Debt in the firms balance sheets Essay Example | Topics and Well Written Essays - 1750 words

Debt in the firms balance sheets - Essay Example The paper presents ordinary shares that can be simply defined as shares which are not preferred shares and which do not offer fixed dividend amounts. As Nevin states, an ordinary share directly indicates equity ownership in a company and it entitles the owner to voting rights in various crucial affairs of the company in proportion to their percentage of shareholding. Ordinary shareholders are entitled to receive dividends on their investment only if anything left after all liabilities are paid. In contrast, debt is an obligation owed by one party (debtor) to another party (creditor). In case of debts, lenders have no rights on the firm’s operations and are unable to take part in determining major strategic issues. Organisations and businesses across the world use debt to finance their day to day operations and other particular projects. The levels of debt are fundamental macroeconomic data and it they largely vary from company to company. Generally, levels and flows of public debt are given central importance while levels and flows of private debt are not considered as a major cause of concern. Stocks and flows are two important tools of debt measuring. Stocks are levels of debt and they have units of currency whereas flows change in debt levels and have units of currency/time. All credit is debt and it is created by lenders who agree to lend money for the exchange of adequate future returns. Lundgren reflects that the amount of money lent is considered to be the asset of the creditor while it becomes the liability of the debtor. Debt is often issued along with a specific repayment plan; and the debt maturity time or period of repayment may range from a few days to 50 years or longer. According to the maturity period, debt is classified into three categories such as short term, medium term, and long term debt. In order to accurately calculate total debt of a business, it is necessary to take off-balance sheet debt into account as all debt items may not s how up on the balance sheet. As Shearn (2011, p. 116) states, these debt items may include lease obligations, warranties, purchase contracts, unfunded pension liabilities and any other contractual obligation. However, this type of debt is generally disclosed in the footnotes attached to the financial statements. White, Sondhi & Fried (2006, p. 323) indicates that the liability amount shown on the balance sheet may not always represent total cash flow required to meet the debt. Business houses only record the present value of the future cash flow. To illustrate, if a firm borrows $1,000 at an interest rate of 12%, total amount payable at the end of that period becomes $1,120. However, the balance sheet will only represent the present value of the future payment or $1,000. Factors affecting levels of debt As Crane, Knoop, and Pettigrew (1977) point out, different firms have varying strategies in maintaining their debt levels and this strategic differences cause debt level variances in firms’ balance sheets. A firm considers an array of factors before framing its debt level strategies. In the words of Long and Ravenscraft (1993), no firm would allow its debt level to grow beyond its repayment capacity as this condition may adversely affect the feasibility and market repute of the business. More precisely, a firm’s debt level heavily depends on its borrowing policies. â€Å"Tthe capacity to borrow depends on several factors such as profitability, stability, relative size, asset competition, and the industry position of a business† (Shearn, 2011, p.115). Hart (1995, p. 142) argues that profitability plays a pivotal role in determining the debt level of a business house. General trends indicate that level of debt will be in an

Only Hope comparison Essay Example | Topics and Well Written Essays - 1000 words

Only Hope comparison - Essay Example On the other hand, Condon authored a book describing his findings from an extensive study that sought to describe how the youth of the Inuit people of the Holman island of Canada Arctic coped with the rigorous changes of adolescence amidst many social, economic, and demographic transformations. Both of these books offer an anthropological description of the Inuit youth and Chinese singletons. This paper will offer a comparison of the research questions addressed, methodologies, roles of the research , the content described in the two books and the conclusions drawn. Fong’s as highlighted in the book ‘only hope’ research question centered on determining what type of attributes were exhibited by singletons. The research was probed by the fact that parents of singletons bestowed a lot of hope in these children. Moreover, the possibility that the parents accorded these children all their attention and offered them multiple material things would have had the potential of spoiling such children. On the other hand, Condon realized that the adolescence stage presented rigorous psychological, emotional, hormonal, and physical changes that define the transition from childhood to adulthood (Fong, 2006). This prompted him to analyze how the adolescents of the Inuit youth in the Holman Island in the Canadian Arctic region coped with the social, economic, and demographic factors. He reasoned that understanding how all these changes shaped the maturation process of the adolescents could offer an advanced understanding of functioning processes of humans. Fong carried a study in the Dalian region, a coastal city that was undergoing transformation from an industrial center to service-oriented town. For 27 months, in the years 1997-2002, Fong worked closely with different schools, students, and parents. Her survey was extensive and included 2273 students in different ranks of schools. She had the privilege of visiting about 107 homes in the region (Fong, 2006) . She identified 31 families as her sample after having an extensive interaction through tutorial classes offered within the home setting. The role of her research was to determine whether the one child policy had any impact on the children born. On the other hand, Condon carried out two extensive field studies of the Inuit youth on the Holman Island. Although his first study sought to address a different objective, it offered an introductory understanding of the community (Condon, 1988). He compiled his findings after seven years of an interactive field study. The role of his research was to analyze how the youth coped with the numerous changes that defined their lives. Condon selected sub-section of the Holman Island as his sample population. Fong’s research revealed that singletons faced a surging pressure to become exemplary children as her findings highlight. The different chapters in her book reveal that parents expected singletons to demonstrate a higher sense of focus in school compared to children who had siblings. This translated into different forms of pressure exerted on the children by the parents so that they would meet the defined expectations (Fong, 2006). It becomes evident from the findings described that parents had viewed singletons in terms of the future. The research