Ashtead

Introduction Background Information Ashtead group provides rental solutions in various situations such as facilities management, nonresidential construction markets, disaster relief, traffic management and major event management. It provides equipment such as lifts, powers, generates, moves, digs, pumps, and directs for rental purposes.Advertising We will write a custom essay sample on Ashtead specifically for you for only $16.05 $11/page Learn More It was founded in 1947 as Ashtead Plant Hire Equipment Limited. The Group trades in the London Stock Exchange under the ticker symbol AHT (Ashtead Group PLC. 2012a; Ashtead Group Plc. 2012c) Markets Division The company operates in the United States of America and the United Kingdom. In the US, it operates under the brand name Sunbelt Rentals and A-plant in the UK. Sunbelt has over 372 outlets across various cities in the US while A-plant has over 110 outlets in the major cities of the UK. In the US, the Grou p has engaged about 6,822 employees while in the UK, it has employed about 1,916 employees. The operating revenue for Sunbelt as at 31st October 2012 amounted to 1,041 million while for A-plant amounted 199 million. Based on the comparisons above, it is evident that the operations of Ashtead Group in the US are greater than the operations in the United Kingdom. Market share of Ashtead Group is greater in the US than the UK. In the US, it is the second largest in the equipment rental business while in the UK it is the third largest (Ashtead Group Plc. 2012b; Ashtead Group Plc. 2012d, Ashtead Group Plc. 2012f). Issues Facing the Management The key issue facing management is how to manage the leverage level of the group so as to attract new investors (Smith Smith 2003). The company aims to seek new funding that can help in expanding the business but the company cannot receive either equity or debt because of the high leverage (Ashtead Group Plc. 2012g).Advertising Looking for ess ay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Commercial Financial Environment Ashtead’s Business Environment Ashtead Group operates in construction equipment rental business industry both in the US and the UK. Since it operates in various locations and deals in a wide range equipment, the Group faces a complex business environment. The location of the businesses offers the Group a diverse legal and political environment for operation (Berkshire Hathaway Company 2013). It is necessary to analyze both the internal and external environments of the Group so as to ascertain the strengths, weaknesses, opportunities, and threats that the entity faces (Skinner Kim 2010). Ashtead Group has a strong brand both in the US and UK. This enables it to be on top of the competition. The strong brand name has been built for over six decades. Another strength of the company is that it has a wide range of products and services to offer. Diversification is a source of financial strength for the company because if one product does not perform as expected in the market, revenue from other products will cushion the company finances (Shim Joel 2008). Thirdly, the group has extensive and well built distribution network both in the US and the UK. It enables the Group’s products and services to penetrate the markets easily. Also, the Group engages qualified personnel to run businesses. This ensures quality work in all areas of operation (Sirman, Hitt, Ireland 2003). Further, the Group makes use of latest technology in the market. Finally, the Group has good business relations with the host countries. It complies with all the regulatory framework. This creates a conducive environment for its operations (Siddidui 2005). A major weakness for the company is that the markets are concentrated in the US and the UK only. Any major changes in the two markets are likely to impact heavily on the financial performance of the Group.Advertising We will write a custom essay sample on Ashtead specifically for you for only $16.05 $11/page Learn More The company has a number of opportunities to venture into. To start with, the global recession that hit the global economy made the Group to stop most of its expansion programs (Steven 2007). Therefore, the Group has a number of investments to make (Rachels 2009). Secondly, the company should consider investing in regions outside the US and the UK. This offers the Group opportunity to expand its global presence and increase revenues (Samuels, Wilkes, Brayshaw 2005). The company faces a number of threats. First, the constantly changing regulations impacts on the operations of the business (Power, Walsh, O’ Meara 2007). For instance, the US came up with a law which requires a change from the use of off road diesel engine to full compliance with the Tier 4 carbon emission regulation (Ashtead Group plc. 2012e, Ashtead Gr oup Plc. 2012h; Ashtead Group Plc. 2012i). This change is capital extensive and would impact heavily on the finances of the company. Further, the environmental, health and safety regulation are quite expensive to comply with. Stiff competition is another threat that the company faces (Shapiro 2005). It is one of the top equipment rental companies both in the US and UK. The company faces competition from other large companies such as United Rentals, RSC Equipment Rental, Hertz Equipment Rental Corp, and Home Depot Rentals. Ashtead Competitive Position The key driver for the construction rental business is the construction of non-residential and heavy constructions (The American Rental Association 2012a; The American Rental Association 2012b).Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More The construction equipment rental business does well in the US more than the UK. In the US there are over 12, 200 construction rental businesses. The US industry has experienced tremendous growth in the recent past. The growth is characterized by increasing fleet utilization rates. Large companies have increased their fleet sizes. In addition, there is significant acquisitions and mergers geared towards increasing the market size (Penton Business Media 2012a). As at 2011, the four large companies these are, United Rentals, RSC, Sunbelt, and Hertz Rental Equipment (The Financial Times Limited 2011) accounted for 22% (equivalent to $27 billion) of the market share for the construction rental equipment industry in the US. The remaining 78% is shared among the other small companies. It shows the existence of stiff competition among the top four large companies. The table below shows the top companies in the US their market share. Source – (Penton Business Media 2012b) Constructio n rental equipment industry is not booming in the UK as compared to the US market. In the UK the company Ashtead faces competition from companies such as Hewden, Hawk, Speedy. The top ten companies account for about 53% of the plant hire industry. Speedy takes 15% of the market share. Based on the gross book value, Speedy Hire is the largest followed by HSS Hire Service, A-Plant Tool Hire, GAP Group, and Jewson Tool Hire (Executive Hire News 2007). The market share of the companies has greatly changed over the years. The tables below show the market share in 2012. US market Company Market share 1 United Rentals 70% 2 Sunbelt 14% 3 Hertz Equipment Rental Co 6% 4 Top 4-10 US 4% 5 Others 6% UK market Company Market share 1 Speedy 61% 2 A-plant 11% 3 HSS 6% 4 VP 6% 5 Hewden 5% 6 Lavendon 4% 7 GAP 4% 8 Others 3% Source of data – Ashtead Group Plc. 2012j; Ashtead Group Plc. 2012k Potential for Future Growth and Major Market Risks With the s hift to rental business in the US, the market is likely to grow to a greater extent in the near future. Further, the global financial crisis caused a number of firms to shut down due to their inability to make sales that can cover the fixed cost of operation (Choi 2003). Also, the rapid change in technology and regulations is quite expensive for small firms comply with (Bragg 2006). Therefore, they are forced to shut down. The industry is capital intensive and only stable firms like Ashtead Group can survive the market dynamics. This creates a big opportunity for growth. Despite the availability of opportunities, the Group faces a number of market risks that cast doubt on its ability to tap the opportunities. First, is the economic conditions. Down swings slow down the rates of growth of the Group (Brealey Myers 2009). Secondly, competition from local established firms reduces the market share and revenues for the Group. Thirdly, since the industry is capital intensive, obtaining f inancing is a challenge. For instance, debt financing is limited to a fixed number of years. One source of financing cannot be adequate for the nature of the business (Brigham Joel 2009). Fourthly, rapid changes in technology are a major threat to the continuity of the business because the business relies on technology. Investing in the latest technology is a risk to the Group. Also, attracting and retaining highly qualified personnel is a key risk for the company (Bull 2007). Finally, compliance with health, safety, environmental, and other regulations is a major hindrance to the future success of the Group (Campbell 2005). These regulations change from time to time. Analysis of Performance Over Past Five Years The financial statement as they are providing the users with a narrow insight into the financial strength and weaknesses of the company (Dubrin 2008). Therefore, it is of essence to carry out an in depth financial analysis of the performance of the Group. The analysis makes use of the income statement, statement of financial position and the cash flow statement. The financial analysis is carried out from a debt provider and a shareholder point of view (Dayananda, Irons, Harrison, Herbohn Rowland 2002). The shareholders if mostly concerned with the profitability and returns of his investment while a debt provider is mostly concerned with the leverage of the Group. Ratios analysis and graphs will be used to carry out financial analysis of the group for a five year period (Erricos Cristian 2007). Profitability and financial gearing ratios will be computed for the company. The table below shows the profitability of the company. Profitability ratios 2007 2008 2009 2010 2011 Net profit margin 0.88% 7.41% 5.60% 0.25% 0.09% Return on assets 0.49% 4.65% 3.38% 0.12% 0.06% Return on equity 1.99% 17.62% 11.98% 0.42% 0.19% The profitability ratios for the company are low. The net profit margin range from 0.09% to 7.41%. Return on assets range from 0. 06% to 4.65% and return on equity range from 0.19% to 17.62%. The Group experienced an increase in profitability from 2007 to 2008 thereafter financial performance declined sharply. The profitability of the Group is on a downward trend since 2008. This might not attract a potential investor. The graph below shows the trend of profitability from 2007 to 2011. Leverage Ratios Gearing ratios looks at the capital structure of the company (Eugene Michael 2009). It focuses on the amount of capital financed by debt in relation to the amount financed by equity (Collier 2009). It also focuses on how well the company’s profits cover interest expense. This ratio is of essence to a potential debt provider sine it shows them how levered a company is and the ability of the company to meet the interest expense as they fall due (David 2003). The table below shows the gearing ratios for the company of the five year period. Leverage ratios 2007 2008 2009 2010 2011 Total debt to equity r atio 3.02193093 2.786282 2.538783 2.38297 2.320523 Interest coverage ratio 0.71448763 2.466578 1.011834 1.078431 0.979818 In the above table, the total debt to equity ratio is greater than one for the five years. This implies that the proportion of debt financed by debt is greater than the proportion financed by equity. This shows that the company is highly levered and not desirable for a potential investor. Equity financing takes a small proportion of the capital structure. A low debt to equity ratio is desirable. Further, interest coverage ratio ranges from 0.7144 to 2.467. These ratios are low and they indicate that the company has difficulties in paying the finance cost. For instance in 2007 and 2011, the company’s operating income could not pay the cost of interest. Therefore, leverage of the company is very high. It might be very risky for a potential debt provider to out in mode debt in the company. The graph below displays the trend of gearing ratios for the five year period. From the above review, it is evident that the company relies more on debt financing than equity financing. Total debt exceeds the total equity. The company uses debt from the bank and finance lease. The situation is not desirable since it increases the finance cost and reduces amount attributed to shareholders. The company’s financial position is not desirable for potential debt provider and a shareholder. Three Year Forecast for Operating Profits The Group focuses on maintaining an organic growth of returns in excess of 20%. The growth is achievable due to the fact that there is a potential for growth in the US market because the infrastructure in the US is quite dilapidated and there is need to replace or repair. Besides, the target markets are recovering from the period of recession. Therefore, there is a possibility of achieving the growth of 20%. Also, in 2011 and 2012, the company has recorded growth in performance which is likely to continue for a few mo re years. It is evident that the company experiencing a phase of growth in operation. The forecasts for operating income is based on the assumption that the operating income grows at 10% annually in the first year, 15% in the second year and 20% in the third year. This rates portrays an organic growth. The company will achieve the20% growth in the third year. The table below shows the forecasts for the next three years. It also shows the current operating profit for the group. 2012 2013 2014 2015 Revenue Rental revenue 1005.9 1106.49 1272.464 1526.956 Sale of new equipment Merchandize and equipment 44.7 49.17 56.5455 67.8546 Sale of used rentals 84 92.4 106.26 127.512 1134.6 1248.06 1435.269 1722.323 Operating cost Staff cost 334 367.4 422.51 507.012 Used rental equipment sold 74.6 82.06 94.369 113.2428 Other operating costs 344.9 379.39 436.2985 523.5582 753.5 828.85 953.1775 1143.813 EBITDA 381.1 419.21 482.0915 578.5098 Depreciation 199 .8 219.78 252.747 303.2964 Amortization 3.1 3.41 3.9215 4.7058 584 642.4 738.76 886.512 Operating profit 169.5 186.45 214.4175 257.301 Based on the forecast above, the company will make an operating profit of  £186.5 million in 2013,  £214.42 million in 2014 and  £257.30 million in 2015. Forecasts are conservative and they take into account risks arising from the exchange rate fluctuations. Besides, considering that the economy just recovered from the recession, it is most certain that it will experience recovery thereafter a boom. This also applies to companies. Therefore, the forecasts are based on a 90% confidence that the Group will earn the forecasted annual operating profits or even more but not less. The graph below shows the trend of forecasted operating profit for the next three years. Future Cash Flow and Funding Needs Funding is required to achieve the growth in operating profit forecasted above. The funding should be adequate so as to meet the working ca pital and capital expenditure needs (Mark 2002). From the income statement of the group, it is evident that the a great proportion of revenue originates from rental income. Therefore, it is important that the company incurs adequate amount of money on fleet planning. This is with regard to size, number and fleet utilization. The graph below shows the cash flow and funding for the past five years. 2007 2008 2009 2010 2011 2012 Revenue  £millions 896 1,048 1,073 837 949 1,135 Cashflow  £millions -376 -1 246 190 19 -35 Fleet age in months 31 31 35 44 44 37 Fleet size  £million 1,434 1,528 1,763 1,689 1,632 1,880 EBITDA margin (%) 35 35 33 30 30 34 Return on investment (%) 14 12 10 5 7 12 Based on the market conditions, the management is optimistic about improvements in performance and a strong market. The revenue might grow up to 50%. However, this depends on the growth of the fleet and improvement in yield. The management also intends to reduce leverage status of the group up to twice the value of EBITDA. The Group also intends to reduce fleet age to between 34 and 38 years. Fleet size is likely to increase up to about 25% and EBITDA is also likely to exceed the previous peak up to 35%. Finally, the return on investment is likely to increase in the coming years. The expected performance can be used to forecast future cash flow and funding needs for the next three years. The table below shows the forecasts for the next three years. 2012 2013 2014 2015 Revenue  £millions 1,135 1,248.5 1,373.35 1,510.685 Cash flow  £millions -35 76 106.4 148.96 Fleet age in months 37 38 35 34 Fleet size  £million 1,880 2,068 2,481.6 3,102 EBITDA margin (%) 34 35 37 40 Funding: Debt 1,117.1 1,059.08 1,054.266 967.614 Equity 481.4 481.4 481.4 481.4 Total debt to equity ratio 2.320523 2.2 2.19 2.01 Revenue will grow at 10% in 2013, 15% in 2014 and 20%in 2015. The growth is conservative and achievable due to expansion of the US mark et. Cash flow will also grow over the years. It is based on the assumption that the debt will reduce while equity will remain constant thus reducing the leverage level of the company. This implies interest expense will decline thus improving the cash flow (McDaniel Gitman 2008). Increase in cash flow will also arise from an increase in revenue and operating profit. The fleet age is likely to go down from 38 to 34 months. Also, fleet size is likely to grow in the coming years. It will increase up to  £3,102 in 2015. With the increase in level of operation and revenue, EBITDA will go up to 40% in 2015. Management of the company intends to reduce the leverage level of the company. They expect to reduce the net debt over the years. The funding needs are based on the assumption that debt funding will go down by 5% every year to  £967.61 in 2015. Equity funding will remain constant over the period of the forecast. The funding mix will enable the company to achieve a total debt to equ ity ratio of 2.0 by 2015 from 2.32 in 2012. The budget above shows the funding needs of the company for the next three years. It shows the expected flow of revenue, cash flow needs and funding needs. The budgets take into account the capital expenditure, depreciation, working capital movement, taxation, and dividends (Maher, Stickney, Weil 2011). All these are shown in the net cash flow. The forecast is also based on the assumption that the company will reinvest a substantial amount of net income into the business. It is due to the fact that the current capital mix and performance of the entity may not allow it to obtain external funding easily. This may continue for the next three years thereafter it can seek external source of funding (Mankiw 2011). Therefore, the estimates are based on a 90% level of confidence that the company will achieve and even surpass the estimates in the estimates above. Capital Structure, Funding Analysis and Valuation Analyzing the capital structure of a company is of utmost importance because it determines the rate at which a company grows (Kinney, Skaife William 2007). Further, it also dictates the amount of working capital that is available for the company. The capital structure shows the amount of various ways of funding that the company uses (Kymal 2007). It is of importance to maintain an optimum mix of various sources of funds because the mix have an impact on the profitability, cash flows and amount attributed to shareholders (Longenecker, Petty, Palich, Moore 2009). The capital structure that a company decides to use depends on the market the company operates in, the financial planning through the business cycle, the operational excellence of the group and the the next phase of growth patterns of the company (Lys, Collins, Badertscher 2007). The table below shows the current capital mix of the company for the year 2012. Source of funds Amount Proportion 1 Total debt 875.6 61.22% 2 Total equity 554.7 38.78% T otal 1,430.3 100 The current capital structure of the company comprises of debt and equity financing. The total debt amounts to  £875.6 million. It is equivalent to 61.22%. The company uses lease financing, secured bank debt, and secured bank note. Total equity amounts to  £554.7. It is equivalent to 38.78% of the capital structure. Therefore, it is evident that the debt financing is greater than equity financing. The debt to equity ratio is 2.3. Optimal Level of Debt Determination of optimal level of debt is a vital decision on financing options to use. Optimal level of debt is the level at which the cost of capital is minimized. It is the level beyond which a firm should not borrow. There are various studies that have been conducted to show the optimal debt – equity mix. The most popular theory is the Miller and Modigliani model (Mintz Morris 2011). The model asserts that in the absence of transaction cost, the capital structure of the company has no effect on the v alue of the firm (Moorad, Joannas, Pereira, Pienaar 2003). Therefore, the capital mix a firm uses if of no importance. The theory further asserts that the capital structure of a company is irrelevant. However, various scholars greatly criticized this model (Newage International Publishers 2012). They argue that the Miller- Modigiliani model is based on unrealistic assumptions of absence of taxes, efficient market, absence of agency cost and perfect information (Nicholson 2000). In the contemporary business world, these assumptions are quite unrealistic and do not exist (Nikolai, Bazley, Jones 2011). An example of a scholar with a contrary opinion is the Aswath Damodaran. The scholar is against the irrelevance model. He argues that capital structure has an impact on the value of the firm (Michael Jon 2010). Damodaran argues that the amount of debt in the capital structure of the company affect cash flow thus changing debt changes cash flows to equity because cash flow is attained from assets after repayment of debt and making reinvestment for future growth (Melicher Leach 2009). He further asserts that as debt increases, equity becomes riskier and the cost of equity will definitely increase. The optimal debt ratio depends on a number of factors (McLaney Atrill 2008). These are the tax rate, the pre – tax returns on firm, variation in earnings and default spread (McGraw-Hill Higher Education 2007). Computation of optimal debt will be based on the Damodaran mode thus the amount of debt has an effect on the capital structure of the firm. The Ashtead Group uses a number of key performance indicators to measure performance for a given period. Of most importance are the underlying earnings per share, return on investment, and net debt and leverage at constant exchange rate. The Group aims to maintain a â€Å"conservative balance sheet structure with a target range for net debt to underlying EBITDA of 2 to 3 times† (Ashtead Group Plc. 2012e). The Gr oup also aims to â€Å"sustain significant availability that is, the difference between the amount we are able to borrow under our asset-based facility at any time and the amount drawn through the cycle† (Ashtead Group Plc. 2012e). It is worth noting that the Group operates in an extremely capital intensive sector. The company heavily relies on asset based financing. It is also of utmost significance to evaluate the returns on assets of the company for the past five years. This would help ascertain if the company is using the assets adequately to generate returns. Return on assets 2007 2008 2009 2010 2011 Return on assets 0.49% 4.65% 3.38% 0.12% 0.06% From the ratios calculated, it is worth noting that the return on assets of the company are quite dismal and they have a declining trend since 2008. This trend is attributed to the global financial crisis which resulted to low profitability and a sharp decline in equipment rental business. The table below shows the amou nt debt of the company for the past five years. 2007 2008 2009 2010 2011 Total debt 1,198.8 1,226.8 1,335.4 1,192.2 1,117.1 The table above shows the total amount of debt the Group has both short term long term debt. From the table, it is evident that the amount of debt increased between 2007 and 2009 thereafter it started to decline. The decline is attributed to the management decision to reduce debt to equity ratio to 2 times. The trend of total debt is shown in the graph below. Calculation of of optimal debt for the group will be based on the underlying theoretical models. The weighted average costs of capital approach will be used to calculate the optimal debt. Based on this approach, the cost of debt is determined by a number of factors these are, the rate at which the company can borrow long term today (risk free and a default spread) and the tax rate. The cost of debt is not similar to the interest rate at which a company obtains debt. The cost of debt is computed a s shown below. Cost of debt = (risk free rate + default spread) (1 – t) Risk free rate = 9% Default spread = 0.4 Tax rate = 26% (corporate tax in the UK is 26%) Substitute the values (9% + 0.4)0.26 = 6.956% = 7% The cost of debt is 7%. It is based on the assumption that risk free rate is 9% and the default spread is 0.4%. Determination of the optimal amount of debt majorly depends on the objective the firm. Use of debt is cheap and it reduces the weighted average cost of capital. However, increasing the amount of debt increases the amount of weighted average cost of capital as gearing, financial risk, and beta equity goes up. If the Group’s objective is to maximize shareholders’ wealth, then the company must reduce the amount of debt thus reducing beta equity. Further, the amount of debt is inversely related to its risk. Cost of equity denotes the of return shareholders require for their investment. Equity is a significant component of the capital structure. It is worth noting that the amount debt in the capital structure has an impact on the cost of equity. High amount of debt increases risk of equity thus increasing the risk premium that shareholders will require for their investment. Cost of equity is computed using the formula shown below. Cost of equity = risk free rate + Beta * Risk premium Risk free rate shows the rate of interest that does not have default risk, no reinvestment risk and are in the same currency. Beta measures the market risk in which the group operates in. Beat depends on the type of business, operating leverage and financial leverage. Finally, risk premium shows the premium for the average risk of investment. Cost of equity = 9% + 0.4 * 5.82% = 11.328% = 11.33% The calculations above shows that the cost of equity is 11.33%. The risk premium is relatively high because of the high leverage. Computation of the weighted average cost of capital is shown below. The weighted average cost of the capital = cost of equity * proportion equity the capital structure + cost of debt * proportion debt in the capital structure. Weighted average cost of capital = 11.33% * 38.78% + 7% * 61.22% = 8.68% The calculations above can be summarized as shown in the table below. Source of funds Amount Proportion Cost of capital 1 Total debt 875.6 61.22% 7% 2 Total equity 554.7 38.78% 11.33% Total 1,430.3 WACC 8.68% Even though the market for equipment rental is likely to grow rapidly and equipment rental businesses will require adequate funding so as to tap the growing market especially in the US, there is a need for the Group to maintain a capital mix that will maximize shareholders’ wealth. Debt offers a cheap source of financing though it reduces shareholders’ wealth. The optimal level of debt in the capital structure should be 50% of the total amount of debt. Implications of Optimum Level of Debt in the Capital Structure Currently the proportion of debt in the capital structure is 61.22% . In the event that the proportion of debt is reduced, the risk of debt will go down. Therefore, risk premium used in debt calculation will go down. Summary of calculations is shown below. Cost of equity = risk free rate + Beta * Risk premium Cost of equity = 9% + 0.4 * 3.82% = 10.53% = 10.53% Once the risk premium reduces, the cost of equity also reduces. The calculation for the weighted average cost of capital is shown below. The weighted average cost of the capital = cost of equity * proportion equity the capital structure + cost of debt * proportion debt in the capital structure. Weighted average cost of capital = 10.53% * 50% + 7% * 50% = 8.77% From the calculations, it is evident that reduction of the amount of debt to 50% reduces the cost of equity from 11.33% to 10.53%. Further, the weighted average cost of capital increases slightly from 8.68% to 8.77%. The information is summarized in the table below. Source of funds Amount Proportion Cost of capital 1 Total debt 715 .15 50% 7% 2 Total equity 715.15 50% 10.53% Total 1,430.3 WACC 8.77% Criteria for Evaluating Future Funding Needs Investment decisions require adequate review before injecting funds into the investments because they require massive capital (Arnold, 2008). Further, the decisions are irreversible. Also, there are competing demands for capital therefore, funds should only be channeled to most viable ventures (ACCA 2012; Mankiw 2012). There are a number quantitative criteria that can be used to evaluate investment. The firm’s key goal is to reduce leverage and increase returns. A significant quantitative approach is the net present value approach (Khan Jain 2006). It shows the present value of net benefits that a firm expects. It is a superior method of evaluating project because it uses cash flow for the entire project life. Further, it makes use of time value of money. However, it is complex to compute. A second approach, is the payback period (Holmes Sugden 2008). Th e Group should invest in projects that promises an early return due to the swings in the market. An advantage of this approach is that it offers an investor an opportunity to rank project (Troy 2009). However, the criterion does not make use of cash flow after the payback period (Tutor2u: Variance analysis 2012). Finally, the management can use the internal rate of return to evaluate the project (Vance 2003). The method makes use of cash flow for the entire life of the project (Vandyck 2006). Further, it takes into account the time value of money (Watson Head 2007). However, it is difficult to compute (Weiss 1998). Also, there is no definite way of computing the value of internal rate of return (Willekens Numan 2010). Valuation of Equity Valuation of equity shows the value of a company based on the current assets and its position in the market (Zahra George 2002). The valuation is of significance to potential shareholders and debt providers so as to know how the shares of the com pany performs in the market (Atrill 2009). There are a number of models that can be used to value equity of the company, these are, price earnings ratio, dividend discount model, and dividend growth model. Valuation of equity will be carried out using a price earning ratio. It is a ratio of market value per share and earnings per share (Fahey 1999). Using this valuation model, the value of equity is  £328.8. Appendix one shows the share price of the company from July 2012. From the table, it is evident that the company’s shares has been trading at a price greater than the intrinsic value of the shares. Financial Risk Management Considering the fact that the company operates in two markets, it is exposed to currency and interest risks. If left unmanaged, the risks can impact greatly on the earnings of the company (Fraser 1990). The company does not trade in financial instruments. From a review of the capital structure of the company, it is observable that the company has fix ed and variable rate of debt. â€Å"The group policy requires borrowings to be held at amortized costs thus the carrying value of fixed debt is not affected by changes in the market. There is no exposure to fair value interest rate risk†( Ashtead Group Plc. 2012e; Globusz Publishing 2012). Upon review of the financial statements of the company, it is evident that the pretax profit of the company will change by about  £5.4 million for a percentage change in the interest rate applicable to the variable rate of debt after tax effects, equity changes by  £3.2 million. The interest rates are managed through interest rate swaps (Gibson 2010). Currency exchange risk is restricted to risks arising from the translation. There are no risks arising transaction since the Group does not engage in any foreign transaction (Glen 2007). The Group reports in sterling pounds while most of the assets and liabilities are in US dollars. The Group’s exposure to currency risk is quite lim ited because the most transactions are carried out in local currency (Helfert 2001). Besides, the Group does not hedge on the translation of profits arising from the US market. Further, currency exchange risk on significant non trading transaction are treated in isolation (Have, Have, Stevens, Elst Pol- Coyne 2003). From the review, the group is significantly exposed to interest rate changes. However, the treasury department adequately manages the financial risks adequately. Treasury The treasury department is mandated to â€Å"monitor liquidity, currency, credit and financial risks† (Ashtead Group Plc. 2012e). Further, the department â€Å"manages and monitors the Group’s financial risks and internal and external funding requirements in support of the Groups corporate objectives† (Ashtead Group Plc. 2012e.) The group does not trade in financial instruments. The financial aim of the company is to reduce leverage, increase cash flow, increase revenue and increas e fleet size (Haber 2004). In monitoring liquidity, currency, credit and financial risks, the Treasury department will ensure that the company has adequate liquidity (Heldman 2005). Further, they will aid the management to monitor the capital structure of the Group. Reference List ACCA 2012, Optimum capital, http://www.accaglobal.com/content/dam/acca/global/PDF-students/2012s/sa_junjul09_lynch.pdf. Arnold, G 2008, Corporate financial management, Prentice Hall, Harlow. Ashtead Group Plc. 2012a, About Ashtead, http://www.ashtead-group.com/. Ashtead Group Plc. 2012b, Ashtead at a glance, http://www.ashtead-group.com/about/ataglance.asp. Ashtead Group Plc. 2012c, History, http://www.ashtead-group.com/about/history.asp. Ashtead Group Plc. 2012d, Investor relations, http://www.ashtead-group.com/investors/default.asp. Ashtead Group Plc. 2012e, Annual report account 2012, http://www.ashtead-group.com/doclib/091432-annualreportandaccounts2012.pdf. Ashtead Group Plc. 2012f, Annual report ac count 2010, http://www.ashtead-group.com/doclib/125341-annualreportaccounts2010.pdf. Ashtead Group Plc. 2012g, Annual report account 2011, http://www.ashtead-group.com/doclib/ashtead-group-annual-report-2011.pdf. Ashtead Group Plc. 2012h, Annual report account 2009, http://www.ashtead-group.com/doclib/100533-ashtead-ar-2009-indexed.pdf. Ashtead Group Plc. 2012i, Annual report account 2008, http://www.ashtead-group.com/doclib/061852-ashteadara2008.pdf. Ashtead Group Plc. 2012j, Annual report account 2007, http://www.ashtead-group.com/doclib/170759-ashteadar2007indexed.pdf. Ashtead Group Plc. 2012k, Annual report account 2006, http://www.ashtead-group.com/doclib/114818-annualreport2006full.pdf. Atrill, P 2009, Financial management for decision makers, Financial Times Prentice Hall, Harlow. Berkshire Hathaway Company 2005, Hyperion delivers improved business forecasting for Ashtead Group plc., http://www.businesswire.com/news/home/20050926005339/en/Hyperion-Delivers-Improved-Busin ess-Forecasting-Ashtead-Group. Bragg, S 2006, Financial analysis: A controller’s guide, John Wiley Sons, Inc., New Jersey. Brealey, D Myers, T 2009, Principles of corporate finance, McGraw Hill, New York. Brigham, F Joel, F 2009, Fundamentals of financial management, South-Western Cengage Learning, USA. Bull, R 2007, Financial ratios: How to use financial ratios to maximize value and success of your businesses, Elsevier, Amsterdam. Campbell, D 2005, Organizations and the business environment, Elsevier, Butterworth- Heinemann, Amsterdam. Choi, F 2003, International finance and accounting handbook, John Wiley Sons, Inc., New Jersey. Collier, P 2009, Accounting for managers, John Wiley Sons Ltd, London. David, E 2003, Financial analysis and decision making: Tools and techniques to solve, McGraw-Hill books, New York. Dayananda, D, Irons, R, Harrison, S, Herbohn, J, Rowland, P. 2002. Capital budgeting: Financial appraisal of investment projects, the Press Syndicate of the Un iversity of Cambridge, London. Dubrin, A 2008, Essentials of management, South-Western Cengage Learning, Alabama. Erricos, J Cristian, G 2007, Optimisation, econometric and financial analysis, Springer-Verlag, London. Eugene, F Michael, C 2009, Financial management theory and practice, South-Western Cengage Learning, USA. Executive Hire News 2007, Tool hires top ten, http://www.executivehirenews.co.uk/archives/000370.html. Fahey, L 1999, Competitors, John Wiley Sons, New York. Fraser, G 1990, Decision accounting, Basil Blackwell Ltd, Oxford. Gibson, C 2010, Financial reporting and analysis: using financial accounting information, South-Western Cengage Learning, United States of America. Glen, A 2007, Corporate Financial Management, FT Prentice Hall, Harlow. Globusz Publishing: Variance analysis 2012, http://www.globusz.com/ebooks/Costing/00000015.htm Haber, R 2004, Accounting dimistified, American Management Association, New York. Have, S, Have, W, Stevens, F, Elst, M, Pol- Coyn e, F. 2003. Key management models, Financial Times/ Prentice Hall, New York. Heldman, K 2005, Project manager’s spotlight on risk management, Jossey-Bass, San Francisco. Helfert, E 2001, Financial analysis, tools and techniques: Assessment of business performance, McGraw-Hill books, New York. Holmes, G Sugden, A 2008, Interpreting company reports, Financial Times/Prentice Hall, Harlow. Khan, M Jain, P 2006, Management accounting, McGraw-Hill Companies Publishing Company, New Delhi. Kinney, J, Skaife, A William, C 2007, â€Å"The discovery and reporting of internal control deficiencies prior to S0X-mandated audits.† Journal of Accounting and Economics, Vol. 44.No.1 pp. 166-192. Kymal, C 2007, Conducting effective process-based audits: A handbook for ISO/TS 16949, Paton Professional, United States of America. Longenecker, J, Petty, W, Palich, L, Moore, C. 2009. Small business, Cengage Learning, New York Lys, T, Collins, D Badertscher, B 2007, â€Å"Discretionary ac counting choices and the predictive ability of accruals with respect to future cash flows.† Journal of Accounting and Economics, Vol. 53.No.1, pp. 330-353. Maher, M, Stickney, C Weil, R 2011, Managerial accounting: An introduction, Cangage, Alabama. Mankiw, G 2011, Principles of economics, Cengage Learning, Alabama. Mankiw, G 2012, Macroeconomics, Cengage Learning, Alabama. Mark, C 2002, The marketing glossary: Key terms, concepts and applications, Clemente Communications Group, New Jersey. McDaniel, G Gitman, L 2008, The future of business: the essentials, Cengage Learning, United States of America. McGraw-Hill Higher Education 2007, Ethics in accounting. http://highered.mcgraw-hill.com/sites/0072994029/student_view0/ebook/chapter. McLaney, E Atrill, P 2008, Financial accounting for decision makers, Prentice Hall Europe, Harlow. Melicher, R Leach, C 2009, Entrepreneurial finance, Joe Sabatino, United States of America. Michael, C Jon, W 2010, Break even analysis: A defin itive guide to cost-volume-profit- analysis, Business Expert Press, New York Mintz, S Morris, M 2011, Ethical obligations and decision making in accounting: Text and cases, McGraw-Hill, Boston. Moorad, C, Joannas, D, Pereira, R, Pienaar, R. 2003. Capital market instruments: Analysis and valuation, Pearson Education Limited, London. New Age International Publishers 2012, International financial markets, www.newagepublishers.com/†¦/000403.pdf. Nicholson, S 2000, Measuring community benefits, viewed 04 January 2013, http://content.healthaffairs.org/content/19/6/168.full.pdf. Nikolai, L, Bazley, J Jones, J 2011, Intermediate accounting, Rob Dewey, United States of America. Penton Business Media 2012a, Rental equipment register: Best business ever, http://rermag.com/mag/equipment_best_year_ever/. Penton Business Media 2012b, RER 100 back in black, http://rermag.com/business_technology/business_info_analysis/rer-100-back-in-black-20120501/. Power, T, Walsh, S O’ Meara, P 2 007, Financial management, Gill Macmillan, New York. Rachels, J 2009, The elements of moral philosophy, McGraw-Hill, Boston. Samuels, M, Wilkes, F Brayshaw, E 2005, Financial management decision making international, Thomson Publishing Company, Alabama. Shapiro, A 2005, Capital budgeting and investment analysis, Pearson Education India, New Delhi. Shim, J Joel, S 2008, Financial management, Barron’s Educational Series, Inc., New York. Siddidui, A 2005, Managerial economics and financial analysis, New Age International (P) Limited, New Delhi. Sirman, D, Hitt, M Ireland, R 2003, Dynamically managing firm resources for competitive advantage: Creating value for shareholders. Research Paper, Academy of Management Seattle. Skinner, D Kim, I 2010, â€Å"Measuring securities litigation risk.† Journal of Accounting and Economics, Vol. 53.No. 2, pp. 290-310. Smith, T Smith, L 2003, Business and accounting ethics, www.acct.tamu.edu/smith/ethics.html. Steven, B 2007, Financ ial analysis a controllers guide: Financial analysis, John Wiley sons, New York. The American Rental Association 2012a, Rental industry outlook — Accentuating the positive, http://www.rentalmanagementmag.com/Article/tabid/670/ArticleID/13613/t/Default.aspx. The American Rental Association 2012b, Rental industry outlook — rental specific data at your fingertip, http://www.rentalmanagementmag.com/Article/tabid/670/smid/1276/ArticleID/13614/reftab/685/t/Default.aspx. The Financial Times Limited 2011, The US shift to rental boosts Ashtead Business, http://www.ft.com/intl/cms/s/0/dd7ac180-21bb-11e1-8b93-00144feabdc0.html#axzz2H0Op3AeO. Troy, L 2009, Almanac of Business and Industrial Ratios 2009 Almanac of Business Industrial Financial Ratios, CCH. Tutor2u: Variance analysis 2012, http://tutor2u.net/business/presentations/accounts/varianceanalysis/default.html Vance, D 2003, Financial analysis and decision making: Tools and techniques to solve, McGraw-Hill books, United States. Vandyck, C 2006, Financial ratio analysis: a handy guidebook, Trafford Publishing, United states of America. Watson, D Head, A 2007, Corporate finance: Principles and practice, FT, Prentice Hall. Weiss, L 1998, How to understand financial analysis, Insead, Fointanebleau, France. Willekens, M Numan, W 2010, â€Å"An empirical test of spatial competition in the audit market.† Journal of Accounting and Economics, Vol. 53. No. 2, pp. 450-465. Zahra, S George, G 2002, International entrepreneurship: The current status of the Field and Future Research Agenda in Strategic Entrepreneurship creating a new mindset, Blackwell Publishing, Oxford. Appendix 1 Date Ashtead Group PLC share prices Volume 06-07-12 262.4 4,403,901 09-07-12 258.3 1,437,408 10-07-12 266.3 1,174,345 11-07-12 255.3 1,318,738 12-07-12 250.8 1,932,608 13-07-12 262.8 876,128 16-07-12 261.9 1,369,786 17-07-12 256.6 1,078,060 18-07-12 264.1 1,389,897 19-07-12 254.1 2,985,573 20-07-12 246 1,900,510 23-07-12 241.3 1,128,749 24-07-12 244.2 840,675 25-07-12 240.5 794,812 26-07-12 248.4 605,534 27-07-12 257.8 1,507,749 30-07-12 260.7 811,266 31-07-12 252.7 988,133 01-08-12 258 983,958 02-08-12 250.3 1,019,967 03-08-12 264.7 1,021,394 06-08-12 265.9 584,213 07-08-12 267.8 484,623 08-08-12 267.6 497,329 09-08-12 271.1 803,741 10-08-12 270.8 775,938 13-08-12 267.3 439,862 14-08-12 267.5 600,608 15-08-12 267 592,737 16-08-12 267.3 763,853 17-08-12 269.6 508,320 20-08-12 267.1 1,031,738 21-08-12 272.3 1,016,764 22-08-12 270.2 767,996 23-08-12 274.3 755,803 24-08-12 278.8 902,811 28-08-12 273.2 1,106,862 29-08-12 278.9 1,017,253 30-08-12 276.3 895,052 31-08-12 283.4 1,502,119 03-09-12 282.5 1,472,800 04-09-12 315.9 4,854,817 05-09-12 320.3 1,991,911 06-09-12 330 1,413,709 07-09-12 331.8 1,561,599 10-09-12 332.7 932,645 11-09-12 330 1,613,440 12-09-12 331 1,027,269 13-09-12 330.6 859,735 14-09-12 334.8 2,093,810 17-09-12 333.3 715,366 18-09-12 325.3 1,127,222 19-09-12 328.3 1,590,227 20-09-12 338.8 1,707,237 21-09-12 340.4 2,030,826 24-09-12 337.4 1,032,880 25-09-12 336 834,339 26-09-12 324.6 1,658,031 27-09-12 322.9 1,309,926 28-09-12 323.8 925,580 01-10-12 334.5 1,098,393 02-10-12 336.1 1,030,495 03-10-12 337.7 462,799 04-10-12 343.7 742,436 05-10-12 345.6 1,205,057 08-10-12 348 494,677 09-10-12 348.1 1,092,083 10-10-12 344.9 1,170,651 11-10-12 349 771,126 12-10-12 342.6 1,580,995 15-10-12 344 1,029,329 16-10-12 345.5 1,088,322 17-10-12 356.4 3,158,260 18-10-12 358.4 994,201 19-10-12 356 637,114 22-10-12 353.5 501,716 23-10-12 351 1,091,777 24-10-12 350.2 966,513 25-10-12 362.5 1,331,843 26-10-12 356.4 1,092,797 29-10-12 358.4 739,747 30-10-12 364.6 605,881 31-10-12 373 2,751,450 01-11-12 378 1,135,827 02-11-12 379.2 760,115 05-11-12 384.3 926,729 06-11-12 388.3 1,296,771 07-11-12 383.3 1,215,757 08-11-12 387.5 1,126,210 09-11-12 382.1 1,230,816 12-11-12 381.2 775,757 13-11-12 380.5 1,008,887 14-11-12 376.8 978,722 15-11-12 373.2 670,821 16-11-12 378.3 1,347,688 19-11-12 384.4 530,838 20-11-12 391.3 921,931 21-11-12 392.7 553,024 22-11-12 389.6 605,005 23-11-12 390 584,838 26-11-12 383.9 1,174,126 27-11-12 380.6 1,257,605 28-11-12 378.3 907,158 29-11-12 378.5 1,009,330 30-11-12 383.2 772,199 03-12-12 385 907,569 04-12-12 384.6 900,935 05-12-12 380.9 823,904 06-12-12 381.5 1,033,195 07-12-12 383.4 1,125,321 10-12-12 390.5 1,319,819 11-12-12 389.7 4,177,799 12-12-12 391 2,355,988 13-12-12 398.5 2,792,820 14-12-12 408.6 1,231,991 17-12-12 412 1,045,460 18-12-12 425.4 1,986,180 19-12-12 436.6 2,725,868 20-12-12 434.8 1,334,356 21-12-12 427 1,707,922 24-12-12 434 185,415 27-12-12 431.3 675,256 28-12-12 424.9 399,439 31-12-12 426.3 535,948 02-01-13 445.2 1,176,864 03-01-13 436.8 939,771 04-01-13 435.7 1,7 49,810 This essay on Ashtead was written and submitted by user Callum Dejesus to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.

construction project observations essays

construction project observations essays After several months of planning and design, excavation for the new ACES library on the University of Illinois campus began in May 1999. The project is sponsored and will be owned by the Board of Trustees for the University of Illinois. Six separate contractors are working together under one general contractor. The project, which began in May of 1999, is scheduled to be completed by February 2001. Through informal interviews with Charles O. Pickar we learned that the project is 4-5 weeks behind schedule. Pending weather conditions 25 to 35 workers usually present on site. The typical workday can run between 6:30am and depending on deadlines can last until 9-10pm. As of the third week in January 2000, the concrete foundation and the steel framework for the five-story structure, with the exception of the roof, were intact. The appendix of this report contains photographs of observed procedures and site materials. On the morning of January 27, two massive 18-wheel trucks carrying various shapes and sizes of steel beams were unloaded on site. It took almost two hours to unload each truck. A crane approximately 200 ft. high was used to move the steel from the truck onto wooden planks on the ground. The steel was separated by shape, and by using the quite large reaching span of the crane, the workers were able to deliver the beams directly from the truck to their appropriate sides of the site. This operation involved a six-man crew. Two men connected the hooks from the crane onto the steel. Two men guided the steel onto the planks on the ground. Two men took turns operating the crane. This process was very time consuming due to the amount of steel needed to be lifted entirely over the five story structure to the other side of the site, and due to what seemed to be a lack of experience of the rigging crew. It took them a very long time to make the connections on each beam, and check for security. These factors may have influen...

Argumentative on the Existence of God Essay Example | Topics and Well Written Essays - 1250 words

Argumentative on the Existence of God - Essay Example Religions across the world embrace the tradition of worshipping a supreme power, which people know as God. The concept of a supreme power is popularly known as God, and this power is perceived to be omnipotent, omnipresent and omniscient. Different religions worship different deities, attributing different qualities and traits to each. However, the educated elite in Europe subsequently came up with the idea of rationalism, which upheld a view that no such power existed and challenged the concept of God. However, the people who argue against the existence of God has never been able to provide any substantial evidence to disprove it. Thus, it transpires that those who merely refute the existence of God simply wants to stake a claim without actually dwelling on the philosophy of effect of the belief in God on humans. The existence of God has been the first doctrine of the Theo-philanthropists. They considered Bible as the universal philosophy of God and they claimed that the messages in Bible are those of God. Thus, the belief in the existence of God dates back to earlier ages in the history of mankind. People worshipped God in different religious institutions such as churches, mosques, temples and so on. When a study on the emergence of the universe and the whole system of creation arises one must surely be aware of the fact there are a million concepts for which no proof exists about their founder. In philosophy, especially in the natural philosophy, it God is considered as a divine entity. Through the development of science, the belief of God’s existence is challenged but no one can disregard the existence of a supreme power. Discussion: From the early stages of evolution, humans have harbored the faith in a superpower. Primitive humans worshipped natural forces such as water, fire, an d wind. Subsequently, as human civilization evolved, they began to worship God in the name of various religious faiths It becomes relevant here that all religions and the resultant faith in God, intends the good of humans. The belief in God, without doubt, instills confidence in humans and encourages them to follow certain ethical and moral values. Thus, humans gain a certain level of spirituality by believing in God. Basically, the concept of God relies on the premise that God is a benevolent being that guides humans to the path of kindness, love, and compassion. Thus, if faith can bring positive outcomes in humans, such results in them constitute the God. Therefore, it can be construed that the presence of God is evidenced by the good traits in humans. However, with the emergence of science, the existence of God has been challenged and the issue became a controversy. Many characteristics have been attributed to God and it transpires that God is a positive and benevolent power. All the religions in the world have developed through the concept of God. However, some people take the concept of God as a mere thing, but it is a universal truth that there exists a supreme power. The existence of the universe and various mysteries in it rather tend to validate the theory that God exists. There have been philosophers in the ancient periods who were great thinkers also. They believed that there is a supreme power. Philosophers such as John Locke, Nyaya, Plato, Zhuangzi, Descartes, Nagarjuna, Ganges, Thomas Reid, Edmund Burke, and Sextets Empiricus have postulated various theories about God. Of these philosophers, most support the theory of the existence of God. Plato developed the theory of Republic, emphasizes the existence of God. He also argues that God is intangible. â€Å"In Republic, Plato’s point is not to establish an idea of God, but instead to determine what is right, good, just, and true; however, in his journey, Plato has implicitly brought forward a vague, abstract notion of God† (Plato’s Philosophy in Republic Implies a Concept of God p.1).

Legal brief (Kentucky v. King, 563 U.S. ___ (2011) ) Assignment

Legal brief (Kentucky v. King, 563 U.S. ___ (2011) ) - Assignment Example denied the accused’s indication to suppress the evidence; reason being that exigent circumstances (the need to prevent the elimination of evidence) vindicated the warrantless entrance. The respondent reserved his right to appeal the decision by a lower court. The Court of Appeal of Kentucky affirmed the decision of the Circuit court, but the Supreme Court reversed the decision. Procedural History of the case: the King moved to court and filed an appeal to reverse the decision of the Circuit court which was affirmed by the Kentucky court of Appeals, which had come to a finding that the officers had a reasonable basis to investigate the marijuana odor and that they properly carried out the investigation by firstly knocking on the door of the apartment and anticipating a response .The court also held that the exigent circumstances vindicated the warrantless entry since there was no response from the apartment when the officers knocked and one officer heard movement in the apartment which he thought were people trying to destroy evidence. The respondent was sentenced for 11 years imprisonment. The respondent reserved his right to appeal the decision by a lower court. The Court of Appeal of Kentucky affirmed the decision of the Circuit court, but the Supreme Court reversed the decision. Holding and reasoning of the case: The court held the opinion that the police should have foreseen that their action would have impelled the occupants to purge the evidence. The court determined that the exigent circumstances rule did not apply in this case. The exigent circumstances rule usually applies in circumstances when police fail to create the exigency by engaging themselves in the conduct violating the Fourth Amendment. This amendment (fourth amendment) brings about requirements: all searches and seizure ought to be sensible and the scope of the search should be well set out and a warrant may not be issued unless a justifiable cause is established. The presumption

Impact of the war on terror on Rules of Evidence Essay

Impact of the war on terror on Rules of Evidence - Essay Example However the alteration of the U.S. security system after 9/11 and various fresh national security agendas have produced extensive anxiety over the safeguard of international human rights, democratic standards, and several rights preserved in the U.S. Constitution that outline the civil liberties of the American citizens. Since the United States has not experienced any more attack on U.S. soil, which shows the efficiency of different U.S. counterterrorism efforts. But the 9/11 terrorist attack led the U.S. administration to review several existing laws and strategies and to make fresh ones, mistakes and exceeding the limit associated with these labors added grave erosion of faith in U.S. guiding principles and direction. In foreign countries, exposures of extrajudicial apprehensions and detainee mistreatment have damaged U.S. status and sincerity. Further it hindered counterterrorism collaboration with allies, and endowed with provocative misinformation that helps terrorist radicalization. Internally, policy deviations over security and civil liberties have been recurrent, extensively revealed, and sensitively charged, creating a situation of animosity and doubt that has confronted the people’s faith in the administration, caused division among supporters, and destabilized collaboration among the political branches of government. (Prieto, 2009). Criminal laws of US normally focus on dealing with criminal actions that have already happened, and are less effective in attaining the counterterrorism aim of preventing future attack. Criminal laws face a lot of disputes in tackling the terrorist threat. Even after a person is detained, a number of challenges face a successful criminal trial. Before 9/11, criminal trials relied on involving the defendant to a specific violent act or a plot to perform such an attack. The admissibility of evidence causes an additional challenge. Information that may be suitable in an intelligence framework may fail to suit the

Anonymity in Theories of Crowd Behaviour

Anonymity in Theories of Crowd Behaviour Darrin Paul Explain the place of anonymity in theories of crowd behaviour. Is it always associated with a ‘loss of self’ (Dixon and Manhendran, 2012) Social psychology provides much information with regards to collective behaviour and the interaction of individuals within a crowd. It has been observed that an individual’s behaviour can be influenced and therefore altered when they become part of a large group or crowd. Dixon and Manhendran (2012, p.3) ‘state that anonymity shapes crowd behaviour’; to evaluate the effect of anonymity on collective behaviour, psychological and social processes need to be examined. Dose anonymity render individuals powerless to control their actions, resulting in primitive regressive behaviour as proposed by Le Bon (1895). Or is a loss of self, were crowd participants cease to identify themselves as individuals a factor of anonymity. Other theories such as social identity theory address the issue of identity and how people perceive themselves and others in a crowd, what they conform to and how they express their identity. Does anonymity within crowds inevitably lead to aggressive or antisocial behaviour or does it influence identity salience and group norms as well as strategic factors and power relations (Dixon and Mahendran, 2012)? Early research regarding collective behaviour of groups was proposed by Le Bon, he developed his theory of crowds in the latter years of the nineteenth century. Le Bon was of the opinion, that when people joined large relatively unstructured social groups, they engaged in spontaneous and atypical regressive behaviour. Le Bon proposed that crowds are ruled by a collective mind or ‘group mind’ were individual rationality is lost to a hypnotic state in which group members experience unconscious primitive instincts devoid of reason and culture. Due to an unconscious process known as contagion individuals become influenced by ideas, feelings and emotions generated within the crowd, which spreads rapidly throughout creating a collective mass, leading to a ‘loss of self’. The physical presence of others creates a sense of anonymity were the individual can feel masked, diminishing their sense of responsibility from social and moral norms, thus generating a sense of unaccountable power form their presence within the crowd. Freedman and Perlick (1979) studied the effects of laughter on crowds; they showed that mood and behaviour are likely to spread through the group via contagion (Dixon and Manhendran, 2012). Deindividuation theory proposed by Festinger, Pepitone and Newcomb (1952) is a translation of Le Bon’s theory. They defined clear antecedent variables such as anonymity and group immersion that lead to subjective changes in the individual. Deindividuation is defined as a loss of personal identity or loss of self were crowd members merge and become anonymous, rather than separate distinct individuals. This leads to weak constraints against impulsive behaviour and hence an inability to monitor or regulate the immediate demands of the group. Deindividuation theory differs from Le Bon, in that it challenges the concept of a group mind, it dose not propose that group members lose their mind to the collective mind, instead it’s the loss of self that effects the social context leading to a loss of control. The effect of anonymity releases the individual from internal moral restraints, generating behaviour that is impulsive, irrational and regressive (Dixon and Mahendran, 2012, p.6). Festinger et al found that males in a group, who remembered the least amount of information that was individuating, were more likely to show hostile, aggressive behaviour towards their parents (Dixon and Manhendran, 2012). Zimbardo (1969) further developed deinviduation theory, especially in relation to the association between anonymity and aggression. He believed that crowds provide a cloak of anonymity which diffuses personal responsibility for the consequences of an individuals actions. A loss of individual identity produces a reduced concern for social evaluation. Zimbardo carried out a study to support his theory; he dressed up some of his subjects in overalls and hoods and left the others in their own clothes with large name tags so they could be identified. The results appeared to support his theory, when asked to administer electric shocks in a, learning experiment, participants who had been deindividuated in hoods and overalls, gave shocks for longer periods, suggesting that anonymity had intensified aggression.Recent studies would also support Zimbardo’s findings; Silke (2003) found that statistics of paramilitary attacks in Northern Ireland showed that the severity of attacks increase d with high levels of anonymity when the perpetrators were disguised (Dixon and Mahendran, 2012). However other studies have shown that anonymity does not necessarily lead to acts of aggression or anti-social behaviour. Gergen, Gergen and Barton (1973) observed strangers in mixed gender groups in well or dimly lit rooms. Their observations revealed that participants engaged in acts of physical and emotional intimacy which created feelings of sexual arousal. It would indicate that the social context of a group can produce cues that influence whether anonymity produces negative behaviour. In relation to Gergen et al’s results, Johnson and Downing (1979) replicated Zimbardos 1969 experiment giving half the subjects Ku-Klux-Klan outfits and half a nurses outfit, were each group was either anonymous or not. Results showed that participants in the anonymous nurse condition reduced the amount of shocks given compared to those in the other conditions. Zimbardo also replicated his experiment with Belgian soldiers and found that the anonymous group shocked less, the exact opposite to his previous results. These results would suggest that aggressive, anti-normative behaviour, is not always the outcome and that deindividuation may involve a desire to conform to situational group norms rather than a disregard for social regulation (Dixon and Mahendran, 2012). Diener (1980) observed there was a problem in expressing the relationship between deindividuation and anonymity. He proposed that anonymity does not directly lead to deindividuation and a loss of self, but a loss of self awareness. The ability to remain self focused increases the ability for self regulation and individuation, he believed that the above studies made participants become more self-aware and therefore less likely to engage in aggressive behaviour. As with most theories deindividuation has been open to criticism regarding it’s mostly lab based studies that don’t allow more naturalistic studies to increase ecological validity, taking into consideration the insider viewpoint of participant meaning and purpose. The over emphasis of aggressive anti-normative behaviour ignores the positive normative outcomes of crowds and that social norms from the immediate environment, can be the basis of controlled, meaningful behaviour (Dixon and Mahendran, 2012). Social identity theory adopts the concept of social identification, individuals identify with the social identity of the crowd and conform to normative group behaviour through conformity of shared group norms. The theory states that during crowd membership and other deindividuating settings, ‘the individual does not simply experience a loss of self, but makes the transition from an individual identity to a more collective sense of self’ (Dixon and Mahendran, p. 13). This shift in the sense of self is a key difference when compared to deindividuation theory. Unlike Le Bon’s concept of contagion, individuals through inductive categorisation respond to cues from group representatives that define the beliefs, attitudes and objectives of the group, resulting in behaviour that is regulated by social standards. Individual identification of intergroup relations, also effects to what extent an individual will conform to the emergent, spontaneous and normative cues of the g roup (Dixon and Mahendran, 2012). Reicher (1984) adopted an internal crowd perspective by examining testimonies of the St. Pauls riots which occurred in Bristol in1980 and found that black and white youths identified with one another due to police and social injustices, creating a collective social identity which created an intergroup struggle against authority. In Reicher and Stott’s (2011) study of the 2011 London anti police riots, observed that participants were not seen as anonymous, but part of a community that knew one another. They argue that ‘rioters did not experience a loss of identity or self but rather a shift to a collective shared identity which gave their actions purpose and meaning’ (as cited in Dixon and Mahendran, 2012, p.19). They also point out that violence was not indiscriminate but targeted at police and symbols of authority (Dixon and Mahendran, 2012). Stott (2012) points out in his audio interview that the ability of crowds to express their identity is very important, especially when that ability is suppressed by police. He points out that dialogue and engagement are vital aspects of communication that are essential in creating perceptions of legitimacy in policing. This brings into consideration the influence of power relations on crowd behaviour, Holloway (1012) states that ‘it is a two way dynamic rather than something exercised by the powerful on the powerless’ (p. 47). Social identity theory outlines that manipulation of anonymity affects the power that the in-group has in expressing aspects of group norms that are deemed anti-normative by the out group, in this case the police (Dixon and Mahendran, 2012). There has been a significant amount of research and studies carried out into collective crowd behaviour; resulting in evidence that membership of a crowd alters human behaviour and the psychological state of an individual. Although Le Bon’s work lacks empirical evidence it was hugely influential on crowd behaviour and the role of anonymity in understanding the psychological dynamics of crowds. But as Reicher points out he exaggerates the violent and irrational nature of crowds. Deindividuation theorists can show evidence for loss of self and the relationship between anonymity and increased intensity of aggression, however as Deiner (1980) and Prentice-Dunne and Rogers show, deindividuation does not necessarily lead to a loss of self and anti-normative behaviour. Social identity theory provides evidence of the role of social identity in collective crowd actions that express group norms, but does not see the role of anonymity as a negative aspect of crowd relations. It would app ear that further research is required to develop a more comprehensive theoretical model than can explain the relation between anonymity, and identity in group relations. Word count: 1625 References: Dixon, J., Mahendran, k. (2012). Crowds In Hollway, W., Lucey, H., Phoenix, A., and Lewis, G. (eds). Social Psychology Matters (p.1-22). Milton Keynes: The Open University. Stott, C. (2012). Assessment of the 2011 riots. Milton Keynes: The Open University.

Legalizing Marijuana: Pros and Cons Essay -- Drugs, Pros and Cons

The war on drugs is a movement of prohibition and military aid being undertaken by the United States government intended to both define and reduce the illegal drug trade. In the year 2010 the U.S. government spent $15 billion on the war on drugs, at a rate of $500 per second. State and local governments spent another $25 billion as well. In 2007, $42 billion was spent on the marijuana prohibition. That is more money than the war on drugs spent on all types of drugs three years before when $40 billion was spent all together. Why is our government focusing on a drug that can be called merely harmless to those who use it? Why is this drug getting more money spent on it than drugs that are highly addictive and life threatening? Marijuana is not as dangerous as people may want it to seem. Marijuana is a product of the Cannabis stavia, a hemp plant, and it is usually referred to as the plants leaves and flowers. Marijuana has become a popular drug with its recreational use that produces a feeling of well-being. The U.S. Department of Health and Human Services reported that 21.1 million people were current users of illegal or illicit drugs, and of these people 75 percent reported using marijuana. Illegal in most countries this drug has many monikers such as pot, weed, grass, mary jane, etc. This drug is generally dried, crushed, and smoked in pipes or hand-rolled cigarettes, but it can also be consumed in food and drink. This drug comes with feeling both physical and psychological effects (Gale). The article â€Å"Is Marijuana Good?† by states that marijuana affects the brain with it’s key ingredient THC. The author asserts that â€Å"THC, a key ingredient in marijuana, attaches to cannaboid receptors throughout the body. Several areas of ... ...n Horse: Anti-communism and the War on Drugs." Contemporary Crises 14.1 (1990): 39-55. Print. Hardy, Quentin. "Cost of Marijuana Prohibition: $42 Billion Per Year." Green Change. 01 Oct. 2007. Web. 21 Mar. 2011. Web. Klein, Joe. "Why Legalizing Marijuana Makes Sense - TIME." TIME.com. 02 Apr. 2009. Web. 28 Mar. 2011. Web. "Marijuana." Current Issues: Macmillian Social Science Library. Detroit: Gale, 2010. Gale Opposing Viewpoints In Context. Web. 21 Mar. 2011. "Physicians and general public agree on medicinal marijuana use." PharmacoEconomics & Outcomes News no. 480 (2005), 11-11. Print. Sophia Prashad, et al. "Smoking marijuana gives teen `normal' life." New York Amsterdam News89.3 (1998), 18-18. Print. Welch, William M., and Donna Leinwand. "Slowly, Limits on Pot Are Fading." USATODAY.com. 09 Mar. 2010. Web. 21 Mar. 2011. Web.