Problems Of Modern Youth Essay

It has been rightly said that we spend the first half of our lives trying to understand the older generation, and the second half trying understand the younger generation. This is nothing peculiar to the modern age. It has always been so. Every age has its own problem Youth has always felt somewhat exasperated with age, and age In always been suspicious of youth. With their natural ebullience a impatience, a majority of young people is keen to act and learn on the own rather than be guided by the experience of their elders. The ok people, being more at home with words rather than with action, oft make noises about the problems of youth. In every generation, old men are found shaking their hoary heads and waxing nostalgic about I good old days when young people knew better and showed due reverence to age and tradition. In all ages, whenever they have pondered over ways of youth, they have foreseen nothing but ruination staring the world in its face. And yet the world goes on. Every generation passes from spontaneity and exuberance of youth to the caution and prudence of old age, and then yields place to the next. Some of the charges brought against modern youth are that they represent a rudderless generation without any ideals to live by, or cause to live for. Without the redeeming influence of faith, they are afflicted with a compulsive reverence which manifests itself in increasing defiance of parental authority and revolt against established social, moral and behavioral norms. On the slightest pretext they take to the streets, indulging in violence and destruction. They want to attract attention to themselves through unconventional behaviour and clothes. A majority of them have fallen victims to self-pity, mister med as alienation. They are becoming a generation of drug addicts and have developed an aversion to honest, hard work, ever on the lookout to have something for nothing. It is no longer anxious youth going forth into a hostile world. Now, it is hostile youth going forth into an anxious world, which is not sure, what to expect from it. This is a formidable list of charges and it will require an army of psychologists to ascertain the truth of the allegations made and to analyze the erratic behaviour patterns referred to. But even from the layman’s point of view, the indictment appears to be patently one-sided. It betrays a lack of sympathetic understanding and realistic appreciation of the dilemma in which the younger generation finds itself today. If we come to think of it,  it is not that only the younger generation is feeling restless. As a matter of fact, human society itself is in a state of flux. And that is not a recent development. A profound change has been coming over it for the last quarter of a century. It started with those who had fought in the Second world War. They had been brought up in an atmosphere impregnated by conformism. But after they had borne the brunt of fighting for seven long y ears, their outlook was radically changed. They came to acquire a rather equivocal attitude towards established authority as also towards long-accepted social mores and codes of conduct. They had seen the death and destruction wrought by the war. It diminished their respect for the wisdom of old age because it was the old men—their fathers—who had started the war. The catastrophes of death and destruction, which had visited the world twice in thirty years eloquently, showed that the old had bungled, and that their claims to matur wisdom were false. Then the general erosion of law and order, which is natural in times of war, wrought a profound change in the spirit of the age. An attitude of dissent and irreverence came to replace spontaneous faith and quiet acceptance of the status quo. Thus, it was the old people themselves who sowed the seeds of that arrogance of which they complain so bitterly while discussing modern youth. A fast-growing populations has increased to complexities of life in our times and the fantastic technological progress triggered off by the Second World War. These two factors combined have brought about great socio-political changes during the last three decades, both in the industrialized countries of the west and in the underdeveloped countries in Asia and Africa. Growing affluence in the developed societies of the West has generated among the people there a restlessness, which pines for instant rewards. Pursuing the mirage, parents have little time to devote to their children and to properly direct and supervise their activities. The children have all the money they need, and seldom face the need to work for a living. The result is that they try to attract attention in other ways and seek excitement in drugs and permissiveness. In the underdeveloped countries also, young people are feeling disgruntled because their visions of a happy future are being obliterated either by interna l strife or by political opportunism. Very few among such countries are enjoying political stability and even in them, more often than not, it is a particular class which is cornering most of the  rewards of technological progress. This provokes the young to protest against rampant corruption in society and the denial of social justice. In the circumstances, is it to be wondered at if all talk of dedication to ideals, renewed moral vigour, basic virtues etc. leaves the young cold and unconvinced? They are no longer prepared to blindly accept whatever their elders choose to ram down their throats. They are prone to subject to critical review all the social and political values they are called upon to accept. When they see high-sounding principles invariably being ignored for expediency, political leaders deliberately hoodwinking the masses, vested interests being allowed to frustrate the state at every step, corruption common in high places and other gaping differences between promise and performance, they naturally bec ome cynical and clamour for change. Students form a very important group among the youth of all nations. Like the others in the same age group, they too have ample reason to be dissatisfied with the state of affairs in our educational institutions. Their biggest and most legitimate grievance is that what they learn after putting in so much time, effort and money has very little relevance to the realities of life with which they come face to face after leaving the university. Rather than equipping them to make a honourable living, education appears to be rendering them unemployable. Therefore, it is but natural that they should want to have a say in determining what should be taught so that it has some relevance to their future life and its needs. They would no longer tolerate politickers masquerading as teachers. They are not prepared to concede that the educational authorities have also to act as the guardians of their morals. They consider themselves quite capable of looking after themselves. If we look at the problems of youth today in the light of foregoing, it will be apparent that it is not the young alone who are to blame for the state of mind in which we find them. They may well be charged with being ignorant of what they want. But they surely know what they do not want. Theirs is a movement of protest against hypocrisy and lack of integrity in their elders, an expression of moral revulsion against corruption in society. Students are up in arms against displays of hollow pedantry and alienated erudition in educational institutions, the lack of living contact between students and teachers, and the unresponsiveness of the whole educational system to the need for change. The young are protesting against the difference between the  myth and reality of the society in which they are growing. Evidently, this concern for the future and this anxiety to rescue life from hypocrisy is very laudable indeed. But it cannot be said that the young are all the time guided by such high purpose, or that their choice of methods is always happy. Dissent is necessary—in fact obligatory, when things go wrong. But when it descends from the verbal level to the physical, it invites tragedy. Violence comes natural to youth. The young, supremely sure that the authority against which they are up in arms is unjust and oppressive, and feeling certain of the correctness of their own stand, react emotionally. The intensity of their feelings is such that it fills them with hatred and they turn to violence. Those who advocate taking to the streets to give vent to feelings of grievance plead that no one pays attention to words any longer. But this way of thinking is dangerous. Violence is an expression of intolerance. As the President of the Yale University said some time ago, the ugliness of the radical is no different from the ugliness of the reactionary. Both share the sin of arrogance, which is the enemy of freedom. In a general unleashing of violence, dissent is the first casualty. On the whole, the younger generation today is much misunderstood and more maligned than it deserves. The world, which it is going to inherit, will be immensely more exciting than the world of its predecessors ever was or could be. At the same time, life will present to it a much bigger and far more complex challenge. It would not do to condemn it and find fault with it that is easy enough. What is really important is that it is treated with understanding so that it can develop its faculties to reshape the world it is going to inherit in accordance with its noblest vision.

Early Hominids and Tools

Early Hominids and Tools Jacky Thompson ANT 101 March 20, 2013 Even though humans seem to be the most advanced creatures walking this earth, we certainly had ancestors before us. We share similar genetic information of other animals. They are what we consider early hominids. Early hominids date as far back as 6 to 8 million years ago. Just like humans, they had to have some type of culture in order to survive and make a living. Culture is defined as a dynamic adaptive process of learned, shared, and integrated behaviors.But it is not so obvious that these hominids had culture, so the presences of stone tools and home bases might be the answer to determine if they had culture. Tools are defined as a device or implement used with the hand, to carry out a specific function. Primates learn and share in certain culture, but their social behavior is not as complex as those of humans. The earliest hominids were classified as Australopithecus, which is a type of ape. Scientists claimed that their brains were not big enough to fathom the thought of making tools. Perhaps they used tools to hunt animals.The animals that later hominids hunted were used for food and maybe the furs were used for clothing. This is what we consider hunting and gathering. It is a technique in which the men are responsible for hunting while the women gather the resources. In order for them to hunt they must have had tools to help them kill and clean animals. This process of hunting can be learned and passed on through generations, which are basic parts of culture. The use of tools allowed or ancestor’s opportunities to hunt and do other useful things that were off-limits before the use of tools.Scientist still really does not have clues as to how and why this transition took place. The actual history and time comes from the actual tools themselves. The act of making tools is an example of how developed our ancestor’s brains were. To actually create the thought of making tools and t o figure how they will be designed is a significant development in itself. This symbolizes culture because the process of making tools was probably passed down to generations, and they became better at using and making better tools.Early hominids used stone tool making. This is the deliberate fashioning of a stone into an actual tool. Throwing or bashing the stones against something created it. Archaeologists recognized four types of tools: choppers, flake tools, crude tools, and hand axes. Mostly found in Africa and the Middle East. Early hominids probably made tools with sticks, wood, horn, and other perishable materials. Besides previous uses of tools mentioned, they were also used for fishing out termites and other insects.These tools were supposedly long blades of grass that had been licked, and stuck into holes to get termites, which they ate in order to get proteins and the nutrients they needed. Besides humans, species in the animal kingdom, also shared culture behavior. Thi s was mainly seen in chimpanzees. Scientist often compared the culture of the two. Chimps are genetically the closest related relatives to humans, sharing 98 percent of our DNA. Seeing as to they were this closely related to us, of course they would be capable of making tools like earlier hominids did.Chimps made weapons to hunt. They hunted in things like nuts, fishing for termites. And just like earlier ancestors who ate them, the chimps did also. They choose branches, stripped it of its leaves, trimmed it, and put it to use. Unlike hominids, it is not really successful for chimps to hunt. This might be so because their brain is not as developed as ours. They mostly go after available resources such as, fruits and branches. Males used methods such as grabbing prey and killing it, while the females created the tools that were useful for catching the prey.Now, to the actual cultural behaviors of both humans and chimpanzees, we have a few behavior patterns in common. Humans have the ability to throw things, and more precisely, they are able to aim at an actual object then throw. Chimps have also showed this type of behavior. This type of behavior is not one that is passed on through genetics, but it is socially learned. Like little children who look at their parents, and mirror their actions, baby chimps also learn to do the same thing. So in this case, cultural is socially gratified even though it is not as complex as humans.Both species evolved upright or bipedal. Another culture characteristic is the way chimps wake. This gives us an idea of how our early ancestors begin walking. They no longer walked on all fours, they being to free their hands in order to carry valuable resources. Other characteristics include emotions. Chimps have ways to show fear, often displayed with a small smirk, just like humans. Perhaps this is a mechanism used not to show fear. They can also contract similar illnesses that humans have such as HIV and hepatitis but they do not show symptoms of the viruses.Much like institutionalized humans, chimpanzees whose social, intellectual, and physical, needs are not met, they show behavioral symptoms of stress. Chimpanzees exhibit such behaviors, as self-mutilation, continual rocking, and aggression. These are socially learned mechanisms within cultures. Evidence of early hominids have been seen everywhere, but to actually distinguish if they have cultural behavior is hard. Just like hominids, chimpanzees share, almost the same amount of DNA, giving them a better chance to act out as humans, versus other animals.Even though we share a fair amount of DNA, while chimpanzees are further studied, it is becoming more apparent that their intelligence is higher than we previously thought. Talking, for instance, is not a hard task for hominids, but for chimps, it is believed that they have the learning capacity to use spoken language, but their throats and vocal cords are not designed to make consonant noises and sounds. This eliminates the possibility of chimps actually being able to talk. However, chimps in opposition have been taught to understand English, communicate through with certain keypads, acknowledge certain symbols, and use sign language.Since early hominids were descendants of the same common ancestor as chimps, they most likely had the same resources available to learn the same things as humans did. Another thing that hominid cultures find to be normal is to let the male wander off while the females stayed put in a specific area. Chimps use a similar type method. Instead of the male going out to gather sources and goods, the female traveled while the male held the home base. Another behavior characteristic that we share is socializing. Chips show this by grooming, chasing, or playing.Like hominids they too, show affection, which includes kissing and hugging. Perhaps chimps use grooming to connect, while hominids were more successful through talking. We both show facial expression, and sho ckingly, language. Instead of verbal sounds, chimps make grunts and screams. When it came to hominids and chimps hunting, they both searched for meats and plants, making the both of them omnivorous. Even though many humans would prefer eating meats, chimps lean more towards fruits. One of the most common similarities of the wo are bipedalism. This is the act of walking on two legs. Chimps would be seen most of the time walking on all fours but they use bipedalism to further ahead of themselves. When comparing these two species we are able to find so many similarities. With almost the same amount of DNA, the resemblance is shocking. We both have the ability to hunt, walk on two legs, eat similar foods, and we lack a tail. Our behavior is learned, and shared. Chimpanzees and early hominoids, take on the responsibility of hunting and providing for there offspring.They both had the ability of making and using tools. Perhaps they inherited this ability from some common ancestor. Since ch imps did not learn from humans, we can accept the fact that we are related and originated from a common ancestor. Culture is socially stratified, thus making it important for chimps and humans to adapt to the social norm in order to communicate. So the presence of stone tools, and home bases do suggest that we both had culture, and I can conclude the fact the early hominids and chimps cultural behavior did strongly compare.

The Crucible and Mrs Putnam

In the opening of the play how does Miller seek to create an atmosphere of hysteria and tension? Do you find the opening effective? The Crucible is a play by Arthur Miller written in the 1950’s. It was set in the 1690’s in Massachusetts. The play is about the witch trials and how something like a group of girls in the woods could lead to about 200 people being hanged and accused of witchcraft. The people of Salem were new to Massachusetts as they were puritans who went off to America to set up a new religious colony .The people were new to their surroundings had the Native Americans as enemies because they took their land. Although the Crucible is about the witch trials, it is thought to be a metaphor for the McCarthy Communist trials that was happening during the 1950’s. It was very similar to witchcraft and many people in the Hollywood were accused. You could be dismissed from the accusations of being communists after naming other people who you think were comm unists. Many innocent died because of both of these events. It was a way to get rid of your hatred and anger against others.The very opening of the play portrays a worrying and fearful scene, when we see Betty in bed not moving and Reverend Parris knelt down and praying. A child unconscious in bed creates tension because we don’t what is wrong and grabs the attention of the audience as the audience would be keen to know what is wrong with the child. More hysteria is caused when Tituba comes in through the door, which makes Parris angry and shouts at her â€Å"Out of here! † This sharp and imperative sentence allows Miller to show that even the minister of Salem sees a black â€Å"negro slave† as an animal.This would gain sympathy from the audience who is tensed from all the mysteriousness that is taking place. It would also make the audience jump and be frightened and this gives Parris an authoritative figure. It also shows that Parris is tensed because he is ev en shouting at people who says that his child is going to better. Also the entrance of Abigail causes further tension between her and Parris because he asks about them dancing g in the wood and Abigail gets very defensive. This then leads on to the conversation of whether Abigail name in the village is pure or not.When Parris question about why no one has asked her to work for the last seven months after working with the Proctors. Abigail gets very rude and blames Goody Proctor for no one offering a job â€Å"Goody Proctor is a gossiping liar† From this we learn that Abigail is a selfish and arrogant because she knows that she is hated but yet refuses to confess her faults because she doesn’t want her reputation to be besmirched because then she would be thrown out of her house and the church and out of the whole community which would do her any good so she is blaming others to keep her reputation.This causes hysteria and tension because Abigail is getting angry and th e whole conversation is getting more serious away from the main problem of Betty being sick. Parris is more worried about what his daughter and niece were doing rather than about Betty because like Abigail he doesn’t want his reputation besmirched because no one would value him as a priest and he would lose his job, house and income. Abigail is also very manipulative because she makes Parris feel guilty. â€Å"Do you begrudge my bed, uncle? This makes Parris feel guilty for accusing her and this conveys that she can play well with her words to make herself seem naive. As more people come under one roof, in one room the hysteria and tension increases because everyone has different opinions and people are shouting over each other to make their point. This causes tension and hysteria because there is a lot of talking and shouting and people are not able to make their point because someone interrupts while another person is speaking and everything gets so confusing and out of or der.In addition to that, people like Mr Putnam and Mrs Putnam jumps into the conclusion of witchcraft before they even know what is actually happening. â€Å"How high did she fly? † This shows the narrow minded nature of the people in Salem because they don’t even think about the natural causes; they just assume it has to do with witches. That was a quote from Mrs Putnam. I think the fact that she has lost 7 babies makes her think it is work of the devil trying to punish the â€Å"good†.Once everyone believed it was the work of the devil, they blamed Tituba who is only low class person in the household and her being a black slave makes it easy for everyone to blame her because as she doesn’t have any power or authority she won’t react and her coming from a completely different culture to than the people in Salem makes the believe that she is affected by the witch and devil.Miller sets the whole of Act 1 in one room this conveys hysteria because the y are all in one room and everyone is shouting each other. Also it will be quiet dark and crowded as the windows are all narrow so only little light comes through. I also think it is a metaphor for the narrow minded nature of the people in Salem. The fact that only a little comes through conveys that they have little knowledge of the outside world.The language used is very different and address woman as Goody and men as Mister. This contributes to the difference in society and the time. In conclusion, I think is very effective because it grabbed my attention because of the tension and hysteria used as it made me eager to know what was happening. Miller uses language and setting effectively convey the tension and hysteria because it makes the audience be worried and tensed of the mystery of the child lying unconsciously in bed.

Canada Essay Example | Topics and Well Written Essays - 750 words

Canada - Essay Example The country is highly developed and has a diversified economy that has its base in plenty of natural resources and tradeship with other developed countries like the United States. The country is a member of various organizations like the United Nations and Commonwealth. The capital city is Ottawa, Ontario. Canada Day is July 1 (Central Intelligence Agency, 2009). According to the 2009 Estimates, the population of Canada is 33,873,357. The percentage of males is 49 percent and that of females is 51 percent. The median age of male is 38.6 years and that of female is 40-4 years. The birth rate is 10.28 births/1,000 population, death rate is 7.74 deaths/1,000 population, the net migration ratio is 5.63 migrant(s)/1,000 population , infant mortality rate is 5.04 deaths/1,000 live births and total fertility rate is 1.58 children born/woman (Statistics Canada, 2009). Canadians are of multiple ethnic origin, the most common being English, French, Scottish, Irish and German. Originally, the land of Canada was occupied by several Aboriginal groups. Christianity is the predominant religion with majority being Catholics (Roman and Old). The main spoken language is English which is used by 78.3 percent people, followed by French (21.7 percent). The literacy rate of the population is 99 percent in both males and females (Statistics Canada, 2009). Canada is a wealthy country. The per capita income is very high. the country is a member of the G8 and Organization for Economic Co-operation and Development. the market of Canada is mixed comprising of service, mining, agriculture, energy, automobiles and aeronautics,and other manufacturing sectors (Central Intelligence Agency, 2009). The unemployment rate is low. The debt status of the country is also low. The transportation system is excellent with good road and railways networks, 10 international airports and several small airports and several national and international ports (Statistics Canada, 2008). These

Electrics Essay Example | Topics and Well Written Essays - 2250 words

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Service Marketing Essay Example | Topics and Well Written Essays - 2250 words

Service Marketing - Essay Example Service marketing in simple terms refers to both the business-to-business (B2B) and business to consumer (B2C) services and involves marketing such services as financial services, telecommunication services, all kinds of hospitality services, air travel, car rental services, professional services, as well as health care services (Lovelock & Gummesson 2004, p. 21). Thus, service marketing is a variety of the expressions and approaches of marketing ideas conducted with the hope of effectiveness in conveyance of ideas to wide range of population of individuals who receive it. As this paper is emphasizing on marketing of services, it is not good to overlook the concept of â€Å"service.† Services are the diverse economic activities offered to people or parties by another person or party. They are often time-based and effective performance brings about the desired outcomes to the objects, recipients, or the other assets of interest for which the purchasers have responsibility. The service customers anticipate value from their access to labor, goods, facilities, professional skills, systems, and networks in exchange for time, money, and effort. However, service customers do not assume ownership of the diverse physical elements involved (Lovelock & Wirtz 2011, p. 35). In the present day, every business entity is interested in promoting its business with such strategies of marketing that will foster its performance via the roof. There are numerous service sector businesses plugged with techniques of product marketing and this is the prime time for them to improve their marketing performance. In fact, services are totally different from products since they are intangible. In addition, the target audience for products and services is different hence the need of applying different strategies of promotion in order to attract potential clients. For effective promotion of services in order to generate significant buzz, service marketers are encouraged to employ 7 Ps i n their strategies of service marketing mix. The 7 Ps marketing mix is an extension of the 4 Ps marketing mix, which are the known as the marketing core strategies. The purpose of this paper is to provide advice to Mr Hirohito in his new venture of starting a high street restaurant in London. The paper shall provide information of how to develop appropriate strategies aimed at extended services marketing mix. It will also provide recommendations for action and preparation and presentation of informed, systematic, and effective marketing report as the basis for marketing decisions. Background Information: Hirohito Yamachu set up Wakaba Ltd, a London-based food company, in 2009 after being made redundant while working as head chef in Bank of Japan’s staff restaurant. The main business of Wakaba Ltd is involved in the supply of ready-to-eat ‘sushi’ meals and cooked Japanese cuisine to staff via company canteens in London City area. Currently, the business prides in its list of clients, which includes J P Morgan, Bank of Japan, Barclays, Chase Manhattan, and City Corp. While working there, his cooking was loved and much favored by the employees of the company unlike most of the other staff canteens. CEOs and senior managers even invited business clients, relations, and friends from outside for lunch in the staff restaurant. In 2008, unfortunately, Hirohito Yamachu became a casualty as the restructuring plan of the company as well as the ensuing BPR exercise reached an agreement of outsourcing in-house catering facilities. Termination of his career made him to establish his own business. Bank of Japan became his first client, as he did not need much introduction or serious marketing efforts. His cooking was done at his home with the aid of some family members

TQM in Higher Education Literature review Example | Topics and Well Written Essays - 2750 words

TQM in Higher Education - Literature review Example front, changes need to be made to ensure great campus, positive staff attitude, great spiritual environment, less bureaucracy and an enriching student life. According to Gary A. Berg 2008, a large amount of research on Total Quality Management has been focused on for private organizations. However, TQM has been widely used in student service and education fields. Lozier and Teeter (1993) were among the first researchers to focus on application of TQM to higher education. These researchers stress on stakeholder satisfaction as the most significant aspect of TQM in higher education. Juran defined quality as fitness for use and Crossby as conformance to requirements. However, Deming’s definition of is to follow quality as surpassing customer needs and expectations is the one that applies the most to higher education. One of the approaches to quality in higher education is to follow ISO 9000 in educational setup. According to this approach, the staff can be trained to control the behavior of the students (who are customers) rather than their ideas. A combination of responsive systems, implementation framework and staff empowerment would enable successful implementation of ISO 9000 in higher education system. However, some researchers have suggested a change in the education process by eliminating non-productive activities and hence improve the quality of higher education. According to H.J. De Jager & F.J. Nieuwenhuis 2005, there are three important features of TQM in educations according to a specific TQM model. These are leadership, scientific methods & tools and problem solving through teamwork. These three features are integrated to form a great organizational climate, a healthy training & education environment and provision of meaningful data. Customer service acts... This paper approves that the Australian universities brought improvements in their efficiency and accountability while realizing the benefits of economies of scale. These universities were provided additional funds by the government to enable quality assurance practices. However, most of the universities were self-accrediting and lacked external control. Australian Universities Quality Agency was formed to address this limitation. The author also gives example of the Swedish experience in implementing quality in higher education. Here the processes in the universities were decentralized and an improvement led model was followed. The funds were provided to institutions based on their performance and the quality models were customized as per the needs of each institution. This essay makes a conclusion that the quality initiatives in Canadian Universities remain limited to performance indication. This was also introduced with growing pressure from local magazines and government. Association of Universities and Colleges of Canada came up with performance indicators but they were not well accepted by the universities or the public. Most of the universities prefer to use their own list of performance indicators. Therefore, there has been an avoidance of public participation in quality assurance by Canadian universities.

Translation arabic -english Dissertation Example | Topics and Well Written Essays - 500 words

Translation arabic -english - Dissertation Example Since children are the most innocent stratum of society, and are considered to be the future builders of their nation as well, special care is given while producing literature for them for the adequate socialisation and brought up of the innocent minds. Although hundreds of thousands of books, journals and novelettes are available in the market, material of which is generally based upon local tales, fiction and moral stories, yet the parents and teachers look for inclusion of foreign literature in the studies meant for children, so that the young minds can obtain familiarity with the literature has been being produced at global scale. It is important for children to be exposed to different cultures from a young age and to have their world knowledge broadened by stories and characters from all over the world. (Sas, 2010:2) Translated children’s literature is able to break down barriers of geography, language and race and that learning about other cultures is an enriching experi ence that opens up new horizons and stimulates new ideas†. (Hallford, 2005: 4) Since children are not in a position to study themselves the material written in a foreign language, the services of proficient and professional translators are hired to translate the foreign study material in simple and comprehensible native language.

Amy Tan's The joy Luck Club Essay Example | Topics and Well Written Essays - 750 words

Amy Tan's The joy Luck Club - Essay Example At first it seems that these disparate stories have nothing in common, except the conflict between two cultures - they are just a figment of some not very happy ladies’ experiences. However, during the process of reading, the pictures complement one another and stories, which were supposed to be autonomous, are connected by a thin thread. The author also concerns â€Å"the nature of mother-daughter relationships, which are complicated not only by age difference, but by different upbringings. The issues of self-respect, personal identity are also highlighted in the novel† ("BookRags Book Notes on") . The young mothers who arrived to America create a club for meeting and communication. At these meetings, they eat Chinese food, play board game mahjongg, talk. Each of them experienced some heavy losses in the past. But instead plunging into the painful memories of those losses, they prefer coming together for mutual support, material and spiritual. They all share a hope for the future, so they called themselves The Joy Luck Club. It is obvious, that is extremely difficult, and even impossible for the senior generation, to get accustomed to new American culture, to leave behind their usual Chinese lifestyles. â€Å"American circumstances but Chinese character†¦ How could I know these two things do not mix?† (Tan 15: 254), - this question bothered not only Lindo, but the rest of mothers. The women of older generation, â€Å"Old World fossils† (Tan 2: 89), are in the state of permanent cultural shock. The gap between the American and Chinese cultures is supposed to be insurmountable. When one of the women dies, her daughter Jing-mei was invited to take mother’s place at the mahjongg table. The daughters know only about their mothers’ lives in America, but they never told about what kind of life their parent had in China. As one of the young girls states, -"Over the years, she told me the same story, except for the ending, which grew darker, casting long shadows into her life, and eventually into mine."(Tan 1: 21). And if the main task for the older generation was to assimilate into the new environment, for American-born children it was a problem to overcome feelings of shame for their parents being immigrants. Jing-mei feels uneasy in the company of all these Chinese â€Å"aunties†; the young girl taking her mother’s place at the table, which is contrary to her own desire, â€Å"symbolizes the very generation and cultural gap between children and parents† ("BookRags Book Notes on"). Conversations of June and Suyuen testifies to the fact that it was a torture to come to understanding. â€Å"My mother and I never really understood one another. We translated each other's meanings and I seemed to hear less than what was said, while my mother heard more† (Tan 2: 27) Thus, a reader understands that â€Å"there is also a communication barrier between mothers and daughters† ("BookRags Book Notes on"). The mothers are eager to raise their daughters according to their traditions and worldviews, -â€Å"†¦Only two kind of daughters. Those who are obedient and those who follow their own mind! Only one kind of daughter can live in this house. Obedient daughter!" (Tan 8: 142)† The young girls rebel against such intentions; they do not want to be oppressed and do not want their

Story Analysis Essay Example | Topics and Well Written Essays - 250 words

Story Analysis - Essay Example In Araby, this corruptible nature of women is also depicted. The narrator, a young boy, believes that in order to get the attention and love of Mangan’s sister, he needs to buy her gifts. In addition, the stories show that women are servants of the men. For instance in The Dead, the story opens b showing that Lily helped the men remove their coats. The two stories also depict women as symbols or figures of love and beauty. This is one aspect used by women to control men. In The Dead, Gabriel is attracted to Lily’s beauty, and this forces him to ask her about her love life. In addition, during the dance, Gabriel is attracted o his former love, Gretta. In both cases, the author shows that women can gain some form of control or influence in men through their beauty. In Araby, the narrator is attracted to Mangan’s sister to the extent that these feelings take control of him. For instance, he says that the image of Mangan’s sister accompanies him to places most hostile to romance and her name sprang to his lips during times of prayers and praises. He literally followed her every morning to

Reminders About the Acceptable Use of Email and Text Messaging Essay - 3

Reminders About the Acceptable Use of Email and Text Messaging - Essay Example Use of email and text messaging by the employees of People Support Aegis Company is allowed, given support, and strongly agreed since this is very useful and is an important business tool of the company. However, People Support Aegis has policy regarding the use of email and texts messaging since these are company property and for the facilitation of the business of the company. Every employee must make sure to: do not use email and text messaging for the making and giving out of any extremely unpleasant, or messages that cause problems, which includes messages that have offensive comments about private and personal matters, age, gender, race, sexual beliefs, origin, physical and mental condition and political and religious beliefs. Using of monitoring software has been reserved in order to ensure that employees are obeying all the policy given. Therefore, the company has the authority to monitor and access all messages on the email and text messaging system.Assuming of privacy in anything the employee created, received, sent or stored on the company’s email system are not allowed because all their messages maybe seen without any prior notice. Accepting personal emails can be made but the messages should be saved in a separate folder. Breaching and failing to comply with the policy have sanctions to be applied on the employee. If an employee is found and proven to have breached the po licy, they will face the company’s disciplinary penalty ranging from a verbal to dismissal.  

Impetus to Department of Homeland Security Essay Example for Free

Impetus to Department of Homeland Security Essay Abstract This is a case study into the impetus of The Department of Homeland Security due to the 9/11 terrorist attack on the World Trade Center and the increase awareness of terrorist attacks. This study will also cover the Oklahoma City and the 1993 World Trade Center bombing and why it did not have the full impact or awareness of the 9/11 attack. Also, the study will try inject ways that the two earlier kinds of attacks could have been prevented according to the protection strategy in place today. Title of Paper (Does not Count as Heading) The word terrorist and terrorism is synonymous in that they both are used as violent acts to frighten the people in an area as a way of trying to achieve a political goal. The 9/11 attack on The World Trade Center serves as a prime example to the type of terror that Americans have never witness before. It showed that our great nation was venerable to a new kind of attack where people do not value life but value their pursuit of life, liberty, and justice much more. These are the type of organization or people who will die for a justice cause. These very people lead to the Impetus of The Department of Homeland Security. The main reason the 9/11 attack was so gruesome was the fact that the organization did not need weapons of mass destruction to accomplish it goal. The organized group of the Taliban or Al Qaeda, as known by some, was able to commandeer two 747 planes and launch an attack on the World Trade Center and the Pentagon. This was a strategic threat that was well plan and the funding of it leader Osama bin Laden. These types of suicide missions that were televised to the nation through the media signified the dawn of a new kind of threat and that a new kind of organization or rational think had to be formed. This formidable threat lead to the formation of the Department of Homeland Security with the expressed mission of keeping our people, cyber, and critical infrastructure safe from terrorists and natural disasters. This is the third largest federal department that encompasses state, local, and the private sector. Of course this is not the first time that our soil has been threatened by extremist or terrorist groups. For example, on the morning of April 19, 1995, an ex-Army soldier and security guard named Timothy McVeigh parked a rented Ryder truck in front of the Alfred P. Murrah Federal Building in downtown Oklahoma City(n.d.). He was about to commit mass murder. Inside the vehicle was a powerful bomb made out of a deadly cocktail of agricultural fertilizer, diesel fuel, and other chemicals(n.d.). McVeigh got out, locked the door, and headed towards his getaway car(n.d.). He ignited one timed fuse, then another. McVeigh’s anger with the federal government on how his colleagues was treated at the Waco incident cause massive destruction and the loss of 168 human beings lives. Although, this was one of the worst home grown act of terrorist it did not gain that much dramatic impact from society and politicians because it was small scale and did not appear to have the funding to escalate to large scale terrorism. It also did not have the mass appeal of the 9/11 incident that was broadcast to the nation. Only the after mass was on display. Plus the ingredients used in making the bomb were your everyday garden variety, not weapons of mass destruction. Another example of the destructive nature of a terrorist group was the bombing of the Epicenter Parking Center under the World Trade Center. On Friday, February 26, 1993, Middle Eastern terrorism had arrived on American soil with a bang(n.d.). A small group of Islamic terrorist detonated a bomb that caused a massive crater killing 6 people and injuring thousands of others. The intent was to topple one building into the other collapsing both. The Federal Bureau of Investigation had intelligence information on this group but did not foresee them as a threat. Again, this incident did not have the dramatic impact as the 9/11 attack because the group was small scale and did not have the funding to inflict the damage of weapons of mass destruction. There were no ties to a large terrorist group with unlimited funding and followers. In both of these examples as stated neither gain the grandeur nature of the 9/11 attack because of they were not televised live as the event occurred, they did not have the notoriety or followers as Taliban or Al Qaeda terrorist group, they not have the funding of group capable of amassing weapons of mass destruction, and they were not the all for nothing suicidal group that would have giving their life for a cause. What we have in place today that could have thwart the attacks in the examples are different agencies are task with investigating specific areas and that is what they specialize in. For example, if one department had the responsibility of investigating the intelligent on the Islamic terrorist group they would have been more inclined to have arrested the group before they did any damage. The deployment of explosive sniffing dogs at critical infrastructure sites may have been able to detect the bombs before they were detonated. Surveillance camera located at critical location may a detected the vans being abandon for an undetermined time and helped to identify those involved. Quotations (n.d.). Retrieved from http://www.fbi.gov/about-us/history/famous-cases/oklahoma-city-bombing (n.d.). Retrieved from http://www.fbi.gov/news/stories/2008/february/tradebom_022608 References http://www.fbi.gov/about-us/history/famous-cases/oklahoma-city-bombing http://www.fbi.gov/about-us/history/famous-cases/oklahoma-city-bombing Gaines, Larry K., and Victor E. Kappeler. Homeland security. Boston: Prentice Hall, 2012. Print.

Impact of Financial Leverage on Investment

Impact of Financial Leverage on Investment The term Investment is frequently used in jargon of economics, business management and finance. According to economic theories, investment is defined as the per-unit production of goods, which have not been consumed, but will however, be used for the purpose of future production. The decision for investment, also referred to as capital budgeting decision, is regarded as one of the key decisions of an entity. Leverage is a method of corporate funding in which a higher proportion of funds is raised through borrowing than stock issue. It is measured as the ratio of total debt to total assets; greater the amount of debt, greater the financial leverage. Financial Leverage is the ability of a company to earn more on its assets by taking on debt that allows it to buy or invest more in order to expand. Nowadays financial leverage is viewed as an important attribute of capital structure alongside equity and retained earnings. Financial leverage benefits common stockholders as long as the borrowed funds generate a return greater than the cost of borrowing, although the increased risk can offset the general cost of capital. In the past years, a large body of the literature has provided robust empirical evidence that financial factors have a significant impact on the investment decisions of firms. While traditional research on investment was based on the neoclassical theory of optimal capital accumulation (where under the assumption of perfect capital markets, the cost of financing does not depend on the firms financial position), more recent literature has increasingly incorporated frictions such as asymmetric information and agency problems as a source behind the relevance of the degree of financial pressure faced by the firm in determining the availability and the costs of external financing This chapter will seek to enclose literature on the impact of financial leverage on investment and other factors that may affect investment in firms. 1.1 Modigliani Miller (MM) 1958 theory with no taxation In what has been hailed as the most influential set of financial papers ever published, Franco Modigliani and Merton Miller addressed capital structure in a rigorous, scientific fashion, and their study set off a chain of research that continues to this day. Modigliani and Miller (1958) argued that the investment policy of a firm should be based only on those factors that will increase the profitability, cash flow or net worth of a firm. The MM view is that companies which operate in the same type of business and which have similar operating risks must have the same total value, irrespective of their capital structures. It is based on the belief that the value of a company depends upon the future operating income generated by its assets. The way in which this income is split between returns to debt holders and returns to equity should make no difference to the total value of the firm. Thus the total value of the firm will not change with gearing, and therefore neither will its Weighted Average Cost of Capita (Pandey, 1995). Many empirical literatures have challenged the leverage irrelevance theorem of Modigliani and Miller. The irrelevance proposition of Modigliani and Miller will be valid only if the perfect market assumptions underlying their analysis are satisfied Under the original MM propositions, leverage and investment were unrelated. If a firm had profitable investment projects, it could obtain funding for these projects regardless of the nature of its current balance sheet. 1.2 Modigliani Miller 1963 theory with tax M M (1963) found that the corporation tax system carries a distortion under which returns to debt holders (interest) are tax deductible to the firm, whereas returns to equity holders are not. They therefore concluded that geared companies have an advantage over ungeared companies, i.e. they pay less tax and will have a greater market value and a lower WACC. Following this research, the consensus that emerged was that tax is positively correlated to debt (Graham 1995, Miller 1977) and is considered a major influence in the debt policy decision. Modigliani et al (1963) argued that we should not waste our limited worrying capacity on second-order and largely self correcting problems like financial leveragingà ¢Ã¢â€š ¬Ã… ¸. That is firms should not be worried about growth as long as they have good projects in hand, since they will always be able to find means of financing those projects. 1.3 The Trade-Off Models Some of the assumptions inherent in the MM model can be relaxed without changing the basic conclusions as argued by Stiglitz (1969) and Rubenstein (1973). However, when financial distress and agency costs are considered, the MM models are altered significantly. The addition of financial distress and agency costs to the MM model results in a trade-off model. In such a model, the optimal capital structure can be visualized as a trade-off between the benefit of debt (the interest tax shield) and the costs of debt (financial distress and agency costs) as presented by Myers (1997) The trade-off models have intuitive appeal because they lead to the conclusion that both no-debt and all-debt are bad, while a moderate debt level is good. However, the trade-off models have very limited empirical support, Marsh (1982), suggesting that factors not incorporated in this model are also at work. Jensen and Meckling (1976) invoked a moral hazard argument to explain the agency costs of debt, proposing that high levels of debt will induce firms to opt for excessively risky investment projects. The incentive for such a move is that limited liability provisions in debt contracts imply that risky projects will provide higher mean returns to the shareholders: zero in low states of nature and high in good states. However, the higher probability of default will induce investors to demand either interest rates premiums or bond covenants that restrict the firms future use of debt. 1.4 Pecking-Order Theory Initiated by Donaldson (1961), the Pecking-Order theory argues that firms simply use all their internally-generated funds first, move down the pecking order to debt and then lastly issue equity in an attempt to raise funds. Firms follow this line of least resistance that establishes the capital structure. Myers noted an inconsistency between Donaldsons findings and the trade-off models, and this inconsistency led Myers to propose a new theory. Myers (1984) suggested asymmetric information as an explanation for the heavy reliance on retentions. This may be a situation where managers have access to more information about the firm and know that the value of the shares is greater than the current market value. If new shares are issued in this situation, there is a possibility that they would be issued at a too low price, thereby transferring wealth from existing shareholders to new shareholders. 1.5 Investment and Leverage One of the main issues in Corporate Finance is whether financial leverage has any effects on investment policies. The corporate world is characterized by various market imperfections, due to transaction costs, institutional restrictions and asymmetric information. The interactions between management, shareholders and debt holders will generate frictions due to agency problems and that may result in under-investment or over-investment incentives. Whenever we refer to investment, it is essential to distinguish between over- investment and under-investment. In his model, Myers (1977) argued that debt can create an overhang effect. His idea was that debt overhang reduces the incentives of the shareholder-management coalition in control of the firm to invest in positive net-present-value investment opportunities, since the benefits accrue, at least partially, to the bondholders rather than accruing fully to the shareholders. Hence, highly levered firms are less likely to exploit valuable growth opportunities as compared to firms with low levels of leverage. Underinvestment theory centers on a liquidity effect in that firms with large debt commitment invest less, no matter what their growth opportunities (Lang et al, 1996). In theory, even if debt creates potential underinvestment incentives, the effect could be attenuated by the firm taking corrective action and lowering its leverage, if future growth opportunities are recognized sufficiently early (Aivazian Callen, 1980). Leverage is optimally reduced by management ex ante in view of projected valuable ex post growth opportunities, so that its impact on growth is attenuated. Thus, a negative empirical relation between leverage and growth may arise even in regressions that control for growth opportunities because managers reduce leverage in anticipation of future investment opportunities. Leverage simply signals managements information about investment opportunities. The possibility that leverage might substitute for growth opportunities is referred to as the endogeneity problem. Over-investment theory is another problem that has received much attention over the years. It is described as investment expenditure beyond that required to maintain assets in place and to finance positive NPV projects. In these kind of situations, conflicts may arise between managers and shareholders (Jensen,1986 Stulz,1990). Managers seek for opportunities to expand the business even if that implies undertaking poor projects and reducing shareholder worth in the company. Managers abilities to carry such a policy is restrained by the availability of cash flow and further tightened by the financing of debt. Issuing debt commits the firm to pay cash as interest and principal, forcing managers to service such commitments with funds that may have otherwise been allocated to poor investment projects. Thus, leverage is one mechanism for overcoming the overinvestment problem suggesting a negative relationship between debt and investment for firms with weak growth opportunities. Too much debt also is not considered to be good as it may lead to financial distress and agency problems. Cantor (1990) explains that highly leveraged firms show a heightened sensitivity to fluctuations in cash flow and earnings since they face substantial debt service obligations, have limited ability to borrow additional funds and may feel extra pressure to maintain a positive cash flow cushion. Hence, the net effect would be reduced levels of investment for the firm in question. Accordingly, Mc Connell and Servaes (1995) have examined a large sample of non financial United States firms for the years 1976, 1986 and 1988. They showed that for high growth firms the relation between corporate value and leverage is negative, whereas that for low growth firms the relation between corporate value and leverage is positively correlated. This trend tends to indicate that to maximise corporate value, it is preferable to keep down leverage to a low level and to increase investment. Lang, Ofek and Stulz (1996) used a pooling regression to estimate the investment equation. They distinguish between the impact of leverage on growth in a firms core business from that in its non-core business. They argue that if leverage is a proxy for growth opportunities, its contractionary impact on investment in the core segment of the firm should be much more pronounced than in the non-core segment. They found that there exists a negative relation between leverage and future growth at the firm level. Also they argued that debt financing does not reduce growth for firms known to have good investment opportunities. Lang et al document a negative relation between firm leverage and subsequent growth. However, they find that this negative relation holds only for low q firms, i.e. those with fewer profitable growth opportunities. Thus, their findings appear to be most consistent with the view that leverage curbs overinvestment in firms with poor growth opportunities. Myers (1997) has examined possible difficulties that firms may face in raising finance to materialize positive net present value (NPV) projects, if they are highly geared. Therefore, high leverages may result in liquidity problem and can affect a firms ability to finance growth. Under this situation, debt overhang can contribute to the under-investment problem of debt financing. That is for firms with growth opportunities, debt have a negative impact on the value of the firm. Peyer and Shivdasani (2001) provide evidence that large increases in leverage affect investment policy. They report that, following leveraged recapitalizations, firms allocate more capital to business units that produce greater cash flow. If leverage constrains investment, firms with valuable growth opportunities should choose lower leverage in order to avoid the risk of being forced to bypass some of these opportunities, while firms without valuable growth opportunities should choose higher leverage to bond themselves not to waste cash flow on unprofitable investment opportunities. Ahn et al. (2004) document that the negative relation between leverage and investment in diversified firms is significantly stronger for high Q segments than for low Q business segments, and is significantly stronger for non-core segments than for core segments. Among low growth firms, the positive relation between leverage and firm value is significantly weaker in diversified firms than in focused firms. Their results suggest that the disciplinary benefits of debt are partially offset by the additional managerial discretion in allocating debt service to different business segments within a diversified organizational structure. Childs et al (2005) argued that financial flexibility encourages the choice of short-term debt, thereby dramatically reducing the agency costs of under-investment and over-investment. However the reduction in the agency costs may not encourage the firm to increase leverage, since the firms initial debt level choice depends on the type of growth options in its investment opportunity set. Aivazian et al (2005) analysed the impact of leverage on investment on 1035 Canadian industrial companies, covering the period 1982 to 1999. Their study examined whether financing considerations (as measured by the extent of financial leverage) affect firm investment decisions inducing underinvestment or overinvestment incentives. They found that leverage is negatively related to the level of investment, and that this negative effect is significantly stronger for firms with low growth opportunities than those with high growth opportunities. These results provide support to agency theories of corporate leverage, and especially to the theory that leverage has a disciplining role for firms with weak growth opportunities 1.6 Investment, Cash Flow and Tobins Q It was traditionally believed that cash flow was important for firms investment decisions because managers regarded internal funds as less expensive than external funds. In the 1950s and 1960s, this view led to numerous empirical assessments of the role of internal funds in firm investment behaviour. These studies found strong relationships between cash flow and investment. Considerable empirical evidence indicates that internally generated funds are the primary way firms finance investment expenditures. In an in-depth study of 25 large firms, Gordon Donaldson (1961) concludes that: Management strongly favoured internal generation as a source of new funds even to the exclusion of external funds except for occasional unavoidable bulges in the need for new funds. Another survey of 176 corporate managers by Pinegar and Wilbricht (1989) found that managers prefer cash flow over external sources to finance new investment; 84.3% of sample respondents indicate a preference for financing investment with cash flow. Researchers have also discovered the impact of cash flow on investment spending in Q models of investment. Fazzari, Hubbard, and Petersen (1988) find that cash flow has a strong effect on investment spending in firms with low-dividend-payout policies. They argue that this result is consistent with the notion that low-payout firms are cash flow-constrained because of asymmetric information costs associated with external financing. One reason these firms keep dividends to a minimum is to conserve cash flow from which they can finance profitable investment expenditures. Fazzari and Petersen (1993) find that this same group of low-payout firms smooths fluctuations in cash flow with working capital to maintain desired investment levels. This result is consistent with the Myers and Majluf (1984) finding that liquid financial assets can mitigate the underinvestment problem arising from asymmetric information. Whited (1992) also extended the Fazzari, Hubbard, and Petersen (1988) results in a study of firms facing debt financing constraints due to financial distress. She found evidence of a strong relationship between cash flow and investment spending for firms with a high debt ratio or a high interest coverage ratio, or without rated debt. Himmelberg and Petersen (1994) in a study of small research and development firms find that cash flow strongly influences both capital and R D expenditures. They argue that the asymmetric information effects associated with such firms make external financing prohibitively expensive, forcing them to fund expenditures internally, that is by making use of cash flows. An alternative explanation for the strong cash flow/investment relationship is that managers divert free cash flow to unprofitable investment spending. One study assessing the relative importance of such an agency problem was performed by Oliner and Rudebusch (1992), who analysed several firm attributes that may influence the cash flow/investment relationship. They find that insider share holdings and ownership structure (variables that proxy for agency problems) do little to explain the influence that cash flow has on firm investment spending. Carpenter (1993) focused on the relationships among debt financing, debt structure, and investments pending to test the free cash flow theory. He finds that firms that restructure by replacing large amounts of external equity with debt increase their investment spending compared to non-restructured firms. He sees these results as inconsistent with free cash flow behavior, because cash flow committed to debt maintenance should be associated with reductions in subsequent investment spending. Findings by Strong and Meyer (1990) and Devereux and Schiantarelli (1990) support the free cash flow interpretation. Strong and Meyer (1990) disaggregate the investment and cash flow of firms in the paper industry into sustaining investment (i.e., productive capacity maintaining) and discretionary investment, and total cash flow and residual cash flow (i.e., cash flow after debt service, taxes, sustaining investment, and established dividends). Residual cash flow and discretionary investment are found to be positively and strongly related. This evidence suggests that residual cash flow is often used to fund unprofitable discretionary investments pending. Devereux and Schiantarelli (1990) find that the impact of cash flow on investment spending is greater for larger firms. One explanation they provide for this result is that large firms have more diverse ownership structures, and are more influenced by manager/shareholder agency problems. The Q model of investment relates investment to the firms stock market valuation, which is meant to reflect the present discounted value of expected future profits, Brainard and Tobin (1968). In the case of perfectly competitive markets and constant returns to scale technology, Hayashi (1982) showed that average Q, the ratio of the maximised value of the firm to the replacement cost of its existing capital stock, would be a sufficient statistic for investment rates. Tobins Q, further assumes that the maximised value of the firm can be measured by its stock market valuation. Under these assumptions, the stock market valuation would capture all relevant information about expected future profitability, and significant coefficients on cash-flow variables after controlling for Tobins Q could not be attributed to additional information about current expectations. However if the Hayashi conditions are not satisfied, or if stock market valuations are influenced by bubbles or any factors other than the present discounted value of expected future profits; then Tobins Q would not capture all relevant information about the expected future profitability of current investment. If that is the case, then additional explanatory variables like current or lagged sales or cash-flow terms could proxy for the missing information about expected future conditions. The classification of q ratios into high and low categories is based on a cut-off of one Lang, Stulz, and Walkling (1989). The latters motivation for this cut-off is partially based on the fact that under certain circumstances firms with q ratios below one have marginal projects with negative net present values (Lang and Litzenberger, 1989). However, q is also industry specific and one may argue that managers should not be held responsible for adverse shocks to their industries. As such, the industry average may be a useful alternative cut-off point to separate high q firms from low q firms. Hoshi, Kashyap, and Scharfstein (1991) regressed investment on Tobins q, other controlling variables, and cash flow. They interpreted differences in the importance of cash flow between different groups of firms as evidence of financing constraints. Results obtained by Vogt (1994) indicate that the influence of cash flow on capital spending is stronger for firms with lower Q values. This result suggests that cash flow-financed capital spending is marginally inefficient and provides initial evidence in support of the FCF hypothesis. The stronger the influence cash flow had on capital spending in this group, the larger the associated value of Tobins Q. After the results presented by Kaplan and Zingales (1997 and 2000), several studies have criticised the empirical test based on the cash flow sensitivity as a meaningful evidence in favour of the existence of financing constraints. The significance of the cash flow sensitivity of investment, it was argued, may then be the consequence of measurement errors in the usual proxy for investment opportunities, Tobins Q, and may provide additional information on expected profitability rather than being a signal of financing constraints. Gomes (2001) showed that the existence of financing constraints is not sufficient to establish cash flow as a significant regressor in a standard investment equation, while Ericson and Whited (2000) demonstrate that the investment sensitivity to cash flow in regressions including Tobins Q is to a large extent due to a measurement error in Q. Likewise, Alti (2003) shows that investment can be sensitive to changes in cash flow in the benchmark case where financing is frictionless. 2.3 Investment and Profitability The idea that investment depends on the profitability of a firm is amongst the oldest of macroeconomic relationships formulated. The sharp fluctuations in profitability in the average cost of capital since the 1960s revived interest in this relationship (Glyn et al, 1990). However the evidence for the impact of profitability on investment remains sketchy. Bhaskar and Glyn (1992) concluded that profitability must be regarded as a significant influence on investment, though by no means the overwhelming one. Their results indicated that enhanced profitability is not always a necessary, let alone a sufficient condition for increased investment. However, years later Glyn (1997) provided an empirical study that examined the impact of profitability on capital accumulation. He tested the impact of profitability in the manufacturing sector on investment for the period 1960-1993 for 15 OECD countries. His findings suggested that the classical emphasis on the role of profitability on investment wass still highly significant and had a very tight relationship. Korajczyk and Levy (2003) investigated the role of macroeconomic conditions and financial constraints in determining capital structure choice. While estimating the relation between firms debt ratio and firm-specific variables, they found out that there was a negative relation between profitability and target leverage, which was consistent with the pecking order theory. This indicated that if leverage of the firm is low, profitability will be high and the entity will be able to invest in positive NPV projects i.e. increase investment. Bhattacharyya (2008) recently provided an empirical study where he examined the effect of profitability and other determinants of investment for Indian firms. He found that Short-run profitability does not have consistent influence on investment decisions of firms, implying that one should concentrate on the long-run profitability of a firm. This indicates that profitability is still regarded as one of the major determinants underlying investment decisions of firms. However, he suggested that liquidity is relatively more important than profitability when it comes to firms investment decisions. 2.3 Investment and Liquidity Under the assumptions of illiquid capital and true uncertainty, management can never be sure that investment projects will produce sufficient liquidity to cover the cash commitments generated by their financing. Yet failure to meet these commitments may result in a crisis of managerial autonomy or even in bankruptcy. Thus, capital accumulation is a contradictory process. Investment is inherently risky, while the failure to invest will ultimately lead to the firms marginalization or demise. Crotty and Goldstein (1992) Chamberlain and Gordon (1989) used the annual domestic investment of all nonfinancial corporations in the United States between 1952 and 1981 in an attempt to determine the impact of liquidity on the profitable investment opportunities available to the corporation. They have put forward that in their long-run survival model, liquidity variables play an essential role as it captures the firms desire to avoid bankruptcy. It was also noted that there was a significant improvement in the explanation of investment when liquidity variables were added to the profitability variables of their regression, thereby supporting the view that liquidity is a pre-dominant determinant of investment and that they are positively related. Hoshi, Kashyap and Scharfstein (1991) attempted to find the relationship between investment and liquidity for Japanese firms. They found that high current profits increase current liquidity, thereby generating further investment from the firm to ensure future profitability and increased output to meet demand. Myers and Rajan (1998) suggested that liquid assets are generally viewed as being easier to finance and therefore, asset liquidity is a plus for nonfinancial corporations or individual investors. However, Myers and Rajan argued that although more liquid assets increase the ability to invest in projects, they also reduce managements ability to commit credibly to an investment strategy that protects investors. Johnson (2003) found that short debt maturity increases liquidity risk, which in turn, negatively affects leverage and the firms investment. Jonson also suggested that firms trade off the cost of underinvestment problems against the cost of increased liquidity risk when choosing short debt maturity 2.4 Investment and Sales Sales growth targets play a major role in the perceptions of top managers. Using surveys, Hubbard and Bromiley (1994) find sales is the most common objective mentioned by senior managers. Additional explanatory variables like current or lagged sales are very important in the investment equation as they can act as proxy for the missing information about expected future conditions in case such information has not been captured by Tobins Q. Kaplan and Norton (1992, 1993, 1996) argue that firms must use a wide variety of goals, including sales growth, to effectively reach their financial objectives. They suggested that Sales growth influences factorsà ¢Ã¢â€š ¬Ã‚ ¦..all the way to the implied opportunities for investments in new equipment and technologiesà ¢Ã¢â€š ¬Ã‚ ¦.. According to this study of 396 corporations, Kopcke and Howrey (1994) found that the capital spending of many of the companies corresponds very poorly with their sales and profits. These divergences suggest that sales and profits do not represent fully an enterprises particular incentives for investing. Consequently, these findings do not support generalizations contending that companies with more debt are investing less than their sales and cash flows would guarantee. Athey and Laumas (1994) using panel data over the period 1978-86, examined the relative importance of the sales accelerator and alternative internal sources of liquidity in investment activities of 256 Indian manufacturing firms. They found that when all the selected firms in the sample were considered together, current values of changes in real net sales and net profit were all significant in determining capital spending of firms. Azzoni and Kalatzis (2006) considered the importance of sales for investment decisions of firms. They found that sales presented a positive and significant relationship with investment in all cases. Impact of Financial Leverage on Investment Impact of Financial Leverage on Investment The term Investment is frequently used in jargon of economics, business management and finance. According to economic theories, investment is defined as the per-unit production of goods, which have not been consumed, but will however, be used for the purpose of future production. The decision for investment, also referred to as capital budgeting decision, is regarded as one of the key decisions of an entity. Leverage is a method of corporate funding in which a higher proportion of funds is raised through borrowing than stock issue. It is measured as the ratio of total debt to total assets; greater the amount of debt, greater the financial leverage. Financial Leverage is the ability of a company to earn more on its assets by taking on debt that allows it to buy or invest more in order to expand. Nowadays financial leverage is viewed as an important attribute of capital structure alongside equity and retained earnings. Financial leverage benefits common stockholders as long as the borrowed funds generate a return greater than the cost of borrowing, although the increased risk can offset the general cost of capital. In the past years, a large body of the literature has provided robust empirical evidence that financial factors have a significant impact on the investment decisions of firms. While traditional research on investment was based on the neoclassical theory of optimal capital accumulation (where under the assumption of perfect capital markets, the cost of financing does not depend on the firms financial position), more recent literature has increasingly incorporated frictions such as asymmetric information and agency problems as a source behind the relevance of the degree of financial pressure faced by the firm in determining the availability and the costs of external financing This chapter will seek to enclose literature on the impact of financial leverage on investment and other factors that may affect investment in firms. 1.1 Modigliani Miller (MM) 1958 theory with no taxation In what has been hailed as the most influential set of financial papers ever published, Franco Modigliani and Merton Miller addressed capital structure in a rigorous, scientific fashion, and their study set off a chain of research that continues to this day. Modigliani and Miller (1958) argued that the investment policy of a firm should be based only on those factors that will increase the profitability, cash flow or net worth of a firm. The MM view is that companies which operate in the same type of business and which have similar operating risks must have the same total value, irrespective of their capital structures. It is based on the belief that the value of a company depends upon the future operating income generated by its assets. The way in which this income is split between returns to debt holders and returns to equity should make no difference to the total value of the firm. Thus the total value of the firm will not change with gearing, and therefore neither will its Weighted Average Cost of Capita (Pandey, 1995). Many empirical literatures have challenged the leverage irrelevance theorem of Modigliani and Miller. The irrelevance proposition of Modigliani and Miller will be valid only if the perfect market assumptions underlying their analysis are satisfied Under the original MM propositions, leverage and investment were unrelated. If a firm had profitable investment projects, it could obtain funding for these projects regardless of the nature of its current balance sheet. 1.2 Modigliani Miller 1963 theory with tax M M (1963) found that the corporation tax system carries a distortion under which returns to debt holders (interest) are tax deductible to the firm, whereas returns to equity holders are not. They therefore concluded that geared companies have an advantage over ungeared companies, i.e. they pay less tax and will have a greater market value and a lower WACC. Following this research, the consensus that emerged was that tax is positively correlated to debt (Graham 1995, Miller 1977) and is considered a major influence in the debt policy decision. Modigliani et al (1963) argued that we should not waste our limited worrying capacity on second-order and largely self correcting problems like financial leveragingà ¢Ã¢â€š ¬Ã… ¸. That is firms should not be worried about growth as long as they have good projects in hand, since they will always be able to find means of financing those projects. 1.3 The Trade-Off Models Some of the assumptions inherent in the MM model can be relaxed without changing the basic conclusions as argued by Stiglitz (1969) and Rubenstein (1973). However, when financial distress and agency costs are considered, the MM models are altered significantly. The addition of financial distress and agency costs to the MM model results in a trade-off model. In such a model, the optimal capital structure can be visualized as a trade-off between the benefit of debt (the interest tax shield) and the costs of debt (financial distress and agency costs) as presented by Myers (1997) The trade-off models have intuitive appeal because they lead to the conclusion that both no-debt and all-debt are bad, while a moderate debt level is good. However, the trade-off models have very limited empirical support, Marsh (1982), suggesting that factors not incorporated in this model are also at work. Jensen and Meckling (1976) invoked a moral hazard argument to explain the agency costs of debt, proposing that high levels of debt will induce firms to opt for excessively risky investment projects. The incentive for such a move is that limited liability provisions in debt contracts imply that risky projects will provide higher mean returns to the shareholders: zero in low states of nature and high in good states. However, the higher probability of default will induce investors to demand either interest rates premiums or bond covenants that restrict the firms future use of debt. 1.4 Pecking-Order Theory Initiated by Donaldson (1961), the Pecking-Order theory argues that firms simply use all their internally-generated funds first, move down the pecking order to debt and then lastly issue equity in an attempt to raise funds. Firms follow this line of least resistance that establishes the capital structure. Myers noted an inconsistency between Donaldsons findings and the trade-off models, and this inconsistency led Myers to propose a new theory. Myers (1984) suggested asymmetric information as an explanation for the heavy reliance on retentions. This may be a situation where managers have access to more information about the firm and know that the value of the shares is greater than the current market value. If new shares are issued in this situation, there is a possibility that they would be issued at a too low price, thereby transferring wealth from existing shareholders to new shareholders. 1.5 Investment and Leverage One of the main issues in Corporate Finance is whether financial leverage has any effects on investment policies. The corporate world is characterized by various market imperfections, due to transaction costs, institutional restrictions and asymmetric information. The interactions between management, shareholders and debt holders will generate frictions due to agency problems and that may result in under-investment or over-investment incentives. Whenever we refer to investment, it is essential to distinguish between over- investment and under-investment. In his model, Myers (1977) argued that debt can create an overhang effect. His idea was that debt overhang reduces the incentives of the shareholder-management coalition in control of the firm to invest in positive net-present-value investment opportunities, since the benefits accrue, at least partially, to the bondholders rather than accruing fully to the shareholders. Hence, highly levered firms are less likely to exploit valuable growth opportunities as compared to firms with low levels of leverage. Underinvestment theory centers on a liquidity effect in that firms with large debt commitment invest less, no matter what their growth opportunities (Lang et al, 1996). In theory, even if debt creates potential underinvestment incentives, the effect could be attenuated by the firm taking corrective action and lowering its leverage, if future growth opportunities are recognized sufficiently early (Aivazian Callen, 1980). Leverage is optimally reduced by management ex ante in view of projected valuable ex post growth opportunities, so that its impact on growth is attenuated. Thus, a negative empirical relation between leverage and growth may arise even in regressions that control for growth opportunities because managers reduce leverage in anticipation of future investment opportunities. Leverage simply signals managements information about investment opportunities. The possibility that leverage might substitute for growth opportunities is referred to as the endogeneity problem. Over-investment theory is another problem that has received much attention over the years. It is described as investment expenditure beyond that required to maintain assets in place and to finance positive NPV projects. In these kind of situations, conflicts may arise between managers and shareholders (Jensen,1986 Stulz,1990). Managers seek for opportunities to expand the business even if that implies undertaking poor projects and reducing shareholder worth in the company. Managers abilities to carry such a policy is restrained by the availability of cash flow and further tightened by the financing of debt. Issuing debt commits the firm to pay cash as interest and principal, forcing managers to service such commitments with funds that may have otherwise been allocated to poor investment projects. Thus, leverage is one mechanism for overcoming the overinvestment problem suggesting a negative relationship between debt and investment for firms with weak growth opportunities. Too much debt also is not considered to be good as it may lead to financial distress and agency problems. Cantor (1990) explains that highly leveraged firms show a heightened sensitivity to fluctuations in cash flow and earnings since they face substantial debt service obligations, have limited ability to borrow additional funds and may feel extra pressure to maintain a positive cash flow cushion. Hence, the net effect would be reduced levels of investment for the firm in question. Accordingly, Mc Connell and Servaes (1995) have examined a large sample of non financial United States firms for the years 1976, 1986 and 1988. They showed that for high growth firms the relation between corporate value and leverage is negative, whereas that for low growth firms the relation between corporate value and leverage is positively correlated. This trend tends to indicate that to maximise corporate value, it is preferable to keep down leverage to a low level and to increase investment. Lang, Ofek and Stulz (1996) used a pooling regression to estimate the investment equation. They distinguish between the impact of leverage on growth in a firms core business from that in its non-core business. They argue that if leverage is a proxy for growth opportunities, its contractionary impact on investment in the core segment of the firm should be much more pronounced than in the non-core segment. They found that there exists a negative relation between leverage and future growth at the firm level. Also they argued that debt financing does not reduce growth for firms known to have good investment opportunities. Lang et al document a negative relation between firm leverage and subsequent growth. However, they find that this negative relation holds only for low q firms, i.e. those with fewer profitable growth opportunities. Thus, their findings appear to be most consistent with the view that leverage curbs overinvestment in firms with poor growth opportunities. Myers (1997) has examined possible difficulties that firms may face in raising finance to materialize positive net present value (NPV) projects, if they are highly geared. Therefore, high leverages may result in liquidity problem and can affect a firms ability to finance growth. Under this situation, debt overhang can contribute to the under-investment problem of debt financing. That is for firms with growth opportunities, debt have a negative impact on the value of the firm. Peyer and Shivdasani (2001) provide evidence that large increases in leverage affect investment policy. They report that, following leveraged recapitalizations, firms allocate more capital to business units that produce greater cash flow. If leverage constrains investment, firms with valuable growth opportunities should choose lower leverage in order to avoid the risk of being forced to bypass some of these opportunities, while firms without valuable growth opportunities should choose higher leverage to bond themselves not to waste cash flow on unprofitable investment opportunities. Ahn et al. (2004) document that the negative relation between leverage and investment in diversified firms is significantly stronger for high Q segments than for low Q business segments, and is significantly stronger for non-core segments than for core segments. Among low growth firms, the positive relation between leverage and firm value is significantly weaker in diversified firms than in focused firms. Their results suggest that the disciplinary benefits of debt are partially offset by the additional managerial discretion in allocating debt service to different business segments within a diversified organizational structure. Childs et al (2005) argued that financial flexibility encourages the choice of short-term debt, thereby dramatically reducing the agency costs of under-investment and over-investment. However the reduction in the agency costs may not encourage the firm to increase leverage, since the firms initial debt level choice depends on the type of growth options in its investment opportunity set. Aivazian et al (2005) analysed the impact of leverage on investment on 1035 Canadian industrial companies, covering the period 1982 to 1999. Their study examined whether financing considerations (as measured by the extent of financial leverage) affect firm investment decisions inducing underinvestment or overinvestment incentives. They found that leverage is negatively related to the level of investment, and that this negative effect is significantly stronger for firms with low growth opportunities than those with high growth opportunities. These results provide support to agency theories of corporate leverage, and especially to the theory that leverage has a disciplining role for firms with weak growth opportunities 1.6 Investment, Cash Flow and Tobins Q It was traditionally believed that cash flow was important for firms investment decisions because managers regarded internal funds as less expensive than external funds. In the 1950s and 1960s, this view led to numerous empirical assessments of the role of internal funds in firm investment behaviour. These studies found strong relationships between cash flow and investment. Considerable empirical evidence indicates that internally generated funds are the primary way firms finance investment expenditures. In an in-depth study of 25 large firms, Gordon Donaldson (1961) concludes that: Management strongly favoured internal generation as a source of new funds even to the exclusion of external funds except for occasional unavoidable bulges in the need for new funds. Another survey of 176 corporate managers by Pinegar and Wilbricht (1989) found that managers prefer cash flow over external sources to finance new investment; 84.3% of sample respondents indicate a preference for financing investment with cash flow. Researchers have also discovered the impact of cash flow on investment spending in Q models of investment. Fazzari, Hubbard, and Petersen (1988) find that cash flow has a strong effect on investment spending in firms with low-dividend-payout policies. They argue that this result is consistent with the notion that low-payout firms are cash flow-constrained because of asymmetric information costs associated with external financing. One reason these firms keep dividends to a minimum is to conserve cash flow from which they can finance profitable investment expenditures. Fazzari and Petersen (1993) find that this same group of low-payout firms smooths fluctuations in cash flow with working capital to maintain desired investment levels. This result is consistent with the Myers and Majluf (1984) finding that liquid financial assets can mitigate the underinvestment problem arising from asymmetric information. Whited (1992) also extended the Fazzari, Hubbard, and Petersen (1988) results in a study of firms facing debt financing constraints due to financial distress. She found evidence of a strong relationship between cash flow and investment spending for firms with a high debt ratio or a high interest coverage ratio, or without rated debt. Himmelberg and Petersen (1994) in a study of small research and development firms find that cash flow strongly influences both capital and R D expenditures. They argue that the asymmetric information effects associated with such firms make external financing prohibitively expensive, forcing them to fund expenditures internally, that is by making use of cash flows. An alternative explanation for the strong cash flow/investment relationship is that managers divert free cash flow to unprofitable investment spending. One study assessing the relative importance of such an agency problem was performed by Oliner and Rudebusch (1992), who analysed several firm attributes that may influence the cash flow/investment relationship. They find that insider share holdings and ownership structure (variables that proxy for agency problems) do little to explain the influence that cash flow has on firm investment spending. Carpenter (1993) focused on the relationships among debt financing, debt structure, and investments pending to test the free cash flow theory. He finds that firms that restructure by replacing large amounts of external equity with debt increase their investment spending compared to non-restructured firms. He sees these results as inconsistent with free cash flow behavior, because cash flow committed to debt maintenance should be associated with reductions in subsequent investment spending. Findings by Strong and Meyer (1990) and Devereux and Schiantarelli (1990) support the free cash flow interpretation. Strong and Meyer (1990) disaggregate the investment and cash flow of firms in the paper industry into sustaining investment (i.e., productive capacity maintaining) and discretionary investment, and total cash flow and residual cash flow (i.e., cash flow after debt service, taxes, sustaining investment, and established dividends). Residual cash flow and discretionary investment are found to be positively and strongly related. This evidence suggests that residual cash flow is often used to fund unprofitable discretionary investments pending. Devereux and Schiantarelli (1990) find that the impact of cash flow on investment spending is greater for larger firms. One explanation they provide for this result is that large firms have more diverse ownership structures, and are more influenced by manager/shareholder agency problems. The Q model of investment relates investment to the firms stock market valuation, which is meant to reflect the present discounted value of expected future profits, Brainard and Tobin (1968). In the case of perfectly competitive markets and constant returns to scale technology, Hayashi (1982) showed that average Q, the ratio of the maximised value of the firm to the replacement cost of its existing capital stock, would be a sufficient statistic for investment rates. Tobins Q, further assumes that the maximised value of the firm can be measured by its stock market valuation. Under these assumptions, the stock market valuation would capture all relevant information about expected future profitability, and significant coefficients on cash-flow variables after controlling for Tobins Q could not be attributed to additional information about current expectations. However if the Hayashi conditions are not satisfied, or if stock market valuations are influenced by bubbles or any factors other than the present discounted value of expected future profits; then Tobins Q would not capture all relevant information about the expected future profitability of current investment. If that is the case, then additional explanatory variables like current or lagged sales or cash-flow terms could proxy for the missing information about expected future conditions. The classification of q ratios into high and low categories is based on a cut-off of one Lang, Stulz, and Walkling (1989). The latters motivation for this cut-off is partially based on the fact that under certain circumstances firms with q ratios below one have marginal projects with negative net present values (Lang and Litzenberger, 1989). However, q is also industry specific and one may argue that managers should not be held responsible for adverse shocks to their industries. As such, the industry average may be a useful alternative cut-off point to separate high q firms from low q firms. Hoshi, Kashyap, and Scharfstein (1991) regressed investment on Tobins q, other controlling variables, and cash flow. They interpreted differences in the importance of cash flow between different groups of firms as evidence of financing constraints. Results obtained by Vogt (1994) indicate that the influence of cash flow on capital spending is stronger for firms with lower Q values. This result suggests that cash flow-financed capital spending is marginally inefficient and provides initial evidence in support of the FCF hypothesis. The stronger the influence cash flow had on capital spending in this group, the larger the associated value of Tobins Q. After the results presented by Kaplan and Zingales (1997 and 2000), several studies have criticised the empirical test based on the cash flow sensitivity as a meaningful evidence in favour of the existence of financing constraints. The significance of the cash flow sensitivity of investment, it was argued, may then be the consequence of measurement errors in the usual proxy for investment opportunities, Tobins Q, and may provide additional information on expected profitability rather than being a signal of financing constraints. Gomes (2001) showed that the existence of financing constraints is not sufficient to establish cash flow as a significant regressor in a standard investment equation, while Ericson and Whited (2000) demonstrate that the investment sensitivity to cash flow in regressions including Tobins Q is to a large extent due to a measurement error in Q. Likewise, Alti (2003) shows that investment can be sensitive to changes in cash flow in the benchmark case where financing is frictionless. 2.3 Investment and Profitability The idea that investment depends on the profitability of a firm is amongst the oldest of macroeconomic relationships formulated. The sharp fluctuations in profitability in the average cost of capital since the 1960s revived interest in this relationship (Glyn et al, 1990). However the evidence for the impact of profitability on investment remains sketchy. Bhaskar and Glyn (1992) concluded that profitability must be regarded as a significant influence on investment, though by no means the overwhelming one. Their results indicated that enhanced profitability is not always a necessary, let alone a sufficient condition for increased investment. However, years later Glyn (1997) provided an empirical study that examined the impact of profitability on capital accumulation. He tested the impact of profitability in the manufacturing sector on investment for the period 1960-1993 for 15 OECD countries. His findings suggested that the classical emphasis on the role of profitability on investment wass still highly significant and had a very tight relationship. Korajczyk and Levy (2003) investigated the role of macroeconomic conditions and financial constraints in determining capital structure choice. While estimating the relation between firms debt ratio and firm-specific variables, they found out that there was a negative relation between profitability and target leverage, which was consistent with the pecking order theory. This indicated that if leverage of the firm is low, profitability will be high and the entity will be able to invest in positive NPV projects i.e. increase investment. Bhattacharyya (2008) recently provided an empirical study where he examined the effect of profitability and other determinants of investment for Indian firms. He found that Short-run profitability does not have consistent influence on investment decisions of firms, implying that one should concentrate on the long-run profitability of a firm. This indicates that profitability is still regarded as one of the major determinants underlying investment decisions of firms. However, he suggested that liquidity is relatively more important than profitability when it comes to firms investment decisions. 2.3 Investment and Liquidity Under the assumptions of illiquid capital and true uncertainty, management can never be sure that investment projects will produce sufficient liquidity to cover the cash commitments generated by their financing. Yet failure to meet these commitments may result in a crisis of managerial autonomy or even in bankruptcy. Thus, capital accumulation is a contradictory process. Investment is inherently risky, while the failure to invest will ultimately lead to the firms marginalization or demise. Crotty and Goldstein (1992) Chamberlain and Gordon (1989) used the annual domestic investment of all nonfinancial corporations in the United States between 1952 and 1981 in an attempt to determine the impact of liquidity on the profitable investment opportunities available to the corporation. They have put forward that in their long-run survival model, liquidity variables play an essential role as it captures the firms desire to avoid bankruptcy. It was also noted that there was a significant improvement in the explanation of investment when liquidity variables were added to the profitability variables of their regression, thereby supporting the view that liquidity is a pre-dominant determinant of investment and that they are positively related. Hoshi, Kashyap and Scharfstein (1991) attempted to find the relationship between investment and liquidity for Japanese firms. They found that high current profits increase current liquidity, thereby generating further investment from the firm to ensure future profitability and increased output to meet demand. Myers and Rajan (1998) suggested that liquid assets are generally viewed as being easier to finance and therefore, asset liquidity is a plus for nonfinancial corporations or individual investors. However, Myers and Rajan argued that although more liquid assets increase the ability to invest in projects, they also reduce managements ability to commit credibly to an investment strategy that protects investors. Johnson (2003) found that short debt maturity increases liquidity risk, which in turn, negatively affects leverage and the firms investment. Jonson also suggested that firms trade off the cost of underinvestment problems against the cost of increased liquidity risk when choosing short debt maturity 2.4 Investment and Sales Sales growth targets play a major role in the perceptions of top managers. Using surveys, Hubbard and Bromiley (1994) find sales is the most common objective mentioned by senior managers. Additional explanatory variables like current or lagged sales are very important in the investment equation as they can act as proxy for the missing information about expected future conditions in case such information has not been captured by Tobins Q. Kaplan and Norton (1992, 1993, 1996) argue that firms must use a wide variety of goals, including sales growth, to effectively reach their financial objectives. They suggested that Sales growth influences factorsà ¢Ã¢â€š ¬Ã‚ ¦..all the way to the implied opportunities for investments in new equipment and technologiesà ¢Ã¢â€š ¬Ã‚ ¦.. According to this study of 396 corporations, Kopcke and Howrey (1994) found that the capital spending of many of the companies corresponds very poorly with their sales and profits. These divergences suggest that sales and profits do not represent fully an enterprises particular incentives for investing. Consequently, these findings do not support generalizations contending that companies with more debt are investing less than their sales and cash flows would guarantee. Athey and Laumas (1994) using panel data over the period 1978-86, examined the relative importance of the sales accelerator and alternative internal sources of liquidity in investment activities of 256 Indian manufacturing firms. They found that when all the selected firms in the sample were considered together, current values of changes in real net sales and net profit were all significant in determining capital spending of firms. Azzoni and Kalatzis (2006) considered the importance of sales for investment decisions of firms. They found that sales presented a positive and significant relationship with investment in all cases.