As a Chief Financial Advisor, i have to appoint one public listed company in Malaysia. So, I had chosen one finance company which is Malayan Banking Berhad. And i as a CFA I have to give recommendation on a corporate restructuring involving a merger which is MMA which stands for Malaysian Merchant Marine Berhad.
Malaysian Merchant Marine Berhad (MMM) is an established Malaysian ship-owner and commercial manager involved in dry-bulk transportation and tanker services. Their core strength lies in ability to manage ships both effectively and efficiently. The Company's track record is largely attributed to a team of dedicated and experienced staff. After a three year downturn in performance, the management was reorganised in December 2007 under a new professional team and since then, the performance has seen a revival. Various government incentives such as tax free shipping profits and zero import duty on vessels are also pivotal in bringing MMM to where we are today. [1]
Maybank is a leading banking group in South East Asia. This bank focus on capturing growth opportunities in high growth and conservative approach to capital management. Their strong track record of financial strengths and high credit ratings allow them to keep their momentum and continue with robust performance even amidst the current environment.
Total assets of RM331 billion
Total Shareholders' funds of RM26.7 billion
More than 39,000 Maybankers serving over 16.3 million customers
By strengthening their core business and franchise, they gain competitive advantage by achieving synergies across our diverse group. Domestically they aim to achieve leadership across key and profitable segments.While at internationally they capture value from new investments and continue to pursue organic expansion by delivering innovation and superior customer value. They are a top recruiter of talent and view leadership pool and talent pipeline as key to realising the aspirations. They always seek to enhance performance management and achieve cost optimisation by focusing on effective IT operations and enhancing employee productivity.
Malaysia's banking icon has been making waves since its inception in 1960. Over the years, Maybank has achieved many milestone moments, all of which support our vision of becoming a leading regional financial services group by 2015. [2]
Largest financial services provider in Malaysia in assets and reach.
Largest banking network in Malaysia with 386 branches, 17 trade finance centres, 39 business centres, 37 share investment centres and 22 private banking centres.
Total 1,750 branches and offices in 14 nations.
Largest network channel in Malaysia of more than 2,800 ATMs.
Largest internet banking portal with a dominant market share of 55%.
No.1 Islamic bank in Malaysia by assets with Maybank Islamic as top 15 world's largest Islamic bank operator.
One of the top companies by market capitalisation in Bursa Malaysia.
Ranked 152, (highest ranking for Malaysian bank) in The Banker top 1,000 world banks (July 2009).
The largest bancassurer provider in South East Asia.
Malaysia's Most Valuable Brand in 2007 & 2008.
Emerged as Gold Award winner among Malaysia's financial institutions in Putra Brand Awards 2010 by Association of Accredited Advertising Agents Malaysia / Malaysia's Most Valuable Brands.
Mergers
Mergers are business combination transactions involving the combination of two or more companies into a single entity. Most state laws require that mergers be approved by at least a majority of a company's shareholders if the merger will have a significant impact on either the acquiring or target company.
If the company you've invested in is involved in a merger and is subject to the SEC disclosure rules, you will receive information about the merger in the form of either a proxy statement on Schedule 14A or an information statement on Schedule 14C.
The proxy or information statement will describe the terms of the merger, including what you will receive if the merger proceeds. If you believe the amount you will receive is not fair, check the statement for information on appraisal or dissenter's rights under state law. You must follow the procedures precisely or your rights may be lost.
You can obtain a copy of a company's proxy or information statement by using the SEC's EDGAR database. To learn how to find these statements read our tutorial on how to use EDGAR. If you know that a company has filed a proxy or information statement with the SEC, use the "Quick Forms Lookup" search and enter either "PREM14A," "DEFM14A," "PREM14C," or "DEFM14C." The form prefixes-"PREM" and "DEFM"-stand for preliminary and definitive statement.
Leverage BuyOuts
A leveraged buy-out (LBO) is an acquisition of a public or private company in which the takeover is financed predominantly by debt with minimum equity investment. The debt is typically structured to include a combination of bank loans, loans from other financial institutions and bonds with below investment-grade credit ratings, referred to as high-yield bonds. Assets of the acquired company act as collateral for the debt and interest and principal obligations are met through cash flows of the refinanced company.
LBOs appeal to private equity firms due to the size of acquisitions that can be made with relatively small equity investments. Since the acquired company will be highly leveraged (i.e. large debt to equity ratio), a suitable LBO target should have an existing strong balance sheet, low initial debt levels and adequate stable cash flows.
LBO strategies first became widely employed in the 1980s coinciding with the growth in public debt markets, which enabled a wider group of borrowers to access large amounts of capital. The largest LBO to date is the 1998 acquisition of RJR Nabisco by Kholberg, Kravis, Roberts (KKR) for US$25 billion. During the 1980s LBOs gained a notorious reputation due to a number of high profile transactions that led to the bankruptcy of the target companies. These failures were due to the over-aggressive use of debt to finance the acquisitions, which resulted in the acquired corporate entities being unable to meet interest payments from cash flows .
LBO transactions are sometimes viewed as highly predatory in a hostile takeover situation since the target company's own financial strength and assets are used as the main source of collateral for the transaction. Whatever the initial transaction motivation, following an LBO the aim is to meet the increased debt obligations through improved corporate efficiency and / or corporate restructuring. In this respect, LBOs may be seen as a means of reducing agency costs by fully aligning the interests of managers with those of shareholders through the discipline imposed by increased financial leverage. In a corporate context, agency costs are said to arise when managers' interests (e.g. rapid business expansion) do not coincide with principals' primary interest (i.e. maximize shareholder return).
The acquiring entity in an LBO typically enters into the transaction with a planned exit strategy. A popular exit strategy to achieve a targeted return on the equity invested in the LBO is to break up and sell the acquired company or conglomerate. This technique was particularly popular in the 1980s. Other exit strategies may include an IPO or a trade sale within the company's industry. As an intermediate strategy, assuming improved financial efficiency, company shareholders may refinance the company to further increase its debt thereby releasing a portion of funds to equity holders.
In summary, an LBO is a takeover largely funded by debt, which is collateralized and serviced by the target company's assets and cash flows. Following an LBO transaction, the new shareholders aim to improve corporate efficiency and generate a targeted return on equity invested through a successful exit strategy.
Divestiture involves the disposal of an ownership interest in a company or subsidiary in exchange for other forms of assets. Divestiture may be a voluntary act effected to raise money, stem operating losses, or reorganize a corporation. It also may be compulsory, where a government or regulator demands a divestment to achieve a public policy goal under the threat of legal action.
Companies usually divest themselves of subsidiary business units because the capital invested in that operation could be more wisely employed somewhere else. These disposals are frequently carried out under the authority of a board of directors, and usually do not require the express consent of shareholders.
Where the owner is not a corporation, but an investment trust, the investor may elect to divest the trust of a certain asset because that asset is performing poorly or is engaged in activities tat are opposed by the investor. Divestiture allows the owner to undertake a more beneficial employment of assets by making them transferable.
Corporate laws and regulations provide few barriers for divestment, except when it is related to fraudulent or anticompetitive activity. The ability to convert an investment into a transferable asset benefits owners tremendously by allowing their capital to be employed with optimal efficiency.
BASIC PRINCIPLES
The basic concept of divestiture is as old as trade itself, but corporate divestiture as a principle has a relatively brief history. This is because the procedures involved developed out of modern forms of legal incorporation. Any company endowed with a certain asset maintained an ownership right that entitled it to employ that asset any way it chose, including financial disposal or divestment.
For example, a railroad line might purchase a coal mining company to provide a direct source of fuel for its fleet of locomotives. But with development of more efficient diesel engines, the value of that mine becomes seriously eroded. As the railroad replaces its steam engines with diesels, it has no use for its coal, except to sell it to someone else. Thus, it faces a crucial decision of whether to sell the mine or hold on to it and enter the coal supply business.
If the company decides that it could not compete effectively with other coal producers, and should remain only a railroad, it might choose to divest itself of the mine. If this were the case, the railroad would begin negotiations with potential buyers.
As an operating subsidiary of the railroad, the mine may be worth $2 million. But one potential buyer, another coal company, offers $2.5 million for the mine. A second buyer, a steel mill, offers $2.8 million. This illustrates a necessary motivation for divestment: a difference in valuation among the parties. In this case, the steel mill wins the competition and agrees to take over the railroad's mine for payment of $2.8 million.
A somewhat more complex scenario arises if the coal company offers only $1.5 million for the mine, and the steel company's top bid is $1.8 million. Again, there is a difference in valuation, but the railroad would incur a loss from the sale.
Under these circumstances, it might choose to go ahead with the sale anyway, because it could employ the $1.8 million offered by the steel mill to increase its profitability in other ways. It could use the proceeds of the sale to upgrade its facilities and purchase new diesel engines. This might enable the railroad to derive additional efficiencies from its existing operation that might be valued at $1 million. Despite the loss of $200,000 on the sale of its mine, the railroad stands to gain a net profit of $800,000.
These examples demonstrate the most common reasoning behind the divestiture of certain assets where a justification lies in increased economies of scale and economies of scope. The steel mill clearly could make better use of its coal mine in its own operations than could the railroad, and this is reflected in the valuation.
Divestiture may result from instances where anticipated synergies do not result. Although related to the concept of economies of scale, synergistic combinations attempt to translate product-specific technologies to entirely different markets.
For example, a manufacturer of military aircraft may purchase a company operating at a loss whose primary business is building business jets and other civilian aircraft. The justification for such an acquisition is that the company's engineering expertise from building fighter jets could be applied to design better, and therefore more profitable, airplanes for the private market.
But in practice, the company discovers that its primary strengths with military aircraft, such as high-speed manoeuvrability and radar-evading designs, provide no marketable benefit to private aircraft. As a result, the company is unable to apply the benefits from its most valuable military technologies to the civilian aircraft market.
In this case, the company's military and civilian aircraft enterprises remain divorced, each with distinctly separate engineering requirements, cost structures, and markets. Since no benefit can be derived from the combination, the company may elect to divest the civilian aircraft operation. With the proceeds, it might purchase another company that will benefit more from an association with the core business.
Divestiture also may be advantageous where business cycles are involved. For example, a paper and lumber company gradually diversified its operations to include certain types of specialty chemicals. This sideline provided the company with a valuable source of income from an operation that was well-insulated from the business cycles in the paper and lumber markets. When paper and lumber were unprofitable, the successful chemicals enterprise provided earnings stability, and by the time chemicals declined, paper and lumber had recovered to take its place.
But two dissimilar business cycles will not always coincide so conveniently. At one point, assume chemical operations became unprofitable well before demand for paper and lumber could recover. The company might decide to divest the chemical operations to stem its financial losses and even provide capital to pay off whatever debt it may have incurred to keep the company solvent.
If the company simply cannot afford to run the division any longer, its only option is to divest quickly. The paper company would be forced to sell the chemicals division at a substantial loss, because the chemicals market is at the low point of its cycle.
As a result, the purchaser of the chemical division can assume control of it at a very low cost. Eventually, the demand for chemicals will recover and the division will become profitable again. Accordingly, the value of the operation increases. If the valuation continues to grow, the new owner may elect to sell the operation, if only to realize a profit before the cycle turns down again.
Both instances illustrate the motivation behind a divestment due to circumstances solely attributable to business cycles. The same dynamic also applies to the cycles that govern individual products and product lines.
In some cases, a company may choose to divest itself of completely unrelated divisions because the parent company's management believes it can no longer administer them efficiently.
For example, a manufacturer of aluminium diversifies into a variety of final products, including outdoor structures, automotive assemblies, household appliances, and missiles. The only thing that each of the four divisions has in common is that its products are constructed of the parent company's aluminum. As a result, each division builds unique administrative organizations and cultures based on their different markets. In effect, they function as completely different enterprises.
These differences would be amplified if the parent company were to lose its competitive advantage in aluminum production. In this instance each of its units would be better off purchasing aluminum from competitors. If the parent company were to exit the aluminum business, it would remain in charge of four functionally disparate companies.
Management at this point might ask whether this represents an appropriate distribution of its assets. It might identify one or two business units for divestment, based on which unit would provide the lowest earnings, relative to its worth. The company then could use the proceeds of the sales to make additional investments in the remaining businesses it felt it could operate best.
Divestment, coupled with acquisition, provides an effective means for a company to discover unanticipated economies and synergies through trial and error. A company whose core skills lie in financial control and administrative consolidation might strive to assemble a fully diversified conglomerate.
In this case, the company's mission is to assemble unrelated businesses, in the hope that their profitability can be restored through restructuring or that their combination might provide some unforeseen benefit. When a division fails to deliver such benefits, its parent company might choose to divest itself of the operation and try again with another type of company.
Some companies may not feel compelled to divest underperforming divisions because there is inadequate pressure from the company's owners to maximize the company's profitability. The primary motivating factor in this resistance lies in the financially irrational concept of empire building, where sheer size and diversification feed the egos of management.
This situation usually persists until a group of activist shareholders can persuade the company's management-usually through proxy battles-to consider divestiture of these assets.
The awarding of substantial stock options to company management serves to more closely align the interests of management with interests of shareholders. In addition to merely drawing a salary from the company, these managers would become significant shareholders who would benefit from the greater profitability that a divestiture might create.
During the 1980s, the concept of the leveraged buyout (LBO) was propelled by the potential value of divesting undervalued operations. Several corporations progressed to a point where each operating unit was unable to compete efficiently in its respective markets. This depressed the value of these corporations and made them targets of raiders who financed, or leveraged, bids for these companies with the companies themselves as collateral.
These raiders understood that such companies were comprised of several divisions that, if sold separately to others-even their own competitors-could exact a total selling price well in excess of the total company's market value. By divesting certain operations, the raiders could raise funds to pay off the often substantial loansthat were needed to launch the LBO in the first place.
For example, an underperforming company with ten divisions might be acquired for $500 million, financed by banks or other investors. Six of these divisions are sold for $350 million. These funds are immediately transferred to the lenders, reducing the debt to $150 million, and cutting the amount of payments on the company's debt by 70 percent.
However, the remaining four divisions have a market value of $300 million. The raider can sell the company at this amount and take a $150 million profit, or use the profits from its remaining operations to pay down its debt over a period of, say, three years. At the end of that term, the company might be sold for $300 million, all of which would be profit.
Often the managers of potential takeover targets recognize the precarious position their companies are in and initiate divestments to raise the market value of their companies. This, it is hoped, would discourage others from launching LBOs that could cost them their jobs. They do exactly what a raider would do, but they do it before losing control of their company to a raider. In both instances, the owner benefits, whether the owner is a corporate raider or a group of shareholders.
Because managers often are in the best position to understand the state of their company, they themselves may opt to purchase the company from shareholders, in effect, launching their own LBO. These management buyouts take many forms: they may involve the entire company, or just a single division of it.
To illustrate this, assume a group of managers arranges financing to offer shareholders $600 million for the same underperforming ten-division company. At this price, shareholders may realize an immediate 20 percent premium on the market value of their shares. If the shareholders can be convinced to sell at this price, the managers would take control of the company and initiate the same divestments described earlier. Again, the managers are acting the same way as a raider, only it is they, as owners, who benefit from the divestiture.
But if a group of managers within one of the company's ten divisions believes it can administer the operation more efficiently than the parent company, they might arrange financing to purchase only that division from the parent company. If the managers can offer a price for the division that is greater than the company's valuation of it, the company may elect to divest the operation.
TYPES OF DIVESTITURES
Divestitures take several distinct forms, based on the nature of the exchange of assets and the relationship between the buyer and seller. Because these forms have subtle differences, the terms used to describe them are frequently used incorrectly.
The most common term, used to describe the most common form of divestiture, is the sell-off. Here a company agrees to sell one of its divisions, as an individual enterprise, to another company. The defense industry has provided several examples of sell-offs in recent years.
General Dynamics, a maker of nuclear submarines, battle tanks, and aircraft, decided to exit the military aircraft portion of its business in 1993. This operation was centered at a single plant, the Convair works in Fort Worth. It found a buyer in Lockheed, a military aircraft manufacturer that was better structured to profitably operate the Fort Worth facility. In exchange for the plant, Lockheed paid a single amount in cash to General Dynamics. Lockheed eventually merged with Martin Marietta in 1995, but in another divestiture sold its interest in Lockheed Martin to Martin Marietta in 1996. This action by Lockheed allowed Martin Marietta to use the stock to make additional acquisitions.
A second type of divestiture is the spin-off. Here, a company divests itself of a part of its operations by replacing its existing shares with two or more classes of shares, representing the new, independent operations.
Morton Thiokol, a manufacturer of chemicals, salt, and rocket motors, executed a spin-off when it divided its operations into two companies in 1990. Shareholders exchanged shares in Morton Thiokol for an equivalent value of shares in the two new companies, Morton International and Thiokol, Inc. Thiokol's performance since the split has improved, partially due to its 1995 acquisition of a majority interest in Howmet, maker of blades for jet engines and gas turbines. In May 1998 Thiokol was renamed Cordant Technologies Inc.
The most celebrated spin-off occurred in 1984 when, under antitrust pressure from the U.S. Department of Justice, AT&T was forced to divest its 22 local Bell operating companies. Shareholders were issued new shares in AT&T, which retained its long distance, manufacturing, and research divisions. As of the late 1990s, those shareholders also held stock in eleven new companies, including Ameritech, Bell Atlantic, BellSouth, Lucent Technologies, Pacific Telesis, Nynex, Southwestern Bell, SBC Communications, and US West as a result of that spin-off.
In both examples, there were no buyers and sellers. Shareholders were compensated with new shares, and no money changed hands. In 1998 Michael Noer speculated in Forbes that the same type of spin-off could happen at Microsoft if the U.S. government won its antitrust case against the software giant.
In some cases, a company may choose to create a divestment by offering partial equity in its subsidiaries. For example, General Motors Corp. offers two classes of stock shares-Class A for its core automotive operations and Class H for its GM Hughes Electronics group.
The company maintained a majority stake in Hughes but allowed a minority of those shares to trade independently of General Motors Class A. If at some point, for example, GM elected to divest most or all of its interest in Hughes, it could merely sell its shares in that company to a buyer or to the general population of shareholders. The exchange would be made between GM and the buyer on the basis of money for shares.
Another form of divestment, described earlier, is the management buyout. Union Carbide, a diversified manufacturer of industrial chemicals and plastics, operated a small consumer products group. In 1989 Union Carbide announced its intention to sell the consumer group in order to focus on improving the performance of its core operations. A group of managers organized financing, some of which was provided by Union Carbide, to make the division an independent company, now called First Brands Corp.
In this instance, the buyer was a group of managers, and the company was compensated with both cash and shares. Union Carbide gradually reduced its equity interest in First Brands by later selling its shares in the company.
Asset trades constitute a fifth form of divestment. Telephone companies have been known to divest of certain service territories with asset trades. For example, a company that has operations centered in Louisiana, but which operates telephone franchises in Ohio, might benefit from trading its operations in Ohio to a company whose business is stronger in that state. In return, the Ohio telephone company offers operations it has in Louisiana as payment.
In this case, both companies are buyers as well as sellers. Payment is in the form of barter, where each company's divestment is the other's acquisition.
The final form of divestment involves total liquidation, where all of a company's divisions are sold off or its operations are wound down and the assets sold for cash. In 1990 Eastern Airlines fell into such a deep financial morass that it was forced to close down. The company's debts far outnumbered its assets. A court ordered the liquidation of the company to provide at least partial settlement for its liabilities.
The company's aircraft, facilities, routes, and even its venerable name were divested. A shell corporation remained in place only to administer the divestiture of assets. In this case, there were many buyers, and payment was strictly in cash.
Regardless of the form or the specific motivations behind it, a divestiture is almost always undertaken to do one thing: maximize the value of invested capital. It provides an exit mechanism to convert invested capital back into a negotiable form of assets, usually cash, shares, or some other debt instrument. These assets, freed of their previous application, can then be applied to some new form of investment.
Business Failure Fundamentals
Business failure, or colloquially going out of business, refers to a company ceasing its operations following its inability to make a profit or to bring in enough revenue to cover its expenses. The final step is always that the business runs out of cash. It has been said that running out of cash defines business failure [1]. This is the basis of the expression, "cash is king".
Types of Business Failure
Its returns are negative or low.
A firm that consistently reports operating losses will probally experience a decline in a market value
If the firm fails to earn a return that is greater than its cost capital, it can be viewed as having failed
Low returns and unless remedied are eventually in one of the following more serious types of failure.
Technical Insolvency
Business failure that occurs when the stated value of a firm's liabilities as they come due
When a firm is technically insolvent, its assets are still greater than its liabilities, but it is confronted with a liquidity crisis.
Bankruptcy
Business failure that occurs when the stated value of a firm's liabilities exceeds the fair market value of its assets.
A bankrupt firm has a negative stockholders equity- the claims of creditors cannot be satisfied unless the firm's assets can be liquidated for more than their book value.
Causes of Business Failure
The following are some possible causes of business failure.
• Cash flow problems
• Poor business planning
• Fall in demand for the product
• Rise in costs or a lack of control of costs
Cash Flow problems
For many small and newly formed businesses, this is often the
single most important reason for business failure. The problem
arises when the money coming into the company from sales is
not enough to cover the costs of production. It is important to
remember that it is a case of having the money to be able to
pay debts when the debts are due, not simply generating
enough revenue during a year to cover costs.
Poor Business planning
Many new businesses will have to put together a business plan
to present to the bank before it receives loans or financial help.
The time and effort put into these plans is crucial for success.
Bad planning or poor information on which the plan is based is
likely to lead to difficulties for the firm. For example, if the
firm plans to sell 2,000 units per month in the first year
because it used only limited market research and ends up only
selling 500 per month, it will soon be in serious danger of
collapse.
Fall in demand for the product
There are a number of reasons why demand might fall. Some
of these might be to do with the business taking their eye off
the ball and not paying sufficient attention to their customers'
needs - perhaps the product is not up to scratch, perhaps the
quality is poor, maybe the price is too high - most of these
things are within the businesses control.
Falling sales might be a sign that there might be something
wrong with the product or the price or some other aspect of the
marketing mix. Sometimes the fall in sales might be as a result
of the competition providing a better product or service - in
part the business can do something about this they have to
recognise it in the first place.
Rise in costs or a lack of control of costs
Costs of production can rise for a number of reasons. There
may have been wage rises, raw material prices might have
increased (for example the price of oil or gas), the business
might have had to spend money on meeting some new
legislation or standard and so on. In many cases, a firm can
plan for such changes and is able take them into account but if
the costs rise unexpectedly, this can catch a firm off guard and
tip them into insolvency.
Business failure occurs when your business has reached a
point (commonly insolvent) where it can no longer continue
trading without encountering further problems. These problems
may offer no feasible solutions and by continuing to trade, you
put yourself in deeper trouble. At this point, it is important that
you accept business failure early or you will face increased
financial and legal problems when you try to save your
business or put it to rest.
Business failure does not always occur because of problems in
your own business, but can be achieved as a knock-on effect
from actions made by other businesses, suppliers and
customers. It is therefore important that you recognize the
early signs of business failure before it is too late for the
situation to be resolved
Business failure, or colloquially going out of business, refers
to a company ceasing its operations following its inability to
make a profit or to bring in enough revenue to cover its
expenses.
REASONS
Some businesses fail early on. This can occur as a result of
wars, recessions, high taxation, high interest rates, excessive
regulations, management decisions, insufficient marketing,
inability to compete with other similar businesses, or a lack of
interest from the public in the business's offerings. As well,
some firms can be sold to another owner, or merged with
another firm. Some businesses may choose to shut down prior
to an expected failure. Others may continue to operate until the
very last day before they are forced out by a court order. Yet
with some small businesses, the owner may voluntarily cease
operations not due to financial constraints, but as a result of a
personal decision, such as retirement.
After closing, a business may be dissolved and have its assets
redistributed after filing articles of dissolution. A business that
operates multiple locations may continue to operate, but close
some of its selected locations that are under-performing, or in
the case of a manufacturer, cease production of some of its
products that are not selling well. Other failing companies may
be purchased by a new owner who may be able to run the
company better, or else merge with another company that will
then take over its operations. Yet some businesses may be able
to save themselves through bankruptcy or bankruptcy
protection, thereby allowing themselves to restructure.
CAUSES
In economics, arec ession is a general slowdown in economic
activity over a sustained period of time, or a business cycle
contraction.[1][2] During recessions, many macroeconomic
indicators vary in a similar way. Production as measured by
Gross Domestic Product (GDP), employment, investment
spending, capacity utilization, household incomes and business
profits all fall during recessions.
Governments usually respond to recessions by adopting
expansionary macroeconomic policies, such as increasing
money supply, increasing government spending and decreasing
taxation.
Law establishes from whom atax is collected. In many
countries, taxes are imposed on business (such as corporate
taxes or portions of payroll taxes
). However, who ultimately
pays the tax (the tax "burden") is determined by the
marketplace as taxes become embedded into production costs.
Depending on how quantities supplied and demanded vary
with price (the "elasticities" of supply and demand), a tax can
be absorbed by the seller (in the form of lower pre-tax prices),
or by the buyer (in the form of higher post-tax prices). If the
elasticity of supply is low, more of the tax will be paid by the
supplier. If the elasticity of demand is low, more will be paid
by the customer. And contrariwise for the cases where those
elasticities are high. If the seller is a competitive firm, the tax
burden flows back to the factors of production depending on
the elasticities thereof; this includes workers (in the form of
lower wages), capital investors (in the form of loss to
shareholders), landowners (in the form of lower rents) and
entrepreneurs (in the form of lower wages of superintendence).
Strike action, often simply called a strike, is a work stoppage
caused by the mass refusal of employees to perform work. A
strike usually takes place in response to employee grievances.
Strikes became important during the industrial revolution,
when mass labor became important in factories and mines.
labor cost -wages paid to workers during an accounting period
on daily, weekly, monthly, or job basis, plus payroll and related
taxes and benefits (if any).
Legislation (or "statutory law") is law which has been
promulgated (or "enacted") by a legislature or other governing
body. The term may refer to a single law, or the collective body
of enacted law, while "statute" is also used to refer to a single
law. Before an item of legislation becomes law it may be
known as a bill, which is typically also known as "legislation"
while it remains under active consideration. Legislation can
have many purposes: to regulate, to authorize, to provide
(funds), to sanction, to grant, to declare or to restrict.
The act of law making is sometimes known as legislating.
Under the doctrine of separation of powers, the law--making
function is primarily the responsibility of the legislature.
However, there are situations where legislation is enacted by
other means (most commonly when constitutional law is
enacted). These other forms of law-making include
referendums and constitutional conventions. The term
"legislation" is sometimes used to describe these situations, but
other times, the term is used to distinguish acts of the
legislature from these other lawmaking forms, which have
been scaled down.
FIRM
the members of a business organization that owns or operates
one or more establishments; "he worked for a brokerage
house"
unwavering in devotion to friend or vow or cause; "a firm
ally"; "loyal supporters"; "the true-hearted soldier...of
Tippecanoe"- Campaign song for William Henry Harrison;
"fast friends"
Business failure
Poor marketing
Successful modern businesses are ones that understand and
meet the requirements of their customers. Detailed market
planning and market research is therefore an essential for new
businesses, to find out details such as the potential size of the
market, the extent of competition, as well as consumer
preferences and tastes.
Cash flow problems
Many businesses struggle through poor cash flow
management. It is all very well having a good idea and a good
product but it is also necessary to be able to meet short term
outflows. Many businesses try to grow too quickly, and end up
borrowing too much money externally, resulting in crippling
interest repayment charges.
Poor business planning
Business planning should cover aspects such as marketing,
finance, sales and promotional plans, as well as detailed
breakdowns of costings and profit predictions. It is often said
that 'failing to plan, is planning to fail'.
Lack of finance
Insufficient finance often means that businesses are unable to
take opportunities that are available to them, or have to
compromise - going for high cost solutions to problems, rather
than lower cost ones that would yield greater competitive
advantage.
Failure to embrace new technologies and new
developments
In a fast changing world leading businesses are ones that make
best use of advanced modern technologies in an appropriate
way. Firms that operate with outdated technologies and
methods frequently find themselves at a cost disadvantage over
more dynamic rivals.
Poor choice of location
Location is a very important business decision. A good location
is one that appeals to large numbers of customers, while at the
same time minimising costs. For example in retailing it is often
a mistake to choose a low cost location, that is not visible to
customers. However, conversely there are considerable cost
advantages to out-of-town retailers that customers are prepared
to travel to visit.
Poor management
Weak and inexperienced management is one of the major
causes of business failure. Managers have to work extremely
hard, and to understand their customers needs, and the business
that they are in if they are to be successful.
Poor human resource relations
Are often a cause of failure. Successful businesses motivate
their employees to work hard to help the business to succeed.
Lack of clear objectives
Successful organisations have clearly focused and
communicated objectives that enable everyone in the
organisation to pull in the same direction.
