Manage Recruitment and Selection

Question: Clarify about the Manage Recruitment and Selection. Answer: General introduction: agreements of work Under the present place of employment order, each worker must get made agreement out of the terms and conditions inside two months of starting. This declaration, along with a portrayal of the commitments of the post, is given to a person from staff by the assigning office in a standard association position as the proper letter of arrangement (Nzele, 2002). Probation A course of action may be made dependent upon a portrayed probation, in which case the period is resolved in your letter of arrangement as well as declaration of terms of occupation. In case the worker contract is at risk to a probation, your progression should consistently be investigated and discussed with them, normally no later than almost through the preliminary time period, despite the standard checking of your execution as another person from staff. The inspiration driving a probation period is to ensure that a worker taking up another game plan is, inside a reasonable time span, prepared to get a full cognizance of the necessities of the post and to achieve a pleasant degree of execution. Regardless, where the worker has not had the ability to go to work for the full length of the communicated probation time frame perhaps they fell debilitated or they were missing, the association may decide to expand the probation time frame (Frank, 2008). Examination The objective of assessment is to improve correspondence between people from staff and those accountable for their organization and as needs be grow work satisfaction, motivation, and the sufficiency with which the affiliation works. Assessment isn't related to progression, merit praises or disciplinary movement (Graham, 2008). Pay rates Compensation/Remuneration/Payment There is no suggested proportion of remuneration. Additional portions, (for instance, for extra time or work on ends of the week or Public Holidays) are found out from the total pay as appeared in the understanding. The total pay is the total of the money gotten by the delegate and the portion (for example the estimation of food and settlement.). The representative will be paid at least $2000 every month (Ray, 2009). Superannuation The association offers portrayed bit of leeway word related annuity plans for qualified delegates. These plans give an annuity and an obligation free particular sum on retirement and what's more life spread while in the organization's work. You are a certified laborer if you have been given an understanding of employment and are developed no under 18 and under 55 (Nzele, 2002). Retirement You may decide to leave at some random time, the base annuity age specified in the Rules of the advantages plan to which you the worker has a place , on giving the proportion of notice that would be required to end the course of action. Capability for retirement favorable circumstances, and the focal points payable, will be according to the obtainments of the annuity plan. (Graham, 2008). Work license The affiliation must agree to Home Office necessities to ensure that all agents and workers have approval to work in the country. If one is certifiably not a local of the country, they will require a visa to work in the nation (Frank, 2008). Work force records and changes in singular conditions Any representative ought to inform recorded as a hard copy of any change in your possession, address, matrimonial status, nearest relative, particularly to the finance area at the human asset office (Graham, 2008). Open Holidays The days said in the Public Holidays Act must be permitted at this point the social affairs can agree to additionally open events. Manage an open event is totally tenacious and a business may not be constrained to work on such open event. The official open events are: 1 January this is the New Years Day 21 March this is the Human Rights Day Easter occasion Family Day which fluctuates relying upon the years 27 April which is the autonomy Day 1 May this is the Workers Day 16 June this is the Youth day 9 August this is National Woman's Day 16 December this is the Day of Reconciliation 25 December this is Christmas Day 26 December this is the Day of Goodwill Different days declared authority occasion event sometimes should yielded. Occasionally can be exchanged off for some other day by statement. If the specialist manages an open event, they may be paid the average days wage (Ray, 2009) Yearly Leave Yearly leave may not be under 21 nonstop days for throughout the day workers, a day at ordinary spans worked or one hour at normal stretches worked. The yearly leave must be permitted following a half year in the wake of completing a 12 consecutive long stretches of working. The yearly leave may not be permitted at the same time with whenever of crippled leave, nor with a period of notice of the finish of the understanding of occupation (Frank, 2008). Wiped out leave In the midst of each depleted leave pattern of three years, an individual from staff is equipped for a proportion of paid incapacitated leave equal to the amount of days the delegate would normally work in the midst of a period of about a month and a half. All through the underlying a half year of excursion, a specialist is equipped for one day's compensated cleared out leave for the accuracy worked (Nzele ,2002). In the business it's anything but a compulsory to pay a laborer if the individual from staff has been truant from work for in excess of two nonstop days or much multiple occasions in the midst of a two months time span. If the agent doesn't convey, a helpful underwriting communicating that the specialist couldn't work for the length of the delegate's nonattendance as a result of affliction or harm (Graham, 2008). Maternity leave The individual from staff is equipped for four consecutive months' or less maternity get out. The association isn't obliged to pay the nearby worker for the period for which they are off work on account of her pre-birth period. In any case, the workforce conferences may agree that the family unit expert will get some portion of or their entire pay for the time that they are off a direct result of pregnancy (Frank, 2008). End of Appointments Notice period and end of business To the extent the Basic Circumstances of Employment Act, any assortment of a business contract must give a warning seven days before the leave: Multi week, in the event that one labored for about a month or give a notice a month sooner on the off chance that one labored for about a month (Graham, 2008). Reference Graham Hooley, etal (2008) promoting methodology and serious situating; fourth Edition, Asgford shading press. Beam H. arrison and Erick W.Noreen (2009) Managerial bookkeeping, Cocepts for Planning,control and dynamic, seventh Edition Usa. Nzele D. Nzomo (2002) Basic Accounting standards and methodology, Nairobi University Press Straight to the point Woods and Alan Sangster (2008) Business Accounting, eleventh Edition , Lombarda Italy. Troy, L. (2008). Chronological registry of business and modern monetary proportions. Chicago, IL: CCH Drain, R. (2010). Proportions made basic: An amateur's manual for the key monetary proportions. Petersfield, Hampshire: Harriman House. Gibson, C. H. (2009). Money related announcing investigation: Using monetary bookkeeping data. Bricklayer, OH: South-Western Cengage Learning. Bull, R. (2008). Money related proportions: How to utilize budgetary proportions to augment worth and accomplishment for your business. Amsterdam: Elsevier/CIMA Pub. Albrecht, W. S. (2007). Bookkeeping, ideas applications. Bricklayer, Ohio: Thomson/South-Western. Duchac, J. E., Warren, C. S., Reeve, J. M. (2011). Bookkeeping utilizing Excel for progress. Artisan, Ohio: South-Western. A word reference of bookkeeping. (2010). Oxford: Oxford University Press. Simanovsky, S. (2010). Representing tenderfoots. Grandville, MI: Global Finance School.

Garden of Love free essay sample

Blake is situated towards liveliness and fun exercises and the house of prayer represents something contrary to Blake’s wants which is quietness and request. The rhyme plan of the principal refrain is A-B-C-B. The utilization of metaphorical language alongside the basic rhyme conspire joins to offer an alleviating impact for the peruser. Additionally, the reiteration of I in the initial verse urges the peruser to trust the poet’s perspective. â€Å"I went to the Garden of Love, And saw what I never had seen; A sanctuary was worked in the middle, Where I used to play on the green. †The tone step by step becomes darker in light of the fact that the experience of the poet’s life turns out to be all the more discouraging with adulthood. The dim tone starts when the artist came back to where he used to play as a youngster. At the point when he goes there, he sees that a house of prayer was worked in his inside play area of bliss. We will compose a custom exposition test on Nursery of Love or on the other hand any comparable point explicitly for you Don't WasteYour Time Recruit WRITER Just 13.90/page He comprehends that the cheerful life he had when he was a youngster was presently supplanted by the unbending nature of rules. This nursery of adoration represented a position of cheer and freedom. As he gets more seasoned, he specifies that a sanctuary was built.This house of prayer speaks to the entirety of the guidelines and guidelines that the artist needs to hold fast to as a grown-up which removes his opportunity that he once felt as a minor. â€Å"I went to the Garden of Love†¦ A house of prayer was worked in the midst†¦Ã¢â‚¬  Blake allegorically discusses the way that he was not permitted in the church as a result of the severe laws, rules and guidelines of religion †The Ten Commandments: â€Å"Thou shalt not†. Frustrated, the artist chose to go to another piece of his inner Garden of Love where blossoms used to be. There, he would like to feel a feeling of bliss once more. The writer utilizes an image of blossoms to speak to satisfaction, an inclination that he once felt in his childhood. â€Å"†¦ I went to the Garden of Love That such a large number of sweet blossoms bore. † In the last verse of the sonnet, it appears as though all expectation of satisfaction is lost for the writer. This happens when he got to the next piece of the nursery; it was loaded up with graves in a burial ground. These graves represent the failure that Blake felt as a grown-up. In a similar spot where blamelessness has exposed its underlying foundations was the burial ground. This change features the subject: grown-ups see the world uniquely in contrast to kids. His fantasies that were once thrived brimming with creative mind lay now under the heaviness of misery and severe laws of society. The sentiment of discontent emerges in light of the fact that he needed to acquire a feeling of lightening, however rather reality struck him. Additionally on the graves were gravestones which supplanted the blossoms. These speak to death, without a doubt rather than joy. There were ministers strolling around in the sonnet, â€Å"And clerics in dark outfits were strolling their rounds†, which represents governmental issues and the individuals who authorize the law of religion. He feels all his youth opportunity and euphoria were taken away.This is portrayed by the utilization of briars which actually are prickly stems. In this way, his fantasies as a kid were gagged and couldn't work out as expected any longer. â€Å"†¦and authoritative with briars my delights and wants. † The sorrowful and dismal tone of the sonnet realized a thoughtful state of mind. It causes the perusers to feel pitiful for the essayist in view of the absence of joy as a grown-up. The utilization of first individual and imagery were two procedures utilized that assisted with making an incredible differentiation of the experience of the writer’s youth versus adulthood.

Online Classes Make Illinois Great

Online Classes Make Illinois Great One of the best things about Illinois is that you can choose a lot of the classes you can take. Sure, there are some general education requirements for the school and your major. However, even then you can choose from hundreds of class options. Classes are taught by Pulitzer Prize winners, Nobel Peace Prize winners and people in the industry, which is so insanely cool. But us Millennials are so tech savvy, some of us can learn even better online than in the classroom. Illinois knows this very well and has plenty of online classes students can take. Some are eight weeks long and others are full semester (16-week long) courses. I have taken a ton of online classes  here for my Sociology minor, such as Deviance and Technology  Society. Taking the class online has given me a lot of flexibility to take the class whenever I want, and I dont necessarily have to roll out of bed to go to class. Nothing beats a healthy sleep! Giphy.com Online classes have also allowed me to learn more about the course content because now I have all the time in the world to read my textbook, but professors bring in tons of YouTube videos, documentaries, and television shows to teach us, too. This is effective for some people because documentaries take longer to watch than class time, so it gives us the ability to watch it on our time and really learn more about the topic. If I ever do have questions about the coursework or need clarification on a concept, the professors are gracious enough to hold in-person office hours, so I always take advantage of those. Pro tip: always go to your professors office hours! Its nice for them to know who you are, and youll enjoy the class more if you get to know the professor thats teaching it. They end up being really interesting if you take the time to get to know them. I recommend any Illini take one online class to see if its their kind of learning style. Im thankful I did. Daniel Class of 2018 I’m an Advertising major in the College of Media. I’m from a northwest suburb of Chicago called Buffalo Grove. I chose Illinois because it was the first university in the entire world to offer an Advertising major, which is pretty cool!

Christian and Environmental Stewardship - 1363 Words

Christians and Stewardship of Their Environment 1. Introduction Our earthly habitat is not an unexpected occurrence of little worth, but rather, it is one to be highly valued and preserved. The biblical doctrine of creation helps the Christian to understand the true significance of the world in order to deal with the environmental crisis. The Bible says, â€Å"For thus saith the Lord that created the heavens; God himself that formed the earth and made it; he hath established it, he created it not in vain, he formed it to be inhabited†¦Ã¢â‚¬  (King James Version, Isaiah 45:18). In Christian teaching, God not only created Heavens and Earth, but expressed His delight in His creation. This creation meant, everything encompassing the trees, the†¦show more content†¦That means we do not have the right to do with the earth as we see fit. We cannot exploit the land and suck it dry of all of its natural resources. To be a steward is to manage the property of another; that m eans to care for it and use it properly, not exploit or abuse the resources of the master. On the other hand, we are not to revere or worship the earth as God’s creation to the point where we fail to â€Å"subdue† it. God commands us to have dominion over the animal kingdom and to subdue the earth (Genesis 1:28). Pro-environmental groups like Deep Ecology believe that humans have an obligation to themselves and the environment as well. They believe that all forms of life have the right to exist, and that humans aren t any different from other species. They basically say that humans are equal to other species. (â€Å"Stanford Encyclopedia of Philosophy†). This is the sin that Saint Paul refers to: â€Å"Because they exchanged the truth about God for a lie and worshiped and served the creature rather than the Creator, who is blessed forever† (King James Version, Romans 1:25). Just as it is a sin to ruthlessly exploit the earth and its resources for greedy gain, so too is it a sin to revere the earth as an object of worship. We must walkout a balance between worship and exploitation, and that is where the stewardship model comes in. The stewardship model sees the earth as a blessed gift from God for the advancement and nurturing of humanShow MoreRelatedChristians and Environmental Stewardship Essay832 Words   |  4 PagesChristians, the world over, have been given the important task of stewardship of God’s creation. The problem is, Christians and non-Christians alike have become so driven to make money that concern for the earth and it’s well-being have fallen by the wayside. As Rich Deem states, â€Å"As Christians, we should be doing everything Jesus commanded, including taking care of our families and all the resources He has given to us.† (Deem, 2009) This phenomenon has been going on since the Industrial RevolutionRead MoreChristian Environmental Ethics1517 Words   |  7 PagesResearch Essay: 20876077 Through the study of scripture, Christian movements and the views of historical and contemporary figures, it can be said that Christian ethical teachings have a significant influence on the lives of its adherents. A prime example of the effects of these teachings is the nature and practice of Christian environmental ethics. The Stanford Encyclopaedia of Philosophy defines environmental ethics as the discipline in philosophy that studies the moral relationship of human beingsRead MoreChristians and The Environmental Ethics958 Words   |  4 Pages An environmentalist is a person worships the environment and cares for nature more than people. Christians and others share the common perception that environmental ethics exist for how human beings should relate to the land, the free market perceptive and the environmental perceptive. Humans share a relationship with all creations of the earth. But as humans, they find themselves as having a role in the created order which is they hav e a closer relationship with the creator who has chargedRead MoreGlobal Warming and Christian Stewardship Essay1052 Words   |  5 Pagesscientists and politicians debate over what (if anything) should be done, many Christians are at odds as to why they should care. Regardless of the disagreements amongst dualists, defeatist, and biblical optimists, all Christians should do their part in the preservation and protection of the earth’s resources—partially because the earth does not belong to mankind, and mostly because God entrusted man to have dominion and stewardship over His creation. According to the dualist view of Christianity the worldRead MoreEnglish Essay on the Environment1715 Words   |  7 Pagesimportance of proper environmental management – preservation and conservation. Imprudent ecological governance has led to the extinction and diminution of several species of wildlife and plants. Mankinds pursuit of industrialization to make work easier, has resulted in the dangerous depletion of the earths natural resources. Fingers are pointed as the blame is cast on organizations such as church and state. It appears as if humanity has refused to accept that proper environmental management is everyonesRead MoreEssay about Stewardship771 Words   |  4 Pagesin Christian and secular circles we hear the word stewardship. Not only is stewardship one of the basic issues discussed in scripture, but it’s also something we neglect as something we need to concentrate on while going through our own Christian walk. We live in a society that is very indivi dualistic, concentrating on whatever will bring pleasure and make us feel good. Stewardship definitely doesn’t fit into the way society is today. Before going to far into this, what exactly is stewardship? StewardshipRead MoreSome Christian Precepts and Concepts1025 Words   |  4 Pagestheir relationship with God every day. However not all Christians exercise this covenantal relationship the same way or act out the principal beliefs to the same extent. Different denominations represent their beliefs - the foundations for their lived expression - in different manners. Some of the Christian principal beliefs include, Revelation, Salvation, the Trinity, and the Life, Death and Resurrection of Jesus. It is through environmental ethics and ethical teachings, and the practice of baptismRead MoreThe Political Dialog Of Conservation And Power Over The Earth1589 Words   |  7 Pagesutilizing Biblical scripture. Since the majority of Republicans are also Christian, targeting the Church will appeal to large amounts of people. This requires connecting popular scripture in Christianity with the issue of climate change. Creation care is the idea that God calls Christians to care for the Earth. Even though all Christians acknowledge that God created the Earth, not everyone agrees about the responsibilities Christians have for this creation. In Genesis 1:28, â€Å"God blessed them, and saidRead More Christians and the Environment Essays1243 Words   |  5 Pagesenvironment. Every day that passes seems to leave the world with more to be concerned with, the ever-increasing pollution, the deforestation, and the threat of nuclear waste. Taking responsibility for the environment is a duty that Christians should commit to. In fact, Christians should lead the world in taking specific actions in the preservation and restoration of the environment. Some environmentalists have blamed Christianity for the abuse of the environment. The 1967 article by Lynn White suggestsRead MoreA Brief Note On Christians, Muslims, And Secular1416 Words   |  6 PagesIntroduction The purpose of this research is aimed at studying how Christians, Muslims, and Secular participants view methods assessed by people attitudes toward environmental issues. The biggest peril change to humanity this century is the change in climate. Regional and National governments worldwide are reducing emissions to increase pressure of greenhouse gases. Electricity generation is a prominent source of greenhouse gas emission, a status that has prompted efforts to decarbonize their

The Misleading Message of Chopins The Storm Essay

The Misleading Message of Chopins The Storm nbsp; Kate Chopinsnbsp; The Storm focuses on two simultaneous and related storms, one a fierce tempest of the natural world with the expected rain, wind, lightening, and thunder, the other a cyclone of the mind and heart which results in an short love affair between the two main characters. With her husband Bobinot and her son Bibi stranded in town by the storm, Calixta finds herself at home alone when an old lover, Alcee, rides up. The storm, the worst in two years, drives the two indoors, where, though they have not met in five years, they soon are embracing each other. As the storm outside reaches a climax, the emotions in the house spike to a fever pitch, and, though not directly†¦show more content†¦Most literature and my own life experiences bear this out, and I would challenge the reader to find an instance where the outcome of adultery did not fall into one of the above-mentioned broad categories. nbsp; nbsp;nbsp;nbsp; Chopin, however, does not fit her story into either pattern. Instead, she makes it clear that the affair has at least a short-term beneficial effect on all those touched by it. Calixta seemed much lighter of spirit because of it, thus causing her not to scold Bobinot and Bibi for coming home muddy; Alcee is happy to stay in town without his wife Clarisse and (as is insinuated) continue the relationship with Calixta; and Clarisse iss relieved not to have to leave her friends in Biloxi. As Chopin saidnbsp; The storm passed and everyone was happy.nbsp;nbsp; (p.669) nbsp; nbsp;nbsp;nbsp; One might argue that the author is being ironic in this last sentence. Thenbsp; happinessnbsp; described is intended by Chopin to by an illusion that will not last long, but instead the adulterersnbsp; actions willShow MoreRelatedStory of an Hour by Lawrence L. Berkove3379 Words   |  14 PagesLawrence L. Berkove (essay date winter 2000) SOURCE: Berkove, Lawrence L. â€Å"Fatal Self-Assertion in Kate Chopins ‘The Story of an Hour.’† American Literary Realism 32, no. 2 (winter 2000): 152-58. [In the following essay, Berkove contends that Chopins narration of â€Å"The Story of an Hour† is ironic rather than straightforward.] Kate Chopins thousand-word short story, â€Å"The Story of an Hour,† has understandably become a favorite selection for collections of short stories as well as for anthologiesRead MoreANALIZ TEXT INTERPRETATION AND ANALYSIS28843 Words   |  116 Pagesthe level of gaiety. Intensity was more usually reached by way of the solemn than by way of the brilliant, and such a sort of intensity was often arrived at during winter darkness, tempests, and mists. Then Egdon was aroused to reciprocity; for the storm was its lover, and the wind its friend. Then it became the home of strange phantoms; and it was found to be the hitherto unrecognized original of those wild regions of obscurity which are vaguely felt to be compassing us about in midnight dreams of

Ike Wister Turner Free Essays

Ike Wister Turner came into this world on November 5, 1931. He was an American musician, bandleader, songwriter, arranger, talent scout, and record producer. In a career that lasted more than half a century, his repertoire included blues, soul, rock, and funk. We will write a custom essay sample on Ike Wister Turner or any similar topic only for you Order Now He is most popularly known for his 1960s work with his then wife Tina Turner in the Ike Tina Turner revue. As a teenager in high school he led his own music group, the Kings of Rhythm. He employed the group as his backing band for the rest of his life. His first recording, â€Å"Rocket 88† with the Kings of Rhythm credited as â€Å"Jackie Brenston and his Delta Cats†, in 1951, is considered a possible contender for â€Å"first rock and roll song†. Relocating to St. Louis, Missouri in 1954, he built the Kings into one of the most renowned acts on the local club circuit. It was there he met singer Anna Mae Bullock, whom he married and renamed Tina Turner, forming the Ike Tina Turner Revue, which over the course of the sixties became a soul/rock crossover success. Throughout his career Turner won two Grammy Awards and was nominated for three others. Alongside his former wife, Turner was inducted into the Rock and Roll Hall of Fame in 1991 and in 2001 was inducted into the St. Louis Walk of Fame. Allegations by Tina Turner in her autobiography of her abusive relationship with Turner and the film adaptation of this coupled with his cocaine addiction damaged Turner’s career in the 1980s and 1990s. He claims to have spent more than $100,000 on coke in a two-month period in 1989 . Addicted to cocaine and crack for at least 15 years, â€Å"I was on a 15-year party,† he says. â€Å"This hole in my nose was so bad that when I would go to sleep, it would be hurtin’ so much that I would be tryin’ to get my hand up behind my eyeballs†¦ Pain. The first thing I’d want to do when I got up was get cocaine and put it in my nose. That would deaden the pain. † Turner was convicted of drug offenses, serving seventeen months in prison between July 1989 and 1991. He spent the rest of the 1990s free of his addiction. Near the end of his life, he returned to live performance as a front man and produced two albums returning to his blues roots, which were critically well received and award-winning. Turner has frequently been referred to as a ‘great innovator’ of Rock and Roll by contemporaries such as Little Richard and Johnny Otis. Phil Alexander (then editor-in-chief of Mojo magazine) described Turner as ‘the cornerstone of modern day rock ‘n’ roll’. He spent the 1990s free of his addiction, but relapsed in 2004. Ike Turner was found dead of an accidental cocaine over dead on December 12 2007 at his home in San Marcos in San Diego County. How to cite Ike Wister Turner, Papers

Music of My Life free essay sample

My Fender Sonoran acoustic-electric guitar sits still against the draped sheets of my bedpost. I rip out a page from my notebook and reach for my favorite pen. I make a few scribbling motions in the air, waiting for any sudden spur of thought or melody to come to me. As I glance toward the clock, I read 2 AM – not a great time for an all-honors, national merit scholar to be up, especially on a school night, but as always, music prevails. The clock ticks steadily, and suddenly, my grip on my pen tightens. Yes, inspiration is coming. I have heard it before. Ticking, closing in†¦ Closing walls and ticking clocks Tides that I tried to swim against Brought me down upon my knees Oh I beg, I beg and plead Coldplay I close my eyes. Almost like a long-forgotten dream, it all comes back to me. Time rolled back several years. We will write a custom essay sample on Music of My Life or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Anger flowed through me as I remember the beating, the pounding of fists, the yells. Junior High, a time I never want to remember. My head was more often shoved into my locker rather than into my books, and it did not help that all that was eye-level to me were chins and foul mouths. The lyrics pounded in my head. I beg and plead. I had pleaded even more when the news broke in 8th grade. Cancer. Not one, not two, but three members of my family began an invisible war with themselves. Closing walls and ticking clocks. Helplessness was my life’s theme, and that theme had a song. My page is now filled, and the written words have a recurring feature: brokenness. But no, my life is not broken. It is nearly the opposite. My eyes settle on my guitar, and I strum an E minor, my first-ever chord. Not too long after that, I had learned my first ever song. But now I’m rising from the ashes Finding my wings And all that I needed was there all along Within my reach As close as the beat of my heart David Cook I had found my wings, not realizing that I just had to look over my shoulder. Church. My friends. The amazing support was what saved me. There were people there that cared. There were people that respected me, as I learned to respect myself. Alone at first, I had only needed a glance from a pastor for a chance to lead, and as my physical and musical talents matured, so did I. The stage and lights became my friends, and those who gathered round looked up to me. But now I’m rising from the ashes. From ashes I rose, and my once-wilted confidence flowered. I let out a strum. The tones echo through my room. Through another succession of strums, I can’t help but smile. This is what matters: the ability to write my own story, to be in control of my own future. I let my voice ring out like none other, as if nothing else had ever existed or ever would exist. Once alone and lost, my wings were torn But heaven came, and captured a life forlorn Who knew those whiles which cause all strife Would frame and mold the Music of my Life? And so I come running back, alive and reborn And so I come running back, alive and reborn Greg Wan

DIvidend Policies and Financing Essay Example

DIvidend Policies and Financing Essay Dividend policy refers to the decision made by the company whether to retain the profits within the company, or they pay out the profits to the owners of the organization in the form of dividends (Garrison 2008). Once the company decides on whether to pay dividends, they may establish a somewhat permanent dividend policy, which may in turn impact on investors and perceptions of the company in the financial markets (Garrison 2008). What they decide depends on the situation of the company now and in the future. It also depends on the preferences of investors and potential investors (Garrison 2008).When deciding on the dividend policy, several factors such as legal constraints, contractual constraints, internal constraints, growth prospect, owners considerations and market considerations have to be taken into account. Considerations taken into account can be incorporated in several dividend theories such as the residual theory of dividends, the clientele theory, the signalling dividend theory, the bird-in-the-hand theory and Modigliani and miller dividend theory.Manufacturing overseas can reduce costs due to its cheap labour costs but there are other considerations that have to be taken into account. There are pros and cons for manufacturing at overseas.Companys capital structure refers to the way a corporation finances its assets through some combination of equity, debt, or hybrid securities (http://en.wikipedia.org/wiki/Capital_structure). Debt financing and equity financing has their own advantages and disadvantages but certain factors have to be considered when choosing between these two financing strategies.2.0 Factors Affecting the Dividend PolicyWhen deciding on the dividend policy, several factors need to be taken into account. The factors needed to taken into account are as follows (sources taken fromhttp://freemba.in/articlesread.php?artcode=488substcode=30stcode=10):Stability of EarningsThe nature of business has an important bearing on the dividend pol icy. Industrial units having stability of earnings may formulate a more consistent dividend policy than those having an uneven flow of incomes because they can predict easily their savings and earnings. Usually, enterprises dealing in necessities suffer less from oscillating earnings than those dealing in luxuries or fancy goods.Age of CorporationAge of the corporation counts much in deciding the dividend policy. A newly established company may require much of its earnings for expansion and plant improvement and may adopt a rigid dividend policy while, on the other hand, an older company can formulate a clear cut and more consistent policy regarding dividend.Liquidity of FundsAvailability of cash and sound financial position is also an important factor in dividend decisions. A dividend represents a cash outflow, the greater the funds and the liquidity of the firm the better the ability to pay dividend. The liquidity of a firm depends very much on the investment and financial decisio ns of the firm which in turn determines the rate of expansion and the manner of financing. If cash position is weak, stock dividend will be distributed and if cash position is good, company can distribute the cash dividend.Extent of Share DistributionNature of ownership also affects the dividend decisions. A closely held company is likely to get the assent of the shareholders for the suspension of dividend or for following a conservative dividend policy. On the other hand, a company having a good number of shareholders widely distributed and forming low or medium income group would face a great difficulty in securing such assent because they will emphasize to distribute higher dividend.Needs for Additional CapitalCompanies retain a part of their profits for strengthening their financial position. The income may be conserved for meeting the increased requirements of working capital or of future expansion. Small companies usually find difficulties in raising finance for their needs of increased working capital for expansion programs. They having no other alternative, use their ploughed back profits. Thus, such Companies distribute dividend at low rates and retain a big part of profits.Trades CycleBusiness cycles also exercise influence upon dividend Policy. Dividend policy is adjusted according to the business oscillations. During the boom, prudent management creates food reserves for contingencies which follow the inflationary period. Higher rates of dividend can be used as a tool for marketing the securities in an otherwise depressed market. The financial solvency can be proved and maintained by the companies in dull years if the adequate reserves have been built up.Government PoliciesThe earnings capacity of the enterprise is widely affected by the change in fiscal, industrial, labor, control and other government policies. Sometimes government restricts the distribution of dividend beyond a certain percentage in a particular industry or in all spheres of busi ness activity as was done in emergency. The dividend policy has to be modified or formulated accordingly in those enterprises.Need for FundsDividends paid to stockholders use funds that the firm could otherwise invest. Therefore, a company running short of cash or with ample capital investment opportunities may decide to pay little of no dividends. Alternatively, there may be an abundance of cash or a dearth of good capital budgeting projects available. This could lead to very large dividend payments.Management Expectations and Dividend PolicyIf a firms managers perceive the future as relatively bright, on the one hand, they may begin paying large dividends in anticipation of being able to keep them up during the good times ahead. On the other hand, if managers believe that bad times are coming, they may decide to build up the firms reserves for safety instead of paying dividends.Stockholders PreferencesReinvesting earning internally, instead of paying dividends, would lead to highe r stock prices and a greater percentage of the total return common stockholders receive coming from capital gains. Capital gains are profits earned by an investor when the price of a capital asset, such as common stock, increases.Common stockholders may prefer to receive their return from the company in the form of capital gains and some may prefer to receive their return from the company in the form of dividends. Capital gains are not taxed at all unless they are realized. That is, unless the stock is sold. The board of directors should consider stockholder preferences when establishing the firms dividend policy.Restriction on Dividend PaymentsA firm may have dividend payment restrictions in its existing bond indentures or loan agreements. For example, a companys loan contract with a bank may specify that the companys current ratio cannot drop below 2.0 during the life of the loan. Because payment of a cash dividend draws down the companys cash account, the current ratio may fall b elow the minimum level required. In such a case, the size of a dividend may have to be cut or omitted. In addition, many states prohibit dividend payments if they would create negative retained earnings on the balance sheet. This restriction is a prohibition against raiding the initial capital. Figure 1 summarizes the factors that influence the dividend decision.Figure 1: This figure identifies key elements that make a dividend payment more or less likely.2.1 Leading Dividend TheoriesThe factors that affect the dividend policy can be incorporated in several dividend theories. Dividend theories can be divided into dividend relevance theory and dividend irrelevance theory. Dividend relevance theory refers to the value of a firm is affected by its dividend policy while dividend irrelevance theory refers to a firms dividend policy has no effect on either its value or its cost of capital (http://www.studyfinance.com/lessons/dividends/index.mv?page=01).2.1.1 Dividend Relevance TheoriesAcc ording to Gallagher Andrew (2007) dividend relevance theories are as follows:The Clientele Dividend TheoryThe clientele dividend theory is based on the view tat investors are attracted to a particular company in part because of its dividend policy. For example, young investors just starting out may want their portfolios to grow in value from capital gains rather than from dividends, so they seek out companies that retain earnings instead of paying dividends. Stock prices tend to increase as earnings are retained and the resulting capital gain is not taxed until the stock is sold.Older investors, in contrast, may want to live off the income their portfolios provide. They would ten to seek out companies that pay high dividends rather than reinvesting for growth. According to the clientele dividend theory, each company therefore has its own clientele of investors who hold the stock in part because of its dividend policy.If the clientele theory is valid, then it doesnt much matter what a companys dividend policy is as long as it has one and sticks to it. If the policy is changed, the clientele that liked the old policy will probably sell their stock. A new clientele will buy the stock based on the firms new policy. When a dividend policy change is contemplated, managers must ask whether the effect of the new clienteles buying will outweigh the effects of the old clienteles selling. The new clientele cannot be sure that the most recent dividend policy implemented will be repeated in the future.The Signaling Dividend TheoryThe signaling dividend theory is based on the premise that the management of a company knows more about the future financial prospects of the firm than do the stockholders. According to this theory, if a company declares a dividend larger than that anticipated by the market, this will be interpreted as a signal that the future financial prospects of the firm are brighter than expected. Investors presume that management would not have raised the d ividend if it did not think that this higher dividend could be maintained. As a result of this inferred signal of good times ahead, investors buy more stock, causing a jump in the stock price.Conversely, if a company cuts it dividend, the market takes this as a signal that management expects poor earnings and does not believe that the current dividend can be maintained. In other words, a dividend cut signals bad times ahead for the business. The market price of the stock drops when the firm announces a lower dividend because investors sell their stock in anticipation of future financial trouble for the firm. If a firms managers believe in the signaling theory, they will always be wary of the message their dividend decision may send to investors. Even if the firm has some attractive investment opportunities that could be financed with retained earnings, management may seek alternative financing to avoid cutting the dividend that may send an unfavorable signal to the market.The Bird-i n-the-Hand TheoryThe bird-in-the-hand theory claims that stockholders prefer to receive dividends instead of having earnings reinvested in the firm on their behalf. Although stockholders should expect to receive benefits in the form of higher future stock prices when earnings are retained and reinvested in their company, there is uncertainty about whether the benefits will actually be realized. However, if the stockholders were to receive the earnings now, in the form of dividends, they could invest them now in whatever they desired. In other words, a bird in the hand is worth two in the bush.If the bird-in-the-hand theory is correct then the stocks of companies that pay relatively high dividends will be more popular and therefore will have relatively higher stock prices than stocks of companies that reinvest their earnings.2.1.2 Dividend Irrelevance TheoriesDividend irrelevance theories are as follows (Gallagher ; Andrew 2007):The Residual Theory of DividendsThe residual theory of dividend is widely known. The theory hypothesize the amount of dividends should not be the focus of the company. Instead, the primary issue should be to determine the amount of earning the firm should retain within the firm for investment. The amount of earnings retained, according to this view, depends on the number and size of acceptable capital budgeting projects and the amount of earnings available to finance the equity portion of the funds needed to pay for these projects. Any earnings left after these projects have been funded are paid out in dividends because dividends arise from residual or leftover earnings, the theory is called the residual theory.The residual theory focuses on the optimal use of earnings generated from the perspective of the firm itself. This may appeal to some, but ignores stockholders preferences about the regularity of and the amount of dividend payments. If a firm follows the residual theory, when earnings are large and the acceptable capital budgetin g projects small and few, dividends will be large. Conversely, when earnings are small and many large acceptable projects are waiting to be financed, there may be no dividends if the residual theory is applied. The dividend payments will be erratic and the amounts will be unpredictable.Modigliani and Millers Dividend TheoryFranco Modigliani and Merton miller (commonly referred as M;M) theorized in 1961 that dividend policy is irrelevant. Given some simplifying assumptions, M;M showed how the value of a company is determined by the income produced from its assets, not by its dividend policy. According to the M;M dividend theory, the way a firms income is distributed (in the form of future capital gains or current dividends) doesnt affect the overall value of the firm. Stockholders are indifferent as to whether they receive their return on their investment in the firms stock from capital gains or dividends so dividends dont matter.2.2 Advantages and Disadvantages of Overseas Manufactu ringManufacturing at overseas certainly saves cost of production in some degree due to cheap labor and material cost but it has its advantages and disadvantages for overseas manufacturing.2.2.1 Advantages of Overseas ManufacturingEase and Speed of Distribution: Manufacturing in overseas shortening the distance between the original location of manufacturer and its distribution market (if the manufacturer has its markets around the region of the considered location). For example, when Nike manufacturer from United States manufactures in Malaysia, they have greater ease and speed of transportation for goods and people to other Asian markets. Besides that, transportation and shipping cost may be reduced due to a shorter distance for shipping and distribution.Cost Savings: In less-developed countries, labor cost is cheaper than developing and developed countries. It is estimated that a company that manufactures in less-developed country can cut costs by between 30% and 80% depending on h ow labor intensive the product is. Besides that, material cost is also cheaper compared to developed countries too.Gain in Efficiencies and Economies of Scale: Besides that, in the long run, manufacturing overseas can gain efficiencies and economies of scale which will assist in reducing unit cost as output increases. Moreover, the initial investment of capital may be spread over an increasing number of units of output and therefore the marginal cost of producing a good or services decreases as production increases.Low Capital Costs: Low capital cost is one of the advantages that encourages manufacturing overseas. The cost of capital in developing or developed countries is higher than the cost of capital in less-developed countries.Incentives for Manufacturing: Some of the less developed countries encourage overseas manufacturers to invest or manufacture in their country. In order to attract manufacturers, these less-developed countries do offer incentives for the manufacturers. For example, Penang has offered incentive to Motorola from USA in order to attract them to manufacture at Penang.2.2.2 Disadvantages of Overseas ManufacturingQuality of Production Suffers: Cheap labor is an advantage for cost savings. Inversely, it reduces the quality of the products as cheap labors usually produce less quality productions. Therefore, the products will suffer in quality as most of the cheap labors are unskilled or semi-skilled. Indirectly, the manufacturer may lose its customers due to the production of less quality products.Time Consuming: When an organization wants to manufacture in overseas, the organization has to analyze and comprehend the considered location and also the facilities available around the setting up area. The analysis and comprehension takes considerable time to complete in order to have a perfect set up in overseas. Therefore it spends considerable time and energy to understand the considered location (Sweeney N.D.).Complexity: To operate oversea i s not as easy as locally. Most of the manufacturers have adapted to their own manufacturing culture and therefore adapting to another manufacturing environment would be difficult for them to familiarize with it. First of all, language may be a barrier, for example, it is difficult to communicate with the South Americans labors if we are not familiar with Latin (Sweeney N.D.). Besides that, finance, tax, and labor laws will be different and must be understood (Sweeney N.D.). Sweeney (N.D.) stated that, understanding national cultures and subcultures are important for any activity as manufacturers have to deal with government and private sector people and especially selling into the market.Brand Risks: Nowadays, consumers are perceived where the product is made from. The production location is a factor that will affect the brand image and reputation. For example, consumers would prefer a product made in USA rather than made in China. If the manufacturer produces in Bangladesh it may m ore or less affect their images as some of the consumers believe that products from developed countries are much better than less-developed countries and therefore the image and reputation of the brand may suffer.Availability of Expertise: The availability of expertise is one of the factors that should be considered when organization seeks to manufacture overseas. Less developed countries may not provide the expertise in the fields required.Long Start Up Time: It is not easy for manufacturer to start up their manufacturing process. To manufacture in a smooth way requires time. It usually requires a considerable of long time start up and familiarize.3.0 Debt ; Equity Financing3.1 Equity FinancingEquity financing is a method to acquire capital that involves selling a partial interest in the company to investors (Brian 1990). In return of the money paid, shareholders receive ownership interests in the corporation (Brian 1990).3.1.1 Pros and Cons of Equity Financing3.1.2 Pros of Equity FinancingThe advantages of equity finance are:Commitment of Funds: The funding is committed to the business and intended projects. Investors only realize their investment if the business is doing well (eg. through flotation or a sale to new investors).Vested Interest: Investors have the same interest that is to keep the business going on well and generate maximum profits which leads to an increase in the value of the business.Follow-up Funding: When business grows, investors are often prepared to provide follow-up funding.(Source of reference:http://www.businesslink.gov.uk/bdotg/action/detail?type=RESOURCES;itemId=1073789573)Wider Pool of Finance: When company is listed in stock exchanged, the company has the access to wider pool of finance.Quality Products: The owners will pay proper attention for improving the quality of products. The reason is the appropriate of quality product goes to them.No Interest Cost: No payment of interest for the funds provided by the shareholders. The c ost of production remains low as there is no burden of interest.Earning Remains with the Firm: When funds provided by shareholders for improvement in the business are making profits, the earnings are remained with the owners. Earnings are not shared by the creditors.To Tide over Emergencies: Firm is in a better position to tide over recession period and other emergencies due to no burden of rate of interest.Ability to borrow: Borrowing ability is improved if the equity capital is financed well.(Source of Reference: http://www.blurtit.com/q303144.html)Sources of Skills and Experiences: Good investors can bring resources for the business. They can help one to get skilled people, right contacts to build the business. They might also help out with their own experience in the formation of the strategy or with decision making.No Obligation for Repayment: No obligation for the repayment of the finances in the initial phase of the business when the cash flow is quite slow. Whereas, in bank loans there are severe obligations and penalties in case a business fails to generate monthly interests and make the monthly payments to the bank.(Sources of Reference:http://www.freewarefiles.com/techfi/Advantages_of_Equity_Financing.html)Pledge No Assets: Corporation does not have to pledge their assets as collateral to obtain equity investments.Availability of Cash: Business will have more cash available due to no debt payments have to be made.(Source of reference:http://forums.forbes.com/forbes/board/message?board.id=entreforum;message.id=399)3.1.3 Cons of Equity FinancingThe disadvantages of equity finance are:Costly and Time Consuming: Raising equity finance is costly and time-consuming. Business may suffer as times are devoted to the deal. Potential investors will seek background information on owner and his business and they will closely scrutinize past results and forecasts and will delve the management team.Interference in Management: The equity investors can interfere in the management of the company and in addition they also have the voting rights which could influent the making of major decisions.Extra Effort to Provide Information: Founder will have to invest management time to provide regular information for the investor to monitor the situation of the business.Share Dilution: Founders share in the business will be diluted which means lessen in strength. Besides that, businesss profits will be shared by other equity investors.Legal and Regulatory Compliance: There can be legal and regulatory issues to comply with when raising finance (eg. when promoting investments).(Source of Reference;http://www.businesslink.gov.uk/bdotg/action/detail?type=RESOURCES;itemId=1073789573)Limitation of Control: Founders must give up some control of the business. If investors have different perceptions and ideas about the companys strategic direction or day-to-day operations, they can pose problems for the entrepreneur.(Source of Reference: http://www.answers.com/eq uity+Financing?cat=biz-fin)No Tax Deduction: Dividend payments are not tax deductible.(Source of Reference:http://forums.forbes.com/forbes/board/message?board.id=entreforummessage.id=399)3.2 Debt FinancingAccording to (http://www.answers.com/debt+financing?cat=biz-fin) debt financing is a strategy that involves borrowing money from a lender or investor which the full amount will be repaid in the future usually with interest within a certain period. It asserted that it does not include any provision for ownership of the company. Debt financing has a prior claim on the company irrespective of the profits earned despite the company goes into liquidation (Joseph 2008).3.2.1 Pros and Cons of Debt Financing3.2.2 Pros of Debt FinancingMaintain ownership: The debt holder cannot interfere in the management of the company and they do not have the voting rights. Therefore, business can be run without outside interferenceTax deductions: Principal and interest payments on a business loan are cla ssified as business expenses and thus tax deductible. It also lowers the actual cost of the loan to the company.Lower interest rate: There is a lower interest rate of debt financing when interest rate is lower than tax rate (where the business can take a loan and have a deduction on tax rather than high interest rate).(Source of Reference: http://entrepreneurs.about.com/od/financing/a/debtfinancing.htm)No Complex Procedures Required: Debt financing is easier to obtain than equity financing. Raising debt capital is less complicated because the company is not required to comply with state and federal securities laws and regulations.No Profits Sharing: Profits of company are not shared with the lenders who require capital appreciation and dividends on their investments.Forecasting: Interest and principal payments are typically a know amount that can be forecast.(Source of Reference: http://www.job-employment-guide.com/business-financing.html)No Extra Rewards: Debt holders are entitled only to repayment of the agreed-upon principal of the loan plus interest and have no direct claim on future profits of the business if the company has made extra profits.Saving Management Time: Company does not have to send periodic mailings to large numbers of investors, hold periodic meetings with shareholders and seek the vote of shareholders before taking certain actions.(Source of Reference: http://smallbusiness.findlaw.com/banking_financing/be1_5debtvsequity.html) David H. Schwartz3.2.3 Cons of Debt FinancingRepayment: Sole obligation to the lender is to make payments on time. If the business fails, the company still has to make payments. If business goes into bankruptcy, lenders will have claim to repayment before any equity investors.Impacts Credit Rating: It seems to be attractive to keep bringing on debt when company needs money, a practice known as levering up, but each loan will be noted on your credit rating. The more borrowings, the higher the risk to the lender and th e higher interest rate the company will have to pay.Cash and Collateral: The company is usually required to pledge assets of the company to the lender as collateral, and owners of the company are in some cases required to personally guarantee repayment of the loan.(Source of Reference:http://entrepreneurs.about.com/od/financing/a/debtfinancing.htm)Difficulty in Business Growth: Interest is a fixed cost which raises the companys break-even point. High interest costs during difficult financial periods can increase the risk of insolvency. Companies that have large amounts of debt as compared to equity often find it difficult to grow because of the high cost of servicing the debt.Restrictions on Activities: Debt instruments often contain restrictions on the companys activities, preventing management from pursuing alternative financing options and non-core business opportunities which results in losing of other investment opportunities.(Source of Reference:http://smallbusiness.findlaw.co m/banking_financing/be1_5debtvsequity.html)3.3 Consideration Factors for Sources of FinanceEquity financing and debt financing is the option for a company that needs financing. Each company is unique and they have their own financing requirements and therefore, it is inappropriate to determine any one of the financing methods is the best option for companies. There are certain factors that a company needs to consider before choosing the right financing method:The size of the company: Larger companies may obtain financing by equity financing due to the needs of wider pool of finance for company growth (Joseph 2008). However for smaller companies, debt financing is much easier to obtain because its not easy to reach the status of public limited company and the issuance cost of equity finance is unaffordable by smaller companies (Joseph 2008).The ability to generate cash flow: This relies upon the operations of the company (Joseph 2008). If the company is able to generate enough cash f low, the company may seek debt financing because debt financing requires cash make frequent repayment of interest and principal (Joseph 2008).Any Restrictive Covenants: If the company is restricted by the lender from subsequent borrowings, equity financing is more appropriate due to the bindings against the company.The Cost of Financing: The cost of financing for debt financing is cheaper than equity financing due to the debt financer is exposed to lesser risk and he is entitled for prior claim in the companys profits and interest payable are tax deductible (which means actual cost of debt is lesser) (Joseph 2008).The Duration of Borrowing: The longer the duration, the interest rate charged on the borrower will be higher (Joseph 2008).The Current Gearing Level: If a company has a high gearing level, it is the best to go for equity financing whilst if a company has a low gearing level, they can go for debt financing (Joseph 2008).4.0 ConclusionNot every dividend policy suits a compan y. When deciding on how much dividend should be distributed to their investors, factors such as legal constraints, contractual constraints and etcetera have to considered to obtain the most suitable and appropriate dividend policy for better financing.Factors that affect dividend policy can be incorporated in several dividend theories such as residual dividends theory, clientele theory, signalling dividend theory, bird-in-the-hand theory and Modigliani Miller dividend theory. These theories can be classified into dividend relevance theory where its dividend policy will affect on companys value and cost of capital and dividend irrelevance theory where its dividend will not affect on companys value and cost of capital.Overseas manufacturing gains advantages such as cost savings and economies of scale. Inversely, it also has other effects such as no expertise available and also time consuming for starting a new factory.Companys capital structure can be financed through debt financing and equity financing. These are the strategies that a company can get its fund. However, these two strategies have their own advantages and disadvantages. When implementing any of those strategies, factors such as size of the company, ability to generate cash flow, current gearing level and other factors have to be considered in order to have the most suitable strategy to finance the organization. DIvidend Policies and Financing Essay Example DIvidend Policies and Financing Essay Dividend policy refers to the decision made by the company whether to retain the profits within the company, or they pay out the profits to the owners of the organization in the form of dividends (Garrison 2008). Once the company decides on whether to pay dividends, they may establish a somewhat permanent dividend policy, which may in turn impact on investors and perceptions of the company in the financial markets (Garrison 2008). What they decide depends on the situation of the company now and in the future. It also depends on the preferences of investors and potential investors (Garrison 2008).When deciding on the dividend policy, several factors such as legal constraints, contractual constraints, internal constraints, growth prospect, owners considerations and market considerations have to be taken into account. Considerations taken into account can be incorporated in several dividend theories such as the residual theory of dividends, the clientele theory, the signalling dividend theory, the bird-in-the-hand theory and Modigliani and miller dividend theory.Manufacturing overseas can reduce costs due to its cheap labour costs but there are other considerations that have to be taken into account. There are pros and cons for manufacturing at overseas.Companys capital structure refers to the way a corporation finances its assets through some combination of equity, debt, or hybrid securities (http://en.wikipedia.org/wiki/Capital_structure). Debt financing and equity financing has their own advantages and disadvantages but certain factors have to be considered when choosing between these two financing strategies.2.0 Factors Affecting the Dividend PolicyWhen deciding on the dividend policy, several factors need to be taken into account. The factors needed to taken into account are as follows (sources taken fromhttp://freemba.in/articlesread.php?artcode=488substcode=30stcode=10):Stability of EarningsThe nature of business has an important bearing on the dividend pol icy. Industrial units having stability of earnings may formulate a more consistent dividend policy than those having an uneven flow of incomes because they can predict easily their savings and earnings. Usually, enterprises dealing in necessities suffer less from oscillating earnings than those dealing in luxuries or fancy goods.Age of CorporationAge of the corporation counts much in deciding the dividend policy. A newly established company may require much of its earnings for expansion and plant improvement and may adopt a rigid dividend policy while, on the other hand, an older company can formulate a clear cut and more consistent policy regarding dividend.Liquidity of FundsAvailability of cash and sound financial position is also an important factor in dividend decisions. A dividend represents a cash outflow, the greater the funds and the liquidity of the firm the better the ability to pay dividend. The liquidity of a firm depends very much on the investment and financial decisio ns of the firm which in turn determines the rate of expansion and the manner of financing. If cash position is weak, stock dividend will be distributed and if cash position is good, company can distribute the cash dividend.Extent of Share DistributionNature of ownership also affects the dividend decisions. A closely held company is likely to get the assent of the shareholders for the suspension of dividend or for following a conservative dividend policy. On the other hand, a company having a good number of shareholders widely distributed and forming low or medium income group would face a great difficulty in securing such assent because they will emphasize to distribute higher dividend.Needs for Additional CapitalCompanies retain a part of their profits for strengthening their financial position. The income may be conserved for meeting the increased requirements of working capital or of future expansion. Small companies usually find difficulties in raising finance for their needs of increased working capital for expansion programs. They having no other alternative, use their ploughed back profits. Thus, such Companies distribute dividend at low rates and retain a big part of profits.Trades CycleBusiness cycles also exercise influence upon dividend Policy. Dividend policy is adjusted according to the business oscillations. During the boom, prudent management creates food reserves for contingencies which follow the inflationary period. Higher rates of dividend can be used as a tool for marketing the securities in an otherwise depressed market. The financial solvency can be proved and maintained by the companies in dull years if the adequate reserves have been built up.Government PoliciesThe earnings capacity of the enterprise is widely affected by the change in fiscal, industrial, labor, control and other government policies. Sometimes government restricts the distribution of dividend beyond a certain percentage in a particular industry or in all spheres of busi ness activity as was done in emergency. The dividend policy has to be modified or formulated accordingly in those enterprises.Need for FundsDividends paid to stockholders use funds that the firm could otherwise invest. Therefore, a company running short of cash or with ample capital investment opportunities may decide to pay little of no dividends. Alternatively, there may be an abundance of cash or a dearth of good capital budgeting projects available. This could lead to very large dividend payments.Management Expectations and Dividend PolicyIf a firms managers perceive the future as relatively bright, on the one hand, they may begin paying large dividends in anticipation of being able to keep them up during the good times ahead. On the other hand, if managers believe that bad times are coming, they may decide to build up the firms reserves for safety instead of paying dividends.Stockholders PreferencesReinvesting earning internally, instead of paying dividends, would lead to highe r stock prices and a greater percentage of the total return common stockholders receive coming from capital gains. Capital gains are profits earned by an investor when the price of a capital asset, such as common stock, increases.Common stockholders may prefer to receive their return from the company in the form of capital gains and some may prefer to receive their return from the company in the form of dividends. Capital gains are not taxed at all unless they are realized. That is, unless the stock is sold. The board of directors should consider stockholder preferences when establishing the firms dividend policy.Restriction on Dividend PaymentsA firm may have dividend payment restrictions in its existing bond indentures or loan agreements. For example, a companys loan contract with a bank may specify that the companys current ratio cannot drop below 2.0 during the life of the loan. Because payment of a cash dividend draws down the companys cash account, the current ratio may fall b elow the minimum level required. In such a case, the size of a dividend may have to be cut or omitted. In addition, many states prohibit dividend payments if they would create negative retained earnings on the balance sheet. This restriction is a prohibition against raiding the initial capital. Figure 1 summarizes the factors that influence the dividend decision.Figure 1: This figure identifies key elements that make a dividend payment more or less likely.2.1 Leading Dividend TheoriesThe factors that affect the dividend policy can be incorporated in several dividend theories. Dividend theories can be divided into dividend relevance theory and dividend irrelevance theory. Dividend relevance theory refers to the value of a firm is affected by its dividend policy while dividend irrelevance theory refers to a firms dividend policy has no effect on either its value or its cost of capital (http://www.studyfinance.com/lessons/dividends/index.mv?page=01).2.1.1 Dividend Relevance TheoriesAcc ording to Gallagher Andrew (2007) dividend relevance theories are as follows:The Clientele Dividend TheoryThe clientele dividend theory is based on the view tat investors are attracted to a particular company in part because of its dividend policy. For example, young investors just starting out may want their portfolios to grow in value from capital gains rather than from dividends, so they seek out companies that retain earnings instead of paying dividends. Stock prices tend to increase as earnings are retained and the resulting capital gain is not taxed until the stock is sold.Older investors, in contrast, may want to live off the income their portfolios provide. They would ten to seek out companies that pay high dividends rather than reinvesting for growth. According to the clientele dividend theory, each company therefore has its own clientele of investors who hold the stock in part because of its dividend policy.If the clientele theory is valid, then it doesnt much matter what a companys dividend policy is as long as it has one and sticks to it. If the policy is changed, the clientele that liked the old policy will probably sell their stock. A new clientele will buy the stock based on the firms new policy. When a dividend policy change is contemplated, managers must ask whether the effect of the new clienteles buying will outweigh the effects of the old clienteles selling. The new clientele cannot be sure that the most recent dividend policy implemented will be repeated in the future.The Signaling Dividend TheoryThe signaling dividend theory is based on the premise that the management of a company knows more about the future financial prospects of the firm than do the stockholders. According to this theory, if a company declares a dividend larger than that anticipated by the market, this will be interpreted as a signal that the future financial prospects of the firm are brighter than expected. Investors presume that management would not have raised the d ividend if it did not think that this higher dividend could be maintained. As a result of this inferred signal of good times ahead, investors buy more stock, causing a jump in the stock price.Conversely, if a company cuts it dividend, the market takes this as a signal that management expects poor earnings and does not believe that the current dividend can be maintained. In other words, a dividend cut signals bad times ahead for the business. The market price of the stock drops when the firm announces a lower dividend because investors sell their stock in anticipation of future financial trouble for the firm. If a firms managers believe in the signaling theory, they will always be wary of the message their dividend decision may send to investors. Even if the firm has some attractive investment opportunities that could be financed with retained earnings, management may seek alternative financing to avoid cutting the dividend that may send an unfavorable signal to the market.The Bird-i n-the-Hand TheoryThe bird-in-the-hand theory claims that stockholders prefer to receive dividends instead of having earnings reinvested in the firm on their behalf. Although stockholders should expect to receive benefits in the form of higher future stock prices when earnings are retained and reinvested in their company, there is uncertainty about whether the benefits will actually be realized. However, if the stockholders were to receive the earnings now, in the form of dividends, they could invest them now in whatever they desired. In other words, a bird in the hand is worth two in the bush.If the bird-in-the-hand theory is correct then the stocks of companies that pay relatively high dividends will be more popular and therefore will have relatively higher stock prices than stocks of companies that reinvest their earnings.2.1.2 Dividend Irrelevance TheoriesDividend irrelevance theories are as follows (Gallagher ; Andrew 2007):The Residual Theory of DividendsThe residual theory of dividend is widely known. The theory hypothesize the amount of dividends should not be the focus of the company. Instead, the primary issue should be to determine the amount of earning the firm should retain within the firm for investment. The amount of earnings retained, according to this view, depends on the number and size of acceptable capital budgeting projects and the amount of earnings available to finance the equity portion of the funds needed to pay for these projects. Any earnings left after these projects have been funded are paid out in dividends because dividends arise from residual or leftover earnings, the theory is called the residual theory.The residual theory focuses on the optimal use of earnings generated from the perspective of the firm itself. This may appeal to some, but ignores stockholders preferences about the regularity of and the amount of dividend payments. If a firm follows the residual theory, when earnings are large and the acceptable capital budgetin g projects small and few, dividends will be large. Conversely, when earnings are small and many large acceptable projects are waiting to be financed, there may be no dividends if the residual theory is applied. The dividend payments will be erratic and the amounts will be unpredictable.Modigliani and Millers Dividend TheoryFranco Modigliani and Merton miller (commonly referred as M;M) theorized in 1961 that dividend policy is irrelevant. Given some simplifying assumptions, M;M showed how the value of a company is determined by the income produced from its assets, not by its dividend policy. According to the M;M dividend theory, the way a firms income is distributed (in the form of future capital gains or current dividends) doesnt affect the overall value of the firm. Stockholders are indifferent as to whether they receive their return on their investment in the firms stock from capital gains or dividends so dividends dont matter.2.2 Advantages and Disadvantages of Overseas Manufactu ringManufacturing at overseas certainly saves cost of production in some degree due to cheap labor and material cost but it has its advantages and disadvantages for overseas manufacturing.2.2.1 Advantages of Overseas ManufacturingEase and Speed of Distribution: Manufacturing in overseas shortening the distance between the original location of manufacturer and its distribution market (if the manufacturer has its markets around the region of the considered location). For example, when Nike manufacturer from United States manufactures in Malaysia, they have greater ease and speed of transportation for goods and people to other Asian markets. Besides that, transportation and shipping cost may be reduced due to a shorter distance for shipping and distribution.Cost Savings: In less-developed countries, labor cost is cheaper than developing and developed countries. It is estimated that a company that manufactures in less-developed country can cut costs by between 30% and 80% depending on h ow labor intensive the product is. Besides that, material cost is also cheaper compared to developed countries too.Gain in Efficiencies and Economies of Scale: Besides that, in the long run, manufacturing overseas can gain efficiencies and economies of scale which will assist in reducing unit cost as output increases. Moreover, the initial investment of capital may be spread over an increasing number of units of output and therefore the marginal cost of producing a good or services decreases as production increases.Low Capital Costs: Low capital cost is one of the advantages that encourages manufacturing overseas. The cost of capital in developing or developed countries is higher than the cost of capital in less-developed countries.Incentives for Manufacturing: Some of the less developed countries encourage overseas manufacturers to invest or manufacture in their country. In order to attract manufacturers, these less-developed countries do offer incentives for the manufacturers. For example, Penang has offered incentive to Motorola from USA in order to attract them to manufacture at Penang.2.2.2 Disadvantages of Overseas ManufacturingQuality of Production Suffers: Cheap labor is an advantage for cost savings. Inversely, it reduces the quality of the products as cheap labors usually produce less quality productions. Therefore, the products will suffer in quality as most of the cheap labors are unskilled or semi-skilled. Indirectly, the manufacturer may lose its customers due to the production of less quality products.Time Consuming: When an organization wants to manufacture in overseas, the organization has to analyze and comprehend the considered location and also the facilities available around the setting up area. The analysis and comprehension takes considerable time to complete in order to have a perfect set up in overseas. Therefore it spends considerable time and energy to understand the considered location (Sweeney N.D.).Complexity: To operate oversea i s not as easy as locally. Most of the manufacturers have adapted to their own manufacturing culture and therefore adapting to another manufacturing environment would be difficult for them to familiarize with it. First of all, language may be a barrier, for example, it is difficult to communicate with the South Americans labors if we are not familiar with Latin (Sweeney N.D.). Besides that, finance, tax, and labor laws will be different and must be understood (Sweeney N.D.). Sweeney (N.D.) stated that, understanding national cultures and subcultures are important for any activity as manufacturers have to deal with government and private sector people and especially selling into the market.Brand Risks: Nowadays, consumers are perceived where the product is made from. The production location is a factor that will affect the brand image and reputation. For example, consumers would prefer a product made in USA rather than made in China. If the manufacturer produces in Bangladesh it may m ore or less affect their images as some of the consumers believe that products from developed countries are much better than less-developed countries and therefore the image and reputation of the brand may suffer.Availability of Expertise: The availability of expertise is one of the factors that should be considered when organization seeks to manufacture overseas. Less developed countries may not provide the expertise in the fields required.Long Start Up Time: It is not easy for manufacturer to start up their manufacturing process. To manufacture in a smooth way requires time. It usually requires a considerable of long time start up and familiarize.3.0 Debt ; Equity Financing3.1 Equity FinancingEquity financing is a method to acquire capital that involves selling a partial interest in the company to investors (Brian 1990). In return of the money paid, shareholders receive ownership interests in the corporation (Brian 1990).3.1.1 Pros and Cons of Equity Financing3.1.2 Pros of Equity FinancingThe advantages of equity finance are:Commitment of Funds: The funding is committed to the business and intended projects. Investors only realize their investment if the business is doing well (eg. through flotation or a sale to new investors).Vested Interest: Investors have the same interest that is to keep the business going on well and generate maximum profits which leads to an increase in the value of the business.Follow-up Funding: When business grows, investors are often prepared to provide follow-up funding.(Source of reference:http://www.businesslink.gov.uk/bdotg/action/detail?type=RESOURCES;itemId=1073789573)Wider Pool of Finance: When company is listed in stock exchanged, the company has the access to wider pool of finance.Quality Products: The owners will pay proper attention for improving the quality of products. The reason is the appropriate of quality product goes to them.No Interest Cost: No payment of interest for the funds provided by the shareholders. The c ost of production remains low as there is no burden of interest.Earning Remains with the Firm: When funds provided by shareholders for improvement in the business are making profits, the earnings are remained with the owners. Earnings are not shared by the creditors.To Tide over Emergencies: Firm is in a better position to tide over recession period and other emergencies due to no burden of rate of interest.Ability to borrow: Borrowing ability is improved if the equity capital is financed well.(Source of Reference: http://www.blurtit.com/q303144.html)Sources of Skills and Experiences: Good investors can bring resources for the business. They can help one to get skilled people, right contacts to build the business. They might also help out with their own experience in the formation of the strategy or with decision making.No Obligation for Repayment: No obligation for the repayment of the finances in the initial phase of the business when the cash flow is quite slow. Whereas, in bank loans there are severe obligations and penalties in case a business fails to generate monthly interests and make the monthly payments to the bank.(Sources of Reference:http://www.freewarefiles.com/techfi/Advantages_of_Equity_Financing.html)Pledge No Assets: Corporation does not have to pledge their assets as collateral to obtain equity investments.Availability of Cash: Business will have more cash available due to no debt payments have to be made.(Source of reference:http://forums.forbes.com/forbes/board/message?board.id=entreforum;message.id=399)3.1.3 Cons of Equity FinancingThe disadvantages of equity finance are:Costly and Time Consuming: Raising equity finance is costly and time-consuming. Business may suffer as times are devoted to the deal. Potential investors will seek background information on owner and his business and they will closely scrutinize past results and forecasts and will delve the management team.Interference in Management: The equity investors can interfere in the management of the company and in addition they also have the voting rights which could influent the making of major decisions.Extra Effort to Provide Information: Founder will have to invest management time to provide regular information for the investor to monitor the situation of the business.Share Dilution: Founders share in the business will be diluted which means lessen in strength. Besides that, businesss profits will be shared by other equity investors.Legal and Regulatory Compliance: There can be legal and regulatory issues to comply with when raising finance (eg. when promoting investments).(Source of Reference;http://www.businesslink.gov.uk/bdotg/action/detail?type=RESOURCES;itemId=1073789573)Limitation of Control: Founders must give up some control of the business. If investors have different perceptions and ideas about the companys strategic direction or day-to-day operations, they can pose problems for the entrepreneur.(Source of Reference: http://www.answers.com/eq uity+Financing?cat=biz-fin)No Tax Deduction: Dividend payments are not tax deductible.(Source of Reference:http://forums.forbes.com/forbes/board/message?board.id=entreforummessage.id=399)3.2 Debt FinancingAccording to (http://www.answers.com/debt+financing?cat=biz-fin) debt financing is a strategy that involves borrowing money from a lender or investor which the full amount will be repaid in the future usually with interest within a certain period. It asserted that it does not include any provision for ownership of the company. Debt financing has a prior claim on the company irrespective of the profits earned despite the company goes into liquidation (Joseph 2008).3.2.1 Pros and Cons of Debt Financing3.2.2 Pros of Debt FinancingMaintain ownership: The debt holder cannot interfere in the management of the company and they do not have the voting rights. Therefore, business can be run without outside interferenceTax deductions: Principal and interest payments on a business loan are cla ssified as business expenses and thus tax deductible. It also lowers the actual cost of the loan to the company.Lower interest rate: There is a lower interest rate of debt financing when interest rate is lower than tax rate (where the business can take a loan and have a deduction on tax rather than high interest rate).(Source of Reference: http://entrepreneurs.about.com/od/financing/a/debtfinancing.htm)No Complex Procedures Required: Debt financing is easier to obtain than equity financing. Raising debt capital is less complicated because the company is not required to comply with state and federal securities laws and regulations.No Profits Sharing: Profits of company are not shared with the lenders who require capital appreciation and dividends on their investments.Forecasting: Interest and principal payments are typically a know amount that can be forecast.(Source of Reference: http://www.job-employment-guide.com/business-financing.html)No Extra Rewards: Debt holders are entitled only to repayment of the agreed-upon principal of the loan plus interest and have no direct claim on future profits of the business if the company has made extra profits.Saving Management Time: Company does not have to send periodic mailings to large numbers of investors, hold periodic meetings with shareholders and seek the vote of shareholders before taking certain actions.(Source of Reference: http://smallbusiness.findlaw.com/banking_financing/be1_5debtvsequity.html) David H. Schwartz3.2.3 Cons of Debt FinancingRepayment: Sole obligation to the lender is to make payments on time. If the business fails, the company still has to make payments. If business goes into bankruptcy, lenders will have claim to repayment before any equity investors.Impacts Credit Rating: It seems to be attractive to keep bringing on debt when company needs money, a practice known as levering up, but each loan will be noted on your credit rating. The more borrowings, the higher the risk to the lender and th e higher interest rate the company will have to pay.Cash and Collateral: The company is usually required to pledge assets of the company to the lender as collateral, and owners of the company are in some cases required to personally guarantee repayment of the loan.(Source of Reference:http://entrepreneurs.about.com/od/financing/a/debtfinancing.htm)Difficulty in Business Growth: Interest is a fixed cost which raises the companys break-even point. High interest costs during difficult financial periods can increase the risk of insolvency. Companies that have large amounts of debt as compared to equity often find it difficult to grow because of the high cost of servicing the debt.Restrictions on Activities: Debt instruments often contain restrictions on the companys activities, preventing management from pursuing alternative financing options and non-core business opportunities which results in losing of other investment opportunities.(Source of Reference:http://smallbusiness.findlaw.co m/banking_financing/be1_5debtvsequity.html)3.3 Consideration Factors for Sources of FinanceEquity financing and debt financing is the option for a company that needs financing. Each company is unique and they have their own financing requirements and therefore, it is inappropriate to determine any one of the financing methods is the best option for companies. There are certain factors that a company needs to consider before choosing the right financing method:The size of the company: Larger companies may obtain financing by equity financing due to the needs of wider pool of finance for company growth (Joseph 2008). However for smaller companies, debt financing is much easier to obtain because its not easy to reach the status of public limited company and the issuance cost of equity finance is unaffordable by smaller companies (Joseph 2008).The ability to generate cash flow: This relies upon the operations of the company (Joseph 2008). If the company is able to generate enough cash f low, the company may seek debt financing because debt financing requires cash make frequent repayment of interest and principal (Joseph 2008).Any Restrictive Covenants: If the company is restricted by the lender from subsequent borrowings, equity financing is more appropriate due to the bindings against the company.The Cost of Financing: The cost of financing for debt financing is cheaper than equity financing due to the debt financer is exposed to lesser risk and he is entitled for prior claim in the companys profits and interest payable are tax deductible (which means actual cost of debt is lesser) (Joseph 2008).The Duration of Borrowing: The longer the duration, the interest rate charged on the borrower will be higher (Joseph 2008).The Current Gearing Level: If a company has a high gearing level, it is the best to go for equity financing whilst if a company has a low gearing level, they can go for debt financing (Joseph 2008).4.0 ConclusionNot every dividend policy suits a compan y. When deciding on how much dividend should be distributed to their investors, factors such as legal constraints, contractual constraints and etcetera have to considered to obtain the most suitable and appropriate dividend policy for better financing.Factors that affect dividend policy can be incorporated in several dividend theories such as residual dividends theory, clientele theory, signalling dividend theory, bird-in-the-hand theory and Modigliani Miller dividend theory. These theories can be classified into dividend relevance theory where its dividend policy will affect on companys value and cost of capital and dividend irrelevance theory where its dividend will not affect on companys value and cost of capital.Overseas manufacturing gains advantages such as cost savings and economies of scale. Inversely, it also has other effects such as no expertise available and also time consuming for starting a new factory.Companys capital structure can be financed through debt financing and equity financing. These are the strategies that a company can get its fund. However, these two strategies have their own advantages and disadvantages. When implementing any of those strategies, factors such as size of the company, ability to generate cash flow, current gearing level and other factors have to be considered in order to have the most suitable strategy to finance the organization.

alexander the great was not worthy of his title essays

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Decentralized And Strategic Business Unit Of Nestle Management Essay

Decentralized And Strategic Business Unit Of Nestle Management Essay Based in Switzerland, Nestle operates in 86 countries across the globe. The company has products that cross more borders than a professional diplomat, including Nescafe coffee, Purina and Friskies pet food, Kit Kat candy, Buitoni pastas and its flagship chocolate. Although there are many exceptions, food tends to be inherently local, both because of its perishable nature and because of the regional nature of many food preferences. For Nestle, success has meant finding the right balance between localization and globalization. Packaging has played a key role in this successful balancing act, which is why Nestle is Food Drug Packagings 2004 Food/Beverage Packager of the Year. Nestle can earn greater return from its distinctive competencies, like unique strengths that allow a company to achieve superior efficiency, quality, innovation and customer responsiveness. By applying those competencies, and the products they produce, to foreign markets where indigenous competitors lack similar competencies and products, Nestle can realize enormous returns. Furthermore, Nestle can take advantage of location economies. Location economies arise from performing a value creation activity in the optimal location for that activity, anywhere in the world. The optimal location for a value creating activity lowers the costs of value creation therefore helping the company achieve a low-cost position. 4.1 International strategy Nestlà © is a global organization. Their competitive strategies are associated mainly with foreign direct investment in dairy and other food businesses. Nestlà © aims to balance sales between low risk but low growth countries of the developed world and high risk and potentially high growth markets of Africa and Latin America. Nestlà © recognizes the profitability possibilities in these high-risk countries, but pledges not to take unnecessary risks for the sake of growth. This process of hedging keeps growth steady and shareholders happy. When operating in a developed market, Nestlà © strives to grow and gain economies of scale through foreign direct investment in big companies. Recently, Nestlà © licensed the LC1 brand to Mà ¼ller (a large German dairy producer) in Germany and Austria. In the developing markets, Nestlà © grows by manipulating ingredients or processing technology for local conditions, and employ the appropriate brand. For example, in many European countries most chilled dairy products contain sometimes two to three times the fat content of American Nestlà © products and are released under the Sveltesse brand name. Another strategy that has been successful for Nestlà © involves striking strategic partnerships with other large companies. In the early 1990s, Nestlà © entered into an alliance with Coca Cola in ready-to-drink teas and coffees in order to benefit from Coca Colas worldwide bottling system and expertise in prepared beverages. European and American food markets are seen by Nestlà © to be flat and fiercely competitive. Therefore, Nestlà © is setting its sights on new markets and new business for growth. 4.1.1 Asia market Nestlà ©s strategy has been to acquire local companies in order to form a group of autonomous regional managers who know more about the culture of the local markets than Americans or Europeans. Nestlà ©s strong cash flow and comfortable debt-equity ratio leave it with ample muscle for takeovers. Recently, Nestlà © acquired Indofood, Indonesias largest noodle producer. Their focus will be primarily on expanding sales in the Indonesian market, and in time will look to export Indonesian food products to other countries. Nestlà © has employed a wide-area strategy for Asia that involves producing different products in each country to supply the region with a given product from one country. For example, Nestlà © produces soy milk in Indonesia, coffee creamers in Thailand, soybean flour in Singapore, candy in Malaysia, and cereal in the Philippines, all for regional distribution. Nestlà ©s overall strategic postures make sense because the company has developed a consistent strategic direction and vision. The company has determined its strategic direction in advance and then implemented it on a global scale. Knowing that innovation and quality were key determinants, Nestle transferred these distinctive competencies to foreign markets. 4.2 Decentralized and Strategic Business Unit Nestle is a decentralized organization where responsibility for operating decisions is delegated to local units, which have a high degree of autonomy concerning pricing, distribution, marketing, etc. Nestle is one of the worlds largest food company and has successfully grown and increased its market share since its foundation in 1866. This already indicates that Nestlà ©s overall strategic posture makes sense given the markets and countries Nestle participates in. Nestle is organized into seven different worldwide strategic business units (SBUs). These have responsibility for high-level strategic decisions and engage in overall strategic business development, including acquisitions and market entry strategy. Parallel to this structure, there is a regional organization that divides the world into five major geographical zones, such as Europe, North America, etc. The regional organizations are responsible for developing regional strategies and assist in the overall strategy development process. However, neither SBU nor regional managers get involved in local operating decisions. http://articles.castelarhost.com/nestle_competitive_strategy.htm 4.3 Challenges As a global company, Nestle faces many challenges. They are varied in nature, spanning social, environmental and economic issues, and range from local to global in scale. Some of the challenges as below: 4.3.1 The double burden of malnutrition While nutrition has largely improved worldwide over the past 50 years, new nutrition-related problems have emerged, ranging from under-nutrition in developing countries through to increasing rates of obesity in both developing and developed countries. Both contribute to increasing rates of chronic disease around the world.18 4.3.2 The global water crisis In recent years, water has been increasingly recognized as equal to climate change as a pressing environmental issue. With approximately two-thirds of all water being withdrawn by agriculture, the future of agriculture and food security is at stake if we are not able to solve the world water crisis. We have adopted rigorous standards to reduce water consumption at our plants and facilities, and help farmers to become better stewards of water, support water resource awareness and education programmes, and participates in global dialogue with leading experts and policymakers.19 4.3.3 Renewable energy In addition to operational efficiency improvements and energy-saving equipment, we continue to explore the industrial feasibility of switching to more renewable energy sources to reduce our reliance on fossil fuels. A number of projects have come on-stream in 2009 which will increase our overall proportion of energy derived from renewable resources, including a landfill gas project in Ohio, USA that recovers methane, the generation of energy from spent coffee grounds at a factory in Colombia and solar panels on the roof of our Purina factory in Denver.20 4.3.4 Sustainable palm oil We share the concern about the serious environmental threat to rainforests and peat fields caused by palm oil plantations, and participate in multi-stakeholder solutions to this complex problem. We only buy processed palm oil and processed oil mixes, we do not use crude palm oil and we have no direct link with plantations. We have also undertaken an in-depth review of our supply chain and committed to using only Certified Sustainable Palm Oil (CSPO) by 2015. Nestle recently joined the Round table on Sustainable Palm Oil (RSPO) and has repeatedly spoken out against the production of palm oil for a bio-fuel.21 4.3.5 Child labour in the agricultural sector As a founding participant in the International Cocoa Initiative, set up specifically to eradicate the worst forms of child labour, Nestle and other industry players are improving access to education and addressing all forms of exploitation of children, forced labour and its causes.22 http://www2.nestle.com/CSV/CreatingSharedValueAtNestle/Challenges/Pages/Challenges.aspx