Evolution of Financial Management Essay

The Traditional Phase:This phase has lasted for about four decades. Its finest expression was shown in the scholarly work of Arthur S. Dewing, in his book tilted the Financial Policy of Corporation in 1920s. In this phase the focus of financial management was on four selected aspects. It treats the entire subject of finance from the outsider’s point of view (investment banks, lenders, other) rather than the financial decision maker in the firm. It places much importance of corporation finance and too little on the financing problems of non-corporate enterprises. The sequence of treatment was on certain episodic events like formation, issuance of capital, major expansion, merger, reorganization and liquidation during the life cycle of an enterprise. It laid heavy emphasis on long-term financing, institutions, instruments, procedures used in capital markets and legal aspects of financial events. That is, it lacks emphasis on the problems of working capital management. It was criticized throughout the period of its dominance, but the criticism is based on matters of treatment and emphasis. Traditional phase was only outsiders looking approach, over emphasis on episodic events and lack of importance to day-to-day problems. The Transition Phase: It began in the early 1940’s and continued through the early 1950’s. The nature of financial management in this phase is almost similar to that of the earlier phase, but more emphasis is given to the day-to-day (working capital) problems faced by the finance managers. Capital budgeting techniques were developed in this phase. Much more details of this phase is given in the book titled Essays on Business Finance. The Modem Phase: It began in the mid 1950’s and has shown commendable development with combination of ideas from economic and statistics has led the financial management to be more analytical and quantitative. The main issue of this phase is rational matching of funds to their uses, which leads to the maximization of shareholders’ wealth. This phase witnessed significant developments. The area of advancement was – capital structure. The study says the cost of capital and capital structure is independent in nature. Dividend policy, suggests that there is the effect of dividend policy on the value of the firm. This phase has also seen one of the first applications of linear programming. For estimation of opportunity cost of funds, multiple rates of return-gives way to calculate multiple rates of a project. Investment decision under conditions of uncertainty gives the formula for determination of expected cash inflows and variance of net present value of project and also defined how probabilistic information helps the firm to optimize investment decisions involving risk. Portfolio analysis gives the idea for the allocation of a fixed sum of money among the available investment securities. Capital Asset Pricing Model (CAPM), suggests that some of the risks in investments can be neutralized by holding a diversified portfolio of securities. Arbitrage Pricing Model (APM), argued that the expected return must be related to risk in such a way, that no single investor could create unlimited wealth through arbitrage. CAPM is still widely used in the real world, but APM is slowly gaining momentum. The Agency theory emphasizes the role of financial contracts in creating and controlling agency problems. Option Pricing Theory (OPT), applied Martingale pricing principle to the pricing of real estates. The cash management of models (working capital management) by Baumol Model, Miller and Orglers, Baumol models helps to determine optimum cash conversion size; Miller model reorder points and upper control points and Orglers model helps to determine optimal cash management strategy by adoption of linear programming application. Further new means of raising finance with the introduction of new capital market instruments, such as Pads, Fads, PSBs and Caps, etc. Financial engineering that involves the design, development and the implementation of innovative financial instruments, and formulation of creative optional solutions to problems in finance. Even though, the above mentioned developed areas of finance is remarkable, but understanding the international dimension of corporate finance formed a very small part of it, which is not sufficient in this era of globalization.

Mind and Morality Essay

The external factors play a huge role in shaping one’s decisions. One may think that his genetic and background history has the most influence on his actions, but in reality, the intensity of a given situation has greater impact in the choices of the individual. The surroundings one lives in ultimately influences his perception, decision, and morality. In his essay, â€Å"The Power of Context,† Malcolm Gladwell states how it is the little things in life that makes the bigger difference and in many aspects this is true. In Daniel Gilbert’s essay, â€Å"Immune to Reality† he talks about how human perception about reality is not always accurate. In Oliver Sacks’s essay, â€Å"The Mind’s Eye† he shows how there are many different perceptions to view the world. So at the same time, is it possible to dictate what is right and wrong in one’s life if all the decisions are a result of his given situation and surroundings? Also the morality for each person varies depending on their circumstances and perception of their world. Ultimately, an absolute form of right and wrong does not exist because the context of the situation always changes, but still it is possible to achieve an applicable standard of morality in society. Each individual has his own way of looking at the world that is completely unique when compared to the way another person does. This is perception of reality and this form is always open to discussion because the person generates this viewpoint. Each individual makes his decisions based on his perception of the world. â€Å"The processes by which we generate positive views are many: we pay more attention to favorable information, we surround ourselves with those who provide it, and we accept it uncritically† (Gilbert 134). In many instance one creates his own perception to suit his way of thinking, so the individual could be in the center of his world. â€Å"He seemed to regard this loss of visual imagery as a prerequisite for the full development, the heightening, of his other senses† (Sacks 304). Most people see becoming blind as unfortunate event, but according to this person it helped him to improve his other senses. â€Å"The tabloids dubbed Goetz the subway vigilante and the death wish shooter† (Gladwell 153). Rather than seeing Goetz as a lunatic the newspapers depicted him as a hero. So this shows the difference in perception between people and how it varies from individuals. Importantly since each person’s perception varies it is hard to claim whose perception is right or wrong because ultimately is there a â€Å"right† perception of the world that everybody should be following? Even when viewing a painting everybody has their own interpretation of the art. No one claims there is only one â€Å"right† perception; rather the different perceptions are simply different approaches towards looking at the world. â€Å"It was simply inconceivable that someone could pull a gun on someone else on the subway and be called a hero for it. † (Gladwell 154) shows how different viewpoints affect the verdicts of a situation. A hero to some people might be a villain to others and it is hard to claim who is the â€Å"right† hero. The difference in subjectivity among people will always create a discrepancy of opinions among people. Since a variety of perception exists, then is it possible to have a perfect set and stone â€Å"right and wrong† rules in life? The context of a given matter plays a huge role in deciding the morality of the event. Morality is very much depended on the background information of the event. It is very hard to dictate the morality of an issue without seeing the bigger picture. Most people might see stealing as a wrong act, but what if someone stole a piece of bread in order to make sure he does not die from starvation, is that still a wrong act? In a situation like that one might feel sympathetic to that poor fellow and probably will see stealing as reasonable in that given situation. â€Å"We do not realize that our views will change† (Gilbert 135), the idea of morality varies on the situation because the context of the event directly affects morality. â€Å"Blindness now becomes for him a dark paradoxical gift. This is not just compensation, but a whole new order, a new mode of human being† (Sacks 305), in many aspects blind people do not see their condition as a curse or burden rather a different approach towards living and for most sighted people it might be hard to understand and accept this approach. â€Å"That there are instances where you can take normal people from good schools and happy families and good neighborhoods and powerfully affect their behavior merely by changing the immediate details of their situation† (Gladwell 162) this shows how the little details of an event plays huge role in the outcomes of an event. Essentially, context of a situation is what dictates morality and it is going to be almost impossible to label morality as set and stone as something like the Ten Commandments because the context always changes. Even though the standards of morality vary according to the situation there are some aspects of morality that one subconsciously accepts. Some ethics are universally considered wrong and one’s mind without even one knowing already knows that some choices are not right. That is why the mind tends to usually question the choices one makes. â€Å"When we cook facts, we are similarly unaware of why we are doing it, and this turns out to be a good thing, because deliberate attempts to generate positive views† (Gilbert 134), subconsciously to some extend individuals are aware of the morality behind an action and this will help individuals to make their decisions wisely. â€Å"To what extent are we our experiences, our reactions shaped, predetermined, by our brains, and to what extend do we shape our own brains† (Sacks 303), There are some emotions and judgments that are simply preinstalled in one’s mind which aids an individual in making choices that are difficult. â€Å"After a while the bad guys wised up and began to leave their weapons home and pay their fares† (Gladwell 157) this shows how there is a consciousness inside individuals that helps in guiding with decision making. When making a choice that might inflict pain to us or others one’s mind will usually try to suggest against that decision. That is why the idea of taking an innocent person’s life is universally seen as a wrongful act in societies. Therefore, there is a sense of unconscious morality that lies within the hearts of most individuals. Achieving a complete form of morality is a very idealistic thought because practically it’s not possible. There are infinitely many ways of perceiving morality and it would be impossible to set a standard that would suit all the time. â€Å"Too often people with sight don’t see anything† (Sacks 310). There are parts that even one’s eye sometimes cannot capture meaning that sometimes it’s simply not possible to account for all the possibilities. â€Å"The benefit of all this unconscious cookery is that it works, but the cost is that it makes us strangers to ourselves† (Gilbert 135). People sometime engage in activities without being aware of the magnitude of the situation. †They are both based on the premise that an epidemic can be reversed, can be tipped, by tinkering with the smallest details of the immediate environment† (Gladwell 157) the intensity of the situation has a huge influence on the decision of the individual. Due to all this, perceiving morality completely would be very difficult. Also having a perfect morality would require infinite knowledge which humans do not possess. As an individual one is limited at what he observes at a given time and there are limitations for each individual in this world. However, through the perceptions of many individuals, people will be able to come up with a better understanding of morality. Even with the limitations each individual has a small understanding of morality in the back of his head. Essentially, when all these understanding that are possessed by individuals are combined then a suitable set of standards will be formed that can accompany most situations. The collective effort of people will help to generate a better set of morality that will help in creating a peaceful environment for people to live in. That is why it is important to have many different perceptions of morality because they all eventually lead to creating appropriate rules that will be suitable for the well-being of a society. Despite not being able to have an absolute morality with infallible accuracy and with infinite knowledge, an applicable method of sensing morality is still practical. Individuals lack the ability to have a perfect morality because for one to acquire it in completion one needs to possess infinite amount of knowledge. Despite this back drop each individual innately has the ability to know morality in small parts and therefore combining the small parts of every individual will help to achieve a suitable set of codes. The differences in perception between people only aids to benefit humans in portraying a better understanding of morality. That is why it is important that there are different types of perceptions because if there was only one view then a very limited and narrow minded principle would be prevalent in the world. The different pathways of thinking done by people finally leads to achieving a suitable mode of morality. An absolute form of morality will never be possible in this imperfect world, however, that does not mean accomplishing a reasonable standard is impossible.

Holiday Sales May Be Frightful Essay

The article â€Å"Holiday Sales May Be Frightful, But Discounts Will Be Delightful† discusses tough holiday season for retailers because Christmas sales are expected to increased up to 4%. Nevertheless, the season is claimed to be soft and sluggish. This season is, actually, slower compared with sales of the previous year. The decrease in sales is explained by macroeconomic problems as, for example, house slump and credit crunches which negatively affect customers. The author cites Niemira who argues that â€Å"a huge worry facing the holiday season is that the home-price decline and housing wealth decline will cut into consumer spending broadly†. I think the article is informative and provides up-to-date information as practically all people are interested in making purchases. It is known that one of the most popular leisure activities in American consumer is shopping. People are ready to spend money on things they are willing to possess, but housing problems make it less affordable for many citizens. All aspects of consumerism are paid thorough attention by marketing workers and economic analysts. I think the author is very logical and unbiased as the author firstly defines the problem and then explains what reasons have led to it. Credit crunch and housing problem, in my opinion, are two the most serious problems. For example, the author says: â€Å"the credit crunch makes it harder for all households, especially low-income families, to refinance and get other credit†. Apparently, the poor have been disproportionately hurt by high fuel prices. I think that the author does sense in his argument and suggestions. Moreover, all his ideas are properly supported by evidence and explanations of analysis and economists.