Research on the profit of an organization

The purpose of this paper is to establish whether there is a direct correlation between employee retention and the overall profit growth of an organization. The study utilizes 6 articles and explains how they relate to the problem or purpose.Advertising We will write a custom article sample on Research on the profit of an organization specifically for you for only $16.05 $11/page Learn More The article on â€Å"Keep Your Turnover Low† by Todd Donnelly shows there is a relationship between retention and profits of call centers. This article explores some of the causes of high turnover in call centers which include; unfavorable working environment and dissatisfied work force. Donnelly (2012) explains that high turnover in call centers, has impacts on profits due to high operational costs. The author also, gives strategies to reduce turnover in order to reduce costs and increase the profits. The article by Thinking Leaders on â€Å"Calculating the H igh Cost of Employee Turnover† is directly related to problem. This article shows that there are direct and indirect costs incurred by a company or an organization when a high turnover occurs. These costs include; exit interview costs, litigation costs, outplacement costs, hiring costs and human resource processing costs (Thinking Leaders 2011). The article also shows high turnover can lead to decreased productivity hence reducing profit margins of a company. The article shows that high turnover leads to reduced profit margin of a company, hence showing the correlation between turnover and profit margin. Ways of retaining employees are mentioned in the article. Article by Arnold Anderson on â€Å"A Turnover Rate’s Effects on an Organization† also is directly related to the topic. According to Anderson (2011), when an employee is fired or resigns, the organization is likely to be affected negatively. The author further explains that employee turnover affects the g rowth and productivity of an organization. Anderson (2011) also identifies the impacts of turnover, which include; high cost, loss of talent, loss of competitive edge and loss of identity or culture. The article by Chris Young on â€Å"Employee Retention Strategies Drive Revenue Growth in Sears† shows there is a direct correlation between turnover and profit margins of an organization. One of the key strategies the author discuses is employee satisfaction (Young 2007).The author also explains that, employee satisfaction and attitude play a crucial role in productivity and retention of employees thus affecting the profits of the company. Young (2007) gives a case study of Sears Company, to show how employee satisfaction had great impacts on the profits of the company. The article shows there is direct co-relation between retention and profit margin of an organization.Advertising Looking for article on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Article by David Ingram on â€Å"The Definition of High Turnover Rate† contributes to the topic of the relationship between employee retention and profit margins of a company. Ingram (2009) defines high employee turnover as employees leaving their jobs at a high rate. He further explains the employee turnover in different industries. The author also explores ways of reducing employee turnover, so it directly contributes to the purpose of the study. The article explores ways of employee retention, which has direct impact on the profit margins of an organization. According to Ingram (2009) the key to employee retention is satisfaction. The article by Ruth Mayhew on â€Å"How to Solve Employee Turnover Rate† shows there is a direct correlation between retention of employees and profit margin of a company. The writer highlights the importance of solving employee turnover to reduce the negative impacts on productivity of workforce. The arti cle comprises of steps to solve employee turn over in order to keep a steady profit margin. The article is related to the purpose of the study (Mayhew 2011). References Anderson, A. (2011). Effective Communication and Organization. A turnover rates  effects on an organization. Web. Donnelly, T. (2012). Human Resources. Keep Your Turnover Low.  Web. Ingram, D. (2009). Calculate interest rates. The Definition of High Turnover rate. Web. Mayhew, R. (2011). Managing Employees: Employees. How to solve Employee Turn  over Rate.  Web.Advertising We will write a custom article sample on Research on the profit of an organization specifically for you for only $16.05 $11/page Learn More Thinking Leaders. (2011). Calculating the high cost of employee turnover. Web. Young, C. (2007). Employee retention strategies drive revenue growth at Sears. Web. This article on Research on the profit of an organization was written and submitted by user PuppetMaster to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.

Strategic Planning at the Chronicle Gazette Essays

Strategic Planning at the Chronicle Gazette Essays Strategic Planning at the Chronicle Gazette Essay Strategic Planning at the Chronicle Gazette Essay Student Name: Lee Cheuk Fung Jerff Student ID No. : LE0002110 Course No. : MGT 195 Course Name : Business Policy and Strategy Title of the Assignment: Strategic Planning at The Chronicle Gazette Date of submission: 8 DEC 2011 TABLE OF CONTENTS 1. Introduction 3 2. State of the newspaper publishing industry today 2. 1Data on Circulation and Revenue 4-6 2. 2 Top 20 U. S. Newspapers Print Circulation 7-8 3 Why newspapers are facing declining circulations and revenues? 3. 1 External Assessment . 11 Rise of the Web , Internet and free information 9 3. 12 Economic downturn put company into the trouble 9 3 Internal Assessment of The Chronicle Gazette 4. 13 Strengths 10 4. 14 Weaknesses 10 4 Strategies in publishing industry to cope with the Challenges 11,12 5 Steps to deal with the challenge 13 6. 1 Short-term steps 6. 2 Long-term steps Strategic Planning at The Chronicle Gazette 1. Introduction The Chronicle Gazette is a leading newspaper in the United States with a circulation of 225,000 customers. Over the past few years, it has been facing a decline in its customer base and revenues. This is mainly due to the increasing dominance of the Internet as a means of disseminating information and news. Susan Feinman, the publisher of The Chronicle Gazette, noted the criticalness of the problem and worried this will become the 21st century equivalent of buggy whip manufacturers. The company is not looking for band-aid solutions but an insight of all the challenges and to work out an effective business strategy. As The Chronicle Gazette has been a steady decline in subscriptions and revenues, this report will present the strategic vision of where the newspaper publishing industry stands today and where it is headed over the next decade. 3. State of the newspaper publishing industry today The U. S. newspaper industry is in the midst of a historic restructuring, buffeted by a deep recession that is battering crucial advertising revenues, long-term structural challenges as readership to free news and entertainment on the Internet, and heavy debt burdens weighing down some major media companies. As the distress mounts – seven U. S. newspaper companies have filed for bankruptcy in the past years – lawmakers are debating possible legislation to assist the industry. Additionally, the Federal Trade Commission (FTC) will hold a series of workshops in 2009 to look at challenges facing newspapers, television, and radio in the Internet age. There are now about 1,400 daily newspapers in the United States and thousands of community papers, which generally publish weekly or biweekly. A handful of papers, including the Wall Street Journal, USA TODAY, and the New York Times, have a national print readership topping a million or more. The top 50 papers account for about a third of circulation, among them the big city papers that had some of the largest circulation declines in 2008. Overall, the newspaper industry, including printers, reporters, advertising salespeople and other personnel, was a roughly $50 billion business in 2002, according to Census Bureau data, employing about 400,000 people. Over the past few years, there has been a steady decline in the readership of newspapers. Anincreasing number of people are using the Internet to read and view news online for free. Due tothe advancements in Internet, people have free access to news and information online twentyfour hours a day and seven days a week. The news content is available in real time and can beaccessed anytime anywhere in the world. The majority of these online news providers do not levy a fee. As a result, the number of readers willing to pay for news content is reducing and this has a direct impact on the sales of newspapers. 2. 1Data on Circulation and Revenue The following tables and data demonstrating the decline of print circulation and revenue of the newspaper industry A) U. S. Newspapers Circulation in the last decade U. S. Newspapers Circulation forecast Starting decline from the early 90’s (B) Top 20 U. S. Newspapers Print Circulation (Six-Month Period Ending in March 2009) Daily PrintSix Months NewspaperCirculationEnding Mar 2009 USA TODAY 2,113,725 -7. 46% The Wall Street Journal 2,082,189 0. 61% The New York Times 1,039,031-3. 55% Los Angeles Times 723,181 -6. 55% Th e Washington Post 665,383 -1. 16% New York Daily News 602,857 -14. 26% New York Post 558,140 -20. 55% Chicago Tribune 501,202 -7. 47% Houston Chronicle 425,138 -13. 96% The Arizona Republic 389,701 -5. 72% The Denver Post 371,728 NA Newsday 368,194 -3. 01% The Dallas Morning News 331,907 -9. 88% Minneapolis Star-Tribune 320,076 -0. 71% Chicago Sun-Times 312,141 -0. 04% San Francisco Chronicle 312,118 -15. 72% The Boston Globe 302,638 -13. 68% Cleveland Plain Dealer 291,630 -11. 70% Detroit Free Press 290,730 -5. 90% The Philadelphia Inquirer 288,298 -13. 72% Source: Nielsen Online and Editor Publisher. (C) Newspapers Advertising Revenue (D) Top 25 U. S. Newspapers Circulations As of mar 2011 Why newspapers are facing declining circulations and revenues? 4. 2 External Assessment 3. 11 Rise of the Web , Internet and free information The key challenge of traditional newspaper are too much free information from everywhere, internet , web, free newspaper and app. People can know all the things though the forum of a website. And the development of iphone , ipad, and smartsphone let the electronic reading grow fast. Prin t circulation for daily papers fell by 13. 5% from 2001 to 2008, and 17. 3% for Sunday editions. Losses are mounting. Average daily newspaper print irculation fell 7% alone during the six-month period ending March 31, 2009, compared too the same period in 2008 As print circulation declines, online readership is soaring. U. S. newspaper websites averaged more than 73 million individual visitors a month in the first quarter of 2009, up 10. 5% from the same period in 2008. Newspapers are attracting online readers from well beyond their local communities including other cities and countries. Newspaper executives point to surging online readership as an endorsement of their product, saying public interest in news has increased, not diminished. But readership trends are complex, as habits and preferences evolve in response to the enormous array of information available on the Internet, television, and through devices such as hand-held readers and cell phones. Though readers want news, they do not necessarily want it from a traditional paper, and are using multiple sources. For example, there is just one newspaper in the top five news websites. The biggest news websites, in descending order are : MSNBC Digital Network, CNN Digital Network, Yahoo! News, AOL News, and NYTimes. com. MSNBC had nearly twice the online audience of the New York Times. Now is the technology era, television, radio and internet is more popular. The reader can more easily get some information and up to the minute news in them. They are the most threats to newspaper publishing industry. The Chronicle Gazette has the fixed supplier to furnish to the paper and printing inks, also long-term cooperation between us. Therefore, the bargaining power of suppliers is in medium-high level. Many competitors exist in the market. Also, the substitute products come out, such as Yahoo, MSNBC, Hotmail and 24-hours cable news, etc. In additional, they are free. The readers will towards them. Therefore the bargaining power of customers is high. Other so-called aggregators run websites that mix links to newspapers’ stories with some original content, and bloggers frequently mingle newspaper and other reporting with their own commentary and insights. Increasingly individual stories are displayed on the Web as discrete products, separate from a broader newspaper. About 22% of readers who visited newspaper websites arrived indirectly, by first clicking onto online search engines like Google, with another big share arriving through the front page of Web portals like Yahoo or MSN, according to one analysis. A separate 22% came from traffic moving between media and news websites, containing links to specific stories. Once readers arrive at newspaper websites, they spend less time there, on average, than print readers spend reading a traditional newspaper, though some studies show that time online has been increasing. Web readers spend an average of 53 minutes a week with newspapers – or just under eight minutes a day. It is also found, however, that 22% of readers had recently dropped a paid print newspaper or magazine subscription because they could get the paper free online. 3. 2 Economic downturn put company into the trouble The financial crisis in 2008 and the European debt problem let the newspaper industry is in trouble. Some large newspaper companies took on significant debt shortly before the economic downturn hit. Legacy costs are a complicating factor. Many newspapers have traditional, defined-benefit pension plans, which now appear underfunded due to large losses in mar ket investments. It will have to make bigger cash contributions to its pension plans in coming years than previously expected, due to poor market returns and changes in pension law. The company cautioned investors that â€Å"the contributions will place additional strain on the company’s liquidity needs. Investors have soured on newspapers. Some large newspaper companies saw their stock prices drop by more than 80% last year – far beyond the overall decline in the publishing industry and various stock indices. Newspaper stock prices rebounded a bit in 2009, but are still near historic lows. With revenues declining and their ability to raise new capital impaired, some newspaper companies are in danger of breaching financing agreements with their lenders. If that happens, lenders could terminate lines of credit and call in existing loans. 3 Internal Assessment of The Chronicle Gazette 4. 1 Strengths * Good reputation on brand name for good quality * Accumulated significant market share * With experienced and professional workforce * Conservative corporate investment policy which had minimized lost during the economic recession * Top Managements all have the will to change and are ready for transformation 4. 2 Weaknesses Deficient in proactive action to the challenge of Internet and Web threats * Without a focus work team to nurture innovative ideas and develop new products * Inadequate of interaction with audiences in both online website and traditional print newspaper and so can have updated news. * Insufficient technology knowledge and experience in terms of people and equipments * A rigid hierarchy organizational structure which impede employees’ motivation to propose new ideas or changes 5. Strategies in publishing industry to cope with the Challenges The newspaper industry in the United States is faced with multiple challenges of reducedreadership, increased costs and competition from new media companies, such as Google. Amajority of the newspapers have online versions of their editions on websites. They have alsoother measures to increase circulation and improve profitability. Newspapers have increased the prices for both the subscriptions and single buy purchase. They are also analyzing the markets they serve to understand the cost-benefit dynamic of each market. As a result, some newspapers have cut back on circulation to remote areas where the revenues earned are more than the cost of delivery. The Wall Street Journal is one of the leading newspapers in the United States, which has changed its market strategy and business model to overcome the challenges in the publishing industry. Through its website, www. wsj. com, the paper provides online access of its news content to readers. As of April 2010, the Wall Street Journal had 414,025 e-subscriptions. Though the website is available online, not all of the content is free. The Journal has formulated a mixed price strategy where it provides both free and paid content. The popular sections of the news content, such as politics, sports, arts and entertainment is free. Niche coverage such as editorials, opinions and articles on business and financial topics can be viewed only for a fee. Indepth coverage, analysis, opinions and reviews are available only to paid users(PricewaterhouseCoopers, 2010). By adopting this strategy of free and paid access, the WallStreet Journal has been able to increase its e-readership base. The free access to popular content attracts more traffic on its website. This brings in more advertising revenues and increases profitability. At the same time, it helps in building a relationship with new readers. They are aware of the useful content available on wsj. com and are willing to pay for more in-depth coverage and analysis. Another important measure taken by the Wall Street Journal is embracing the digital revolution and becoming a part of it. The Wall Street Journal is available on Apple’s iPad. This move helps the Journal to widen its market and tap younger readers who are technologically savvy. As of June 2010, the Journal had sold more than 10,000 subscriptions and generated $2. million in revenues from the iPad (Business Insider, Inc. , 2010). There are companies at the other end of the spectrum in the newspaper industry who have adopted drastic measures to cope with the challenges. The Seattle Post-Intelligencer was facing significant losses for a few years. In 2008, the paper’s losses amounted to $14 million. As aresult, i ts owner The Hearst Corporation decided to shut down its print operations (GuardianNews and Media Limited, 2010). The Company had to make the hard decision of stopping publication of the 146-year old newspaper. It stopped delivery to nearly 117,600 weekday readers (Hearst Seattle Media, LLC, 2010). In March 2009, the Seattle Post-Intelligencer rolled out its final print edition. It decided to publish only the online version, www. seattlepi. com of the paper. The paper reduced its staff headcount drastically from 165 to 20 (PricewaterhouseCoopers, 2010). Since the paper transformed into an entirely digital web format, its website, www. seattlepi. com, has had 4 million visitors per month with 40 million page views. With a reduced headcount, the website covers major topics, such as politics, sports and local happenings by itself. It also sources stories through wire services and other news agencies. The website also makes use of 150 local bloggers for regional content (World Editors Forum, 2010). 6. Steps to deal with the challenge 7. 1. Short-term steps For the short-term, The Chronicle Gazette should study its organization structure and ensure that the human capital is being effectively used in the business. And it will publish the edition tabloid for free. And we will recruit the new employee have experience in technology, he will establish the E-newspaper and for future technology and internet issue. . 2. Long-term steps Adopt a multimedia mindset, viewing the business as a portfolio of products and services with different business models, pricing and distributions strategiesWe establish email and discussion area in our web-site for the reader offer the information. First of all, it is to attract much more reader to our platform. Second, we will know their favorite orientation in they provided the data. T hird, it can increase the subject in our newspaper and E-newspaper by reader offered data.

A Beginner’s Guide to Alliteration

A Beginner’s Guide to Alliteration A Beginner’s Guide to Alliteration A little alliteration can liven up even the limpest literature. So if you’re not sure what this is, or why that first sentence is full of â€Å"L† words, you may want to check out our guide. We’ll also look at two related poetic techniques: consonance and assonance. What Is Alliteration? Alliteration occurs when we use the same sound repeatedly in a sentence. This is often at the start of a word, but it can also be at the start of a stressed syllable in a word. You may have seen alliteration used in poetry, particularly in tongue twisters. For example, the nursery rhyme â€Å"Peter Piper† uses the letter â€Å"p† alliteratively: Peter Piper picked a peck of pickled peppers. A peck of pickled peppers Peter Piper picked. If Peter Piper picked a peck of pickled peppers, Wheres the peck of pickled peppers Peter Piper picked? This is a case of alliteration where the whole point is to be tricky to say! Why Use Alliteration in Poetry? Usually, poets use alliteration to create a mood in a poem or to give it rhythm. For example, take the first stanza of Edgar Allen Poe’s â€Å"The Raven†: Once upon a midnight dreary, while I pondered, weak and weary, Over many a quaint and curious volume of forgotten lore-   Ã‚  Ã‚   While I nodded, nearly napping, suddenly there came a tapping, As of some one gently rapping, rapping at my chamber door. â€Å"’Tis some visitor,† I muttered, â€Å"tapping at my chamber door-   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Only this and nothing more.† Here, we have multiple cases of alliteration that combine with the rhyme scheme to give the text a strong rhythm and emphasize certain words. Poe does the same throughout the poem. Sometimes, you can also use alliteration to evoke a mood or image. A good example of this is sibilance, which involves the repetition of soft â€Å"S† sounds: The snake slithered silently across the sand. Here, the repetition of â€Å"S† sounds like the hiss of a snake. As such, the sound of the sentence reinforces the image it describes, like in onomatopoeia. Other Uses of Alliteration Many people use alliteration to make language memorable, including in: Company and brand names (e.g., Coca Cola, Dunkin’ Donuts) Slogans (e.g., Jaguar’s â€Å"Don’t dream it. Drive it.†) Titles of books, movies, etc. (e.g., Black Beauty, Doctor Doolittle) Character names (e.g., Mickey Mouse, Peter Parker) In all these cases, the repetition makes the phrase catchier and more striking. Assonance and Consonance Finally, we should look at two techniques related to alliteration: assonance and consonance. These both involve repetition of sounds, but they’re not quite the same as alliteration. Assonance is repetition of vowel sounds. For example, the repetition of â€Å"oo† in â€Å"Your spooky bassoon went boom as I fell through my stool.† Consonance is repetition of consonant sounds in any part of a word, not just at the start. For instance, â€Å"The vegan dog hugged the ugly frog† is consonance but not alliteration. This is because the repeated â€Å"G† occurs in different parts of the words, not just at the start of stressed syllables. You can use assonance and consonance to make writing more rhythmic or memorable. This is especially common in poetry, but, as with alliteration, it is also effective in other contexts.

Philip Morris Co Case Study Example | Topics and Well Written Essays - 3250 words

Philip Morris Co - Case Study Example Production of a good quality product, testing it properly, marketing it in a proper way ensuring that no unethical means are used are some of the aspects of business ethics. In short, business ethics are the rules to ensure that the business causes no harm to other businesses, people and society in any way, be it morals and values or any other way. Being such a big international organization, Philip Morris holds great social responsibility. Adding to it the fact that it is a tobacco company, this social responsibility is even doubled. Many ethical issues are posed on it every day and the way it tackles these issues and makes its decisions accordingly, is one of the main factors that make it the leader of the tobacco market. Corporate social responsibility is defined by many people in many ways. Some define it as carrying out the business responsibly and properly giving the society economic benefits, while other define it as striving to solve world's different problems. In either case, corporate social responsibility refers to the act of an organization acting as a responsible part of the society and helping it in one way or the other. When talking about Philip Morris's Corporate Social Responsibility, the main issue is the question that w... Looking at these facts and statistics, it is not surprising if Philip Morris cannot be classified as a socially responsible company no matter how philanthropic campaigns they lead and how many worthy causes they serve to. In cases like Philip Morris, where the corporate goals and interests of the society go in totally different directions, it is very important for the company to incorporate corporate social responsibility in its corporate strategy in a much more integrated way as compared to any other organization. This is extremely important for companies like Philip Morris, the leader of a market that literally kills people. This issue, if not handled properly, can become so serious for the organization that it can become an issue for its survival in the market, since the society would always tend to reprimand any such business that poses such hazards to it and is totally incongruent to its values and interests. Ethical Issues associated with Marketing Practices Although ethical issues are frequent in almost all areas of the business for a tobacco company like Philip Morris, but the major issues are posed in the arena of marketing of its product. In 1998, after the conflicts of four years, the US government and Tobacco Market Leaders settled on an agreement. It tackled with the two most important and growing issues in the society; public health and underage access to the tobacco products. The settlement also required the industry to take necessary steps to ensure the reduction in underage access and underage consumption of the tobacco products. It created a National Foundation and a Public Education fund to make people aware of the hazards attached to tobacco consumption and educating them accordingly.

Strategic Management Case Analysis section on how to prepare a Research Paper

Strategic Management Case Analysis section on how to prepare a strategic case analysis. (IP 4) - Research Paper Example It has been subject to serious design level issues wherein product recalls were traced back to the to the faults in design and manufacturing processes of Toyota. This suggests that its operational weaknesses may be on the rise during the recent past. Ford as a part of automobile industry is facing stiff social challenge of improving its image. There is a general perception within the general public that car automakers are thriving on tax payers’ money. Overall market demand is emerging from US market. Ford’s primary demographics is in North American market besides it serves EU market also. Its overall product range serve both high end and low end market. In order to overcome the weakness of low consumer demand, Ford can enter into small car manufacturing. It needs to improve its R&D efforts to produce more cost effective vehicles which can serve the mass market at the global market (Nilsson-Witell, Antoni, & Dahlgaard, 2005). It needs to increase its R&D budget and engage into further improving its fuel efficient cars. In order to overcome it dependence on two markets, Toyota need to establish its manufacturing and distribution facilities in other emerging markets specially in India and other growing markets where demand for low cost fuel efficient cars can be enormous. It can expand into these markets through effective quality management. (Taddese & Osada, 2011) It needs to enter into market development process in a way which can ensure its presence in optimal market locations across the whole globe. Nilsson-Witell, L., Antoni, M., & Dahlgaard, J. (2005). Continuous improvement in product development: Improvement programs and quality principles". International Journal of Quality & Reliability Management,, 22(8),

Three Gorges Dam :: China Nature Essays

Three Gorges Dam Director Owen Lammers calls it one of the "largest and most environmentally and socially destructive projects on Earth"(Maier, 1997). One of China’s oldest dreams is becoming its newest reality. Since 1914 the idea has arisen of damming the Yangtze River. China plans to do this with a 600-foot, cement wall which will take eleven years to complete and costs could rise to over 75 billion dollars. The dam is claimed to have many advantages for China and the Chinese. Three Gorges is expected to produce around one-tenth of the nation’s energy, without the use of coal, improving air quality. Also, the natural floods that occur with the Yangtze river will be stopped, supposedly saving thousands of lives in the future. The first thing needed to keep the project going is money, and many United States senators see this as a great opportunity for jobs, but it is also viewed as a good investment. Fortunately, the U.S. Export-Import Bank, (for the first time), "†¦denied financi ng solely on environmental grounds"(Giaccia, 1997). These advantages are easily outweighed by the disadvantages of this proposal; this monument threatens the environment, but construction will ensue. If the dam is so beneficial then why is it that all public debate on the issue has been banned since 1989, even for "†¦scientists and specialists"(Faison, 1997). This has probably been done to slow the process of or eliminate any opposition that may arise to this project. There are a few questions or "What if’s" about the dam, such as "What if the dam collapses?" or "What if during a war or conflict a bomb is dropped on the dam?" and since the dam is built on many seismic faults, will earthquakes be a problem? Besides all of these questions, there are numerous facts that should dissuade any proponent of the dam to insist on its construction. The dam besides hurting the environment, will also "†¦displace 1.3 million people."(Giaccia, 1997). These people were not asked to leave, they were told, and many of them still have not been compensated for their trouble, but this goes deeper than financial burdens. Individual rights have been violated, the government simply forc ed these people off their land and out of their homes and this affects children, families and livelihoods. Looking at the dam’s environmental harm specifically, it is clear that this project should immediately cause. "Environmentalists warn that sewage will back up and destroy the precious habitats for river dolphins, giant pandas and other rare animals.

Other-than-temporary impairment (OTTI) Essay

Introduction O.T.T. Incorporated, principally engaged in the manufacture and sale of clothing, has six investments remaining in the department’s portfolio as of December 31. According to ASC, this memo analyzes whether any of its investments are other-than-temporary impaired, and determines the amount of the impairment. Facts Investment 1 — Happy New Year & Co. OTT purchased 11 shares of Happy New Year & Co. stock on at $20 a share †¨on Jan. 3, 20X1, and the price dropped to $15 in March and remained steady till Dec. 31, 20X1. OTT management does not believe the decline in price to be permanent and has asserted that it does not intend to sell this investment in the future. Investment 2 – Beary Beary OTT held notes of Beary Beary with an amortized cost of $95 and a fair value of $88 on Dec. 31, 20X1. OTT’s investment committee established a policy requiring the sale of this security when the fair value declines below $90. Investment 3 – Buy-A-Lot Company OTT held bonds of Buy-A-Lot Company with an amortized cost of $100 and a fair value of $88 as of December 31, 20X1. The company’s credit rating upgraded from BBB to BBB+ that management has asserted it does not intend to sell this investment. Investment 4 – March Madness Incorporated On March 25, 20X1, OTT bought 50 shares of March Madness Incorporated stock †¨at $100 a share, classifying its investment as available for sale. As of December 31, 20X1, the price of the stock was $72. On January 31, 20X2, the date the Company’s financial statements are issued, the price of the stock went up to $75. Investment 5 — Tohoku Toys OTT held bonds issued by Tohoku Toys with an amortized cost of $25 and a fair value of $5 as of December 31, 20X1. Tohoku Toys is going through a restructuring because it was significantly affected by a severe earthquake in April 20X1. OTT does not believe that the restructuring will ultimately be successful. Investment 6 — Chatterbox OTT holds a debt security issued by Chatterbox with an amortized cost of $100 and a fair value of $90 as of December 31, 20X1. The present value of the cash flows OTT expects to receive, discounted at the security’s original effective interest rate is $92 as of December 31, 20X1. OTT intends to sell this security. Issues The other-than-temporary impairment depends on two issues:  ·Whether the fair value of the investment is less than its cost.  ·The impairment is either temporary or other than temporary depending on other guidance when the fair value is less than its cost. Discussion Investment 1—Happy New Year & Co. ASC 323-10-35-32: â€Å"A loss in value of an investment that is other than a temporary decline shall be recognized. Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment.† ASC 320-10-35-34: â€Å"If it is determined in Step 2 that the impairment is other than temporary, then an impairment loss shall be recognized in earnings equal to the entire difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made.† Because the share price had a large decline from $20 to $15 and remained steady around $15 in most of time, it seems the share is absence of an ability to recover the carrying amount of the investment. Therefore, other-than-temporary impairment has  occurred, and loss of $55 (11*$5) should be recorded. Investment 2 – Beary Beary ASC 320-10-35-33A: â€Å"If an entity intends to sell the debt security (that is, it has decided to sell the security), an other-than-temporary impairment shall be considered to have occurred.† The company intends to sell the investment because the fair value is below $90. Therefore, other-than-temporary impairment has occurred, and loss of $7 ($95-$88) should be recorded. Investment 3 – Buy-A-Lot Company ASC 320-10-35-33F: â€Å"Changes in the quality of the credit enhancement should be considered when estimating whether a credit loss exists and the period over which the debt security is expected to recover.† Although the fair value of the investment was lower than the amortized cost, the credit rating had been upgraded from BBB to BBB+, and the investment does not intend to be sold. These evidence show that the bond is expected to recover, so no other-than-temporary impairment has occurred. Investment 4 – March Madness Incorporated ASC 320-10-35-34: â€Å"The fair value of the investment would then become the new amortized cost basis of the investment and shall not be adjusted for subsequent recoveries in fair value.† Based on ASC 320-10-35-34 I mentioned above, the other-than-temporary impairment should be recoded as $28 ($100-$72) as of December 31, 20X1. On January 31, 20X2, when the price of the stock went up to $75, the other-than-temporary impairment should be recoded as $25 ($100-$75). If the share price was $95 instead of $75 on January 31, 20X2, I think no other-than-temporary impairment needs to be recorded, because there is no material decrease occurred. Investment 5 — Tohoku Toys ASC 320-10-35-35: â€Å"In periods after the recognition of an other-than-temporary impairment loss for debt securities, an entity shall account for the other-than-temporarily impaired debt security as if the debt security had been purchased on the measurement date of the  other-than-temporary impairment at an amortized cost basis equal to the previous amortized cost basis less the other-than-temporary impairment recognized in earnings. For debt securities for which other-than-temporary impairments were recognized in earnings, the difference between the new amortized cost basis and the cash flows expected to be collected shall be accreted in accordance with existing applicable guidance as interest income.† Although Tohoku Toys is undergoing a restructuring because of earthquake, OTT does not believe the restructuring will be successful. Based on authoritative literature mentioned above, the other-than-temporary impairment shall be recognized as $20 ($25-$5) when no addition evidence provided. Investment 6 — Chatterbox –Alternative 1: SAB 320-10-35-34B: â€Å"If an entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary impairment shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date.† Based on the authoritative literature, if OTT intends to sell this security, the other-than-temporary impairment shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis ($100) and its fair value ($90), which is $10. –Alternative 2: SAB 320-10-35-34C: â€Å"If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary impairment shall be separated into both of the following: a. The amount representing the credit loss. b. The amount related to all other factors. Different from alternative 1, if OTT does not intend to sell the security and it is not more likely than not that it will be required to sell the security, †¨the credit loss will be $8 ($100-$92) and other factor loss will  be $2 ($10-$8).