Perspectives

Pavlov (1927), founder of classical conditioning used dogs in his experiments. The key terms within his experiment were stimulus and response. The unconditioned stimulus of the child's fear would be the presence of animals and the unconditioned response would be the behavior of crying. The unconditioned response would become conditioned as It's associated with the stimulus (Doherty, Hughes, 2009). Skinner (1966) developed operant conditioning, focusing on reinforcement or punishment to elicit changes in behavior.He found reinforced behavior becomes strengthened and repeated whereas behavior not reinforced becomes extinct and weakened. For child X, his previous experience with animals may have been negative; therefore he may prefer the experience not to occur again (Miller, 2011). Watson (1924) believed Individual differences and experiences mould our behavior as emphasized below. â€Å"Give me a dozen healthy infants, well-formed, and my own special world to bring them up in and I'l l guarantee to take any one at random and train him to become any type of specialist I might select†¦ (quoted in Schaffer, 2004, peg. 336). Influenced by Pavlov, Watson believed behavior can be controlled through understanding relationships between stimulus and response. Child Ax's home or educational setting could change to adapt a pet policy within the environment, to become confident to eradicate his fear. Bandeau (1986) emphasized on behavior as imitation with four elements; attention, mental representation, mitotic response and motivation. Child X could have seen someone showing negative affection towards an animal (attention allowing him to remember his observations (mental representation).This may be the reason as to how he behaves In the same way (mitotic response) when he felt the urge to cry (motivation) (Levine, Munich, 2011 This theory highlights people learn from imitation as a direct reinforcement of their own behavior within their environment. â€Å"The psychodr ama approach focuses on the role of internal processesÃ'›. In shaping personality, and thereby behavior. † (Clansman, Had, 2009, peg. 224) our preconscious mind or they are totally inaccessible within our unconscious mind.Our unconscious thoughts can become conscious through dream interpretation, free association and transference. Many unconscious thoughts are experiences best forgotten (Gross, 2010). Child X could have experienced a negative incident with animals causing him to erase this event from his mind. Freud recognized three structures of personality resulting in clashes. Old is the basic personality wanting everything and will do anything to feed it's desires through operating a ‘pleasure principle'. For child X, the id would make him cry while looking at animals making it uncontrollable.Superego is the sensible structure conditioned by the environment and has a conscience of both right and wrong, so would tell child X not to seek attention by crying. Ego is a mediator between id and superego; therefore controls both structures (Hermann, 1994). However, as child X grows older, his superego ill control his id through moral principles resisting temptations of crying. Humanists are optimistic and recognize behavior through own free will (Gross, 2010). Mason (1968) and Rogers (1951) regarded personal growth and fulfillment in life as basic human nature.Both theorists emphasis on growth and fulfillment for a person to be able to self-actualities (Nee, 1996). Mason believes individuals have capability to progress towards the level of self- actualization highlighted through hierarchical stages (see appendix 1). However, if there is a failure to meet lower level needs, progression to the next stage is delayed. Although there are many needs to be met at the bottom there is a potential to achieve for all (Nee, 1996). Child X may have experienced a dangerous situation with an animal; therefore his safety needs would need to be met for him to progre ss onto the next stage.Rogers believed humans have one basic aim; to self-actualities by fulfilling their own potential. His theory highlights self-esteem as the ‘real self and the ‘ideal self. Being able to achieve what one is capable of allows self-actualization and positive regard from others to promote self-esteem (Doherty, Hughes, 2009). If child X was shown positive regard when in the presence of animals, he may remove his fear and begin to self-actualities. â€Å"Cognitive psychology is concerned with†¦ Perception, learning, memory, language, emotion, concept formation and thinking. (Essence, 1995, peg. L) Cosmogonists view people and their environment as important. Piglet's (1969) constructivist theory is based on age ability of stage learning. His theory describes children's perspective on their world (Levine, Munich, 2011). Pigged identified four stages of learning (see appendix 2) believing past experiences shape children's organization of the world. Ref lecting on Piglet's stages, child X would be in the very early stages of the pre-operational stage as he cannot see his fear of animals from another perspective.Using symbolic features within this stage may allow him to make links between reality and fantasy (Dates, Grayson, 2004) forming close links to the psychodrama approach regarding accessing the unconscious mind. Child X may not access his unconscious mind due to unpleasant past experience. Weights (1978) emphasized social interactions through scaffolding and understanding of the world (Curtis, Change, 2005). Like Pigged, he constructed a stage theory (see appendix 3). Child X may understand emotions and experiences if knowledge is stored within him.Making him understand there is nothing to fear about with animals, may be beyond his intellectual capability because of his global developmental delay. He may not have reached the stage of maturity within ZAP to remove his fears. However, through reconstruction and social interacti ons, he may become used to the presence of animals within his environment. The cultural context within stages may influence his fear as family contexts may imply a ‘no pets' policy, Hereford imitating the family attitude.Behaviorist's emphasis on connections between the environment and the behavior and ignore physiological and cognitive events occurring. Pavlov and Skinner experimented on animals whereas Bandeau and Watson experimented with children. The behaviorism perspective is concerned with nurture as the environment is the stimulus of it's theories. It does not take into perspective holism, therefore against the humanistic approach (Clansman, Had, 2009). Humanists found the psychodrama approach to be too pessimistic in comparison to their optimistic approach.This approach is individualistic and studies internal world of the person rather than external. Measles hierarchy suggests moving upwards in regards to achievement similar to the stage theories for other perspectives . Although his theory is not age related, it is similar to Hoosegows as individuals' progress accordingly. However, Pigged identified children cannot progress onto the next stage without having developed fully in the previous. All these theorists have one thing in common; failure to meet lower level needs results in a delay or fixation to develop (Gross, 2010).

Blue Jeans †American Cultural Artifact Essay

Blue jeans in the last thirty years have attained such world wide popularity that they have come to be considered an American icon. However jeans have not always been held in high stead, but rather have had a troubled history including its beginnings within the working class movement, being considered unsavory by religious leaders and also seen as a rebellious statement about ‘western decadence’. According to the University of Toronto, no other garment has served as an example of status ambivalence and ambiguity than blue jeans in the history of fashion. Throughout this essay I will discuss how jeans have become such a common treasured and even expensive item crossing over class, gender, age, regional, and national lines as reflected by the many changing political views and acceptance from various social classes over the past 50 years. History of Blue Jeans According to the University of Toronto, blue jeans were originally created for the California coal miners in the mid-nineteenth century by the Morris Levi Strauss, a Bavarian immigrant who relocated to New York in 1847. Mr Strauss’ fate and the history of clothing changed forever when in 1872 he received an offer from Jacob Davis, a tailor from Reno Nevada. Mr. Davis, in order to improve the durability of the pants that he made for his clients, had been adding metal rivets to the highly stressed seams. The idea was successful and he wished to patent it, but due to financial constraints required a partner and hence Levi became the financial backer and partner. In 1873, the new partners received a patent for â€Å"an improvement in Fastening Pocket-Openings†, and thus the history of blue jeans as we know them began. Blue jeans were originally called â€Å"waist overalls† by Levi Strauss and Co and in the 1920’s these were the most widely used worker’s pants in America. The name of these trousers changed to â€Å"jeans† in the 1960’s when Levi Strauss and Co. recognized that this was what the product was being called by the young, hip teenage boys. The history of â€Å"waist overalls† continues as the history of blue jeans. â€Å"Jeans† is now generally understood to refer to pants made out of a specific type of fabric called â€Å"denim† (Fashion Encyclopedia). Blue Jeans through the decades The popularity of blue jeans spread among working people, such as farmers and the ranchers of the American West. According to the Encyclopedia of Fashion, in the 1930’s jeans became so popular among cowboys that Wrangler formed just to make denim work clothing for those who rode the range. Jeans have tended to follow along in popularity with popular culture as evident with the popular Western films which found adventure and romance in the adventures of the cowboys who rode horses, shot bad guys, and wore blue jeans. Those who wished to imitate the casual, rugged look of the cowboys they saw in films began to wear jeans as casual wear (Fashion Encyclopedia). This effect is not hard to understand, as even today fashion trends are greatly influenced by what highly publicized celebrities choose to wear. During World War II blue jeans became part of the official uniform of the Navy and Coast Guard, and became even more popular when worn as off-duty leisure clothing by many other soldiers. In his book, â€Å"Jeans: A Cultural History of an American Icon†, James Sullivan states that the rise of the popularity of jeans after the WWII can greatly be attributed to the influence of the film and music industry, during the 1950s many young people began to wear jeans when they saw them on rebellious young American film stars such as Marlon Brando and James Dean. By 1950, Levi’s began selling nationally and other brands started emerging, such as Lee Coopers and each with its own particular fit (Sullivan 287). According to the University of Toronto, in the 1960’s and 1970’s jeans were embraced by the nonconformist hippie youth movement, and the history of blue jeans even gets linked to the downfall of communism. Behind the iron curtain, jeans became a symbol of â€Å"western decadence† and individuality and as such were highly sought. Jeans had become extremely popular, but were still mainly worn by working people or the young. In the 1980’s through to the 1990’s jeans were no longer seen as rebellious or a source of individuality, but they were transformed as the term ‘designer jeans’ was discovered. Many designers such as Jordache and Calvin Klein came on board to create expensive jeans and some jeans even reached haute couture status (Fashion Encyclopedia). In the new millennium denim is seen on designer catwalks and there are now hundreds of styles, types and labels available and of various price ranges. Changing Popularity According to Peter Beagle in his book â€Å"American Denim: A New Folk Art†, the popularity of jeans can be attributed to the fact that jeans can be seen to embrace the American democratic values of independence, freedom and equality. Some Americans even consider jeans to be the national uniform. Blue jeans have evolved from a garment associated exclusively with hard work to one associated with leisure. What began as work clothes has transformed into one of the â€Å"hottest† items available on the consumer market today. What was once apparel associated with low culture has undergone a reversal in status. Blue jeans were the first to accomplish a rather revolutionary cultural achievement bringing upper class status to a lower class garment. Conclusion At one point or another throughout history, blue jeans have been the uniform of many groups and are considered the one garment of clothing that has remained hip for over a century and has survived everything from World War II to the eighties. For half a century blue jeans have helped define every youth movement, and every effort of older generations to deny the passing of youth. Fifty years ago America invented the concept of teenager, and it is probably no coincidence that the enduring character of blue jeans, claiming independence and the right to self-expression, can be traced to the same time. Jeans were once seen as clothing for minority groups such as workers, hippies or rebellious youth, but are now embraced by the dominant American culture as a whole.

Body Image Problems Are Serious And Deadly

Body Image When I hear the word body image I began to shrink inside. I have never really been comfortable in my own skin. As a child I was my own worst critic; I hated the color of my skin, my weight, to my hair. As a child my relatives would always say I was dark. So, I hated my skin color. I always wanted to be lighter because it seemed that light-skinned girls my age that were light skinned were able to get whatever they wanted. From the time I was a little girl I told myself I would get†¦ conditioned to believe that our bodies are flawed. Projected by the media consumed, fashion modeled during Fashion Week, or critics online, the message is clear: we commit the crime of imperfection simply by existing. Society shames us for this, for not fitting into the unrealistic mold cast upon us. One of the primary sources of this is body shaming, which is simply defined as â€Å"shaming someone for their particular body type†. Living in the 21st Century, anyone can be subjected to body shaming. However, the†¦ Media’s Influence on Body Image Many people would say that they are unhappy with their body. This problem can be described as low self esteem, several individuals say it is caused by mass media. Over the years the media has continued to negatively influence people’s body images, usually in a bad way. The media’s influence on body image strongly impacts the way boys and girls see themselves, causing severe insecurity and sometimes serious mental diseases. A person’s body image can be described as†¦ Essay Date Here- The Media and Female Body Image The media is everywhere. Magazines. TV shows. Movies. People are exposed to it on the daily. But, very little attention is given to whom is exposed or what messages are being conveyed. Females, young and old, from the very beginning are exposed to the broadcasting and the sorts. Image upon image of a â€Å"perfect† female are constantly drilled into their heads. Everything from â€Å"flawless† skin to â€Å"proportioned† bodies are scattered across the way and viewed†¦ me because I’m naturally thin, I always have been, but not by choice. I know that if I did not have the genes my parents gave me I would not be the same size I am today. To be honest I consider myself to be a fat person. No, I do not have a body image problem. I know I am thin, but at this point I should be extremely fat. I am constantly eating junk food, I am the one who goes to a party and instantly starts to look for the food and will shamelessly shove brownies, cupcakes, and bacon in my face†¦ Body Image in Our World How many women and men are unsatisfied with their body image? How many people could say that they have never judged someone based solely on their looks or their body figure? Body image in the world today consists of the perfect figure for both men and women. The perfect body figure resembles an in shape, healthy, and tan body. Though being skinny and being in shape are two different concepts. Many women struggle with what other people think about their body image. Becoming†¦ Social Problem of Body Image Body image is a social problem because it affects our daily lives. Body image is a perception of how one sees how they should look like (Paquette and Raine). It affects our lives by causing people to have body dissatisfaction, dieting, eating disorders, and muscle-enhancing. Surveys show that many women, regardless of their age or weight, are dissatisfied with their bodies (Paquette, Raine 1). It is known from Psychology studies that women’s self and body images are lower†¦ part of popular culture that has a large influence on the general population is how women displayed are in mass media. Women in popular culture show indirectly that being thin is successful and beautiful. With this false message transmitted, serious problems occur. The influence of women in popular culture and how they present themselves can be a breeding place for physical and emotional unrest. When women are objectified in popular culture, they set a standard on how one should appear. Popular†¦ Body Image The perfect body is something that every person wants but very few posses. Many people will do just about anything to either fit in with their community or cover up their insecurities. Women are clearly more obsess with obtaining the perfect body more than men. From an adolescent’s viewpoint, a particular body image can be particularly dangerous because it can lead to a physiological obsession, eating disorders, and physical health consequences (Berger, 2014). Adolescents can become†¦ sends. The â€Å"perfect image† projected by the media promotes a negative body image in individuals and can lead to lower self ­esteem. Body image could be defined as the way people picture themselves and how they think other people picture them. However, negative body image is a thought that is influenced by the messages the media. It is an unrealistic view of how a person pictures their body. Those who have a negative body image have critical comments and thoughts about their body, obsessively compares†¦

Audi A6 Essay Example | Topics and Well Written Essays - 750 words

Audi A6 - Essay Example It’s available in the saloon and wagon configurations, providing an appealing combination of luxury, technology and responsive handling dynamics. Exterior Outside, the  A6  resembles a downsized version of  Audi's full-size  A8  sedan. The exteriors features more extensive use of aluminum components, with day time running lights, body color front and rear bumpers, halogen headlight with projector beam lenses and remote sun proof tinted glass. Its external dimensions include 73.8 inches width, overall length of 193.9 inches, 3,682 lbs weight, and overall height of 57.8 inches, 114.7 inches wheelbase, a front track 64.1 inches, rear track (63.7 inches) and curb to curb turning circle 39.0ft. Other notable features include a paneled under floor to direct airflow under the vehicle, and the use of striking matte-finish wood inlays. A wraparound dashboard and the most recent generation of  Audi's instinctive MMI system are built-in as standard. Performance The A6 is avai lable in five different flavors: the A6 Premium 2.0, the A6 Premium Plus 2.0, the A6 Premium 3.0, the A6 Premium Plus 3.0 and the A6 Prestige 3.0. â€Å"The engine transmits power to the front wheels via a constantly variable transmission† (audi.com) returning fuel economy records of 25 mpg and 33 mpg in the city and on the highway respectively. To ensure traction for all weather conditions, the A6 comes exclusively with Audi's valued Quattro all-wheel-drive system which makes use of an eight-speed automatic gearbox. It’s fitted with standard equipment that include eight-way power adjustable leather seats with memory functionality, Bluetooth  Smartphone integration, triple-zone automatic climate control, keyless start, a four-spoke multifunction steering wheel and a premium audio system with an iPod input jack. The 17-inch alloy wheels and Audi drive select enables drivers to set vehicle steering configurations, select transmission shift characteristics and customize engine response. Drivers have the choice of Auto, Comfort, Dynamic or Individual settings. The A6 Premium Plus also has a 40-GB hard drive voice-activated navigation system, Audi MMI touch handwriting recognition to interpret handwritten inputs, Audi connect which turns the car into a portable Wi-Fi hotspot and a parking assistance system with front and rear sensors. Optional Features The A6 Cold Weather Package comprises heated steering wheel as well as front and rear seats. The optional sport package incorporates a lower and firmer suspension, a three-spoke steering wheel with flappy paddle shifters and, depending on the trim level, special 18-, 19- or 20-inch wheels. The Driver Assistance Package integrates Audi pre sense plus, adaptive cruise control, and power folding, heated exterior side mirrors. Side Assist Package includes a blind spot monitoring system, power-folding mirrors and a pre safe system for altering the front and rear head commands to achieve maximum support inc ase an impending collision is identified. The Innovation Package also has a heads-up display, night vision assistance and LED headlights. Safety features All A6 models are equipped with dual front airbags, driver and front passenger knee air bags and optional Rear-passenger thorax side airbags. Other safety features include tire-monitoring system, traction and stability control systems and ABS with electronic brake-pressure distribution. Conclusion The Audi A6 model is near the top of the line for Audi products suitable

People Resourcing Essay Example | Topics and Well Written Essays - 2500 words

People Resourcing - Essay Example With the stated objective of ‘protecting the rights of workers’, unions negotiate with the management of the company and other regulating bodies to extract the best possible solution for the problems arising from time to time. But the union will be able to negotiate the solution only if it is recognized the management and the regulatory bodies for the purpose. The first step towards recognition is to be acceptable amongst the workers. To seek recognition, the union has to be acceptable amongst the employees as well. This implies that the union will have to enrol good number of employees as its members. In general, the minimum number of employees to be enrolled by any union for recognition, is defined in the rulebook. It also needs to be emphasised that enrolment or affiliation of a member with union has to be purely voluntary and without any coercion. The recognition itself is a multistage process comprising of the following steps (OPSI, 2004);  Step-1: After ensuring support of the requisite minimum number of workers, the union writes to the employer/ management requesting recognition. For the request to be valid there must be at least 21 employees under the banner of the union. The management can grant the recognition on the basis of the request or it may wish to verify the claim or further negotiate it with the employees and the union. At times, the help of Advisory, Conciliation and Arbitration Service (ACAS) is also sought in case of some disagreements.  Step-2: In case of persistence of some difference, the matter can be referred to the Central Arbitration Committee (CAC) by the union (s). The CAC is supposed to decide on the matter within a fixed time period by taking into account the merits of the case and the percentage of employees being represented by the union. Representation of at least 10 percent of the total workforce is once such criterion which helps in deciding in favour of the union. Step-4: Once the bargaining unit is formed the union is granted recognition either directly or by carrying out a referendum amongst the workers to ascertain the validity of the claims being made by the union.

The Life of Josef Stalin Essay Example | Topics and Well Written Essays - 750 words

The Life of Josef Stalin - Essay Example When the majority of people perceive or heed the name Joseph Stalin, they usually correlate it with a fierce and pitiless political head of the Soviet Union who coped to send more and more Russians towards their deaths than Hitler has done with the Jews. Apart from this verity, most personages identify very little with regards to Joseph Stalin as well as his decree over the Soviet Union. As unforeseen as it may be, Stalin performed even more than slaughter during his control. Within a matter of years he was competent to convert Russia from a fraught nation into a super-power humanity. Regardless of Stalin's villainous character as a crowd murderer as well as a terrified ruler, his economic along with his political achievements inside Russia have produced him to be one of the preeminent socialist / communist monarchs of the 20th century2. During the year of 1928, Stalin projected the Five Year Plans, which were to assemble profound business, transportation, as well as an enhanced in farming production. This early attempt to industrialize the country was generally victorious; however collectivization was tremendously detested and was opposed by the peasants. As an answer Stalin had hundreds and hundreds of them killed, or has permitted them to go hungry. Stalin declared that the Soviet Union was at the back of the rest of the world with regards to industry as well as agriculture, and required to draw level quickly. Stalin also formed all economic doings under government authority. Under this domination economy, he owned every business and decided on all economic judgments3. Although Stalin had absolute power over the Soviet Union, he still sensed that the citizens were not in favor of him. During the Great Purge, Stalin aimed for and killed any person who proposed any sort of danger to him. Ultimately, about 800,000 citizens were killed4. Upon thinking of a dictatorship, the label of Joseph Stalin has grown to be synonymous with this word. There has been not any other ruler who has applied such merciless and has had the capability to victor and sustains authority against all probability. Starting from his rise to supremacy in 1928 until his bereavement twenty five years later, during 1953, Stalin made use of an iron fist towards the management of the Soviet Union along with its people. For the period of his statute he altered the Soviet Union from a reasonably economic backward state that was still striving to pull through from the consequences of the Russian Revolution, into a military juggernaut which would face up to the United States for worldwide superiority5.Towards merely contemplating on Stalin's totalitarian alarm does disregard his momentous achievements, nevertheless the end does not justify the means. Stalin was a self-righteous man and was arrogant of Russia, he apprehended that Russia has been a backwar d realm and without driving USSR towards modernization it would be trampled. Stalin inside his speech declared "All have trampled her due to her military, industrial as well as her agricultural backwardness We are about fifty towards a hundred years behind the highly developed countries either we compose the difference within ten years otherwise they might crush us6."Stalin applied propaganda together with nationalism to brainwash the

Standardized Tests and Informal Reading Assessments Essay

Standardized Tests and Informal Reading Assessments - Essay Example A standardized test is one that employs a standard method assessment. Such tests include CAT (California Achievement Test), STAR (Standardized Testing And Reporting). These tests are employed to determine if a student is fulfilling certain requirements ordained for his grade, age and intellectual level, and if he does so, he is promoted to the next grade. Some institutions use these tests along with other tools of assessment, while others simply rely on the test scores for assessing a student’s academic performance. Standardized tests are relied upon heavily for assessment purposes; yet there are many benefits as well as upsides associated with them Standardized tests are considered accountability tools for teachers and students (Meador, 2012). The syllabi taught vary from school to school, and also from teacher to teacher. So it is standardized tests that reconcile this gap and ensure that at least a particular guideline is followed regarding teaching and learning (Panday, 20 11). By comparing a child’s score with score from other subjects the tests are influential in highlighting the weaknesses and strong sides of a child; at the same time allowing for comparison of a particular subjects score, over time; allowing to infer improvement or (Popham, 1999). Since, these tests are standardized; they allow the scores of students to be compared from school to school or even at a larger scale like states; also allowing for data from social subgroups to be compared (Meador, 2012). Standardized Tests are helpful in testing and Judging a students’ Cognitive abilities and skills (Brassard & Boehm, 2008). Another important feature of standardized tests is that they are completely objective in nature; since, they are marked by computers; they grade every student on same terms and without biases (Meador, 2012). Standardized tests are also criticized by many academic highlighting many upsides in the tests and the assessment they provide. Over and over sta ndardized tests have been criticized as an inaccurate and limited means of assessing a students’ achievement and learning (Fairtest, 2007). Learning cannot be just established through a single measure, it is not uni-dimensional, and requires measurement of dimensions like creativity and ability to learn step-by-step etc. (Panday, 2011). Although standardized tests are capable of assessing a child’s cognitive abilities, yet they need t be culturally and linguistically just in order to do so, but that is not the case with standardized tests in schools, they are too demanding and are not an accurate measure, hence, requiring the use of other assessing mechanisms along with the tests to ensure proper assessment (Brassard & Boehm, 2008). Scores from these tests are considered representing a student’s educational and intellectual capacities, and thus results in their being allocated to inferior educational practices, taking away the opportunity to learn what their fel lows will be learning (Weaver, 1995). Standardized tests have also been criticized for leading the curriculum to be exam oriented; only topics covered in the exams are taught and limit the broader coverage and implications of education (Fairtest, 2007). Standardized tests also depict a false impression of being ‘objective’, when the only objectivity they have about them is that they are scored by computers, while their preparing and all the other procedures are carried out by people who belong to some group or the other

Comparing short stories Essay Example | Topics and Well Written Essays - 2000 words

Comparing short stories - Essay Example Later on it was found out that her daughter from her first marriage was alive and was living in the cottage. The little girl was black and Effie concealed this fact from Grant as she was scared that he would reject her as she was mother of a child of mixed race. â€Å"The Murders in the Rue Morgue† revolves around twin murders of a mother and her daughter in Rue Morgue, which is a fictional street in Paris. Dupin, who lives in Paris takes it upon himself to solve the mystery. There were numerous witnesses who claimed they heard the suspect but could not recognise the language. At the murder venue, Dupin finds a hair which does not belong to any human. Eventually, it was revealed that an Ourang-Outang has escaped from a sailor with his shaving razor, and the animal is responsible for the murders. Though the theme of both the stories circles around unlocking of a mystery but they are very different from one another in terms of plot in both the stories. The theme in the â€Å"The Yellow Face† lies in the mystery surrounding a previously married but devoted wife’s sudden suspicious behaviors, whereas, we witness a much more complex theme in â€Å"The Murders in the Rue Morgue† where we are gripped with an aura of chilling mystery surrounding a couple of ruthless murders. The first story is a framed narrative from Dr. Watson’s point of view, like most other Holmes’ series. On the other hand, the second story is narrated in first person by an unnamed narrator. Although its inspirations can be traced back to the â€Å"Das Frà ¤ulein von Scuderi† by E.T.A. Hoffmann in 1819 and the 1748 publication of the â€Å"Zadig† by Voltaire, The Murders in the Rue Morgue (1841) by Edgar Allan Poe is considered to be the first ever detective mystery that showcases the art of deduction in solving a crime based on detection and analysis of clues that by an investigator.

Arabic Culture Essay Example | Topics and Well Written Essays - 500 words - 1

Arabic Culture - Essay Example Religious beliefs and traditions give ample freedom to the males in Muslim culture so that they can control or regulate the freedom of the Arabic women. â€Å"Koran says girls must stay home and that it is right to beat women if they disobey their husbands† (Chu). In other words, Koran undoubtedly gives the authority to men over women in Arabic culture. It is difficult for the Arabic females to engage in all types of activities as their men counterparts do. Driving is prohibited for Saudi women even though it is allowed in other Arabic states. â€Å"A Saudi woman sentenced to be lashed 10 times for defying the countrys ban on female drivers. The woman, named as Shaima Jastaina and believed to be in her 30s, was found guilty of driving without permission in Jeddah in July, 2011†(Jones). Even though the Saudi King interfered in the matter and removed the punishment of Shaima Jastaina, the above incident revealed the extent of oppression faced by women in Saudi Arabia and in other Arabic countries. No Arab women, especially the Saudi women, can go out without covering their entire body. It should be noted that in countries like America or Britain, women have the right to wear any clothes they like. In fact women in western countries cover their body less, compared to their male counterparts. Women in western countries take part in kind of social activities just like men whereas in Arabic culture, it is difficult for the women to enjoy such freedom. It should be noted that Arabic men can marry more than one girl and keep more than one wife at the same time. However, Arabic women do not have the right to keep more than one husbands at the same time. In other words, in Arabic culture, all the customs and norms were formulated to safeguard the interests of the male community whereas in other cultures, the interests of both the males and females are respected in equal measures. To conclude, the status of

Ethics Choice in the Workplace Essay Example for Free

Ethics Choice in the Workplace Essay Ethics and corporate social responsibility (CSR) becomes one of key point to evaluation business value. â€Å"In today’s highly interconnected, global, and transparent world, corporations are finding that social responsibility is essential to fundamental business strategy† (Trevino Nelson, 2010, page 332). The main purpose of this paper is to offer readers an overview and concept about the role of ethics and social responsibility in food industry. Besides that, some ethical problems of organizations, stakeholder perspective on the firm and some recommendations are listed. Ethics Choice in the Workplace Regarding to corporate ethics and CSR are exposed, both consumers and governments are focusing their attention on corporate social responsibility practices (Maloni Brown, 2006). Ferrell, Geoffrey Ferrell (2011, p.38) stated, â€Å"business ethics as the principles and standards that determine acceptable conduct in business organizations†. The behavior of acceptability is confirmed by many stakeholders of organizations such as customers, suppliers, employees, government regulators, owners as well as community. Ethics and social responsibilities are influent to business strategy and setting in recently. White (2012) claimed social responsibilities manage on decision making from top level to bottom line of firms. Ethics and Social Responsibilities are being evaluated as a key successful factor to measure organization outcomes. Ethics Issues in Business In order to identify certain situations that affected by various environmental and individual factors as ethical or unethical decision (Bommer, Gravander Tuttle,1987). The identification is impacted by bias, principles, concepts and definitions of social group or community. These standards are different from geographies, races, languages, time, etc. According to Ferell et all, 2011, ethics is related to organizations’ culture, financial status and business objective. Plenty of ethical issues in business can be classified into their relative behavior as abusive and intimidating behavior, conflicts of interest, fairness and honesty, communications, and business associations. Abusive and Intimidating Behavior Actions in working environment caused other people physical threats, being annoying, harshness, or even though bypassing some individual opinions. Abusive can be considered as a distraction or disruption of the workplace (Ferell et all, 2011). Intensity of voice, situation of speaking and used words are factors to be determined to abusive or un-abusive. Conflicts of interest This kind of conflicts occurs quite frequently in reality. For instance, managers could make decisions either to reinforce their power or enhance benefit to shareholders. A CEO will keep confidential a bad financial status to board of director sometimes. The conflict is often among employees because they use the same resources. Un-transparency of gifts may effect to outcome decisions to be an illegal or un-ethical behavior. Fairness and Honesty Fairness and honesty is the most important of business ethics and create general values of decision makers (Ferell et all, 2011). For instance, some newspapers claimed there are some exceed ingredients in power milk caused harmfulness to children health 2 years ago. In addition, Microsoft window software is still being cracked very popularly in China and Vietnam in particular even though people knew these products are protected by copyright law. Communications Communication is one of effective tools to bring product ideas and images to consumers. However, some organizations transferred to community incorrect information about their products. Under-weight or over-weight harmful of ingredients, food safety and hygiene are the most of improper announcement in advertising and labels. Furthermore, there is lack of information to compare differences or similarities between products (Ferell et all, 2011). For example, many people does not know how differentiated among Uniliver’s detergents: OMO, Viso, and Suff. Business Relations This ethical behavior is relevant to business relations to customers, suppliers, bosses vs. their staff and others in their workplace that create to ethical concerns. Managers take advantages on legitimate and authority roles to supervise their staff. Sometime they play Lording games to reinforce their power (Mintzberg, 1985). In reality, commission and gifts are used very popularly on Sales and Marketing. In Vietnam, gifts are considered as traditional requirement on national holidays. Corporate Social Responsibility (CSR) Corporate Social Responsibility â€Å"means that organizations should take responsibility for their impact on society and the environment† (Castka Balzarova, 2007, p.297). Every organization should build and adopt their owned CSR plans. There are four dimensions or four faces of social responsibility: economic, legal, ethical, and philanthropic (which sometimes call voluntary, altruistic or humanitarian) (Ferell et all, 2011) and (Geoffrey, 2001). Economic Responsibilities. Business organizations are groups to conduct goods or service to satisfy consumers as well as create jobs for community (Geoffrey, 2001). Firms should pay fair to workers, look for new resources, technical innovation and celebrate a friendly and fairly working environment. Therefore, economic responsibility â€Å"is to be profitable for principles by delivering a good quality product at a fair price is due to customers† (Geoffrey, 2001, p. 3). Novak (1996, p. 139-145) defined seven economic responsibilities. There are to (1) satisfy customers with goods and services of real value, (2) make a reasonable return on the funds entrusted to the business corporation by its investors, (3) create new wealth which reduce poorness as their wages rises, (4) create new jobs to enhance worker incomes, (5) defeat envy by generating people values and creations that can improve their conditions, (6) promote ingenuity and invention, (7) diversify the interest s of the republic. Legal responsibi lities. Legal behavior is obeying the law by playing rules and policies of the game. The business laws are passed by the society and community. The laws tell organizations what should or should not be done. However, the laws often provide a minimum level or a floor of moral that â€Å"might be followed involuntarily out of fear of punishment rather than voluntarily out of internal moral conviction† (Geoffrey, 2001, p. 4). Ethical responsibilities. Ethical duties overcome limitations of legal responsibilities. They include moral, doing what is right, just, fair and avoiding harm to society and community even if preventing harm caused by others (Smith Quelch, 1993). This behavior shows how wealth the organization affects non-economic aspects of society, such as benefit to employees, how closely working environment is, as well as natural environment. Altruistic responsibilities This kind of responsibilities display in the forms of voluntary service, association and giving, offer over of legal of society floor principles. Over the half of century, business increasingly has been judged not only by its economic and its ethical performance, but also by its social contributions (Geoffrey, 2001). Conclusion By understanding deeply Ethics and Corporate Social Responsibility, businesses can adopt not only get higher profit or outcomes but also be interested to society, community and natural environment. For the time being, we can expect to hear more about social responsibility and much of what of our companies do to give a hand to build our society around us.

Impact of Financial Leverage on Investment

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