread, and destitution, defilement and mistreatment are wherever to be found. (Perfect world and Satire)In balance of El Dorado with the contemporary framework, we found that in the contemporary framework much persecution and misuses have been submitted and in El Dorado the occupants are temper ate; they were a general public with nonappearance of numerous organizations. An entirely sketchy point in Candide and his phenomenal positive thinking is the reason in the event that he accepts that everything complies with an awesome example and everything is generally advantageous, why didn’t he stay in El Dorado?. Dalknekoff states that the thought processes given by Candide for withdrawing are not really deserving of commendation.His want to be more extravagant than every one of people around him is surely disgraceful. (‘Impossible dream) As Dalknekoff stated, intentions that move every single individual are cash and the craving for predominance. In addition, Shanley and Stillman embrace Candide; who States â€Å"If we remain here, we will just resemble others†. On the off chance that they leave, they can be amazing and well off. They can flaunt their movements, and Candide can recoup Cunegonde. As per the creators above Candide’s thought processes to leave El Dorado are normal human motives.Now alongside the way that every single person are continually looking for fortune and great situation of high status, we found another significant component: the adoration for his dear Cunegonde. The adoration factor is a conspicuous angle that can drive a human away from an ideal society like El Dorado. El Dorado is by all accounts the ideal spot with an amazingly delight in all viewpoint. Candide had an incredibly desire to leave this intriguing heaven since he needs to rejoin with his affection Miss cunengonde who was going to get hitched with another man.All the wealth of El Dorado it wasn’t enough to join Candide to El Dorado. Then again, Dalkenoff cases to remain in El Dorado would intend to escape from the shades of malice of this present reality instead of to face and manage them. It isn't in man’s defective nature to discover joy in such an ideal society; the most ideal of all universes isn't being suites to man as he seems to be. (Ideal world and Satire) In understanding with Dalkenoff the human instinct is moved by the regular difficulties and such flawlessness doesn’t seem to be appealing for Candide.After remained thirty days in El Dorado Candide needs to return as soon conceivable to the incredibly damaged world outside. The Eldorado stones may be of an incentive to him in the imperfect world, where the individuals were parsimonious and insatiable and they were estimated by what they had. The Stones and excellence of El Dorado oblige to energize insatiability and desire in Candide, whose lone past thought was endure and his adoration for Miss Cunegonde Voltaire had a thought regarding the ideal society and he needed transmit the plan to the standards establishments of his time.At the time Candide was written in 1759 Europe was in the Enlightenment time frame: According to Bristow The Enlightenment is the period throughout the entire existence of western idea and culture, extending generally from the mid-many years of the seventeenth century through the eighteenth century, described by sensational upsets in science, theory, society and governmental issues; these upheavals cleared away the medieval world-see and introduced our advanced western world. (Bristow, standard. 1)

Market Structure Telecommunications

Question: Talk about theMarket Structurefor Telecommunications. Answer: Presentation Australian market structures have verifiably slanted towards a furiously serious, oligopolistic structure. The fund part is based around four significant banks; Petrol depends on four significant retailers; broadcast communications depended on three significant players, despite the fact that this structure is right now stalling; and Supermarkets comparable, with its significant players being Woolworths and Coles (70 to80% of piece of the overall industry) with the equalization commanded by specialty showcase IGA and comparable stores. The Introduction of significant world players in these enterprises is making a gigantic flood in rivalry and making vulnerability in the commercial center, with numerous speculators anxiously anticipating results and harmony to be reestablished. As of late, the German Supermarket, Aldi, has gone into the once steady, nearly duopolistic, unquestionably exceptionally focused, Australian Market. The presentation of such a gigantic, prestigious and all arou nd subsidized chain is causing both energy and apprehension. The presentation of Aldi into the Australian Market has just observed an expansion in rivalry all together for every one of the business heads to build up their piece of the pie, now and again unfavorable to essential makers and nearby industry, yet successful in making sure about work openings and bringing costs down to the shoppers. Attributes of Australian Supermarket Industry Before Entry of Aldi Before the section of Aldi into the Australian Market, the grocery store industry was the most amassed on the planet, with Woolworths and Coles overwhelming at 70 to 80% of the market (Hubbard,Garnett, Lewis O'Brien 2016). The market chiefs have contended and stayed consistent for various years. Their quality has made it practically incomprehensible for littler retailers to enter the market; they just dont have the purchasing force, assets or assets expected to monetarily contend with the Major grocery stores in a value war for piece of the overall industry. It is regular that the two heads have come out on top and utilized each other as benchmarks for valuing and stock. They have nearly reflected each other concerning dedication projects and promoting. A couple of number of firms commanded the market of the Australian grocery store industry before the passage of Aldi. There is association among the current firms and the organizations are profoundly affected by the exercises of one another. The value level and the yield level set by one firm influence the business structure of the other organization. In the market, there is obstruction to enter be that as it may; it is not exactly the monopolistic market. In the oligopolistic showcase, the publicizing is an amazing instruments utilized by the associations. There is a nearness of high rivalry in the market because of which the dealers to keep an appropriate information about the market. The procedures utilized by the adversary organizations in the oligopolistic advertise are additionally concentrated cautiously. The organizations working in the market delighted in economies of scale and had power over the fundamental and the specific information sources. Moreover as opined by Fudenberg Tirole, (2013), there is an absence of consistency in the firm size working in the oligopolistic market of Australia before the passage of Aldi in the market. There is a gigantic contrast in the measures of the organizations as certain organizations are too huge while some are little. This outcomes in lopsided circumstance in the market of Australia. Since, the organizations in the oligopolistic showcase are not value producers, it is significant for them to adhere to the value level set by the market request and flexibly. In such a market, when a specific market attempts to bring down the value level, the other adversary organizations hit back by limiting their value level further down. Along these lines, there exists a value war between the organizations in the market. Then again, if a firm chooses to build the cost level with the goal to help up the benefit level, different organizations don't follow by expanding the value level of their items. In s uch a situation, cost inflexibility happens as neither of the organizations attempts to increment or lessening their value level (Horstmann, Kraemer Schnurr, 2015). The oligopolistic encounters a crimped request bend because of the nearness of rivalry from different firms of the market. Figure 1: Demand and flexibly bend in the Australian market before the section of Aldi (Source: Horstmann, Kraemer Schnurr, 2015) The interest bend of the oligopolistic showcase turns out to be progressively flexible at a value level over the point P. Now, the costs are high and buyers attempt to settle on items that are moderately of lower costs. Hence, over the value level P, the yield of the oligopolistic showcase falls at a quicker pace. Hence, the interest for the yield in the market turns out to be progressively flexible in nature. Section of Aldi Retailers in the Once Concentrated Market When Aldi, a widely acclaimed, asset rich and monetarily well off, Supermarket arrived on Australian shores, Australias two significant pioneers discovered they werent in a situation to crush out the opposition as they had with past contenders; Aldi had comparable money related assets (Auerbach et al., 2013). All things considered, they were confronted with a third rival in the market for a similar piece of the overall industry. Aldis portion of the market has been consistently expanding since their appearance. Accordingly, shoppers are seeing low costs because of the expanded rivalry, which is, thus, expanding spending in an economy as of now in decrease. The presentation is likewise observing new business openings. Nonetheless, financial specialists in the other significant chains are seeing their profits decline as they go after what was before their nearly assigned piece of the overall industry (Rios, McConnell Brue, 2013). The chains are hoping to diminish costs so as to contend and in some cases, as we saw with Dairy Farmers, the essential makers can be left bearing these weights. Each of the three predominant organizations are known for sourcing items from different nations and all have abroad financial specialists, which are seeing benefits move outside of Australia. In this regard, they are a lot of the equivalent concerning cash being contributed somewhere else. By and large, Aldi has positively affected what was recently observed as a drowsy, self-satisfied industry, through expa nded rivalry. Predetermined number of firms controlled the market of Australia after the section of Aldi, the contenders of Aldi has been stressed over the conduct of Aldi. With the raise in the quantity of firm winning in the tomato soup showcase in Australia, there would be a raise in the gracefully of items in the market. This shows a rightwards move of the gracefully bend in the tomato soup market of the organization. This can be clarified with the assistance of figure 2 , underneath. Figure 2: Effect on cost of the tomato soup with the passage of Aldi (Source: As made by creator) From the above figure, it is seen that with the passage of Aldi, there is a raise in the gracefully of tomato soup in the market. This expansion in the flexibly, makes a rightward move of the gracefully bend from S1 to S2. Relating to the move of the flexibly bend, there is a fall in the cost from P1 to P2, and an expansion in amount from Q1 to Q2. There is a fall in the harmony level (Walras, L. (2013). The providers, who were there prior in the market, presently get a lower cost, than they got prior. Subsequently, there is a decrease in the net revenue of the makers. Along these lines, the section of Aldi in the market of Australia causes the oligopolistic market to turn out to be increasingly serious in nature. The expansion in the opposition causes the spending level of the clients to diminish (Pearce, Barbier Markandya, 2013). This makes the general GDP of the economy decay as the organizations in the market acquires lower salary. End The presentation of Aldi into the Australian market has expanded rivalry, yet additionally constrained the business to turn out to be progressively proficient inside their own piece of the overall industry, even specialty showcase experts. The outcome is bigger decision for shoppers, progressively serious estimating, more prominent openings for work and increasingly proficient industry by and large. While industry pioneers will keep on battling for a lot of the Australian market, the market will locate its new balance for the two customers, makers and financial specialists. After the presentation of Aldi in the market of Australia, not exclusively was the matter of Aldi was influenced yet additionally the market and the matter of the adversary organizations. The expanded in the market rivalry because of the passage of Aldi caused the value level of the items in the market to fall. Be that as it may, the expanded rivalry made the general GDP of the pay fall because of the lower spending of buyers. References Auerbach, A. J., Chetty, R., Feldstein, M., Saez, E. (Eds.). (2013).Handbook of open economics(Vol. 5). Newnes. Fudenberg, D., Tirole, J. (2013).Dynamic models of oligopoly. Taylor Francis. Horstmann, N., Kraemer, J., Schnurr, D. (2015). Oligopoly rivalry in consistent time.Available at SSRN 2630664. Hubbard,G., Garnett,A., Lewis,P., O'Brien,T. (2016). fundamentals of financial matters (3rded.). Melbourne: Pearson. Okuguchi, K., Szidarovszky, F. (2012).The hypothesis of oligopoly with multi-item firms. Springer Science Business Media. Pearce, D., Barbier, E., Markandya, A. (2013).Sustainable turn of events: financial matters and condition in the Third World. Routledge. Rios, M. C., McConnell, C. R., Brue, S. L. (2013).Economics: Principles, issues, and approaches. McGraw-Hill. Walras, L. (2013).Elements of unadulterated financial matters. Routledge.

Strategic Management Research Proposal Example | Topics and Well Written Essays - 1500 words

Key Management - Research Proposal Example The marking of new agreements and wandering into new associations is a manner by which this can be accomplished. Be that as it may, there is the subject of the exchange cost. In other words, the expense brought about during the procedure of a trade. Williamson’s exchange cost approach expect that the exchange is the central unit of investigation and through understanding its streamlining one can assess how their overseeing structures serve in their streamlining. To put it plainly, to comprehend an exchange, one must investigate the terms under which the exchange is occurring and guarantee it is in light of a legitimate concern for the business. Resource explicitness alludes to the highlights of a benefit that make it helpful for single or numerous particular purposes and is the most significant measurement (The financial matters of association: The exchange cost approach †AcaWiki 4). In view of this, the more the explicitness of a benefit, the lower its odds for resale or redeployment. A model is laborers prepared to perform just a solitary errand. Vulnerability essentially is the condition of an advantage being questionable to the objective. Vulnerability varies from chance in that hazard can be estimated through earlier or situational likelihood while vulnerability isn't quantifiable in any way. Being a multidimensional viewpoint, it holds a significant job in the dynamic procedure of the partners, in this way should be thought about before contracts are agreed upon. In conclusion the recurrence is the rehashed occasions wherein an exchange will happen between explicit or numerous gatherings. Additionally, one needs to think about the recurrence of unsettling influence in the market. This is to state, the adjustment of the market to the change that is achieved with the exchange. This must be represented, with the end goal that it must be known whether the exchange is a one time bargain or will it will be rehashed. Having considered all the above in the for the exchange

Research and analysis in applied accounting - Free Essay Example

I. INTRODUCTION a. Topic Chosen and its context In this Research and Analysis project Report, I will be analyzing the financial performance of Ââ€Å"Royal Dutch Shell Plc†. I will be identifying and analyzing the factors effecting the financial position of Royal Dutch Shell plc. The role of non-financial performance indicators which effects the financial position of the company will also be kept in mind. I will analyze the financial position of the company compared to its performance with previous years, with the industry and with its rival (BP). The word Shell will be used in place of Royal Dutch Shell as it is convenient. I will base my comparison on figures of audited annual accounts for the last 3 years. Financial analysis is an effective way of analyzing companyÂ’s performance. Ratio Analysis is the technique, which will mainly be used for financial analysis. My analysis will also be based upon the comparison of key ratios with main rival of Shell, which will indicate some of the core strategies in seeking a competitive position to achieve its purposes. I will use ‘Life CycleÂ’ model to analyze my findings on those markets, which materially contribute towards the companyÂ’s financial results. Then I will use PEST analysis to analyze different stages identified and nature of ‘Life CycleÂ’. My conclusions will be based on current situation of the company as compared to past years and future expectations using the techniques mentioned above. b. Reasons for selection Reasons for selection of the topic and organization are as follows:  § Wide Information base: Shell, being a public limited company and one of the largest oil and gas concern in the finance sector the availability of timely, relevant, reliable information was an added advantage.  § Relation to my studies: While studying my ACCA, one of the important skills which I have learned is the ability to analyze the financial statements, and such a comprehensive research and analysis project will definitely help in developing the same  § The company: Ââ€Å"Other reason is the investment prospective and size of the company. The company unveiled the largest expenditure program in its history, spend $36bn in 2008 compared to $25bn last year, as it seeks new sources of oil and gas to boost reserves and production and to better exploit its existing resources†. (Ft.com, July2008) Ââ€Å"Standard Poors, the credit ratings agency, downgraded its long-term rating for BP, the Oil and Gas Company, and upgraded Royal Dutch Shell, BPs closest rival, illustrating the widening perception of the two companyÂ’s circumstances. SP noted Shells reserves replacement success and said current major projects should sustain its production plateau in the next decade†. (Ft.com, September 2008) c. Aims and Objectives The aims and objectives contains the comparison of the financial performance of the petroleum sector to assess the worth of the company in its operational industry .To get an idea about the attitude of the management towards the operations of the company by assessing the companyÂ’s cash flow position compared to its profits. Also to analyze the risks faces by the company I will take in to account Solvency, Liquidity and Capital structures. d. Research Approach ACCA provides a complete guide about different sections of the report, and also this provides the opportunity to plan and think to allocate my time carefully. This planning will help me to concentrate on each section of the report so that I can focus on core and important areas of the report. This also enables me not to overspend my time in explaining any section of the report. Information mainly collected from annual reports of the company and also different sort of other sources like ACCA text books, internet, newspaper, library etc. Traditional ratio analysis has been used to measure and compare the financial performance of the company over last 3 years with its rivals. Ratio analysis will focus on the following key ratios:  § Profitability Ratios This ratio is the reflection of how well the business is performing in term of profits in order to pay the shareholders. Key ratios are: a. Gross Profit Margin b. Operating Profit Margin c. Return on Average Capital Employed  § Liquidity Ratios Liquidity ratio refers to the state of an assetÂ’s nearness to cash to meet business short term obligations as they fell due. Key ratios a. Current Ratio b. Quick ratio (Acid Test Ratio)  § Efficiency Ratios These ratios show how efficiently the business is employing those resources invested in fixed assets and working capital. Ratios are: a. Debtor Days b. Creditor Days  § Risk Ratios These ratios are used to assess how healthy and sound the business is in term of capital or finances. Ratios are a. Gearing Ratio b. Interest Cover  § Investors Ratios Both present and prospective shareholders look at these ratios to measure their return and to make economic decisions. Key ratios are a. Earnings per Share b. Diluted Earnings per Share II. INFORMATION GATHERING a. Sources of Information Used The information has been collected from different secondary sources for the preparation of this project. Main secondary sources which are use to gather information is as follows:  § Annual Accounts: The annual audited accounts of Shell are the main secondary source of information to use in this project. These annual audited accounts were available from stock exchange. As it supposed to be accurate and reliable thus provides me with an ideal source of annual accounts of the company. I have used only the audited annual accounts for the last three years of the company though unaudited quarterly review until July was available, to make certain that only reliable and accurate source of information is used in my research and analysis project. These audited annual accounts provides me all the information for the last three years which is essential in computing key financial ratios and also to make a comparison with rivals and industry averages of the company. Annual accounts of the rivals for the last three years are also used to make comparison with the Shell.  § Financial AnalystÂ’s Report: They are professional people and their views are independent and their analysis helped the shareholders making economic decisions, which in turns affects the very existence of the company.  § KaplanÂ’s Tutorial Text: KaplanÂ’s tutorial text for Bsc (Hons) in Applied Accounting also helped me a lot for gathering information and also about the different requirements of the reports. It also helped in focusing a particular section of the report and also helped in overall design of the project so that nothing is missing in the project.  § News Papers: Getting in touch with the business section of leading newspapers like The Times, The Independent, Daily Express and The Telegraph was very useful as it provided me guidance on the economy overall and as well the movement in the share prices of different companies. b. Methods Used To Collect Information To collect information various methods are used like,  § Internet: Ââ€Å"Internet offers a speedy and impersonal way of getting to know the basics of the services that a company provides†. (BPP 2005 Paper 3.4) I visited www.shell.com to access the financial reports of the company and press releases. I also visited www.bp.com to get information about the rival company of Shell for the purpose of comparison. Also I visited www.ft.com which really helped me a lot for the up to date information about the Shell and BP. I have also visited www.wikipedia.org to get information which helped me a lot to understand the oil and gas industry. In addition I visited the www.bbc.co.uk to get the latest news and important interviews.  § Use of the E-mail: For communication with Shell people I use to e-mail them during my research whenever I want to get some important information. They responded quickly to answer my query.  § Library Research: Libraries proved quite helpful so some libraries in London, Kaplan Financial College library and City Business Library in Moorgate London for general reading of the newspapers, journals, different books, magazines to get important information about Shell and BP. I spend most of my time in city business library, where I was able to get specific information through different CD ROMS which included different databases search designed specifically for getting information about different companies. Some of the CD ROMs are:  § Financial Analysis Made Easy: This database provided the detailed key financial data in the form of profit and loss accounts and the balance sheet. Also it helped me to get important ratios of the Shell and BP and their comparison with the preceding years in the form of graphs.  § Marketing and Business Information Centre (Data Monitor): This database provided vital information regarding the company, industry and market news for the research and analysis. This database contains records of hundreds of companies in UK and worldwide. When I looked at the Shell data, it really helped me by providing the overview and the detailed information. Then same thing was true for its rival BP. c. Limitations in the Information Gathering A number of difficulties I have faced sometime in getting the required information. For instance, I was expecting to get more information from the newspaper, but actually it was not. The newspaper only provides information about a particular date and some events but in depth information cannot be obtained and also articles are found in different newspaper i.e. nothing is new than others. Similarly when I went to City library, I was not aware of using FAME database, so when I tried to get information from database it took me too long. Moreover it only provides me the financial data in the form of graphs. Another problem which I have faced is the information overload on the internet. Whenever I tried to search something on the net it gives me too many results which some time confused me which information I should use and which is not. d. Accounting Technique Used and Limitations In this report to analyze the financial performance of Shell comparing to BP ratio analysis has been used. Ratios are important tool in analyzing the financial performance of the company. Ratios are used because shareholders and potential investors are primarily concerned with receiving an adequate return on their investment. An earnings per share is a key ratio that is to be used to determine the returns on shareholderÂ’s fund. Suppliers and lenders are concerned with the security of their debt or loan. So they are mainly focused on the gearing level the company is having and also the interest cover. More over management is concerned with the trend and level of profits, so ratios are the main measure of the success. Furthermore, managementÂ’s bonuses are linked to the profits of the company. I have calculated the key ratios in an appendix from 2006-2008 for Shell and BP and they did analyze the results. Ratios were used as a tool to assist analysis and to focus attention systematically on important areas. Ratios summarize information in an understandable form and also helped me to identify trends and relationships. Ââ€Å"There are also limitations of financial statements and ratio analysis as they are based on the past and ratios are not predictive if they are based on historical information. Ratios ignores any future action which is or to be taken by management. Another limitation faced by ratio analysis is the fact that the ratios results may be distorted if there are differences in the accounting policies†. (Kaplan Financial Study Text Paper F7) In all, Ratios have limitations but are still regarded as the best tool for analyzing the financial performance of the business and so I also used it. III. ANALYSIS In this section of the report I will explain and analyze the financial performance of Shell and will compare its results with BP.I will also explain ShellÂ’s financial position in the current year. a. Company History: Ââ€Å"The Royal Dutch Shell Group was created in February 1907 when the Royal Dutch Petroleum Company and the Shell Transport and Trading Company Ltd of theUnited Kingdommerged their operations. This move was largely driven by the need to compete globally with the predominant American oil company† (www.wikipedia.org) b. Financial Analysis: Here is the analysis of the financial data of Shell (Revenue, GP and NP) over the last three years.  § The revenues in 2008 were ($458.4 billion) 28.8% higher than in 2007, when they were ($355.8 billion) 11.6% higher than in 2006. (Appendix)  § The oil and gas prices was One of the main reasons of increase in revenues in 2008  § Ââ€Å"Brent crude oil prices average $97.14 per barrel in 2008 compared with $72.45 in 2007, while West Texas Intermediate average $99.72 per barrel compared with $72.16 a year earlier. Oil prices saw great fluctuation in 2008†. (Annual Report Shell 2008)  § A 6% increase in Gross Profit of Shell in year 2008 and 2007 as compared to gross profit in year. (Appendix)  § Its shows an increase in production costs in line with increase in revenues on high margin products.  § Earnings ($26.5 billion) were lower by 17% in 2008 compared to 2007, when they were ($31.9 billion) 21% higher than in 2006 ($26.3 billion). (Appendix) Ââ€Å"The decrease in 2008, compared with 2007, reflected the effect of declining oil prices on inventory in the second half of the year, lower production volumes, lower realised refining margins and higher operating costs. These more than offset the positive impact on earnings from higher realised oil and gas prices as well as higher LNG and GTL product prices†. (Annual Report Shell 2008) Ââ€Å"Second quarter 2009 reported earnings were $3,822 million compared to earnings of $11,556 million in the same quarter a year ago†. (2nd quarter results 2009, www.shell.com )  § Earnings By Business Segments : All figures in this table are in $million The table shows that earnings in 2008 were higher by 47% in Exploration Production, Gas Power and Oil Sands segments as compare to 2007. On other hand earnings were lower by 100% in 2008 as compare to 2007 in Oil Products, Chemicals and Corporate segments. This 100% reduction in last three segments causes overall reduction of earning in 2008. Ââ€Å"In the Second quarter Exploration Production segment earnings were $1,334 million compared to $5,881 million a year ago. Earnings compared to the second quarter 2008 reflected the impact of significantly lower oil and gas prices on revenues, lower oil and gas production volumes, higher exploration expenses and non-cash pension charges, which were partly offset by lower royalty and tax expenses†. (2nd quarter results 2009, www.shell.com ) Comparison of Shell with BP  § Revenue Growth: Shell and BP revenue over the last three years is shown in the graph: Growth in Revenue in $ Million Shell and BP revenue showed a consistent growth over a period of 3 years. In 2008 Shell revenue 26.9% higher than BP. Which shows that Shell growing consistently as Shell revenue were higher 25.2% 19.9% from BP in 2007 2006 respectively. (Appendix) a. Profitability Ratios Ââ€Å"The profitability of a company is important and a key measure of its success. The figures shown in the profit and loss account mean very little themselves. However, by expressing them as a percentage of sales they become much more useful. The figures can then be compared with previous years or with other similar companies†. (Student Accountant ACCA Magazine, Ââ€Å"Christopher†, 1999.) Gross Profit Margin: Gross profit margin shows earning on sales of a company. In the 2nd quarter of 2009 the gross profit margin has fallen 62% compared to last yearÂ’s 2nd quarter results. An indication of high profit margin is that the company earned well on sales by keeping overhead cost in control. Gross profit margin of 2008 is lower than previous years. Net Profit: Shell net profit margin dropped by 3.2% to 5.8% in 2008 from 9% in 2007. And margin in 2006 was 8.3%.BP net profit margin dropped by 1.5% to 5.9% in 2008 from 7.4% in 2007. The 2006 margin was 8.4%. (Appendix) Growth in Net Profit Shell and BP (%) The profit margin is mainly used as an internal comparison tool. As there are different levels of expenditure involved it is therefore sometimes difficult to accurately compare the net profit ratio for different entities. As compared to BP ShellÂ’s net profit margin dropped by a higher percentage in 2008.On the other hand if we see the year 2007 the Shell profits are higher than the BP. Return on Average Capital Employed: ROACE reflects the ability of the company to utilize the resources i.e. capital in generating revenue. Capital employed consists of total equity, currant debt and non-current debts. The published segment level contains the computation and calculation of the tax rate and the minority interest components. The strong income generation is the only reason for change in ROACE from18% to 24% between 2006 and 2008. Ââ€Å"There is a significant decrease in the capital employed from 24% to 18% in 2008 as compare to 2007. A significant decrease in income attributable to shareholders is partly offset by an increase in capital employed, resulted in a decrease in ROACE of 6.0% in 2008(18%) compared to 2007 (24%). The 2006 figure was 23%†. (Appendix and Annual Report Shell 2008) Ââ€Å"ROACE is defined as the sum of the current and previous three quartersÂ’ income adjusted for interest expense, after tax, divided by the average capital employed for the period. In the 2nd quarter or 2009 the ROAC stands at 8.3% way below the 25.8% in the 2nd quarter of 2008†. (2nd quarter results 2009, www.shell.com ) On the other hand BP utilization of its capital resources was showing a sorry picture. BP ROCE has moved in a range of 16% to 19% between 2006 and 2008. BPÂ’s ROCE was 19% in 2006, and then reduced to 16% in 2007, followed by an increase of 1% to stand at 17%. This was due to lower income attributable to shareholders in 3 years time. This increase in 2008 was due to some increase in income attributable to shareholders. (Appendix) ROCE Shell and BP (%) The drop in oil price in the second half of 2008 had a significant impact on earnings. The strengthening of the dollar against other main currencies reduced the impact of ShellÂ’s investment plans on capital employed. b. Efficiency Ratios Debtor Days ShellÂ’s receivable days has fallen from 76 days in 2007 to 65 days in 2008. The figure for 2006 was 68 days. This was due to the effective and better controlled credit policy. (Appendix) BP on the other hand, showed increase in its collection to 30 days in 2008 from 49 days in 2007. The 2006 figure stands at 53 days. All this reflected an aggressive and comprehensive credit control policy and ability to collect from customers. (Appendix) Creditors Days The payment to creditors from Shell showed improvement in payment to creditors in 2008 if we compare the figures to last three years. As creditors days reduced to 78 days in 2008 from 93 days in 2007, while the figure in 2006 was 87. This improvement shows that company has liquidity to pay off its debts and also helped in making stronger relationship with creditors, which could be Suppliers, lenders. (Appendix) BPÂ’s creditorÂ’s days showed reduction over a period of 3 years i.e. from 82 days in 2006 to 78 days in 2007 and more improved to 46 days in 2008 which showed a good sign for the company. (Appendix) c. Liquidity Ratios Current Ratio Ââ€Å"As short-term creditors prefer a high current ratio since it reduces their risk. The current ratio measures the adequacy of current assets to meet the companyÂ’s short-term liabilities as they fall due. Traditionally, a current ratio of 2:1 or higher was regarded as appropriate for most businesses to maintain creditworthiness. However, more recently a figure of 1.5:1 is regarded as a norm†. (Kaplan Financial, Paper F7 Study Text) Current ratio for Shell in 2008 was 1.1 and remained Constant between 2006 and 2007 to stand at 1.2. This shows better position for Shell and its ability to pay short term liabilities as they fall due. (Appendix) BP current ratio was also healthy between 2006 and 2007, but in 2008 the ratio was below 1 which may be not a good sign for short term creditors. But it was ok as for as it remains near to 1. (Appendix) Ââ€Å"One drawback of the current ratio is that inventory may include many items that are difficult to liquidate quickly and that have uncertain liquidation value. SO the quick ratio is an alternative measure of liquidity that does not include inventory in the current assets†. (Paper3.6, BPP Professional Education, June 2007) Quick Ratio Ââ€Å"The quick ratio also known as the acid test ratio eliminates inventory from the currant assets. It provides the acid test of whether the company has sufficient liquid resources (receivables and cash) to settle its short term liabilities. Normal level for quick ratio ranges from 1:1 to 0.7:1†. (Kaplan Financial, Paper F7 Study Text) For Shell, liquidity ratio remained unchanged within the industry standards between 2006 and 2008 to stand at 0.9. This shows the companyÂ’s ability to pay short liabilities from most liquid resources i.e. receivables and cash not inventory. (Appendix) BPÂ’s quick ratio showed a sorry picture and remains unchanged on 0.7 between 2006 and 2008, as it was standing at the danger level of 0.7 meaning that BP is not having enough liquid resources to pay off the liabilities due. (Appendix) d. Risk Ratios Gearing: Ââ€Å"Gearing is the relationship between the companyÂ’s fixed return capital and its equity capital. Gearing ratio indicates the degree of risk attached to the company and the sensitivity of earnings and dividends to change in profitability and activity level. High geared businesses uses large proportion of fixed return capital, so there are greater chances of insolvency and ultimately return to shareholders grow proportionately more if profits are growing. While low geared businesses provide scope to increase borrowings when potential profitable projects are available and can usually grow more easily†. (Kaplan Financial, Paper F7 Study Text) Gearing levels in (%) (2006-2008) Shell maintained smooth profits and more suitable assets for security in order to make use of gearing successfully. ShellÂ’s gearing level increased in 2008 due to more debts taken as compared to 2006 and 2007. Gearing was 23% in 2008 compared to 17% in 2007. The gearing ratio was 15% in 2006. The increase was due to rise in the total debt. On the other hand, BP gearing level was also high standing between 36% to 28% with 36% in 2008 compare to 28% in 2006, while 2007 figure was 33%, which is higher than Shell. High level of gearing means high risk to business, but this is compensated by a significant increase in profits and the returns to the shareholders. So Shell can borrow more easily in future. Interest Cover Ââ€Å"CompanyÂ’s interest cover indicates the ability to pay interest out of profits generated. Low interest cover indicates to the shareholders that their dividends are at risk (because most profits are use to pay interest payments) and the company may have difficulty financing its debts if its profits fall†. (Kaplan Financial, Paper F7 Study text) ShellÂ’s interest cover has decreased to 42 times in 2008 compared to 45 times in 2007. The interest covers for 2006 was 38 times. This shows ShellÂ’s ability to finance its debts and the ability to pay interest out of the profits for sure. As investors are interested in the risk level the company is in, it is a healthy sign. Interest Cover in Times (2006-2008) For BP, there is an increase of interest cover to 30 times as compare to 29 times in 2007 but in 2007 there is a huge reduction in interest cover to 29 times from 49 times in 2006 which clearly indicates the inability of BP to finance its debt and to pay interest out of profits generated. That makes BP riskier than Shell for investment purposes. e. Investors Ratios Earnings per Share (EPS): Ââ€Å"Earnings per Share for Shell decreased in 2008 from $5 in 2007 to $4.27 in 2008. This was due to decline in profits followed by the repurchase of the shares, which causes a net decrease of 105 million in the number of ordinary shares outstanding as a result of share buybacks. As widespread the use of the EPS as a yardstick for investment decisions. Share price of company might fall if it looks as if EPS is going to be low. EPS increased to $5 in 2007 compared to $3.97 in 2006, this was due to decrease in the number of ordinary shares in 2007 as company repurchased its 112 million shares of common stock for cancellation at a gross cost of $4.4billion.this purchase reduced the number of shares outstanding to 1.7% in 2007 and by 7.3% in total since the commencement of share repurchases following the unification into Royal Dutch Shell and successful completion of Royal Dutch Minority tender (August 2005)†. (Annual Report Shell 2008) Ââ€Å"In the first six months of 2009 the EPS for Shell is $1.19 compared to the six month figure of $3.34 of the same period of 2009 (2nd quarter results 2009, www.shell.com ) Earnings Per Share in $ (2006-2008) Ââ€Å"BPÂ’s Basic Earnings per Share increased in 2008 to $1.13 from $1.09 in 2007. This was due to the appreciation in the profits followed by the repurchase of shares, which causes a net decrease of 373 million in the number o shares. Basic EPS decline by 0.01 to stands at $1.09 in 2007 compared to $1.10 in 2006. This was due to the declining of profits of BP†. (BP Annual Report 2008) Diluted Earnings per Share(DEPS) : Ââ€Å"Diluted Earnings Per Share attempts to alert the shareholders to the potential impact on the Earnings per Share due to change in equity share capital in future owing to circumstances which exist now-known as dilution. The most common type of dilution is an option or warrant which gives the holder right to buy shares at time in future at predetermined price†. (Kaplan Financial, Paper F7 Study Text) Diluted Earnings Per Share in $ (2006-2008) ShellÂ’s DEPS reduced due to the reduction in the profits and number of shares to $4.26 in 2008 compared to $4.99 in 2007, while it was $3.95 in 2006. BPÂ’s DEPS increased to $1.12 in 2008 from $1.08 in 2007. The figure was $1.09 in 2006. The main reason for this was increase in profits despite shares in numbers was reduced. (Appendix) f. Cash Flow Statement: ShellÂ’s cash flow from operating activities has increased by 27% reaching a record level of $43.9 billion in 2008 compared with $34.5 billion in 2007 and $31.7 billion in 2006. This improvement in cash flow from operations was a result of reduces working capital in 2008 compared to 2007. The increase in the operating activity in 2007 mainly because of increase in income as well as a reduction in taxation paid in 2007 compared to 2006. Ââ€Å"In 2009, ShellÂ’s cash flow from operating activities reduced in the first two quarters to stands at $8478 million compared to $21,030 million in the same period of 2008†. (2nd quarter results 2009, www.shell.com ) Ââ€Å"BPÂ’s cash flow from operation declined to $24.7 billion in 2007 compared to $28.2 billion in 2006, but the cash from operating activity increased in 2008. This is menially because of increase in income†. (BP Annual Report 2008) Higher capital expenditure in 2008 compared to 2007 made Shell to use its Cash flow in investing activities i.e. $28.9 billion in 2008 compare to $14.6 Billion in 2007. Ââ€Å"In 2009, Shell continued to invest more with cash flow from investing activities stands at $(13,829) million in six months from $(12,275) million in 2007†. (2nd quarter results, www.shell.com) Ââ€Å"But there was less cash paid out in investing activity in 2007(-14.6 billion) as compare to 2006(-20.9 billion) and the main reason was that the proceeds from sale of asset was higher and les capital expenditure in 2007 as compare to 2006†. (Shell Annual Report 2008) Ââ€Å"BP was also having strong investment with $(22.8) billion in 2008 from $(14.8) billion in 2007. The figure for 2006 was $(9.5) billion†. (BP Annual Report 2008) In 2008, as Shell took more debts which results in ShellÂ’s cash flow from/used in financing activities reduced to $(9.4) billion in 2008 from $(19.4) billion in 2007.As Shell acquired Canada minority interest in 2007 resulting Cash flow from financing activity increased in 2007 from (13.7) billion in 2006. Ââ€Å"There was a small increase of BPÂ’s Net cash flow from/ used in financing activities from (9.0) billion in 2007 to (10.5) billion in 2008 menially because of more dividends paid and less repurchase of shares in 2008. Net cash from financing activities was reduced to $(9.0) billion in 2007 from $(19.0) billion in 2006†. (BP Annual Report 2008) Cash and Cash Equivalent of Shell and BP in Billions Ââ€Å"Cash and Cash equivalent of Shell reached 15.2 billion at the end of 2008, up by 57% as compare to 2007 figure of 9.6 billion. Which is good sign for Shell as there cash and cash equivalent was higher as well in 2007 as compare to 2006 figure of 9.0 billion. BPÂ’s cash and cash equivalent also increased to $8.2 billion in 2008 from $3.5 billion in 2007 and also up from 2006 level of $2.5 billion†. (Shell and BP Annual Report 2008) This shows that Shell has a sound position and has no problem what so ever in cash flow compared to its rivals. c. Non-Financial Analysis In this section of the report I will be analyzing the corporate social responsibility and the SWOT analysis. Corporate Social Responsibility (CSR) Ââ€Å"We recognise that our continuing business success depends on helping to meet the worldÂ’s growing energy needs in environmentally and socially responsible ways. To manage todayÂ’s business risks and deliver our strategy, it is critical that we maintain the trust of a wide range of stakeholders†. (Shell Annual Report 2008) Environmental Social performance Greenhouse Gas Emissions Ââ€Å"In 2008 despite growing business, Shell operated facilities emitted 75 million tons of GHGs, (measured on a CO2 equivalent basis), about 7 million lower than the previous year, and nearly 30% below 1990 levels†. (Shell Annual Report 2008) Flaring Since 2001, Exploration Production has reduced its natural gas flaring by more than 70%. In 2008, total flaring in Exploration Production dropped again mostly due to reduces flaring in Malaysia and Gabon, as investment and operational improvement programs showed result. In 2008 flaring levels in Nigeria were same as in 2007. Spills Shell has reduced the amount of oil and oil products spilled from operations for reasons, Shell can control, like corrosion or operational failures. Spills from sabotage or extreme weather, like hurricanes, which are harder to prevent, have fluctuated with events. In 2008 the number and amount spilled for operational reasons dropped again. Accident and Injuries Rate Ââ€Å"In 2008 26 people lost their lives working for Shell. That was five more than in 2007. Shell has improved in its accident on sites and injuries to staff by 50% reduction in it compared to 1999 by staff training and better working conditions†. (Shell Annual and Environmental Report 2008) SWOT Analysis Ââ€Å"SWOT analysis is a critical assessment of the strengths and weaknesses, opportunities and threats affecting an organization to establish its strategic goals and objectives, taking into account the environmental conditions. Strength and weaknesses analysis involves looking at the particular strengths and weaknesses of the organization itself and its product/service range. It is an internal appraisal. An analysis of opportunities and threats is con concerned with profit-making opportunities in the business environment, and with identifiable threats. It is therefore an external appraisal†. (BPP study text 2007, paper P3) Strength Ââ€Å"Shell strong financial position and manpower strength which dominate Shell as compare to their rivals. Shell invested more in 2008 as compared with last year, as it seeks new sources of oil and gas to boost reserves and production and to exploit existing resources better†. (www.ft.com 1-08-2008) Ââ€Å"Shell is world leader in oil and gas with technological advancement and project management skills and operations in 37 countries and majority interest in 40 refineries worldwide. The company is ranked third in 2008 Fortune Global 500 ranking†. (City Business Library DATAMONITOR) Weaknesses Ââ€Å"Hydrocarbon production has shown a decline in recent years due to the fields decline. Furthermore, natural gas production was also affected by declining fields in Malaysia, US, UK and Canada. This would adversely affect ShellÂ’s revenue. In 2008, Shell paid $120 million to settle a class action lawsuit led by the Pennsylvania State Employees Retirement Board due to the overstating oil and natural gas reserves and inflating stock prices from April 1999 to March 2004†. (City Business Library DATAMONITOR) Opportunities Ââ€Å"In order to cope up with worlds demand for energy, Shell is expanding business particularly in Asia. In 2008, Shell signed joint venture with Qatar and China, which would build an oil refinery and petrochemical products manufacturing complex in China†. (City Business Library DATAMONITOR) Ââ€Å"Shell is the latest company to invest in AustraliaÂ’s coal bed methane industry to develop projects in Australia and internationally†. (ft.com, June 2 2008) Threats Ââ€Å"Worlds energy demands on the rise, by 2015 easily accessible oil supplies of oil and gas will no longer keep up with demand†. (www.express.co.uk, 26 January 2008) Ââ€Å"Disruption in Nigeria has badly affected ShellÂ’s business. Nigeria is the worlds eighth-biggest oil exporter; however, the violence in the country affected the industry with the output cut by a fifth since early 2006, thus increasing the oil prices above $100 per barrel in 2008. In Nigeria, ShellÂ’ pipelines were attacked by the residents†. (bbc.com, 20-06-2008) IV. Conclusion: Shell is having a strong growth in its business throughout the world between 20062008 and this continues in 2009 as well. This growth is attributed to number of factors including high revenue generation, more investments and thus rising profits particularly in last one year. Moreover, ShellÂ’s ability to expansion in different continents of the world with 42% in Europe, 25% in Asia, Africa and Australia, 25% in America and 8% in other America is also a main factor in its growth. ShellÂ’s sales revenue has gone up by nearly 11.6% in 2007 and 28.8% in 2008.In 1st six month of 2009 its sales revenue has affected due to world economic slowdown and reduced to 49.7% compared to 1st six months of 2008. ShellÂ’s profits are also high in last three years but reduced 56% increase in six months of 2009 that is due to the reduction in oil price resulting by world economic downturn. Return on Average Capital Employed (ROACE) also showed a rise of 1% from 2006 to 2007 but a significant decrease in income attributable to shareholders in 2008 and partly offset by an increase in capital employed, resulted in a decrease in ROACE of 6.0% in 2008(18%) compared to 2007 (24%).However ROACE has reduced 17.5% in current yearÂ’s first two quarters to last year because company is facing threats in its operations in Nigeria, 8th biggest oil nation in the world and also due to the OPEC reduction in oil production. Shell generated a massive cash flow from its operation 34.5% up in 2008 to last year. This is due to strong income growth followed by less taxation. Whilst ShellÂ’s rival BP reported a huge decline in cash flow from operations showing its bad performance. Gearing (risk attached to business) increased to 23% in 2008 from 17% of 2007 mainly due to more borrowing i.e. more debt and also due to rise in operating lease obligations, as ShellÂ’s expansion allows it to borrow more. This increase in gearing is offset by significant rise in profits. Earnings per Share for Shell decreased in 2008 from $5 in 2007 to $4.27 in 2008. This was due to decline in profits followed by the repurchase of the shares. Despite of worlds slow economy a second quarter 2009 dividend has been announced of $0.42 per share, an increase of 5% over the US dollar dividend per share for the same period in 2008. Shell has also met its environmental and social obligations by implementing strong company-wide health, security, safety and environmental (HSSE) standards. The company has shown a considerable reduction in Greenhouse Gas Emissions, Flaring, and Spills and also company has implemented a strong waste minimization policy mainly due to the success of the mud treatment process. From social perspective, Safety-Fatal Accident Rate also reduced in recent years and also the Injuries-TRCF rate shown a decline. This was attributed to better working conditions, employees training and by following the health and safety laws. Summing up, Shell has strong market position and ranked best in the world. Shell is the energy company of the future. Its strong revenue generation ability, more expansions, and strong strategies in conducting business, its technological advancements its project management skills and sharper implementation of strategies will help the company to overcome the situation of global economic slowdown and to improve its performance.

Influence Of Terror On Pakistan Stock Market Returns - Free Essay Example

Sample details Pages: 10 Words: 2917 Downloads: 7 Date added: 2017/06/26 Category Finance Essay Type Research paper Did you like this example? Abstract This paper examines the influence of political instability and terror on Pakistan stock market returns between 1997 and 2010. The study constructs three variables that quantify political instability and terror and examine the effect on country stock return. This study seeks to apply the Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model to assess the impact of these variables on stock market returns and volatility using daily time series data for KSE. Don’t waste time! Our writers will create an original "Influence Of Terror On Pakistan Stock Market Returns" essay for you Create order Results for KSE showed strong support for the hypothesis that bad news exerts more adverse effect on stock market volatility than good news of the same magnitude. Furthermore, terror and regime have significant negative impact while war has positive but insignificant effect on stock market volatility. JEL Classification: O40, C32. Keywords: Terror, Regime, political instability, growth, ARCH/GARCH. Introduction Many people agree that stock prices sometimes behave in bizarre ways. Markets are pretty tough and quite difficult. In the world of todays no one can negate the importance of stock markets. Stock market acts as a barometer for any countrys economy. In todays information-oriented world, news travels very fast and contagion can spread quickly and capital markets become more flexible and are absorb shocks brought on different news such as terrorism, political instability etc. Stock market of Pakistan is going through quite rough patch from many years. The change of political government and later on the terrorists attacks have badly affected the stock market and make the Pakistan Stock Market unreliable place for investment. As by seeing the overall scenario of Pakistans stock market during that time period it was not difficult for prices to follow certain patterns that support the rejection of Random Walk Hypothesis. This paper examines the impact of change in government, war and t error on economic growth in the Pakistan. Pakistan is one of those episodic-democratic countries who are facing continuous upheavals and socio-political disruptions since their inception. Military interventions could be witnessed in the political history of Pakistan. More over intervallic wars with India, strikes, antigovernment demonstrations and most importantly the ongoing war on terror have popped Pakistan to prominence on the socio-political platform. Such sociopolitical flux, terrorist attacks and other disruptions can have serious implications for stock price movement because stock prices reflect investors expectations about the future and these stock price movements on aggregate can generate a surged wave of activity. There has been an extensive work on study of stock market returns and volatility with respect to the fundamental variables and the macroeconomic variables but a diminutive work has been done so far to study the impact of socio-political factors on the stock market volatility in Pakistan. The existing literature on impact of socio-political factors on stock returns volatility is quite inadequate especially if we talk in context of Pakistani market. Masood Sergi (2008) analyzed Pakistans political risks and events that have affected the Pakistani stock market since its independence but their study chiefly covers the political events. Terrorism and strikes which have recently become the matters of intense interest and the source of unrest in the economy are the missing part there. The Karachi stock market is rapidly converting into a volatile market. If we see figure below it showed that there are high volatility during 1997 to 2010. This cannot be viewed as a positive sign for this emerging markets like Stock market of Pakistan. Though heavy fluctuations in stock prices are not an unusual phenomena and it has been observed at almost all big and small exchanges of the world. But focusing on the reasons for such fluctuations is instruc tive and likely to have important policy implications. The efficient market hypothesis argued that changes in stock prices are mainly dependent on the arrival of information regarding the expected returns from the stock and risk associated with that stock. (See Figure 1.1) So the purpose of our study is to examine empirically the impact of socio-political instability on Pakistani stock market. This study examines the three factors and their impact on the Pakistani stock market; the political instability due to military interventions, 1999 Kargil war, and terrorism. Literature Review A number of theoretical and empirical articles argue that these factors hinder economic growth of a country. Cutler, Poterba and Summers (1989) claimed that the sock prices move in response to the information other than about the fundamental values. They estimate the fraction of stock returns that can be accredited to various kinds of economic and non-economic events including assassinations of important political or national figures, war, invasions, raids and major policy change but their findings suggests a very small effect of non-economic news on the share price. Most of the studies have found a significant impact of political news or events on the stock market behavior. Chan Wei (1996) studied the impact of political news on the stock market volatility in Hong Kong and using GARCH-M model they found the strong evidence of the impact of political news on stock market volatility inferring that unfavorable political news is correlated to negative returns for the Hang Seng Ind ex and vice versa. Mei Guo (1999) examined the impact of political insecurity on the financial crises in emerging markets and they observe that market volatility increased during political election and transition periods and political uncertainty could be a major contributory factor to financial crisis. Similarly Kim Mei (2001) infered through empirical analysis using GARCH(1,1) filter that the political risk affect the stock market volatility but this impact of political events or news is asymmetric, with bad news having a greater influence on volatility relative to good news. However Voth (2001) have argued that the impact of political factors in studies on German market has been over stated. He argued that the majority of events escalating political uncertainty had a minute or no effect on the value of German assets and the volatility of their returns. Instead, it was inflation that is mainly responsible for most of the variability in stock returns. He suggests that there is no direct linkage between the political factors and the stock market, however through channel it impacts. But Voth (2002) in a panel study of a set of 10 countries using panel regression confess that during great depression political risks changed dramatically over the period, and are adequate to account for a large part of the boost in stock price volatility. Beaulieu, Cosset Essaddam (2002) examined the impact of political risk in Canada on the volatility of stock returns, covering important political events in the country. Their study suggested that political news performs a significant role in the volatility of stock returns. Moreover the volatility of stock returns also depends on the degree of how much a firm is exposed to political risk i.e. the structure of its assets and the level to which there is foreign involvement. Kutan Perez (2002)  also found a significant impact of social and political factors on stock return volatility in their study conducted on Colom bian stock market. Bautista (2003) applied Regime-switching-ARCH regression on Philippine stock returns to estimate its conditional variance and the estimated volatility was then related to major political and economic events. Their study revealed that the Philippine stock market is sensitive to radical changes in the political situation. Moreover the series of military takeover attempts during late 1980s in Philippines lead to hefty fluctuations in stock market index. Masood Sergi (2008) analyzed political risks and events that have affected the Pakistans stock markets since its foundation. They have found that Pakistans political risk carries a significant risk premium of between 7.5% and 12%. They made forecasts using Bayesian hierarchical modeling and Markov Chain Monte Carlo (MCMC) techniques and found that there is relatively high probability of occurrence of events with an average arrival rate of approximately 1.5 events per year. Many others also wrote that politic al instability warped the future path of investment decisions (Calvo and Drazen (1997), lessened public investment leading to a shift of government budgets from capital spending to government consumption (Darby, Li and Muscatelli (1998), and makes governments less inclined to make improvements to the legal system (Svensson (1993) Wars and unrest at the borders creates instability and panic among the investors that could affect the stock market movement at large. The affect of war has been analyzed in many studies including Cutler, Poterba and Summers (1989), Aggarwal, Incaln Leal (1999) and in Pakistan Masood Sergi (2008). Aggarwal, Incaln Leal (1999) examined the sort of events that cause large swings in volatility of emerging stock markets. For this purpose they examine various social, political and economic events both at global and domestic level to find out their explanatory power in context of the returns volatility in the emerging markets including the impact of gulf war. Though at small scale but the impact of gulf war was felt in those emerging markets. Similarly Masood Sergi (2008) found that among other factors that they studied, wars with India, 1948, 1965, 1971 and 1999 kargil war negatively influenced the Pakistani stock market. Evia et al. (2008) examined the affect of socio-political conflict in Bolivia on economic performance. Factors studied widespread during the conflicts as strikes, demonstrations, road blockades, and conventional rent-seeking. Their results showed that economic growth due to external factors is positively related to conflict while growth due to productive investment is negatively related to conflict. Terrorism is another as put that has been studied in relation to economic activity. Many studied in this distance; produced conflicting results as Becker and Murphy (2001) argue that economic performance are not much affected, because terrorist attacks usually devastate only a small portion of the overall stock of capital in a country. By contrast, Abadie and Gardeazabal (2005) repeated that terrorism shape overall economic risk in a country and lead to the economic shakiness in the country. They also conclude their study that higher level of terrorism risks results into the lower levels of foreign direct investment (FDI). Almost all studies on terrorism and its influence on stock prices limited to only on a single or few events, such as the 11 September 2001 attacks, as considered by Hon et al. (2004) Chen and Siems (2003) study. Chen Siems (2003), used event study methodology to capture the aftermath of terrorism on global capital markets. They studied on the reaction of U.S. capital markets in response to terrorist attacks. Their results showed that capital markets of US are more resilient flexible than in the past and recover quicker from terrorist attacks than other global capital markets. Their study suggests this increased market resilience to be partially explained by a stab le financial sector in US that provides adequate liquidity to support market stability and reduce the spread panic. Methodology and Data Description Stock index data is taken from Karachi Stock Exchange, Yahoo Finance. This is a well known and reliable source of business information in Pakistan. The daily closing value of KSE-100 index is used for calculating the daily returns. The continuously compounded annual rate of return is used to measure the returns for the specific period as; Rt = ln (Pt / Pt-1) The closing prices of KSE-100 index for Karachi Stock Exchange are taken for the period July 2, 1997 to Oct 13, 2010. Our proxies are TERROR, a dummy variable of terrorist incidents during this period; REGIME, a dummy variable for government changes from fully democratic government to Marshal Law or democratic under such condition; a dummy variable for the period of the Kargal War in 1999. We applied regression model and Arch/Garch technique to capture the results. ARCH/GARCH Study Models This section presents the methodology of the paper. Daily data for Karachi stock markets were obtained from Yahoo finance and data for terror, kargal war and regime were obtained from South East Asia Terrorism Portal, and Different News Paper of Pakistan. Study apply ARCH/GARCH tools to see the long term relationship of these variable taking stock return as dependent variable and terror, regime and kargal war as independent variables. As aggregate uncertainty may be a function of political instability, we proceed to model uncertainty directly. It is natural to look at the conditional variance of output. Thus, we examine GARCH processes, in a more general framework than in the previous section. The model estimated here is a GARCH (1,1) process. Engle (1982) argue that in high frequency data large and small disturbance errors appear in group therefore error term variances can be shown as a function of their lagged values. He calls it Autoregressive conditional Heteroskedasticity ( ARCH). As an investor or policy maker, we might be interested in investigating the returns and variance financial assets over observable period of time (conditional) rather than long run estimate of variance (unconditional). Engle (1982) shows that it is possible to describe the conditional mean and conditional variance of a financial asset using information set of previous period; Where is the return of financial asset in time t conditional on the information set at time t-1. E represents the expected value in statistics. Consider the simple model Where Where the rate of is return and are the regression parameters. A typical ARCH model can be written as follows: Conditional Mean Equation; Error Decomposition OR where à ¢Ã¢â€š ¬Ã‹Å"v is the part of variance which is homoskedastic and is the conditional variance which is Heteroskedasticity. This conditional variance can be shown as ARCH Conditional variance Equation, i.e. where and are non negative. Eng le (1982) has also derived a Lagrange Multiplier (LM) based principle to test the hypothesis of. Another useful variant of ARCH methodology, proposed by Bollerslev (1986) is the generalized ARCH or GARCH model. Bollerslev (1986) argues that conditional variance in financial series is not only the function of its lagged error term but also the function of its lagged conditional variances. Therefore, GARCH (1, 1) process would be So GARCH model helps to explain the conditional variance with the help of past squared error term and conditional variance lag value. Which also means that conditional variance at timeà ¢Ã¢â€š ¬Ã‹Å"t would be function of long run variances and also variances conditional on past information set (short run) or observed shocks i.e. . Testing for ARCH/GARCH effects: Before estimating Arch/Garch techniques, it is first important to check for possible presence of Arch effect in order to know which model is requires the ARCH estimation instead of OLS (Ordinary Least Squire). The presence of ARCH effects in a regression model does not invalidate OLS estimation. However it implies that there is more efficient nonlinear estimator than OLS. (See Table 1.1) Obs*R-Squared is 147.26 and has a probability limit of 0.000. This clearly suggested that ARCH effect is present and presence of Heteroskedasticity suggested that ARCH/GARCH is appropriate model for this type of time series data. So we can apply ARCH/GARCH model on this data instead of ordinary least squire regression. Result of GARCH effects: The results of GARCH are presented in Table 1.3. The first column presents the regression results when we include as independent variables dummy values of the regime, terror, and war. In most of the cases, the variables enter with the anticipated signs, but not all of them are consistently significant at the 0.05 level. We can see an evidence of significant negative impact of terror, regime that show due to bomb blast in Pakistan and change in government negatively impact the country stock return in long run while insignificant positive impact of war on the country stock return. The results can further explained that stock return volatility every day is explained by approximately 71% of the previous months return volatility for Karachi stock exchange. This is significant for KSE returns. The coefficient of return innovation are statistically significant for market implying that new information arrival into the markets has significant impact on predicting next days stock market v olatility. Because, the constant term in the variance equation for KSE is significant. The results of GARCH (1,1) are presented in Table 1.3 (Table 1.2) The model can be written as; Mean Equation: = 0.001188+ 0.064048* R_KSE(-1) Variance Equation: GARCH = 4.01E-05 + 0.20721*ARCH+ 0.713458 GARCH(-1) 1.21E-05*Terror + 1.93E-05*War -1.48E-05*Regime The persistence parameter for KSE Durbin-Watson stat = 1.943, which is 1. This show a very explosive volatility in KSE returns. It also demonstrates the capability of past volatility to explain current volatility (Engle and Bollerslev, 1986) and because it is very high, the rate at which it diminishes is rather very slowly. For ACRH/GARCH, conditional standard deviation and conditional varience graph were as shown in figure 1.2 and 1.3; The GARCH coefficient is both statistically significant and conforms to expectation. This implies that past variances exert significantly positive effect on stock return volatility in KSE. On the basis of these results, it is evident that there is significant time varying volatility in Pakistan stock market returns during the sample periods. Conclusions and Recommendations In this paper, we have estimated a nonlinear GARCH model for daily stock returns volatility and terror, Kargal war and regime in Pakistan. Data for the estimation of GARCH (1,1) models was obtained from Yahoo finance and South Asia Terror Portal and news paper of Pakistan. The asymmetric effect of terror, war and regime on stock returns and volatility was investigated. Preliminary investigation into the nature of the data reveals that study had to employ ARCH/GARCH techniques for data analysis. Firstly, results show evidence of time varying volatility in stock market returns across the market and from the asymmetric model, results indicate that bad news has larger impact on stock volatility than good news in the KSE. The result for KSE showed that terror and regime has negativity impact on returns of KSE while war has positively effect, it may be due to short term period of the war. All three variable are significantly have their impact on the returns.

Sunday Field Trip And Sketch / Photo Essay - 1626 Words

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How the Ideal Gas Law Applies to Real Physical Experiments free essay sample

Student: Wanda Mattson Rhodes Date: March 12, 2015 Partner: Tiara Key Introduction Section: 721 The objective of this lab was to examine how the Ideal Gas Law applies to real physical experiments. Using the Ideal Gas Law, we were able to find absolute zero and the universal gas constant. An ideal gas is a gas that is composed of a set of randomly moving non-interacting point particles. The Ideal Gas Law is given by the equation: iv = nor Where p = pressure (Pa) V = volume (mm) n number of moles (mol) R = Universal Gas Constant T = temperature (K). Couture Collect Beakers of different Ethanol and Ethylene Glycol mixtures with ratios of 00, 25:75, 50:50, 75:25, 100:0 percentages of mixture. Place dry ice in each beaker. For each mixture ratio use lab quest to determine the temperature and pressure of each mixture. Record all data and plot graph. Rest Its The results of our experiment Showed that percentages with a higher Ethylene glycol content had a higher pressure, but lower temperature compared to the mixtures with higher Ethanol content. We will write a custom essay sample on How the Ideal Gas Law Applies to Real Physical Experiments or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page In our lab we noticed accurate trends in pressure and temperature. We also observed that Ethanol had a lower pressure at 1 00%, than Ethylene Glycol at 100% As shown in the graphs below Discussion In out lab experiment for the most part we measured everything accurately when it came to recording temperature and pressure of the Ethanol and the Ethylene Glycol mixtures. The one thing that I did notice a trend in is the longer the dry ice sat in the mixtures compared to when it was first submerged the pressure and temperature changed relatively.So I think in this experiment our calculations are off because we were measuring the pressure and temperature of the mixtures all at different times after the dry ice had been submerged into the mixtures. Conclusion In conclusion this lab indeed did show us trends of pressure and temperature that we should have seen. While pressure increases, temperature decreases, and when Pressure decreases temperature increases.