Investing In Liquid Or Non Liquid Assets - Free Essay Example

Sample details Pages: 18 Words: 5465 Downloads: 7 Date added: 2017/06/26 Category Finance Essay Type Research paper Did you like this example? CHAPTER 1: Liquidity was found to be one of the most important unresolved problems in the field of corporate finance (Brealy and Myers, 1996). In addition, the same studies found that the liquidity management was the pinpoint of determining both future investment opportunities and future capacity of external borrowing. Firms, in general, invested in the most liquid assets. Don’t waste time! Our writers will create an original "Investing In Liquid Or Non Liquid Assets" essay for you Create order Liquid assets made up a considerable segment of total capital or assets and had the more important implications for the risk and profitability of firms (John, 1993). For instance, according to Kim, Mauer, and Sherman (1998), the average ratio of cash plus marketable securities to total assets (Liquidity) was 8.1% during the period of 1975 to 1994 of a sample of 915 industrial firms of the United States of America. Kim et al. (1998) analyzed both the costs and benefits of holding the liquid assets and concluded that the investment in liquid assets (e.g., Treasury Securities) was more costly because by investing in liquid assets, the firms accepted opportunity cost of investing in less liquid and more rewarding assets; furthermore, the firms also bear transaction costs of trading financial securities. But firms managed significant and predictable amounts of excess liquid asset holdings because of the capital market imperfections provided a strong logic to maintain some excess liquidity to tackle some emergencies. Huberman (1984), Ang (1991), and Myers and Rajan (1995) had noted that liquid assets might prompt more severe agency problems than less liquid assets. Specifically, if and only if the external financing was costly, the investment in liquid assets was the most advantageous reply to having to seek costly external financing to fund future production needs or investment opportunities and the costs of external financing included the direct expense to issue securities, the costs arising from potential agency conflicts, and costs arising from the adverse selection problems attributable to asymmetric information (Smith, 1986). Thus, investment in surplus liquidity can be viewed as a cost-effectively rational way to reduce the firms reliance on costly external financing. Obviously, any such remuneration must be balanced against the holding costs that liquid assets force on the firm. Liquid assets earned a low rate of return as compared to the less liquid asset s. However, the firms despite decided to hold a positive amount of liquid assets provided undecided future in-house funds and costly external financing. Hence, it was concluded that there was a tradeoff between the holding cost of liquid assets (a low rate of return) and the benefit of minimizing the need to seek costly external financing if internally generated funds were insufficient to finance future investment opportunities. According to Horne and Bowers (1968), liquidity can be expressed as the ability to realize value in an accepted means of exchange. Being the acceptable means of exchange, money was the most liquid asset and was also a benchmark against which the value of other type of monetary assets was compared as to its degree of replacement. In addition, liquidity had two dimensions: the one was the time required to convert the asset into money, and the other was the certainty of the price realized, i.e., the stability of the exchange ratio between the money and the a sset. In the business world, there was the high corporate demand for liquidity and firms in the real, financial and industrial sectors managed its liquidity needs in the numerous ways in order to carry out further production and investment plans efficiently without being stopped by impermanent liquidity deficiencies. The firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ decisions regarding the future ability to avail financial funds was affected by several key factors such as the capital structure set deadlines for settling the amounts to investors, corporations did not invest all of its resources in the most profitable, long term projects and in fact they also invested funds in less profitable liquid assets, the corporations engaged in the risk management and derivatives were used to evade the particular risks (such as rate risk, exchange rate risk, etc.), and lastly, international risk burden was also measured by the companies. (Holmstrom and Tirole, 2000) 1.2 Problem Statement In the corporate finance, the liquidity was considered to be one of the most important issues. The main objective behind the study of the corporate liquidity was that this was the most important issue for the present firms to either invest in the more liquid assets or to invest in the less liquid assets. Furthermore, investment in liquid assets was prompted by several other factors such as the future investment opportunities and future uncertain cash flows and the external costly financing. Contrastingly, the investment in less liquid assets attracted the corporations because of the high rate of return of such investments. The purpose of the study was to notice whether the financial factors explained in detail by Kim and David and Ann (1998), and John (1993), present the detail regarding the choice of the firm to invest in liquid or non liquid assets in Pakistan. The scope of study was to analyze the distinctive financial factors which affected the firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ decisi ons to place their funds in more liquid assets and on the basis of firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ financial factors, the research study determined the choice of investing in liquid assets or the choice of having internal liquidity. 1.3 Hypotheses A central query in front of firms which needed new finance to invest in operational activities was whether to use internal funds generated through the most liquid assets or to raise the costly external financing. Various factors impacted the decision regarding the decision to invest in liquid assets (liquidity). The firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s characteristics had the great importance in selection of the investment decisions; these characteristics were firm size, operating income to sales ratio, operating income to total assets ratio, market to book ratio, inventory plus gross fixed assets to total assets ratio, log natural of annual sales, total debt ratio, and long term debt ratio. Many authors as Kim and David and Ann (1998), John (1993) discussed these characteristics in research. The hypothesized relationship of these listed factors with liquidity is provided below: H1: There is negative impact of Firm Size on Liquidity. H2: There is negative impact of Total Debt Ratio on Liq uidity. H3: There is negative impact of Long-Term Debt Ratio on Liquidity. H4: There is positive impact of the ratio of the Market to Book Value of Equity on Liquidity. H5: There is positive impact of the ratio of Operating Income to Sales on Liquidity. H6: There is negative impact of the Operating Income to Total Assets ratio on Liquidity. H7: There is negative impact of the ratio of Inventory plus Gross fixed assets to Total Assets on Liquidity. H8: There is positive impact of sales of firms on liquidity. 1.4 Outline of the Study The research structured as follows. Chapter one was based on the introduction of the thesis, which consists of the some introduction of the liquidity by different authors, the statement of problem, scope and objectives, hypothesis etc. Chapter two consisted of literature review given by different authors, theories on liquidity and factors affecting the choice of decision to invest in more liquid assets or not. Chapter three described methodology which is composed of justification of the selection of the variables utilized in analysis sample, the data, technique and hypothesis, also estimate model utilized in analysis. In chapter four, analyses of the results were there which were taken after the data processing. Chapter five contained the final results, conclusions and recommendations. References were included in chapter number six. CHAPTER 2: LITERATURE REVIEW When a firm wanted to invest in a project or production facilities, there was a question before the firm that it should use its own funds or retained earnings or raise an external financing. The firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s answer to this question did not affect the wealth of security holders in the world of Miller and Modigliani (1961) where the capital markets were perfect. However, among other things, the capital market perfection means the absence of liquidity problems. Resultantly, all assets can be exchanged for cash and vice versa and that exchange was made at the market value and it does not entail a loss. (Huberman, 1984) The real markets were not quite perfect and one can see a variety of reasons about it. Consider the example of firms wishing to finance new projects by issuing claims on the projects. If the firms knew more about the projects than the outside world knew and the claims were considered risky, a market collapse may take place (Ackerlof, 1970). If the firms bel ieved their projects were good, will perceive that their claims were undervalued by the market and will not issue such claims and only the projects of pessimistic firms will be financed (Huberman, 1984). Finally, it was the best option that a firm used its own liquid assets to invest quickly without going to the capital market under certain circumstances. Hence, it was the most desirable that a firm possesses the excess liquid assets in the real world of capital markets imperfection (Huberman, 1984). There was a vast literature available on the liquidity and one of the most prominent theories of liquidity is the Liquidity Preference Hypothesis (LPH). 2.1 Liquidity Preference Hypothesis (LPH): The Liquidity Preference Hypothesis (LPH) gave details that the return on government securities was a monotonically rising function of the time to maturity. That was, restricted on all on hand information, the probable monthly return on a T-bill with one year to maturity should surpass the probable monthly return on a six month T-bill, which should be better than the sure yield on a one month T-bill, and so on. Regardless of the shape of the term structure or any other economic variables contained in the agentà ¢Ã¢â€š ¬Ã¢â€ž ¢s information set, the LPH meant this condition. The underlying intuition behind the LPH was that the longer term bonds are riskier; that was, they were more susceptible to the fluctuations or volatility in interest rate than the shorter term bonds and the individuals needed to be compensated for the risk of holding these bonds, hence, the higher predicted yield. (Boudoukh, and Richardson, and Smith, and Whitelaw, 1999) The LPH did not worry about the choi ces investors made between the whole variety of financial assets, on the one hand, and other broad classes of assets, on the other. LPH took as given the choices determining how much wealth was to be invested in financial assets and concerned itself with the distribution of these amounts among cash and substitute financial assets. An issue can be identified here; that is, why should any balances be held in cash, in preference to other financial assets? The author distinguished two possible sources of liquidity preference, while recognizing that they were not mutually exclusive. The first was inelasticity of expectations of future interest rates. The second was insecurity about be future of interest rates. (Tobin, 1958) Tobin (1958) argued liquidity preference as the theory of most advantageous portfolio masterpiece in a two-asset (money, bonds) world in which one asset (money) was riskless in his original paper. The basic conclusion of Tobinà ¢Ã¢â€š ¬Ã¢â€ž ¢s theory of liquidity preference and portfolio choice rested on the properties entitled to these  µ-à ¡Ã‚ »? curves. According to Lachmann (1937), in current literature there appeared to be present a reasonable amount of conformity among writers that uncertainty had to be looked upon as the foremost determinant of movements in the size of cash balances, i.e., as the main cause of liquidity preference. At more rapidly scrutiny, though, this noticeable agreement came out as to some extent full of twists and turns, because diverse writers gave this word a different meaning. In the following, it was only restricted to the assessment of two examples of monetary theories in both of which the most important role was allocated to uncertainty, and it was found based on the research that in each case the word had a different meaning. After that, the results of the critical assessment of these theories will be used in the best way with the intention to find that meaning of à ¢Ã¢â€š ¬Ã…“uncertainty wh ich will enable the research study to regard it as the cause of liquidity preference. Uncertainty was but one of a lot of grounds of liquidity preference. Possibly the failure of the author to set up a causal association between uncertainty and liquidity preference was due to the authorà ¢Ã¢â€š ¬Ã¢â€ž ¢s having used the word uncertainty in too broad and too indefinite a meaning. The endeavor to ascertain a causal association between uncertainty and liquidity preference had up to now driven out to be an absolute failure. Wells (1983) had publicized that want for liquidity was an indispensable economic reaction to the not able to be understood and considerably variegated future which always lied to the front. Liquidity was valued in an indecisive world because it afforded economic units the preference of not entirely host aging their own economic future to the uncertain future of the economy. Its ownership provided businesses and households the elasticity to reorganize their econo mic plans, to redistribute their wealth as the future slowly opens out and becomes the past, as acquaintance was gained with the simple passage of time. In short, this was Keyness (1937) theory of liquidity preference. And from just this explanation it can be simply understood why his hypothesis, as it was remade by subsequent generation of writers, turned out to be detached from Keyness (1937) unambiguous acknowledgment of the central significance of time and uncertainty, of liquidity and liquidity preference. The disconnection came about largely because the fact that our information of the future was unpredictable, indistinguishable, and doubtful demonstrated to be a perception far too short lived to support contemporary quantitative model building research. Keyness concepts were real, but they were necessarily so unclear and imprecise that model builders could not well integrate these phenomena into their analytics. Kaldor (1981, 1982) for instance observed that the stress on liquidity preference as a theory of the demand for money had made an immense contribution to the accomplishment of monetarism. As long as the demand for money could be shown statistically to be less than perfectly elastic and the supply of money to be determined independently enough from the demand, the supply of money was the major determinant of economic activity. This investigation presented here puts emphasis that liquidity preference was a theory of the desire to hold short- versus long-term assets and that the state of liquidity preference was presided over primarily by the productivity of business. (Mott, 1985-1986) According to the Keynesà ¢Ã¢â€š ¬Ã¢â€ž ¢s liquidity preference theory, the authorities achieved their objectives, which the author understood to be set with respect to the level of the interest rate, against the background of liquidity preference. The interest rate was changed not only by varying the rate at which the central bank was all set to discount (Bank rate), but also by open market operations: sale or purchase of securities between the central bank and the other market members. According to Reilly and Brown (2005), the theory of Liquidity Preference hold that the higher returns must be given on the long term investments than the shorter ones because some of the yields and returns to invest in the short term investments were given up by the investors in order to avoid the greater price fluctuations of the securities having longer life. Another way to interpret the liquidity preference hypothesis was to say that lenders preferred short term loans, and, to induce them to lend long term, it was necessary to offer higher yields. The liquidity preference theory was also called the Term Premium Theory and it asserted that uncertainty and volatility caused investors to favor short term issues over bonds with longer maturities because short term securities were less volatile and can easily be converted into predictable amounts of cash should unforeseen events occur. This theory argued that the yield curve generally sloped upward and that any other shape should be viewed as a temporary deviation. To see how the liquidity preference theory predicted the future yields and how it compensated with the pure expectations hypothesis, to predict future long term rates from a single set of one year rates: 6 percent, 7.5 percent, and 8.5 percent. The liquidity preference theory suggested that investors added increasing liquidity premiums to the successive rates to derive actual market rates. As an example, investors might arrive at rates of 6.3 percent, 7.9 percent, and 9.0 percent. As a matter of the historical fact, the yield curve showed an upward bias, which implied that some combination of the liquidity preference theory and expectations theory will more accurately explain the shape of the yield curve than either of them alone. Specifically, actual long term rates consistently tended to be above what was envisioned fr om the price expectations hypothesis. This tendency implied the existence of a liquidity premium. The liquidity premium was provided to compensate the long term investor. CHAPTER 3: RESEARCH METHODS 3.1 Method of Data Collection Data was collected from Karachi Stock Exchange KSE 100 Index as given by State Bank of Pakistan in publication Balance Sheet Analysis of Joint Stock Companies Listed on the KSE (2003-2008). The period of study covered six years, 2003-08. The opted sample size of 70 non financial firms was taken from KSE 100 Index and all of the non financial firms listed on KSE 100 Index were selected for the samples which were either manufacturing firms or service providing firms excluding the financial firms. The objective behind the exclusion of the financial firms from the sample was that liquidity impact of the financial firms and non financial firms was entirely different. 3.2 Sample Size A sample of 70 non financial firms from KSE 100 Index was taken. Only firms were used in the samples which were only the non financial firms which included the industrial firms and service providing firms listed on the KSE 100 Index form 2003-2008. The impact of the different financial factors on the liquidity was analyzed on all of the non financial firms selected as the sample. 3.3 Research Model Developed There were various financial factors of the non financial firms which affected the liquidity of the firms. This research study analyzed the impact of different factors on the liquidity. The factors, their relation with the liquidity, their measurement formula and the hypothesized relationship with liquidity were discussed below following the discussion after à ¢Ã¢â€š ¬Ã‹Å"Liquidityà ¢Ã¢â€š ¬Ã¢â€ž ¢. 3.3.1 Liquidity According to Horne and Bowers (1968), Liquidity can be expressed as the ability to realize value in an accepted means of exchange. Being the acceptable means of exchange, money was the most liquid asset and is also a benchmark against which the value of other type of monetary assets was compared as to its degree of replacement. In addition, liquidity has two dimensions: the one was the time required to convert the asset into money, and the other was the certainty of the price realized, i.e., the stability of the exchange ratio between the money and the asset. Kim and David and Ann (1998), and John (1993) both measured the liquidity as the ratio of cash and marketable securities to total assets. 3.3.2 Firm Size and Liquidity Recent research showed that small firms were more likely to face borrowing constraints than large firms Gertler and Hubbard (1988), Whited (1992), and Fazzari and Petersen (1993). In addition, Barclay and Smith (1996) argued that the cost of external financing was smaller for larger firms because of scale economies resulting from a substantial fixed cost component of security issuance costs. H1: There is negative impact of firm size on liquidity. 3.3.3 Total Debt Ratio and Liquidity The firms debt ratio was expected to be negatively related to liquid assets. There were at least two reasonable reasons. Baskin (1987) argued that as the firms debt ratio increased, the cost of funds used to invest in liquidity increased thereby reducing funded liquidity. Additionally, John (1993) argued that firms with access to debt markets-as proxied by the debt ratio-can use borrowing as a substitute for maintaining a stock of liquid assets. Firms with ready access to debt markets and other sources of borrowing can also use debt as a substitute for liquidity maintenance. H2: There is negative impact of total debt ratio on liquidity. 3.3.4 Long Term Debt Ratio and Liquidity Baskin (1987) argued that as the firms long term debt ratio increased, the cost of funds used to invest in liquidity increased thereby reducing funded liquidity. Additionally, John (1993) argued that firms with access to debt markets-as proxied by the long term debt ratio-can use borrowing as a substitute for maintaining a stock of liquid assets. Firms with ready access to debt markets and other sources of borrowing can also use debt as a substitute for liquidity maintenance. H3: There is negative impact of long term debt ratio on liquidity. 3.3.5 Operating Income to Total Assets and Sales Ratio and Liquidity According to John (1993), similarly, operating incomes or cash flows provided a ready source of liquidity. Firms with ready access to debt markets and other sources of borrowing can also use debt as a substitute for liquidity maintenance. Therefore, firms with good operating incomes (OI/S or OI/TA) or ready sources of financing (proxied by measures of debt) can afford to keep lower levels of liquidity. Hence, liquidity ratios (LIQR) would be lower for firms with higher operating incomes. H4: There is negative impact of operating income to total assets ratio on liquidity. H5: There is negative impact of operating income to sales ratio on liquidity. 3.3.6 Inventory and Gross Plant and Equipment to Total Assets Ratio and Liquidity Another measure of the liquidity costs of asset restructuring was the collateral value of the assets Shleifer and Vishny (1992). Titman and Wessels (1988) suggested proxies for the collateral value. The ratio of inventory plus gross plant and equipment to total assets (IGP/TA) was positively related to collateral value. The liquidity costs of asset restructuring were negatively related to collateral value. A firm with assets of high collateral value needed only to maintain low levels of liquidity. In other words, the liquidity measures will be decreasing in IGP/TA. H6: There is negative impact of inventory and gross plant and equipment to total assets ratio on liquidity. 3.3.7 Market to Book Ratio and Liquidity Myers (1977) argued that risky debt financing may engender sub- optimal investment incentives when a firms investment opportunity set included growth options. Managers acting on behalf of equity holders may fail to exercise profitable investment options because debt captured a portion of equity holders return in the form of a reduction in the probability of default. The firm can reduce the risk of financial distress and thereby mitigate the incentive to under invest in growth options by maintaining excess liquidity. This view also predicted a positive relation between corporate liquidity and the market-to-book ratio. H7: There is positive impact of market to book ratio on liquidity. 3.3.8 Sales and Liquidity According to John (1993), the variable sale was one of the control variables to account for the level of liquidity justified by transaction and precautionary motives. The variable sales proxy for the transaction needs of the firm. H8: There is positive impact of sales on liquidity. The model developed was a linear model and its specifications are provided below: LIQR = a0 + a1FIRM + a2DEBT + a3LTD + a4LSALES + a5OI/S + a6OI/TA+ a7 IGP/TA+ a8Market to Book Ratio + ц LIQR = the sum of cash and marketable securities divided by total assets FIRM = natural log of the book value of total assets DEBT = the ratio of shorter period plus longer period debt to total assets LTD = the ratio of longer period debt to total assets LSALES = natural log of the annual sales OI/S = the ratio of operating income to sales OI/TA = the ratio of operating income to total sales IGP/TA = the inventory plus gross fixed assets to total assets ratio à Ã¢â‚¬Å¾ = the error term The proposed relationship of the independent variables on liquidity is summarized in the below table: TABLE 3.1 : Relationship between Independent Variables and Liquidity  Firm Size Debt LTD OI/TA OI/S IGP/TA Market to Book Sales Liquidity negative negative negative negative positive negative positive positive 3.4 Statistical Technique Multiple Linear Regression Analysis (MLR) technique was used for this research study to examine the impact of the distinctive financial characteristics of the non financial firms on their liquidity of the selected firms; Statistical Package for the Social Sciences (SPSS) was used for the examination of the secondary data. Multiple Regression Analysis technique was used for the purpose of prediction of the decision of the non financial firms to invest in the liquid assets or not. The selected technique was used to study the impact of the different independent variables (financial factors as listed in the previous chapters) on the dependent variable i.e., liquidity. The multiple regression analysis was selected for this study because the multivariate analysis was more suitable than univariate investigation. In such a way; to openly taking into consideration, the interaction between multiple regressing variables, the study included the derivation of the linear regression function. It showed the intensity of the impact on liquidity during year 2003-2008 on the basis of several independent variables. CHAPTER 4: RESULTS The sample of 70 non financial firms from the Karachi Stock Exchange KSE 100 Index was taken; Multiple Regression Analysis (MLR) technique was used for this research study. Researcher examined the distinctive financial characteristics of non financial firms which invest in the more liquid assets. The selected technique was used to study the impact of the different independent variables (financial factors as listed in the previous chapters) on the dependent variable i.e., Liquidity. 4.1 Findings and Interpretation of the results Initially, the regression technique was applied on the data collected using SPSS. It was obvious from the results that there was the existence of strong multicollinearity among the predictors of the liquidity and this implies that there was strong interrelationship present among the independent variables. Hence, the results generated through SPSS were purely biased. In addition, there was the absence of the normality among the variables. Due to non normality, the results were not providing the true picture of the impact of the different predictors on the study variable. While resolving the problem, it was noticed that the main cause of the multicollinearity among the predictors was due to the two independent variables including firm size and annual sales. So, annual sales variable was removed from the analysis of the impact of different factors on liquidity. Hence, the multicollinearity issue was resolved. In resolving the issue of normality, various transformations were appl ied on the variable in order to normalize the variable so that the results could be more reliable; and accurate outlook of the true picture of liquidity can be made. Ultimately, all the issues were successfully resolved which were creating hindrances in the way of accuracy of results. Now, proceeding with the analysis of the results because the data was normal and there was also no multicollinearity issue in the data. The interpretation and analysis is presented in the next sections of this research study. TABLE 4.1 : Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate 1 .724a .524 .439 .06894 Table 4.1 showed the summary regarding the regression model. The R square of 52.4% in the above table showed that the all the predictors of liquidity combined together explained 52.4% variation in the dependent variable and the remaining variation was unexplained or latent predictors were not included in the model. TABLE 4.2 : ANOVA Model Sum of Squares Df Mean Square F Sig. 1 Regression .204 7 .029 6.141 .000a Residual .185 39 .005   Total .390 46    The table 4.2 checked the significance of the linear regression model in such a way that the reliability of the data file regarding the applicability of the regression technique can be understood from the above table; however, ANOVA table was reliable test of checking the linear regression modelà ¢Ã¢â€š ¬Ã¢â€ž ¢s ability to explain any variation in the dependent variable of liquidity. This was perfectly obvious from the sig value of .000 which meant that the linear regression model was highly significant for the data collected for the research study conducted. TABLE 4.3 : Coefficients Model Unstandardized Coefficients Standardized Coefficients t Sig. Collinearity Statistics B Std. Error Beta Tolerance VIF 1 (Constant) .379 .146  2.597 .013   Debt Ratio .053 .450 .018 .119 .906 .515 1.942 Long-Term Debt Ratio .718 .842 .138 .854 .398 .466 2.148 Operating Income to Total Assets Ratio .718 .967 .144 .742 .462 .325 3.072 Square Root of Operating Income to Total Sales Ratio .449 .389 .202 1.154 .255 .397 2.519 Square Root of Inventory plus gross plant and equipment to total assets -.823 .168 -.648 -4.891 .000 .696 1.438 Natural Logarithm of Market to Book ratio .001 .017 .010 .066 .948 .534 1.871 Firm Size .000 .009 .000 -.001 .999 .858 1.166 In the table 4.3, the final model of regression included only one independent variable which was square root of inventory plus gross fixed assets to total assets ratio. This was included in the model because this was the only variable which was highly significant in playing a vital role in explaining the variation in the dependent variable of liquidity ratio. In short, these results were not consistent with the results of Kim and David and Ann (1998), and John (1993). The other independent variables were not significant in explaining the variation in the dependent variable of liquidity ratio because firstly, the economic and the financial environment was different; secondly, the behavior of the non financial firms was not same as that of the foreign firms in regard of liquidity; and lastly, the decisions of the firms regarding the portion of their investments in liquidity were affected by the political situation and the security threats of Pakistan. 4.2 Hypotheses Assessment Summary The hypothesis of the study was distinctive financial factors had significant impact on the non financial firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ decision to invest in more liquid assets. These financial characteristics were market to book ratio, inventory plus gross fixed assets to total assets ratio, operating income to sales ratio, firm size, operating income to total assets ratio, total debt ratio, long term debt ratio, and natural log of sales. In this study each of the financial characteristic of non financial firms was tested and concluded the results. TABLE 4.4 : Hypotheses Assessment Summary S.NO. Hypotheses ÃŽÂ ² t SIG. RESULT H1 There is negative impact of Total Debt Ratio on Liquidity. 0.053 0.119 0.906 Rejected H2 There is negative impact of Long-Term Debt Ratio on Liquidity. 0.718 0.742 0.398 Rejected H3 There is positive impact of the market to book ratio on Liquidity. 0.001 0.66 0.948 Rejected H4 There is positive impact of the ratio of Operating Income to Sales on Liquidity. 0.449 1.154 0.255 Rejected H5 There is negative impact of the Operating Income to Total Assets ratio on Liquidity. 0.718 0.742 0.462 Rejected H6 There is negative impact of the ratio of Inventory plus Gross fixed assets to Total Assets on Liquidity. -0.823 -4.891 0.000 Accepted H7 There is positive impact of firm size on liquidity. 0 -0.001 0.999 Rejected H8 There is positive impact of sales on liquidity. Rejected CHAPTER 5: DISCUSSIONS, CONCLUSION, IMPLICATIONS AND FUTURE RESEARCH 5.1 Conclusion It was concluded based on the results of this research study that inventory plus gross plant and equipment ratio was only the independent variable which was showing significance in Pakistani market. And the remaining independent variables could not explain the variation in liquidity. These results were not matching with the study conducted by Kim and David and Ann (1998), and John (1993). These results were varying because in various countries, the macroeconomic conditions and the financial environment were entirely different from each other and in addition, the security problems and political situation also affected the liquidity and firms made decision accordingly. 5.2 Discussions Firm size could not play a significant role in defining the liquidity in this research thesis and this was also the case with the research study conducted by Kim and David and Ann (1998) because in their study the firm size was not playing a significant role. The variation in the liquidity was not explained by the market to book ratio while it was significant in the study done by Kim and David and Ann (1998). The operating income to sales ratio, operating income to total assets ratio, debt ratio, long term debt ratio, and sales were not significantly explaining the variation in the liquidity and study analyzed by John (1993) provided different results from that of the results concluded by this research thesis. 5.3 Implications and Recommendations This research was limited to the various firms listed on Karachi Stock Exchange of Pakistan only. The data taken from 70 non financial firms which were took through various sectors of the KSE 100 Index for the year 2003-08. It suggested that such type of study should be carried out in other countries of Asia as well, as to have comprehensive idea about the choices of the firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ decision to invest in liquid assets. Moreover, it also suggested that other factors except ones examined in this study should be researched as to have perfect idea about the selection of liquidity decisions. Besides that, this study can also be replicated in other developing countries. 5.4 Future Research This study helped various investors, management and other research conductors in analyzing and observing the behavior of firms regarding their decisions to invest in liquid assets. Research students who want to work further on liquidity can be benefited by this research study. Further more, the non financial firms will become advantageous from this study because the study clarified the distinctive characteristics of different firms which significantly explained the variations in the liquidity.

A General Model Of Colonialism And Underdevelopment

It is very much clear that a general model of colonialism and underdevelopment cannot explain the variations in India’s growth trend during the colonial period from 1863 to 1947. However, there are three structural features that define the entire colonial period. Structural features which include the importance of natural resources and labour to economics growth and welfare.Land intensive agriculture, Labour-intensive handicrafts, and modern industry in natural resources, were the main livelihoods throughout this period and beyond. Global features which saw a more open Indian economy and the fact that India took part in the first globalisation of the 19th century, which saw a rapid integration of world economy in terms of commodity trade, capital flows, and labour migration. Due to the opening of Suez canal in 1867 India also witnessed the revolution in transport and communication, Railways and telegraph which were introduced in this phase. There were Colonial features suggest ing India was a colony is evident from the large remittances that government of India paid to the government in Britain. Thus, development in India was not resultant of a single factor but can be summed as the culmination of various factors which shaped, in mutual interaction, the economic growth in the region. Economic historians divide the period into two parts pre-war: from 1867 to 1920-5 and interwar: 1920-5 to 1947, moreover, they define National income in the periods as the following expression:Show MoreRelatedModernization Theory Vs Dependency Theory1227 Words   |  5 PagesModernization theory vs Dependency theory While many theorists have numerous explanations towards underdevelopment, experts like David Brooks and Peter Hallward have described the natural disaster in Haiti to be brutally destructive primarily due to its poverty. With this said, by reducing the poverty level in countries such as Haiti, it is possible to avoid the many disasters that they face. Reducing poverty means that society must accept development. What is development and how can it be achievedRead More Economic Development In Zimbabwe Essay1522 Words   |  7 Pagestransition from dependency underdevelopment to self-reliant industrialization. The purpose of this essay is to make a cursory but adequate examination of Zimbabwean socio-economic and political system, as means to analyzing the countries economic development. The ultimate purpose of this study is to provide a model of the structure necessary to achieve economic development where none previously existed. Zimbabwe is an appropriate model because the dynamics of underdevelopment to development in this countryRead MoreReaction to the Film Ghandi Essay1433 Words   |  6 Pagesas Ghandi himself is a model of courageousness. It takes courage to speak out against oppressors. Only a courageous man would take the initiative to lead a country to freedom. Ghandi shows his courageousness through his peaceful resistance and through his speeches. Every jail sentence he served and every hunger pain he endured prove his courage. A situation where Ghandi proved himself to be a calm and collected man is when he met with General Smuts. He appeared at the generals office, in his prisonersRead MoreModernization And Neoliberalism : Economic Status And Growth1841 Words   |  8 Pageshinged upon economic status and growth. This core assumption is present in the primary models of development, modernization and neoliberalism, both of which in turn offer their own implications and consequences. It is these consequences that inspire Sachs, and many ot hers, to seek out a more comprehensive definition and approach to development. As was previously stated, the two most prevalent theoretical models of development are modernization and neoliberalism. These ideologies are both centeredRead MoreDeveloping Countries Research Paper2963 Words   |  12 Pagespolitical, social and economic underdevelopment. The United Nations finds Third World term slightly pejorative and prefers the label less developed countries (LDCs). Terminology notwithstanding, LDCs suffer from underdevelopment and poverty. At the grassroots level, economic underdevelopment connotes widespread scarcity, substantial unemployment, substandard housing, poor health conditions, and inadequate nutrition†. (Handleman, 2011, p. 3) The underdevelopment plunges countries into devastatingRead MoreRole of African Elites in Dismantling Decolonization5146 Words   |  21 Pagesestablished by colonialism. An analysis of the economic, political and social contradictions created by colonialism is, therefore, necessary in understanding and effectiv ely countering neocolonialism. For the contradictions created by colonialism are still realities in contemporary Africa s development. Walter Rodney s How Europe Underdeveloped Africa analyzes the colonial relations of production -- and the economic and political contradictions -- that produced Africa s underdevelopment and continueRead MoreThe World Nations And The Second World Countries2772 Words   |  12 Pageslevels of income, high levels of education, high levels of health care, and high life expectancy. Developed countries have post-industrial economies with the service sector providing more wealth than the industrial sector. Kofi Annan, former Secretary General of the United Nations, defined a developed country as follows, A developed country is one that allows all its citizens to enjoy a free and healthy life in a safe environment (Annan, 2001, p.34) By contrast, a developing country, also called a less-developedRead MoreThe Economic And Social Structures Of India Pakistan Since The Moghuls2342 Words   |  10 Pagescolonial and early nation-building history of the country, and how this has shaped subsequent development trajectories, achievements and failures. Introduction Bibliography A examines of the impacts of colonial rule in India. It investigates the general notion that British rule was damaging to the Indian economy in such that it was exploitative and primarily served the economy of Great Britain. It also evaluates other consequences it had on education, social structures and institutions, Indian cultureRead MoreEssay about International Development Ethics2965 Words   |  12 Pagescontroversies, challenges, and agenda. A relatively new field of applied ethics, international development ethics is ethical reflection on the ends and means of socioeconomic change in poor countries and regions. It has several sources: criticism of colonialism and post-World War II developmental strategies; Denis Goulets writings; Anglo-American philosophical debates about the ethics of famine relief; and Paul Streetens and Amartya Sens approaches to development. Development ethicists agree that theRead MoreDevelopment by Gustavo Esteva8857 Words   |  36 Page stransforming its agony into a chronic condition. From the unburied corpse of development, every kind of pest has started to spread. The time has come to unveil the secret of development and see it in all its conceptual starkness. THE INVENTION OF UNDERDEVELOPMENT At the end of World War II, the United States was a formidable and incessant productive machine, unprecedented in history. It was undisputedly at the centre of the world. It was the master. All the institutions created in those years recognized

Management and Organizations Environment of Ford and Taylorism

Question: Discuss about the Management and Organizations in Global Environment Ford and Taylorism. Answer: Ford and Taylorism Taylorism Taylorism refers to application of scientific management in work process which would break a particular task into numerous sub-tasks so that production could increase. It emphasises on maximising production efficiency by minimizing the requirement and application of skills. In the present business situation, specialists in America, Australia and Europe would not welcome Taylorism procedure since there have been significant changes in the technological and innovative aspects of work process. The Taylor model does not enhance the skill level of the workers and there is no wisdom involved in adopting this old theory (Axelrod VanDeveer, 2014). The workers of the present generation are willing to increase their skill-set and knowledge base since the prevailing business environment is highly competitive. Since work related skills and knowledge is not encouraged in the Taylorism model, workers would not want to get involved in just a mechanical process which does not involve any skill and knowledge transfer (Axelrod VanDeveer, 2014). Explain Taylorism in that! The implementation of the Taylorism model can be useful in the designing aspect of scripts for the use in call centres to a limited extent. Since the activities and operations involved in the call centre set-up are mainly grouped into different categories based on the sector that specialize in the particular function (Axelrod VanDeveer, 2014). There is scope to divide the work process in a call fixate contingent upon the zone of learning, ability and occupation part of representatives and in like manner allot particular employment to the call focus workers by adopting the taylor scientific management model. But this work method will not come in handy when a new or different situation arises which needs a different kind of a solution. There will be many enterprises and organizations around the world which can receive the Taylorism technique for work. The essential standards which are followed in the process like division of work, high pay for diligent work, utilization of straightforward creation methods are the foundation for ant start-up business concern. The accurate application of Taylorism in the current scenario can help relevant firms to get good results (Axelrod VanDeveer, 2014). Corporate culture Why Zappos Employees Quit Zappos has incorporated an unconventional strategy in its recruitment process, i.e., paying the new employees on after the first week of training after joining to quit. The employees who are newly recruited and would quit the same moment would also be awarded with extra $ 1000. This unique and unconventional strategy has worked for the online shoe retailer in engaging deep level of commitment from its employees, especially to check and keep the new employees who are new to the company and are actually willing to work for the company for long term (Collings, 2014). The very human work culture inculcated by Zappos has worked in favour of the company to keep the employees, whether new or old, to be proactive and enthusiastic to work for the company along with providing best of the customer service (Erez, et al., 2013). The employees have the liberty of deciding the work culture every year. The intention of the company to retain the new employees by paying them is to layer out the best and the most interested employees for providing best customer service by paying the employees who have the probability of engaging less in providing service in the company. The company does this to keep the candidates who are actually fit for the job. Building a culture-based company The CEO of Zappos, Tony Hsieh, believes in having great work culture in the organization. Having very flexible work culture in the organization paves a way to invite in better customer service and generation of sales for the company. If a company has great organization culture, building of an excellent brand image becomes an eventual outcome. The work culture can also lead to having efficient employees right from the recruitment process who would work and provide efficient productivity on a longer term (Frynas Mellahi, 2015). A better organization culture would lead to maximizing profits and generation of better revenues on a longer term. A flexible and innovative company culture would lead to keeping the employees content and more inclined towards the organizations even during the crisis. An open and flexible work culture also enhances the creative pool of the company which leads to the generation of various ideas both in quality and quantity (Frynas Mellahi, 2015). The company having more number of ideas would result in the innovation of the services and products along with the whole organization which would be beneficial for the company for a longer them. A better organizational culture enhances the productivity of a company as a whole. References Axelrod, R.S. and VanDeveer, S.D. eds., 2014.The global environment: institutions, law, and policy. CQ Press. Botha, A., Kourie, D. and Snyman, R., 2014.Coping with continuous change in the business environment: Knowledge management and knowledge management technology. Elsevier. Brady, J., Ebbage, A. and Lunn, R., 2013.Environmental management in organizations: the IEMA handbook. Routledge. Brown, B.E., 2016. Regional fishery management organizations and large marine ecosystems.Environmental Development,17, pp.202-210. Collings, D.G., 2014. Integrating global mobility and global talent management: Exploring the challenges and strategic opportunities.Journal of World Business,49(2), pp.253-261. Erez, M., Lisak, A., Harush, R., Glikson, E., Nouri, R. and Shokef, E., 2013. Going global: Developing management students' cultural intelligence and global identity in culturally diverse virtual teams.Academy of Management Learning Education,12(3), pp.330-355. Frynas, J.G. and Mellahi, K., 2015.Global strategic management. Oxford University Press, USA. Hislop, D., 2013.Knowledge management in organizations: A critical introduction. Oxford University Press.

Love Essays (781 words) - Social Philosophy, Emotions,

Love Love is a theological virtue that enables us to develop caring relationships with God and others. With love comes sexuality, which is the condition of having a gender and relating to others as a result of that gender. Love and sexuality often go hand and hand but when people deal with these factors there are guidelines so that people do not abuse two wonderful gifts that God has given us. To live a chaste life is not always simple and easy. There are cultural challenges that affect us and make it difficult for us to make the right decisions. These challenges test us and can make us stronger people. First, sexual intercourse, which is the most intimate act between a man and a woman in marriage, is sometimes used as a way to obtain money and power. At times people's lives become like soap operas because of their greed and the low regard they have for nurturing love. Also, sex is often the hook or gimmick for an advertisement. It sells perfume, furniture, cars, gum, clothes, food, and anything else imaginable. It becomes the reason to see a movie or comedian. Second, in our culture love is used to describe a feeling for many things. This makes it hard for a person to be sure that they really love a person, or that the other person truly loves them. And finally, in our culture growing up as a kid the Catholic religion, the labels of sex being dirty or sinful often paint t he wrong picture of a perfectly normal; intimate act that God Himself created. Then, a person sees the virtue of chastity as just another rule to brake. Another rebellious act has no meaning based on the first impression they were given about sex. Society is another obstacle to overcome when a person is trying to live a chaste life. First, for people of all ages peer pressure is a force to reckon with. The pressure on each of us to conform to the standards of others can be great. The point of peer pressure is to make a person feel that they are not accepted unless they do what others are doing. When it comes to having, sex encouragement and pushing from outsiders make things harder. Second, society gives us a blanket to shield ourselves with, which sounds good but is really a lie. It is the lie of individuality. The person says they are doing what they are doing not because of someone else but because they want to do it. But actually, people say this so often that it is really a scapegoat for conformity. And third, the familiar phrase everybody's doing it is another excuse, however, in reality, not everyone is doing it in the first place and that's them, and not you. Christian love includes three qualities; one of them is responsibility. Responsibility means being able to answer for one's conduct and obligations and being able to choose for oneself between right and wrong. As Christians, we believe that we are temples of the Holy Spirit and because of that privilege, we have a responsibility to treat ourselves and others not as objects but as persons, God's human beings. Another quality in Christian love is respect. Respect is an act of giving particular attention or consideration to a person. All people deserve respect. A person's partner especially deserves to be held in high regard. In Jesus' image, we are called to respect others and ourselves, which is something that comes before truly loving someone. When you love someone, you respect their ideals, beliefs, and wishes. A final quality in a love that is chaste is self-control. Self-control is restraint exercised over one's own impulses, emotions, or desires. Because we are disciples of Jesus, the right thing to do is to be obedient to Him. And to try to act based on the mutual good of others and ourselves. My character is best enhanced by mature and responsible relationships by putting out effort. It involves a life-long way of relating to others. Also, there are rewards to living a chaste life such as a sense of true freedom and happiness because I am relating rightly to others. My