Concepts of Professional Ethics and Moral Responsibility

Ideas of Professional Ethics and Moral Responsibility Gathering Members: Cheong Loong TAN Yehya ELLEISSY Xavier VUONG Chenkai JIN Moral Dilemma The improvement of the item/administration is to meet end user’s fulfillment and keeping them in accordance with the development of innovation. Such diversion is give the client the capacity to make 3D objects by utilizing programming and a 3D printer, permit clients to share their musings on realities or thoughts without limitation and even furnish clients with a gadget that goes about as a real existence friend. The fundamental moral difficulty in the situation is the maltreatment of the items and administrations, which more often than not brings about dishonest conduct. With the end goal of this examination, dishonest conduct will be characterized as any conduct that abuses or upsets the ethical code of the general public. For instance, it is unscrupulous to discuss a person without their essence, since it makes hurt the victim’s notoriety. Thinking about this, Facebook would be the biggest host of dishonest conduct, as this happens regularly. Another item that is regularly commented as being faulty is the Google Glass, an item that consolidates video/voice recording with the capacity to interface with the web in gadget that clients wear around their eyes as glasses. This brings up issues encompassing security of the individuals around the client, as they won't know whether the client has initiated the record work. In conclusion, the 3D printer, since the time its creation has caused moral issues with the client ready to make guns that can't be recognized by metal indicators. These items will be additionally examined in the principal question, with connection to the obligation of the organizations and association that create them. The situation introduced diagrams a portion of the moral issues that could emerge if utilizing those items or administrations. These moral predicaments are issues, for example, protection attack, security related issues and the user’s capacity to make hurt another. Through this examination, we will talk about the items and administrations being referred to by investigating their highlights, and what hurt they are equipped for causing when manhandled. At that point we will proceed onward to respond to the topic of whether the organizations or associations ought to be considered answerable for the highlights of their items and administrations that permit clients to settle on moral choices. Followed by this inquiry will be a rundown of potential answers for the issues introduced in the past inquiry. The moral difficulty surely exists inside the situation, yet whether it is the obligation of the associations and organizations to assume liability for the activities of their clients is question that will be dissected. Should Companies/Organizations be considered capable Organizations would make these items and administrations with the expectation of fulfilling the clients while submitting to the laws. The issue with the diversion gave happens when the end clients misuse the framework, and in that they could settle on ethically inaccurate choices which influence others. The wrongdoers are just ready to submit the maltreatment in light of the fact that there is no limitation; in this manner the inquiry raised to consideration is that ‘Should the organizations/associations that build up these items/administrations be considered liable for â€Å"moral dynamic programming code and features† that they incorporated with them?’ With the end goal of this investigation, â€Å"Moral-dynamic programming code and features† is characterized as the specific parts of items and administrations that add to ethical quality. Client Numerous item and administration offered permits client to communicate their inventiveness, musings and thoughts. A 3D printer permits client to print to life anything they can display utilizing programming, and a Google Glass permits client to incorporate every single normal innovation into one little gadget to be utilized anyplace. Online life, for example, Facebook permits client to share, remark, vote, and even go about as a promoting stage for association. All things considered, there exist a specific gathering of client that abuse the item either for notoriety, or cash purposes. A genuine model would be a 3D printer. The printer depends on the innovativeness of the client itself. At the point when the printer was discharged, the serious issue confronted was gun printing. A solitary snap on the web empowers client to download a weapon outline and next stacking it into the product and in a flash an incredibly risky merchandise was created. In nation where guns are hard to get, these guns can be effortlessly evolved utilizing a 3D printer and costing just around $25 of plastic with sensibly high sturdiness (OCallaghan, 2014), and this issue is right now on the ascent (Wilson, 2014). In view of our study report, half of the people concur that 3D printer ought to be openly accessible. Another model would utilize Facebook as an apparatus for carrying out wrongdoing. Digital tormenting, following, and transferring photographs and recordings of individuals without their assent are basic in Facebook. Proficient programmers misuse the vulnerabilities in Facebook and accumulate target’s individual data, for example, name, address, telephone number and bank data. Some of them even imitate as relatives, family members or companions to accumulate delicate data. Pay off frequently occurs with danger of transferring delicate data/pictures on Facebook. Frequently this prompts self-destructive when casualties are excessively discouraged and can't adapt to the pressure (Arkell, 2013). Facebook doesn't have the choice of erasing account †a total swipe out of user’s data. The main choice was deactivating the record. This may appear to be valuable when a client changes his/her psyche, as they can reactivate back their record whenever. Anyway this posts an immense security issue. Imagine a scenario where a programmer misuses Facebook Database and offer out all the delicate data. From our study report, dominant part of the client needs the choice of erasing record to be actualized. Taking a gander at the models over, the issue exists since organizations are not being considered liable for the activities of the client. Organizations/associations know about these issues anyway it is past their capacity to keep this from occurring as a portion of the client ceaselessly adventures and abuse the item. Each client ought to be taught on the duty in their doings while keeping up an expert morals. Experts The counter contention introduced by proficient states that client ought to be answerable for their own government assistance and conduct while utilizing these item. This is a substantial explanation, as it is the user’s activities that bring about unscrupulous conduct, not the item. The item was planned with the goal of performing inside the laws of the nation, and not to make any dishonest issues. The 3D printer’s capacity to make guns was not the underlying expectation by the producer but instead the client itself. Also, guns made are not solid enough, and not commonsense in long haul. Google Glass’s security issue is addressed on the grounds that client is utilizing it in the open territory. On the off chance that it’s for individual use, at that point there would be no security concern. Wallach and Allen (2009) depict a genuine situation where semiautonomous mechanical gun broke down murdering 9 fighters and injuring 14 others on October 2007. The contention here matches the first contention, that organizations ought to be answerable for the â€Å"moral-dynamic programming code† in the framework. For this situation, the organization would be considered capable on the grounds that they didn't guarantee that framework worked effectively. Taking everything into account, the organization or association liable for the item/administration ought not be considered answerable for the ethically off base activities of their shoppers. While it might appear, from the contentions over that they are without a doubt mindful, it was consumer’s alternative to purchase the item. Hence, this investigation bolsters the expert explanation that shoppers ought to be answerable for their own government assistance when utilizing these items. What else should be done to tackle the hidden issue? Organizations that build up these items with shouldn’t be held full obligation regarding its abuse. For the most part the client chooses how it is utilized and on the off chance that it is utilized in an untrustworthy way or not. Rather, what we ought to center and putting our time in is the thing that should be possible to tackle those hidden issues. Take one of the most energizing progressions in innovation today, Google Glass, for a model. Google Glass is a cutting edge innovation looking like an eyewear gadget that can take photographs, recordings, and in any event, going about as a GPS gadget, yet this component concerns the infringement of protection. For instance, client may take photographs or even record a video of another person without their assent as the gadget itself imitated a couple of glasses with no sign that a chronicle is being finished. Another significant issue concerns open wellbeing. When utilizing Google Glass GPS highlight, the overlay and prompts show up may divert the driver from seeing approaching traffic, impediments and people on foot. Lethal mishap may emerge because of this. Arrangements Here are a few recommendations/approaches to manage the issue Morals and Privacy Blaring tone being produced when a client catch an image or make a chronicle. This is to show to the client and encompassing open that photos are being caught or a chronicle is being made. Open ought to be taught and educated about Google Glass usefulness and highlights. This can be accomplished through ads TV promotions, web based life and web. Security Laws and enactments ought to be executed and upheld on the use of Google Glass when driving. Driving while at the same time utilizing Google Glass ought not be allowed, as it represents a danger to both the driver and encompassing open. Instruct client Client ought to be accomplished on the do’s and don’ts when utilizing the dev

Mary Shelley’s novel Essay

There are not many scholars in world writing whose legends have become regular names and are utilized in the consistently life of individuals from various societies. Among the predetermined number of such fortunate makers is Mary Shelley who has composed at a significant youthful age in 1818 her everlasting â€Å"Frankenstein†. In spite of this reality the novel is very influential and captivating, having the full scope of highlights which show a develop author’s experience. The distributing of the story deifies her. The popularity which the book brings rises above outskirts and time. They are the best check of the monster’s recommendation after the passing of the eager specialist: â€Å"and when I will be no more the very recognition of us both will quickly vanish†. This unobtrusive notion demonstrates not to be valid. In any event his inauspicious outline stays in the brain over-burden with data. All our readers’ consideration being retained, we don't see how we move the name of Dr Frankenstein over to the product of his logical work. As a matter of fact the beast he makes so constantly is left anonymous and is erroneously called after his maker. It is very basic to discover the name â€Å"Frankenstein† related with awkward and terrible manifestations of different creators or in regular discussions. It has taken on its own life and regularly is used to mean any anecdotal human-like beast. It is imperative to take note of the first â€Å"meeting† with the word â€Å"Frankenstein† in each person’s life. This is totally conceivable to be through Roald Dahl’s story â€Å"James and the Giant Peach†. The creator utilizes the celebrated name in a rhymed discussion between the two aunties of the young man. They misuse each other utilizing offending articulations. One of them contains the symbolism â€Å"you would make an exquisite Frankenstein†. This is the manner in which we normally partner the title of Shelley’s book. There might be a few exemptions not to incorporate the amazing name however to summon some comparability with the presence of the character. In the well known TV parody, â€Å"The Adams Family† for instance, the head servant â€Å"Lurch† is clearly demonstrated on this animal however the makers don't rehash the far reaching mistake of calling him â€Å"Frankenstein†. The topicality of Mary Shelley’s book comes not just with the referencing of its title in any specific circumstance. It has further relations with a great deal of highlights of contemporary life as it raises issues of complex governmental issues of human want. We can find the author’s knowledge in handling the consuming issues from our lives: responsibility †particularly in the clinical, cultivating and militarily ventures; social estrangement †including hoodlums and detainees, outcasts, vagrants or embraced youngsters issues; the nature of life itself. The decision of caption isn't unplanned. â€Å"The Modern Prometheus† identifies with the imbuement of life (fire) into a non-living thing. The beneficent activity of the anchored Titan from Greek folklore has given a great deal of inspiration in all expressions of the human experience. Taking motivation from Byron’s recommendation of composing apparition stories, Mary Shelley investigates a zone which identifies with all researchers dreams: the accomplishment of counterfeit life. This is the abrogating reason for the endeavors of her principle saint whose name gives the title to the novel. In his youth Victor Frankenstein had been astonished by power. He had seen its impact on a â€Å"beautiful oak† struck by an amazing stroke of lightning. Later the youthful specialist imparts this experience to his companion †Arctic adventurer Robert Walton. Obviously the new marvel profoundly energizes the creative mind of the experimenter, much the same as Mary Shelley herself suffers before the science. Clearly both rivalry in her friend network and her developing enthusiasm for the uncovering of nature’s privileged insights have terminated the creative mind of the skilled lady. She has known about the contemporary doctor Dr Erasmus Darwin’s and the scientist Sir Humphry Davy’s looks into, and presumably has been energized by sentiments like those we have today when cloning or Genetic Modification of food is contended about. In the event that we thoroughly consider the compromising expense of breaking the natural pecking order, a progression of hazardous pictures can frame before our eyes. Tragically, under the front of thinking about people and making more food we are venturing into the obscure where there might be sneaking genuine and erratic dangers. The author goes to the thought for the advancement of a phenomenal character so as to show where pompous clinical and natural methodologies could lead. In her vision for the future she is near the plots utilized in films about military undertakings. The spreading of infections from concealed medical clinic research facilities is much the same as the getting away of the beast from Frankenstein’s workshop. The contemporary world is significantly under more noteworthy danger from the creation and capacity of atomic weapons. Experimentation with them, and even their very presence, helps us to remember Shelley’s notice of what could occur if there should be an occurrence of disappointment. The fake saint, to whom she gives knowledge, is presumably the first in the quest for comparative pictures in world writing. In the cutting edge times her model is rehashed in the development of electronic humanlike machines. All dialects are improved by the word â€Å"robot† presented by Karel Capek in his â€Å"RUR† play. The condensing for Rosumove Universalne Roboty could be interpreted as â€Å"sensible widespread work†. For the final word Capek utilizes an old lexeme which isn't in contemporary Czech however exists in other Slavonic dialects.

Suggested Argumentative Essay Topics

Suggested Argumentative Essay TopicsSome top essay topics include thoughts about teaching, a philosophy in defense of art, or a political argument in defense of a policy. With a little creativity, these topics can be woven into interesting essays.There are no rules that govern how often argumentative essay topics can be used. Each essay is unique and there is no right or wrong. Students should learn to write their own opinion essays, but it is important to keep in mind the needs of the audience. The audience is the instructor's audience, and the essay should be written to further the course and enhance learning.Regardless of the specific audience for the essay, the information should help the reader learn more about the subject. The class discussion is usually given when planning the topic, so the professor is able to think of a topic based on what he or she knows about the topic. Topics should be written to build on the class discussion and on the professor's research.Good argumenta tive essay topics can include the benefits of political and economic policy. Topics can also be written about specific issues or topics with strong arguments on both sides. Arguments can be about the use of power, or questions about the definition of freedom. These topics can be written by just about anyone who wants to take up a writing challenge.Students may find themselves drawn to writing about issues with strong arguments because they are involved in a debate with their classmates or professors. Most students know by heart some of the strongest arguments in the history of science, and they have seen many arguments that have not been completely supported by science. This is why it is important to learn how to create your own argumentative essay topics. Those who do not think they can become good at this type of writing will be disappointed when they realize that they can master it.Anyone who wants to put their skills to use to write good, fresh arguments for those who are too la zy to do it will benefit from knowing their writer's abilities and writing styles. Students who want to improve their writing skills by writing argumentative essays should consult with an experienced writing coach or learn from a fellow student who has written for publication. After all, it is better to have a better-written article than a poorly-written one.The best way to write a topic with supporting evidence is to begin by thinking about the type of argument that might be used. If it is possible to do so, make a list of the strongest arguments. If you need to do this in more detail, the topics are usually easier to write.If you are feeling the pressure of trying to get a degree while doing full-time work, the teacher's requirements are very demanding. Some classes have several sections of topics, and these topics should be incorporated into the course and can be used to add interesting points to the discussion. The writer can gain great insight into their writing skills and perh aps a valuable career by being a part of the great debate going on at the university.

Theme Of Violence In The Kite Runner - 810 Words

Violence is seen absolutely everywhere in the world, and the causes of it can range from pure rage and hatred, to being a necessity to live through a difficult situation. The Kite Runner utilizes violence to set the tone and setting towards a darker, more depressing atmosphere. The character Hosseini is the producer of the majority of violence in the novel and he definitely has an impact on the mood, but for good reason. Many events occur including the rapes of Hassan and Sohrab, the Hassan and Farzana murders, stonings at Ghazi stadium, and the actual activity of kite fighting. The darkness of these events may seem irrelevant and gory, yet they are entirely important to the mood and tone of the story. Early in the story, Amir has a†¦show more content†¦Amir was beat badly by Assef, but his courage gave Sohrab time to fire his slingshot and hit Assef in the eye. Returning to the idea that the rapes show the development of Amir’s character, the violence proceeded Amirà ¢â‚¬â„¢s character towards what the audience believes to be a better person. Before Hassan’s son is found by Amir, Amir learns of more violence; the Taliban’s murder of Hassan and his wife. In chapters 16-17, Hassan’s time spent in Pakistan is recounted since Baba and Amir left for America. The basics of Hassan’s life are told, including his son Sohrab, who was named after a character in a song Hassan and Amir created. The death of Hassan is incredibly important to the theme and tone, as Hassan’s ethnicity was connected in a symbolic way to the discriminatory attacks on Hazara in Kabul since the Taliban showed up. Hassan had been killed by two members of the Taliban, with the members never being punished for their actions, symbolizing the Taliban’s views on the Hazara even further. A much more worldwide act of violence, contained not only in the story, but real life as well, were the stonings at Ghazi Stadium. In Chapter 21, Amir and Farid v isit the soccer game taking place at the Ghazi Stadium. Everything is uneasy and at halftime, the Taliban drive into the stadium, dumping off a man and woman and burying them up to their chests. It is announced that the two are adulterers, and they are stoned to death in front of the crowd. The event shows theShow MoreRelatedTheme Of Violence In The Kite Runner1133 Words   |  5 Pagesnovel â€Å"The Kite Runner† by Khaled Hossieni, we as the reader see many different situations in witch Amir is putting his real self aside and taking his anger out and betraying someone very close to Baba and Amir himself, closer than the reader and the protagonist Amir will learn until further on; Hassan the servant’s son. In this powerful novel we see very real situations unravel, to be more specific we see one act of violence that relates to every reader in a different way. The act of violence being theRead MoreTheme Of Violence In The Kite Runner859 Words   |  4 Pages In every great piece on literature there always ends up being a scene with some sort of violence. In the book The Kite Runner by Khaled Hosseini there are a couple of points that include violence that help carry the plot and contribute to the overall meaning of t there are a couple of points that include violence that help carry the plot and contribute to the overall meaning of the work. There are two scenes in particular that really show this concept such as Hassan’s rape and the fight betweenRead MoreTheme Of Violence In The Kite Runner729 Words   |  3 Pages Violence is something that can create conflict but in some cases also bring peace. The Kite Runner by Khaled Hosseini is an extraordinary piece of literature that shows a prime example of how violence can contribute to the overall meaning of a story. In this novel, violence is shown throughout the book in forms of betrayal and redemption. Amir, the main character, lives with a deep regret for most of his life from betrayin g his closest friend, Hassan, a Hazara and who he later discovers is alsoRead MoreThe Kite Runner Symbolism Analysis753 Words   |  4 PagesTHE KITE RUNNER Symbolism is a literary device found in all mediums. Symbols are marks or words that designate the significant features in a piece of literature. They allow people to connect to the many concepts found in the literary works. The novel The Kite Runner by Khaled Hosseini, showcases this notion of symbolism well. These symbols come full circle by the end of the novel as they represent pivotal moments in the close bond Amir and Hassan share. Within the novel, Hosseini uses a kite to symbolizeRead MoreKhaled Hossieni s The Kite Runner1433 Words   |  6 Pagesmedicine in the private sector in 1996. (britannica.com) The Kite Runner was his first novel and he had the idea to write a novel while still practicing medicine in 2001 and then published The Kite Runner in 2003. Initially, he wrote a light twenty five page short story about boys in Kabul flying kites after being inspired from a news story about the Taliban and all the limitations they placed on people, it said that they even bann ed the sport of kite running. That struck a personal chord for Hossieni asRead MoreThe Kite Runner759 Words   |  4 PagesThe Kite Runner, Khaled Hosseinis powerhouse debut novel, was recommended to me by a friend whose literary tastes Id never previously had the opportunity to compare with my own. Its always reassuring to me when I find that someone I respect has standards that reasonably approximate my own. The novel is currently a bestseller, and is hailed as the first Afghan novel written in English. I liked The Kite Runner enough to read it through twice. It was a gripping read the first time around. It heldRead MoreAnalysis Of The Kite Runner 1229 Words   |  5 PagesThe Kite Runner’s plot is centered on the story of Amir, a young boy who grew up in Afghanistan with his father, and friend, Hassan. Amir was raised without a mother, and had no womanly influence in his life until he was married. This lack of women in the storyline has caused some to argue that the nov el is demeaning to women (Gomez). The vulgar language and explicit themes are seen as demoralizing towards the female gender (Schaub). In the novel the women are required to remain committed and submissiveRead MoreReview Of Khaled Hosseini s Kite Runner Essay1386 Words   |  6 PagesI was on a plane when I finished reading Khaled Hosseini’s Kite Runner, but my public surroundings didn’t deter me from crying as I would have, snuggled under the covers in my bed. This book transported me to another world, with atrocities that I could never have imagined; and the worst part was that it is based on history. Literature like this has the power to convey themes and ideas through the stories and actions of characters. In his book How to Read Literature like a Professor, Thomas FosterRead MoreThe Meaning Of Betrays In The Kite Runner By Khaled Hosseini1417 Words   |  6 Pages In reading Khaled Hosseini’s novel â€Å"The Kite Runner†, we as the reader can assum e the novels meaning is tied to regret. Our protagonist Amir, remains holding himself accountable for the rape of Hassan, due to his lack of courage to stop the incident. Nonetheless, after the horrific incident happens, it unties the novels secondary meaning, which is betrayal. Throughout the novel, we see Amir trying to rid of Hassan as a way of trying to forget what he has done, or better yet what he didn’t do. HoweverRead MoreThe Kite Runner By Khaled Hosseini1621 Words   |  7 Pagesthat we wouldn’t typically have from the outside looking in. They counteract the stereotypes that outsiders procreate of something that they have never intimately experienced. Keeping that in mind, my classical nomination is the Bestseller The Kite Runner by Khaled Hosseini. Hosseini wrote this historical novel in 2001 while completing his residency at Cedars-Sinai Medical Center in Los Angeles, California. Much of the historical content was based off his childhood experiences living in Afghanistan

Breaking the Law or Civil Desobedience Essay example

History has spoken. The words of the weak started it. Their actions proved it. Disobeying a law is a crime that the offender should be willing to take the punishment for and let his sacrifice be used as a point to rally around to create a just, moral change. Whenever a law is deemed unjust, there is good reason for breaking it to achieve justice. Civil Disobedience will never be legal and those who employ it should be willing to accept the penalty that comes with breaking a law. It has been shown through historic cases, modern examples, and the core values of a democratic society that show Civil Disobedience not only works, but should be used as a tool to demonstrate the moral objectives that are being sought. Considering some laws are†¦show more content†¦For example, the law King Jr. broke to get into Birmingham Jail was a law against parading, that one has to have a permit to do so. He argues that it is unjust because it was used to stifle the blacks’ first amendm ent right to free speech and public protest (King). Another popular theory about Civil Disobedience is that in today’s society it no longer applies because government does not pass laws that are in violation of human rights. In most cases this would mean there is no longer justification for the breaking of any law, but to the contrary there are still many laws passed without adequate approval from society and therefore have no real power in a Democracy. These laws are then justified to be disobeyed politically and otherwise in a Representative Democracy (Markovits). This shows that even in today’s modern society there is still reason for Civil Disobedience and not every law should just be followed blindly. To what end is breaking a law ok? There must be a line, so where is it? Saying that civil disobedience is a right is going too far according to some individuals. Making it a right will just make breaking laws more of a political tool rather than a way to fight against tyranny. The only time to use it is when there is a definite political tyranny where the

Analysis Of Company Culture Of The Lincoln Electric Company

Analysis of the Company Culture of the Lincoln Electric Company Analysis of the Company Culture of the Lincoln Electric Company â€Å"Lincoln employs 2,400 workers in two U.S. factories near Cleveland and approximately 600 in three factories located in other countries† (Sharplin, 1989), numbers which don’t include their substantial field sales force. Lincoln Electric’s founder, a John C. Lincoln, was a man of sound business practices who, after being frozen out of Elliott-Lincoln Company in 1895, built his own company from the ground up, starting with one of his patents and building improved motors from its design (Sharplin, 1989). James F. Lincoln, John C. Lincoln’s brother, joined the company after John had a battle with a bout of typhoid, in 1907. He became acting head of the company in 1914. James was a man of sound, ethical business practices who valued customers first and employees second, and who put exceptional emphasis on fairness of compensation and humane treatment of his employees. The motto of Lincoln Electric is The actual is limited, the possible is immense (Sharplin, 1989), and the way I interpret this is â€Å"the way things are is not the way things have to be,† which would reflect Lincoln Electric’s progressive, otherminded history and policies. Influence of the Founders: Plans, Performance, and Management Style Lincoln Electric’s management style is, for one, progressive and employee-oriented. When James F. Lincoln became the active head of LincolnShow MoreRelatedLincoln Electric Company : Case Analysis On Company Culture943 Words   |  4 PagesLincoln Electric Company – Case analysis on company culture The Lincoln Electric Company is a shining example of an effective organizational structure. In this analysis, summarized from Arthur Sharplin’s case study from 1989, several different aspects of the culture will be discussed and how they have propelled the company in to success. The first aspects will be the company’s mottos, long standing traditions and way of communication; afterward, the pay structure, including bonus programs and performanceRead MoreAnalysis Of Lincoln Electric Company Of Cleveland Ohio Usa S Organizational Culture877 Words   |  4 PagesLincoln Electric Company of Cleveland Ohio USA`s organizational Culture is exceptional and has earned it the acolade of being the best managed manufacturing company in the whole world. I will explore and attempt to identify culture aspects of Lincoln Electric from several issues such as; the continuing influence of founders of the company, the golden rule, the incentive management plan,the performance appraisal system, how people communicate in the organization, the merit pay plan, the bonus planRead MoreLincoln Electric Company Case Study Study Analysis1026 Words   |  5 PagesLincoln Electric Company Case Study Analysis In this Case Study Analysis, I will identify examples of the types of organizational culture (innovative and stable) that the Lincoln Electric Company has, as well as the benefits and problems the company could experience as a result of these. The idea that stuck out the most about the Lincoln Electric Company is that they obviously have a strong culture that all levels of employees are proud to be a part of. According to Carpenter, Taylor, and ErdoganRead MoreAnalysis On The Lincoln Electric Company Essay948 Words   |  4 PagesANALYSIS ON THE LINCOLN ELECTRIC COMPANY INTRODUCTION The general outlook of The Lincoln Electric Company shows that it was a successful company regardless of the death of James F. Lincoln in 1965. The many college management texts refer to the Lincoln plan as a model of achieving high worker productivity. SUBJECTING THE LINCOLN ELECTRIC COMPANY TO THE ORGANISATIONAL CULTURE ANALYSIS Organizational Culture according to the text book refers to a system of shared assumptions, values, and beliefs thatRead MoreOrganizational Culture Of The Lincoln Electric Company1439 Words   |  6 PagesIntroduction The Lincoln Electric Company is the world’s largest manufacturer of welding machines and electrons. Lincoln employs 2,400 workers in two U.S. factories near Cleveland, OH and approximately 600 in three factories located in other countries. (The Lincoln Electric Company p. 1.) The main focus of this paper is to analyze the organizational culture of this company, by doing so, I will point out the different features, the rules and norms, beliefs and philosophies and the systems implementedRead MoreHrm Lincoln Electric Case1044 Words   |  5 PagesLincoln Electric Case Study Analysis Overview of the Case of Lincoln Electric Lincoln electric established consistent HRM policies to build trust. This has been true since inception. This long history promotes confidence in employees and surety of future reward. Workers average $17,600 per year on standard 32 hour work weeks. They are able to earn about this same amount again in bonuses. This system creates high productivity. Lincoln Electric operates on a system of equality, cooperation, andRead MoreAn Organization s Culture At The Lincoln Electric Company894 Words   |  4 Pagesorganization’s culture may be one of its strongest assets†¦,† (Principles of Management p. 184). Culture at the Lincoln Electric Company exemplifies this statement, and has since 1914. The Lincoln brothers’ attitude towards the employee has helped skyrocket this once small company to the powerhouse that it is today. Examining this outcome oriented company yields a perfect example of how a strong culture can add to the overall bottom line. Outcome Oriented Culture In 1923, the Lincoln Electric Company beganRead MoreAnalysis Of Lincoln Electric s Website878 Words   |  4 Pages117 Years of Excellence; this is the header of the â€Å"Company History† section of Lincoln Electric’s website. I began the analysis at the careers section, looking through a variety of job descriptions and qualifications. The common requirements for management on the site are a Bachelor’s degree (Masters preferred), 5+ years of previous management experience, experience with Lean/Six Sigma tools to create impactful business improvements, proven experience in implementing and/or running an operationRead MoreCase Analysis : Lincoln Electric Company958 Words   |  4 PagesCase Analysis: Lincoln Electric The Lincoln Electric Company is a great example of an organization that has multiple cultures within it. In this week’s reading of chapter 8, we learned about several cultures. The ones that come to mind immediately when referencing Lincoln Electric Company are people-oriented and outcome-oriented. (Carpenter, Taylor Erdogan, 2009, p. 188) Investigating the founders of the company makes it easy to see that Lincoln Electric Company’s founders shared a common visionRead MoreCase Analysis : Lincoln Electric Company Harvard Case Study Essay973 Words   |  4 PagesAssignment Unit 3 Case Analysis of The Lincoln Electric Company Harvard Case Study In this case analysis I will be analyzing and summarizing my understanding of the organizational culture of the Lincoln Electric Company, based on key pointers and a Harvard Case Study by Arthur Sharplin. In my analysis I will be using the framework from chapter eight of the textbook â€Å"Principles of Management† by Carpenter, Bauer and Erdogan to discern aspects of the company’s culture. The company is said to have a distinctive

Genetic Technology free essay sample

# 8217 ; s Impact On Human Freedom Essay, Research Paper Genetic engineering, in specific, enhancement, would greatly better one # 8217 ; s ability to be free. The positive statements that can be made sing this topic are many. However, in order to understand the impacts familial engineering will hold on human freedoms, one must find the significance of freedom. Using the classs of freedom developed by Mortimer J. Adler, one can reason the legion benefits of familial engineering and sweetening. These freedoms include Circumstantial Freedom of Self-Realization, Acquired Freedom of Self-Perfection, and Natural Freedom of Self-Determination. For illustration, Circumstantial Freedom of Self-Realization is dependent on one # 8217 ; s given fortunes. Man has a will # 8212 ; a specific power with a typical activity. Decisions are made in order to achieve the value which is believed to possess the greatest sum of realizable good under the prevailing fortunes. Genetic engineering, in the manner of sweetening, could better one # 8217 ; s state of affairs by pull outing restricting properties, both physical and mental. We will write a custom essay sample on Genetic Technology or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Enfeebling diseases such as diabetes, asthma, and malignant neoplastic disease could be eliminated before birth. Besides, one could be given characteristics and/or abilities that he or she would non hold been given of course, such as strength or mental ability. Therefore, through this procedure, one # 8217 ; s ability to derive Circumstantial Freedom of Self-Realization would be greatly improved. Second, one # 8217 ; s Acquired Freedom of Self-Perfection could besides be farther assisted through familial sweetening. This freedom can be defined as one # 8217 ; s freedom to seek and achieve their maximal potenti Al or to be the best individual one could perchance be. Bosanquet, a 19th century philosopher, refers to this as one’s true ego. The abilities and attributes given to one through familial sweetening, along with the extraction of enfeebling characteristics could supply the agencies necessary to take an easier life. This in bend would let the individual more clip and energy to give to their self-fulfillment and betterment. Following, familial engineering could besides help in the development of one # 8217 ; s Natural Freedom of Self-Determination. In the widest sense, this type of freedom is the absence of external restraint that hinders one from showing his or her ego. In the rigorous sense, this freedom means the absence of an intrinsic necessity or finding in the public presentation of an act. Using this definition of freedom, familial sweetening would extinguish all or most of the external restraints a individual may hold possessed otherwise, leting this individual more freedom. One might reason that supplying the agencies for one to win in an country provides room for unneeded force per unit area. However, the intrinsic finding to win in that country would besides hold to be present. The homo will is a power which determines itself to move or non to move, to move this manner or that manner, as it desires. Through these statements, one can see the huge benefits of familial engineering and sweetening. It would let for Circumstantial Freedom of Self-Realization, Acquired Freedom of Self-Perfection, and Natural Freedom of Self-Determination to be attained more easy. Familial sweetening would profit world in ways that no other engineering has succeeded in to day of the month.

The Impact of the A380 Project on the Financial Performance of EADS Essay Example For Students

The Impact of the A380 Project on the Financial Performance of EADS Essay ? Acknowledgements We would like to express our gratitude to the department for affording us the time and research facilities without which this report would not have been possible. Special thanks go to the head of department Dr. Anders Hederstierna, our supervisor Dr. Britt Aronsson and the course coordinator Dr. Klaus Solberg. Abstract Airbus has been making headlines in the past few months for all the wrong reasons. This iconic European corporation has undergone a turbulent period due to the problems surrounding the Airbus A380 project. A new flagship product that should have curved out an unassailable advantage for Airbus over Boeing went completely wrong. The Airbus A380 aircraft was a ground breaking concept that was meant to push EADS into a unique market segment. Instead, it threatened the very existence of the company and served as a catalyst for major surgery and a complete reorganization of the corporation starting from the top management down to the production floors. Numerous studies have been undertaken that have documented details of the Airbus A380 project and what, how and why it all went wrong. We will write a custom essay on The Impact of the A380 Project on the Financial Performance of EADS specifically for you for only $16.38 $13.9/page Order now The company and other stakeholders have been undertaking drastic steps to try and put the company back on track and ensure the survival of the commercial aircraft business unit. In this study we look at how the problems surrounding the Airbus A380 project have affected the financial health of EADS. The background to the problems and the financial performance of Airbus is studied and presented. A brief discussion of how the data we collected and used for the study and the data that we could not get access to is also presented early in the paper. From the data and analysis, a comparison of the two dominant players in the commercial aircraft manufacturing industry, Airbus and Boeing, is also undertaken. A brief highlight of the financial impact of a project in the computer/consumer electronics industry is also presented. Finally from these data and prior studies on this subject, we have tried to highlight the impact of the project on the short and long term financial direction of EADS. Table of Contents List of Tables6 6 List of Figures7 1 Introduction8 Theoretical Framework14 3 Data Collection25 4 EADS Background and Analysis27 5 Boeing Background and Financial Data50 6 Comparative Analysis of EADS and Boeing 59 7 Other Factors that Affected the Financial Health of EADS69 8 Long-Term Prospects72 9 Comparison to a Project in a different Industry78 10 Conclusions79 81 11 Future Work82 12 Reference List83 List of Tables Table 4. 1 Business Segment Data of EADS 36 Table 4. 2 Consolidated Cash Flow Statements of EADS. 36-37 Tabl e 4. Consolidated Income Statement of EADS.. 40 Table 4. 4 Consolidated Balance Sheet of EADS 40-41 Table 5. 1: Consolidated Statements for Boeing 55-57 Table 5. 2: Income Statements for Boeing. 57-58 Table 5. 3: Consolidated Cash Flow Statements of Boeing 58-59 Table 8. 1: The Order Book for A380 Aircraft 76-77 List of Figures Figure 4. 1: EADS stock ownership. 29 Figure 4. 2: EADS management structure.. 31 Figure 4. 3: Airbus management structure 32 Figure 4. 4: EADS divisions and revenue. 34 Figure 4. 5: EADS share price (25 Nov 05 to 25 Jun 07)†¦. 49 Figure 5. 1: Boeing distribution of stock. 51 Figure 5. 2: Boeing divisions, revenue and activities.. 52 Figure 5. 4: The management structure of Boeing.. 54 Figure 6. 1: Working Capital Boeing Vs EADS 61 Figure 6. 2: Revenue Boeing Vs EADS 64 Figure 6. 3: Airplane Delivery Boeing Vs EADS. 65 1 Introduction The commercial aircraft industry requires huge capital investments in manufacturing and research and development. This is a very competitive sector where industry consolidation has resulted in the emergence of two major players from either side of the Atlantic, EADS in Europe and Boeing in the United States of America. The two form a duopoly with market leadership in the sector largely rotating between these two corporate giants depending on the market dynamics. Commercial airlines and other air transport operators form the bulk of the customers. Governments are also important customers. The government involvement in the sector extends to investing, supporting (Aboulafia, Richard, 2000; O’Neal, Michael, 1990) and regulating. Any problems in the industry have implications that go well beyond the confines of the affected companies. Governments therefore subsidize and invest in aircraft manufacturing and research and development. This also serves to protect the highly skilled jobs in this sector and ensures that the respective countries remain technologically competitive (Wall, R. Sparaco, P, 2007). Big companies play an important role in the economics of the countries they operate in. They influence the conditions in the industries and directly impact employment rate in the countries where the manufacturing takes place. EADS and Boeing are the leading competitors in the aircraft manufacturing industry and demonstrate the high level of political interest in this sector and the way governments try to influence the business decisions made by such corporations (Wall, Robert Jens, Flottau 2007; Barrie, Douglas 2007). 1. Problem Definition Airbus is a subsidiary of EADS that has been a global leader in the manufacture of commercial aircraft. The launch of the A380 aircraft project was expected to become a huge success and elevate EADS to a new level of market domination. But following production delays and the cancellation of some orders for the A380 aircraft by some customers, the company found itself in a difficult position. The failure of a challenging project such as the A380 project can have far reaching financial consequences that could lead to bankruptcy. It could also serve to expose weaknesses and inefficiencies in the structure of an organization that could be a major hindrance to the success of a company. The popular media and professional journals have been full of news and articles concerning the problems with the A380 aircraft and Airbus in particular. The list of problems include workforce discontent, possible reduction in production activities, delivery delays, customer dissatisfaction and a lack of new orders, to mention only a few. The complex set of problems extends to the influence EADS has that can cause significant economic problems in the concerned countries. Numerous studies and articles have been written about EADS and the A380 project that catalogue the various organisational, technical and financial problems associated with the manufacture of the A380 super-jumbo aircraft. A systematic evaluation of the financial consequences of the project has not been carried out. 1. 2 Purpose The purpose of this research work is to evaluate the impact of the A380 project on the financial health of EADS. The following questions will be addressed: In the short run, what effect has the A380 project had on the financial performance of EADS? In the same period, what was the financial performance of Boeing, the direct competitor of EADS? Should EADS continue supporting the A380 project with additional financing? What long term financial impact will the A380 project have on the future of EADS? Finally, in order to fulfil the purpose we will also briefly discuss other factors that influenced the financial health of EADS, in addition to the A380 project 1. 3 Research Methodology The first stage of this research will involve reviewing the information that is available about the aircraft manufacturing industry with a focus on information about EADS and Airbus. Our focus will be on financial information. As a public company, EADS is obliged to publish financial data about the corporate structure and financial information containing revenues, profits and sales orders per EADS division such as Airbus. The A380 has been a major project at EADS for the past few years that has taken substantial preparations and investments amounting to significant annual expenditures (Thomas, J. , 2001; Gummesson, E, 2006). The main thrust of our research will be quantitative for aspects where we shall obtain the financial data needed to do the analysis. We shall also employ a qualitative approach to evaluate the leadership and organizational structure at EADS. To evaluate the financial impact of the A380 project on EADS, our primary focus will be on financial and ratio analysis of the company. We will examine the financial statements from EADS. This quantitative analysis will include the period from 2004 to 2005 that preceded the initial announcements delivery delay of the A380 as well as the period following the announcements, from 2006 to the first quarter of 2007. To analyze the changes in profits, revenues and cash flows, we will perform a comparative analysis of the years from 2004 to 2006 and evaluate the first quarter of 2007 in comparison to the first quarter of 2006. We will explore what influence the Airbus A380 project has had on the financial health of EADS. In order to get a clearer picture of the financial health of EADS, we will compare the financial performances of EADS and its main competitor, Boeing. The financial statements of Boeing Company are also generally available as it is a public corporation. Boeing has a similar structure, is engaged in the same activities and is comparable in size with EADS. Boeing also operates in the aircraft manufacturing industry, with its commercial aircraft unit also being the major part of the company’s activities. Therefore, the cross-company financial analysis between EADS and Boeing will provide some useful insights into the scale of the finanicial problems. Some A380 aircraft customers have already cancelled their orders and moved to Boeing instead. Since these two companies form a duopoly, most customers that leave EADS for Boeing increase the market share for Boeing. The foreign currency exchange rates between the US dollar and the euro have had an impact on the competitiveness of EADS. The manufacturing plants of EADS are located in Europe. The basic bills are paid in Euros (salaries, taxes etc), while customers outside Europe settle their contractual obligations in US dollars. The lead time between contractual agreements and actual aircraft deliveries, coupled with fluctuating US dollar versus euro exchange rate influence the financial performance of EADS. Depending on the direction the change takes, it can add to the losses from the A380 project, especially with the lead time from the date of agreement to the date of delivery being stretched by the delays The US dollar to euro relationship is therefore an area of interest, we will therefore analyze trends in exchange rates and evaluate its impact on EADS. We will also evaluate trends in stock prices of EADS and compare them to ones of Boeing. This will allow us to see how the market value of the company was affected by the A380 crisis and delivery delays. The market values of stocks are important indicators of financial stability and are of special interest to investors. Trends in the stock price will also show the possible direction of the company. A review of the financial position of EADS, that will include cash flows, revenues in total, total revenues and profits, revenues and profits by divisions in the period starting from 2005 to 2007 (both within the company and in comparison with Boeing), together with review of stock prices and exchange rates in 2005-2007, will help paint the picture of the A380 project impact on the short run financial performance of EADS. Evaluation of trends in profits and cash flows of EADS and review of order and delivery book of Airbus, the major source of revenues and cash flows for EADS will reveal the possible future direction of the company. Upon reviewing the trends in financial position of EADS (through ratio analysis) and examining the order or delivery book of Airbus, taking into account that this type of business involves cash transfers and recognition of revenues upon fulfilment of contracts, we will be able to determine how much of a burden the A380 project is for EADS and if the company can carry on without significant financial reorganization. Finally, we will briefly examine other factors which could additionally influence financial health of EADS. The corporate structure and leadership issues have important bearing on the operations of a company and could also influence financial state of a company. Our evaluation will be based on information from the companies on the existing organizational structures and scientific articles where available. Among others, the following issues will be examined: the composition of the Boards such as the number of independent directors and how focused the Boards are on business activities and how independent they are when making decisions. This will give us some insight into the efficiency of EADS as an organization, which has an indirect influence on profitability as well. The dynamics of exchange rates influence financial health of EADS as the company is based in Europe but sells big part of its products overseas. We will use data on exchange rates obtained from business media sources for this analysis. 1. 4 Possible Limitations We will be unable to accurately estimate certain values without sufficient data. This is a complex case, with several interrelated issues. We will use the available data. The available data will be sufficient to make qualitative conclusions as is usual in case studies. For example, without knowing the values of discounts offered to some customers, the values of penalties incurred, the impact of some customers exercising the option to buy alternative aircraft from Airbus, we may be unable to make exact quantitative conclusions on losses and net cash outflows from the project. We cannot definitely determine sources and values of external (from other projects) financing for the A380 project. We would liked to look at the A380 project appraisal (preferably with more comprehensive appraisal method, like NPV), but it will not be possible to do this as we will lack exact data necessary for this type of evaluation. The A380 project is an evolving story that has new developments all the time. The data from primary data that we sourced from some company’s websites may be skewed in favour of the respective companies as there is tendency for companies to put emphasis on positive information. 2 Theoretical Framework 2. 1 Introduction According to Brealey et al, 2006, managers are agents of the owners of the company, the shareholders. The manager’s main goal is to increase the value of the shareholders’ wealth. The board of directors are part of the corporate governance system and are meant to oversee the performance of the managers and strategic direction of the company. The board ensures that the managers are adequately compensated for the day to day running of the corporation and have the mandate to replace the managers if they do not deliver shareholder value or , among other reasons do not conduct the operations ethically or legally. There are several methods to evaluate potential success of a project in a company. This is an important step. In a large company and/or if a significant investment opportunity is considered, investment appraisal methods, such as NPV (Net Present Value) are applied. To analyse the impact of the A380 project on EADS, our approach was to look at the problem from three angles: the financial angle, the organisation structure (leadership and governance) and to compare EADS to a similar organisation. The theoretical foundations that we base our analysis on are described in the following sections of this chapter. . 2 Assessment of the Financial Health 2. 2. 1 Financial Statements – Ratio Analysis Potential investors, as well as other interested parties, always analyze past/present financial performance of a company before making investment. This is necessary to evaluate possibility of future returns. Trends in profits and cash flows of past few years not only show how effective was a company in the post, but can also indicate future direction of a company. Probably the best way to evaluate possible return from investment is by analyzing data available from financial statements of a company (40). The major financial statements are: Statement of Balance Sheet, Statement of Cash Flows and Income Statement. Income Statement is intended to disclose revenues and expenses, as well as profits of a particular period. It should be noted, that profits are often different from cash flows, as items like depreciation of fixed assets are not taken into account in net cash flow calculations, but they do influence profits. Statement of Balance Sheet shows the financial position of a company at a particular point in time. Namely, it shows the values of assets (both current and non-current), liabilities (both current and non-current) and equity. Following balance of Balance Sheet components is always maintained, if the statement is correctly prepared: Assets-Liabilities=Equity Statement of Cash flows discloses the way all cash resources have been used throughout a particular period of time. Cash Flow Statement consists of three basic parts: Cash Flows from Operating Activities, Cash Flows from Investment Activities and Cash Flows from Financing Activities. Income Statement, Statement of Balance Sheet and Cash Flow Statement can be analyzed to find out how effective the performance of a company in the past was and to forecast, what can be expected in the future. It should be pointed out, that basic financial statements of listed (parent) companies are readily available to general public (through company web sites, etc), while financial statements of subsidies (â€Å"daughter† companies), like Airbus, usually are not readily available. A. Millichamp, 1997, suggests three methods for assessing financial performance. Each figure (or number) in the financial statement should be compared with: 1) The corresponding figure of previous statements 2) The corresponding forecasted (budgeted) figure 3) The corresponding figure of another company in the similar business While comparison of subsequent statements of a company is important (to see improvements/backward steps etc), it is sometimes even more important and interesting to see how well a company is performing in comparison with direct competitor (e. g. in our case Boeing vs. EADS). The first method of assessment shows trends within a company, while cross-company evaluation shows if those steps are more effective than the ones taken by a competitor. Third method of an evaluation (i. e. comparison with budgeted values), while definitely being important, usually cannot be performed by an outsider, as budgets (i. . internal data) are rarely disclosed by companies. While comparison of absolute values of financial statements is often performed, comparison through financial ratios is frequently more relevant. Many financial values are inter-related. Besides, some trends are better seen through relative analysis of values, for instance, when two companies construct their financial statements in dif ferent currencies. Boeing does this in US dollars while EADS uses the euro. According to Williams et al, 2005, (p606): â€Å"Ratio is a simple mathematical expression of the relationship, of one item to another. .u69e1382ecf5ca546a058109ffc84c791 , .u69e1382ecf5ca546a058109ffc84c791 .postImageUrl , .u69e1382ecf5ca546a058109ffc84c791 .centered-text-area { min-height: 80px; position: relative; } .u69e1382ecf5ca546a058109ffc84c791 , .u69e1382ecf5ca546a058109ffc84c791:hover , .u69e1382ecf5ca546a058109ffc84c791:visited , .u69e1382ecf5ca546a058109ffc84c791:active { border:0!important; } .u69e1382ecf5ca546a058109ffc84c791 .clearfix:after { content: ""; display: table; clear: both; } .u69e1382ecf5ca546a058109ffc84c791 { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .u69e1382ecf5ca546a058109ffc84c791:active , .u69e1382ecf5ca546a058109ffc84c791:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .u69e1382ecf5ca546a058109ffc84c791 .centered-text-area { width: 100%; position: relative ; } .u69e1382ecf5ca546a058109ffc84c791 .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .u69e1382ecf5ca546a058109ffc84c791 .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .u69e1382ecf5ca546a058109ffc84c791 .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .u69e1382ecf5ca546a058109ffc84c791:hover .ctaButton { background-color: #34495E!important; } .u69e1382ecf5ca546a058109ffc84c791 .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .u69e1382ecf5ca546a058109ffc84c791 .u69e1382ecf5ca546a058109ffc84c791-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .u69e1382ecf5ca546a058109ffc84c791:after { content: ""; display: block; clear: both; } READ: Should Racist Speech Enjoy Protection under the Fi EssayEvery percentage may be viewed ad a ratio-that is, one number expressed as a percentage of another†. 2. 2. 1. 1 Ratio Analysis Assessment of three basic types of activities can be conducted to evaluate overall financial performance of a company (35). Changes since previous period show short term improvements/steps backward, while overall trends in years can also indicate what can be expected in the future. These three activities are: Liquidity, Profitability and Gearing/Leverage. It should be noted, though, that this is not a strict classification and some ratios may â€Å"belong† to more than one perform ance appraisal subgroups. For better representation of subsequent statements, they are usually placed next to each other and percentages of each corresponding values are also given. 2. 2. 1. 2 Liquidity Measures Liquidity of a company refers to its ability to manage short term obligations. Short term obligations are those ones, which should be repaid within a year. In other words, it is an ability to repay current liabilities with available current assets. Current assets are assets readily convertible into cash. While current liability is an obligation which should be settled within a year. The basic term often used in relation to Liquidity is Working Capital. Simply, it is an excess of current assets over current liabilities. Basic ratios used to assess liquidity of a company are: 1) Current Ratio=Current Assets/Current Liabilities It is a measure of how well are current liabilities covered by current assets. To some extent, the more it is (hopefully over 1. 5), the better it is for a company, but too high Current Ratio may imply that current assets are not entirely utilized. 2) Quick Ratio=(Current Assets-Inventories)/Current Liabilities It is a similar measure to Current Ratio, but with the exclusion of inventories-the least liquid current assets. Sometimes it is a more relevant measure. Again, a value of Quick Ration in excess of 1 is usually expected, but it varies from industry to industry. 3) Working Capital Cycle is considered to be an important illustrative measure of Liquidity. It is calculated in days/months. By Working Capital Cycle we measure the period from the date purchase of raw materials to the date of cash collection from products manufactured from those materials. Working Capital Cycle equals: Period to collect cash from customers+ period to turn over inventories- period to settle trade liabilities Days to collect cash from customers= (Average Receivables/Sales Revenues) x 365 Days to turn over inventories = (Average Value of Inventories/Cost of Sales) x 365 Days to settle trade obligations = (Average Payables/Cost of Sales) x 365 If average values are not available, year end values can also be used. Generally, the shorter is the Working Capital Cycle, the better it is for a company, as it is an indicator of effective performance. 2. . 1. 3 Profitability Measures Profitability ratios can help us evaluate trends in profitability and help us find out if a company earns sufficient profits in comparison with available resources. One thing should be noted here. If a company has a very high profitability but low cash balance, it can lead to a collapse-company can run out of cash. It is called Overtrading. On the other hand, excessive cash balance wi th corresponding low profitability is an indicator of Overcapitalization-sign of inefficient use of available resources (assets do not generate sufficient profits). Trends in Profitability can be measured both in absolute terms and with the use of ratios. Following measures are used: 1) Gross Profit Percentage: Gross Profit/Sales Revenue It is an indicator of what is percentage of Gross Profit from Sales Revenue Earnings per Share: Earnings for Ordinary Shareholders/Number of Outstanding Shares is an indicator of earnings for one share. Two important measure of profitability are also used to evaluate the efficiency in use of assets and equity to generate profits. Return on Equity = Net Profits/Value of Equity Return on Assets = Operating Profit / Value of Total Assets Maintenance of high levels of profitability is the primary objective of a company. It is a sign of relatively safe continuity. But as it was stated above, high levels of profitability should not be confronted with low Liquidity. 2. 2. 1. 4 Measures of Gearing and Leverage By Gearing we mean the ability of a company to meet long term debt obligations. Debt composition of Balance Sheet is an important indicator of Gearing. Higher share of long term debt in comparison with to equity is an indicator of higher Gearing. While, generally, long term debt is considered to be the least expensive source of finance (less expensive than common stock issue), too much reliance on debts puts accompany into danger, as interest on debt should be repaid (unlike dividends) regardless of profitability level. Good indicator of Gearing is the Debt Ratio: Debt Ratio= Total Liabilities/Total Assets Another indicator of Gearing is Interest Cover: Interest Cover= Profit before Interest and Tax/Interest Expense The higher it is, the easier it is for a company to settle its long term debt interest. This ratio is also related to Liquidity of a company. All above mentioned ratios are calculated from Statements of Balance Sheet and Statements of Income. Additionally, examination of Cash Flow Statements can reveal how cash is used in a company, which items of the statement are seem to generate more/less cash than was expected and by how much has cash decreased/increased in the considered period. 2. 2. 2 Limitations of Financial Evaluations using Ratios Financial analysis through ratios is an important and useful method to evaluate financial performance of a particular company. But this type of evaluation has its limitations. One can never make convinced conclusions purely based on ratio analysis. One of the reasons can be so called â€Å"window dressing†, i. e. a case when a company intensively â€Å"improves† performance by the end of accounting period to make year end financial statements look â€Å"attractive†. This can lead to incorrect assessment of a company. Besides, measures used in financial analysis are relative measures, which indicate to relative changes and therefore do not always allow us to make absolute judgments on companies (Millichamp A, 1997; Williams R. t al, 2005). Nevertheless, comprehensive (including cross-company) evaluation of company performance through financial ratios can disclose not only past problems of a company but even allow us make forecasts on future financial health of the company. This evaluation is well supplemented by other non-ratio financial indicators, like stock price trends and (where rele vant) trends in currency exchange rates. 2. 2. 3 Stock Prices The wealth of shareholders in a company is generated from: 1) Dividends received; 2) Market values of shares Return from investment to shareholders can be generated from both received dividends and from capital gain due to increase in value of shares. Very important measures a company value is market value of all its outstanding shares. In order to increase the value of a company, management should achieve high profits so that it could distribute higher dividends and insure high values of shares (to allow higher capital gains). When market value of shares is low, the possibility of takeover from an outsider company is more likely. What is also significant, value of shares and trends of share prices are very important indicators of a company financial health for a potential investor. It is taken into account together with financial statements of a company (Millichamp A. 1997, Brealey R. et al, 2006). 2. 3 Additional Factors that can affect the Financial Health In this section we look at other factors that can have a bearing on the finances of EADS as factors like corporate structure, leadership and foreign exchange rates can have an influence on the financial stability of a company or indirect impact on projects within a company. The indirect influence of factors like corporate structure and leadership is reflected in the ability to avoid or reduce the negative impacts caused by a project while fluctuations of exchange rates can magnify losses or profits from projects when exchange rates are either favorable or unfavorable. However, the primary purpose of this thesis is to look at the impact of the A380 project. 2. 3. 1 Leadership The corporate culture, leadership and governance of a corporation influences the way the success of a company. Dubrin A. , (2007) has further catalogued the types of leadership characteristics that are needed for organisational success. These are especially relevant in organisations of the scale and complexity of EADS or Boeing that depend on the creativity and the innovation of the workforce. Dubrin also describes leadership traits needed to effectively manage international or geographically dispersed companies that are also culturally diverse are also. Other characteristics that have relevance to our subject matter relating to Airbus and EADS include teamwork, leadership development, succession and transformational leadership skills are required to lead an organisation through a crisis. This list is not exhaustive, it only seeks to provide a brief background to some of the leadership failures that could have led to the problems at Airbus, impacted on organisational efficiency and subsequently translated into financial woes for the company. 2. 3. 2 Corporate and Governance Structure Organizational structure can play a vital role in the performance of a company. The way the board of directors coordinate performance of top management and the manner it communicates with groups of shareholders is often as important as contemporary financial health of a company. The central role in organizational structure belongs to board of directors which usually consists of 8-15 members in a large corporation. The board should be independent to ensure independent and objective reporting and decision-making of the board (15). According to Walter J. Salmon: â€Å"Inside directors are often too committed to tradition and their new ideas. Outside directors, without independent sources of information are usually only capable of anaemic discussion and dissent. The result: consumers, competition, technology, and the economy may all change, but the company fails to keep up† (15, p4). According to Walter J. Salmon, a board of 8-15 members is optimum, with at least 2/3 of it being outside directors. An empowered board (15) has the ability and independence to monitor activities of management and to influence top management to revise their activities if their performance does not correspond to the strategic direction of a company determined earlier. The board should monitor the performance of the CEO and interfere if the company moves in the wrong direction to improve things before further damage occurs. The following steps are essential for Board empowerment (15): Directors receive independent and competent information on the performance of a company in the most easy-to-understand format The board consists of independent, competent members. It is an integrated board. Members of the board freely and frequently communicate with each other The board members also monitor the performance of the board itself. They set objectives for themselves and try to achieve them. 2. 3. 3 Governed Corporation vs. Managed Corporation According to John Pound, there are two types of organizational structures: a governed corporation and a managed corporation. The board of directors has a passive role in a managed corporation. Its main tasks are monitoring and selection and appointment of top management. The managers retain all leadership and decision-making rights (15). It is not considered to be the best governance model nowadays. Today many problems of large organization do not stem from power imbalances, but rather from poor decision-making. The governed corporation model proposed by John Pound is designed to remove the imbalances of the managed corporation model. It is centred on the decision making process in the company. The board of directors, top management and shareholders are more integrated and share responsibilities in decision making and formulation of the strategic direction of a company. Managerial duties are retained by CEO’s, but the board is not a passive onlooker. 2. 3. 4 The Impact of Foreign Exchange Rates Exchange rate of a currency is a rate at which one country’s currency can be traded in exchange to another country’s currency. Basically, exchange rate is determined by supply and demand of currencies at exchange markets. Following factors influence exchange rates: Government policy to influence exchange rates (limitation of maximum exchange value etc) Interest rates in the countries of those currencies The rates of inflation in those countries Trends in exchange rates (Euro to Dollar) can become a source of troubles for both importers and exporters of products, because â€Å"actual† amount received by them can fluctuate as exchange rates vary (35). There are some measures to be taken in order to avoid or reduce negative influence of exchange rates: 1) Contracts can be agreed in local currencies (Euro, in case of EADS) 2) Outsourcing of some activities can be done, i. . a company, operating in foreign country can deal with local suppliers-sell products manufactured from local supplies to local market etc. The danger, regarding exchange rates, for an importer is that enough revenues in local currency should be earned so that upon exchanging domestic currency, expected value is obtained (Brealy R. , 2006) To reduce impact of negative excha nge rates, following measures can be taken: Matching of receipts and payments should be made. This implies offsetting payments in one currency, with receipts in the same currency Company can also make forward exchange contracts. It implies fixed exchange rate for the future cash transfers to/from importer/exporter. Employing options for future contracts Employing hedging. For instance, an exporter can hedge against exchange risks by converting foreign currency into domestic one at the spot rate 3 Data Collection The financial data used for this study was obtained from the statements published EADS and The Boeing Company. They are listed companies whose stock is traded publicly. They are therefore legally bound to publish this and other information for the benefit of stakeholders. This data included: Annual reports containing: Income statements, cash flows, financial statements/position, statements of operations, segment information and statements on shareholders equity. Stock price data was also available from the company’s websites. Additional information was obtained from the Annual Reports published by the European Union Transport Commission on airplane manufacturers, EADS and Boeing. Statistical information published by the United States Department of Transport Federal Aviation Administration was also examined. The financial data was used in the ratio and other financial analysis, we employed a quantitative method for this data. Additional information about the aeronautical industry in general and EADS, Airbus, the A380 project and The Boeing Company in particular was sourced from scientific journals and articles that are listed in the references section. Our requests for detailed and specific information about the A380 project such as details about the feasibility studies, financial and cost projections (the method and data applied for investment appraisal), and the organization of the project team did not bear fruit. We did however obtain information about the expected number of airplanes to be delivered over the lifetime of the project and the number of airplanes needed to be delivered for the project to breakeven. Other data that we could not obtain was pricing information of the airplanes the financial value of the penalties incurred when planes were not delivered, the value of the discounts and the value of the options that Airbus negotiated with customers for them to buy alternative aircrafts if they did not wish to wait for the A380. Information on leadership, governance and organizational structures of EADS and Boeing was obtained from the companies-this data is available to general public. We employed a qualitative approach to analyse and compare the leadership, governance and organizational structures of these two organizations. 4 EADS Background and Analysis 4. 1 Background and Corporate Structure European Aeronautic Defence and Space Company, EADS, is one of the largest aerospace corporations in the world. It was formed in July, 2000 after a merger of French company Aerposspatiale-Matra, Spanish company Construcciones Aeronauticas (CASA) and German company Daimler-Chrysler Aerospace AG (DASA). Currently there are 800 million EADS shares outstanding. 30% of the share capital is held by French shareholders, 22. 5% by Germans, 5. 5%-by Spanish shareholders and the rest of shares are held by various minority shareholders. The diagram below shows the EADS stock ownership. Figure 4. 1: EADS stock ownership The EADS Board of Directors consists of a maximum of eleven members appointed and removed by the shareholders’ meeting. EADS has two chairpersons and Chief Executive Officers. The Board of Directors determines the manner of appointment and the responsibilities of the Chairmen and the Chief Executive Officers. As of December 2006, EADS had over 116,000 employees. The management structure with the extension to Airbus is shown below. The corporate governance of EADS reflects the complexity of the company. EADS is a multi-national company, with significant shareholding from governments or state agencies. In order to balance the requirements of the different large shareholders, the company has two Chief Executive Officers (CEO’s). One of them is nominated by Daimler-Chrysler group and the second one is chosen by SOGEADE group. There are 10 directors in the Board of Directors at EADS. Similar to nominations of CEO’s, four members of the board are nominated by German Daimler-Chrysler and four other inside directors are nominated by SOGEADE (i. e. French and Spanish) group. There are two independent directors, one of them nominated by Daimler-Chrysler and second one by SOGEADE. The directors nominated by Daimler-Chrysler elect one CEO, while the second one is elected by SOGEADE. The Board of Directors appoints two chairmen (again, chosen by two large stakeholders). In case of dispute between two CEO’s the issue is transferred to the chairmen. Figure 4. 2: EADS management structure Figure 4. 3: Airbus management structure Manufacturing, production and sub-assembly of parts for the Airbus aircraft are distributed around 16 sites in Europe, with final assembly in Toulouse in France and Hamburg in Germany. These locations are: The EADS centers of excellence are organized as follows: The UK has 2 locations specializing in wings and electrics .uf6eff859ff7c041ef95977e79146b0d7 , .uf6eff859ff7c041ef95977e79146b0d7 .postImageUrl , .uf6eff859ff7c041ef95977e79146b0d7 .centered-text-area { min-height: 80px; position: relative; } .uf6eff859ff7c041ef95977e79146b0d7 , .uf6eff859ff7c041ef95977e79146b0d7:hover , .uf6eff859ff7c041ef95977e79146b0d7:visited , .uf6eff859ff7c041ef95977e79146b0d7:active { border:0!important; } .uf6eff859ff7c041ef95977e79146b0d7 .clearfix:after { content: ""; display: table; clear: both; } .uf6eff859ff7c041ef95977e79146b0d7 { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .uf6eff859ff7c041ef95977e79146b0d7:active , .uf6eff859ff7c041ef95977e79146b0d7:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .uf6eff859ff7c041ef95977e79146b0d7 .centered-text-area { width: 100%; position: relative ; } .uf6eff859ff7c041ef95977e79146b0d7 .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .uf6eff859ff7c041ef95977e79146b0d7 .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .uf6eff859ff7c041ef95977e79146b0d7 .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .uf6eff859ff7c041ef95977e79146b0d7:hover .ctaButton { background-color: #34495E!important; } .uf6eff859ff7c041ef95977e79146b0d7 .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .uf6eff859ff7c041ef95977e79146b0d7 .uf6eff859ff7c041ef95977e79146b0d7-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .uf6eff859ff7c041ef95977e79146b0d7:after { content: ""; display: block; clear: both; } READ: Ted Bundy (1453 words) EssayGermany has 7 locations specializing in cargo and cabin customization, forward and aft fuselage, vertical tail plane and electrics France has 4 locations working on nose and center fuselage And finally Spain has 3 locations that specialize in horizontal tail plane and A380 rear fuselage sections and belly fairing The major assembly and production is carried out in French and German factories and basic production associated with civil and military aircrafts. Besides aircrafts, EADS manufactures helicopters (it is the biggest helicopter producer in the world), satellites, missiles and other products. Airbus is a subsidiary and most important part of EADS and is involved manufacturing civil aircrafts. It is a direct competitor to the American aircraft-manufacturing company, Boeing. Airbus is a private company that is wholly owned by EADS. It has been the major generator of revenues and profits as well as cash for EADS. See the chart below that shows the size of the EADS divisions in terms of activity and revenue. Figure 4. 4: EADS divisions and revenue 4. 2 Airbus Airbus SAS is a subsidiary company of the EADS group and as stated earlier the company is one of the leading manufacturers of commercial aircrafts in the world. The main competitor of Airbus is The Boeing Company. Airbus recently increased its market share after obtaining larger number of orders and propelling it to number one in aircraft manufacturing and sales share. Airbus is a pan-European company that was founded in 1970. EADS initially had an 80% stake in Airbus with the remaining 20% held by the British company BAE Systems. In April 2006 BAE Systems sold its 20% stake to EADS through a put option, making EADS the sole owner of Airbus. The company manufactures aircraft components in four European countries: France, Germany, Spain and UK. Approximately 57,000 people are employed by Airbus. The company was formed as a European competitor to American aircraft manufacturing giant, Boeing. The first aircraft was manufactured by Airbus in early seventies but aircrafts of EADS had not been popular until 1981. Only after the launch of the A320 model in 1981 the company established itself as an important player in aircraft production business. Thereafter, the number of orders for aircrafts has been increasing significantly. Airbus manufactures the A300 range of aircrafts. Its smallest aircraft can accommodate 100 passengers. Recently it started the development of the A380 aircraft touted to be the biggest civil aircraft in the world with capacity to carry up to 850 passengers. Airbus competes with Boeing in similar aircraft market segments and also has different planes intended for different groups of customers, mainly airlines. 4. 2. 1 The Airbus A380 Project The A380 project was launched in December 2000. Jurgen Thomas was a Senior Vice President in the Large Aircraft Division of Airbus and gave a lecture that gave pertinent insight into factors that are taken into consideration when this project was undertaken. The following paragraphs summarise that lecture and present a background to the A380 project from its conception. The A380 was going to be the biggest aircraft ever built. It was meant to open up a new segment by addressing the changing market needs, congestion at the hub airports being one. With the environment having gained a profile, the A380 was designed with low emissions and low noise. The project took five years of preparatory development and testing that cost over US$600 million. The development cost was projected at US$10 billion and a tax windfall of 3 billion euro in Europe alone and induced worldwide employment creation of about 200,000 jobs. It was also going to give Airbus a foothold in all commercial aircraft market segments meant to challenge and surpassing Boeing in the over 500 passenger carrier aircraft segment as well. The innovative manufacturing processes and novel materials required for the aircraft meant that there were however, going to be little or no synergies between the manufacturing of the A380 and the other Airbus families of aircraft. Other factors that promised success for the project included the growth in air traffic that was twice the industrial average, increasing revenue per passenger, ground and air congestion and the availability of new technology to improve the economics of operating large aircraft (11,15). The aircraft had 50 firm orders immediately after it was launched. The market for the A380 was projected to be 1235 aircrafts, 8% of all commercial aircraft deliveries and worth around US$77. 4 billion. Numerous tests involving potential customers around the world were carried out. The A380 is the biggest civil aircraft in the world and is produced by Airbus with a capacity to carry between 555 and 850 passengers. The development of this aircraft was probably one of the most significant and expensive project in the history of Airbus. Before the development of this plane, it had been assumed that due to growing number of long-distance flights and corresponding increase in fees paid by airlines per landing, it was reasonable to construct a double-deck, large capacity aircraft. That type of plane would have been capable of minimizing the operating costs for airlines especially on long haul flights such as between Europe and the USA. The average price for one A380 was estimated to be US$ 290 million, making it, by far, the most expensive aircraft in the world. The first orders for the plane were received in late 2001 from Emirates Airlines for seven aircrafts. Further orders followed soon and the company seemed to be very successful in attracting new customers. In 2006, the first test flight took place. 4. 2. The A380 Project Crisis In order to become successful, the company needed to fulfil its delivery and manufacturing obligations to customers. That did not happen. In June 2005, Airbus announced that due to technical problems, mainly problems attributed to internal wiring in aircrafts, there were going to be delays in the delivery of the A380 to customers. Initially, the delays were scheduled to last six months. But on 13 June 2006, Airbus announced anoth er delay of further six to seven months. This caused major shifts in the delivery schedule. The company was not going to supply the promised quantity of aircrafts on time in the following years. As a result of delays the chief executive officers (CEO’s) of both EADS and Airbus resigned. The EADS share price fell by 26%. The effect the announcement of delays to the delivery of the A380 had on the stock is illustrated in figure 5. 2. Existing customers began to express their discontent and some of them cancelled the contracts with Airbus and chose to place new orders with the rival, Boeing instead. Airbus set up a research group to analyse the problems and find a way out of the crisis. Upon completing its internal review, the Airbus crisis research group decided that further delays in manufacture were unavoidable and on 3 October 2006 the new delayed schedule for delivery was announced. This meant further delays to airlines. For instance, the first A380 aircraft to Singapore Airlines is now expected to be delivered in October 2007. In November 2006 and in March 2007 FEDEX and UPS opted to abandon Airbus and chose 747 and 777 aircrafts from Boeing. The 747 and 777 planes do not have similar specifications to the A380. EADS is currently trying hard to retain the existing customers and orders. It has also tried to maintain its market share by allowing substantial discounts to existing and new customers. Heavy losses and significant cash flow shortages are affecting EADS now. 4. 3 Financial Analysis EADS The following tables contain EADS’ financial data that is used in subsequent ratio analysis and in the chapter comparing EADS to Boeing. Table 4. 1 Business Segment Data of EADS EADS Consolidated Cash Flow Statements(In Million Euros, for Years Ended by 31 December) 2006 2005 Profit for the Period Attributable to Equity Holders of the Parent (Net Income) 99 1,676 Profit Attributable to Minority Interests 16 4 Adjustments to Reconcile Profit for the Period (Net Income) to Cash Provided by Operating Activities Depreciation and Amortization 1,691 1,653 Valuation Adjustments and CTA Release 426 261 Deferred Tax (Income)/ Expense -193 386 Change in Tax Assets, Tax Liabilities and Provisions for Actual Income Tax -160 63 Results of Disposal of Non-Current Assets -336 -170 Results of Companies Accounting for by Equity Method -152 -210 Change in Current and Non-Current Provisions 2,150 175 Change in Other Operating Assets and Liabilities -143 1,239 Cash Provided by Operating Activities 3,398 5,107 Purchase of Intangible Assets 2,708 -2,818 Proceeds from Disposal of Intangible Assets 76 101 Acquisition of Subsidiaries and Joint Ventures -82 -131 Proceeds of Disposals of Subsidiaries 86 89 Payments for Investments in Associates and Other Investments and Long Term Financial Assets -421 -659 Proceeds from Disposals of Associates and Other Investments in Long Term Financial Assets 813 485 Dividends Paid by Companies Valued at Equity 46 36 Increase in equipment of Leased Assets -147 -40 Proceeds from Disposal of Leased Assets 215 256 Increase In finance Lease Receivables -16 -219 Decrease in Finance Lease Receivables 79 85 Disposal of Non-Current Assets/Disposal Groups Classified as Held for Sale and Liabilities Directly Associated with Non-Current Assets Classified as Held for Sale 690 0 Change of Securities 3,357 1,008 Change in Cash from Changes in Consolidation 0 12 Cash Provided by Investing Activities 1,988 -1,795 Change in Long-Term and Short-Term Financial Liabilities 784 -344 Cash Distribution to EADS Shareholders -520 -396 Dividends Paid to Minorities -16 0 Payments Related to Ability for Puttable Instruments -2,879 -93 Capital Increase 94 187 Purchase of Treasury Shares -35 -288 Cash Used for Financing Activities 2,572 -934 Effect of Foreign Exchange Rate Changes and Other Valuation Adjustments on Cash and Cash Equivalents -57 17 Net Increase in Cash and Cash Equivalents 2,757 2,395 Cash and Cash Equivalents at the Beginning of Period 5,386 2,991 Cash and Cash equivalents at the End of Periods 8,143 5,386 Table 4. 2 Consolidated Cash Flow Statements of EADS 2006 % 2005 % 2004 % Dev(05-06) Eu ro % Revenues 39,434 100 34,206 100 31761 100 5,288 15 Cost of Sales -34,722 -88 -27,530 -80 -25522 -80 -7,192 26 Gross Margin 4,712 12 6,676 20 6239 20 -1,964 -29 Selling, Administrative and Other Expenses -2,462 6 -2,336 -7 -2296 -7 -126 5 Research and Development Expenses -2,458 -6 -2,075 -6 -2126 -7 -383 18 Other Income 297 1 222 0 314 1 75 34 Share from Profit from Associates under Equity Method 189 0 225 1 84 0 -36 -16 and Other Income from Investments Profit Before Finance Costs and Income Taxes 278 1 2,712 8 2215 7 -2,434 -90 Finance Costs -244 -1 -177 -1 -330 -1 -67 38 Income Taxes 81 0 -825 -2 -664 -2 906 -110 Profit for the Period 115 0 1,710 5 1221 4 -1,595 -93 Attributable to: Equity Holders of Parent (Net Income) 99 0 1,676 5 1203 4 -1,577 -94 Minority Interests 16 0 34 0 18 0 -18 -53 Earnings Per Share Basic 0. 12 2. 11 1. 5 -1. 99 Diluted 0. 12 2. 09 1. 5 -1. 97 Table 4. 3 Consolidated Income Statement of EADS 2006 % 2005 % 2004 % Non-Current Assets Intangible Assets 10,855 15 11,052 16 10549 15 Property, Plant and Equipment 14,315 20 13,951 19 12956 19 Investments in Associates under the Equity Method 2,095 3 1,908 3 1738 3 Other Investments and Long-Term Financial Assets 1,666 2 1,938 3 2110 3 Non-Current Other Assets 4,231 6 3,610 5 2548 4 Deferred Tax Assets 2,624 4 2,980 4 466 1 Non-Current Securities 1,294 2 1,011 1 7096 10 37,080 52 36,450 51 37463 55 Current Assets Inventories 16,892 23 15,425 22 12334 18 Trade Receivables 4,852 7 4,802 7 4406 6 Other Current Assets 4,545 6 3,675 5 5242 8 Current Securities 549 1 4,189 6 0 0 Cash and Cash Equivalents 8,143 11 5,386 8 8718 13 34,981 48 33,477 48 30700 45 Non-current Assets/Disposal Groups Held For Sale 76 0 881 1 0 0 Total Assets 72,137 100 70,808 100 68163 100 Total Equity Equity Attributable to Equity Holders of the Parent Capital Stock 816 1 818 1 810 1 Reserves 7,593 11 8,699 12 7899 12 Accumulated Other Comprehensive Income 4,955 7 3,982 6 7678 11 Treasury Shares -349 0 -445 0 -177 24 13015 19 13054 19 16210 Minority Interests 137 0 153 0 144 0 13,152 19 13,207 19 16354 24 Non-Current Liabilities Non-Current Provisions 9,063 13 7,997 11 6074 9 Long-Term Financial Liabilities 3,561 5 4,189 6 4405 6 Deferred Tax Liabilities 2,465 3 2,376 3 4134 6 Other Non-Current Liabilities 12,680 17 11,295 16 10267 15 27,769 38 25,857 36 24880 36 Current Liabilities Current Provisions 3,631 5 2,727 4 2350 3 Short-Term Financial Liabilities 2,196 3 908 1 818 1 Liability for Puttable Instruments 0 0 3,500 5 3500 5 Trade Liabilities 7,461 10 6,634 10 5860 9 Current Tax Liabilities 218 0 174 0 178 0 Other Current Liabilities 7,646 25 17,739 25 14223 22 31,152 43 31,682 45 26929 40 Liabilities Directly Associated With Non-Current Assets for Sale 64 0 62 0 62 0 Total Equities and Liabilities 72,137 100 70,808 100 68163 100 Table 4. 4 Consolidated Balance Sheet of EADS 4. 3. 1 Ratio Analysis of EADS from 2004 to 2006 4. 3. 1. 1 Liquidity For the years 2004, 2005 and 2006 Liquidity condition was quite good and become even better in 2006. As the first news on delivery delay appeared in June 2005, it can be expected to see more trends in 2006 and 2007-impact of financial performance usually takes time to become evident. Working capital in 2006 was 34,981 31,152 = 3829 That is more than in 2005: 33477 – 31682 = 1795, more by 113% Between 2004-2005 working capital decreased by 1,976 million euros, 53% decline. Therefore, following decline in 2005, Working Capital recovered in 2006. As for most liquid current assets like cash and cash equivalents with currents securities (accounting treatment of both has been changing over years but sum of them can be compared) 9% increase in 2005 was followed by decrease in 2006. Both Liquid and Quick Ratios are slightly improved in 2006: 2004 2005 2006 Liquid Ratio 1. 14 1. 05 1. 12 Quick Ratio 0. 68 0. 56 0. 58 Although, generally, quick ratio is expected to be above 1, due to high value of EADS inventories and the peculiarity of the industry this level seems to be acceptable. But overall working capital balance is only increased by 4%, because significant cash increase is balanced by substantial reduction in current securities. Let’s have a look at inventory turnover: Increase occurred in 2006 after significant decline in 2005. 2004 2005 2006 2. 06 1. 78 2. 05 To complete the picture, it is reasonable to calculate working capital cycles in days (365 days per year): Days to collect Receivables Days to pay Payables Days to Sell Inventories Working Capital Cycle 2004 47 (84) 176 139 2005 51 (88) 205 168 2006 45 (78) 178 145 Again, some improvements are seen in 2006 after working capital cycle became longer in 2005. At first, days to sell inventories figures seem to be quite high but it is generally due to the nature of the industry. Cash flows provided by operating activities reduced by 1,709 million Euros in 2006, although are still much higher than net profit. 4. 3. 1. 2 Profitability The increase in total revenues in 2005 was 8%, it continued to increase up to 15% in 2006. It is a significant increase. But although percentage increase in cost of sales was 8% in 2005 (in comparison to 2004), it rose to 26% in 2006, leading to 29% decline of Gross margin in 2006. Net profit over 3 year period has been changing quite significantly, it was 5% of revenues in 2005, 4% of revenues in 2004 and almost equal to zero in 2006. The contributions from Airbus revenues in EADS total revenues have been stable equal to 63% in each research years (2004-2006). Contributions from Airbus in Earnings before Interest and Tax figure of EADS have been substantial. It was equal to 78% in 2004, 80% in 2005. It was 1919 millions in 2004, 2307 in 2005 and -572 in 2006, which is a radical drop of earnings in 2006. Therefore it is clear that substantial drop in Airbus is solely responsible in EADS being almost non-profitable in 2006 (just 399 millions in 2006, while it was 2852 in 2005 and 2432 in 2004). Therefore it can be concluded that difficulties in Airbus (exclusively) led to profitability crisis of EADS in 2006. In the following paragraphs we analyze how effectively the company used its resources and perform a ratio analysis of profitability. Earning per share figures were 1. 5 euro in 2004, 2. 11 euro in 2005 and just 0. 12 euros in 2006. These changes can be exclusively attributed to trends in earnings over years as actual number of outstanding stock has not changed significantly (in percentage terms). The number of outstanding shares was 797,000,000-802,000,000. Return on Assets (ROA): 2004 2005 2006 3% 3% 0% ROA=Operating Income/Average total Assets Return on Equity (ROE): 2004 2005 2006 7% 13% 0% ROE=Net Income/Average Total Equity As both operating and net income in 2006 was very low it is not surprising that ROA and ROE were equal to zero. Both equity and assets were employed very poorly and in particular, because of poor performance at Airbus. In 2004-2205 ROA remained constant as both operating income and Total assets changed slightly and to the same direction (both increased slightly). ROE was higher in 2005 than in 2004 because total equity reduced in 2004, while net income increased. 4. 3. 1. 3 Gearing/Leverage For a complete picture it is necessary to evaluate Gearing in each year. Non current liabilities increased just by 1% in 2005, but rose by 7% in 2006. Debt Ratio = Total Liabilities / Total Assets 2004 2005