PEST analysis Essay Example | Topics and Well Written Essays - 2250 words

Bug investigation - Essay Example The outer condition comprises of four principle factors, political, monetary, social and innovative (Dubrin, 2012). These components are aggregately known as PEST. These variables show up as open doors for the association while it is likewise conceivable that at certain point in time, they present dangers. The associations need to keep a consistent eye upon these four elements to remain productive and now and again for center endurance. The paper examines about these variables and their persuasions upon the associations arrangements, capacities and productivity. Political Aspects of External Environment The political part of outside condition is identified with the administration laws, enactments, rules, polices and other global rules that are authorized every once in a while. These components supplant all nearby and authoritative precepts and each association will undoubtedly obey them for its reality (D’Anieri, 2009). The regular case of this factor is levy rules, charge rat es, work laws (Collins, 2010) and exchange shares. Each association needs to provide food for every one of these focuses to follow the guideline. The resistance represents the most genuine danger and associations take a very long time to settle the claims documented against them due to infringement of laws. Numerous administration approaches are identified with remote direct speculation and force certain limitations on the proprietorship privileges of the business. Especially in the Gulf States, responsibility for domain assets by outsiders is restricted. It makes uncertainty for the business concerns while they intend to put resources into these nations. Another purpose of worry in such manner is about the monetary record of the association that has solid money related position yet can't possess the land and building which naturally diminishes their advantages side. In the current business period, globalization has evacuated numerous obstructions and the free development of capital , products and work has become a training. The work laws are loose about employing exiles and it is expanding the degree of assorted variety in the association (Barak, 2011). There are sure Acts which guarantee formal assurance of employees’ rights. This circumstance has raised numerous difficulties to the associations. Guaranteeing fulfillment of a various workforce on the grounds of fair treatment isn't child’s play. Each worker has various necessities and it is nothing unexpected that one’s intrigue hurts the advantage of others. The associations need to guarantee that a success win condition is met constantly (Vent, 2009). There are guidelines identified with the lowest pay permitted by law which influence the associations cost structure and thusly the overall revenues. There are sure rules about work amount of nearby and remote representatives, it powers associations to bargain over the gifted pool and recruit the person who may not be at standard in instru ctive and proficient prerequisites. The political angles are connected with the presentation of stock trade also. Stock trade is the most unpredictable area of the economy which is impacted by each news and occasion in any side of the world. The mobs and political dependability in one nation adversely influences the market estimation of the organizations which have a place with that nation regardless of they are enrolled with some global stock trade like London Stock Exchange or New York Stock Exchange. Monetary Aspects of External Environment The effect of financial viewpoints in the outer condition is as apparent as the

Students Need To Be Able To Learn How To Become Effective Problem Solv

Understudies should have the option to figure out how to become viable issue solvers. They ought to be ready to recognize issues, assess those issues and afterward interpret an approach to move their learning to those issues such that will achieve an answer. On the off chance that an understudy can act in an issue comprehending circumstance an important learning should then happen in light of the fact that he has developed a translation of how things work utilizing prior organized. This is the hypothesis behind Constructivism. By making an individual translation of outside thoughts and experiances, constructivism permits understudies the capacity to see how thoughts can identify with one another and prior information. A educator should then perceive the significance of the cognative and social methodologies for learning and instructing so she may help the understudies' advancement in constructivist learning. The two methodologies are important in light of the fact that one will underline the job of cognative procedures and the other will underscore culture and social connection in the job of important learning. One, in any case, may think about how to approach upholding these methodologies. One strategy is through platform, furnishing an understudy with adequate data to have the option to finish an undertaking on his own or, to introduce a slow diminishing in the measure of help availible permitting the understudy the ability to work independantly. Arranged learning will give the understudy a lot of learning errands set in sensible settings. This will remember the capacities to utilize information for a working learning approach and obtaining idle information dependent on the learning of detached realities in restricted conditions. In conclusion, understudies should, using different points of view, have the option to see issues and thoughts. These thoughts introduced will at that point have the option to reveal insight into the idea of critical thinking. There are three most basic kinds of issues, the principal being very much organized issues. All around organized issues are ones obviously expressed with known arrangement strategies and assessment principles; a model being a mathamatical procedure. Another kind of issue are those that are badly organized; they are expressed enigmatically, have hazy arrangement methodology, and obscure gauges of evalalution. The third sort, issue issues, are badly organized issues that will arrouse srtong sentiments in the understudies. The initial phase in helping understudies become adaquate issues solvers is guaranteeing they understand that an issue exists. When an issue is identifiedm understudies ought to be relied upon to comprehend the idea of the issue. The following consistent advance would then be for those understudies to gather all important data to their concern permitting them to figure and complete an answer. In conclusion, the understudies would then be required to assess their answers working out the blemishes, explaining the outcomes. Critical thinking is an important abilty for an understudy which will, as it were, garuntee his future abilty to move information. The understudy needs a firm base comprehension of the critical thinking ideas to prompt a positive exchange of his later thoughts. He ought to have the option to perceive the requirement for various critical thinking procedures and how to relate and isolate hypotheses in his insight. The educator ought to have the option to introduce the beginning grounds to empower her understudies a strategy for delivering the answers for their issues. List of sources Snowman, J., and Biehler, R. (2000). Brain research Applied to Teaching (ninth release) Boston, MA: Houghton Miflin Company.

How to Cope With Financial Stress

How to Cope With Financial Stress Stress Management Situational Stress Print Coping With Financial Stress in Your Life By Elizabeth Scott, MS twitter Elizabeth Scott, MS, is a wellness coach specializing in stress management and quality of life, and the author of 8 Keys to Stress Management. Learn about our editorial policy Elizabeth Scott, MS Updated on December 01, 2019 How Stress Impacts Your Health Overview Signs of Burnout Stress and Weight Gain Benefits of Exercise Stress Reduction Tips Self-Care Practices Mindful Living Blend Images - KidStock / Brand X Pictures / Getty Images If youre worried about money, youre not alone. Money is a common source of stress for American adults. In fact, according to the American Psychological Association (APA), 72% of adults report feeling stressed about money, whether its worrying about paying rent or feeling bogged down by debt. This is pretty significant given financial stress is linked to so many health issues.?? How Financial Stress Affects Your Health Although any stress can take a toll on your health, stress related to financial issues can be especially toxic. Financial stress can lead to: Poor physical health: Ongoing stress about money has been linked to migraines, heart disease, diabetes, sleep problems, and more.?? Left untreated, these conditions can lead to life-threatening illnesses, which can plunge you even further into debt.Delayed healthcare: With less money in the budget, people who are already under financial stress tend to cut corners in areas they shouldnt, like healthcare. According to Gallups annual Health and Healthcare poll, 29% of American adults held off seeking medical care in 2018 because of cost. Though this tactic may seem like a good way to keep costs down, delaying medical care can actually lead to worse health outcomes and higher costs,?? both of which can lead to more stress.Poor mental health: In many instances, the link between mental and financial health is cyclicalâ€"poor financial health can lead to poor mental health, which leads to increasingly poor financial health, and so on. For years, studies have shown that people in debt have h igher rates of mental health issues like depression and anxiety than those who are debt-free.Unhealthy coping behaviors: Financial stress can cause you to engage in a variety of unhealthy behaviors, from overeating to alcohol and drug misuse. According to an APA survey published in 2014, 33% of Americans reported eating unhealthy foods or eating too much to deal with stress. How to Cope With Financial Stress Learning to cope with financial stress and effectively manage your financial situation can help you feel more in control of your life, reduce your stress, and build a more secure future. Try some of the following tips to get started: Understand the debt cycle. Understanding debt is the first step to getting yourself out of it. Once you know how to break out, you can start building toward your future in a more positive way with simple habits that are easy to maintain.Create extra sources of income. If youre feeling stressed about finances, you likely already feel you need more money in your budget. But knowing how to increase your financial holdings without creating significant stress for yourself can be tricky, too. Thankfully, there are several ways to boost your income and relieve your stress.Declutter your budget. Since life is rarely constant, regular budget checkups are essential to improving your financial health. Take control of your finances by setting aside some time to schedule, organize, and declutter all of the money coming in and out of your bank account. The more control you have, the less stress you will feel.Dont forget general stress management. As you work on improving your financial situation, you can reduce stress by practicing stress-reducing techniques and making other changes to create a low-stress lifestyle. A Word From Verywell If you feel that the stress of your financial situation is too much for you to handle, its important to share your concerns and not just keep them to yourself. Talk about your money concerns with trusted friends and family. You don’t have to go into details if you aren’t comfortable with them, but the more you talk about your concerns with your support system, the less isolated and stressed you will feel. Your loved ones may even be able to offer a new perspective on what you could do differently to get your financial issue under control.

Video B And Its Effects On Our Society - 924 Words

Child abuse, in most cases, end in two different ways. The children are killed, mentally and physically, or the abuse is reported to the authorities. Approximately 5 children die every day because of child abuse. Although many people do not understand how many children are abused, there is a mass amount of content online about this topic and how it affects our society. Both videos are engaging and informative. However, although Video A has better text, Video B’s imagery and sound is more thought provoking, making Video B more effective. Video B has better imagery in comparison to Video A. The imagery showed not just sad children that are beaten, but also a story with clear and memorable scenes. For example, in Video B, it shows a brutal scene of a drunken father ramming his fist into his son’s face; the boy’s face became swollen and bruised. In opposition, Video A only shows a small girl curled into herself as the audience hears muffled shouting. In another scene from Video B, an angled shot of a boy destroying his red new bicycle out of frustration. Showing the viewer how a kid under an abusive home feels powerless. Video B shows how the brutal imagery can affect the viewer, but sound also links with the story is progressing in the video. The sound of a whistle as a kid kicks and smashes his bright red bike into the pavement, anger clear on his face. Or a father’s fist hitting flesh over and over again, the smacking sound echoing in the video. Finally, Video B’s imagery areShow MoreRelat edViolence in Television, Movies, and Video Games Should Not Be Censored1653 Words   |  7 PagesVIOLENCE IN TELEVISION, MOVIES, AND VIDEO GAMES SHOULD NOT BE CENSORED Television, movies, and video games have a great influence on the minds of todays youth. But, what exactly are the effects of such an influence? Certain people have exaggerated the effects that these media have on todays youth. Many people, including government officials, have singled out these three media sources as the cause of some types of violence simply because it is an easy target for laying the blame. The truth isRead MoreKantian Ethical Analysis1614 Words   |  6 Pagesb) - Kantian Ethical Analysis: 1 - Introduction and brief explanation of Kantian ethics: German philosopher Kant was first to introduce the Kantian ethics; hence, the named after him. According to Professor Elizabeth Anscombe, Immanuel Kant was Unitarianism’s rival; he believed actions that are taboo should be completely prohibited at all times. For instance, murder should be prohibited. Even though nowadays a person cannot be punished if death is involved as a self defense, from Kant’s perspectiveRead MoreVideo Game Violence : Virtual Violence1512 Words   |  7 Pages Video Game Violence: Virtual violence v. Real-world violence Miguel Rodriguez Holguin Southern New Hampshire University The video game industry has grown to gigantic proportions; it’s a medium of entertainment that has great influence over the youth and adults globally. As with any media channel it is diverse in its content from childish themes to more mature topics. The industry’s success has been plagued by many critics and sociology experts all whom criticize the library of violentRead MoreIntroduction:. How Many People Listen To Music? That Is1747 Words   |  7 Pagesmatter, on the radio, in the comfort of their own homes, and etcetera. Music is a part of our society, and it cannot be separated from us. It is used to convey emotion when nothing else can, and it is a great art form and recreational activity. But, how does music affect us in any way relating to our thoughts and actions, or does it do nothing? Negative connotations within music can make people within our society, especially the younger generations, more calloused and more accepting of inappropriateRead MoreViolent Video Games: The Behavior Of Those Who Play Them1034 Words   |  4 PagesTitle : Violent Video Games: The Behavior Of Those Who Play Them I. Introduction A. hook / opening †¢With the recent violence across the world in schools, once again a concern has been stumbled upon in regards to whether or not video games can impact an individual’s demeanor, specifically in children and teenagers. However, when the concern is about children and violent video games, one thing is a sure fact: If parents keep getting these types of games the children will keep playing them, andRead MoreMedia Is The Most Accessible Form Of Information1643 Words   |  7 PagesOne of the contents what they spend their time is YouTube. It is a large video sharing service and more than 4 billion clips are watched every day on YouTube. In addition, many of most watched videos are music videos. A recent study found that 77% of adolescents are watching a YouTube channel and 1 over 3 of them is a viewer of music channel. More over, 91.4% of teenagers think it is a one of positive aspect of our society. However, as with anything there are negative aspects too. According to them Read MoreThe Love of the Game: Video Games Essay977 Words   |  4 PagesLove of the Game Currently, video games are a part of the lives of nearly all children. Video games are an element of modern life and have a lasting impact. There are various opinions regarding the impact that video games have on young children. For example there are those who believe that video games cause nothing but harm to children. On the other hand, there are others who believe that video games effectively support children’s learning. Educational video games offer children endless optionsRead MoreAmanda Mclaurin. Informative Outline. Topic:Rape Culture.1701 Words   |  7 PagesAmanda McLaurin Informative Outline Topic: Rape Culture Specific Purpose: To inform the audience of how our society has become a rape culture. Thesis: Due to overexposure our society has become desensitized to the effects of rape and sexual abuse allowing a rape culture to flourish. I. Introduction a. Attention Getter: What is rape? By definition provided by Justice.gov, â€Å"Rape is the penetration, no matter how slight, by a sex organ of another person, without the consent of the victim.† A majorityRead MoreChildren Aggression From Violent Television Essay1692 Words   |  7 Pageshave studied the effects that television has had on children. When†¯children are taught†¯to†¯tie their shoes, it is because their parents taught them. When children are taught to ride their bikes, it is because someone showed them. In many instances, children learn†¯by watching and observing things they see others do.†¯This leads researchers to believe that violent television in terms, makes children more aggressive. According to Huesmann Rowell L., One of the notable changes in our social environmentRead MoreHow Smartphones Have Become An Essential Part Of Our Everyday Lives1398 Words   |  6 PagesSmartphones have become an essential part of our everyday lives; not only because of the variety of ways to communicate with each other, or the convenience of checking in on the most current events, but by the new video content that we entertain ourselves with. Video content has grown rapidly within the last two years. With more than half of the wireless traffic coming from smartphone use, which says a lot about much more people use their phone to stream video content. With that being said, Verizon has

The Constitutionality Of Capital Punishment Essay

Justifiable Murder One of the longest ongoing ethical conflicts in political history is the idea of ending one’s life for the sake of justice. It has stood the test of time over gun control, church and state, or even abortion. Consequently, being an issue of controversy is will most likely not be resolved any time in the near future. Many issues contribute to why there is such diversity. Most controversial subjects are brought into the light after something happening that relates to it. Capital punishment is one issue that, for the most part, is always a topic of interest. There are many extremists on each side of the argument, and there are also many issues that make up this debate. The constitutionality of capital punishment is one of the most debated issues. It’s a question of ethics and of its effectiveness. Execution has been a popular way to deal with crime almost since the beginning of time. Most countries carried out death sentences through disturbing ways such as crucifixion, disembowelment, beheading, burying alive, burning, drowning, or being thrown into a den of wild animals (Godlman 15). The first written law concerning execution was established in the eighteenth century by the Cod of King Hammurabi of Babylon which justified executions for more than twenty different misdemeanors. And in the 17th century execution was declared the only available punishment for any crime. It was not a popular concept to think badly of executions, it was a social norm. In fact,Show MoreRelatedThe Constitutionality Of Capital Punishment1726 Words   |  7 Pagesalmost all capital sentences in the United States have been imposed for homicide. There have been intense debates among Americans regarding the constitutionality of capital punishment. Critics charge that executions are violations of the à ¢â‚¬Å"cruel and unusual punishment† provision of the Eighth Amendment; while supporters of the death penalty counter that this clause was not intended to prohibit legal executions. In the 1972 court case of Furman vs. Georgia, the U.S. Supreme Court ruled that capital punishmentRead MoreThe Constitutionality Of Capital Punishment1625 Words   |  7 PagesCapital punishment is a form of taking someone s life in order to repay for the crime that they have committed. Almost all capital punishment sentences in the United States of America have been imposed for homicide since the 1970 s. Ever since the reinstatement after 38 years of being banned, there has been intense debate among Americans regarding the constitutionality of capital punishment. Critics say that executions are violations of the â€Å"cruel and unusual punishment† provision of the EighthRead MoreThe Constitutionality Of Capital Punishment2105 Words   |  9 PagesA major discussion and legal issue that has been the topic of major debates across the world is the legality of Capital Punishment. Capital Punishment, also known as the death penalty, is defined as â€Å"the legally authorized killing of someone as a punishment for committing a crime† (Oxford, n.d.). The issue has been undecided by the federal government, which gives the states the right to determine their own laws on the issue. Some states have outlawed the death penalty while others still use thisRead MoreEssay about The Debate Over Capital Punishment1141 Words   |  5 Pages The debate over capital punishment has been raging on for countless number of years. Capital punishment has been used for thousands of years due to the physiological fear it inflicts on the people who witness and learn about the death penalty. The use of this punishment has helped to reduce crime and alter the minds of future criminals to deter them against committing heinous crimes such as murder, treason, espionage, terrorism and in some c ases aggravated kidnapping. Advocates say it deters crimeRead MoreCapital Punishment : Deontology Vs. Consequentialism1165 Words   |  5 Pages Capital Punishment: Deontology vs. consequentialism Subject: Analyze the deontological and consequentialist arguments on both sides of the issue of capital punishment in Gregg v Georgia. In this paper I will present the moral arguments of deontology and consequentialism used to determine whether or not using the death penalty was in fact constitutional. I will present both sides of the arguments and present them in the context of this trial and of similar situations where the arguments couldRead MoreThe Death Penalty : Costly, Counterproductive, And Corrupting1678 Words   |  7 Pagescrime: costly, counterproductive and corrupting; 35 Santa Clara Law Review 1211 (1995) Summary paragraph: In Stephen Bright’s article, â€Å"The Death Penalty as the Answer to Crime: Costly, Counterproductive, and Corrupting† Bright asserts that capital punishment does not work because it is racially biased, the quality of the lawyers and attorneys supplied by the state to poor defendants is unfair, and that the law system currently in place does not accomplish its true goals. Bright defends his claimRead MoreThe Death Penalty Is Justified1143 Words   |  5 PagesObjective paper on the death penalty Capital punishment is legally authorized killing as punishment for a crime. The death penalty questions the morality of killing a person as justification for their crime. It also brings to question whether the death penalty actually serves as a deterrent for crime, and that some of the people executed are found innocent afterwards. The debates over the constitutionality of the death penalty and whether capital punishment should be used for retribution are alsoRead MoreShould Capital Punishment Still be Used in the American System1260 Words   |  6 PagesCapital punishment, also known as the death penalty, â€Å"is the pre-meditated and planned taking of a human life by a government in response to a crime committed by that legally convicted person† (usliberals.about.com). â€Å"Most death penalty cases involve the execution of murderers.† Capital punishment can also be â€Å"applied for treason, espionage, and other crimes† (ProCon.org Death Penalty ProCon.org) . The death penalty is done â€Å"primarily by means of lethal injection† (ProCon.org Death Penalty ProConRead MoreCapital Punishment and its Controversies 1434 Words   |  6 PagesCapital punishment uses death penalty as a form of punishment in many states and countries. It is a practice that has raised endless questions all over the world. Capital punishment or death penalty policy has changed in many countries overtime. Countries such as, New Australia, Zealand and 15 states in the US do not have capital punishment. One of the major concerns arising with capital punishment is because it causes ending of a human life. People and organizations of different backgrounds areRead MoreThe Case Against Death Penalty: Article Analysis1694 Words   |  7 Pagesconsenting adults. While there have been ongoing calls to abolish this sentence, capital punishment is still used in some cases on the basis that international law does not prohibit the death penalty. However, its now appar ent that many nations across the globe are abolishing capital punishment as evident in the fact that various international treaties now outlaw the death penalty. One of the major reasons capital punishment has largely been used in the past is the publication of various studies that

Horror Movies Free Essays

We have all experienced those feelings we get when we sit down to watch a horror movie. We feel that little adrenaline rush when we see a character in a movie trying to escape a knife-wielding-psycho that is endlessly chasing them and we feel that jump out of your skin feeling when the evil guy suddenly pops into the scene from out of nowhere. Then the movie ends, you sigh a breath of relief that it’s over and there is nothing to be scared of. We will write a custom essay sample on Horror Movies or any similar topic only for you Order Now But did you know that there are a few movies out there that were based on real life events? The 1988 popular and cult classic movie Child’s Play is about a single mother that gives her son a beloved doll for his birthday. They later find out that the doll is possessed with the soul of Charles Lee Ray, a serial killer, who takes his soul and buries it into the seemingly good guy doll Chucky. Charles Lee Ray then tries to put his soul into the boy’s body in order to become human again. The writer for Child’s Play, Don Mancini, was inspired by the story of Robert the Doll. Robert the doll is a toy once owned by a Key West painter and author Robert Eugene Otto. The doll was given to Robert in 1904 by a Jamaican nurse who was skilled in black magic and voodoo. She was said to have been displeased with her role in the Otto family so she placed a curse on the doll. The family reported that Robert would have conversations with Eugene when he was a child and would often scream for help while he slept, his parents would enter his room and find furniture knocked over and Robert the Doll sitting close by. Neighbors also claimed to see the doll moving from window to window when the family was out. When Eugene died in 1974, the doll was left in the attic of his sold house until a 10 year old girl found the doll. It wasn’t long until she started talking with Robert and experienced attacks in the middle of the night too. Today, the doll can be found in the Fort East Martello Museum in Key West. Robert the Doll is featured in many ghost tours. He is seen here in an early 20th century white officer sailor suit clutching a stuffed lion. Legend says that if you want to take a picture with Robert you must ask the doll politely, if he doesn’t agree he will tip his head to one side and you must forget it and pass by, if you take the picture anyways he will curse your family. Another cult classic horror movie that is loosely inspired by true events is A Nightmare on Elm Street. The movie is about a spectral child murderer, Freddy Krueger, who stalks the children of the members of the lynch mob that killed him and, one by one, kills his victims in their dreams. In the Philippines they call the sudden death of a person while sleeping, bangungot, or nightmare. In other areas of the world it has been labeled as sudden unexpected nocturnal death syndrome or SUNDS. The Filipinos believe that ingesting high levels of carbohydrates before sleeping due to eating rice cakes causes SUNDS. Victims of SUNDS have been found to have no organic heart diseases or structural heart problems, however, cardiac activity during SUNDS indicates irregular heart rhythms and ventricular fibrillation. When reports surfaced in the United States that perfectly healthy young Asian Men were complaining of horrific nightmares and refusing to sleep for days on end, it caught the attention of a young Wes Craven who later incorporated the theme of Freddy Krueger entering his victim’s dreams and killing them into his 1984 film, A Nightmare on Elm Street. The Shining, is about a family that heads to an isolated hotel for the winter where an evil spiritual presence causes the father, Jack Torrance, to slowly slip into madness, while his psychic son, Danny, sees disturbing visions from the past and of the future. Stanley Kubrick created this 1980 movie based on Stephen King’s 1977 bestseller book. The movie is based on the strange unexplained activity that happens in The Stanley Hotel in Estes Park, Colorado which is located next to the Rocky Mountain National Park. The hotel was built by Freelan O. Stanley of Stanley Steamer and opened on July 4, 1909. Since its opening the hotel has accommodated a collection of rich and famous people, including Titanic survivor Margaret Brown, Theodore Roosevelt, and the Emperor of Japan. Over the years, many people have reported ghostly phenomena in the hotel, the majority of which happen in the large ballroom. The kitchen workers at the hotel have reported loud music, dancing, and conversation in the ballroom, only to search the area and find nothing. Visitors have heard the hotel’s piano playing at odd hours and have seen a number of apparitions. Stephen King was inspired to write The Shining when around Halloween in 1974 he and his wife Tabitha decided to take a mini-vacation to the Stanley Hotel. On October 30, 1974 the couple checked into room 217, which was said to be haunted. King said that night he dreamed of his 3 year old son running through the corridors, looking back over his shoulder, eyes wide, and screaming. He was being chased by a fire hose. Nowadays, many movies claim to have been inspired by real life. Did they really happen? Or is Hollywood just slapping that phony â€Å"true story† label on their movies in hopes of filling theater seats and winning box office gold? This is just a short list of movies that directors took inspiration from strange events, tragic tales, and dark memories to show us, the audience, that truth can be more terrifying than fiction. And whether you actually care if it’s based on true events or not, it’s sure to have piqued your interests. Gloria Isabel Rivas Speech 1315 Wed. 02/27/13 5:30-6:50 p. m. How to cite Horror Movies, Papers

Lufthansa Analysis free essay sample

The offices are positioned in Deutz, Cologne and main operations are based in Frankfurt. About 2. 8 billion euro was announced for the 2010 revenues. The transport volume was about 1. 8 million tons of cargo and also 8. 9 billion revenues were from ton-kilometers. Those figures make possible the Lufthansa Cargo to be in the forefront of companies engaged in the transport of air cargo. Till now there are 4500 people worldwide that work for this company. Growth of the company As mentioned before the company was founded in 1926, when flying wasn’t even percept. However times changed and it become very important transportation method. The company started to grow too. Although, it developed with high steps the seventies announced two oil crises, which resulted in a huge economy decline. Lufthansa Group found it very difficult to gain with that kind of crisis. However, the engineers applied methods to reduce fuel consumption and succeed. In 2001, Lufthansa’s focus was on innovation and quality. Since 2001 till 2005 crises of aviation industry occurred. The program called â€Å"Future European Operation† played crucial role in the remaining Lufthansa on the ascent. The 50th anniversary of Lufthansa took place in 2005. SWISS integrated in Lufthansa Group as an independent airline to consolidate Lufthansa’s position among Europe’s leading network carriers. Three years after, Lufthansa created new prospective for Germany’s future as a business location. The Lufthansa Aviation Centre became an architectural flagship. In addition, it becomes partner of Star Alliance. Rivalry among existing firms The main competitors of Lufthansa Airlines are DAX, British Airways and Air France. The competitors to Lufthansa Technic are on the one hand the original equipment manufacturers (OEMs) of aircraft, engines and components. They are joined by other airlines that offer maintenance services, such as Air France-KLM, as well as independent contractors (e. g. ST AERO, SR Technics). This competition is getting tougher, as new  MRO  capacities enter the market and increase price pressure, while cost and margin pressure on the airlines remains high. Lufthansa Technic quickly introduced programs to counteract this, by making capacities more flexible, cutting costs and increasing efficiency. The cost advantages of emerging economies are responsible for continued price decline and thus a trend towards shifting certain activities abroad. Combined solutions like those already offered by Lufthansa Systems in the airline sector are also becoming progressively significant. Under these conditions competitive cost structures and the ability to invest in new technological developments are the key success factors. However, the industry is fragmented because the price competition is severe. Concentration The main business for Lufthansa Group is the transportation of passengers. The company concentrates its activities into five strategic business segments: 1- Passenger Airline Group 73% Strengthening the Lufthansa’s position as a leading European premium carrier is the main objective of this segment. The three pillars on which the company resets its growth strategy are: a- Lufthansa is expanding its short and long-haul network in the medium term throw organic growth. This expansion is achieved through the centers in Frankfurt, Munich etc, in interest of cost efficiency. b- Lufthansa is expanding the cooperation with partners. The key role is played by Star Alliance, which opened new market. c- Lufthansa participates in the ongoing consolidation of the airline businesses. Logistics 10% The logistic service provider in the Lufthansa Group is the Lufthansa Cargo. By offering customers time-definite transport service, it is ranked among the largest cargo carries company. The Lufthansa Cargo activities cover these three segments: a- General Cargo with its td. Pro service b- The express segment with td. Flash c- Specials segment with four competence centers It als o operates in the airport-to-airport business, serving almost 300 destinations worldwide. 3- Maintenance Repair Overhaul 10% Technical segment is very important. Lufthansa Technik Group is an independent provider of airplanes technical services. Its portfolio includes the service of maintenance, repair, overhaul, all modifications and the components for commercial passenger planes. Due to innovations it is possible to low the costs and increase efficiency. The group is well-prepared for everything and challenge caused by their competitors. 4- Catering 6% Lufthansa Service Holding AG is the provider of in-flight services. The group is made with 133 companies around the world. Its products and services covers airline catering, in-flight service, airport services, etc. he changing of business strategy was one way to response to the increasing cost pressure and strong competition. It has been achieved according to these strategies: a- Making improvements by focusing on standardization and lean processes. b- Increasing sales beyond airline catering c- Developing partnerships in order to enter in the new markets. d- Appreciating growth potential in nearby markets. About 28499 people are employed in this segment business. 5- IT Services 1% In order to have efficient process management, Lufthansa has developed integrated IT solutions. Lufthansa Systems offer solutions for industries and operators. Their products provide added value for its customers in terms of efficiency. The IT solutions address all the business processes of an airline-from the passengers to the operations. They make possible for customers to optimize the business processes quickly. Long-term project experience is the base for the continuously expansion of this segment. Substitute products Lufthansa as a company operating in the airlines industry has to consider the threat of substitute products. The availability of substitute products in this industry depends on the routes of the flights. The threat might be higher for regional airlines than for international or intercontinental carriers. For regional flights, trains can be considered as a large threat because they show diverse advantages over flying such as: cheaper prices, central location of train stations, no check-ins and more commodities. Another substitute products could be also the use of own cars, but in this case it would be more time consuming, even though it has the advantage of increasing the flexibility of the travellers, the use of buses or even the use of ships. However, for intercontinental or overseas destinations there is no real substitute to flying considering the time needed to reach the destination. In our case switching comes from technology not only from the customers’ willing to switch. Buyers bargaining power Buyers can influence the quality and customer service through; the information that they possess, the volume of the tickets purchased, the brand identity, price sensitivity, buyer’s incentive (Porter’s five forces). On the other hand, these indicate a cost to the seller. In the Lufthansa case study, buyers are not concentrated, meaning there are many buyers and with little market share. Also customers do not purchase large volume of tickets, thus they are weak in this aspect. However, since the airlines industry has experienced many technological changes due to the impact of the Internet, the costumers’ influence on the prices has relatively increased. This happened because buyers can now switch easily among other alternatives when they browse the Internet for tickets purchasing without using an intermediary. They also benefit from network connectivity and number of destinations. In addition, the effects of previous plane crashes or 9/11 has made the customers to switch in other means of transportation such as trains. The price of a plane ticket is usually much more expensive than that of a train so the demand is rather elastic for most of the buyers. In the contrary, buyers can have less power when the airlines arrange prices among each other until there is a price war. Suppliers bargaining power The supplier’s power is also known as the market of inputs because it is composed of the labor services raw materials etc. In order to analyze hether the suppliers are weak or powerful, we should study the components of Lufthansa. The manufacturers of aircraft and fuel suppliers are the main components of Lufthansa suppliers. Since April 2011 Lufthansa has used agro fuel blend by Finnish oil and Neste Oil. However Neste Oil is the only company worldwide which produces large quantities of jet fuel from plant oil, especially palm oil. This is what makes Lufthan sa special. Also, LSG Sky Chefs and Lufthansa Technik are external and internal suppliers which have been included in joint projects to cut costs. On May 2011 Fokker Airinc was awarded as the â€Å"Excellent Supplier† by Lufthansa Technik. The Fokker aircraft is characterized by advanced technologies, low noise level and durability. On one hand the suppliers are powerful, because aircraft that operate in a long distance cannot be substituted by others. On the other hand the fuel suppliers share also strong bargaining power as they can raise the fuel prices. Firm’s competitive strategy When we analyzed the industry where Lufthansa and its main rivals operate we emphasized the importance that the industry structure has over a company’s profit potential. Through the model of five forces of Michael Porter, we investigated the opportunities offered airlines industry. But the profitability of a firm is influenced not only by the structure of the industry in which the company operates, but also it is influenced by the strategy the company uses to position itself in the market. There are two main competitive strategies: 1. ) cost leadership and 2. ) Differentiation. Lufthansa’s competitive strategy is based on cost-leadership. After being privatized, they realized the pressure of competitiveness, so they focused more on the strategically cost effective even more. Therefore, Lufthansa continues this revolution stage by implementing The Strategic Cost-Management Programme ‘15’, which intended to reduce overall unit cost by 20% within five years. Lufthansa’s cost leadership strategy is based on three main pillars that leads to strategic vision: 1. ) Cost flexibility – reduces share of fixed expenses, 2. ) Responsiveness – fast capacity adjustment, 3. ) Opportunities – secure markets, deploy for the economic revival. These three pillars help to navigate successfully through crisis times. While being more concentrated on internal costs and structural redevelopment, Lufthansa has worked more on its external relationships by executing the strategy: ‘growth through partnerships’. Thus, founding the STAR ALLIANCES was a logical consequence. The purpose of this partnership is to provide higher revenues and decrease costs by exploiting synergy effects. If parts of the Lufthansa were to merge with parts of other companies under the STAR ALLIANCES name, costs would reduce persistently and they would not be just a profitable company but also very competitive. Some parts of the STAR ALLIANCES that corporates to provide a successful company, leader in the market, are: 1. Lufthansa Cargo AG 2. Camp;N Tourism 3. LH Technik AG 4. Lufthansa LSG SkyChefs 5. GlobalGround 6. Lufthansa Systems GmbH 7. In All Areas Lufthansa remains on solid strategic track, continuously struggling for efficiency and higher quality. So, it also pays attention to the differentiation its products. It tries to provide differentiated products by catering service and one specialty of this airline company is trying to be always on time, not laying-off. Until now its strategy has proven to be successful, but the future will show if changes will be necessary in its competitive strategy. The main challenge of Lufthansa is currently facing is how to maintain the awareness of the crisis and the openness for changes. Lufthansa has developed strategies to overcome threats and work on eliminating its weaknesses in order to stay ahead of competition. However Lufthansa is more based on differentiation rather than on cost leadership because its tickets’ prices are quite high compared to the low-cost airlines’ tickets. Accounting Analysis The consolidated financial statements of Deutsche Lufthansa AG, Cologne, and its subsidiaries have been prepared in accordance with the International Financial Reporting Standards (IFRS). The method applied in the consolidated financial statements is historical cost. In 2010 the company experienced some changes in the reporting standards, thus previous years’ figures have been calculated as if the amended standards had already been applied last year. The other standards and interpretations applied after 2010 did not have a significant influence on the Group’s net assets, financial and earnings position in the reporting period. Revenue and other operating income are recognized when the service has been provided or when the risk has passed to the customer. Operating expenses are recognized when the product or service is used or the expense arises. Provisions for guarantees are made when the corresponding revenue is recognized. Interest income and expenses are accrued in the appropriate period. Dividends from shareholdings not accounted for using the equity method  are recognized when the legal claim has arisen. Annual impairment tests applied to goodwill are carried out using recognized discounted  cash flow methods. This is done on the basis of expected future cash flows from the latest management planning, which are extrapolated on the basis of long-term revenue growth rates and assumptions with regard to margin development, and discounted for the capital costs of the business unit. Tests are performed at the cash generating unit (CGU) level. The annual financial statements of foreign Group companies are translated into euros in accordance with the functional currency concept. Assets and liabilities are translated at the middle rates on the balance sheet date. Income statements are translated at the average exchange rates for the year. These translation differences are recognized directly in shareholders’ equity without effect on profit or loss. Goodwill from capital consolidation of foreign subsidiaries prior to 2005 is carried at historical cost net of amortization accumulated by the end of 2004. Goodwill arising since 2005 has been recognized in the currency of the company acquired. Transaction differences, however, are recognized in profit or loss. These differences arise in the financial statements of consolidated companies from assets and liabilities based on a currency other than the company’s functional currency. Any resulting exchange rate differences are included in other operating income as foreign currency transaction gains, or in other operating expenses as foreign exchange losses. Acquired intangible assets are carried at cost, internally generated intangible assets from which the Group expects to derive future benefit, and which can be measured reliably, are capitalized at cost of production and amortized regularly using the straight-line method over an estimated useful life. Tangible assets used in business operations for longer than one year are valued at cost less regular straight-line depreciation. The cost of production includes all costs directly attributable to the manufacturing process as well as appropriate portions of the indirect costs relating to this process. In addition to amortization and depreciation on intangible assets and property, plant and equipment,  impairment  losses are also recognized on the balance sheet date if the asset’s recoverable amount has fallen below its carrying amount. The recoverable amount is determined as the higher of an asset’s fair value less costs to sell, and the present value of the estimated net future cash flows from continued use of the asset (value in use). Property held exclusively for letting to companies outside the Group is classified as investment property and recognized at amortised cost. Equity investments accounted for using the  equity method  are capitalized at cost at the time of acquisition. Financial assets are classified within the Lufthansa Group as â€Å"at fair value through profit or loss†, â€Å"loans and receivables† and â€Å"available-for-sale financial assets†. Inventories include non-repairable spare parts, raw materials, consumables and supplies, purchased merchandise and advance payments made for inventories. They are measured at cost, determined on the basis of average prices, or at production costs. Individual, formerly non-current assets or groups of assets which are expected to be sold within the next twelve months are measured at the lower of their carrying amount at the time they are reclassified and fair value less costs to sell. Liabilities in foreign currencies are measured at the exchange rate on the balance sheet date. Quality of disclosure When analyzing the quality of disclosure for Lufthansa, we can say that there is a lot of transparency in its financial statements. The company gives detailed information about its operations, products and services. In the annual report for 2010 we can find not only information about the Management and the financial performance, but also letters to the Shareholders, which clarify the company’s conditions, making a description of the actual situation and future plans. In these letters are mentioned not only the positive developments of the company, but also the negative consequences of certain phenomena; such as the world financial and economic crises or other human and natural disasters like the volcanic eruption in Iceland and the ilots’ strike, which had negative impact on the profits of the company. Their reaction to bad news and situation is reported in their sites. In order to remain in the top of airlines companies they are using strategies to overcome not only world financial crisis, but they take preliminary measures for unpleasant surprises. Important elements are also the footnotes to expl ain changes and calculations made in balance sheet and other company operations. There are footnotes about losses and revenues resulting from different expenses that this company is doing annually. Lufthansa controls air traffic operations on the basis of network results not on the base of regional earnings contributions. The same applies to the catering service. The information on the Passenger Airline Group business segment and Logistics segment in the management report includes a presentation of traffic revenue generated by traffic region, rather than by original location of sale. It provides facilities to customers to book flights throught internet with competitive prices. All this information is reflected in its official website and brochures. Red flags Lufthansa is not a large company; hence, it is not very difficult for it to maintain control over its statements. This has result in a decrease of the potential â€Å"red flags† that can arise. Moreover, it’s based on only one country making it easier to report almost all the data. However there is always room for any red flag. One of the red flags is that the tax rate has declined comparing to the previous year. It was (129. 00) in 2009 and has gone (165. 00) in 2010. However this is not something to worry, because tax rates tend to increase up to normal level in the long run. A low tax rate might result in an artificially high reported profit. Since the company offers its service in nearly all over the world, it has to work with different currencies. At the end it has to translate all the operations into the Euro. This fact may result in a risk because if the Euro has depreciated towards that currency, it looks like it has made more sales but in fact it’s the currency who has appreciated. This is a potential red flag for all the companies that have a substantial amount of their trade with other countries, and for Lufthansa is particularly true since it operates in many countries around the world. Another red flag is that the current ratio is below 2. 0, which means that the company might experience difficulty paying its bills or keeping up with its payments to vendors, suppliers and contractors. This is something to worry about because it is not a cash-and-carry company (grocery store) that held few current assets. Financial Analysis Financial analysis is the best way to understand if the Lufthansa Airline’s growth is sustainable and if that company is increasing its profits. Also we want to know if this company makes an effective use of its resources. Evaluating the performance of a company based on its goals and objectives, is the duty of financial analysis. An important element that gives us an overview of how independent items of one firm are related to each other in order to play role in the growth of the company is ratio analysis. There are several tools that mangers can use to increase profitability of the firm: * Operating management * Investment management * Financing strategy * Dividend policy In order to make those words more concrete and to understand better the ratio analysis we will compare our company â€Å"Lufthansa† with another airline company â€Å"British Airways†. We chose â€Å"British Airways† because it is one of the strongest competitors of Lufthansa. Even though Lufthansa is one of the companies that offer the best service to its customers, it is necessary for us to analyze and see whether that company is really in better situation than its competitors. Moreover we want to know if that company gives investors good reason to invest on it. 1) PROFITABILITY RATIOS Return on Equity (ROE) ratio ROE is the ratio that gives us an overview of the profitability of the company because it provides an indication of how well managers are using the funds invested by firm’s shareholders to generate returns. In order to calculate that ratio we need to have the values of â€Å"net income† and â€Å"shareholder’s equity† Lufthansa | 2009| 2010| Total Net Income| (34M)| 1. 13B| Shareholder’s Equity| 6. 202B| 8. 340B| ROE| 65%| 43%| ROE is decreased from 2009 to 2010 so we can say that the efficiency of the company has decreased. This reduction of ROE came as the result of the raised of shareholders equity, which was much higher in 2010 due to the increased retained earnings. If we make an average of ROE for at least three years we can see that it is about 44. %. On the other hand, British Airways Company has a ROE 2010=66. 39% and in 2009 the ROE was 52. 25% so it increased. Also we did an average ROE for the latest three years and we observe that it was 47. 45%. ROE is affected by the profitability of the assets that are used and by the size of the firm’s asset relative to shareholders equity. Shareholders equity=assets-liabilities, which gives us what th e firm owns including short- and long-term debt. Thus, the more debt the company has, the less equity it has, the higher will be the ROE ratio. Furthermore, we know that ROE itself can be decomposed into: * Return on Asset (ROA) * Financial Leverage ROA can be decomposed further into: * Net Profit margin * Asset turnover Net profit margin ratio Net Profit margin comes out from income statement and shows the profitability of the company’s operating activities. It indicates how much the company is able to keep as profits for each dollar of sales it makes. In order to compute Net Profit margin ratio we need figures like â€Å"total net income† and â€Å"total sales†. Lufthansa | 2009| 2010| Total Net Income | (34M)| 1. 13B| Total Sales| 22. 8B| 27. 32B| BA| 2009| 2010| Total Net Income | (86M)| 1. 27B| Total Sales| 68. 28B| 64. 31B| Net Profit Margin| Lufthansa| BA| 2009| 0. 153%| 0. 126%| 2010| 4. 14%| 1. 97%| From what we said before, for each dollar of sales Lufthansa keeps $0. 0414 as earnings. As the net profit does have high levels of differentiation we can say that the company has been using the same business strategy. It also important to keep in mind that earning of the company does not reflect the true situation in which it is positioned because an increase in earning doesn’t mean a surely increase in net profit margin. For example, if the company has costs that are greater than sales, we would have a lower net profit margin. That is an indication that costs should be under a better control. Now we did an average of net profit margin for both companies. | Lufthansa| British Airways| Average Net Profit margin| 2. 15| 0. 922| Asset turnover ratio Asset turnover is a ratio that measures the efficiency of a firm by seeing how it uses assets in generating sales or revenues. The higher that ratio is the better is the company because it means that the firm is using its resources in an appropriate way. Moreover it points out a pricing strategy since companies that have high profit margins definitely have low asset turnover and vice-versa. The key figures in computing this ratio are â€Å"total sales or revenues† and â€Å"total assets†. Lufthansa | 2009| 2010| Total Revenues| 22. 28B| 27. 32B| Total Assets| 26. 39B| 29. 32B| | Lufthansa | British Airways| Asset turnover 2009| 0. 85| 0. 86| Asset turnover 2010| 0. 93| 0. 75| As we see the asset turnover ratio in 2010 has increased different from British Airways, which shows a decreasing of this ratio. As e result we can say that Lufthansa has used its assets more efficiently. Return on Equity (ROA) ratio ROA is a ratio that indicates how much profit a company is able to generate for each dollar of assets invested. As the result the higher the level of this ratio is, the better is for the company. Lufthansa | 2009| 2010| Net Income| (34M)| 1. 13B| Total Assets| 26. 39B| 29. 32B| | Lufthansa| British Airways| ROA 2009| 1. 3%| 4. 64%| ROA 2010| 3. 85%| 2. 28%| The ROA for Lufthansa has increased in 2010, which is also an indicator that the company is doing better. British Airways has not only a lower ROA than Lufthansa but it also has fallen from 4. 64% in 2009 to 2. 28% in 2010. Gross Profit margin ratio The price premium that a firm’s products or services command in the marketplace and the efficiency of the firm’s procurement and production process, are the two important factors that influence gross margin ratio. It is the case when direct costs are linked to the sales. Consequently, if the firm has higher level of gross profit margin than its competitor, than we can say that it is doing better and is more efficient. To compute gross profit margin we need figures like â€Å"sales† and â€Å"cost of sales†. Lufthansa | 2009| 2010| (Operating) Revenue| 22. 28B| 27. 32B| Cost of Sales| 19. 85B| 23. 47B| BA| 2009| 2010| Gross profit margin| 18. 5%| 19. 36%| Lufthansa| 2009| 2010| Gross profit margin| 10. 9%| 14,1%| As we see there is a small the difference between two years. We also computed the average gross profit margin for the latest three years which is 12. 5% and indicates a stable macroeconomic environment. | Lufthansa | British Airways| Average Gross Profit margin| 12. 5%| 18. 86%| By this comparison we has achieved in the conclusion that the British Airline is doing better. Also we can understand that this company has set aside more money that can be spent on other business operations; like, marketing or Ramp;D (research and development). Moreover, if the level of gross profit margin is high, we can say that the company is efficient in using labor and supply in the production process. If the costs of producing are increased, than the gross margin would be lower. LIQUIDITY RATIOS Current ratio Current ratio is a ratio that tells us if the firm is able to cover all its current liabilities from the cash realized by its current assets. As the result, it is considered a key index of a company’s short-term liquidity. In order for a company to be efficient, the current ratio level must be no less than one. A current ratio less than one indicate that the firm has problems because it is not able to cover all its obligations. As mentioned, we need â€Å"current assets† and â€Å"current liabilities† in order to calculate Current ratio. Lufthansa | 2009| 2010| Current Assets| 8. 7B| 10. 36B| Current Liabilities| 8. 78B| 9. 83B| | Lufthansa | British Airways| Current ratio 2009| 0. 99| 0. 84| Current ratio 2010| 1. 05| 1. 07| For both companies the year 2009 has been difficult to cover their obligations, but in 2010 they have improved their abilities to pay short term obligations. As we see British Airways could raise its current rate more than Lufthansa. Quick ratio Quick ratio like current ratio explains how able the company to cover its liabilities is. However, since it is more conservative than current ratio excludes inventory from current assets, a slight difference exist among the two. In quick ratio inventory is excluded because most of the firms face difficult to turn their inventory into cash quickly. The problem is created when some obligations need to be paid very soon. Thus there is a situation where the current ratio overestimates a company’s short-term financial strength. Cash, short-term investment, account receivables and current liabilities are the key elements needed for calculating quick ratio. Lufthansa | 2009| 2010| Cash | 1. 14B| 1. 1B| Short-term investment| 3. 56B| 4. 77B| Account receivables| 2. 04B| 2. 66B| Current liabilities| 8. 78B| 9. 83B| | Lufthansa | British Airways| Quick ratio 2009| 0. 92| 0. 54| Quick ratio 2010| 0. 99| 0. 69| We can see that Lufthansa has done better in the last two years than British Airways, being also more able to turn fast its current assets into liquid cash in order to pay obligations. Debt and coverage ratios The firm’s financial leverage is affected by its debt financing policy, too. There exist some benefits from using debt financing; such as, * Debt is cheaper than equity * Interest on debt financing is tax deductible; on the other hand dividend to shareholders is not tax deductible * Debt financing impose discipline on the way of management * For non-public debt, it’s easier for managers to communicate information on company’s strategies and prospects A firm is said to be in a good position if its debt ratio is less than one, because it shows that it has less liabilities than assets. Lufthansa | 2009| 2010| Total liabilities| 16. 308B| 17. 468B| Total assets| 26. 39B| 29. 32B| | Lufthansa | British Airways| Debt ratio 2009| 41. 86%| 39. 49%| Debt ratio 2010| 40. 86%| 35. 03%| According to the debt ratios, Lufthansa shows a higher level of debt. Even though it has been reduced in the last year, it is much higher than the debt ratio of it’s rival. Liabilities-to-equity ratio This ratio shows that what percentage of equity is used by the company to finance its assets. A high level of this ratio indicates that the company has been aggressive in financing its growth with debt. As the result of the additional interest expense, that can result in a unstable earnings. Lufthansa | 2009| 2010| Total liabilities| 20. 19B| 20. 98B| Total equity| 6. 2B| 8. 34B| | Lufthansa | British Airways| Liabilities-to-equity ratio 2009| 3. 26| 2. 24| Liabilities-to-equity ratio 2010| 2. 51| 1. 77| We also should take into consideration that if we have high debt-to-equity, which means that a huge amount of debt is used to finance increased operations, the company is able to generate more earnings. If those earnings coming from that strategy would be higher, then the shareholders benefit would be higher too. However when the cost of that debt financing increases in a high level that the firm cannot effort, there are lots of chances for bankruptcy. Dividend payout ratio This ratio shows the percentage of earnings paid to shareholders in dividends. Payout ratio provides an idea of how well earnings support the dividend payments. More mature companies tend to have a higher payout ratio. Dividend payout ratio = dividends/net income Sustainable growth rate= ROE*(1- Dividend Payout ratio) | Lufthansa | British Airways| Dividend payout ratio 2009| 64. 59%| 43. 78%| Dividend payout ratio 2010| 48. 6%| 66. 39%| Cash Flow Analysis Each company generates cash from financing activities,  operating activities and investing activities. According to the Cash Flow Statement of Lufthansa Airline Company in 2010, we saw that the cash flows generated from financing activities were (300,000,000)Euro, from operating activities were 3,075,000,000Eur and cash generated from investing were (2,878,000,000). Co mparing with 2009 we can observe an increased of cash flows from operating and investing activities, whereas for financing activities cash flows have been decreased.. In 2009, the cash flows generated from investing activities were (3,563,000,000) Eur. from operating activities were 1,991,000,000 and from financial activities were 1,271,0000,000Eur. As a result we can say that the cash generated from operating activities in 2010 has increased. Concerning the investments activities, the short-term and long-term investments of Lufthansa rose in 2010. The Corporation spent (2,298,000,000) to purchase long-term investments and (580,000,000) for short-term investments. From financing activities, we can notice a decrease of the amount of cash generated. The cause which led to this decline was the financial crisis. Forecasting Forecasted income statement Income statement is that kind of financial statement which indicates how the revenues generated from the sale of goods and services before expenses are taken out is transformed into net income. Differently from the balance sheet that represents the moment of time, income statement represents a period of time. One major element that we saw as crucial when we did the forecasted income statement was net revenues. We based forecasted revenues based on the sales because they are the main contributors to the revenues. Also growth is another element that affects the company’s profits. The percentage sales grow for previous three years are as follows: | 2008| 2009| 2010| Sales Growth in %| 10. 8| (10. 3)| 22. 62| From the table we can see that it is a drastic decline of the sales from 2008 to 2009. This surely might have come due to the well known financial crisis that affected the entire world’s economy. That decrease in sales means that Lufthansa was also affected by that crisis. Since Lufthansa is a kind of company that doesn’t have so many opportunities to differentiate; like an electronic company that can offer new product, the crisis were felt very deep. Another reason is that Lufthansa offering a service rather than an actual product; it concentrates on the amount of the assets rather than inventory. However, 2010 was the most successful year. The high increase in the sales growth might have come as the result of two main factors; such as, recovery of the world economy from financial crisis and the improvements that Lufthansa did in the service quality to satisfy the customers. In order to make the forecasted income statement we were based on the three previous years. We calculated the percentage change of each data we wanted to forecast. Than we did the average of the three years and then we assumed the same value for all the forecasted years. Based on those ratios and percentage changes, we achieved to forecast income statement for the five years. Forecasted BALANCE SHEET In order to make the forecasting for 5 years we first need to use the assumptions of at least the previous three years (average) respectively 2008, 2009, 2010. We make use of the consolidated financial statements in order to proceed with the forecasted balance sheet. We used the invoices of the balance sheet of three years 2008, 2009, 2010 and then we used the turnover ratio to forecast 2011 until 2015. In order to find the turnover ratio for the projected 5 years we use an average of the three years data that we have. For instance, inventory turnover for 2008 was calculated to be 2%, for 2009 was 3% and 2% for 2010. For the proceeding years we made an average of these three numbers, which is approximately 3% and then we put this number as a constant for each of the 5 years. We did the same with Accounts receivable turnover. For 2008, 2009, 2010 the values were respectively 13%, 14%, 13% and the average for the next 5 years was 13% constant. Forecasted cash flow statement Cash flow statement consists of cash flow from operating, investing and financing activities. Thus, to make the forecasted cash flow statement we use a combination of both forecasted balance sheet and forecasted income statement. For evaluating forecasted cash flow from operating activities, it was necessary to make the difference of the balance sheet data (actual year-previous year). On the other hand, forecasted cash flow from investment activities is linked to the capital expenditures which mean funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. The amount of capital expenditures a company is likely to have depends on the industry it occupies. Some of the most capital intensive industries include oil, telecom and utilities. As in our case Lufthansa, has negative level of capital expenditure, as it is an service company and is too linked with the oil, and the oil crisis highly effect the Lufthansa’s position. Changes in account receivable To find the adjusted Account Receivable we calculated it as a change between the A/R in the next year with the A/R in the prior year in the Balance Sheet. We applied this change of two years throughout the actual and forecasted years. A/R forecasted is calculated by multiplying Net Revenue with A/R turnover which is further explained in the forecasted balan ce sheet. b- Inventories We conducted the same calculation to find the change in inventories in the forecasted cash flow statement. Thus we subtracted inventories of the next year with the inventories of the prior year. Interest expense In order to find Interest Expense adjusted we calculated it by multiplying the tax rate which is 25% with the total interest expense which can be found in the income statement. d- Cash flows from operations can be founded by summing the cash flow from operations before interest with the interest. Cash flows from investing are calculated by adding CAPEX with investing cash flow items. These items can be found in the balance sheet. The forecasted CAPEX for 2011-2015 can be found by multiplying the %of CAPEX with the Net Revenues. The % of CAPEX can be found by dividing the CAPEX by Net Revenues in the actual years and then making an average of these data find a constant data for the forecasting years. We also calculated present value of the company in order to find the market value per share. WACC We forecast the free cash flow to firms and discount them by using the weighted average of capital (WACC). The formula for the WACC is: WACC  =  rD  (1-  Tc)*(D/V) +  rE  *(E  /V). All the values for the formula are given in the financial statements of the company, expect re. Firstly, we have to calculate the cost of equity. For the purpose of calculation, we use the CAPM thus: re = rf+ ? (rm-rf). We calculated re=10. 47% or 10. 5%. Another feature of Lufthansa Company is that it does have Debt, which is7,184,000,000, while Equity is 6671603000. So, the WACC=8. 54%. This is the percentage that will be used to discount the forecasted cash flow and as a result to value the company. Valuation We can conduct Valuation of Lufthansa because we have done the forecasting of the financial statements for 5 years. The first method we use is the Discounted Cash Flow Method. Free cash flows will provide us with an estimated share price for the firm. Respectively we have to go through three steps; the first is forecast FCFEE for 5 years, the second is forecast beyond terminal value based on assumption and the third is discount FCFE with the discounting rate which in our case is WACC (weighted average cost of capital) thus 8. 61% as we already calculated. We find the value per share by estimating the future cash flows of the firm for 5 years after 2010 in order to complete the first step. The values of cash flows are as seen in the table. Basically the value of cash flows each are calculated as follows: revenues-operating costs-taxes-net investments-changes in working capital. These values are then discounted by the discount factor which is WACC 8. 61%. For the first year the discount factor will be 1/(1+0. 861) for the second 1/(1+0. 861)^2 and so on for 5 years. The total value of the company for the years 2011 until 2015 is the sum of these values of cash flows, thus Euro 83,079,531,774. 44 We assume that Lufthansa will operate even after 2015 therefore we calculate the terminal value beyond 2015 in perpetuity. This is calculated cash flow of 2015 over (1+0. 0861) whereas the discounted terminal value (in order for us to find its present value) is calculated by discounting this terminal value by its factor that is, (1+. 0861)^5. Now the value of Lufthansa will be the sum of the discounted cash flows from 2011-2015 with the discounted terminal value beyond 2015. The total value after conducting these calculations will be 226,455,658,906 Euros. The value of one stock is calculated by subtracting FCFF with the value of debt and then dividing it by the number of shares outstanding. The value of one stock is 478. 86 compared to the actual value which is 14. 57Euro. Then we use the P/E ratio compared afterwards with that of the industry since this ratio shows the price paid for a share relative to the annual net income. In order to calculate this ratio we use the formula that is: P/E=P/B*1/ROE. P/E has decreased in these past 3 years. This trend means that the lower P/E ratio the less earnings investors are expecting and they will therefore pay lower premiums for the growth. We assumed the growth is 8% since the % increase in sales was also expected to be 8%.