Monday, 26 September 2011
Tuesday, 20 September 2011
Statistics - Permutation and Combinations
This article discuss the use of permutations and combinations in finding the possibilities of arranging or numbe of combinations by using the permutation and combination techniques, particualrly in calculating theoritical probabilities of given events.
ntroduction
In Mathematics problems in permutations and combinations are very tricky. This is because ther are many problems which cannot be categorized in to a particualr method to be applied. The problems have to be solved by using unique insights and intuition and my experimenting with many ways of approch by using a combination of methods. However, by asking some systematic questions many permutations and combination problems can be solved. In this article I will discuss these questions and the categorise some of these problems which can be asked in High scholl Mathematics. This will certainly help students and people who are interested in Mathematics to explore these problems with a systematic way to approach such problems and enable to develop techniques for more complex problems.
The permutations and combinations can be categorised in to two major categories. They are Permutations and combinations without restrictions and with restrictions. It can be Line or circle arrangement in permutation questions. In these cases all items are chosen or some items are chosen. The items can be unique or identical. Restrictions can be categorized in to restricted items and unrestricted items or one or more restrictions. All permutations formulas are for the without replacement or repetition. The categories under without restriction and without replacement can be summariazed as follows:
Permutations and combinations without replacement has two major categories. They are as follows:
1. Without restrictions
2. With restrictions.
Without restriction and with restrictions can have permutations and combinations problems depending on whether order of arrangement is important or not. The categories under without restrictions and with restrictions are as follows:
1. Without restriction
a) Permutation
b) combination
2. With Restriction
a) Permutation
b) combination
Without restrictions, permutations can be firther categorized in to line arrangement or circle arrangement. Like wise with restriction category. This categorization is as follows:
1. Permutation - without restrictions
a) Line arrangement.
b) circle arrangement
2. Permutation with restriction
a) Line arrangement
b) circle arrangement
Line arrangement under permutation without restruction can be further catagorised as all items or some items.
This is as follows:
Permutation without restriction - Line arrangement
1. All items
2. Some items
Permutation without restriction, line arrangement of all items can be further catagorized in to each item unique or some items identical. This is as follows:
Permutation -Without replacement- Line arrangement - All items
1. Each item unique
2. some item identical.
Solutions for permutation and combination, where there is no restrictions in arrangement or chosing
1. Permutation without replacement and without restrictions line arrangement all items are unque = n factorial. Where n factorial = n*(n-1)8(n-2)......................................................1.
2. Permutation without replacement and without restrictions- Line arrangement, some items used = n p r. Where n p r = n factorial/ r factorial * (n-r) factorial.
3. Permutation without replacement and without restrictions, line arrangement some r items are identical and all items are chosen = n factorial/ r factorial.
4. Permutation without replacement, with restriction -Circle arrangement all items used = (n-1) factorial.
Problems involving Permutations and combination without replacement and without restrictions
Question 1
How many ways 7 people be arranged in a line?
Answer 1
In this question it is an arrangement. There fore order important. That is it is a permutation problem involving all items without replacement and without restriction in a line arrangement. There fore the number of ways is equal to 7 factorial = 7*6*5*4*3*2*1= 5040.
Question 2
How many ways the letters of the word Wollongong be arranged?
Answer 2
This a line arrangement permutation where some items are identical. In this instant there are 10 letterers. where it has 3 letter o, 2 letters g and 2 letters l. Applying the formula for this category as per above solutions is as follows:
The ways of arrangement in line = 10 factorial/ 3 factorial*2factorial*2 factorial = 75600.
Question 3
How many different arrangement can be made using 3 letters from the word Monday?
Answer 3
This is a permutation question as it asks for order of arrangement. In this situation the letters are unique and without restrictions. As well, all letters are not arranges only some are arranged. There fore it is a permutation 3 letters out of 6 letters. That is 6 p 3 or 6*5*4 = 120.
Question 4
If people has to arranged ina round table how many different arrangements are there if there are 6 people?
Answer 4
This a circle arrnagement instead of line arrangement. There fore the the cicle permutation as per above solutions to the circle permutation without restrictions and without replacement have to be used. In this situation the number of arrangements are ( 6-1) factorial = 120.
Question 5
How many committees can be formed out of 8 people?
Answer
In this question the order is not important. There fore it is not a permutation problem. It is a combination problem without replacement and without restrictions. There fore applying the solutions formula as mentioned above is 8 c 4 = 8 factorial/ 4 factorial *( 8-4) factorial = 8*7*6*5/ 4*3*2*1 = 70
Solution Model for permutation and combination with restrictions
If the permutations and combinations have restrictions in the way the items have to placed or method of choosing then determine whether it is a line permutation or circle permutation or combination. After deciding from the problem the nature of the problem decide the patterns as per restrictions for a permutation problem of line arrangement and determine the number of arrangement of each restriction and then multiply it with the number of patterns. Say the number of patterns for a restricted permutation problem is (p) and the 1st restricted item of (u) is (u) factorial and the 2nd restriction is (r) items and there fore (r) factorial. Then the total number of restricted permutation = p*u factorial * r factorial.
If say the problem related to circle permutation, the leave one item out of the total number of items and use the line permutation with restrictions as discussed above. For example, say it has n items, ther fore one has to be taken away from the total items. That is (n-1) items are taken into consideration and then use the line arrangement model for the circle permutations.
If it is a combination problem, just like the permutation, the patterns or restrictions combinations have to calculated separately and then identify the different classes in accordance with the restriction or restriction rules. Then multiply the combinations together with that of the number of combination necessary in consonant with the restriction to solve the problem.
In complex situations one has to calculate differently the permutations for different components of the problem and then add all the components together to get the final solutions. As well, in some situations combinations and permutations have to to multiplied to get the accurate results. These are exceptions to the general methodology adopted normally as discussed in this article.
Question 1
How many ways 4 boys and 3 girls can be arranged with 4 boys togeter in a line?
Answer 1
Restricted items: 4 boys
non- restricted items 3 girls
The possible patterns with restrictions are as follows:
BBBBggg
gbbbbgg
ggbbbbg
gggbbbb
That is there are 4 patterns. If no replacement then 4 boys can be arranged in 4 factorial ways, 3 boys can be arranged 3 factorial ways. If there are 4 patterns, then ther are 4*4 factorial * 3 factorial = 576.
Question 2
If 4 males and 3 females are there and they have to be arranged alternatively, how many arrangements are there?
Restricted items: 4 males and 3 females.
Restriction: they must be arranged alternatively that is m f m f m or f m f m. That is only one pattern
4 males can be arranged in 4 factorial ways. 3 females can be arranged 3 factorial ways, only one pattern. There fore the number of total arrangement = 1*4 factorial * 3 factorial = 144.
Question 3
In how many ways 5 adults can be arranged in a circle table, if say Bred and Biggs are not to sit near to each other?
Answer 3
This is a circle arrangement. Fix a position for Bred. Then consider the 4 adults as Biggs will not be at each end.
The possible patterns are
A B A A or A A B A
Bigg can be arranged in 1 factorial ways. The other 3 adults can be arranged in 3 factorial ways. there are two patterns. There fore the total arrangements with bred and Biggs are not sitting together is = 2* 1 factorial * 3 factorial = 12
Question 4
How many committees can be arranged if 3 males and 5 females have to be chosen from 6 males and 10 females?
Answer 4
This do not require order , there fore it is a combination problem with restriction that 3 males have to chosen from 6 males and 5 females from 10 females.
The number of combination if 3 males are chosen from 6 males = 6 C 3 = 6 factorial/ 3 factorial* 3 factorial = 20
The number of combinations of chosing 5 females from 10 females = 10 c 5 = 10 factorial/ 5 factorial * 5 factorial = 252.
There fore, the number of committees are = 20*252 = 5040.
Question 5
In how many ways 5 adults can be arranged in a circle if Ben and Biggs must not sit near to each other?
Answer 5
This is a circle arrangement. Fix a position for Ben. The arrange the 4 adults in such a manner that Biggs do not sit at the end of a line arrangement. If this done, then there are two patterns. The are as follows:
A B A A
A A B A
Biggs can be arranged in 1 factorial way. Other 3 adults can be arranged in 3 factorial ways. There fore total arrangements in a circle with restriction = 2* 1 factorial * 3 factorial = 12.
Question 6
Calculate the probability if 4 males and 3 females are arranged in a line and they alternatively sit.
Answer 6
The number of arrangement possible if 4 males and 3 females are to be sitting alternatively = 1* 4 factorial * 3 factorial = 24 *6 =144
If no restrictions they can be arranged in 7 factorial ways = 7*6 * 5 * 4 *3 *2 *1 = 7*30* 24 = 240*24 = 5040
There fore the probability that the boys and girls alter nate arrangement = 144/ 5040 .
ntroduction
In Mathematics problems in permutations and combinations are very tricky. This is because ther are many problems which cannot be categorized in to a particualr method to be applied. The problems have to be solved by using unique insights and intuition and my experimenting with many ways of approch by using a combination of methods. However, by asking some systematic questions many permutations and combination problems can be solved. In this article I will discuss these questions and the categorise some of these problems which can be asked in High scholl Mathematics. This will certainly help students and people who are interested in Mathematics to explore these problems with a systematic way to approach such problems and enable to develop techniques for more complex problems.
The permutations and combinations can be categorised in to two major categories. They are Permutations and combinations without restrictions and with restrictions. It can be Line or circle arrangement in permutation questions. In these cases all items are chosen or some items are chosen. The items can be unique or identical. Restrictions can be categorized in to restricted items and unrestricted items or one or more restrictions. All permutations formulas are for the without replacement or repetition. The categories under without restriction and without replacement can be summariazed as follows:
Permutations and combinations without replacement has two major categories. They are as follows:
1. Without restrictions
2. With restrictions.
Without restriction and with restrictions can have permutations and combinations problems depending on whether order of arrangement is important or not. The categories under without restrictions and with restrictions are as follows:
1. Without restriction
a) Permutation
b) combination
2. With Restriction
a) Permutation
b) combination
Without restrictions, permutations can be firther categorized in to line arrangement or circle arrangement. Like wise with restriction category. This categorization is as follows:
1. Permutation - without restrictions
a) Line arrangement.
b) circle arrangement
2. Permutation with restriction
a) Line arrangement
b) circle arrangement
Line arrangement under permutation without restruction can be further catagorised as all items or some items.
This is as follows:
Permutation without restriction - Line arrangement
1. All items
2. Some items
Permutation without restriction, line arrangement of all items can be further catagorized in to each item unique or some items identical. This is as follows:
Permutation -Without replacement- Line arrangement - All items
1. Each item unique
2. some item identical.
Solutions for permutation and combination, where there is no restrictions in arrangement or chosing
1. Permutation without replacement and without restrictions line arrangement all items are unque = n factorial. Where n factorial = n*(n-1)8(n-2)......................................................1.
2. Permutation without replacement and without restrictions- Line arrangement, some items used = n p r. Where n p r = n factorial/ r factorial * (n-r) factorial.
3. Permutation without replacement and without restrictions, line arrangement some r items are identical and all items are chosen = n factorial/ r factorial.
4. Permutation without replacement, with restriction -Circle arrangement all items used = (n-1) factorial.
Problems involving Permutations and combination without replacement and without restrictions
Question 1
How many ways 7 people be arranged in a line?
Answer 1
In this question it is an arrangement. There fore order important. That is it is a permutation problem involving all items without replacement and without restriction in a line arrangement. There fore the number of ways is equal to 7 factorial = 7*6*5*4*3*2*1= 5040.
Question 2
How many ways the letters of the word Wollongong be arranged?
Answer 2
This a line arrangement permutation where some items are identical. In this instant there are 10 letterers. where it has 3 letter o, 2 letters g and 2 letters l. Applying the formula for this category as per above solutions is as follows:
The ways of arrangement in line = 10 factorial/ 3 factorial*2factorial*2 factorial = 75600.
Question 3
How many different arrangement can be made using 3 letters from the word Monday?
Answer 3
This is a permutation question as it asks for order of arrangement. In this situation the letters are unique and without restrictions. As well, all letters are not arranges only some are arranged. There fore it is a permutation 3 letters out of 6 letters. That is 6 p 3 or 6*5*4 = 120.
Question 4
If people has to arranged ina round table how many different arrangements are there if there are 6 people?
Answer 4
This a circle arrnagement instead of line arrangement. There fore the the cicle permutation as per above solutions to the circle permutation without restrictions and without replacement have to be used. In this situation the number of arrangements are ( 6-1) factorial = 120.
Question 5
How many committees can be formed out of 8 people?
Answer
In this question the order is not important. There fore it is not a permutation problem. It is a combination problem without replacement and without restrictions. There fore applying the solutions formula as mentioned above is 8 c 4 = 8 factorial/ 4 factorial *( 8-4) factorial = 8*7*6*5/ 4*3*2*1 = 70
Solution Model for permutation and combination with restrictions
If the permutations and combinations have restrictions in the way the items have to placed or method of choosing then determine whether it is a line permutation or circle permutation or combination. After deciding from the problem the nature of the problem decide the patterns as per restrictions for a permutation problem of line arrangement and determine the number of arrangement of each restriction and then multiply it with the number of patterns. Say the number of patterns for a restricted permutation problem is (p) and the 1st restricted item of (u) is (u) factorial and the 2nd restriction is (r) items and there fore (r) factorial. Then the total number of restricted permutation = p*u factorial * r factorial.
If say the problem related to circle permutation, the leave one item out of the total number of items and use the line permutation with restrictions as discussed above. For example, say it has n items, ther fore one has to be taken away from the total items. That is (n-1) items are taken into consideration and then use the line arrangement model for the circle permutations.
If it is a combination problem, just like the permutation, the patterns or restrictions combinations have to calculated separately and then identify the different classes in accordance with the restriction or restriction rules. Then multiply the combinations together with that of the number of combination necessary in consonant with the restriction to solve the problem.
In complex situations one has to calculate differently the permutations for different components of the problem and then add all the components together to get the final solutions. As well, in some situations combinations and permutations have to to multiplied to get the accurate results. These are exceptions to the general methodology adopted normally as discussed in this article.
Question 1
How many ways 4 boys and 3 girls can be arranged with 4 boys togeter in a line?
Answer 1
Restricted items: 4 boys
non- restricted items 3 girls
The possible patterns with restrictions are as follows:
BBBBggg
gbbbbgg
ggbbbbg
gggbbbb
That is there are 4 patterns. If no replacement then 4 boys can be arranged in 4 factorial ways, 3 boys can be arranged 3 factorial ways. If there are 4 patterns, then ther are 4*4 factorial * 3 factorial = 576.
Question 2
If 4 males and 3 females are there and they have to be arranged alternatively, how many arrangements are there?
Restricted items: 4 males and 3 females.
Restriction: they must be arranged alternatively that is m f m f m or f m f m. That is only one pattern
4 males can be arranged in 4 factorial ways. 3 females can be arranged 3 factorial ways, only one pattern. There fore the number of total arrangement = 1*4 factorial * 3 factorial = 144.
Question 3
In how many ways 5 adults can be arranged in a circle table, if say Bred and Biggs are not to sit near to each other?
Answer 3
This is a circle arrangement. Fix a position for Bred. Then consider the 4 adults as Biggs will not be at each end.
The possible patterns are
A B A A or A A B A
Bigg can be arranged in 1 factorial ways. The other 3 adults can be arranged in 3 factorial ways. there are two patterns. There fore the total arrangements with bred and Biggs are not sitting together is = 2* 1 factorial * 3 factorial = 12
Question 4
How many committees can be arranged if 3 males and 5 females have to be chosen from 6 males and 10 females?
Answer 4
This do not require order , there fore it is a combination problem with restriction that 3 males have to chosen from 6 males and 5 females from 10 females.
The number of combination if 3 males are chosen from 6 males = 6 C 3 = 6 factorial/ 3 factorial* 3 factorial = 20
The number of combinations of chosing 5 females from 10 females = 10 c 5 = 10 factorial/ 5 factorial * 5 factorial = 252.
There fore, the number of committees are = 20*252 = 5040.
Question 5
In how many ways 5 adults can be arranged in a circle if Ben and Biggs must not sit near to each other?
Answer 5
This is a circle arrangement. Fix a position for Ben. The arrange the 4 adults in such a manner that Biggs do not sit at the end of a line arrangement. If this done, then there are two patterns. The are as follows:
A B A A
A A B A
Biggs can be arranged in 1 factorial way. Other 3 adults can be arranged in 3 factorial ways. There fore total arrangements in a circle with restriction = 2* 1 factorial * 3 factorial = 12.
Question 6
Calculate the probability if 4 males and 3 females are arranged in a line and they alternatively sit.
Answer 6
The number of arrangement possible if 4 males and 3 females are to be sitting alternatively = 1* 4 factorial * 3 factorial = 24 *6 =144
If no restrictions they can be arranged in 7 factorial ways = 7*6 * 5 * 4 *3 *2 *1 = 7*30* 24 = 240*24 = 5040
There fore the probability that the boys and girls alter nate arrangement = 144/ 5040 .
Sunday, 18 September 2011
Importance of Productivity for an Economy and Factors Contributing to Productivity and Its Impact on Sustainable Economic Growth
This article discuss the impotance of productivvity improvement for any economy to enjoy sustainable economic growth with low inflation.
mportance of productivity for an Economy and factors contributing to productivity and its impact on sustainable Economic Growth
The Definitions of Economic productivity
The economic productivity refers to the cost of factor input and the value of its output. For example if productivity is improved consistently the cost of production or unit cost comedown drastically and there fore it increases consumer welfare as prices comes down.
The measurement of productivity and the problems of measuring productivity
In theory as mentioned above the concept of productivity is straight forward. However, in practice to measure productivity is not easy. This is because, productivity can be increased by unemployed labor or increasing the work day or under severe adverse conditions and there fore productivity can be apparently increased. If this achieved by the above means the productivity is not improved but worsened. There fore the productivity must be approached by the appropriate means not achieved in adverse conditions. In addition, the productivity to measure services is not easy as services output cannot be easily measured accurately. This applicable to education, government services and other service industries.
The main factors affecting productivity in an economy
The productivity of an economy depends on many factors. However, all factors are do not contribute to productivity. However, there are common factors irrespective of the nature of economies boost productivity. The main factor increasing productivity is the availability and the quality of capital and labor resources particularly the skilled and semi-skilled workforce and the flexibility of the labor market. Another factor is the innovate capacity of private and public institutions and the incentives to innovate and consistent technological dynamic development. Another crucial factor contribute to productivity improvement is the level of research and development and the quality of education and training system. In addition, productivity also depends on the level of business taxation and regulatory regime. For example, if business is overly regulated it may have adverse effects on productivity as it may discourage business to invest in productivity enhancing activities because of cost of regulation and risk in investment. In some economies, the amount and quality of natural resources like water, soil quality and other mineral resource availability to greater extent if the majority of economic activity depends on such resources. However, in other economies also will be affected because of oil and other resources are important factor in its cost and quality which determines productivity. Another important factor for long-term productivity growth is the quality of social and physical and technological infra-structure.
If any economy do not concentrate on the major forces of productivity and not have economic policies to address any deficiency compared to other nations they may not be competitive in the global economy and may adversely affected in terms of sustainable economic growth potential and dynamic efficiency of the economy.
The relationship between productivity and economic growth
The main reason productivity has an impact on economic growth is due to the fact productivity improves the profitability of business enterprises and the dynamic efficiency of the private enterprises and there fore increase the level of investment in the economy and there fore increase the potential output of the economy as a whole in the long-term. That is it has the effect of moving the aggregate long tern supply curve to the right. As well, it will enable the economy to grow with less inflation and there fore increase the economic growth rate. As well, as it increases sustainably the real income of the workforce in general in the long-term it increases the consumption potential of consumers and there fore increase aggregate demand and through the multiplier effect produces consistent economic growth. In other words, government polices directed towards productivity improvement in most of the important sectors of the economy as well as the efficiency of the public sector enables the economy as whole to be more productive. This will also enable the economy to have sufficient resources and technology to tackle environmental issues effectively at a minimum cost. In addition productivity improvement also has the effect of attracting international capital to the economy and investment in the economy there by increasing the potential capacity to produce or lift the production possibility curve to the right.
Summary
As mentioned above, the concept of productivity is important for any economy. However the measurement of productivity is not easy. Any economy's productivity is dependent on some crrucial factors. If these factors are neglected over a period of time and if it lags behind some major competitors in a global economy it has severe negative consequences in terms of its economic performance. It is also important to note all economies have some unique factors depending on their economic structures. However, there are some common factors, which determine productivity improvement over a long-term. As discussed above, productivity affects the rate of economic growth and consumer welfare by increasing the level of investment, consumer spending, foreign investment, possibility to control inflation and non-inflationary economic growth and there for to ensure consistent and sustainable economic growth with less boom and bust cycles. It is important that government must play its appropriate role in engendering dynamic efficiency and allocation efficiency so that it can move the aggregate long term supply curve move consistently over a long period of time. In effect, productivity enhancing polices by private and government is a crucial economic welfare and standard of living as well as quality of living of an economy.
mportance of productivity for an Economy and factors contributing to productivity and its impact on sustainable Economic Growth
The Definitions of Economic productivity
The economic productivity refers to the cost of factor input and the value of its output. For example if productivity is improved consistently the cost of production or unit cost comedown drastically and there fore it increases consumer welfare as prices comes down.
The measurement of productivity and the problems of measuring productivity
In theory as mentioned above the concept of productivity is straight forward. However, in practice to measure productivity is not easy. This is because, productivity can be increased by unemployed labor or increasing the work day or under severe adverse conditions and there fore productivity can be apparently increased. If this achieved by the above means the productivity is not improved but worsened. There fore the productivity must be approached by the appropriate means not achieved in adverse conditions. In addition, the productivity to measure services is not easy as services output cannot be easily measured accurately. This applicable to education, government services and other service industries.
The main factors affecting productivity in an economy
The productivity of an economy depends on many factors. However, all factors are do not contribute to productivity. However, there are common factors irrespective of the nature of economies boost productivity. The main factor increasing productivity is the availability and the quality of capital and labor resources particularly the skilled and semi-skilled workforce and the flexibility of the labor market. Another factor is the innovate capacity of private and public institutions and the incentives to innovate and consistent technological dynamic development. Another crucial factor contribute to productivity improvement is the level of research and development and the quality of education and training system. In addition, productivity also depends on the level of business taxation and regulatory regime. For example, if business is overly regulated it may have adverse effects on productivity as it may discourage business to invest in productivity enhancing activities because of cost of regulation and risk in investment. In some economies, the amount and quality of natural resources like water, soil quality and other mineral resource availability to greater extent if the majority of economic activity depends on such resources. However, in other economies also will be affected because of oil and other resources are important factor in its cost and quality which determines productivity. Another important factor for long-term productivity growth is the quality of social and physical and technological infra-structure.
If any economy do not concentrate on the major forces of productivity and not have economic policies to address any deficiency compared to other nations they may not be competitive in the global economy and may adversely affected in terms of sustainable economic growth potential and dynamic efficiency of the economy.
The relationship between productivity and economic growth
The main reason productivity has an impact on economic growth is due to the fact productivity improves the profitability of business enterprises and the dynamic efficiency of the private enterprises and there fore increase the level of investment in the economy and there fore increase the potential output of the economy as a whole in the long-term. That is it has the effect of moving the aggregate long tern supply curve to the right. As well, it will enable the economy to grow with less inflation and there fore increase the economic growth rate. As well, as it increases sustainably the real income of the workforce in general in the long-term it increases the consumption potential of consumers and there fore increase aggregate demand and through the multiplier effect produces consistent economic growth. In other words, government polices directed towards productivity improvement in most of the important sectors of the economy as well as the efficiency of the public sector enables the economy as whole to be more productive. This will also enable the economy to have sufficient resources and technology to tackle environmental issues effectively at a minimum cost. In addition productivity improvement also has the effect of attracting international capital to the economy and investment in the economy there by increasing the potential capacity to produce or lift the production possibility curve to the right.
Summary
As mentioned above, the concept of productivity is important for any economy. However the measurement of productivity is not easy. Any economy's productivity is dependent on some crrucial factors. If these factors are neglected over a period of time and if it lags behind some major competitors in a global economy it has severe negative consequences in terms of its economic performance. It is also important to note all economies have some unique factors depending on their economic structures. However, there are some common factors, which determine productivity improvement over a long-term. As discussed above, productivity affects the rate of economic growth and consumer welfare by increasing the level of investment, consumer spending, foreign investment, possibility to control inflation and non-inflationary economic growth and there for to ensure consistent and sustainable economic growth with less boom and bust cycles. It is important that government must play its appropriate role in engendering dynamic efficiency and allocation efficiency so that it can move the aggregate long term supply curve move consistently over a long period of time. In effect, productivity enhancing polices by private and government is a crucial economic welfare and standard of living as well as quality of living of an economy.
Employee Motivational Theories and Their Applications in Modern Organizations
This guide discuss major employee motivational theories. In addition, it also highlights the limitations of earlier theories and the evolution of modern motivational theories. As well, this guide also discuss how a manager can use these theories to motivate staff.
Maslow's Hierarchy of Needs
Abraham Maslow is a humanistic psychologist developed a theory of personality, which is valuable in the field of employee motivation. Basically they believe humans strive for upper-level capabilities such as creativity and highest level of consciousness.
In his view, humans have five needs and if one need is satisfied they go to the next and motivated by unmet needs in stages. In an employee motivational perspective, applying this theory, managers must identify the unmet needs of employees to motivate them. The five needs are, physiological needs such as food, water shelter, clothing etc. They are the strongest needs because if a person is deprived of all needs the psychological ones comes first in search of satisfaction.
When psychological needs are satisfied for a person, the needs of safety become active. If the psychological needs are satisfied it no longer affects the thoughts and behaviour of humans. When the needs for safety and psychological needs are satisfied a person moves to the next need of love, affection and belongingness.
When the first three needs are satisfied, then they move to the next level of needs for self-esteem such as firmly based high-level self respect and respect from others. If these are satisfied, a person feels self-confident and valuable. When the previous four needs are satisfied the person moves to the highest need of self-actualization. That is the need, which is to do what ever the person is born to do.
In Summary, Maslow's Hierarchy of needs in the perspective of employee motivation is to identify the satisfied needs and provide opportunities to meet the unmet needs to motivate the employees. The major weaknesses of the need theory; is the non-recognition of individual differences and ignoring other factors. For example the work itself can motivate employees.
The Theory X assumes, humans are in average dislike work and avoid responsibility and must be controlled and threatened to work hard. As well, it assumes people that they don't like responsibility and desires security above all. They must be directed so that they work towards organizational goals.
These assumptions are at play behind most organization, which pursues tight control, and punishment or they prefer harmony at work and ignore more higher order needs as specified by Maslow's hierarchy of needs so that the employees behave as Theory X expected. Theory X must be used very carefully in modern organizational environment because it may be counterproductive and may reduce motivation of employees. Contrast to Theory X, Theory Y assumes people use mental and physical effort in work as natural as play.
As well, it assumes that people will direct themselves if they are committed to the goals of the organization. Under proper conditions, average person not only accepts responsibility, but also seeks responsibility. In addition, it assumes imagination, creativity; ingenuity can be used to solve work problems by a large number of employees.
Theory Y also assumes, that in modern industrial life intellectual potential of average man is partially utilized. In the context of employee motivation, if subordinates are not in agreement with the manager of the desired results then the only way for the manager is to use his authority to get the work done using the Theory X assumption. However, if the employees are emotionally mature, agrees with desired results, work is sufficiently responsible and flexible and the employee can see his position in the organizational hierarchy, then in these conditions participative approach to problem solving leads to much improved results applying the Theory Y.
As well, in situations, where the employees agree and commit to the objectives of the organization, then explaining the matter fully to the employees the purpose of action and allow them to self-direct them, they may use better methods and do a better work than simply carrying out an order from the manager. Theory Y is more appropriate in this situation.
As well, the reward satisfies an important need. Then the desire to satisfy the need is strong to make the effort maximize benefits and minimize pain. In this context, the managers must identify what an individual's value is, such as money, promotion, time-off, benefits or satisfaction rewards. They are called valence.
As well, employees have different expectations and confidence about what they are capable of doing. In this respect, managers must identify what resources, training, and supervision employee's need. They are called expectancy. In addition, employees may perceive as whether they will receive what they desire. In this regard management must ensure their promises of rewards are fulfilled and that employees are aware of these rewards. The employee perception of reward is called instrumentality. In this manner a manger can apply the expectancy theory to motivate employees.
Contingency theories of employee motivation recognize leadership and its relevance in different organizational situations and in the context of the profile of workers and type of jobs they do and match the leadership to situation or change situation to leadership style to manage workers and motivate them.
In addition, contingency theories also recognizes the organizational structural issues, such as centralization opposed to decentralization, span of control, delegation, levels of management, decision -making process, which suits the external and internal environment and the static and dynamic nature of the internal and external environment.
As well, the contingency theory considers organizational culture, individual differences, conflict level and the recognition of these variables to motivate staff. That is, motivation of employees must differ from one organization to the next, depending on the nature of activities, profile of human potential, personality, skill, knowledge, experience, organizational culture, technology, nature of external and internal environment, planning horizons, individual differences, structure of organization, group behaviour and dynamics.
Maslow's Hierarchy of Needs
Abraham Maslow is a humanistic psychologist developed a theory of personality, which is valuable in the field of employee motivation. Basically they believe humans strive for upper-level capabilities such as creativity and highest level of consciousness.
In his view, humans have five needs and if one need is satisfied they go to the next and motivated by unmet needs in stages. In an employee motivational perspective, applying this theory, managers must identify the unmet needs of employees to motivate them. The five needs are, physiological needs such as food, water shelter, clothing etc. They are the strongest needs because if a person is deprived of all needs the psychological ones comes first in search of satisfaction.
When psychological needs are satisfied for a person, the needs of safety become active. If the psychological needs are satisfied it no longer affects the thoughts and behaviour of humans. When the needs for safety and psychological needs are satisfied a person moves to the next need of love, affection and belongingness.
When the first three needs are satisfied, then they move to the next level of needs for self-esteem such as firmly based high-level self respect and respect from others. If these are satisfied, a person feels self-confident and valuable. When the previous four needs are satisfied the person moves to the highest need of self-actualization. That is the need, which is to do what ever the person is born to do.
In Summary, Maslow's Hierarchy of needs in the perspective of employee motivation is to identify the satisfied needs and provide opportunities to meet the unmet needs to motivate the employees. The major weaknesses of the need theory; is the non-recognition of individual differences and ignoring other factors. For example the work itself can motivate employees.
Theory X and Theory Y
Theory X and Theory Y is about Human nature like the Maslow's hierarchy of needs.The Theory X assumes, humans are in average dislike work and avoid responsibility and must be controlled and threatened to work hard. As well, it assumes people that they don't like responsibility and desires security above all. They must be directed so that they work towards organizational goals.
These assumptions are at play behind most organization, which pursues tight control, and punishment or they prefer harmony at work and ignore more higher order needs as specified by Maslow's hierarchy of needs so that the employees behave as Theory X expected. Theory X must be used very carefully in modern organizational environment because it may be counterproductive and may reduce motivation of employees. Contrast to Theory X, Theory Y assumes people use mental and physical effort in work as natural as play.
As well, it assumes that people will direct themselves if they are committed to the goals of the organization. Under proper conditions, average person not only accepts responsibility, but also seeks responsibility. In addition, it assumes imagination, creativity; ingenuity can be used to solve work problems by a large number of employees.
Theory Y also assumes, that in modern industrial life intellectual potential of average man is partially utilized. In the context of employee motivation, if subordinates are not in agreement with the manager of the desired results then the only way for the manager is to use his authority to get the work done using the Theory X assumption. However, if the employees are emotionally mature, agrees with desired results, work is sufficiently responsible and flexible and the employee can see his position in the organizational hierarchy, then in these conditions participative approach to problem solving leads to much improved results applying the Theory Y.
As well, in situations, where the employees agree and commit to the objectives of the organization, then explaining the matter fully to the employees the purpose of action and allow them to self-direct them, they may use better methods and do a better work than simply carrying out an order from the manager. Theory Y is more appropriate in this situation.
Hertszberg's Motivation and Hygiene Theory
In this theory, there are two sets of needs. They are basic needs and motivational needs. The basic needs can be working conditions, supervision, company policy and administration, salary and interpersonal relationship. These needs if not met, then employees will be dissatisfied, but not motivate them. That is, if the manager wants to stop the employees doing something, then they must consider hygiene needs. However, if they want to get someone to do something, then they must consider motivational needs. In this theory, the motivational needs are achievement and recognition, work variety, responsibility and advancement.Expectancy and Contingency Theories
According to expectancy theory, people behaviour at work and their goals are not simple. The employee performance at work is based on individual factors such as personality, skill, knowledge, experience, and abilities. The theory suggests even if the individuals have different sets of goals, they can be motivated if they believe their effort leads to performance and performance results in desirable reward.As well, the reward satisfies an important need. Then the desire to satisfy the need is strong to make the effort maximize benefits and minimize pain. In this context, the managers must identify what an individual's value is, such as money, promotion, time-off, benefits or satisfaction rewards. They are called valence.
As well, employees have different expectations and confidence about what they are capable of doing. In this respect, managers must identify what resources, training, and supervision employee's need. They are called expectancy. In addition, employees may perceive as whether they will receive what they desire. In this regard management must ensure their promises of rewards are fulfilled and that employees are aware of these rewards. The employee perception of reward is called instrumentality. In this manner a manger can apply the expectancy theory to motivate employees.
Contingency theories of employee motivation recognize leadership and its relevance in different organizational situations and in the context of the profile of workers and type of jobs they do and match the leadership to situation or change situation to leadership style to manage workers and motivate them.
In addition, contingency theories also recognizes the organizational structural issues, such as centralization opposed to decentralization, span of control, delegation, levels of management, decision -making process, which suits the external and internal environment and the static and dynamic nature of the internal and external environment.
As well, the contingency theory considers organizational culture, individual differences, conflict level and the recognition of these variables to motivate staff. That is, motivation of employees must differ from one organization to the next, depending on the nature of activities, profile of human potential, personality, skill, knowledge, experience, organizational culture, technology, nature of external and internal environment, planning horizons, individual differences, structure of organization, group behaviour and dynamics.
Friday, 16 September 2011
Biotechnology Issues
In this article, I will discuss origins of biotechnology, Biotechnological practice, cell biochemistry and fermentation procedures, cell chemistry, Recombinant DNA, Application and area of Research and biotechnology ethical issues.
What is Biotechnology ?
It is a method of using living organisms or parts of organisms to create new products and processes which are useful and enhance the productivity and other qualities and which are more beneficial to society. Due to genetics and the genome project now scientist can also alter living organisms by genetic engineering. Due to expansion of sophisticated biological research techniques, the outcome of this are applied to traditional sectors of the economy.
Role of biotechnology and biotechnology methods in key sectors
Biotechnology methods are applicable to a wide range of industries such as agriculture, mining, medicine, food processing, manufacturing and the environment. Due to advances made in biotechnology research, it is expected that biotechnology impacts and consequences may have far reaching outcomes to the economy as well as to the environment. It has the potential to improve productivity and also to create new beneficial products in the future if these techniques are applied carefully and ethically and regulated appropriately.
In Biotechnology DNA probe is a technique used in biotechnology. This technology is used to identify whether patients have inherited genetic diseases such as cystic fibrosis, thalassaemia, muscular dystrophy and Huntington's chorea. In addition the DNA fingerprints from blood or hair from an individual can easily identify crime identification of a criminal act. That is it is a useful technique in identifying tge puzzle of who committed the crime.
Genetic engineering is another technology, which can be used to transfer useful genes from plants and animals to bacteria to produce large quantities of biotechnology-based therapeutics for the treatment of animal and human diseases. For example insulin is produced in large quantities using this technique to cure diabetes.
Genetically modified bacteria also can produce enzymes which can be used food technology for appearance, flavour or aroma. In addition, these generically engineered bacteria also can be used in manufacturing process to control temperature and there fore reduce waste. As well, it is also a useful technique in mining industry to make the ore sulfides oxidized and extract minerals such as iron and gold. These techniques can be used to genetically modify bacteria and they can be used to treat contaminated soil or waste chemicals.
Genetic engineering techniques also can improve productivity in agriculture. For example genetically modified cotton produces a pesticide which can kill leaf eating insects by producing the pesticide in its leaves. As well, this technique also can be used for better wool production by producing transgenic sheep by genetically introducing new traits in to animals. That is genetic engineering can be used to increase productivity and there fore reduce environmental issues arising from using chemical pesticides and fertilizers.
The tissue culture, which is a biotechnology technique, can be sued to produce large quantities of the plants with the same genetic makeup. In addition, cell lines of micro-algae can be used to produce food ingredients like polysaccharides for use in food processing and other useful chemicals such as beta-carotene and docosahexanic acid.
Above all, biotechnology is a fundamental tool in medicine. For examples cultures of skin cells are used grow skin and used for grafting on to burns. Researchers are examine whether they can use borne marrow as a raw material to produce bones which can be used in accident victims to replace broken bones or bones which become brittle due to diseases. Complete sequencing of the human genome also is providing a powerful technique or tool for the diagnosis of diseases and the development of new drugs and treatment.
The major biotechnology techniques are as follows:
DNA Probe
Monoclonal Antibodies
Genetic Engineering/ Selection of normally occurring organisms
Tissue culture
What is Biotechnology ?
It is a method of using living organisms or parts of organisms to create new products and processes which are useful and enhance the productivity and other qualities and which are more beneficial to society. Due to genetics and the genome project now scientist can also alter living organisms by genetic engineering. Due to expansion of sophisticated biological research techniques, the outcome of this are applied to traditional sectors of the economy.
Role of biotechnology and biotechnology methods in key sectors
Biotechnology methods are applicable to a wide range of industries such as agriculture, mining, medicine, food processing, manufacturing and the environment. Due to advances made in biotechnology research, it is expected that biotechnology impacts and consequences may have far reaching outcomes to the economy as well as to the environment. It has the potential to improve productivity and also to create new beneficial products in the future if these techniques are applied carefully and ethically and regulated appropriately.
In Biotechnology DNA probe is a technique used in biotechnology. This technology is used to identify whether patients have inherited genetic diseases such as cystic fibrosis, thalassaemia, muscular dystrophy and Huntington's chorea. In addition the DNA fingerprints from blood or hair from an individual can easily identify crime identification of a criminal act. That is it is a useful technique in identifying tge puzzle of who committed the crime.
Genetic engineering is another technology, which can be used to transfer useful genes from plants and animals to bacteria to produce large quantities of biotechnology-based therapeutics for the treatment of animal and human diseases. For example insulin is produced in large quantities using this technique to cure diabetes.
Genetically modified bacteria also can produce enzymes which can be used food technology for appearance, flavour or aroma. In addition, these generically engineered bacteria also can be used in manufacturing process to control temperature and there fore reduce waste. As well, it is also a useful technique in mining industry to make the ore sulfides oxidized and extract minerals such as iron and gold. These techniques can be used to genetically modify bacteria and they can be used to treat contaminated soil or waste chemicals.
Genetic engineering techniques also can improve productivity in agriculture. For example genetically modified cotton produces a pesticide which can kill leaf eating insects by producing the pesticide in its leaves. As well, this technique also can be used for better wool production by producing transgenic sheep by genetically introducing new traits in to animals. That is genetic engineering can be used to increase productivity and there fore reduce environmental issues arising from using chemical pesticides and fertilizers.
The tissue culture, which is a biotechnology technique, can be sued to produce large quantities of the plants with the same genetic makeup. In addition, cell lines of micro-algae can be used to produce food ingredients like polysaccharides for use in food processing and other useful chemicals such as beta-carotene and docosahexanic acid.
Above all, biotechnology is a fundamental tool in medicine. For examples cultures of skin cells are used grow skin and used for grafting on to burns. Researchers are examine whether they can use borne marrow as a raw material to produce bones which can be used in accident victims to replace broken bones or bones which become brittle due to diseases. Complete sequencing of the human genome also is providing a powerful technique or tool for the diagnosis of diseases and the development of new drugs and treatment.
The major biotechnology techniques are as follows:
DNA Probe
Monoclonal Antibodies
Genetic Engineering/ Selection of normally occurring organisms
Tissue culture
Economic Policies to Reduce Unemployment
NTRO
BODY
ü Effectiveness:. these policies unlikely to reduce the structural unemployment rate, it instead increases inflationary pressure because high economic growth induced by technological change can result in high structure unemployment
ü Fiscal policy: one of the macroeconomic policies which can influence resources allocation, redistribution income and reduce the fluctuation of the business cycle, by varying the amount of government spending and revenue, the government can alter the economic activity, which will influence the economic growth, inflation, unemployment and the external indicators in the economy.
ü The aim of this policy is to sustainable economic growth and unemployment rate in Australia by reducing public sector dissaving and our reliance on overseas borrowing.
ü The budget has moved into fiscal surplus since 1997 by a sustained fiscal consolidation policy of reduction in government outlay, therefore provided a higher economic growth and lower unemployment rate.
ü In 2000 the unemployment rate rises to 7 % which is higher than 1900s however as the curs this rising trend the government undergoes expansionary fiscal policy consequently with no new major employment initiatives in 2003’s budget, it will be expected that no further reduction in unemployment until mid 2004.
ü Monetary Policy: Is macroeconomic policy which involves action by the RBA , on behalf the government, to influence the cost and availability of money and credit in the economy. It is used to smooth the effects of fluctuation in the business cycle and influence the level of economic activity, output, employment and price.
ü Used as a long term policy aimed to keeping inflation low, providing an environment which is attractive for investment and employment growth.
ü Once the RBA believe there is a stable low inflation, which will have a greater range for reducing the interest rate in hance to lower the unemployment rate. If the RBA feels that the level of unemployment is approaching the natural rate, they will tighten monetary policy to prevent excessive spending feeding into higher prices and wages.
ü Labour market programmes are aimed to increase the ability of the unemployed to complete effectively in the labour market. Training programmes are one of the significant programmes which allowed the unemployed to be re-employed again and let the labour market to function more effectively and promote a better synergy between supply and demand.
3. Microeconomic reform: is the government improving the resource allocation between firms and industries, in order to maximise output and seeking to improve the efficiency and productivity of producer. A wide rang of microeconomic reform have been introduced to improve the competitive economic environment in Australia and increase the potential for higher productivity, employment and economic growth. Recent solid productivity growth in Australia economy has led to a stronger economic growth and a lower unemployment rate. There are three major microeconomic policies to reduce the unemployment rate. (industry reform, reduction in real wage, and taxation reform)
ü Industry reform: based on encouraging research and development and encouraging innovation in specific industry, this can boost their productivity and growth in that particular industry. By increase more understanding and experience therefore can improve the efficiency growth and job creation in hence to lower the unemployment rate.
ü Reduction in real wage: by reducing the real wages there will be a higher employment rate but it can also increase a high unemployment rate in certain industries and a lower real wage will increase young unemployment.
ü Taxation reform: introduced in July 2000 which is aimed at improving the investment climate in Australia therefore and a higher potential for economic growth and lower the unemployment rate.
- Unemployment refer to a situation where the aggregate demand for the labour is less than the aggregate supply of labour, so that there is an increase in the proportion of the workforce actively seeking work but who are unable to find.
- Unemployment is major cost to an economy not only in terms of the opportunity cost if lost production, but also in term of major long term social cost including increased inequality, poverty, family problems, crime and social division.
- The Australian governments have struggles with the challenge of the achieving a sustain reduction in unemployment. A variety of strategies have been used over the last three decades.
BODY
- Reducing unemployment in one of the most difficult task for the economy management. Unemployment has remained stubbornly high. In Australia, despite a range of government policies designed to attack the unemployment problem. Even after a decade that experienced the longest and strongest growth period on record, the unemployment rate in 2003 had not fallen below its level at the end of the pervious business cycle in 1989.
- The policies a government uses to reduce unemployment will depend upon what it sees as the main causes of the unemployment problem. ????(for instance) the government will stimulate a rate of economic growth that is sufficient absorb that unemployment and the growth in the labour force, while at the same time holding down the rate of inflation.
- ??
- in 1994 the Keating Government introduces Australia’s first comprehensive set of unemployment policies in half of the century, known as Working Nation Labour Market Policy these polices consisted of labour market assistance, apprenticeships and education and training programs. It was aim to help the long-term unemployment to acquire new job skills and become employable again.
- Late 1990s, the Howard Government reduced the fund for labour market programs. (They think the policy was ineffective and expensive and that most people returned to the rank of the unemployed after their training program) the policies shifted to broader labour market reform. They claimed that these restrictions prevent employers and employees implementing flexible workplace arrangements that maximise productivity.
- There is a multi-pronged policy approach low unemployment rate at stimulating aggregate demand, improving productivity, and providing low inflation, competitive and dynamic economy containing all preconditions for high long-term economic growth.
ü Effectiveness:. these policies unlikely to reduce the structural unemployment rate, it instead increases inflationary pressure because high economic growth induced by technological change can result in high structure unemployment
ü Fiscal policy: one of the macroeconomic policies which can influence resources allocation, redistribution income and reduce the fluctuation of the business cycle, by varying the amount of government spending and revenue, the government can alter the economic activity, which will influence the economic growth, inflation, unemployment and the external indicators in the economy.
ü The aim of this policy is to sustainable economic growth and unemployment rate in Australia by reducing public sector dissaving and our reliance on overseas borrowing.
ü The budget has moved into fiscal surplus since 1997 by a sustained fiscal consolidation policy of reduction in government outlay, therefore provided a higher economic growth and lower unemployment rate.
ü In 2000 the unemployment rate rises to 7 % which is higher than 1900s however as the curs this rising trend the government undergoes expansionary fiscal policy consequently with no new major employment initiatives in 2003’s budget, it will be expected that no further reduction in unemployment until mid 2004.
ü Monetary Policy: Is macroeconomic policy which involves action by the RBA , on behalf the government, to influence the cost and availability of money and credit in the economy. It is used to smooth the effects of fluctuation in the business cycle and influence the level of economic activity, output, employment and price.
ü Used as a long term policy aimed to keeping inflation low, providing an environment which is attractive for investment and employment growth.
ü Once the RBA believe there is a stable low inflation, which will have a greater range for reducing the interest rate in hance to lower the unemployment rate. If the RBA feels that the level of unemployment is approaching the natural rate, they will tighten monetary policy to prevent excessive spending feeding into higher prices and wages.
- Labour market reform is by using labour market programmes to improve the flexibility of the labour market to reduce structural unemployment. It can increase the labour productivity, control cost increases and improve flexibility in the supply of the labour market.
ü Labour market programmes are aimed to increase the ability of the unemployed to complete effectively in the labour market. Training programmes are one of the significant programmes which allowed the unemployed to be re-employed again and let the labour market to function more effectively and promote a better synergy between supply and demand.
3. Microeconomic reform: is the government improving the resource allocation between firms and industries, in order to maximise output and seeking to improve the efficiency and productivity of producer. A wide rang of microeconomic reform have been introduced to improve the competitive economic environment in Australia and increase the potential for higher productivity, employment and economic growth. Recent solid productivity growth in Australia economy has led to a stronger economic growth and a lower unemployment rate. There are three major microeconomic policies to reduce the unemployment rate. (industry reform, reduction in real wage, and taxation reform)
ü Industry reform: based on encouraging research and development and encouraging innovation in specific industry, this can boost their productivity and growth in that particular industry. By increase more understanding and experience therefore can improve the efficiency growth and job creation in hence to lower the unemployment rate.
ü Reduction in real wage: by reducing the real wages there will be a higher employment rate but it can also increase a high unemployment rate in certain industries and a lower real wage will increase young unemployment.
ü Taxation reform: introduced in July 2000 which is aimed at improving the investment climate in Australia therefore and a higher potential for economic growth and lower the unemployment rate.
Basic Principles of Financial management
Financial Management
Good financial planning cannot be underestimated. Many surveys have identified that around 74% of business closures were attributable to poor financial management. A good business will have a business plan that incorporates financial budget for projected sales, expenses, net profits, staff needs and capital acquisition (purchase of assets)
- The level of profitability in a business will have an impact on the liquidity of the business, and this must be continuously monitored. The amount of cash in the business daily and the credit available from bankers must be sufficient to allow the businesses to trade. The measure of business’s efficiency is the manner, in which it maintains its records promptly, collects its overdue receivables and maintains an inventory that turns over quickly.
- The ultimate measure of business success is the return on shareholder’s funds, often expressed as net profit divided by shareholders funds.
- Actual results should be reported against budgets at least monthly. This enables management to correct adverse trends . Corrections may include improved staff training, better cost control, improved purchasing from suppliers, and better marketing through advertising, etc.
- The importance of cash in a business and the speed with which it flows through the business accounts can be the difference between survival and failure. Cash is needed to pay bills. A business id deemed to be insolvent when it is unable to pay its debts as and when they arise. Bank lines of credit are very important to any business.
- The financial controls needed in s successful business are intended to minimise risk. Expense control should be firm and production costs should avoid wastage without compromising quality. Minimising risk is supplemented by insurance for fire, burglary, theft and loss of profits, etc.
- Many people enter business with little basic knowledge. Financial planning is about gaining knowledge in preparation for a course of action for any enterprise. It is important to know about financial reports such as budgets, cash flow, profit and loss statements and balance sheets. Record systems are the means of being able to check progress against past results.
- The planning cycle begins with a business looking at its present financial position. Then the managers prepare a business plan with objectives and budgets. Next are the implementation and control phrases. Planning is strategic or operational.
- Major participants in the financial market are:
- Investment/merchant banks
- Commercial banks – provide customers with a range of products including deposit and cheque accounts, credit/debit cards, personal loans and mortgages
- Money market dealers – buy and sell government securities on the secondary market, and offer cash or deposit facilities to major organisations.
- Finance companies – major providers of business finance, factoring, leasing and property financing
- Insurance/superannuation funds – involved in domestic and commercial mortgages, property developments, bonds, shares and government securities.
- Building societies/credit unions- make advances to customers for housing and personal loans, similar to banks.
- The reserve bank of Australia acts as banker for the government; implements monetary policy independently but in conjunction with the government of the day; monitors commercial banks; monitors foreign exchange rates; manages coin and note issues; and monitors economic data.
- Merchant/investment banks are major players in the short-term money markets, dealing with all money market instruments or securities such as commercial bills. They act as primary advisors to corporations seeking to issue shares or debentures/bonds. They also underwrite new share/debenture issues, and tender and deal in government securities.
- The Australian Stock Exchange Limited (ASX) has many customers, but the principle ones are investors, listed companies and stockbrokers , who are intermediaries (links) between them and the capital markets.
- Domestic market influences on our capital markets include where we are on the economic cycle; economic management policies of the Federal Government ; interest rate changes by the Reserve Bank; level of unemployment ; industrial stability; consumer demand; the level of investment in the economy; the innovation rate; and the level of inflation.
- Overseas market influences are affected by the world economic position. These effects flow into our capital markets. Interest rates, unemployment, government management, consumer demand, industrial stability and regional conflicts all affect our markets.
- Like most countries, Australia can point to certain indicators of financial health eg. Changes in inflation rates; the consumer price index; the rate of unemployment; the level of new investment; the increase/decrease in our overseas debt; rate of imports; stock market index; value of currency etc. All these indicators combine to identify trends in our financial markets.
- Internal funds are generated from monies furnished by the owners of the business. If a business is successful financially, the owners may decide to leave some or all of the profits from operations inside the business. These are known as retained profits. A large, old and well-established business may have several hundred million dollars in retained profit. A new small business may have little or no retained profits.
- When business owners decide to borrow , they must obtain the funds from external sources. Short term funding refers to borrowing likely to be repaid within one year. Long term funding refers to borrowing that will be repaid over a term as long as 10-20 years. Mortgages (loans secured by real property or business assets) and debentures (loans from the general public) are commonly used to meet long term funding needs. It is important not to confuse sources of funds (eg banks) with types of finance (overdraft, mortgages).
- Factoring allows businesses to obtain external funds by selling their accounts receivable. Factoring occurs when businesses allow credit in payment for merchandise. The factoring company charges the business a small fee and the business has the advantage of receiving an immediate credit in its bank account. As factoring has become a more common business practice, businesses specialising in factoring have been established in Australia.
- Borrowers need to take care that they will be able to repay the borrowed funds during the life of the intended business expenditure. For example, short term borrowing via on overdraft to fund and expected 90-day cash shortage is considered acceptable business practice. However, taking a long-term mortgage to fund the same expected 90-day cash shortage is generally not considered sound management.
- Philosophies vary about the right combination of debt and equity finance. If the business is unable to repay the debt, including principle, interest and associated charges, creditors may take control of the business. Too much debt financing can mean that all stakeholders are at risk.
- Gearing refers to the percentage of funding that is borrowed against an asset or the total assets of a business. The greater percentage of funding that is borrowed, the higher the gearing ratio. In most cases, a business is unwise to owe more than it owns.
- Both balance sheets and revenue statements are normally prepared at the end of the financial year. They are designed to answer two questions:
- Is the business profitable (from the revenue statement)
- What is the business’s financial position (from the balance sheet)
- The accounting equation (A=L+OE) , from the balance sheet is also expressed as (A–L=OE). For example of the assets of a business are sold for $100 000 and the owners repay all liabilities of $60 000, the remaining $40 000 is what the owner gets to keep – that is, the owners equity
- Current ratios range from 0.6:1 to 3.0:1, depending on how easily inventories and accounts receivable can be converted to cash, and how quickly cash flows in from a sale.
- The higher the debt to equity ratio, the higher the risk for creditors and owners. Solvency (gearing) ratios, like liquidity ratios can vary widely, from debt free to over 300%. A gearing ratio below 100% is usually considered safe or conservative.
- Generally the higher a businesses gross profit ratio, net profit ratio and return on owner’s equity ratio , the better for the business. Profitability ratios are typically starting points for evaluating businesses.
- Efficient managers work to lower expense ratios by monitoring and cutting costs wherever possible. Conversely, they seek to raise accounts receivable turnover ratio by establishing realistic credit policies and monitoring credit collections.
- Ratios allow analysts to compare a business with other similar businesses. Through ratios analysts can also examine the operations of any business over time, or compare a business with a benchmark .
- Both financial reporting and ratio analysis, however useful, have limitations. One business may legally use a different accounting method of its competitors. Another business may value its goodwill differently. The true value of assets may be understated on balance sheets because of historical cost accounting . Analysts need to be wary.
- The term working capital refers to an actual dollar amount. Most businesses need more current assets than current liabilities at all times. A key management responsibility is to ensure the business always has enough working capital to pay for the continuing operating costs incurred by the business.
- The relationship between current assets and current liabilities is often expressed as a ratio.
- A business’s current mix of payables, short-term loans and overdrafts is also largely controllable. Businesses that do not control the mix of their current assets are likely to experience liquidity problems – that is, they will not be able to pay current operating expenses. This commonly occurs when managers allow accounts receivable to become overdue.
- A business’s current liability mix of payables, short-term loans and overdrafts is also largely controllable, and is another important responsibility for managers. Normally, businesses that allow their current liabilities to become greater than their current assets are asking for trouble because creditors, such as telephone companies and suppliers, are likely to stop extending credit when accounts are not paid on time.
- A common management trend is for businesses to manage or improve their dollar amounts and their ratios of working capital by lessening assets or by selling assets and then leasing them back. Factoring is the management strategy of selling accounts receivable, at a discount, to a third party in order to convert accounts receivable to cash. Effective ways to improve the quality of working capital are to improve the collection of receivables, install just-in-time inventory controls, have sales of excess stock and install cost control programs.
- Regrettably many businesses do not recognise the importance of checking cash resource daily . This is vital knowledge to enable creditors, wages, loans and other expenses to be paid. Cash will be tied up in receivables, inventories, or in other investments the business has made. The bank overdraft , usually secured, is intended to be a fluctuating account according to the needs of the business.
- Cash flow statements are presented to management monthly. They show the opening cash flow balance from last month, the total cash received from all sources, receivables , cash sales, proceeds for asset sales, loans received etc and the total payments made out, such as expenses , new inventory and loan repayments. The balance at the end of the month should be within capability of the business bank overdraft. A good cash flow statement should also show the value of receivables, inventory and ideally the sales last month to give a trend.
- Businesses may sell goods for cash or on credit . Management should have policies for checking customer creditworthiness and effective methods of collecting accounts. Customers who do not pay on time will tie up the cash in a business and can jeopardise the success of a business
- Suppliers who value large orders often may offer a discount for bulk purchase or for earlier payment. Discounts can be very effective in lowering the costs of a business, provided the business can manage its cash well. Management can also buy goods on extended terms whereby a supplier has agreed to allow the purchaser to pay over a set period by certain instalments at fixed times.
- Management should have other strategies to ensure the available cash in their business is effectively used. They may sell off idle assets, watch for wastage, and consider factoring and leasing.
- Large companies have found that special cost centres enable different managers to overview how costs are progressing against budget. Production, marketing, administration, research and development may be cost centres. A small business usually has one cost centre. All businesses need to minimise expenses and ensure a senior person is controlling expenses. Costs are made up of two types.
- Fixed costs – such as monthly rent, insurance and leasing charges that do not vary with volume or sales
- Variable costs – vary with the volume of business
- Revenues may be controlled by varying the sales mix and the target markets. As effective pricing policy meets or beats competition, seeks a greater market share and sells surplus stocks.
- Unconscionable conduct usually falls into two major categories; those practices that are illegal , either deliberately or through ignorance, and those practices that may be unethical , through the use of unacceptable actions, generally dictated by the society in which we live.
- Ethics is a set of principles by which our actions are judged by others. It is about how we make decisions to do the right thing and involves honesty, fairness, caring and courage to make the right decision. Businesses can sometimes have dilemmas in deciding between the interests of shareholders , staff, customers, the environment and the wider community.
- Public companies come under more scrutiny as they involve the investment of other people’s money. All public companies must have recognised accounting firm appointed as auditors, who must complete a full investigation of the accounting records each year. The audit report to shareholders is included in each annual report.
- All businesses must follow certain reporting conventions. The Australian accounting profession has laid down minimum standards that must be followed in reporting financial results. The audit report gives a true and fair view of the company’s financial position
- The corporations Law sets out the minimum criteria all companies must meet. Directors may be personally liable for breaches, and heavy penalties can be imposed. Proprietary/private companies must also meet these standards. Certain types of illegal conduct include, bribery, misuse of funds in the business, directors acting against the interest of the company, failure to declare conflicts of interest and continuing to trade while insolvent.
- The Australian Securities and Investment Commission is empowered to administer the Corporation Law and to ensure that all businesses meet their statutory obligations. Such statutory obligations include the duty to act with reasonable care and diligence, to ensure the correct payment of taxes, to act honestly in the exercise of their powers, and to report changes of address or company directors.
- Unethical behaviour is unacceptable conduct. Excuses are often used and rejected as reasons. Certain types of conduct such as asset stripping, giving gifts for favours, illegally obtaining information through others, disposing of waste in the wrong manner and taking advantage of staff, are all unethical and in certain circumstances may be illegal.
Good financial planning cannot be underestimated. Many surveys have identified that around 74% of business closures were attributable to poor financial management. A good business will have a business plan that incorporates financial budget for projected sales, expenses, net profits, staff needs and capital acquisition (purchase of assets)
- The level of profitability in a business will have an impact on the liquidity of the business, and this must be continuously monitored. The amount of cash in the business daily and the credit available from bankers must be sufficient to allow the businesses to trade. The measure of business’s efficiency is the manner, in which it maintains its records promptly, collects its overdue receivables and maintains an inventory that turns over quickly.
- The ultimate measure of business success is the return on shareholder’s funds, often expressed as net profit divided by shareholders funds.
- Actual results should be reported against budgets at least monthly. This enables management to correct adverse trends . Corrections may include improved staff training, better cost control, improved purchasing from suppliers, and better marketing through advertising, etc.
- The importance of cash in a business and the speed with which it flows through the business accounts can be the difference between survival and failure. Cash is needed to pay bills. A business id deemed to be insolvent when it is unable to pay its debts as and when they arise. Bank lines of credit are very important to any business.
- The financial controls needed in s successful business are intended to minimise risk. Expense control should be firm and production costs should avoid wastage without compromising quality. Minimising risk is supplemented by insurance for fire, burglary, theft and loss of profits, etc.
- Many people enter business with little basic knowledge. Financial planning is about gaining knowledge in preparation for a course of action for any enterprise. It is important to know about financial reports such as budgets, cash flow, profit and loss statements and balance sheets. Record systems are the means of being able to check progress against past results.
- The planning cycle begins with a business looking at its present financial position. Then the managers prepare a business plan with objectives and budgets. Next are the implementation and control phrases. Planning is strategic or operational.
- Major participants in the financial market are:
- Investment/merchant banks
- Commercial banks – provide customers with a range of products including deposit and cheque accounts, credit/debit cards, personal loans and mortgages
- Money market dealers – buy and sell government securities on the secondary market, and offer cash or deposit facilities to major organisations.
- Finance companies – major providers of business finance, factoring, leasing and property financing
- Insurance/superannuation funds – involved in domestic and commercial mortgages, property developments, bonds, shares and government securities.
- Building societies/credit unions- make advances to customers for housing and personal loans, similar to banks.
- The reserve bank of Australia acts as banker for the government; implements monetary policy independently but in conjunction with the government of the day; monitors commercial banks; monitors foreign exchange rates; manages coin and note issues; and monitors economic data.
- Merchant/investment banks are major players in the short-term money markets, dealing with all money market instruments or securities such as commercial bills. They act as primary advisors to corporations seeking to issue shares or debentures/bonds. They also underwrite new share/debenture issues, and tender and deal in government securities.
- The Australian Stock Exchange Limited (ASX) has many customers, but the principle ones are investors, listed companies and stockbrokers , who are intermediaries (links) between them and the capital markets.
- Domestic market influences on our capital markets include where we are on the economic cycle; economic management policies of the Federal Government ; interest rate changes by the Reserve Bank; level of unemployment ; industrial stability; consumer demand; the level of investment in the economy; the innovation rate; and the level of inflation.
- Overseas market influences are affected by the world economic position. These effects flow into our capital markets. Interest rates, unemployment, government management, consumer demand, industrial stability and regional conflicts all affect our markets.
- Like most countries, Australia can point to certain indicators of financial health eg. Changes in inflation rates; the consumer price index; the rate of unemployment; the level of new investment; the increase/decrease in our overseas debt; rate of imports; stock market index; value of currency etc. All these indicators combine to identify trends in our financial markets.
- Internal funds are generated from monies furnished by the owners of the business. If a business is successful financially, the owners may decide to leave some or all of the profits from operations inside the business. These are known as retained profits. A large, old and well-established business may have several hundred million dollars in retained profit. A new small business may have little or no retained profits.
- When business owners decide to borrow , they must obtain the funds from external sources. Short term funding refers to borrowing likely to be repaid within one year. Long term funding refers to borrowing that will be repaid over a term as long as 10-20 years. Mortgages (loans secured by real property or business assets) and debentures (loans from the general public) are commonly used to meet long term funding needs. It is important not to confuse sources of funds (eg banks) with types of finance (overdraft, mortgages).
- Factoring allows businesses to obtain external funds by selling their accounts receivable. Factoring occurs when businesses allow credit in payment for merchandise. The factoring company charges the business a small fee and the business has the advantage of receiving an immediate credit in its bank account. As factoring has become a more common business practice, businesses specialising in factoring have been established in Australia.
- Borrowers need to take care that they will be able to repay the borrowed funds during the life of the intended business expenditure. For example, short term borrowing via on overdraft to fund and expected 90-day cash shortage is considered acceptable business practice. However, taking a long-term mortgage to fund the same expected 90-day cash shortage is generally not considered sound management.
- Philosophies vary about the right combination of debt and equity finance. If the business is unable to repay the debt, including principle, interest and associated charges, creditors may take control of the business. Too much debt financing can mean that all stakeholders are at risk.
- Gearing refers to the percentage of funding that is borrowed against an asset or the total assets of a business. The greater percentage of funding that is borrowed, the higher the gearing ratio. In most cases, a business is unwise to owe more than it owns.
- Both balance sheets and revenue statements are normally prepared at the end of the financial year. They are designed to answer two questions:
- Is the business profitable (from the revenue statement)
- What is the business’s financial position (from the balance sheet)
- The accounting equation (A=L+OE) , from the balance sheet is also expressed as (A–L=OE). For example of the assets of a business are sold for $100 000 and the owners repay all liabilities of $60 000, the remaining $40 000 is what the owner gets to keep – that is, the owners equity
- Current ratios range from 0.6:1 to 3.0:1, depending on how easily inventories and accounts receivable can be converted to cash, and how quickly cash flows in from a sale.
- The higher the debt to equity ratio, the higher the risk for creditors and owners. Solvency (gearing) ratios, like liquidity ratios can vary widely, from debt free to over 300%. A gearing ratio below 100% is usually considered safe or conservative.
- Generally the higher a businesses gross profit ratio, net profit ratio and return on owner’s equity ratio , the better for the business. Profitability ratios are typically starting points for evaluating businesses.
- Efficient managers work to lower expense ratios by monitoring and cutting costs wherever possible. Conversely, they seek to raise accounts receivable turnover ratio by establishing realistic credit policies and monitoring credit collections.
- Ratios allow analysts to compare a business with other similar businesses. Through ratios analysts can also examine the operations of any business over time, or compare a business with a benchmark .
- Both financial reporting and ratio analysis, however useful, have limitations. One business may legally use a different accounting method of its competitors. Another business may value its goodwill differently. The true value of assets may be understated on balance sheets because of historical cost accounting . Analysts need to be wary.
- The term working capital refers to an actual dollar amount. Most businesses need more current assets than current liabilities at all times. A key management responsibility is to ensure the business always has enough working capital to pay for the continuing operating costs incurred by the business.
- The relationship between current assets and current liabilities is often expressed as a ratio.
- A business’s current mix of payables, short-term loans and overdrafts is also largely controllable. Businesses that do not control the mix of their current assets are likely to experience liquidity problems – that is, they will not be able to pay current operating expenses. This commonly occurs when managers allow accounts receivable to become overdue.
- A business’s current liability mix of payables, short-term loans and overdrafts is also largely controllable, and is another important responsibility for managers. Normally, businesses that allow their current liabilities to become greater than their current assets are asking for trouble because creditors, such as telephone companies and suppliers, are likely to stop extending credit when accounts are not paid on time.
- A common management trend is for businesses to manage or improve their dollar amounts and their ratios of working capital by lessening assets or by selling assets and then leasing them back. Factoring is the management strategy of selling accounts receivable, at a discount, to a third party in order to convert accounts receivable to cash. Effective ways to improve the quality of working capital are to improve the collection of receivables, install just-in-time inventory controls, have sales of excess stock and install cost control programs.
- Regrettably many businesses do not recognise the importance of checking cash resource daily . This is vital knowledge to enable creditors, wages, loans and other expenses to be paid. Cash will be tied up in receivables, inventories, or in other investments the business has made. The bank overdraft , usually secured, is intended to be a fluctuating account according to the needs of the business.
- Cash flow statements are presented to management monthly. They show the opening cash flow balance from last month, the total cash received from all sources, receivables , cash sales, proceeds for asset sales, loans received etc and the total payments made out, such as expenses , new inventory and loan repayments. The balance at the end of the month should be within capability of the business bank overdraft. A good cash flow statement should also show the value of receivables, inventory and ideally the sales last month to give a trend.
- Businesses may sell goods for cash or on credit . Management should have policies for checking customer creditworthiness and effective methods of collecting accounts. Customers who do not pay on time will tie up the cash in a business and can jeopardise the success of a business
- Suppliers who value large orders often may offer a discount for bulk purchase or for earlier payment. Discounts can be very effective in lowering the costs of a business, provided the business can manage its cash well. Management can also buy goods on extended terms whereby a supplier has agreed to allow the purchaser to pay over a set period by certain instalments at fixed times.
- Management should have other strategies to ensure the available cash in their business is effectively used. They may sell off idle assets, watch for wastage, and consider factoring and leasing.
- Large companies have found that special cost centres enable different managers to overview how costs are progressing against budget. Production, marketing, administration, research and development may be cost centres. A small business usually has one cost centre. All businesses need to minimise expenses and ensure a senior person is controlling expenses. Costs are made up of two types.
- Fixed costs – such as monthly rent, insurance and leasing charges that do not vary with volume or sales
- Variable costs – vary with the volume of business
- Revenues may be controlled by varying the sales mix and the target markets. As effective pricing policy meets or beats competition, seeks a greater market share and sells surplus stocks.
- Unconscionable conduct usually falls into two major categories; those practices that are illegal , either deliberately or through ignorance, and those practices that may be unethical , through the use of unacceptable actions, generally dictated by the society in which we live.
- Ethics is a set of principles by which our actions are judged by others. It is about how we make decisions to do the right thing and involves honesty, fairness, caring and courage to make the right decision. Businesses can sometimes have dilemmas in deciding between the interests of shareholders , staff, customers, the environment and the wider community.
- Public companies come under more scrutiny as they involve the investment of other people’s money. All public companies must have recognised accounting firm appointed as auditors, who must complete a full investigation of the accounting records each year. The audit report to shareholders is included in each annual report.
- All businesses must follow certain reporting conventions. The Australian accounting profession has laid down minimum standards that must be followed in reporting financial results. The audit report gives a true and fair view of the company’s financial position
- The corporations Law sets out the minimum criteria all companies must meet. Directors may be personally liable for breaches, and heavy penalties can be imposed. Proprietary/private companies must also meet these standards. Certain types of illegal conduct include, bribery, misuse of funds in the business, directors acting against the interest of the company, failure to declare conflicts of interest and continuing to trade while insolvent.
- The Australian Securities and Investment Commission is empowered to administer the Corporation Law and to ensure that all businesses meet their statutory obligations. Such statutory obligations include the duty to act with reasonable care and diligence, to ensure the correct payment of taxes, to act honestly in the exercise of their powers, and to report changes of address or company directors.
- Unethical behaviour is unacceptable conduct. Excuses are often used and rejected as reasons. Certain types of conduct such as asset stripping, giving gifts for favours, illegally obtaining information through others, disposing of waste in the wrong manner and taking advantage of staff, are all unethical and in certain circumstances may be illegal.
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