Finance and Positivism

Introduction According to Little (2005), philosophy of social science is a scholarly discipline that attempts to analyse the logic, methodology, modes of explanation of the social sciences, in which its studies include psychology, sociology, anthropology, history and economics. Social science provides understanding of everyday interactions of individuals and interactions among human society in social institutions. Providing prediction and explanation for human behaviour and its consequences are some of the main aims of social science (Rosenberg, 1988).The purpose of this paper is to examine how philosophy of social science can help in explaining speculators’ behaviours. This paper is divided into five sections. It will begin by explaining the speculative behaviours of stock traders on lottery type of stocks, the probable data source and methodology. This will be followed by introducing the concept of positivism and identifying the reasons for selecting positivism. This paper w ill also provide some criticisms to positivism. Lastly, the paper ends with a summary.Speculative Behaviours of the Stock Traders in Lottery Type of Stocks My research will be mainly focus on the speculative behaviours of the stock traders, such as fund managers and retail speculators on lottery type of stocks. Speculation is different from investment, in which according to Peers (2003), On the one hand, speculation involves taking large amount of risks attempting to earn quick profit. Speculation is a game where expected return and risk are both indeterminate.As a result, speculators need to take relatively large amount of risk with respect to attempt to predict the future. A simple example of speculation is purchasing gold. Speculators might think that buying gold is a better use of money due to the inflation. Since gold depends more on inflationary rate and relies less on global economy, buy gold during period of financial crisis will help speculators to generate quick profit. Ho wever, gold prices are now extremely high, and there is no guarantee that prices will keep increasing in the future.Since there are huge fluctuations in gold prices, speculators are very likely need to bear large amount of risk when they purchased gold. On the other hand, according to Taylor Frigon Capital Management LLC (2007) investment involves analyzing the future earning and the preference of participating in those future earnings. The expected future value of investment is higher than the cost of the investment. Expected future value takes into account for all of the potential good or bad events multiply by the probability of those events.Investors usually search for definable expected future value, minimize risk and investors have nominal risk aversion, which means that investors will prefer a more guaranteed payout and the uncertain one, otherwise, investors will need a higher expected returns in order for them to undertake the risk. Using the gold example to differentiate i nvestor and speculator, investors purchase gold and hold it for decades, because after couple of decades, the returns from selling those amounts of gold will be higher than the initial cost of buying those amounts of gold, even after subtracting the returns from the transaction costs.Furthermore, gold will still be considered as one of the most precious metal after couple of decades. Investors do not need to worry that the value of gold will worth nothing, thus expected future value is more guaranteed and risk is minimized to some extent. Speculators purchase gold during the periods of financial crisis, and sell gold in order to buy stocks during periods of bubble. This strategy can help speculators to generate quick profit, however, it is extremely hard to predict when bubble or crisis will occur, and this uncertainty might cause speculators to experience huge amount of loss as well.Lottery Type of Stocks According to Kumar (2009), some stocks are classified as lottery type because they have prominent characteristics of lottery. Lottery type of stocks has low prices and relatively high potential payoff, just like jackpot in lottery. The expected returns of lottery type of stocks are negative but low, and they have risky payoffs. The price distribution of lottery type of stocks has very high variance, and most particularly, the probability of earning a huge profit is extremely small.Since lottery type of stocks has a very big probability of experiencing a loss and a very small probability to generate a huge gain, both risk and expected future value are indeterminate. By applying the definition of investors and speculators that we mentioned earlier, only speculators will have the preference of buying lottery type of stocks, due to their risk loving behavior, while investors do not, because risk-averse investors prefer to minimize risk even though there is a small change to earn huge profit.Positivism One of the main topics in philosophy of social science is pos itivism. According to the Merriam-Webber’s Dictionary, â€Å"positivism† is a view of scientific methods and a philosophy approach that defines positive knowledge is based on natural phenomena and their properties and relations as verified by the empirical sciences, and defines theology and metaphysic as earlier imperfect modes of knowledge.According to Perry, Riege and Brown (1999), some of the ontological assumptions of positivism are that the world exists externally, it is characterized by natural laws and it can be objectively observed by using a scientific way. In other words, positivism can be viewed as an appropriate methodology of social science, which emphasizes empirical observation. Positivism is also associated with empiricism, only the events, things or creatures that can be observed based on sense, experience and positive verification via the five senses can be considered as authentic knowledge.According to Creswell (2003), the underlying epistemological assumption of positivism is that there is an independent researcher of the research project, who is value and bias free, and has no influence on the result of research or data collected. Furthermore, Ticehurst and Veal (2000) states that the methodological approach for positivism is restricted in term of explanation and discovery of facts. Researcher uses developed theories and frameworks to describe behaviours based on the observations and facts collected.As a result, scientific, empiricist, experiental, deductive or quantitative approaches are involved in the research. In addition, Guba and Lincoln (1994) state that the paradigm stresses the value-free theory testing instead of theory building. Some of the key assumptions of the positivism paradigm, according to Phillips and Burbles (2000) include, first of all, researchers use null hypothesis because founded evidence in their research is usually fallible and imperfect. Secondly, majority of quantitative researches begin with the test of a theory.Researches can be considered as a practice of making claims, and subsequently either abandoning or refining them. Thirdly, knowledge is shaped by the data, evidence and rational considerations. Furthermore, research attempts to develop statements those are relevant and true, in which they are able to provide descriptions and explanations for the situation or causal relationship. Lastly, one of the most important parts of a competent inquiry is to being objective. Data and MethodologyIn order for lottery type of stocks to match the main characteristics of lotteries, first of all, the data will mainly focus on the stock with low prices (under one pound per stock). Within the set of stocks with low prices, my PhD research will focus on stocks with higher stock specific skewness, because these are the stock with higher potential payoff and they appears to be more attractive to speculators. Lastly, among the set of stocks with higher stock specific skewness and prices be low one pound, my PhD research will focus on stocks with higher idiosyncratic volatility.It is because stocks with higher idiosyncratic volatility are more likely to be considered as lottery type of stocks, because speculators might believe that when volatility is high, there is larger probability to realize the extreme returns that occurred in the past (Kumar, 2009). The methodology will be similar to Kothari and Warner (2006), in which the return of any given security at any given time can be obtained by adding the expected return based on expected return models, like Fama-French three factors model, to the abnormal return. The abnormal return of a given time eriod can be obtained by averaging all the abnormal returns of the given period. Given the test statistics provided by Kothari and Warner (2006), the paper will test the null hypothesis, comparing the returns of lottery type of stocks and index returns. If the test statistics are significantly lower, then the evidence may sug gest that the returns of lottery type of stocks underperform index returns, or vice versa. Criticisms to Positivism Some of the criticisms to the positivism is that the ontological position of positivist vis-a-vis reality that social reality exists in an independent way to the researcher (Schutz 1954).It is not helpful for the exploratory research, because the research attempts to understand meaning of the speculating process and varying perception of speculators. Berg (2004) claimed that people, events, objects and situation do possess meaning themselves; these elements confer meaning due to human interaction. Furthermore, it is inappropriate to ask the positivistic position on the epistemological question of â€Å"In what way one can obtain knowledge from a particular reality? † due to the postulation that investigating in such a reality provides no change to that reality.Moreover, one of the main criticisms of the positivism paradigm, according to Hussey and Hussey (1997), is that it is impossible to consider to people as being separate from the social contexts and they cannot be understood without apprehending their views of their own activities. A rigorously structured research design will impose some constraints on the results, and it might ignore more relevant findings, because researchers might carry their own value and interest to the research. The researchers cannot be objective because they are also part of what they are trying to observe.Lastly, statistical variables could be misleading as it is trying to capture complex phenomena. Reasons for Selecting the Positivist Paradigm Positivism is chosen to fit my PhD project, because according to Phan (2006), first of all, ontologically, stock markets is a financial world in which investment decisions can be considered as an external world, objectively adjusting itself, and individual perceptions or desires cannot have any influence. Secondly, quantifiable results are mainly the concerns in the wo rld of financial markets; it is impossible to make any alteration to the reality or to make any different perception.Thirdly, epistemologically, the researchers should be independent of their research projects, in other words, they should be free of bias and personal value, and should have no influence on the collection of data or the results of researches. Moreover, one of the main objectives of the PhD projects is to test hypothesis regarding to the returns of indexes and returns of lottery type of stocks, not to construct new theory or to implement any reform. Lastly, objectivity is important in the financial world in order to provide explanation to phenomena and causal relationships.To summarise, the PhD projects will be mainly focus on making measurements in a statistical and systematic way in order to provide validity, generalization, reliability for the measurements, as well as its predictive cause and effect (Casell and Symon 2004). Summary To sum up, my PhD research will be mainly focus on the speculative behaviours of the stock traders, such as fund managers and retail speculators on lottery type of stocks. The paper will be carry out using quantitative method and positivism fits very well in my research, as positivism is a methods that define positive knowledge which can be verified by empirical sciences.There are some criticisms about the ontological and epistemological assumption of positivism, nevertheless, the benefits of applying positivism exceeds it costs as my PhD research will mainly focus on making measurements in a statistical and systematic way to predict the cause and effect of different research topics, as well as their validity, generalization and reliability of the measurements. Reference: Berg, B. L. (2004) Qualitative Research Methods for the Social Sciences. 5th Edition, Pearson Education, Inc. Boston.Casell, C and Symon, G (2004), Essential Guide to Qualitative Methods in Organisational Research, Sage Publications Ltd, London, UK Creswell, J (2003), Research Design: Qualitative, Quantitative and Mixed Methods Approach, 2nd Edition, Sage: Thousand Oaks, CA. Guba, E and Lincoln, Y (1994), Competing paradigms in qualitative research, Handbook of Qualitative Research, Sage, Thousand Oaks, CA. Hussey, J. and Hussey, R. (1997) â€Å"Business Research† Macmillan Press Ltd, Basingstoke Kumar, A. (2009) â€Å"Who Gambles in the Stock Market†, The Journal of Finance, Vol 64, No 4, 1889-1993Little, D. (2005) â€Å"Western Philosophy of Social Science† Peking University Lohpetch, D. andCorne, D. (2010) Outperforming Buy-and-Hold with Evolved Technical Trading Rules: Daily, Weekly and Monthly Trading, EvoApplications 2010, Springer LNCS Phan, A 2006, â€Å"Hedge funds and China’s stock market: a study on factors influencing investment decisions by fund managers†, DBA thesis, Southern Cross University, Lismore, NSW. Peers, M. (2003) â€Å"A Guide To: Gambling, Investment, and Speculati on† Available at: www. math. byu. edu, Accessed on January 15, 2012Perry, C, Riege, A & Brown, L 1999, â€Å"Realism's role among scientific paradigms inmarketing research†, Irish Marketing Review, vol. 12, no. 2, pp. 16-23. Phillips, DC and Burbules, NC (2000), Postpositivism and educational research, Lanham, MD: Rowman and Littlefield. Rosenberg, A. (1988) â€Å"Why a Philosophy of Social Science? † In Philosophy of Social Science. Boulder, CO:Westview Press 1-21. Schutz, A (1954), Concept and Theory Formation in the Social Sciences, The Journal of Philosophy, Vol. 51, No. 9, 257-273 Ticehurst, GW and Veal, AJ (2000), Business Research Methods: A Managerial Approach, Pearson Education: NSW Australia

Ego-Centricity and Socio-Centricity

The Different Windows of Life We all see the world In different perspectives and that's how we, as humans, handle this Journey called life. Two of the many different views of life are ego- eccentricity and solo-centrally, they may seem new to you but actually they're already spread out In the minds of different Individuals. As seen In the structure of the two words, egocentricity and egocentricity, they are obviously two different words not only in structure but also in meaning.Let me elaborate on their difference in meaning based on their structure. Egocentricity comes from the Latin word â€Å"ego† meaning â€Å"l† and â€Å"centrists† meaning â€Å"centered upon†. From their etymology we can infer that the word meaner centered upon oneself. Egocentricity is having opinions or views in life which highlight oneself or give importance to the decisions of an individual. Ego centrists believe that they are the most Important living things on the earth more t han any plant or animal and their view on life Is mostly Influenced by oneself only.They believe that life Is colluded by Individuals and not by any social group or plant/animal. On the other hand Socio-eccentricity coming from the Latin word â€Å"socio† meaning companion and â€Å"centrists† meaning â€Å"centered upon† meaner having views or opinions based on one's membership in a social organization. Socio-eccentricity is having views that one is dominant because of his/her participation in any social organization or structure. Socio-centrists often associate themselves within their group and not as an individual not unlike the former.They also believe that life Is McCollum by societal groups and not Just by any individual. They believe that 2 heads are indeed better than one. No matter what flews/pollens you Imbibe wealth yourself, believe that the world Is McCollum by what we do and not what we think of ourselves or any human being. We can only solve the p roblems of the people if we do some action about it. We can never solve anything based only on our views. We can only bring an end to these if we do our part as human beings here on earth.

A analysis of Google quit Chinese market

Fourthly, the conflict between Google and Chinese government had upgrade to diplomatic emissions, the wise was both of two government solve this problem in intellect way. 2. 0 The company profile of Google Google is an American multinational corporation, which is worked on Internet service including search, cloud computing software and online advertising. The mission and vision of Google is to organize the world's Information and make it universally accessible and useful. As the culture of Google, they hire smart and determined people.Its employees share common goals and vision, but they hire people from all over the world. When they are not work, the offices environment like home and It Is leased. They have open culture, make every contributor feel comfortable. (Google, 2014) 2. 1 The introduction of Google's problem encountered in China The most of obvious problem is Google have conflict with Chinese government. At the beginning, Google was not obeyed Chinese Internet Censored regu lation. But under the pressure of Chinese government, Google tried to cooperate that is not approved by Chinese government, but it did arouse against in the rest of world.A internal problem from Google is they did not understand Chinese culture and language which make search engine Inefficiency. Google's business had been taking from Its competitor?Bald. According to high level report (San, 2007, p. 6) 3. 0 Evaluation of the Inter personal relationships affects the corporation's profit in China Interpersonal relationship means a strong, deep, or close association between two or more people. The interpersonal relationships are formed in the context of social, cultural, traditional and other elements.For most of people, they are likely to feel non-treatable with foreigners, which is hurting international business. Such as Google, it entered China as foreigners, it hard or Google to open Chinese market. Therefore, inter personal relationships allow build trust or even friendship, which is beneficial to corporation's business. Furthermore, Inter personal relationships allow International corporation know the local culture, which Is good for communication. Inter personal relationships can eliminate the barrier In communication, and offer high efficiency and unblocked communication and in respect way.Google do not know the Chinese culture and instead of English. Google did not realize it, its functions of mandarin is weak, so seers cannot get satisfy answer by Google search engine. Interpersonal relationship is based on culture, it is seemingly more vital in China than any rest of countries. The inter personal had been becoming indispensable social element which ensures social function operation, since thousands years ago, inter personal tradition had formed. The foreign corporation effort to enter China market, it is important to learn this culture.Apparently, Google did not figure out this issue, they did not understand culture, and try to use their successful exp erience in America to open Chinese market. They make their business operation too professionals and cool, which betrayed Chinese culture. Because the misunderstanding Chinese situation, they are not favorable for Chinese net citizens. Compare with national brand Baud, the local business are deeper understanding Chinese situation, Baud occupies more market than Google. For example, Baud has many functions which is understanding Chinese culture.Such as Baud Zooidal, it provides a platform to let Internet citizen ask question and answer. And Baud Tibet is very suitable to Chinese Internet citizens, they can communicate on the Tibet. Agreeably, it gathers the people who have common point. Furthermore, Baud search engine understands Chinese language, so user are easy to access what they want, but Google not. (Edward, 2010) Not only the Chinese business men work rely on inter personal relationships, but also are international corporations necessary have good relation with government and a uthorities.The good relation with government official provides the good communication that make international corporations deeper understand local regulations. It is helpful to international corporations which is not adopted Chinese environment to change and transform. However, Google are too late to realize this, they had been trying to work on Internet freedom and try to build this as brand image in first several years entered China market. The brand image was not successful as they expected. With the Baud's rise, Google had been losing market share, and having trouble with Chinese government.According high level report (John 2011, p 1) Hence, it is easier for Google to operate it businesses, if they have good inter personal relationships network as international corporations. It can allow the opportunities and bring profit. Without inter personal relationship is hard to move on in China, but friends can impart experience and help. As long as international corporation build good i nter personal relationship, they are likely to access success and harmony cooperation relations. According high level report (David, p 3) 4. Chinese Internet Management Begun in 2003, Chinese government built the Great Firewall, it can block some foreign websites and surveillance of the network. Any uncensored Internet information is found that will be immediately deleted or shielded. Strength of monitoring program A, Contain the Internet violence B, Contain the Internet rumor C, Keep harmful content away from child A, It impose restriction on Google information B, It hurt human rights and make Google be debatable. 4. 1 The strength of monitoring program In China, the Internet violence has been overflow, which can be controlled by program.A behavior called â€Å"Human flesh search† This action allows net citizens to dig up another net citizens' private information including real name, address, hand phone number, his employer and so on. The Chinese official and social expertis e judge this behavior is Internet violence and guilty. Hence, they persisted monitoring program which contained this behavior. â€Å"Human flesh search† did hurt huge number of people. Some person had action which is unaccepted to other net citizens. The latter would use â€Å"Human flesh search† dig up their information, and abuse, threaten the victims.And it also infringes upon citizen's legal rights, such as right to privacy. Meanwhile, the Great Firewall can intercept dirty language, personal abuse. In some degree, it does refine the Internet environment. The circumstance can be controlled by government. Google is so powerful and it search engine can be this crime's accessory. It is refine the environment of Google. So, for Google, this monitoring can help Google find the crime information, it is good for Google development. (ROB, 2012) The Internet rumor has been overflow, which also has been keeping down by the program.In China, the Internet rumor is seemingly wo rse than any rest of countries. Rumor disrupts normal social order and brings about panic, riot, which is immorality. The government has duty to crackdown on online rumors to give citizen a truth. The radical content can be kept away from children. Some information is ultra, which s full of violence, pornographic, and poison. The child can easily access that information. The appropriate management is benefit to child. The parents are not worry about that children read bad information. (Shannon, 2013) 4. The weakness of Internet management The monitoring system is so strong that cover whole Internet, it can surveillance privacy, stop information, shield search engine. Chinese government use it prohibit many things. It is violate human rights. In China, it is hard to separate the politically- motivated Internet management and protecting legitimate citizen's interest. The overspent takes advantage of the monitoring system to achieve political motivation. The content harmful government but it is truth can be intercepted. It is good for government to shield and cover truth.The research engine cannot provide information to Chinese citizens without government censored. Google is an organization which believes the Internet information freedom, it provide some information which can be harmful to Chinese government. The government use law And it is ruining Google's reputation. (Suburban, 2013) Google cannot provide some websites which are not allowed to access in China, such s Faceable and Youth. Chinese governments and authorities stop these websites from citizens. It does puzzle citizens to use Internet.On another hand, the pirate and tort information is full of Internet in China, the monitoring system like blind and no operation to this crime. Google pay attention on copyrights, but its competitor is not at all. In China, Baud which is the biggest competitor have been offering pirate and tort information under the monitoring system. The authorities are conniving nati onal corporation Baud and cause problem with Google that reduce its competitiveness. And net citizens are prefer Baud in China. According to high level report Anyone, 2011,p. 12) The censored system is so restrict that many useful information had been deleted.Google provides some acknowledge and ideology which also are prohibited, such as some chemistry principle, explode principle, and firearms acknowledge. The Chinese officials believe it can ensure society stabilization. â€Å"There are no explode, because no one can make it† It does puzzle learners have right purpose. Not only it violates human rights, but also does it perplexes Google operation. Google as requested to upgrade system to manage information and corporate the Great Firewall. Liking other Internet Corporation in China, Google had to invest huge sums on develop its monitoring systems.It wastes money and time, it reduces the corporation competitiveness. Furthermore, when the Great Firewall updating, these corpo ration business including Google can be affect. The condition of Internet become Jam and slow. (ROB, 2012) 5. 0 The importance of CAR in maintaining corporation international The CAR means the relationship between global corporations, government of countries, and individual people. The relationship between local society and corporation also is important. And the relationship between corporations with its stakeholders also cannot be forgotten.The stakeholders mean those effect corporation police and practices. Sustainability, the resource on the earth is limited, and corporations are the part of society. Hence, it is concerned that corporation how to use resource. As an international corporation, it behavior would be concerned, and public concerned its use of resource. It more likes morality restraint. And corporations pay attention on resource utilized which is responsible to society. Furthermore, sustainability not only about means resource, but also carrying capacity of the ecosys tem. Global corporations should concerned developing with care protection of ecosystem.They are powerful and taking more responsibility. The society is sustainability development and they can sustainability development. According to David (2008, app) concerned CAR is apparently important. The good action can build good brand awareness, such as charity. The media will help to advertise these beneficial actions, which is more worth that advertisement and promotion. (Craig, 2003, p. 21) For example, in China, Struck donates 1. 5 million US Dollar for training west rural teachers in poor areas, furthermore, this program also support poor students to finish their college study.Moreover, Struck are working on Education in China and Struck are the partner with women's Development Federation and Water and Sanitation Education Project. So, it is the reason of Struck is welcome in China. (Struck, 2006) 5. 1 The advice to Google Google have the privacy issues. As a global corporation, this pro blem had been across many countries. Marc believes that Google violate the global privacy tankards, and those issues are becoming as amusing as serious. Hence, the advice is respected the people's privacy right.It is important to build brand image to public, if Google hurt customer's privacy, which one are likely to use Google. And the different areas have different regulations of privacy, as a globe corporation, it is important to follow those different rules. Internal Google, they can set up a program to check any content that violent privacy. It is too late if external point out this behavior, which can quickly spread to world by media and bring harmful effect. According to high level report Anyone, 2006, p. ) The second advice is keeping away from China. It has a big share of search, in China.Chinese government insisted to censoring search content. Google had been agreeing with this censoring, but it against by rest of world. They believe the monitoring had violated the human ri ght. And the Chinese government still believed Google against the law under the cooperation. The censoring was betrayed Google's principle that respects Internet freedom and reality. Keeping cooperation would arouse the more oppose, including, Human right organization, reporter without burden and so on. In 006, some of demonstrator had the activity called â€Å"Mass Breakup with Google†.This activity protests the Google's cooperation with Chinese government. And demonstrators believe that Google break own principle of â€Å"Don't be evil†. Away from China, and refuse cooperation can build good brand image to rest of world, and the operation still work in Hong Kong. According high level report (Bassoon, 2007, p 10-15) 6. 0 The suggestion to lessen the political vulnerability between the government of USA and China There are many, complex, and rottenness conflicts between two countries. The deepest conflict is in ideology. China is governed by the communist party which b elieves the socialism with Chinese characteristics.Obviously, United States of America is the leader of capitalist countries. Both of two have so much difference in belief. Hence, it related and cause the specific conflicts. The biggest answers were requested censored by Chinese government. The international social believe it betray the principle of freedom of Internet, in further, it violates human rights. Although, Google effort to cooperate with Chinese government, the latter still believe Google default and provide porn information. In the Google sides, they assert hey suffer from Chinese hacker Internet attack.USA government requires Chinese government to protect the rights of Google. Yahoo can work in China, because it respects the Chinese regulation. Yahoo has totally legal operation in China. Yahoo is taking responsibility of CAR. Both of China and USA better keep calm. In front of the conflicts, both of two governments better keep restrain action and speech. Between two lar ge countries, they have to think about the long-term benefit and cooperation. Impulsion and extreme action will hurt long-term cooperation relations. As Google's issue, it is a commercial issue. The suggestion is keeping it to commerce problem.The public social can query Chinese government's strategy of treat Internet information. But, it is not smart for USA, as a government to interfere China internal affairs. It is not smart way to upgrade this issue to political problem that is making problem more complex. The deep communication and understand the culture and custom. Through the communication, both of sides can solve this issue in negotiations and dialogue. USA government can understand Chinese conditions and troubles. There are reasons for censored Internet information. USA government can figure out these reasons before action.Meanwhile, it is important to protect Google's right. Chinese government should investigate Internet attacks. Such as Yahoo, it also has business in Chin a, and it can have a good relation with Chinese government. Yahoo respects Chinese regulation, and the government has no issue with Yahoo. The communication is important to understand the policy of government. 7. 0 Conclusion For many reasons, Google had quite China in 2011. Corporation put website into Hong Kong, which is last part business in China. The biggest reason is Google misunderstanding of China situation.Without consider inter personal relationships, the wrong evaluation was hurt Google in China. The shortage of understanding language make search engine work inefficiency. The market share was declined in big degree. The conflicts with Chinese government were upgrading. The cooperation with Chinese government was suffering against with rest of world. In awkward situation, quite might be the best choose, it still can be helpful to build brand awareness to rest of world. As the conflicts had been caused the diplomatic tensions, the suggestion was that both of governments sol ved this issue, which better noninsured the long-term interest.

ENVY RIDES CASE Study Example | Topics and Well Written Essays - 1250 words

ENVY RIDES - Case Study Example The working capital loan will even bring more revenue to the company. Hence, it will even help increase the gross margin even higher. The business has really been working well on its expenses by cutting down on most of the recurrent expenditure, apart from salaries, to ensure that the expenses reduce from 40.3% to 17.2% from 2007 to 2009 respectively. This is more than two times reduction in percentage expenses. It is, therefore, easy to make a projection of further reduction in expenses that might be realized in the next two years to be at less than 5%. With this tremendous reduction in expenditure, the business is, therefore, expected to have more revenue on the retained earnings section to be used to reinvest in the working capital. The business therefore has no reason to go for a loan for the working capital as it can be obtained from the retained earnings. However, the position of the business through its expenses support more loan to be obtained since it can be repaid easily given the level of the recurrent expenses in the business is also expected to reduce further for the next two years. The net income has also experienced some increase from 2.6% to 4.9% from 2008 to 2009. The increase in the net income may also show that the business is using too little to finance its expenses, and it is increasing its volume of sales. Therefore, with an increase in the net income, there is a possibility of further increase in the next two years. Envy can, therefore, go for further loan to renovate and add working capital since such attempts will only increase the net income, and the company will be in a better position to repay the loans. This is a profitability ratio that gauges whether the far that a firm can generate profits from the investments of the shareholders in the company. The return on equity ratio here has increased from 28.6% to 45.5% from 2008 to 2009. This shows that, currently, from every dollar that the