Tesco Utilising the Marketing Mix Essay Example for Free

Tesco Utilising the Marketing Mix Essay Tesco is one of the world’s international retailers and is recognised as the market leader in the UK supermarket sector. Tesco state that their core purpose is ‘to create value for customers to earn their life time loyalty’ Evaluate how Tesco and other supermarkets utilise the marketing mix to compete in the market place. Tesco is the leading retailer with a market share in 2010 of 29.7% (Wright, 2012), a reason they have proven to be such a successful business is because of their well thought through slogan ‘every little helps’ which is simultaneously used to shape their core values, the slogan is now embedded throughout every aspect of the organisation. Tesco along with many other business use the marketing mix model, otherwise known as the 7 P’s to set effective business strategies in order to provide a good quality of service to their customers. To compare the broadness of the way the marketing mix works for different businesses another leading supermarket chain should be chosen. Asda in 2010 had a market share of 16.9% (Wright, 2012) also applies the marketing mix in considering any values or goals. Consequently their slogan is ‘Asda, always cutting prices’ Asda’s slogan is used similarly to Tesco’s as a means of shaping the business. This ethos is used in order to sell their brand effectively to get a higher amount of Revenue. In a highly competitive market, Tesco and Asda need to make sure the marketing mix model is considered effectively to ensure the business is strong enough to survive in the supermarket sector, meaning all core values must be relevant and work effectively for these profit orientated businesses allowing them to reinvest and develop their brands. Price is a section of the marketing mix, when considering prices if a product is priced too low or too high, it could mean a loss of sales for an organisation. Tesco attempt to meet the consumers in the middle by having lower prices that still give them a reasonable amount of profit. One of their aims is ‘continually increase value for money’ they did this by completing a basket scheme where they then implemented individual prices per product line to insure no major price difference between them and Asda  (Anonymous, 2000). However the problem Tesco are facing is that 80% of consumers fell into the squeezed middle bracket (Wood, 2011), consequently Tesco is having to cut the price of essentials and enforce a psychological pricing strategy to attract customers who are now below the middle class category to ensure they keep their revenues high. Compared to Asda’s more laid back approach where their policy is to have ‘permanently low price through a rollback scheme’ research shows that their prices are on average 5-10% cheaper than the market average (Anonymous, 2000), after looking over Asda’s pricing methods it seems the favoured pricing strategy is the Economy pricing (Anonymous, 2003) where all costs are kept low to insure cheaper products and to make sure a mass market of consumers can afford various products due to the lower prices. Product is a key part of the marketing mix, it involves the brand itself and the service a business is providing to gain a large amount of capital and attract customer loyalty. Tesco’s have expanded into many different markets with their range of products from petrol to food and clothes. It’s become clear to Tesco now that it’s value or basic range has become considerably popular and Tesco’s Value brand is now one of the biggest grocery brands in the UK, even bigger than large popular businesses such as Coca-Cola and Walkers (Anonymous, 2008). This break through has allowed Tesco to focus on other aspects of it’s product portfolio leading them to introduce over 2,000 new and improved food products after looking over customers reviews about product quality being increasingly important to them (Tesco PLC, 2011) as well as looking closer at it’s newer ventures, like Tesco bank and the Tesco’s in Korea. However, when considering all the ranges of products Asda’s would find it difficult to compete with all their products as they are mainly focused on cheaper products which shows as around half their products sales are own label products (Walmart, 2010) Asda mainly focuses on their own brand products as they are the higher sellers and so they ensure there’s a continuous flow of new product innovation so that they are ahead of the consumers needs (Walmart, 2010). Place in the marketing mix looks at where the product/service is sold whether it’s on the internet, a small corner shop or a massive shop. A new place for the supermarket sector to sell at is the internet, because more and more consumers are working longer  hours to get money it is simply much easier for them to do an online shop rather than having to go to the shop, which is shown well in Tesco’s new advert. Tesco’s have made the internet shopping experience their own as they are currently the fastest growing online retailer in volume terms in the clothing, footwear and accessories market (Tesco PLC, 2011) as well as a 15% growth in the online business (Tesco PLC, 2012) proving that when they invested in the internet shopping experience they have helped ‘to create a value for customers to earn their life time loyalty. As well as this, they understand the local market of stores where some local stores have lower prices on a limited range of goods (Anonymous, 2000) building up customer relations to create higher quality services and increase the customer loyalty. Asda has also advanced onto the online shopping hype and has found that in 2009 the home shopping growth was around 40% (Walmart, 2010) Asda understand that this is a growing trend and so have invested into developing new channels and finding innovative ways of reaching customers whether they are at home on the move o r in store (Walmart, 2010), one of the new creations for Asda is an app store which shows they are modernising with the times. Promotion is a vital way in advertising a company, product or service as a means of branding, as well as offering money off deals to make consumers feel like their saving money. A way Tesco’s has managed to keep customer loyalty as well as creating lots of promotional deals is the Tesco club card, which was launched in 1995 (Tesco PLC, 2011). The clubcard allows a customer to collect points for money vouchers which consumers can then spend in store or online. This method allows consumers to get money back from their purchases therefore convincing them to revisit the store to get a return on their spending, this helps with improved customer loyalty as well as high brand awareness. Asda take a different approach and chose not to create promotional deals, but instead highlight their cheaper products this is the Asda rollback scheme. Asda is Britain’s lowest cost to operate supermarket (Walmart, 2010) and so their promotion is the brand and the fact that Asda have a permanently low prices policy, which means consumers feel they would save more money allowing them to have more disposable income and spend more money on extravagant products in Asda if they wish. People are an essential part of the marketing mix, as it relates to the consumers, labour, suppliers, and stakeholders anyone who helps the business stay afloat. Tesco  invest in their staff skills to insure a high quality service, as well as being dedicated to providing a diverse career opportunity for all their staff worldwide (Tesco PLC, 2011), this would provide employees with greater job satisfaction and the opportunity of being promoted. As well as internal affairs, Tesco also thinks about the people externally of the business, as there is increased demand for locally produced food, therefore Tesco now supports the local economy to assist in s ustaining the community and so has increased the local buys from  £850 million in 2009 to  £1 billion in 2010 (Tesco PLC, 2012) to ensure local suppliers are support after the shake of the financial crisis. This is also better for the consumers as imports are more expensive so product costs can be cut. Asda has an ‘everyone matters’ approach demonstrating that colleagues are a vital resource, to ensure the staff are content Asda has flexible working practices and world class reward packages which since it was launched in 1999 has given out  £129 million in bonuses. Asda also likes to help the community so a lot of the suppliers are local, consequently products are cheaper and they have less environmental impact reducing their carbon footprint (Walmart, 2010). Process relates to delivery and the responses to any complaints, for example customer services. Tesco wanted to get customer feedback so introduced ‘every comment helps’ the feedback was based on customer service and product range the got over 20,000 positive responses which reflects on the business well. Tesco has since train around 80,000 staff as a means support them to give helpful advice, be friendl y and efficient. Also keeping up with technology and providing the self service system which currently accounts for around 10,000 transactions per week, this makes queue times shorter as well as being a quick and easy option to make shopping a more pleasurable experience (Tesco PLC, 2011). Asda has provided 1,100 vans, from 160 vans and one dedicated home shopping center that provides coverage for 97% of the UK, therefore a large consumer base is met with only a few people not being able to be delivered to providing a very efficient service (Walmart, 2010). Physical evidence considers the atmosphere of the business and the effect the business has on consumers whether it’s good or bad. Tesco puts staff through training to provide consumers with the best possible service, because of the high levels of engagement customers are able to enjoy the benefits of Tesco’s having confident and experienced staff on hand to help at any given  moment (Tesco PLC, 2011). This provides the Tesco shopping experience with a more relaxed experience for consumers who can be comfortable to ask employees for help. An ex-employee for Asda said how it was a ‘fun and vibrant culture to work in, and how there were regular meetings at the start of shifts to keep all staff updated. How he was lucky enough to be accepted in the stepping stone scheme which trains up employee to promote them up levels in the business,’ (Tasda123, 2007) after analysing the employee review you can really feel how positive the experience is working at Asda, and a positive employee attitude would rub off on a customer meaning they will have a good experience too. As long as the feelings of the employees of businesses are positive then the shopping experience can be enjoyable rather than a chore. After looking over two of the largest supermarket retail you can see how well thought about the individual parts of the business is, every part has been considered. It may be that for some businesses one or multiple sections of the mix has more relevance to their main aims, for example if Tesco wants ‘to create value for customers to earn their life time loyalty’ they may primarily look at promotion and process to enable the best service they could supply to their customers. The supermarket sector is competitive and so utilising the marketing mix has helped Tesco and Asda to develop their own individual take on the sector, to form their own unique business strategies from what they may have researched using primary or secondary data. Looking closer at Tesco and Asda, you can see some similarities, but in the end, they are different in order to compete to gain a higher market share and increase market share. The different parts of the mix will show the effectiveness of the business to increase capital, Tesco has a large range of products at varied prices whereas Asda has a more limited amount of products and the prices are cheaper with the idea that customers can afford to buy more of their products and spend more. After looking over how two businesses in the same sector apply the marketing mix you can observe that they compete from the start in order to gain an increased brand awareness, to do this they must look at each part of the mix to discover it’s overall ethos for which Tesco’s is ‘every little helps’ and Asda’s is ‘Asda, always cutting prices’ both are completely different to attract consumers. Currently statistics show that Tesco’s mix is more effective than Asda, this is because they have invested capital in expanding  all parts of the mix to appeal to a mass market. If used efficiently the marketing mix is useful for competing, to show a business what it’s internal and external running’s are like so that they can establish their ethos to market the business effectively to gain a larger holding in the sector it works in, therefore insuring the marketing mix is thought through properly will help in establishing a business. Bibliography * Anonymous (2000) (Journal) Company pricing policies, Competition Commission, p. 80, p87-88. * Anonymous (2003) (Website) Pricing Strategies, [Online], Available: http://marketingteacher.com/lesson-store/lesson-pricing.html [2012]. * Anonymous, T.- (2008) (Website) Things You didnt know, Tesco Report, pp. 120-121, Available: http://www.superbrands.co.il/pdf/TESCO.pdf. * Tasda123 (2007) (Website) Being an ASDA colleague, 14 February, [Online], Available: http://www.dooyoo.co.uk/employment/asda-stores/1046495/. * Tesco PLC (2011) (Report) Tesco Annual Report 2011. * Tesco PLC (2011) (Report) Annual Reports And Financial Statements 2011, p.18 p.37, p.49. * Tesco PLC (2011) (Website) Timeline, Tesco, Available: http://www.superbrands.co.il/pdf/TESCO.pdf. * Tesco PLC (2012) (Website) Growing Retail services, [Online], Available: http://ar2011.tescoplc.com/business-review/growing-retail-services.html [2012]. * Tesco PLC (2012) (Website) Local Sourcing, [Online], Available: http://www.tescoplc.com/corporate-responsibility/our-sourcing-policies/local-sourcing/. * Walmart (2010) -Asda Home Shopping, All About Asda, p. 15. (Report) -Our Digital Business, All About ASDA, p. 15. -Our Food, All About Asda, p. 10. -Our Story. and today, All About Asda, p. 3. -Our Suppliers, All About Asda, p.7. -What We Love About Asda, All About Asda, p. 6. * Wood, Z. (2011) -Tesco declares war on rivals with  £500m price cutting offensive, The Guardian, September. (Journal) * Wright, C. (2012) Tesco market share at its lowest since May 2005, The Grocer. (journal)

Beautiful Happiness In A Meaningless Life Short Story English Literature Essay

Beautiful Happiness In A Meaningless Life Short Story English Literature Essay I intend to write a short story featuring a few of the more potent themes present within the novelette The Outsider. This short story has simply been written to entertain, and explore the central themes and issues that I have chosen. The content of the story is gruesome and described with vivid details in some cases, so the target audience would be fairly mature, and have an orientation towards fanciful fantasy worlds. The story is set in a land where the local entertainment consists of arena type pit fights. These pit fights are similar to a council of the citys rich and wealthiest, with the lower classes also in attendance. These pit fights are also the place where status is gained and lost among these affluent members of society, with the slaves that compete being used as a means to this end. I have also interpreted the ending of The Outsider differently in my story, with my main character realising that he can make a difference with his life, and that he can live for other people rather than himself only. The content of the story is gruesome and described with vivid details in some cases, so the target audience would be fairly mature, and have an orientation towards fanciful fantasy worlds. The story is set in a land where the local entertainment consists of arena type pit fights. These pit fights are similar to a council of the citys rich and wealthiest, with the lower classes also in attendance. These pit fights are also the place where status is gained and lost among these affluent members of society, with the slaves that compete being used as a means to this end. I have also interpreted the ending of The Outsider differently in my story, with my main character realising that he can make a difference with his life, and that he can live for other people rather than himself only. The ring of steel on steel resounded around the arena, to join the din of gaudy music and jeering shouts ensuing from the on looking patrons of this violent event. The Slave Games took place every day, from the blaze of the new fire in the sky at its start, to its dying embers at dusk. The games consisted of slaves and a monster entered by the Games Keeper. Of course to make it more complicated, there were two different types of slaves, the ones entered by their master, and the ones donated. By a slave being entered it was similar to a bet being placed, with a small fee for entry paid to the games master, the fee also gave slaves the privilege of a weapon of choice. At the conclusion of the battle if the monster was the last one standing, the games master would keep the majority of the winnings, otherwise if a slave was the victor; their master was granted higher standing in society and a large sum of gold as their winnings. There was also an unspoken tradition, that the victorious s lave was granted freedom for their heroic deeds performed within the arena. The donated slaves on the other hand, were the unwanted outcasts of rich society that the Games Keeper bought for a small fee, to liven up the games as he would call it. The scything edge of an axe whistled overhead as the young man shied away from the maiming blow. He dodged left and ducked right, seemingly untouchable with his great agility, and quick mind. His short success ended with his impalement upon a long, unyielding, bronze tipped spear. He was dead before his knees buckled and his bruised and blood spattered head lolled to rest upon his chest. His limp body knelt upright, held there by the protruding spear. His dark, lifeless eyes stared unfocused at the floor of the arena, in a way which made it seem as if the poor boy was still in pain. Tayten observed this, in the moments after he had thrown the spear. But now the boy was dead, and the dead dont feel a thing. He retrieved his spear before turning to the frenzied sounds of battle nearby. The initially frantic fighting in the pit had collapsed in to smaller groups of the more skillful fighters that had survived the morning. Usually the donated slaves would be first to succumb as they main ly consisted of the old, the weak and the lame, though among these tribute slaves, were a handful of the forsaken; the brawlers, the thieves and those who had displeased their master. Tayten was of the forsaken, he was a free man captured, and bludgeoned into slavery. But he valued his freedom greatly, and he loved to journey even though he thought life was meaningless. How could one man make a difference, and be remembered after his death? He returned from his reverie with the great horn blast that signaled the release of the monster. The clash of steel ceased as the remaining slaves turned to face the monster. Usually it would take more than one slave to bring the monster down, so it was at this point that the slaves banded together in a bid to survive. Though if the monster was killed, the slaves would continue the fight between themselves, until a victor was eventually decided. A large iron gate slowly rose to reveal a dark entrance, for a moment nothing emerged, then with a roa r of rage, a full grown bull Minotaur emerged. Its pelvis covered in the blood marred rags of a loin cloth, and standing nearly half again the height of the tallest slave still alive. It carried a great jagged edged axe over its shoulder, mangled gore still present on its edge; it was truly a creature to instill fear into the hearts of even the bravest and most foolhardy of humans. One man turned tail and fled for the opposite side of the arena, sadly this drew the monsters attention and with two leaping bounds the Minotaur trampled the man under hoof. The other slaves charged, with shouts and battle cries, but Tayten held back, silently waiting to see what happened. The Minotaur spun with his deadly weapon, and cleaved in half the two fore runners with a single sweeping blow, seven slaves remained. The next slave, a burly man with a dusty orange beard and a balding crown, jumped with his two-handed sword held high, in an attempt to cut the Minotaur in half. But it simply bounced of f the thick hide and the Minotaur let out a deep rumble of hatred, before crushing the mans skull with the haft of the axe. Death was dealt instantly to the next three slaves, who all attempted a similar approach. The next slave attempted to go for the eyes, but with a sudden jerk, the Minotaur had thrust down with his head, skewering the adolescent upon his horns. Blood now ran down the Minotaurs face and muzzle, some even obscuring vision in his left eye. The sight of blood seemed to push the Minotaur into a frenzy, and he quickly dispatched the next closest slave, an older woman with a hard look in her eyes, and a slight scar running across the bridge of her nose. He was only able to see these finer details, when her head came to rest a foot from where he sat. The Minotaur lunged down with his axe in an attempt to kill the last slave opposing him. But the young boy was surprisingly nimble and evaded easily. A dagger flashed into the boys hand, and he slashed fiercely at the Minot aurs heel. Surprisingly the small blade cut deep, severing the tendon in the monsters leg. This time the Minotaur gave a cry of agony, and fell to one knee. Tayten watched again as the dagger flashed, realising that it must be made of glass; the only material hard and sharp enough, possibly capable of cutting through the Minotaurs thick hide. The Minotaur was too slow to catch the boy, and was obviously spiteful for it. With decisive slices, the Minotaur was unable to hold its axe, but the beast was still deadly. The boys overconfidence in his soon to be triumph over the beast ended with the bone crushing strength in the Minotaurs undamaged hand. The monster lifted the feeble body of the boy high into the air; the Minotaur stared hatefully at the corpse. In an eruption of still warm blood, a long hard shaft emerged from the boys chest. The Minotaur watched the silently in the instant before his death as the bronze tipped spear entered through his eye cavity, and ruptured his brain. Tayten registered the tearing peals of a bell tolling, and the deafening uproar that the crowd was making. None of this concerned him, not even the dead child he had plunged his spear through. Everyone died; it just so happened that they would be meeting her before he did. The crowd grew silent, all eyes watching him. The Games Keeper had risen, and it appeared that he was expecting an answer for an unspoken question. He turned to his peers and asked quietly, Is he not one of your slaves? Not a single one answered. Slaves were expendable, but keeping with his faà §ade of the generous benefactor for such events, he would need to keep the crowd and his rich friends happy. It was blatantly apparent though, that the previous master of the donated slave, expected retribution for the slaves survival. A solution came to mind. With a hollow cone of bronze pressed to his lips, his booming voice emanated out across the stadium, Our victor, Tayten is the champion of this day, and we acknowledge him for his deeds, he let the echo of his voice die before continuing. Never before has a donated slave won this tournament, but I have a solution. As I bought him from his previous master, it will be I who decides his fate, the crowd seemed hold its breath in anticipation of the Games Keepers verdict. The Games Keepers right arm shot out in front of him, with his fist clenched and thumb held horizontal. His thumb dropped slightly, and the crowd began to boo. But this was all part of the act, and before it got out of hand, his thumb shot up in definite sign of approval. The slave would be granted freedom. The crowd applauded with many shouts of joy, even jovial music could be heard in the background. The Games Keeper smiled as he watched the jubilation he had wrought within his crowd, before dropping his arm a moment later. His smile evaporated as he perceived the accusatory eyes of the contemptuous dark eyed noble boring into him. He bowed his head down next to the seated nobles ear, You know, the games keeper continued as if remembering something of importance, many unfortunate fates can befall a freed slave, once he has left the protection of the arena. As the Games Keeper marched off to oversee proceedings of the slaves release, the dark eyes of the noble brightened considerably, and a mean smirk marred his face. à ¢Ã¢â€š ¬Ã‚ ¢Ãƒ ¢Ã¢â€š ¬Ã‚ ¢Ãƒ ¢Ã¢â€š ¬Ã‚ ¢ As Tayten walked beneath the low arch of the arenas gate, a smile caught upon his lips. The prospect of being free was a truly wonderful thought indeed, and the first place he would go was the local tavern. The smell of spirits wafted through the dark enclosed room, bringing back memories of times long past. He drank his fill, but a slave released from service has no money, so when the time came to pay he left promptly to the disgruntled shouts of the barman. He had no money to pay for lodgings, so he settled down in an alley way for the night. The comforting warmth from the liquor spread throughout his body, dulling his senses and propelling him over the edge into the blissful abyss of sleep. He wondered mildly in the moment before slumber came, whether death would be like this, the only difference being you never wake up. Once the mercenary was sure that his quarry would not be moving for the rest of the night, he disappeared back into the night to find his employer. Tayten woke with a start. Four tall dark figures loomed ominously about him, all wore deep set hoods. He realised then that they were only tall, because he was still sitting. Shakily he began to rise, but a heavy blow sent him back to the ground. The alcohol, still thick in his blood, was taking a heavy toll on his ability to comprehend what was happening. Who were these people? One of the men drew back his dark cowl to reveal his identity. The dark eyed noble stared malevolently down upon the man who had once been his slave. With a slight hand gesture from the noble, the three remaining hooded figures roughly seized the prostrate Tayten, hauling him upright to stand helplessly before his wicked enslaver. With a bitter smile, the noble spoke, I bet you thought it was your lucky day. Insult me and survive to tell the tale, I bet thats what you thought, the noble mistook Taytens drunken haze for impudence, and his next words were filled with venom as he sneered. Well you know what you poor dog; your worthless life will be cut to its wick this night, the nobles mouth formed an angelic smile, as he concluded. Not to worry, for I assure you, it will be painful, and before the end you will be begging for death. The sounds of voices approached, and a group of soldiers with lit torches past before the entrance to the alley, that the group was congregating within. The city was not without laws, and murder was punishable by death. The noble realised the vulnerability of his position, and decided to withdraw, leaving the hired mercenaries to dispatch the insolent slave. The three hired soldiers stood in silence as their hirer swiftly disappeared into the darkness. Making sure that the noble was definitely gone before speaking, the man to Taytens left spoke with a fairly high pitched voice, Well wasnt he a nasty one. The man to Taytens right replied simply, in what appeared to be a grumpy tone, They always are. The third soldier behind him, responded to this by saying, Yeah, that may be so, but they dont have the guts to do their own dirty work, and I guess we should be thankful for the work. The second soldier responded in a quietly outraged voice, WORK, you call this WORK!? We get paid so little by these rich bastards, when they have so much. The third answered, Youre right, but the rich only stay rich because theyre so selfish with their wealth. The second, Im sick of how bad were treated, after this Im going to get an honest job with honest pay, at least then Ill get the respect I deserve. The first cut in before the third could answer the seconds lamentations, Well you know we could make more money for these jobs, and still have the same end result. The other two soldiers turned, and in unison the third asked, How? a gleam sparkling in his eye, while the second stared blankly at the first and before asking an unintelligible, What? The first explained his idea, and the other two agreed upon it. They would take the man they were ordered to kill, and sell him to the pit master as a donated slave. Not only would they earn extra gold for this job, but they need not even get their hands dirty with the murder of another person. Taytens head had cleared slightly, and he was now partly focused upon the situation he was in. A voice spoke very close to his ear, As we move through the city, do not make a sound, do not make eye contact, and do not draw attention to yourself, otherwise we will kill you there and then, Tayten nodded, and the group set off. The journey was uneventful, and just before they reached the arena, they turned into a side alley. The soldiers had agreed that the slaves death needed to be assured, so they would slightly maim him, but not making it too visible so that he would still fetch a fair price. The second soldier came over, and with the pommel of his bastard sword, struck a blow that cracked a couple of ribs on the left side of Taytens body. Tayten keeled over from the pain, but he did not cry out. The troupe continued to the slave block built beside the arena, where they found the head slave master and bargained a good price for the slave they were donating. Tayten was then exchanged for the gold, and the trio of mercenaries departed. Two pit guards came to lead him down into the holding cells. As he was led to the entrance of a dark corridor trailing down into the depths of the earth, he remembered the circumstances of his last visit to this dank, moldy hole in the ground. When the noble had first brought him here, his hands had been bound, and a hessian sack had covered his face. As his eyes searched around the dark tunnel, he knew where he was. He remembered the smell and the feeling of oppression he had originally felt the first time he had come down this way, with his head concealed within the dark sack. But the aid of sight didnt help much, as it was hard to see in this dark, oppressive place, regardless of whether or not his sight had been obstructed. He looked at the faces of his escort, but he didnt recognise them, and it was probably the same for them. He was left alone within the dark holding cell for the night. He remembered from the first time, how his mask had been removed, and how he had been affronted with the sight of so many slaves in a single cell. It wasnt the fact that there were a lot of slaves; it was simply that his freedom was greatly restricted within such a tightly packed cell. Yet now he had his freedom within the cold dark cell, and it was eerily quiet. He had his freedom, and yet it wasnt what he remembered it to be. Tayten remembered freedom as warm and cheerful, but this freedom was the opposite. In fact, it had been in the crowded cell on the first night that he had experienced true warmth, nestled in with all the other slaves. He had also found the sounds of people in slumber, far more pleasant than the unearthly hush that had now settled over the chamber. Maybe freedom wasnt what he wanted anymore. He lay down, the cold leaving a bitter ache in his cracked ribs. It would be a long nightà ¢Ã¢â€š ¬Ã‚ ¦ Tayten must have drifted off, as it seemed to him that only moments had passed, since he had lain to rest upon the straw matted floor. But the morning bell was already tolling, signifying the start of the new day, and the opening of the arena gates to paying patrons. Taytens eyes drooped with exhaustion, as he stood up, but his mind was clear and his movements precise. He vowed never to drink alcohol again. His cracked ribs hindered his movements slightly, but as long as he protected that area, he could manage. Just then, a trio of pit guards entered the donated slaves holding chamber, one looked confused for a moment, before surprised recollection dawned upon his face, and he turn and ran out of the room. The two remaining guards shrugged their shoulders, and turned back to the only slave in the cell. The door was unlatched, and Tayten was led to the holding area, where many tunnels converged into a large central hall. The slaves would remain here, until the great gate at the far en d was opened, and the slaves would emerge into the arena. The entered slaves were already present, and Tayten was the only donated slave, so the games would begin at anytime. Taytens reticent nature had turned to mild annoyance for the noble who had imprisoned him, and then continually keeping him from his freedom. Tayten recalled the reason behind him becoming a donated slave in the pits; he had attempted to escape the nobles holdings, but had failed, and had been sentenced harshly by the noble for attempting to leave his service. This new found anger welled up within him, as the door on a side passage leading into the great hall, was thrust open by a tall, illustriously dressed man, stalking furiously towards the central holding cell. The fuming glare of the noble passed over the slaves and came to rest with livid hatred upon Tayten. Tayten smiled back, the nobles eyes darkened and a deep set frown embedded itself where his mouth used to be. Unsettlingly, a moment later, he in turn gave his own wicked smile to Tayten. Just then the bell tolled, to signal the start of the fight. As tradition would have it, the donated slaves were the first to enter the arena, followed a few moments later by the entered slaves. Tayten was happy to leave behind the demonic stare of the noble, so he quickly entered the field. The first thing he noticed, was that amazingly the arenas canopy had become a patchwork of mirrors joined together to form a shell between the spectators and the pit fight. It was obvious that the crowd could still see him from the excited shouts he received upon his entry, even if he himself couldnt see them through the mirrors reflective surface. Some members of the crowd let out surprised yells, as they recognised the victor of the previous day, but the initial surprise turned to angry confusion. Why was the victor (a free man) forced to fight in another round of the Slave Games? The entered slaves had been watching the interaction between the noble and the slave, so when the noble gestured that they should come closer, the entire group of entered slaves obeyed. When they had roughly formed a semi-circle along the wall of the holding pen, the noble spoke, Whoever kills that donated slave, he paused to gesture towards the open great gate, before continuing. Will be granted their freedom. The noble turned and left the holding area, the entered slaves looking at one another. A second smaller bell tolled within the holding area, to tell the entered slaves to cross the threshold into the arena. The slaves quickly departed and took up positions around the arena battlefield. The Slave Games were about to begin. The bell tolled and the fight began. The start of the fight wasnt as frantic as was usually the case. There were no other donated slaves, but Tayten knew that the fighting would be more intense sooner. A few slaves detached themselves from the main fighting, to single out the lone donated slave, this seemed odd to Tayten, as they usually focused on the more aggressive opponents. None the less, Tayten killed the first opponent who challenged him and took his blunt knife. The second enemy was of stocky build, and wielded an axe. But Tayten threw the dagger he had recently acquired, the tip catching the unprepared warrior in the eye. He fell dead, and Tayten retrieved his axe, improving his odds of survival by gaining a better weapon. The noble reemerged in the wealthy section of the spectator seats, and sat alongside the Games Keeper. The Games Keeper unhappily commented, I didnt expect you to bring him back here, when I told you about the unfortunate fates that can befall a free slave. The noble replied, Truly it was not my intention for him to be back here, but none the less, he will die today. Games Keeper, How can you be so sure, he survived once didnt he, why not again? Noble, He didnt have to fight much the first time through, lets just say Ive ensured that all those entered slaves will be hounding him like a plague of black flies to rotting meat. Games Keeper, What did you tell them? Noble, That the person who kills that slave of mine will be granted their freedom. Games Keeper, Never before has this happened, and I will not allow it today. Noble, Calm yourself, of course I lied. The dismayed expression upon the nobles face bespoke of his friends lack of trust. He finished what he intended to say with a mean smirk, I will grant them freedom by their own death, a moment of silence fell between the two, before the noble curiously asked, What monster have you decided to enter into this days Slave Games? Games Keeper, Ahh my friend, that is for me to know and for you to find out, but Ill give you a hint, I had this dome especially built for her unique ability, and I think I will be releasing her early, to give the slaves more of a fighting chance. Tayten was in the thick of battle, fighting two particularly vicious slaves at once. He had managed to acquire a short sword, and was duel wielding this with the axe he had, to keep the hungry weapons of his two adversaries at bay. One had a spear, while the other a scimitar. The man with the scimitar would attack at close combat, with a series of ripostes and thrusts that had Tayten moving back one step at a time. While beside the scimitar user, the woman with the spear was jabbing and thrusting brutally, in an attempt to skewer her foe, though not very skillful at her weapon, she was keeping him busy, as he couldnt move close enough to deal a killing blow, while still defending against the other slaves attacks. Unexpectedly a second bell rang clearly, and far too early. The monster had been released. Tayten had been distracted for only a moment, but that was all that was needed, for the scimitar warrior to lop half his left hand off. With his hand destroyed, he could no longer hold the weapon that was defending against the spear, and as this happened; the woman saw her opportunity and plunged the spear through his cracked ribs, and out the opposite side of his body. He was pushed back by the force of the spear, but then he fell forwards onto one knee, which yanked the spear from the womans grasp. He knelt there upon his heels, resting. He closed his eyes, and listened to the silence of the field, as most of the slaves turned to watch as the monster entered. Someone let out a scream, but Tayten didnt care, he gently grasped the shaft of the spear, and began to pull the shaft towards him, pushing it out the other side of his body. The pain was immense, and he struggled not to scream. It felt as if his left lung was filling with a warm fluid, and he was finding it becoming harder to breathe. He could hear people running about him, but it was in a disorganised fashion which meant that the slaves where in a state of chaos, and the monster was getting the best of t hem. Tayten used the blood covered spear that now lay behind him, as a support when he rose to his feet. He then opened his eyes, and found himself staring into the eyes of a statue. He spun around slowly taking in the sight; the battle field was littered with many statues, in the exact likeness of the slaves he had entered the arena with. He couldnt hear any movement, but he caught sight of what appeared to be the tail of a large snake, disappearing behind the obstructing statues. Tayten remembered the tale of the Gorgon, a woman with snakes for hair, and the lower body of a serpent, and possessed the ability to turn a human to stone by looking them in the eye. He immediately closed his eyes once again. He stood still listening for the faintest of sounds. The dry slithering rasp of something moving across the surface of the arena emanated from behind him, and in a single fluid movement, he turned and threw the spear. The chink of metal on stone told him he had hit a statue, and now weaponless and weakened, he knew he would soon be dead. He was half tempted to open his eyes, but he was unwilling to give up his life just yet. So he stood still and waited, while the rasp grew steadily louder. A dry whispery voice spoke close to Taytens ear, If you had thrown that spear a little higher, it would have cleared the statue, and killed me. A real shame too. Tayten felt something slither around his boots and slowly bind around his damaged body, he didnt need to guess that that this was the gorgons snake like body, constricting her victim. He was wrapped within her coils up to the base of his rib cage, but he removed his hands, before they were stuck tight next to his body. The voice came again, this time directly in front of his face, Why dont you open your eyes son of man, and stare into my eyes. The gorgon had noticed his wounds and knew well of his pain. Blood slid over her scales, dripping from Taytens hand and the still heavily seeping wound through his rib cage. Tayten spoke to the gorgon in a soft voice, What is your name gorgon? Surprised by the humans question, the gorgon replied easily, Medusa. Tayten replied with a smile, I am truly sorry Medusa, but I will not. Not until I have changed the world, and done something to be remembered by. Medusa, Silly human, one soul cannot change the world. Something brushed against Taytens face, and he recoiled slightly in shock at the unexpected feeling. More such light caresses came and went. All that Tayten cared was that they felt nice, and he began to slightly bob his head forward in search of more. Suddenly, unexpectedly, he felt his lips brush against Medusas own cold, yet subtly soft lips. Medusa hurriedly withdrew her face in alarm, her hair venomously hissing at the helpless human. The gorgons initial anger faded away to be replaced by inane curiosity, her hair had stopped hissing, and she moved in closer again. Her face was close enough to see the humans frowning brow, and once again she let her hair lightly caress his face as she easily came forwards to kiss the man. He had tensed his body in surprise, but it soon relaxed. She wrapped both arms around his neck, as to not aggravate his wounds. He also reached behind her and interlocked what was left of his hands. He could feel where the silky smooth human skin gave way to th e smooth scales of a snake. He also felt a strap running across her back, which undoubtedly held the metal breastplate to the front of her body that was now pressing lightly against his chest. The assuring pressure of the cool metal soothed Taytens body, and encouraged him to be conscious of how intimately entwined their two bodies were. Games Keeper, It appears as if your slave is dead. Noble, Not yet, I still havent seen his corpse or statue. Games Keeper, If you ask me, youve become obsessed with killing this guy, why cant you admit that he is dead yet? Noble, Maybe youre right, but you wouldnt believe how hard it has been for me to kill this man, just when you think he is dead; he jumps up and surprises you again. Tayten couldnt understand what he was feeling. What was this new unexplainable emotion? What was this word that was embedded within this emotion; love. He felt so happy and yet he was enslaved, it felt nice to kiss her and her gentle hair lulled him into bliss. Maybe life wasnt about living for yourself, maybe it was meant to be lived for others. Maybe if you live for others you will find that special happiness, that beautiful happiness, that you can only feel when you make another happy. Tayten asked happily, Do you think two souls can change the world? Medusa took a while to answer, I think we can. Tayten, Please release me, so that I can change the world and be remembered, I think Ill need your help though. Gasps from the crowd, made the noble and Games Keeper turn from their conversation, to see what had happened. Standing in the middle of the arena with the gorgon by his side, was the slave, and in his right hand he held a spear. He seemed to be orienting himself (taking care not to look at the gorgon), and when he had finished turning, he was looking directly at the noble. The noble turned to the Games Keeper, He cant see us can he? The Games Keeper replied unconvincingly, Not a chance, were behind a one way mirror, we can see him, but he cant see us. The noble countered fretfully, Then why the hell is he looking at us, and how on earth is he still alive!? Before the Games Master could reply, the slave took off running in their general direction. The noble stood, and with a horrified look on his face watched as the slave threw his spear, which shattered the mirrored glass directly before the wealthy spectator seats, and impaled the head board of the chair the Games Keeper had been sitting in. Frozen with shock, at the close call, the noble began to laugh. But it was short lived as moments later he fixed his gaze upon the most terrible set of eyes he had ever seen, and in that moment his body turned to stone. The same occurred to the Games Keeper, and the majority of the rich nobles who had been transfixed by the spectacle of the shattering mirror. The crowd was in chaos, their leaders were dead and the victor of the Slave Games from the previous day who had returned for a second time, was the direct cause for this. Fearing their own death, the crowd hurriedly exited the arena.

Magical Realism in House of the Spirits vs. Realism in Madame Bovary Es

Through the application of Realism, Gustave Flaubert demonstrates Emma’s detachment of the death of the characters in Madame Bovary, which contrasts to Isabel Allende’s demonstration of Clara’s attachment to the death of the characters in The House of the Spirits by utilizing Magical Realism. In The House of the Spirits, the characters all share a spiritual bond, which leads to emotional and spiritual connections for Clara during the death of the characters. On the contrary, in Madame Bovary, Emma Bovary depicts a realistic and natural character in society which portrays her selfishness, lack of emotions, and overall detachment towards the death of the others. Both of these connections are demonstrated through Realism and Magical Realism. The author stylistically ascribes negative personality traits prior to the death of a character. These negative characteristics portray the character as corrupt. In the text, Homais furiously mentions, â€Å"You[Justin] are on a downward path†(Flaubert 231). The textual evidence indirectly describes the flaws of Emma. The excuse of Justin committing a crime and Emma’s presence â€Å"coincidentally† in the text or purposely by Flaubert exemplifies reality. Furthermore, the blind beggar mentions, â€Å"Dream of love and of love always,† before the death of Emma (Flaubert 300). In the text, the blind beggar is singing a song, although the song implies traits of Emma. Emma always desires and dreams of love which provides the purpose for the song and demonstrates her not being satisfied with the love Charles provides for her. Additionally, Flaubert mentions, â€Å"Charles was suffocating like a youth beneath the vague love influences that filled his aching he art,† (321) which implies that he still loves Emma dearly. Th... ...onnected due to the fact that ‘I slept badly and dreamt again of Rosa† (Allende 203). The diction of â€Å"again† in the text proves that thinking of Rosa occurs multiple times and that her spirit is connected with him. Additionally, Barrabas reappears multiple times, for example: â€Å"It was the last, ignominious vestige of faithful Barrabas† (Allende 269). Although Barrabas died many centuries ago, he is encountered with Blanca and Alba. He displays the most spiritual reconnection with the characters through detail more than any of the other characters throughout the novel. Allende’s House of the Spirits demonstrate emotional connections and remembrances amongst Clara and the characters through the application of Magical Realism which contrasts to Flaubert’s Madame Bovary which demonstrates Emma’s characterization and lack of emotion towards the death of the characters.

Becoming A Doctor :: essays research papers fc

Becoming A Doctor A doctor is someone who can help someone else in need. There are many types of doctors, ranging from general pediatricians to specialists. They are respected people and are looked to when something is wrong. Everyone needs a doctor at some point, so doctors are very much in demand. I am interested in this career because I like to help people. Also, it pays well so I can live off the salary. Another reason is because many of my relatives are doctors, nurses, or dentists. Even though school and training are very hard, it pays off in the end, when someone can make a difference in someone's life. I am not sure if I would like to be a pediatrician, or a specialist. Specialists probably earn more money, but do not do as much, and are required to learn more. I do not think I will want to be a surgeon, because cutting people open and taking things out does not seem very appealing. To become a doctor, one must endure a lot of training and education. In college, one must study courses to prepare for medicine, such as biology, chemistry, and some advanced mathematics. It generally takes seven to eight years to finish his education. The first four years, one would take pre-med. classes. Then it's on to medical school, where for four years one learns about the area of medicine one chooses. After medical school, about one year of internship is needed. Then he becomes a resident and practice medicine under supervision of a senior doctor. All together, it is about 11 years before one actually become an independent doctor. Doctors will always be needed. Because of this, and because of the population growth, doctors will always be in demand and the profession will continue to grow. This way, a doctor will be unemployed less, and will be more secure, financially. A doctor can earn from $60,000 to $700,000. Pediatricians and doctors at free clinics earn the least, although they are probably the most needed. There are many doctors that want to help children, so they become pediatricians, even if they earn a little less than others. Specialists earn a little more, from $90,000 to $200,000. These specialists range from neurologists, dermatologists, and urologists to cardiologists. Of course, the ones that are in need will earn more. The doctors that earn the most are surgeons. Doctors that perform tonsillectomies will earn less than plastic surgeons, and plastic surgeons will earn less than cardiovascular surgeons and neurosurgeons. Anesthesiologists, who give the patients shots during surgery, earn around $250,000 a year.

The American Airline Industry Essay -- Business Management Studies Air

The American Airline Industry The Airline Industry is a highly competitive industry with companies operating in domestic and/or international markets. Many airlines are stilled owned by their respective countries and have treaties between countries to allow airlines to land there. The industry has been taking a relatively shaky course as costs are rising and profits have been decreasing. This was further intensified with the recent terrorist attacks on US soil, which lead to higher costs as the need for more security arose. Recent financial statements of major airlines showing major losses reflect the problems that the industry is having. Yet amidst the storm, some regional airlines such as Jet Blue Airlines have managed to focus on specific markets and maintained or increased their profits. It is no doubt that Porter’s 5 forces of competition are at play in this industry. These forces are the Threat of Substitutes, Threat of New Entrants, Competitive Rivalry, Bargaining Power of Buyers and Bargaining Power of Suppliers. Threat of Substitutes The airline industry has been plagued by rising costs resulting in poor profits. The recession adversely affected the industry during the first half of 2001. This was intensified by the September 11th attacks, when two airlines were crashed into the Twin Towers in New York City by terrorists killing everyone on board and demolishing the buildings. This lead to an immediate reduction in air travel as customers did not feel safe about flying and an increase in the use of other forms of transportation. Amtrak, a railway company, reported an increase in passenger volume in the days following the attacks. Though this has leveled off as things returned to normal, rail travel is a substitute for air travel that will be utilized by customers if they are looking for cheaper travel and if they are looking for a leisure trip that would not be too time consuming. Automobiles are also a form of travel that is a substitute for air travel. This is especially the case when a family is traveling as the costs are minimized and schedules coordinated on the travelers’ timetable. Threat of New Entrants Historically, entry into the market has been relatively easy for airline companies. When the economy was booming, people traveled more for leisure and companies used this opportunity to enter th... ...aken from Hoovers Online) Revenues (in Millions) Sept 2002 Sept 2001 US Airways 1903.0 2493.0 American 4494.0 4816.0 Southwest 1391.2 1335.1 Net Income (in Millions) Sept 2002 Sept 2001 US Airways (248.0) (24.0) American (924.0) (414.0) Southwest 74.9 151.0 Total Assets (in Millions) Sept 2002 Sept 2001 US Airways 7705.0 9564.0 American 31502.0 31840.0 Southwest 8954.3 7994.9 Total Debt (in Millions) Sept 2002 Sept 2001 US Airways 10808.0 10106.0 American 28991.0 25609.0 Southwest 4631.6 4045.3 EPS (in dollars) Sept 2002 Sept 2001 US Airways (3.64) (.36) American (5.93) (2.68) Southwest .09 .19 Revenue Passenger Miles Oct 2002 Oct 2001 US Airways 2,965,753 2,802,967 American 3,048,000 2,851,000 Southwest 3,258,017 2,590,610 Load Factor (%) Oct 2002 Oct 2001 US Airways 66.9 61.7 American 63.2 57.8 Southwest 56.8 53.4

Linking Financial Ratios and Stock Returns

Chapter I INTRODUCTION Financial ratio analysis is a technique for trying to help interpret financial accounts and to determine the intrinsic value of a security by careful examination of key value drivers such as risk, growth, and competitive position. Various ratios can be calculated from the financial accounts. These ratios will then help us to examine the company’s performance over a number of periods by comparing the same ratios in previous years’ accounts and also the accounts of other businesses operating in a similar environment (Most common benchmarks are industry leaders and industry averages). Financial ratio analysis provides essential information and serve (Investors, Stockholders, lenders, corporation management, Fundamental analysts†¦. ) with a lot of different contexts for different kinds of decisions. 1. 1 Statement of the Problem The enormous number of financial ratios used by financial managers and financial analysts and their relationship with stock return is the main problem in interpreting the financial statements. Based on, the ultimate goal of financial managers is to maximize the wealth of their stockholders; financial managers must understand the impact of their managerial decisions on their company’s financial statements and financial ratios concluded which will consequently affect the stock price of their company. Interpreting such a huge number of ratios distracts attention from the most relevant factors that affect stock prices. 1. 2 Purpose of the study A number of studies such as Timo Salmi (1990) were conducted to reduce the information load resulting from computing a large number of ratios and categorize those ratios that were believed valuable. This study aims to identify those variables that are most relevant to the stock returns of pharmaceutical sector in Egyptian stock market. 1. 3 Statement of objectives This study attempt to achieve the following objective: -The most relevant independent variables (financial ratios) with stock returns as a dependent variable. Chapter II FINANCIAL RATIOS AND STOCK MARKET 2. 1 Literature Review The main goal of our research is to evaluate the relationship between common financial ratios as independent variables and stock returns of the pharmaceutical firms as dependent variable. The relation between financial statement information and stock return was examined by Ou and Penman (1989) who observed returns to investment strategies that are based on a measure that summarizes the information in financial statements to identify the relevant financial ratios. Their study indicate that the predicted returns can not be explained by return based risk measures and that financial statements capture fundamentals that are not reflected in stock prices. The results of the study suggest that it is possible for investors to make excess profits using publicly available information. More recently, the relation between financial statement information and stock return was extended by Holtausen and larcker (1992) who identify value-relevant fundamentals in the context of a return-fundamentals relation. Holtausen (1992) examined the ability of accounting information to generate profitable trading strategies (using 60 accounting ratios). The excess returns were observed in the fourth month following the company’s fiscal year end. The results of the study suggest that the trading strategy was able to earn significantly abnormal returns during the period of 1978-1988. The same issue was examined later by Lev and Thiagarajan (1993) who used fundamental ratios as the basis of analysts’ description of different ratios to identify the value relevance of the financial ratios and their usefulness in security valuation. Afterward, Belkoui (1997) employed the popular financial ratios to show the value relevance, where the popularity of these financial ratios is matched by their usefulness in security valuation. He shows that value relevance of popular financial ratios in both a non contextual setting and a setting conditioned by levels of inflation and growth. 2. 2 Classification of financial ratios The classification of financial ratios was studied by Timo Salmi (1990) who split these financial ratios into five somewhat arbitrary groups: †¢Profitability – how good is the business as an investment. Liquidity – the amount of working capital available. †¢Capital Adequacy – measure the leverage percentage. †¢Debt service coverage – how near is the business to bankruptcy. †¢Efficiency – how good is the management of the business. Each financial ratio has its own signal and its own relation to the stock return. Based on these previous studies, the stu dy selected the most popular financial ratios guided in major financial analysis books such as Mishkin (2001) 2. 3 An overview of Egyptian stock exchange EgyptWatch (2002) studied the history of the egyptian stock exchange and mentioned that the Egyptian Stock Exchange is comprised of two exchanges: the Cairo & Alexandria Stock Exchanges (CASE), and is governed by the same board of directors that share the same trading, clearing & settlement systems. The Alexandria Stock Exchange was officially established in 1888 followed by that of Cairo in 1903. The two Exchanges were very active until the 1940s, when the Egyptian Stock Exchange ranked fifth in the world. Nevertheless, the political turmoil of the mid-1950s led to the demise of activity on the Exchange, which remained dormant throughout the period between 1961 and 1992 (MohieEldin and Sourial, 2000). In 1990, the Egyptian government started on economic reform & restructuring program. The move towards a free-market economy has been remarkably swift and the process of deregulation and privatization has simulated stock market activity. The Capital Market Authority (2002) played an instrumental role in initiating and leading the effort for the revival of the Egyptian stock market in the period between 1992 and 1996. The Capital Market Authority (CMA) is the regulatory body in charge of enforcing, regulating & ensuring compliance as well as monitoring market performance. Relevant policy actions undertaken by the CMA include introducing all types of investment vehicles, allowing open competition in the pricing of market services; and providing full investor protection. The main features of the operational framework are fair trading procedures and practices as well as an immediate transfer of ownership of traded securities; optional listing on the stock exchange; quarterly disclosure requirements for companies; adequate protection of minority shareholder rights; and improved data collection schemes. Capital Law 95/1992 has put in place the regulatory framework in which financial intermediaries such as brokers, venture-capital firms, underwriters and fund managers are to operate. With respect to the managerial framework of CASE, a coherent organizational structure with a clear division of authority & responsibilities was established, creating new divisions & departments such as Publications & Public Relations, Research, Surveillance & Market Control, and Information Technology. Additionally, in May 1998, CASE signed a contract with EFA Software Ltd. , to deliver the new electronic trading, clearing & settlement system that will replace the existing one. The Board of Directors also set up several committees with specific responsibilities. At the senior level, an international advisory committee made up of internationally prominent economists, investment bankers, financiers & investors has been developed in order to ensure that CASE stays closely linked to the int’l arena. This group also provides continuous feedback on its policies. Both the CMA & the CASE monitor market activity to detect possible market manipulation or insider trading. Accordingly, they may suspend offers & bids for institutions suspected of price manipulation. In the case of an emergency, the CASE and/or the CMA may halt trading and/or place ceilings on floors trading prices (maximum 5% up or down), based on the closing prices of the preceding day. In the case of individuals, mutual funds & international funds, no taxes are levied on dividends, capital gain & interest on bonds. Profits of Egyptian corporations from securities investments are subject to a capital gains tax. 2. 3. 1 Recent developments On 21 July 2002, CASE commenced its new price ceiling system with regard to the most actively traded stocks. According to the new practice, the five-percent ceiling on daily prices was removed for a set of selected active stocks (currently twelve). This set of stocks comprises 12 out of the most actively traded stocks on CASE. The chosen of this set of stocks was based on meeting some stated criteria decided by CASE (2002): †¢Stocks must be dematerialized. †¢Minimum trading days per company per year is 220. †¢Average number of transactions per stock must be 20. †¢Minimum market capitalization per company amounts to LE 200 million. Minimum free float amounts to 15 percent of the total listed shares. †¢Minimum turnover ratio per company is 10 percent. †¢The company must prepare financial statements for three consecutive years. †¢Transactions conducted on the shares of the company must be executed by at least 20 brokerage firms. The new practice will stipulate the halt of trading on any of the twelve stocks for a period of thirty minutes, forty-five minutes o r till the end of the trading session, if the stock prevailing weighted average price exceeds 10 percent, 15 percent or 20 percent respectively over opening price. When trading is halted, brokers should inform their clients about the temporary suspension, its reasons, duration and should take the necessary actions in order to fulfill their clients requests. Brokers are allowed to cancel, any of their clients’ orders, when trading is halted. 2. 3. 2 Background of Privatization Program The Ministry of Public Enterprise (MPE) is dedicated to achieve the long-term goal of complete implementation of Egypt’s overall privatization plan. In 1991 Public Enterprise Law No. 203 was introduced as a transitional measure. Dr. Khatab M. (Minister of Public Enterprise) (2002) has explained his Ministry’s plans and objectives to facilitate privatization in Egypt and the methods that have been followed in this regard. Also Dr. Mokhtar Khatab has mentioned to the Government of Egypt (GOE) his efforts in undertaking an extensive privatization program whereby state-owned companies are transferred to the private sector through several methods McKinney (1996). †¢The transfer of ownership & control of state-owned enterprise to the private sector through a partial or a full public share flotation on both the domestic or foreign stock exchanges. †¢Direct sale of a controlling interest to domestic or foreign investors. Direct sale of a controlling interest to employees. †¢The law also allows the sale or lease of company assets, unlimited sale of government-owned shares, or liquidation. Primary objectives of the plan are to generate higher productivity and faster (but sustainable) growth, and as a consequence an increase in returns on assets and equity while at t he same time raising internal efficiency, improving capital structure and increasing capital expenditure. Since the early 1990s a number of key programs have been put into place to greatly liberalize commerce and trade; and to re-frame the country’s legal, regulatory, judicial, and tax structures. An equally important focus of the plan is the creation of new jobs that an expanding economy will provide for the workforce. Over the past five years, the GOE has achieved very gratifying results in macroeconomic terms. This is due to the creation of policies to remove trade barriers, the reform of trade and financial markets, and the reform of the legal taxation and regulatory frameworks, Field (1995) 2. 3. 3 Updates on the Situation of the Privatized Companies The Government of Egypt (GOE) has designed a balanced privatization program, which includes the following share sales strategies. The Egyptian Ministry of Public Enterprise Sector (2001) revealed that: †¢Public Offerings on the Cairo and Alexandria Stock Exchange 37 companies have so far been approved by the GOE for privatization and have been sold through Initial Public Offering (IPO) or second offerings. The sales of these companies netted 5. 6 billion pounds which represents 36% of privatization proceeds to date. 16 companies have achieved partial privatization netting the government nearly 1. 76 billion LE. †¢Sale to Anchor and Strategic Investors 3 companies have been privatized by this method, accounting for 6. 4 billion pounds LE in proceeds to the government. Sales to anchor investors have amounted to 42% of the total privatization proceeds thus far. †¢Employee Stock Ownership Programs (ESOPs) The GOE has approved the allocation through the sale of 10 percent of the public enterprises’ share offerings to the employees as part of the â€Å"Employee Stock Ownership Program†. I n other cases, and according to the particular circumstances of each company, the majority of shares have been sold to its management and employees. To date, mainly medium-sized companies in the public works sector have implemented this scheme. So far, 30 Employee Shareholder Association (ESA) sales transactions have taken place bringing in 870 million pounds LE. †¢Lease Management Contracts In this method, Companies were offered for management by the government to the private sector with an option to buy at a future date. This alternative is not very different to the anchor investor approach if and when the managing company exercises its option to buy. Five contracts of this type are currently active. Chapter III PHARMACEUTICAL SECTOR OVERVIEW The government has set a 40% ceiling (maximum that could be privatized), 10% of which is reserved for Employee Shareholder Associations (ESA), on the privatization of any public pharmaceutical company. The restriction relates to the government’s desire to maintain control of the industry for its significant role in society, The Egyptian Ministry of Public Enterprise Sector (2001). The first five companies that have been privatized: Alexandria, Cairo, Memphis, Arab and Nile pharmaceuticals. These companies have already been 40% privatized. The privatization plan then expanded to cover 11 companies at the end of June 2002. . 1 Pharmaceutical Industry Highlights Drug policy and planning center (2002) has published the following statistics: 199920002001 Market Size (LE bn)4. 655. 42 No. of Products (thousand)3. 63. 84 Per capita spending (LE)72. 6677. 1882. 14 3. 2 Pharmaceutical Products Total exports made by Egypt to the whole world includes a lot of commodities which are classi fied to (Fuels Products, Cotton, Raw Materials, Semi finished commodities and finished commodities). Central Bank of Egypt (2002) revealed that Pharmaceutical products are considered as part of finished commodities, they represent 3% of finished commodities and 1. % of the total export. Also, Pharmaceutical products play a significant role in Egypt’s import. They represent 4% of the total import and 21% of their classification division (consumer goods). Figure (1) shows Pharmaceutical Export and Import situation. Figure (1) Local production of medicine satisfies 92% of the market demand, whereas the remainder is balanced by imports. Kompass Egypt (2002-2003) classified the local market players as: 1) Public-sector companies. 2) Private-sector companies. 3) Multinationals Figure (2) Note: The term Private sector encompasses Multinationals and other Private companies. The government has set a relatively low tariff on imported drugs, which averages around 5%. The main reason for this comparatively low duty is the state’s policy of making medicine available to the bulk of the population at the cheapest possible price. 3. 3 Pricing Policy Prior to the reform program in 1991, the government’s major consideration when setting prices for drugs was to make medicine affordable to the bulk of the population regardless of a company’s cost structure. The focus on the social role of medicine, rather than the profitability of pharmaceutical companies, is the main reason behind this policy. The Drug Policy & Planning Center (DPPC) is the main regulatory authority controlling the pharmaceutical industry. The center is in charge of drug registration and pricing. The DPPC (2002) uses a â€Å"Cost Plus Formula† to price drugs. The formula stipulates a price equivalent to the products cost plus a certain profit margin. The profit margin is 25% for nonessential products, and 15% for essential products. It is noteworthy that once a product has been priced, it is seldom eligible for re-pricing to account for increasing costs. The heavy drop in the value of the Egyptian pound was mirrored in an increasing raw material costs burdening the Egyptian Pharmaceutical companies, which import around 80% of their raw material requirements. In order to save the profit margins from the aftermath of the devaluation, the Ministry of Health finally agreed to raise the prices of five products for each pharmaceutical company starting February 2002. 3. 4 GATT and TRIPS Egypt is a signatory to the General Agreement on Tariffs and Trade (GATT) which will come into effect for the pharmaceutical sector in Egypt in 2005. The agreement is likely to have serious repercussions for the pharmaceutical industries of developing countries including Egypt. The agreement calls for the abolition of both quantitative and qualitative barriers to entry for pharmaceutical products, thus eliminating any governmental protection of the industry. Under GATT, Egyptian companies have to abide by the restrictions imposed by patents and property rights for a period of 20 years. Based on the Egyptian commitment with the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which is part of the GATT, President of Egypt published The Law No. 2 for year (2002), calling for the Protection of any invention whether industrial or intellectual. The agreement will result in the extension of a patent to 20 years and will grant protection to the product and the production process. Chapter IV METHODOLOGY AND EMPERICAL MODELS 4. 1 Data Set In our study, we select all the pharmaceutical companies quoted in the Egypt ian stock exchange which consists of 11 pharmaceutical companies representing the pharmaceutical sector. We covered the period from 1996 to 2001. Analyzing six continuous years of data, strengthen and support results and give our conclusion stability and reasonability. Kompass Egypt Financial Year Book and the Egyptian Capital Market Authority were the prime sources for our data set. Additionally, for the purpose of this analysis, we calculate the returns using annually prices of securities for years starting from 1996 to 2001. 4. 2 Selection of Financial Ratios (Independent variables) According to the literature, we determine the most useful financial ratios that could be functional in security valuation by analyzing and comparing several papers and texts were analyzed and compared. The reasons behind the selection of these financial ratios: †¢Their talent in theoretical explanation of fundamental relationships and signals experienced by the firms. [Foster 1986] †¢The importance of their existence in published annual reports. [Gibson 1982] †¢Surveys proved that chief executive officers and other senior executives are concerning popular financial ratios for various types of decision making. [Walsh 1984] The following table provides the most common financial ratios that might affect stock returns. For each financial ratio, we provide the way of calculation, the hypothesized positive or negative relationship with stock returns. Table (1) The common financial ratios and their prediction with stock returns GroupFinancial ratiosVariablesEquationsPrediction of relationship ProfitabilityEarning per ShareEPSNet income / Number of shares outstandingPositive Return on EquityROENet income / owners’ equity Return on AssetsROANet income / total assets Profit MarginPMNet income / total sales LiquidityCurrent RatioCTRCurrent assets / Current liabilitiesNegative Quick RatioQR(Current assets – Inventory) / Current liabilities Operating Cash flow RatioOCFCash flow from operations / Current liabilitiesPositive LeverageDebt to Equity RatioDERLong term liabilities / owners’ equityNegative CoverageInterest CoverageICEBIT / interest expensePositive EfficiencyAssets TurnoverATOSales revenue / Total assetsPositive Receivables TurnoverRTOSales / Account Receivables EBIT: Earnings before Interest and Taxes We refer to the explanantion of these financial ratios (independent variables) in the Appendix section. . 3 Buy-and-Hold Returns (BHR) As far as the dependent variable is concerned, stock returns, there is no consensus on the appropriate methodology for calculating the long-run stock returns (see among other, Barber and Lyon, 1997; Kothari and Warner, 1997; Brav and Gompers, 1997; and Barber, Lyon and Tsai, 1999). Researchers use several methods to calculate long run returns, in particular Buy-and-Hold returns (BHRs) method. The first s tep in calculating Buy-and Hold return method is to calculate rate of return on stocks. We consider that the appropriate rate of return on a given stock is the difference between the stock prices in time t plus dividends in time t-1 and the stock prices in time t-1 , as follows: (1) Where is the return for security I for period t, refers to the closing price of security I at time t , and is the price of security I at time t-1 , is the dividend received for period t-1 for the firm I As far as we consider time t as a year, rate of return on stocks ( ) that we calculated from the previous equation is the Buy-and-Hold return method for a financial year. (2) Where is Buy-and-Hold Return for security i in period t. we consider it a year. 4. 4 Regression Model To determine the relationship between the independent variables (financial ratios) and the dependent variable (stock return), we follow a similar methodology to that of Belkaoui (1997) and estimate the following regression: (3) Where is the annual stock return of firm I at time t, is the earning per share for firm I at t ime t, is the return on equity for firm I at time t, is the return on assets for firm I at time t, is the profit margin for firm I at time t, is the current ratio for firm I at time t, is the quick ratio for firm I at time t, s the operating cash flow for firm I at time t, is the debt to equity ratio for firm I at time t, is the interest coverage ratio for firm I at time t, is the asset turnover for firm I at time t, is the receivable turnover for firm I at time t. Since the return of a given stock is based on a period extending from 9 months prior to the fiscal year-end and 3 months after the fiscal year-end, corresponding roughly with the period between announcing the financial statement, the starting month would be December for firms whose fiscal years end at Jun, the 30th and June for firms whose fiscal years end at December the 31st. CHAPTER V RESEARCH FINDINGS 5. 1 Results We present results of a regression model where independent variables in the regression equation are chosen in two ways (both general and step wise regression). Multicollinearity tests the correlation among two or more of the independent variables (financial ratios) used in the regression equation. Multicollinearity is a problem because it increases the likelihood of rounding errors in the calculation of the beta estimates and standard error, and also it may produces confusing and misleading (signs of beta parameters are different from those signs expected) results (Mendenhall, 1996). Table (2) shows that the existing problem in this Multicollinearity is especially evident for the correlation between the Current Ratio and the Quick Ratio reaching 0. 92 and significant at 99% level. Current Ratio and Quick Ratio are two faces for the same coin. They are categorized under liquidity ratios group, they have the same explanation about the result and there is a little bit difference in their equations (In Quick Ratio, Inventory is excluded from the Current Assets). So we eliminate Quick ratio from the independent variables (financial ratios) and retain on Current Ratio because it is more popular. Table (2) Correlation Matrix to explain the relationships among the financial ratios as independent variables VariablesQRATODERCTRICEPSOCFPMRTOROAROE QR1. 000 ATO-0. 4204*1. 000 DER0. 03920. 3860*1. 000 CTR0. 9239*-03478*0. 08801. 000 IC0. 3752*-0. 3246**-0. 15040. 3610*1. 000 EPS0. 1884-0. 2604**-0. 12480. 0724-0. 03061. 000 OCF0. 0641-0. 3243-0. 29300. 15720. 19970. 32021. 000 PM0. 1659-0. 4338*-0. 2835**0. 23450. 04750. 6245*0. 34311. 000 RTO-0. 2999**0. 1663-0. 0413-0. 0230-0. 0298-0. 19220. 6846*0. 16561. 000 ROA0. 0535-0. 1600-0. 4080*0. 16850. 17500. 6342*0. 6703*0. 6392*0. 3761*1. 000 ROE0. 1264-0. 1178-0. 01580. 21150. 10610. 11030. 8970. 2610**0. 18200. 3693*1. 000 * Significant at the 1% level ** Significant at the 5% level Table (3) & (4) show the multiple and step-wise regressions of the relationship between explanatory variables (financial ratios) and stock returns utilizing buy-and-hold return (BHR) method. The relationship between stock returns and common financial ratios is es timated using the following equation: Where is the annual stock return of firm i at time t. BHR is calculated as follows: Where is buy- and- hold return for security i, in period T, T is the trading month number 12, and indicates the first event month of calculating the return. s the dependent variable in the regression equation. Table (3) Multiple Regressions of the Relationship between Financial Ratios and Stock Returns Independent variables BetaT testSig. T 1- Current ratio (CTR)0. 7821993. 0940. 0055* 2- Interest coverage ratio (IC)0. 6895873. 0850. 0056* 3 Profit margin ratio (PM)0. 6434102. 5740. 0177** 4- Earnings per share (EPS)0. 3790681. 1190. 2757 5- Operating cash flow ratio (OCF)0. 2002970. 5430. 5931 6- Assets turnover (ATO)0. 1150700. 4550. 6537 7- Return on Equity (ROE)0. 0966730. 5010. 6215 8- Debt to equity ratio (DER)0. 0622020. 3040. 7640 – Receivables turnover (RTO)-0. 165573-0. 4660. 6457 10- Return on Assets (ROA)-0. 121268-0. 3320. 7433 Multiple R = 0. 68529F = 6. 76472 R square = 0. 46962Significant F = 0. 0031 * Significant at the 1% level ** Significant at the 5% level The results from table (3) show that the F test used to test the overall utility of the model indicates that the model is significant at the 99% level. However, the R square is 46. 96% indicating that the ten independent variables together explained approximately half of the variance in the yearly return of pharmaceutical sector as a dependent variable. Also, T test of the individual Betas (financial ratios) indicates that the most active ratios in determining stock returns are Current Ratio (CTR), Interest Coverage Ratio (IC) and Profit Margin Ratio (PM) with a significant level of 99%, 99% and 95% respectively. To check on the signs of the beta coefficient, the dependent variable (stock return) was regressed on each of the independent variables (financial ratios) and the signs of the resulting betas were checked against that of the original equation. There are three ratios which are Current Ratio, Receivable Turnover and Return on Assets that had different signs from the original regression equation The positive coefficient estimated for Current Ratio with stock returns is not expected because conservative policies that tend to keep current asset higher than current liability have lower risk and also have lower expected return than the aggressive policies. So we conclude that rational investors put more confidence in low risky stocks and look forward for stable stocks more than the temporary profitable stocks. On the other hand, Receivable Turnover ratio and Return on Assets ratio are completely insignificant as show in table (3), so there is nothing important to explain their different signs from the original prediction. Table (4) Step-wise Regression of the Relationship between Financial Ratios and Stock Returns Independent variables R? BetaT testSig. T ChangeAccumulation 1- Current ratio 0. 194050. 194050. 7302745. 2990. 0000* 2- Interest coverage ratio 0. 121330. 315380. 7161115. 2420. 0000* 3 Profit margin ratio 0. 072850. 388230. 4597934. 1170. 0001* Multiple R = 0. 62308F= 12. 69213 R square = 0. 38823 * Significant at the 1% level ** Significant at the 5% level In the next step, we utilize the step-wise regression to reach the final model that contains the significant explanatory variables and give better explanation for the relationship. Consistent with the general regression models, the step-wise results confirm the above mentioned findings as Current Ratio (CRT) is the most significant variable at the 99% and explained about 19% of the variance in the yearly return of pharmaceutical sector with R square about 19%, while R square for the model is about 39%. Interest coverage ratio has also explained about 12% of the variance in the yearly return of pharmaceutical sector. Interest coverage ratio is regarded as a measure of a company’s creditworthiness because it shows how much income there is to cover interest payments on outstanding debt. Profit margin ratio explained about 7% of the variance in the yearly return of pharmaceutical sector with R square 7%. From results we conclude that rational investors and stockholders are looking for strength and stability first then profitability when evaluating a pharmaceutical stock company. Table (5) Stepwise Multiple regression analysis for the good predictors Company R? BetaT testSig. T ChangeAccumulation 1- Memphis0. 466240. 466240. 73001412. 4530. 0000* 2- Cairo0. 213940. 680180. 6092937. 6880. 0000* 3- Alexandria0. 094360. 77454-0. 521862-4. 6470. 0001* Multiple R = 0. 88006F= 23. 73573 R square = 0. 77454 * Significant at the 1% level ** Significant at the 5% level Stepwise multiple regression model yielded a reduced equation containing only three companies (independent variables) explaining about 77% of the variance in the yearly return of pharmaceutical sector as a dependent variable: the analysis yielded three good predictors as demonstrated at table (5), the results proved that Beta value of Memphis Pharmaceutical and Chemical Industries was 0. 73 and it is significant at 99% level. Additionally, Memphis Company alone explained about 47% of the variance in the yearly return of the pharmaceutical sector. The second good predictor is Cairo Pharmaceutical and Chemical Industries while its Beta value was 0. 60 and it is significant at 99% level. Cairo Company alone explained about 21% and together with Memphis Company explained about 68% of the variance in the yearly return of the pharmaceutical sector. The third and last predictor is Alexandria Pharmaceutical and Chemical Industries with a Beta value of -0. 52 and significant at 99% level. Alexandria Company explained alone about 9% of the variance in the yearly return. 5. 2 Summary and Conclusion The relationship between financial ratios and stock returns has been a popular issue in the area of accounting and finance for a long time, so we found that it is a good issue to discuss on the Egyptian stock market. Here, an analysis is undertaken to show the value relevance of the financial ratios and their usefulness in security valuation in the Egyptian pharmaceutical sector. In our research, we use step-wise multiple regressions between financial ratios and stock returns, also between pharmaceutical companies’ returns and pharmaceutical sector returns. The results from using step-wise and multi regression indicate that Current Ratio (CTR), Interest Coverage Ratio (IC) and Profit Margin Ratio (PM) respectively, are the most relevant ratios in determining stock returns. Additionally, Memphis Pharmaceutical and Chemical Industries is the most relevant company in explaining the variance of the pharmaceutical sector return as a whole. Finally, it seems that Current Ratio (CTR), Interest Coverage Ratio (IC) and Profit Margin Ratio (PM) play a significant role in formulating investment decisions in the Egyptian stock market (specifically, Pharmaceutical sector). Egyptian rational investors put more confidence in low risky stocks and look forward for stable stocks more than the temporary profitable stocks. 5. 3 Further Research The study was conducted on Egyptian pharmaceutical sector and taken all pharmaceutical companies (11 companies) that have been quoted in Egyptian stock exchange, covered the period from 1996 to 2001. Replicating the study on other sectors in Egypt such as (Agriculture, Food & Beverages, Construction, Banks†¦) at different times could be very useful. The study could be also replicated on the valuable Egyptian market indices such as (Case 30, IFCG, MSCI, EFG Hermes). These studies could help in determining more clearly the relationship between financial ratios as independent variables and stock returns as dependent variable. CHAPTER VI REFRENCES Barber, B. , Lyon, J. , and Tsai, C. , (1999), â€Å"Improved Methods for Tests of Long-Run Abnormal Stock Returnsâ€Å", Journal of Finance, 54 (1), 165-201. Baraber, B. , and Lyon, J. , (1997), â€Å"Detecting Long-Run Abnormal Stock Returns: The Empirical Power and Specification of Test Statisticsâ€Å", Journal of Financial Economics, 43 (3), 41-72. Brav, A. , and Gompers, P. , (1997), â€Å"Myth or Reality? The Long-Run Underperformance of Initial Public Offerings: Evidence from Venture Capital and non-Venture Capital-Backed Companiesâ€Å", Journal of Finance, 52 (5). Capital Law 95/1992, â€Å"Intermediation Companies†, (CMA. gov. eg), Available: http//www. cma. gov. eg /En-nf/index4. html, (Accessed: 2003, January 20). CASE, (2002), â€Å"What’s New†, (Egyptse. com), Available: http://www. egyptse. com, (Accessed: 2003, February 7). Central Bank of Egypt (2002), â€Å"Proceeds of commodity Exports and Imports by degree of processing†, (CBE. org. eg), Available: http//www. cbe. org. g, (Accessed: 2003, February 9). Charles, P. J. , (2002), â€Å"Investments Analysis and Management†, Seventh edition, John Wiley & Sons Inc. , NY: Third Avenue. David, I. , and Pitman, (2001) â€Å"Foundation for SME Development: Key Financial Ratios† Available: www. google. com , (Financial Ratios). EgyptWatch, (2002), â€Å"Egypt Stock Market†, (Egyptwat ch. com), Available: http://www. egyptwatch. com/en/Finance/Indicators/stock. doc (Accessed: 2003, February 16). Eugene F. B. , and Joel H. H. , (1998), â€Å"Fundamentals of financial management†, eightth edition, The Dryden Press. Field, M. (1995), â€Å"The Slow Road to Privatization†, Euromoney, Middle East Markets Supplement, November 12-13. Foster, G. (1974). â€Å"Financial statements Analysis: A New Approach†, Englewood Cliffs, NJ: Prentice Hall. Gibson, C. H. (1982a), â€Å"How Industry Perceives Financial Ratios†, Management Accounting. April, p. 13-19 Gibson, C. H. (1982b), â€Å"Financial Ratios in Annual Reports†, The CPA Journal, September, p. 18-29 Holthausen, R. W. , and Larcker, D. F. , (1992), â€Å"The prediction of stock return using financial statement information,† Journal of Accounting and Economics, Vol. 15, p. 373-412. John M. R. and Jeanne Y. H. (1998), â€Å"The power of cash flow ratio†, Journal of Accounta ncy, October, p. 53-55, 56-58, 60-61. Khatab, M. , (2002), â€Å"Minister’s Message†, Available: www. mpe-Egypt. gov. eg Kompass Egypt Financial Yearbook (2002 – 2003), Pharmaceutical & Health Care, Published by Fiani & Partners, Cairo, Egypt. Kothari, S. , and Warner, J. , (1997), â€Å"Measuring Long-Run Horizon Security Price Performance†, Journal of Financial Economics, 43 (3), 30-40. Lev, B. , and Thiagarajan, S. , (1993), â€Å"Fundamental Information Analysis,† Journal of Accounting Research. Autumn, p. 190-250. McKinney, B. M. (1996), â€Å"Recent Development in Egyptian Investment Policies and Programs, and Pending Reform Legislation† Middle East Executive Reports, 19 (7), 9-12. Mendenhall, W. , and Sincich, T. , (1996), â€Å"A Second Course in Statistics Regression Analysis†, Fifth edition, Prentice Hall. Mishkin, F. S. (2001), â€Å"The Economics of money, banking, and financial markets†, Sixth Edition, Adison Wisel y, Boston. MohieEldin, M. and Sourial, M. S. , Institutional Aspects, Distributional Characteristics and Efficiency of Egyptian Securities Market, in Arab Stock Markets: Recent Trends and Performance, edited by Riad Dahel, (Cairo: AUC Press, 2000), 1-44. Ou, J. , Penman, S. 1989. â€Å"Financial statement analysis and the prediction of stock returns,† Journal of Accounting and Economics, Vol. 11, p. 295-330. Peter S. R. , (1999), â€Å"Commercial bank management†, fourth edition, McGraw-Hill Companies, NY: Avenue of the Americas. Riahi-Belkaoui, A. (1997). â€Å"Value relevance of popular financial ratios,† Advances in Quantitative Analysis of Finance and Accounting, Vol. 5, pp. 193-201. Ross, Westerfield, and Jaffe, (2002) â€Å"Corporate Finance†, Sixth edition, McGraw-Hill Companies, NY: Avenue of the Americas. The Capital Market Authority, (2002), â€Å"CMA Public Information Center†, (CMA. ov. eg), Available: http://www. cma. gov. eg/En-nf/index5. html (Accessed: 2003, January 20). The Drug Policy and Planning Center, (2002), Pharmaceutical Industry Statistics, (DPPC. gov. eg), (Accessed: 2003, February 10) The Egyptian Ministry of Public Enterprise Sector, (2001), Privatization Program perform ance from the start to February 2001, (Cairo: MPES), http://www. mpe-egypt. gov. eg/privatize. asp#methods. (Accessed: 2003, February 16) The Law No. 82 for year (2002), â€Å"Trade-Related Aspects of Intellectual Property Rights (TRIPS)†, Pharmacy and Medicine, March 2003, Vol. 24, p. 44-55 Timo S. , Ilkka V. , Paavo Y. O. (1990), â€Å"On the Classification of Financial Ratios†, published on the Word Wide Web as http://www. uwasa. fi/~ts/sera/sera. html Walsh, F. J. (1986), â€Å"The Relative Information Content of Accruals and Cash Flows: Combined Evidence at the Earnings Announcement and Annual Report Release Date† Journal of Accounting Research, p. 165-200 CHAPTER VII APPENDIX (A) Financial Ratios Financial ratios are very important for new investors who would like to invest in the firm and also for stockholders who are the investors of the firm because financial ratios give them several indicators which they can evaluate the firm with. 1) Profitability Ratios The main goal of these ratios is to help us to judge how good the firm's profit performance. Profitability ratios refer to the ability of a firm to generate revenues in excess of expenses. 1. 1 Earnings per Share The portion of a company’s profit allocated to each outstanding share of a company’s common stock. E arnings per share is simply a fundamental measure of profitability that shows how much profit was generated on a per-share-of-stock basis. EPS doesn’t reveal a great deal. Its true value lies in comparing EPS figures across several quarters, or years, to judge the growth of a company’s earnings on a per-share basis. David Irwin (2001) Therefore, studying refers to a positive relationship between EPS and stock market return. To calculate EPS, start with net income (earnings) for the period in question, subtract the total value of any preferred stock dividends and then divide the resulting figure by the number of shares outstanding during that period. Or: Net income / Number of shares outstanding 1. 2 Return on Equity ROE is a fundamental indication of a company’s ability to increase its earnings per share and thus the quality of its stock, because it reveals how well a company is using its money to generate additional earnings. ROE allows investors to compare a company’s use of their equity with other investments, and to compare the performance of companies in the same industry. ROE can also help to evaluate trends in a business. Businesses that generate high returns on equity are businesses that pay off their shareholders handsomely and create substantial assets for each dollar invested as mentioned by Peter S. 1999). To calculate ROE, divide the net income shown on the income statement by shareholders’ equity, which appears on the balance sheet: Net income / owners’ equity 1. 3 Return on Assets A Company’s profitability expressed as a percentage of its total assets. Return on assets measures how effectively a company has used the total assets at its disposal t o generate earnings. Because the ROA formula reflects total revenue, total cost, and assets deployed, the ratio itself reflects a management’s ability to generate income during the course of a given period, usually a year. Ross (2002) Naturally, the higher the return the better the profit performance. ROA is a convenient way of comparing a company’s performance with that of its competitors. ROA should have a positive relationship with the stock market return. To calculate ROA, divide a company’s net income by its total assets, then multiply by 100 to express the figure as a percentage: Net income / total assets 1. 4 Profit Margin Profit Margin is a company’s net profit or loss as a percentage of total sales for a given period, typically a year. This ratio shows how efficiently management uses the sales revenue, thus reflecting its ability to manage costs and overhead and operate efficiently. It also indicates a firm’s ability to withstand adverse conditions such as falling prices, rising costs, or declining sales. Ross (2002) The higher the figure, the better a company is able to endure price wars and falling prices. Investors tend to prefer a higher percentage of profit margins, which considered being an indication of a positive relationship between profit margin and stock market return. The calculation is very basic: Net profit / total sales (2) Liquidity Ratios These are ratios that measure the liquidity of the firm. Firms have to ensure that they have the liquidity required to meet all their commitments. To the extent a firm has sufficient cash flow; it will be able to avoid defaulting on its financial obligations and, thus avoid experiencing financial distress. 2. 1 Current Ratio Current ratio is the company’s liquidity and its ability to meet its short-term debt obligations. By comparing a company’s current assets with its current liabilities, the current ratio reflects its ability to pay its upcoming bills in the unlikely event of all creditors demanding payment at once. Current liabilities are debts that are due within one year from the date of the balance sheet as mentioned by Charles P. (2002). The basic source from which to pay these debts is a current asset. As long as firms are searching for no risks by increasing current assets, profitability will be getting shrunk. So that current ratio should have a negative relationship with stock market return. Working capital is also called net current assets or current capital, and is expressed as: Current assets / Current liabilities 2. 2 Quick Ratio How quickly a company’s assets can be turned into cash, which is why assessment of a company’s liquidity also is known as the quick ratio, or simply the acid ratio. Regardless of how this ratio is labeled, it is considered a highly reliable indicator of a company’s financial strength and its ability to meet its short-term obligations. Because inventory can sometimes be difficult to liquidate, the quick-test ratio deducts inventory from current assets before they are compared with current liabilities-which is what distinguishes it from the current ratio. Potential creditors like to use the quick-test ratio because it reveals how a company would fare if it had to pay off its bills under the worst possible conditions. Indeed, the assumption behind the quick-test ratio is that creditors are howling at the door demanding immediate payment, and that an enterprise has no time to sell off its inventory, or any of its stock. This ratio should have also negative relationship like the current ratio with stock market return. The quick-test is computed by subtracting inventories from current assets and dividing the difference by current liabilities: (Current assets – Inventory) / Current liabilities . 3 Operating Cash Flow Ratio Traditional working capital ratios indicate how much cash the company had available on a single date in the past. Cash flow ratio, on the other hand, tests how much cash was generated over a period of time and compare that to near-term obligations as published by John R. and Jeanne H. (1998). This ratio should str engthen the investors’ confidence toward the firm, therefore it should be positively related with stock market return. The numerator of the OCF ratio consists of net cash provided by operating activities. This is the net figure provided by the cash flow statement after taking into consideration adjustments for non-cash items and changes in working capital. The denominator is all current liabilities, taken from the balance sheet: Cash flow from operations / Current liabilities (3) Leverage Ratios 3. 1 Debt-to-Equity Ratio How much money a company owes compared with how much money it has invested in it by principal owners and shareholders. The debt-to-equity ratio reveals the proportion of debt and equity a company using to finance its business. It also measures a company’s borrowing capacity. The higher the ratio, the greater the proportion of debt but also the greater the risk. Mishkin (2001) describes the debt-to-equity ratio as â€Å"a great financial test† of long-term corporate health, because debt establishes a commitment to repay money throughout a period of time, even though there is no assurance that sufficient cash will be generated to meet that commitment. Creditors and lenders, understandably, rely heavily on the ratio to evaluate borrowers. As long as this ratio is considered to be low, investors’ confidence will be increased which negatively related with the stock performance. The debt-to-equity ratio is calculated by dividing debt by owners’ equity, where equity is, typically, the figure stated for the preceding calendar or fiscal year. Debt, however, can be defined either as long-term debt only, or as total liabilities, which includes both long- and short-term debt. The most common formula for the ratio is: Long term liabilities / owners’ equity (4) Coverage Ratios 4. 1 Interest Coverage The amount of earnings available to make interest payments after all operating and non-operating income and expenses—except interest and income taxes—have been accounted for. Interest coverage is regarded as a measure of a company’s creditworthiness because it shows how much income there is to cover interest payments on outstanding debt. Banks and financial analysts also rely on this ratio as a rule of thumb to gauge the fundamental strength of a business as argued Eugene F. & Joel H. (1998). Investors also rely on this ratio to examine the strength of a firm’s financial statement while this ratio should have a positive relationship with stock market return. Interest coverage is expressed as a ratio, and reflects a company’s ability to pay the interest obligations on its debt. It compares the funds available to pay interest—earnings before interest and taxes, or EBIT—with the interest expense. The basic formula is: EBIT / interest expense (5) Efficiency Ratios Ratios of turnover are constructed to measure how effectively the firm’s assets are being managed. 5. 1 Asset Turnover The amount of sales generated for every pound’s worth of assets over a given period. Asset turnover measures how well a company is leveraging its assets to produce revenue. A well-managed manufacturer, for example, will make its plant and equipment work hard for the business by minimizing idle time for machines. The higher the number the better-within reason. As a rule of thumb, companies with low profit margins tend to have high asset turnover; those with high profit margins have low asset turnover. This ratio can also show how capital intensive a business is. Some businesses-software developers, for example-can generate tremendous sales per dollar of assets because their assets are modest. At the other end of the scale, heavy industry manufacturers need a huge asset base to generate sales as refered by Eugene F. & Joel H. (1998). As long as the plant and equipment work hard and sales are increasing that would be an indication of a good sign. Consequently, this ratio should be a positively related with stock market return. Asset turnover’s basic formula is simply sales divided by assets: Sales revenue / Total assets 5. 2 Accounts Receivable Turnover This ratio explains the number of times in each accounting period, typically a year that a firm converts credit sales into cash. A high turnover figure is desirable, because it indicates that a company collects revenues effectively, and that its customers pay bills promptly. A high figure also suggests that a firm’s credit and collection policies are sound. In addition, the measurement is a reasonably good indicator of cash flow, and of overall operating efficiency as hence by Mishkin (2001). This ratio should have a positive relationship with stock return. The formula for accounts receivable turnover is straightforward. Simply divide the average amount of receivables into annual credit sales: Sales / Account Receivables (B) Statistical Results

Henkel: building a winning culture Essay

Introduction: CEO in 2008: Kasper Rorsted, Studied Economics and has experience in technological companies. Management style was based on face-to-face conversations and pushing for more efficiency. Henkel until 2008 Founded in 1876 as a producer of detergent, by 1920 it was a leading German detergent en glue producer. After WWII: company restarted as a producer of detergent, glues and personal care products. In 2008: 14 billion euros sales over 125 countries: EMEA: 64% North America: 19% Asia-Pacific: 11% Latin America: 6% Executive team mainly Germans and members of the Henkel Family 3 major business units: Adhesive Technologies (48%) Laundry and Home care (30%) Cosmetics/Toiletries (22%) Competition: P&G, Unilever and L’Oreal (See exhibit 1,2,3) 2012 Goals; 14% EBIT Margin 2008: 14 billion in sales (+8%) EBIT-margin (10,3%) => no competitive spirit?! (â€Å"The happy underperformer†) 2nd part of 2008: Financial crisis: Price increase by Henkel => growth in all the business units fell. Reaction of Rorsted (CEO): transform the company into a leaner and more performance driven company by setting 4-year financial goals (2012) for Sales growth (3-5%) EBIT-margin (14%) EPS (Earnings per Share) (above 10%) Reaction of the market: they will not make it. Building a winning culture Rorsted knew that the targets were high, but he wanted to get there by installing â€Å"a winning culture† within the company. 3 main strategic priorities: Achieve the full business potential Focus more on the customers Strengthen the global team 2008-2009: investments in top-performing brands and high potential markets: e.g. – Biggest acquisition ever of 3,7 billion euros for the adhesives and electronic material businesses of the National Starch and Chemical Company. – Dial brand: high investments in North-America => top brand in body wash markets. Selling underperforming brands. Searching for cost-efficiencies. 2009-2012: from promise to reality Rorsted: first do the hard things (close plants, lay off people) then the softer things. For the â€Å"softer things† everybody in the company needed to be on board = emotional buy-in. redefining Henkel’s vision and values  implementing a new performance management system Vision and Values Focus on financial goals and priorities => becoming a winning competitor 10 values (see exhibit 5): but they had little meaning inside the company BUT: the CEO Thought they had..2010: Henkel: â€Å" a global leader in brands and technologies† putting customers central value, challenge and reward people drive excellent sustainable financial performance sustainabilitybuild the future on the family foundation They organised workshops all over the company to introduce the employers to these new values. New tagline: â€Å"Excellence is our passion† in early 2011 performance management A lot of employees have careers of over 20, 30 or even 40 years within the company. 2009: new performance management system for 4 layers of management. For each employee there was: 1) the current rating of his  performance and 2) potential performance for the future. These were put in a grid (exhibit 7) with scores going from L (low), M (moderate) to T (Top) For potential performance numbers were used from 1 to 4 with 4 the limit of performance of someone. These rankings were set up during a Development Roundtable (DRT), a collaborative forum with a group head and his direct reports. Afterwards, the results were discussed during a one-to-one with the employee. DRT-processes were done bottom-up. Targets were set about how many employees should be fitted in a certain category. E.g; 5% had to be L => caused a new way of evaluation within the company. Bonus compensation Bonusses were linked to the overall company financial performance, team performance and individual performance. Group performance: KPI (e.g. EBIT,..): 3 per year Team performance: idem Individual performance: Performance on 2 equally weighted individual KPIs Performance from the DRT process.Each manager could get a target bonus as well. A round table discussion with Henkel Executives about the â€Å"Winning culture†.See case.