Theory Building Essay Essay Example

Theory Building Essay Essay Some of the theories used to explicate different facets of organisational direction include Maslow’s Hierarchical Theory of Needs and Freud’s Psychoanalytic Theory. Harmonizing to Maslow’s theory physiological demands supervene psychological demands. Maslow’s theory provinces that certain demands which are congenital internal motives influence the determinations made by persons ( Landy A ; Conte. 2006. p. 335 ) . His theory allowed for the environment to play a important function in motivated behaviour by proposing that one time a set of demands are satisfied by environmental forces. the following higher demands are activated in an person. As opposed to Maslow’s theory. Freud places accent on the function of an individual’s head [ specifically his unconscious head ] in the finding of an individual’s motive. Within Freud’s Psychoanalytic Theory. an individual’s unconscious desires find his motives. Both theories can be used to explicate the motives behind individual’s actions and determinations within the field of concern. We will write a custom essay sample on Theory Building Essay specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Theory Building Essay specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Theory Building Essay specifically for you FOR ONLY $16.38 $13.9/page Hire Writer How do propositions and hypotheses differ? Harmonizing to Zikmund ( 1988 ) a proposition is â€Å"a statement concerned with the relationship among constructs. It is an averment of a cosmopolitan connexion between events that have certain properties† ( p. 44 ) . As opposed to this. a hypothesis is â€Å"an unproved proposition or guess that tentatively explains certain facts or phenomena. It is a proposition that is through empirical observation testable† ( Zikmund. 1988. p. 45 ) . The chief difference between the two may be traced to the investigatory usage of a hypothesis as the hypothesis is used to look into and prove a claim. It is of import to observe that the hypothesis itself is a proposition ; the difference of a hypothesis from other propositions simply lies in its usage to verify or distort a claim. Given this context one might thereby province that although a hypothesis is a proposition non all propositions are hypotheses. How make constructs differ from variables? Harmonizing to Zikmund ( 1988 ) a construct refers to a â€Å"generalized thought about a category of objects. properties. happenings. or procedure that have been given a name† ( p. 41 ) . As opposed to this. a variable is â€Å"a construct whose value changes from instance to case† ( Macionis A ; Plummer. 2005. p. 51 ) . See for illustration the construct ‘price’ wherein ‘price’ refers to the value of an object. Within the context of the section shop. the ‘price’ of different objects differ from each other due to the differences of the factors used in finding the value of an object. In add-on to this although some constructs may match to a set of empirical steps. non all constructs do as opposed to variables that may match to two or more values. Remark on this statement: â€Å"There is nil every bit practical as a good theory. † A theory refers to a â€Å"coherent set of general propositions used to explicate the evident relationships among certain ascertained phenomena† ( Zikmund. 1988. p. 41 ) . Theories are of import as they provide a model for the analysis of a peculiar event. A theory may thereby supply an person with the necessary premises that may follow the ground for the happening of a peculiar event. In a sense. one might province that it provides an person with the causal account on how an event Q was caused by an event P. It is necessary nevertheless that the theory used for the account is a good theory. A good theory here refers to a theory whose â€Å"empirical content is less than or equal to the ‘logical content’† ( Boland. 1989. p. 56 ) . Such is the feature of a good theory since it ensures that the theory is through empirical observation verifiable and therefore testable. Given this context. there is nil every bit practical as a good theory since it ensures that one’s accounts for the happening of a peculiar event is continuously verifiable and hence testable and thereby easy proven to be valid easy. The 17th-century Dutch philosopher Benedict Spinoza said. â€Å"If the facts conflict with a theory. either the theory must be changed or the facts. † Harmonizing to Spinoza. when facts conflict with a theory there is a necessity to either alter the theory or alter the facts in order to guarantee the theory’s cogency. A theory is either formulated through the usage of inductive logical thinking or deductive logical thinking. Deductive concluding refers to â€Å"the logical procedure of deducing a decision about a specific case based on a known general premiss or something known to be true† ( Zikmund. 1988. p. 46 ) . Inductive logical thinking. on the other manus. refers to the â€Å"the logical procedure of set uping a general proposition on the footing of observation of peculiar facts† ( Zikmund. 1988. p. 47 ) . In the instance of a theory formulated utilizing a deductive statement. there is a demand to measure the cogency of propositions [ facts ] in order to guarantee the cogency and soundness of the statement. In the instance of inductive statements. the alteration or add-on of a proposition [ facts ] alterations the decision thereby taking to the alteration of the theory itself. Find another definition of theory. How is the definition you found similar to this book’s definition? How is it different? Kerlinger ( 1979 ) defines a theory as â€Å"a set of interconnected concepts ( variables ) . definitions. and propositions that presents a systematic position of phenomenon by stipulating dealingss among variables. with the intent of explicating natural phenomena† ( qtd in Creswell. 2002. p. 120 ) . As opposed to this Zikmund ( 1988 ) defines a theory as a â€Å"coherent set of general propositions used to explicate the evident relationships among certain ascertained phenomena† ( p. 41 ) . As can be seen above. both definitions note that a theory is composed of more abstract constituents in the signifier of propositions wherein each proposition is interrelated in such a manner that when combined together they formulate one coherent and systematic worldview. The difference of Kerlinger’s definition nevertheless may be traced to his add-on of what a theory is seeking to explicate that being ‘natural phenomena’ . Hence. Zikmund’s definition may be seen as showing a wide definition of a theory whereas Kerlinger narrows his definition by saying what a theory refers to. Mentions Boland. L. ( 1989 ) . The Methodology of Economic Model Building: Methodology After Samuelson. London: Routledge. Creswell. J. ( 2002 ) . Research Design: Qualitative. Quantitative. and Assorted Method Approaches. London: Sage. Landy. F. A ; J. Conte. ( 2006 ) . Work in the twenty-first Century: An Introduction to Industrial and Organizational Psychology. London: Routledge. Macionis. J. A ; K. Plummer. ( 2005 ) . Sociology: A Global Introduction. Neptunium: Pearson. Zikmund. W. ( 1988 ) . Business Research Methods. California: University of California Press.

UN Sanctions in Iraq essays

UN Sanctions in Iraq essays United Nations sanctions against Iraq, which were put in place after the Persian Gulf War, are hurting the people of Iraq rather than Saddam Hussein himself. Hussein is using the money he receives from illegal trade and programs to help the people of Iraq for his own personal use. The sanctions were originally created to force Hussein to stop building weapons of mass destruction in Iraq. Hussein, however, still maintains these weapons and uses black-market money to develop them. With lack of a better plan, the sanctions are still in effect. The economic sanctions against Iraq began over ten years ago when the Iraqi army began to occupy Kuwait in 1990 (1). These sanctions were created so that Saddam Hussein would pull his troops out of Kuwait. But the UN forces, led by the United States, were able to rid Kuwait of the Iraqis prior to the sanctions having been fully enacted. Since Hussein continued to possess weapons of mass destruction, the sanctions were not lifted until he permitted UN inspectors to verify that he had destroyed these weapons. Hussein has yet to let the UN inspectors into Iraq, therefore, the sanctions are still being imposed. The original embargo banned all trade with Iraq and froze all Iraqi assets that existed overseas. Food and medical supplies were exempt from this embargo, but Iraq was unable to afford these products because it did not have any income from exports. The impact of the sanctions was magnified greatly because of the terrible infrastructure in Iraq. The infrastructure was damaged by war with Iran and the Persian Gulf War (1). The sanctions being imposed on Iraq are hurting the people rather than Saddam Hussein. For example, Basra is Iraqs second largest city and the electric power, when available, flickers on and off. It can take up to ten minutes for a telephone call to be connected. There is a thick layer of smoke covering the city because of jury-rigged gene...

Inspiring Quotes by Eleanor Roosevelt

Inspiring Quotes by Eleanor Roosevelt Married to her distant cousin Franklin Delano Roosevelt in 1905, Eleanor Roosevelt worked in settlement houses before focusing on supporting her husbands political career after he contracted poliomyelitis in 1921. Through the Depression and New Deal and then World War II, Eleanor Roosevelt traveled when her husband was less able to. Her daily column My Day in the newspaper broke with precedent, as did her press conferences and lectures. After FDRs death, Eleanor Roosevelt continued her political career, serving in the United Nations and helping create the Universal Declaration of Human Rights. Selected Eleanor Roosevelt Quotations You gain strength, courage, and confidence by every experience in which you really stop to look fear in the face. You must do the thing which you think you cannot do.No one can make you feel inferior without your consent.Remember always that you not only have the right to be an individual, you have an obligation to be one.The word liberal comes from the word free. We must cherish and honor the word free or it will cease to apply to us.When you know to laugh and when to look upon things as too absurd to take seriously, the other person is ashamed to carry through even if he was serious about it.It is not fair to ask of others what you are not willing to do yourself.What is to give light must endure the burning.Do what you feel in your heart to be right - for youll be criticized anyway. Youll be damned if you do, and damned if you dont.For it isnt enough to talk about peace. One must believe in it. And it isnt enough to believe in it. One must work at it.When all is said and done, and statesmen discuss the future of the world, the fact remains that people fight these wars. When will our consciences grow so tender that we will act to prevent human misery rather than avenge it?Friendship with oneself is all important because without it one cannot be friends with anybody else in the world.We all create the person we become by our choices as we go through life. In a real sense, by the time we are adults, we are the sum total of the choices we have made.I think that somehow, we learn who we really are and then live with that decision.The future belongs to those who believe in the beauty of their dreams.I say to the young: Do not stop thinking of life as an adventure. You have no security unless you can live bravely, excitingly, imaginatively.As for accomplishments, I just did what I had to do as things came along.I could not, at any age, be content to take my place by the fireside and simply look on. Life was meant to be lived. Curiosity must be kept alive. One must never, for whatever reason, turn his back on life.Do the things that interest you and do the m with all your heart. Dont be concerned about whether people are watching you or criticizing you. The chances are that they arent paying attention to you. Your ambition should be to get as much life out of living as you possibly can, as much enjoyment, as much interest, as much experience, as much understanding. Not simply be what is generally called a success.Too often the great decisions are originated and given form in bodies made up wholly of men, or so completely dominated by them that whatever of special value women have to offer is shunted aside without expression.Campaign behavior for wives: Always be on time. Do as little talking as humanly possible. Lean back in the parade car so everybody can see the president.It was a wifes duty to be interested in whatever interested her husband, whether it was politics, books, or a particular dish for dinner.We women are callow fledglings as compared with the wise old birds who manipulate the political machinery, and we still hesitate to believe that a woman can fill certain positions in public life as competently and adequately as a man.For instance, it is certain that women do not want a woman for President. Nor would they have the slightest confidence in her ability to fulfill the functions of that office.Every woman who fails in a public position confirms this, but every woman who succeeds creates confidence. [1932] No man is defeated without until he has first been defeated within.Marriages are two-way streets and when they are not happy both must be willing to adjust. Both must love.Its good to be middle-aged, things dont matter so much, you dont take it so hard when things happen to you that you dont like.You like to respect and admire someone whom you love, but actually, you love even more the people who require understanding and who make mistakes and have to grow with their mistakes.You cant move so fast that you try to change the mores faster than people can accept it. That doesnt mean you do nothing, but it means that you do the things that need to be done according to priority.It is neither unusual nor new for me to have Negro friends, nor is it unusual for me to have found my friends among all races and religions of people. [1953]The separation of church and state is extremely important to any of us who hold to the original traditions of our nation. To change these traditions by changin g our traditional attitude toward public education would be harmful, I think, to our whole attitude of tolerance in the religious area. Religious freedom cannot just mean Protestant freedom; it must be freedom of all religious people.Anyone who knows history, particularly the history of Europe, will, I think, recognize that the domination of education or of government by any one particular religious faith is never a happy arrangement for the people.A little simplification would be the first step toward rational living, I think.The more we simplify our material needs the more we are free to think of other things.One must even beware of too much certainty that the answer to lifes problems can only be found in one way and that all must agree to search for light in the same way and cannot find it in any other way.A mature person is one who is does not think only in absolutes, who is able to be objective even when deeply stirred emotionally, who has learned that there is both good and bad in all people and all things, and who walks humbly and deals charitably with the circumstances of life, knowing that in this world no o ne is all-knowing and therefore all of us need both love and charity. (from It Seems to Me 1954) It is essential to have the leadership of a young and energetic President if we are going to have a program of any validity, so let us look forward to a change in November and hope that youth and wisdom will be combined. (1960, looking forward to the election of John F. Kennedy)Too few of us think of the responsibility facing the man who will be President of the U.S. and of all its people on his inauguration, January 20. The crowds that have surrounded him during the past year, the feel he has had of the people who did support him all this will now seem far away as he sits down to appraise the whole situation before him.  (1960, November 14, after the election of John F. Kennedy)You rarely achieve finality. If you did, life would be over, but as you strive new visions open before you, new possibilities for the satisfaction of living.I consider those are rich who are doing something they feel worthwhile and which they enjoy doing.She would rather light candles than curse the darkne ss, and her glow has warmed the world. (Adlai Stevenson, about Eleanor Roosevelt) About These Quotes Quote collection assembled by Jone Johnson Lewis. This is an informal collection assembled over many years. I regret that I am not able to provide the original source if it is not listed with the quote.

Types of Forecasting Research Paper Example | Topics and Well Written Essays - 1000 words

Types of Forecasting - Research Paper Example There is no one standard method of forecasting, the effectiveness of the method depends upon the nature of the business and its usefulness to it. (Render, Stair & Hanna. 2003) Forecasting is easier to perform in businesses which have historical data to follow. For a new business like the one John and Micheal are pursuing is a new business line for which no substantial historical data is available. Further the business with this new venture needs expansion in the scale of production along with the changes in the supply chain. Due to all these factors the forecasting needs to be done in a way which incorporates the changes in the business, its supply chain while reducing cost and increasing profits in the business. The quantitative methods would not be suitable to apply as no historical data on the same lines of business will be available because of the newness of the product in the markets and lack of competitors of the product. The approach Stone Horse Supply Company needs to follow will be forecasting in view of the supply chain which can meet customer’s requirement on time, save costs associated with inventories and earn profits in the future. Unlike the traditional supply chains in the past, the supply chains now focuses on the demand chains, that is greater focus is given on the customers and their needs. Demand forecasting can be done at Stone Horse Supply Company by determining the demand for the future and what level of sales could be achieved. There are many methods of forecasting through which sales and demand can be determined which all usually work on the historic data and underlying assumptions which can not be applied to the new venture Stone Horse Supply Company is going to undertake. (Lawrence, Geurts, & Guerard. 2002) a. Consumer Surveys/ Market Research: This approach is a systematic approach to gain an

Police and Government and Minority groups Essay Example | Topics and Well Written Essays - 750 words

Police and Government and Minority groups - Essay Example There have been cases when the problems have become magnified due to the wrong measures employed in treating the minorities, especially when it comes to law and order in the depressed or disadvantaged areas in the cities. These are highlighted by instances of abuses and discriminatory actions committed by the police against the members of minority groups in the poorer sections. It must be pointed out though that â€Å"these inequalities are based on both race and class, and the injustices suffered by racial and ethnic minorities at the hands of the police are a result of both discrimination and the disproportionate representation of minorities among the poor† (Webster, 2007, p.100). By considering this fact, the government’s handling of the police and their treatment of minority groups on the aspect of peace and order would be more appropriate. The conflicts that often arise between the law enforcement authorities and the minorities in the depressed areas are actually n ot solely based on the prevalence of crime there. It may be true that it is in such areas indeed where crimes are committed and where perceived criminals are often hiding out. However, if only the aspect of peace and order is taken into consideration, the larger issues of urban blight, poverty, racial inequalities would be taken for granted. Naturally, the more comprehensive role of the government would also be set aside in favor of relentless and systematic anti-crime campaigns by the police. From the perspective of the minority groups, this does not solve the problem but would only worsen it. The communities would develop the feeling that they have been singled out by the police for two reasons; they are minorities and they are poor. Therefore, instead of policing their own ranks and keeping their communities safe for themselves, they would unite in their conflict with the police. Weitzer and Tuch point out that â€Å"race plays a major role in shaping citizens’ attitudes and experiences with the police in the United States and other multiracial societies† (2006, p.5). According to them also, â€Å"blacks are more inclined than whites to believe that the police abuse citizens, treat minorities more harshly than whites, and are not held accountable for misconduct.† Then again, it must be reiterated that race in this regard is actually secondary to class. It is evident that the police are not prone to abuses even against blacks or any racial minority who are part of the city’s affluent sections. Since the related issues of race and poverty are behind the poor relations between the police and the minority communities in depressed areas, it is only appropriate that the government itself should formulate and implement a more holistic approach. It must put the problem of crime in these areas in the proper social and cultural context. Crimes are naturally the products of extreme poverty and joblessness. These are two concerns that are ob viously beyond the responsibilities of the law enforcement authorities. The local government should deal with this by carrying out projects that would deal with the twin problems of poverty and unemployment. At the first few stages of implementing such projects, the members of the communities may no be very enthusiastic about it, suspecting that there may be

Animal farm essay

Animal farm essay Animal Farm Essay Animal Farm by George Orwell is a compelling book that represents the Russian revolution. Although viewing through the eyes of animals may seem like a childish concept, George does well into making sure that the book carries out the message of revolution. I, t  believe that George showed that Animal Farm was influence of the Russian revolution by the naming of the naming of the three pigshe condition of the farm, and because of the storys plot. Many of the animals in Animal Farm show some sort of connection with the Russian revolution. Most animals either represent a group of people, or an in/famous person. As the story starts to evolve from the rebellion to the Battle for the Windmill, the reader notices how the animals start to change. When Mr. Jones gets expelled for the farm, 3 smart pigs take of the farm: Squealer, Snowball, and Napoleon. These three animals all represent dictators the had a part in the Russian revolution. The most significant part about the names given to the pigs is that they all symbolize the dictators perfectly. Napoleon was a tough, fierce looking boar but was not much of a talker. This would symbolize Vladimir Lenin., the man who took the place as dictator after Tsar Nikolas II stepped down. Squealers name was the identity of Joseph Stalin, the man who kept on stalling the people by giving quick, persuasive speeches on how Lenin was improving the country. Snowball is then given to Trotsky because like Snowball, Trotsky split up with Lenin. In Animal Farm, these three pigs basically reenact what took place during the Russian revolution: betrayal, propaganda, and communism. Perhaps the best device Orwell used here was how he portrayed the three dictators as pigs, which shows how the name and appearance of the characters in this book are significant and related to the revolution. A reason I believe Animal Farm is about the Russian Revolution, was the choice of naming for the pigs During the whole book, Animal Farm was in very poor condition. During the beginning, Manor farm was a horrid place to live: with little food and lots of work everyday, it portrayed what Russia looked like during the time of revolution. Only during the early stages of the revolution was the economy slightly better than once before. Each time that Orwell describes the farm, it is always in a different condition, one which usually matched the condition of Russia. When Napoleon was ruling, the farm was in great economic trouble: the animals were always hungry while the pigs and dogs had enough to eat. This shows that the economy did not actually improve the animals lives, but instead started to benefit the other, higher members of society which is exactly what the Russian revolution resulted in. The condition of the house was a symbol of Russias state which shows how Animal Farm is connected with the Russian revolution. The final way that Orwell connects both Animal Farm and the Russian revolution, was by the plot of the story. During the entire book, all of the events that took place had at least some little significance with the Russian revolution. When Napoleon oppressed the animals by killing them, it was portraying what was known as Bloody Sunday. At the beginning of the novel, when Old Major is giving the speech about rebellion, it was all inspired by the old man known as Karl Marx. Even the event in which Mollie leaves shows the connection between the two. The easiest event to determine the the two, was most likely the scene were Boxer is taking away. If you think back to the revolution and back to Boxers motto ( I will try harder), you can easily see the Boxer is representing Russias working class. Because Russias working class was so loyal to Napoleon, most of them ended up for worse then before, and even worse, is the fact that Napoleon tossed away these people as if they were tools. The e xact same can be said for the Russian revolution. Lenin abused his people and Orwell demonstrates it very clearly and profoundly. I believe that George showed that Animal Farm was influence of the Russian revolution by the naming of the naming of the three pigs, the condition of the farm, and because of the storys plot. By renaming and reassigning of few characters and events, George Orwell has described the revolution into a book that can is comprehensive to both little kids and young adults.

Corporate Finance Essay

Introduction In 2001, the Tulsa, Oklahoma, Williams Company was in financial distress. The primarily energy-industry company was struggling with a shrinking energy trading market, which was marked by distressed entities such as Enron’s broadband unit and Global Crossing. Williams also suffered internally with a floundering telecommunications division and a plummeting stock price. These issues led credit rating agencies Moody’s and Standard & Poor’s to downgrade the credit rating of Williams’ bonds to the level of non-investment-grade junk bonds. Amidst all of this uncertainty, the company on January 21, 2002, announced a new CEO, Steven J. Malcolm. Malcolm realized one of the most important functions for Williams moving forward would be raising capital. Malcolm’s four-pronged plan to achieve this goal involved selling assets, reaching a resolution for its energy and trading book, managing and monitoring cash and businesses and â€Å"right-sizing† Williams to reflect the new scope of operations. However, Williams had a substantial amount of short-term and long-term debt maturing in the second half of 2002. In addition, its credit and commercial paper facilities needed to be renewed about the same time. With approximately $450 million dollars of cash on hand and only one undrawn revolving credit facility, Williams sought external financing to help meet its current cash flow needs. One group of investors led by Warren Buffett’s Berkshire Hathaway along with Lehman Brothers offered Williams a solution with a one-year $900 million loan. Under the terms of the agreement, each lender would loan $450 million to Williams Production RMT, a Williams subsidiary, whose major assets included natural gas properties in the Rocky Mountains. In addition to the repayment of the principal in one year, Williams would pay 5.8 percent interest quarterly and an additional 14 percent of the principal at maturity plus a â€Å"deferred setup fee.† The deferred setup fee would be equivalent to the greater of 15 percent of the principal or 21 percent of the purchase price less RMT’s indebtedness. This would be influenced by any further asset liquidation by RMT. The loan, guaranteed by Williams Company as well as certain subsidiaries, also contained several covenants that Williams must meet to avoid breach of contract. The positive covenants included maintaining an interest coverage ratio of greater than 1.5 to 1 and maintaining a fixed charge coverage ratio of at least 1.15 to 1. Negative covenants limited restrictive payments (including redemption of capital stock) and capital expenditures in excess of $300 million. Thorough evaluation of the terms and lending scenario reveals this loan would create a beneficial scenario not just for the lenders, but for the borrower as well. For Williams, the loan provided temporary relief from multiple short-term debt security maturations and enhanced the company’s ability to secure a credit facility of $700 million. This would likely be followed by favorable market reactions in the form of increased stock price as a result of decreased uncertainty of future cash flows. Also, any Buffett investments in Williams would signal a strong endorsement of the company’s future prospects, likely leading to increases in Williams’ stock price. Likewise, for Berkshire Hathaway and Lehman Brothers, this deal should supply high returns on investment. Assuming the loan would be held to maturity, the lenders would divide returns of approximately 34% on this loan. Given that Williams guaranteed the loan, backing it with asset and capital stock, such returns on this risk would be a huge win for both lenders. Although the risk-free rate would be necessary to determine the exact net present value of the investment opportunity facing Berkshire Hathaway and Lehman Brothers, sufficient information is available to find the project’s internal rate of return. The IRR for this agreement ranges between 11.87% and 13.01%. The return on investment (ROI) for this particular agreement ranges between 52% and 58%. In either case, the numbers range because of provision (c) listed in the case’s Exhibit 1. The â€Å"deferred setup fee† fluctuates depending on potential sales of RMT’s assets. Terms of the proposed financing Guarantees Those involved in the lending process establish financing terms to protect the positions of all parties. The debt guarantee in Williams’ proposed financing, for example, provided insurance for the repayment of debt. Williams would essentially act as a co-signer for Williams Production RMT’s obligations to Berkshire Hathaway and Lehman Brothers. Per the terms, Williams would have to agree to make payments in place of Williams Production RMT if any of the payments were late or not paid. Using a guarantor would allow Williams Production RMT access to a loan at a lower interest rate than if Williams had not secured the loan. The logic behind this is that two individuals or entities promising to pay back the debt means there is lessened risk for overall default. That means Berkshire and Lehman may be willing to accept a lower interest rate in return for less risk of loss. It is quite possible that Williams Production RMT would not have been able to obtain a loan without a gu arantee. Covenants Equity and debt investors have a somewhat adversarial position, though both want a company to succeed. Equity investors want the company to take a certain amount of risk so they have the chance of seeing large returns. Debt investors want a company to be more conservative to protect the issuer and to ensure that the company will repay its debts. Like many other companies, Williams’ top priority, however, is to maximize stockholder wealth. This creates a dilemma in a debt offering. Berkshire Hathaway and Lehman Brothers therefore use debt covenants to limit the amount of risk Williams can take in the hopes that the company’s actions will not endanger loan repayment. Collectively, these covenants outline the rights of the lenders and restrictions upon Williams in regards to the loan. When a company does not live up to its debt covenant, it breaches the contract. In theory, such action would trigger automatic payment to creditors. In reality, however, many companies default because they are not in good financial health and thus cannot pay. Therefore, breach of covenant usually means that the two parties renegotiate the terms of the debt, often calling for higher interest rates or other incentives for the issuer to allow Williams more time to pay. Williams’ financial problem During the first half of 2002, Williams suffered a number of financial difficulties. The company’s total cash flow decreased by 680.22 percent as compared with 2001. During the year, Williams’ only net positive cash inflows came from financing, which netted the company $1.061 billion. In contrast to cash inflows, the company’s outflows totaled $1.589 billion from operations and investing. Overall, the decrease can largely be attributed to the decrease in cash flow from operations, which amounted to a decrease of $2.566 billion. Specific to operations, much to blame is the company’s decrease in working capital of $879 million. To adjust for this decrease in cash flows, the company liquidated a number of assets in 2002. The most valuable included the Kern River and Williams pipelines, which generated immediate cash proceeds of $1.124 billion. The question remained, however, as to how Williams would be able to find a way to pay debts of $2.347 billion within the next year and eventually long-term debts of $11.972 billion. In May 2002, the firm sold another $1.7 billion in assets and announced its intention to sell an $1.5 to $3 billion in assets. Previously, in December 2001, Williams planned to cut its 2002 capital spending by 25 percent or $1 billion to bolster its balance sheet. Williams also issued $1 billion in equity-linked securities called FELINE PACS and decided to cut its dividend by 95 percent. While seemingly drastic measures, the negative total cash flow of $619 million reveals that reducing dividend payments and selling off two major sources of operating income was not sufficient for Williams to dig itself out from under its debt obligations without independent financial assistance. Signs of distress It was clear that Williams was in deep. Though the signs of distress were many, the most noticeable was that the company’s cash flows were insufficient to meet its short-term debt. Unless the company continued to take drastic action, it could have found itself entering into bankruptcy proceedings within the next year. Another concerning sign included that in 2002, Williams’ 95 percent decrease in dividend payments and its more than 90 percent decrease in stock price should have indicated that the firm was struggling. Particularly striking was the fact that dividend disbursements had been increasing for the prior 10 years and that Williams Communications stock closed at a mere $0.01 per share on July 31, 2002. Williams also sent strongly negative signals with its 2002 sales of its Kern River and Williams pipelines. Although these netted the company immediate cash amounting to $1.124 billion, the sale was made at the sacrifice of substantial cash inflows, suggesting this was an act of desperation. Investors weren’t the only ones receiving signs of Williams’ distress. Credit agencies also observed uncertainty in Williams’ future, as indicated by the company’s fluctuating credit ratings. With Williams in July 2002 settling at a B+ Standard & Poor’s long-term credit rating, the company saw resulting increases in bond yields. Whereas Williams had bond yields of approximately 7 percent in December 2001, its yields fell just under 20 percent in July 2002, further complicating its situation. Recommendation Williams’ plight left it with few options for restoring its financial solvency, and most were of limited feasibility. Williams could have issued additional equity at the then current stock price of $2.95 per share, though this would dilute the company’s current share base. In addition, most companies only hold seasoned equity offerings when they believe their stock is overpriced. Considering that Williams’ stock price had fallen by more than 90%, Williams should not consider an equity offering. The company also could have issued more bonds. This option was not feasible, however, due to the company’s credit downgrade.With Standard & Poor’s rating the company a B+ in July 2002, Williams would have to issue many bonds and pay a substantial yield amounting to just under 20 percent per annum. Williams also could have sold assets. Since Williams had already sold close to $3.0 billion in assets, however, selling more could damage the company’s ability to generate operating cash flows. Though Berkshire and Lehman presented an opportunity, most lenders were hesitant to provide Williams capital due to the company’s financial turmoil. This large, 35 percent interest loan appears to have the most favorable terms possible for Williams in its last-ditch effort to save itself. The real winner here, however, would be Berkshire Hathaway and Lehman Brothers, both of whom would glean a lucrative return on their investment, given it is successful. Williams, on the other hand, should agree to the loan only because it has no other feasible options.