Antitrust and Unfair Trade Practices The Dynamic Corporate Environment

Abstract Antitrust and unfair trade practices have caused a lot of debate for along time. Trade practices that are considered unfair include monopoly, formation of cartels and predatory pricing. Monopolies usually dictate over prices of goods that are in the market because in most markets, monopolistic organizations are the sole suppliers or producers.Advertising We will write a custom essay sample on Antitrust and Unfair Trade Practices: The Dynamic Corporate Environment specifically for you for only $16.05 $11/page Learn More Cartels usually agree on prices that they set for consumers so that consumers have no choice but to buy the products or services at the prices set by the cartels. This proposal will look at unfair trade practices and antitrust cases in relation to corporate organizations. Corporate companies should remain responsible and transparent to allow accountability of their actions and allow consumers to feel positive effects of fair trade practices such as availability of commodities and fair prices for goods and services. The paper will also look at methods which can be used to allow collection of accurate data concerning antitrust laws and unfair trade practices in relation to corporate organizations. Governments in different countries have the responsibility of formulating policies to ensure that trade carried out in the country is fair. Fair trade promotes availability of commodities and services to consumers get them at the right place and at the right time. Fair trade also promotes growth and development of businesses as organizations try to come up with new ways through which they can attract and retain as many clients as possible. Introduction Antitrust laws in the United States of America have the intent of making trading fair and ensure that all the people involved are treated as they should be. The antitrust laws were enacted by the legislative part of the government because they felt that trade is benefi cial to all the stakeholders that are involved. One of the beneficiaries would be the government and the economy because if trade was to thrive, then the government could rake in revenue in form of taxes while the society would benefit if the economy thrives as many jobs would be available and the prices of commodities available in the market would be affordable (Posner, 2001). Most governments have the intention of protecting the consumer by ensuring that there is fair competition among business traders. When there is fare competition like absence of predatory pricing, goods and services are available to consumers at the right prices, at the right time and at the right quantity.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More The fairness in trade practices in the market should be applicable to both the producer and the consumer. Monopolies and mergers that might lead to oppression of the consumer in terms of prices or unfair trade practices are not recommended. Any contract agreements that might be made between a seller and buyer are strongly advised against. According to Tirole (1989), corporate power is the ability held by organizations to enable them to influence the activities of the society and its people, the government and the overall economy based on the resources that these organizations have control over. When the capability of the corporate organizations to influence the society is high, the corporate power that they hold also increases. Antitrust laws are set mainly to protect small business organizations from big business organizations. Antitrust laws have been associated with the growth and development observed in many industries due to the promotion of fair competition. Many organizations have had to come up and invest in innovation so that they can stay on top of available competition which encourages growth and development in different business sect ors. This innovation has especially been observed in the technology industry. According to Areeda (2011), these days, there has also been an increase in the number of mergers that are taking place in the country; both vertical and horizontal mergers. According to Dabbah (2003) ,vertical mergers usually take place when different companies in different lines of business decide to come together and cut on costs they incur when there is prospects of making more money once they are together than when they are apart. The vertical mergers might involve companies that are in different stages of production even though they might be in the same line of business. Horizontal mergers usually take place between companies or organizations at the same level of production of services or goods. There are three major federal antitrust law in the United States of America. These antitrust laws include; The Sherman Anti trust Act, the Clayton act and the Robinson Patman Act. The Regulatory body created u nder the Robinson Patman Act seeks to enforce the laid down rules by the government. Corporate organizations are expected to be responsible in the way that they carry out their business organizations (Cheeseman, 2009). This is especially done so for corporate organizations that may have the responsibility of serving many people. Big corporate organizations would be expected to be transparent so that they can easily be accountable for their actions to the members of the society, to the larger corporate community and to the government.Advertising We will write a custom essay sample on Antitrust and Unfair Trade Practices: The Dynamic Corporate Environment specifically for you for only $16.05 $11/page Learn More There are many corporate organizations that are charged with the responsibility of serving a large number of people, and they are expected to do so responsibly without taking advantage of consumers since the consumers might have no other service pr oviders or suppliers of commodities that they might go to (Dabbah, 2003). Corporate organizations may have a responsibility when it comes to public services like telecommunications services, provision of electricity and water service. Such organizations have to be responsible because in most cases, they might be the only ones in a region that might have the facilities needed to provide services to the members of the society. Corporate organizations have the responsibility of not taking advantage of individuals that need their services in the community. In light of protection of the public from any corporate organizations that might take advantage of them, the United States government passed the Sarbanes- Oxley Act in the month of June in 2001 (Sullivan Sheffrin, 2003). The act was due to highly ranked corporate organizations that were getting bankrupt due to unethical practices that they were engaging in such as Enron inflation of their assets. The accountants at Enron highly infla ted their assets so that the organization could appear as if it was really doing well when in real sense it was in financial trouble.The Sarbanes Oxley was seen as one that might result in accountability and transparency by corporate organizations in terms of the information that they give to the public. As a result of the act, many managers especially those in big internationally known companies, have had to ensure that they are well aware of all the activities that go on in organizations to increase accountability for employees and for the decisions that are made in the organization. After the Enron accounting scandal in 2001, corporate firms were banned from having auditors that were also their clients as was the case with Enron with their auditors Arthur Andersen (Hylton, 2003). Problem Statement The areas that are defined by the antitrust act are not clear as they should translate to competitiveness that occurs between firms. Lack of clarity contributes to carrying out of busin ess activities that might be classified as illegal for corporate organizations. Research Questions Approaches on how lack of clarity of antitrust laws and emerging issues impact business organizations in the country Factors on how the existing antitrust laws impact the operations of corporate organizations especially those with high levels of innovation like the technological and insurance industries that both need innovation in order to achieve successful growth and development. Literature Review There have been many antitrust economics proposals that have been proposed to solve problems that have come up on the basis of the economy and the antitrust laws that have been made into law over the years.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Many sources of literature including business journals and economics textbooks some of which use complex models and mathematical formulas have been dedicated to the explanation of the antitrust laws and their effect on the behavior and actions of firms. Theoretical and applied economics have been made use of using different approaches such as the structural approach (Allan, 2010). Most of the economic models that have been proposed have tried to utilize different models to explain the competition that occurs in organizations and the connection to antitrust laws applied. Some models such as the heuristic model propose that an organization’s structure should be the main focus to determine how business is conducted. The determination of strategic actions that are taken by an organization should have minimal influence over classification of types of businesses involved in corporate competition for market positions (Dabbah, 2003). A combination of theories that are applicable to m icro, macro and meso levels have been used in availble literature to try and explain the innovation that usually occurs in organizations in relation to innovation that most people thought had been restricted by implementation of antitrust laws in the country. The dynamic methods of analyzing markets makes use of antitrust concepts that are utilized in corporate organizations. The antitrust laws are in use in corporate environments to install and maintain healthy competition, and in the protection of buyers from being expolited by suppliers,sellers and producers (Areeda, 2011). The antitrust laws also serve to protect smaller organizations from being exposed to predatory pricing that might push the smaller organizations from business. Using the dynamic theory to analyze markets and corporate organization, monopoly is not seen as a threat to competition between different businesses that are in the same line of production or in the same industry. Using the dynamic approach, monopoly is viewed as coming into play due to competition that exists in the market. For example, businesses that are in the same line of activities might decide to merge their operations in order to cut on costs and take advantage of economies of scale that would be available because of the increase in capital from the resulting company. Companies might be involved in vertical or in horizontal mergers. Un-equilibrium might result in the market but using the progressive dynamic theory, the state of un-equilibrium is viewed as an expected consequence of competition between organizations (Tirole, 1989). People are expected to have strong opinions about antitrust and unfair trade practices that usually exist in the markets. This is a sensitive issue for people because in most cases, it results in unfair trade practices and affects productivity of affected businesses, the economy and living standard of individuals. Awareness of the antitrust laws that exist and their effects on the public and econ omic activities that are affected has an impact on the public and how they perceive corporate organizations (Posner, 2009). Corporate organizations should therefore ensure that, the effects of the antitrust laws and corporate competition portray them in a positive manner for the benefit of their business and to gain a positive effect on their profit margins. Competition across all lines of businesses and industries has gone global. Corporate organizations need to develop strategies so that they can survive amid the competition that has moved from a national to an international level (Dabbah, 2003). For an organization to ensure that it remains gloablly competitive, it should come up with clear goals and objectives for the employees to perform effectively. Organizations are also supposed to adopt and implement workable policies that foster gains for growth and development in the organization and therefore, maintain or increase profit margin. Once policies have been put in place, an o rganization should ensure that the necessary resources needed for the achievement of the organization’s objectives are available. The management of an organization should perform an analysis and performance evaluation to determine the areas which the organization can work on in order to improve or maintain its relevance. The quality of performance in an organization should be taken seriously and be considered a continous and not temporary process. Most of the time, organizations that have all the necessary resources would perform highly in comparison to other organization, but they would need to recognize that they have the resources that can give them a competitive advantage over other organizations. Many organizations are introducing ways through which they can develop strategies to remain competivie in their respective lines of business. Some organizations use simple analysis techniques such as SWOT analysis and Porter’s model to diagnose their weak areas and improv e on them while expoiting their strenghts so as to be among the top leaders in the business (Posner, 2001). After conducting analyses of their organizations, majority of the businesses strategically implement proposed solutions. In doing so, organizations are able to plan for outcomes that may hinder progress and thefore, remove the obstacles early enough and enable these organizations emerge successfull. Analysis also enables an organization to have more control over problems that they may encounter while impementing policies to achieve the vision and mission of the organization. (Hylton, 2003). Many organizations have been able to capitalize on the needed importance on the strenghts and capabilites that they hold in comparison to other organizations have enabled them to stay afloat especially when there is a lot of competition from other companies that are in the industry as the company in question. A good example is the Motorolla Company that has been able to shift its focus from the manufacture of electronic goods such as televisions, to telephone handsets (Allan, 2011). Therefore, by being able to take advantage of the emotions that consumers have over business practices by various organizations, a company can be able to maximize on returns in terns of profits made.Clyde (1997), cites that, organizations should conduct research on ways and the time periods that they should implement their business strategies so that they can take advantage of competition in the market and the concept of antitrust laws applied. Researchers in organizations are able to find out the business situations and the best seasons that they can take advantage of and maximize on by gathering and utilizing the information that they get from clients. For example, personnel in an organization that interact with clients such as customer care executives can easily gauge how clients perceive the organizations and they have the capability of finding out why clients’ preception are ho w they are. Organizations can therefore use such information to benchmark themselves against other similar organizations and be able to take the necessary action in order to maintaain or improve on the types of services that are delivered to clients according to Cheeseman ( 2009). Some of the research that has been carried out on the effectiveness of organizations have been found to be negative. This might result to poor outcomes especially to personnel of organizations who might feel that they have done excellent work only to be informed that there are research findings carried out in the field that show that their work has not been done as properly as it should be done (Hylton, 2003). Such results can have a negative effect on the morale of the human resources resulting in reduced productivity in an organization leading to low profit margins. Organizations should therefore, be prepared for negative feedback from clients and prepare their staff for such feedback to avoid unnecessar y loses for the organization (Tirole, 1989). The Monopoly, Oligopoly and Market Power in antitrust policy On the basis of antitrust laws, monopoly in business is seen as a means of attempting to cash in on the possible greatest amount of profits available in a market especially when such an organization is the only producer or supplier of commodities or sole provider of services in high demand such as sewerage or electirity services or the sale of necessities such as sugar or milk (Sullivan Sheffrin, 2003). The government failed to make a case against Microsoft on the charges of monopolization which left many members of the society wondering about the purpose and effects of the antitrust and unfair trade practices that have been established by the government. The case led many people to feel that situations that have recently been thought of as being a monopoly are situations that promote business competition in the line of business or industries that they occur. Recent court cases and their outcomes have shown that practices such as predatory pricing are the kind of practices that are considered to be unfair trade practices. An example is a court case popularly known as Matsushita Electric Industrial Co. vs Zenith Radio Corporation which led to a conclusion that portrayed predatory pricing as an unfair trading practice, most of the time it is not used and even when used, it might not be successful. Courts have made it illegal for businesses that supply products to companies of being selective in the prices that they charge for the commodities that they sell. For example, a company that sells supplies and still uses the supplies to make finished products, cannot sell the supplies to a competing company at a higher price as this would be an unfair practice (DiLorenzo, 1985). Oligopoly involves a few and mostly powerful organizations involved in the provision of services or selling of products. Most of the oligopolistic organizations usually decide to share pro fits even if it is against the expense of the consumer. Such cartels are common in the petroleum provision industry whereby, the organizations responsible for selling the products might collude to sell their products at high prices yet they know that consumers would have nowhere else to go to get the needed commodity, and there are no subsitutes for such products (Sullivan Sheffrin, 2003). Antitrust laws reforms Most economists argue that the antitrust laws are of no use and they have no basis of being applied in the corporate market which they further illustrate y giving examples of the current market whereby, those in power seem to ignore the monoplostic events that proceed in nation. It is argued that, economists who are the people on the ground when it comes to effects of the different types of organizations on an economy, were not consulted when the antitrust laws were drafted (Dabbah, 2003). Trusts that led to the formation of the Sherman act were shown to have had an effect that was negative to what was originally intended in the first place. DiLorenzo (1985) showed the antitust laws that were established and were infact, contibuting to the expansion of monopolies and cartels. This is because monopolistic organizations were able to expand their production throughout the nation and this resulted in reduction of prices resulting in more products being availble. The antitrust laws had suggested that monoplies and cartels would not be able to grow for their effects to be felt nationwide which was what was being experienced. Examples of organizations that have thrived even though they have been at different times considered monoplies include Walmart and Microsoft. Many powerful companies also propose the formation of mergers that would potentially lead to the opression of consumers but the law seems to ignore the fact that these organization are formed (Allan, 2011). Research Design Population and sample The research would be carried out through surveying o f individuals that would take part in the research study. The twenty individuals that would take part in the study would be selected through random sampling method. This method would reduce the chances of a bias when selecting people to take part in the survey. The names of the invidividuals would be selected from a group of people whose names would have been inputed in the computer. The data for the survey would be collected through indepth oral interviews. The information collected from the interview surveys would then be transcibed into a form that can be analyzed qualitatively. Where applicable, qualitative analysis of the data would also be applied. The research survey will be conducted under the assumption that the participants of the study do not observe antitrust and unfair trade practices. The researchers will try and separate the information given based on whether it is an opinion, a fact or just a feeling (Clyde, 1997). The research survey also intends to design the quest ions in a manner that it can be able to measure the level of knowledge of individuals concerning antitrust laws. The research survey also intends to establish the difference between an individual behavior and attitude to the knowledge that they might hold of the antiturst laws. Knowledge of the participants unfair trade practices that might exist will also be attempted to be linked to participants’ performance at the workplace and the effect on their perception of different organizations that exist in their line of business, and those that might be considered under different types of classifications by different people such as which organizations might be thought of as a monoploly and cartels in th participants line of business and nationally in general (Cheeseman, 2009). Investigative techniques The research survey intends to gather information concerning antitrust laws and practices that are carried out on unfair trade practices. The research has an intention of finding out the strategies that are practiced in organizations in perpetuation of good customer practices and the promotion of fair trade practices in a line of business or in an industry. Practices of different organization and the effects of their practices on clients will also be considered (Clyde, 1997). Data collection The research will be conducted in a period of twenty months. Literature review composition will be conducted in the first six months of this time together with the collection of data with the intent of coming into terms with the problem that has been stated in the research proposal. The putting together of information in the literature review and collection of data will enable better understanding of the problem statement and therefore, offer better chances of understanding the problem and presenting it in a clearer manner. The availble funds and personnel will be invested in coming up with high quality research questionnaires. The questionnaires form an important part of b eing able to get the necessary and required information for the study. The next eight months will be allocated to the pilot study of the survey. Longer time is allocated for this part of the survey to account for unforseen events such as harsh weather which might result in delayed dissemanation of the questionnires for the pre testing period. Questionnaires to be used in the study will also be distributed to the participants during this time. Data that will be collected will be evaluated and analyzed to give information that clearly relates to the problem statement and the research questions (Sullivan Sheffrin, 2003). The last six months will be filled up with presentation of the collected information. The results of the research surveys will be compiled into a report. The report made on an academic basis will be used in the academic defense of the questions that may be asked on how the economy might be affected by antitrust laws and the effects of unfair trade practices. The repor t will be used as a case study with special focus on the details of anti trust and unfair trade practices and their efffects on corporate organizations (Sullivan Sheffrin, 2003). Data Analysis Plan Questionnaires were administered to participants by the researchers through hand delivery and via e-mail. The primary data would be obtained from these questionnaires. A deeper study into the antitrust and unfair trade practices would be expansive so that it is not expected that it would cover all the intended material. The research survey will involve the allocation of questionnnaires to the twenty participants chosen to participate in the study via random sampling technique. The study is therefore, deductive. Assumptions of the study The antitrust and unfair trade pracitces information obtained in the study is presumed to be representative of all areas of busineses and of all industries. Limitations of the Study A lot of time is expected to be consumed in the collection of information for the literature review. The information must be from peeer reviewed sources to ensure authenticty of the research study and its content. Some of the information might not be availble to the public for example, the antitrust case about the microsoft vs US governement case concerning antitrust is availble in bits and pieces from books. A critical analysis of the case would be necessary in order to include the information in the literature review (Areeda, 2011). Conclusion This paper has discussed antitrust and unfair trade practices that have been characterized by businesses in the United States for quite some time. An example is the Enron accounting scandal that exposed some of the inflation techniques that firms use in order to make their balance sheets appear as if they are in order. This is an unethical accounting practice. Several antitrust reform laws have also been explored. From the study carried out above, the results are expected to give more information about antitrust a nd unfair trade practices that are usually carried out in organizations and from the results, a conclusion on the research survey can be made. Corporate organizations are expected to have enacted and followed policies that show that they are ethical in the way that they carry out their business activities. This is supposed to encourage better business practices and promote positive attitude and behavior from both internal and external clients. The research survey has an intention of carrying out a study and giving accurate and timely information about antitrust and unfair trade practices that are carried out by corporate organizations and how they affect the particular organization, other corporate organizations and the whole corporate image and business environment. When there is fair trade in a country, there is healthy competition among organizations. Competition encourages organizations to stay focused on serving their customers which compells them to provide high quality goods and services at the right place and the right time. Therefore, proper guideliness should be established and enacted by the government to ensure that fair trade practices are observed by competing organizations in the industry. References Allan, F. (2010). A Model of Antitrust Regulatory Strategy. New York, NY: Irvine Publishers. Areeda, P.E. (2011). Fundamentals of Antitrust Law, 4th edition. Oxford: Aspen Publishers. Cheeseman, H. (2009). The Legal Environment of Business and Online Commerce. 6th edition. New Jersey: Prentice Hall. Clyde, W. (1997). Antitrust Policy as Corporate Welfare. New York, NY: Irvine Publishers. Dabbah, M. M. (2003). The Internationalization of Antitrust Policy. New York, NY: Cambridge University Press. DiLorenzo, T. J. (1985). â€Å"The Origins of Antitrust: An Interest-Group Perspective.† International Review of Law and Economics Journal, 5:73–90. Hylton, N. (2003). Antitrust Law: Economic Theory and Common Law. New York, NY: Cambridge Univ ersity Press. Posner, R. A. (2001). Antitrust Law, 2nd ed. Chicago: University of Chicago Press. Sullivan, A., Sheffrin, S. M. (2003). Economics: Principles in action. New Jersey: Pearson Prentice Hall. Tirole, J. (1989). The Theory of Industrial Organization. Massachusetts: The MIT Press. This essay on Antitrust and Unfair Trade Practices: The Dynamic Corporate Environment was written and submitted by user Valentin Sweeney to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.

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The burden is ‘legal’ in the sense that it is imposed by a legal rule and ‘persuasive’ in the sense that the party bearing the burden will lose on that issue if he fails to discharge the burden by persuading the tribunal of fact to the relevant standard. In Jayasena, Lord Devlin said that the prosecution discharges the evidential burden â€Å"â₠¬ . In Ching, reasonable doubt is described as a doubt to which you can give a reason as opposed to a mere fanciful sort of speculation. The evidential burden of proof is the burden of adducing evidence fit for consideration by the jury and there is the need to adduce sufficient evidence to satisfy a judge that the matter can be left to the jury to decide. There is an obligation upon both prosecution and defence to present sufficient evidence in support of their case. If the defence fails to discharge the evidential burden, the judge relieves the prosecution from the burden of disproving it. According to Lord Devlin, this requirement may be conveniently called ‘evidential burden’. The prosecution does not have to disprove every possible defence in advance, so if a party has an evidential burden, it does not mean that they actually have to prove anything. The prosecution discharges the evidential burden by establishing a prima facie case, that is enough evidence to entitle, but not compel, the tribunal to find in favour of claimant, had it been no further evidence. In this case, the claimant has thereby defeated a submission of ‘no case to answer’, while the defendant is not obliged to give evidence or call any witnesses. In established the principle of ‘golden thread’, according to which ‘throughout the web of the English Criminal Law one golden thread is always to be seen, that it is the duty of the prosecution to prove the prisoner’s guilt’. Where the accused pleads one of the exceptions, insanity, he bears the persuasive burden which is discharged on a balance of probabilities. However, if the defendant’s defence involves pleading issues, such as non-insane automatism, provocation or self-defence, the onus of disproving them rests on the prosecution. This formulation creates dif ficulties to juries as to the nature of reasonable doubt. As a result, a second formulation was put forward by Lord Goddard, the ‘satisfied so that you feel sure’. In Summers he stated ‘ if the jury told that it is their duty to regard the evidence and see that it satisfies them so that they can feel sure when they return a verdict, that is much better than using the expression ‘reasonable doubt’. When the defence bears the legal burden on an issue, they must prove it on balance of probabilities , as illustrated by Lord Denning in Miller. As the prosecution must disprove the defence ‘beyond reasonable doubt’, the defendant is required to demonstrate to a judge that a jury might have a reasonable doubt as to whether his defence will be disproved by the prosecution. The evidential burden will have been discharged if the defence was ‘a reasonable possibility’ worth leaving to the jury to consider, but not if ‘no reasonable jury, properly directed as to the law, could fail to find the defence disproved’. Therefore, the defendant must to call witnesses or give evidence to substantiate any defence and then it is for the prosecution to illustrate beyond reasonable doubt that the defendant did not act in self-defence and acted with the necessary mental element. Question 2 a confession is defined as inclusive of any statement that partly or wholly adverse to someone who made it, whether made to someone in authority or not, or made in words or otherwise. A confession may be oral, in writing, by conduct or in any other way of communicating information. As stated in, if the defendant accepts an accusation made by the victim of the crime, or by someone else who is on an equal footing, then to the extent that he has accepted it, the statement becomes his own. However, any breach of the procedure may be used as ground for excluding a confession. First, as soon a police officer has grounds to suspect that a person has committed an offence and wishes to question him, the necessary steps needs to be follow, including access to legal advice, as anything said is considered as evidence under. The admissibility and relevance of a confession are questions to be decided by the judge, whereas the weight to be given to the confession is a question for the jury. The defendant cannot be compelled to testify as this may be regarded as a breach of the legal procedure. If the witness is wrongly compelled to answer such a question, his answer may not be admitted as evidence against him at his later prosecution. Under the defence may represent to the court that the confession may to be obtained by suasion and should automatically excluded, even if it turns out to be true. As defined in the method of questioning may amount to oppression. For example, in the deliberate misuse of the truth about the defendant’s mother health by the police could amount to harsh or improper treatment and therefore oppression. Finally, the Court of Human Rights restated the importance of the right to silence and privilege against self-incrimination under Article 6 ECHR regarding access to justice and fair procedure. Pursuant, there is the legal advice privilege, according to which communications passing between lawyer and client, materials prepared for the purposes of litigation and advice given are privileged. To quote the words of Lord Taylor, ‘’, being sure that nothing will be revealed without his consent. It arises out of a relationship of confidence between lawyer and client. Thus, the privilege must prevail over purely procedural subordinate legislation. The only limitations imposed are in relation to the relevant legal context as held in Balabel and Three Rivers. Finally, it is submitted that no breach of confidentiality and no loss of privilege is involved when they are present during interviews or involved in preparing or transmitting communications with the client. Question 3 Opinion evidence is not admissible because it is for the tribunal of fact, and not for the witnesses, to form its opinion on the evidence. They must confine themselves to their personal perception of facts and not make any inferences from those directly observed facts. The opinion of expert-witnesses is helpful when the jury or the judge are unable to form an opinion based on bare facts and require additional expert assistance or when matters arise which concern other sciences or faculties. Although the ‘helpfulness principle’ of an expert witness has been criticized , expert opinion evidence to be admissible it must be able to provide the court with information which is probably outside of jury’s or a judge experience and knowledge, but it must also be evidence which gives the court the help it needs in forming its conclusions. There is no closed category where evidence cannot be placed before a jury, as ‘it would be wrong to deny to the law of evidence the advances to be gained from new techniques and new advances in science’ . An expert’s opinion in order to be reliable it have to be illustrated by admissible evidence. In Hodges was held that part of an expert’s experience and expertise might lie in his knowledge of unpublished material and in his evaluation of it. In R v Gilfoyle, the court suggested that if an opinion given by an expert may not be independently reconsidered by any criteria, this may to hinder its admittance. This is why provides that a jury shall not to make a determination [on unfitness to be tried]†¦except on the written or oral evidence of two at least medical registered practitioners. In our scenario, Dr. Khan’s opinion will not be admissible in evidence, because the method used is an innovative one, which cannot be independently reviewed yet and in any case it is essential that another registered medical practitioner confirms Dr Khan’s opinion. Question 4 (a)provides that ‘any person who without legal authority or presumable excuse and whereof the proof shoul lie on him, has into his possession any offensive weapon in any public area shall to be regarded guilty of violation †¦Ã¢â‚¬â„¢. In R v Williams , it was concluded that imposes a legal burden on the defendant and it was then for the prosecution to make the jury sure that the appellant was not aware and did no has any reason to be suspected that it was readily convertible. Pursuant toan imitation weapon is one that looks as a such weapon; and it can be easily be converted into a weapon which a shot may be discharged. S. 1(6) mentions ‘readily convertible’ as requiring someone without special skills to converting it and for the work involved no tools or outfit other than such as are in common use by individuals performing manufacture and maintenance works in their own homes. The burden of proof on the defendant relies on the plea of diminished responsibility, as per section William has the legal burden of proof and to establish, on the balance of probabilities, that he has not been aware that the imitation firearm could be converted to fire live ammunition and thus he had no intention to use it and thus he may be able to rely upon this defence at trial. (b)In Bowers , it was held that clearly allows an adverse inference to be drawn from silence at a police interview where an accused had not given evidence, as to hold otherwise would permit an accused to preclude the drawing of such inferences by choosing not to give evidence. permits conclusion to be assumed when a accussed remain silent at the time he questioned. , the defendants silent was inadmissible, but the jury had to conclude to an unfavorable conclusion because of defendants silence at charge according to section 34(1)(b). Subsequently, this section cannot be applied to William case. In criminal proceedings, the general rule is that everybody has to be regarded innocent until guilty is proven. The prosecution has to illustrate that the defendant committed an offence by establishing ‘beyond reasonable doubt’ all elements of the violation. permits the jury and the court to conclude to such presumptions as may be regarded proper from the defendant failure or refusal to give evidence and answer any question without good reason. Conclusion is not permitted when the court understands that the mental or physical condition of the defendant makes him undesirable to provide evidence. Based on the 5-step test established in Cowan , if jury’s conclusion show that the silence only can appreciably be ascribed to the defendants no answers or none that would stand up to cross-examination, they may conclude to an hypothetical presumption. Also in , it was held that a jury had not directed that reasons might be provided for not giving other evidence than the in ability to explain or answer the prosecution case. Therefore, ay be able to be applied in our case. (c)Where a suspect disputes identification, the prosecution will have to prove that the defendant is, beyond all reasonable doubt, the person who committed the offence. This is because it has not been clear so far whether the statement that the accused person was the person who committed the offence is admissible as evidence, or merely evidence confirming the evidence of the identifying witness at trial. According to the admissibility of a witness statement about identification is based on whether the evidence are given to the best of his belief and he states the truth. Building on that, the Court of Appeal in Turnbull provided guidance regarding disputed identification evidence and specified that a mistaken witness possible can be persuasive, but notice is required if the prosecution depends fully on the regularity of the identification of the defendant which the defense claims to be incorrect. Also the jury must take into account all the conditions in which identification was made, such as distance, light, impediments, witnesses’ previous accusations and the time between original observation and formal identification. In our scenario, given the circumstances at the night of the crime, William can argue based on Turnbull that there is a high probability that the witnesses’ statement may be not accurate as they cannot be absolutely sure about what they saw.

Cause and Effect of the Water Wheel :: essays research papers

A water wheel changes the energy of falling water into mechanical energy that can be used for machines. The water is directed into the wheel through a tube. The wheel is placed on an axle, which is connected by gearing with the machine it is to operate. There are two types of water wheels, vertical and horizontal. The vertical wheels has an overshot and a undershot. The overshot water wheel has buckets around its edge. Water is delivered to the top of the wheel. The weight of the water falling into the buckets makes the wheel turn. An overshot water wheel has a very good chance of working with a 80 percent efficiency rate. That means, it may turn as much as 80 percent of the energy of the water into mechanical energy. Though, its use is limited to making small amounts of power. The undershot water wheel is built so the water hits the blades at the bottom of the wheel. The power of the wheel depends on the speed of the water hits the blades. The undershot wheel has such a low efficien cy that it is rarely used. Most modern water wheels are horizontal. A horizontal wheel rotates on a vertical shaft. It is driven by the force of the water hitting the blades on one side of the wheel. Horizontal wheels are very efficient if made correctly.   Ã‚  Ã‚  Ã‚  Ã‚  For my experiment I made an vertical undershot waterwheel. For the base of the waterwheel I cut off 8 centimeters of the bottom of a milk jug. Then out of the top of the jug I cut four triangles, four squares and four circles out for the fins of the waterwheel. After that I thumb tacked the 4 triangles to a cork. Put a hole at the end of each side of the cork and glued a skewer in each side for an axis. Then I cut a hole at each side of the base and put the skewers with the cork suspended in the middle. Then I put a 2 inch x 2 inch piece of clay shaped as circles on each side of the skewer. That’s how I got my waterwheel.   Ã‚  Ã‚  Ã‚  Ã‚  In my experiment I didn’t use electricity instead I measured the rate at which a water wheel lifts a weight. Doing this determined the speed at which the water wheel spins. For a weight I used a penny that was taped to a string which was wrapped around the clay. Cause and Effect of the Water Wheel :: essays research papers A water wheel changes the energy of falling water into mechanical energy that can be used for machines. The water is directed into the wheel through a tube. The wheel is placed on an axle, which is connected by gearing with the machine it is to operate. There are two types of water wheels, vertical and horizontal. The vertical wheels has an overshot and a undershot. The overshot water wheel has buckets around its edge. Water is delivered to the top of the wheel. The weight of the water falling into the buckets makes the wheel turn. An overshot water wheel has a very good chance of working with a 80 percent efficiency rate. That means, it may turn as much as 80 percent of the energy of the water into mechanical energy. Though, its use is limited to making small amounts of power. The undershot water wheel is built so the water hits the blades at the bottom of the wheel. The power of the wheel depends on the speed of the water hits the blades. The undershot wheel has such a low efficien cy that it is rarely used. Most modern water wheels are horizontal. A horizontal wheel rotates on a vertical shaft. It is driven by the force of the water hitting the blades on one side of the wheel. Horizontal wheels are very efficient if made correctly.   Ã‚  Ã‚  Ã‚  Ã‚  For my experiment I made an vertical undershot waterwheel. For the base of the waterwheel I cut off 8 centimeters of the bottom of a milk jug. Then out of the top of the jug I cut four triangles, four squares and four circles out for the fins of the waterwheel. After that I thumb tacked the 4 triangles to a cork. Put a hole at the end of each side of the cork and glued a skewer in each side for an axis. Then I cut a hole at each side of the base and put the skewers with the cork suspended in the middle. Then I put a 2 inch x 2 inch piece of clay shaped as circles on each side of the skewer. That’s how I got my waterwheel.   Ã‚  Ã‚  Ã‚  Ã‚  In my experiment I didn’t use electricity instead I measured the rate at which a water wheel lifts a weight. Doing this determined the speed at which the water wheel spins. For a weight I used a penny that was taped to a string which was wrapped around the clay.

Commercial Banking

Assignment 1 Executive Summary The purpose of this report is to evaluate the performance of both Hong Leong Bank and its peer bank RHB Bank for the financial year ended in 2010. The DuPont model is used to provide the information on the bank’s liquidity, profitability, efficiency and leverage status that allows financial analyst to evaluate on the performance of the bank as a result of the changes of these factors. A trend comparison for year 2010, 2009 and 2008 is conducted and evaluated its respective ratios and other financial data.The peer comparison of financial ratios between RHB Bank & Hong Leong Bank is evaluated and analysed to see which bank performs better in 2010. The other key ratios are also calculated in for deep analysis on to see how well these two banks in Malaysia perform in 2010. In addition, its credit risk that includes the risk management and its policy of both banks is then evaluated and compared to see which bank manages its credit risk properly.Fi nally, this report provides an overview of the performance of both RHB Bank and Hong Leong Bank for the financial year ended in 2010 and conclude which bank perform better in terms of various financial ration and management of credit risk. II II Assignment 1 Part A: Bank Performance Question 1: Dupont Model: a. Dopont Model: The DuPont model analysis is a common form of financial statement analysis and this model provides information on the bank’s liquidity, profitability, efficiency and leverage status that allows financial analyst to evaluate on the performance of the firm as a result of changes in one or more of these actors (Milbourn & Haight, 2005). According to Narayanan (2010), the DuPont model provides a starting point to determine the strength and weakness of the firm. It is also a very powerful financial tool to assist financial analyst, shareholders, investors and bankers in understanding the profitability of the firm and a tool that evaluate the firm’s financial statements by comparing the relationships within the income statement and balance sheet, or between the two statements. (Milbourn & Haight, 2005). The DuPont Model starts with the return of equity (ROE).The ROE is a strong measure on how well the management of the bank creates value to the shareholders (Pinsent, 2010). It is also a good starting point in the analysis of a bank’s financial condition. ROE is calculated by dividing the net income by total equity (Gup, Avram, Beal, Lambert & Kolari, 2007). The formula is as follows. ROE= Net incomeEquity According to Gup et at, (2007), the ROE ratio is equal to the Return of Assets (ROA) ratio times the Leverage multiplier that shows the dollar amount of assets that are financed by each dollar of the equity. The leverage multiplier is one indicator of financial leverage.ROE=ROA x Leverage Multiplier Net IncomeEquity = Net IncomeTotal Assets x Total AssetsEquity Leverage multiplier shows the extent to which the b ank relies on debt financing. The higher the leverage multiplier, the more debt the bank is carrying. Leverage Multiplier= Total AssetsEquity The Return of Assets (ROA) measures the bank profits as a percent of its assets and also measures the ability of the firm to use the real financial resources of the bank to generate revenue. It is commonly used to evaluate bank management (Gup et al, 2007). ROA is calculated by dividing net income y total assets. ROA= Net IncomeTotal Assets In the DuPont model analysis, the ROA is expended into another equation: Net IncomeTotal Assets = RevenueTotal Assets x Net IncomeRevenue Thus the DuPont model translates the ROA equation into the following: ROA=Asset Utilisation x Net Profit Margin The net margin ratio shows how much profit the bank makes for every $ 1. 00 it generates from the revenue. Generally, the higher the ratio, the better the net margin. In order to obtain more revenue, most banks will want to reduce the net income to achieve a hig her net margin ratio.Net Margin= Net IncomeRevenue The asset utilisation shows the amount of income the bank generated for every dollar worth of the assets available. This shows the bank’s efficiency in utilising the assets. Basically, the higher the asset turnover, the better the firm use the assets. Asset Turnover= RevenueTotal Assets In order for the bank to increase the ROE, banks need to increase their credit risk; this can be done by providing more loans to customers and subsequently, the bank will earn more income. This will in turn increase the ROA and the same time increases the ROE.Limitations of the Dupont model analysis: * It is based on accounting numbers, which are basically not reliable. * it does not include the Cost of Capital. * Garbage in, garbage out. Assumptions of the DuPont method: * Accounting numbers are reliable. b. Dopont Model Analysis: i. & ii. Trend Comparison of Hong Leong and RHB (2008, 2009 & 2010): Hong Leong Bank’s data: | 201 0| 2009| 2008| | RM’000| RM’000| RM’000| Revenue| | | | Interest income| 2,592,586| 2,937,002| 3,064,785| Non-interest income| 506,979| 511,537| 501,067| Total| 3,099,565| 3,448,539| 3,565,852| | | | | Operating costs| | | |Interest expense| 1,209,792| 1,579,883| 1,688,293| Non-interest expense| 831,139| 806,030| 786,194| Total| 2,040,931| 2,385,913| 2,474,487| | | | | Net profit| 767,817| 659,678| 838,874| Total assets| 77,730,208| 70,732,513| 69,992,756| Equity| 5,815,063| 5,319,288| 4,923,133| RHB Bank’s Data | 2010| | RM’000| Revenue| | Interest income| 4,530,637| Non-interest income| 722,818| Total| 5,253,455| Operating Cost| | Interest Expense| 1,811,153| Non-interest Expense| 1,302,007| Total| 3,113,160| | | Net profit| 1,294,437| Total assets| 105,179,231| Equity| 8,397,474| Dupont Model of Hong Leong Bank 2010| 2009| 2008| Return On Equity: Net incomeEquity| RM767,817,000RM5,815,063,000= 13. 20%| RM659,678,000RM5,319,288,000= 12. 40%| RM83 8,874,000RM4,923,133,000= 17. 04%| Leverage Multiplier:Total AssetsEquity| RM77,730,208,000RM5,815,063,000=13. 37times| RM70,732,513,000RM5,319,288,000= 13. 30times| RM69,992,756,000RM4,923,133,000= 14. 22times| Return On Assets:Net IncomeTotal Assets| RM767,817,000RM77,730,208,000= 0. 99%| RM659,678,000RM70,732,513,000= 0. 93%| RM838,874,000RM69,992,756,000= 1. 20%| Asset Utilization:RevenueTotal Assets| RM3,099,565,000RM77,730,208,000= 3. 9%| RM3,448,539,000RM70,732,513,000= 4. 88%| RM3,565,852,000RM69,992,756,000= 5. 10%| Net margin:Net incomerevenue| RM767,817,000RM3,099,565,000= 24. 77%| RM659,678,000RM3,448,539,000= 19. 13%| RM838,874,000RM3,565,852,000= 23. 53%| Dupont Model of RHB Bank | 2010| Return On Equity: Net incomeEquity| RM1,294,437,000RM8,397,474,000=15. 41%|Leverage Multiplier:Total AssetsEquity| RM105,179,231,000RM8,397,474,000=12. 53times| Return On Assets:Net IncomeTotal Assets| RM1,294,437,000RM105,179,231,000=1. 23%| Asset Utilization:RevenueTotal Assets| RM5, 253,455,000RM105,179,231,000=4. 9%| Net margin:Net incomerevenue| RM1,294,437,000RM5,253,455,000=24. 64%| c. Analysis and Discussion: Trend comparison of Hong Leong Bank Ratio| 2010| 2009| 2008| Net margin| 24. 77%| 19. 13%| 23. 53%| Asset utilisation| 3. 99%| 4. 88%| 5. 10%| Return on assets| 0. 99%| 0. 93%| 1. 20%| Leverage multiplier| 13. 37times| 13. 30times| 14. 22times| Return on equity| 13. 20%| 12. 40%| 17. 04%| Hong Leong Bank’s net margin is higher in year 2010 (24. 77%) compared to the year 2009 (19. 13%) and year 2008 (23. 53%). It means that operating costs are relatively lower in year 2010 compared to year 2009 and year 2008.Operating costs in the year 2010, 2009 and 2008 are RM2,040,931,000, RM3,448,539,000 and RM2,474,487,000 respectively. This indicates that operating costs are well controlled by Hong Leong Bank in 2010 compared to 2009 and 2008. Thus this shows that the bank run their operations effectively in 2010 that increased its profitability. Hong Leon g Bank’s asset utilisation is lower in year 2010 (3. 99%) compared to the year 2009 (4. 88%) and 2008 (5. 10%). It decreased constantly from year 2008 to 2010. The decline in the figures shows that beginning in the year of 2009, the bank did not utilise much of its assets to generate more revenue.Therefore revenue was decreasing from 2008 to 2009. Revenue for the year 2010, 2009 and 2008 are RM3,099,565,000,RM3,448,539,000 and RM3,565,852,000. This shows that the bank well utilised the assets to generate revenue in 2008 compared to 2010. Hong Leong Bank’s return on assets is lower in year 2010 (0. 99%) compared to the year 2009 (0. 93%) and 2008 (1. 20%). This shows that Hong Leong Bank did not do well in managing and utilising its asset base in 2010. Hong Leong Bank’s leverage multiplier decreased from the year 2008 (14. 22times) to year 2009 (13. 30times) and increased back in year 2010(13. 7times).This implies that Hong Leong Bank does not depend too much on debt financing in their activities and carried less debt in their operations in 2009 compared to year 2010 and 2008. Thus, Hong Leong Bank was exposed to more risk in 2008 compared to year 2010. Hong Leong Bank’s return on equity decreased from year 2008 (17. 04%) compared to year 2009 (12. 40%) and increased back in year 2010 (13. 20%). This implies that it did not manage and utilise its equity base and therefore the investors did not get a better return from the Hong Leong Bank in 2010.Overall, Hong Leong Bank performance on profitability was better in 2008 compared to the year 2009 and 2010. Peer comparison Ratio| Hong Leong Bank| RHB Bank| Net margin| 24. 77%| 24. 64%| Asset utilisation| 3. 99%| 4. 99%| Return on assets| 0. 99%| 1. 23%| Leverage multiplier| 13. 37times| 12. 53times| Return on equity| 13. 20%| 15. 41%| Hong Leong Bank’s net margin (24. 77%) is higher than RHB Bank’s (24. 64%). It means that RHB Bank’s operating costs are relatively hig her. RHB Bank’s operating costs are RM3,113,160,000 whereas Hong Leong Bank’s operating costs are RM2,040,931,000.Thus, RHB Bank’s operating costs are higher by RM1,072,229,000. This indicates that operating costs are well controlled by Hong Leong Bank compared to RHB Bank. RHB Bank’s asset utilisation (4. 99%) is higher than Hong Leong Bank’s (3. 99%). This shows that RHB Bank used most effectively of its assets to generate more revenue than Hong Leong Bank. RHB Bank’s revenue is RM5,253,455,000 which is higher than Hong Leong Bank’s revenue which is RM3,099,565,000. Hong Leong Bank’s return on assets is 0. 99% which is slightly lower than RHB Bank’s return on assets which is 1. 23%.This can be implied that Hong Leong Bank did not manage and utilise its assets base better than RHB Bank during operations to generate revenue. However, both banks generated low return on the basis of their assets. With total assets of RHB B ank is RM105,179,231,000, it generated revenue of RM5,253,455,000 whereas Hong Leong Bank’s total assets is RM77,730,208,000 and it generated revenue of RM3,099,565,000. Even though, RHB Bank has assets of 1. 35times more than Hong Leong Bank, its return on assets is still low.Thus Hong Leong Bank managed its assets better than RHB Bank. Hong Leong Bank’s leverage multiplier (13. 7times) is higher than RHB Bank’s (12. 53times). Hong Leong bank has leverage multiplier of 0. 84times more compared to RHB Bank. This implies that RHB Bank does not depend too much on debt financing in their activities and carries less debt in their operations. Thus, Hong Leong Bank is exposed to more risk than RHB Bank. Hong Leong Bank’s return on equity is 13. 20% which is lower than RHB Bank’s 15. 41%. RHB Bank has a higher ROE because possibly the bank does not rely too much on debt financing and offers a high return to shareholders of the bank. Thus, shareholders of RHB Bank will be happy and stay with RHB Bank.Shareholders of Hong Leong Bank may sell its shares and leave the bank. Generally, the overall financial performance of Hong Leong Bank is not very well in comparison with RHB Bank (peer bank). It is possible that Hong Leong Bank’s objectives and strategies are different from RHB Bank’s. Question 2: Hong Leong Bank’s data of 2010 Interest earning asset 1:| RM’000| Deposits and placements with banks and other financial institutions| 7,004,664| Securities held at fair value through profit or loss| 6,703,224| Available-for-sale securities| 3,859,367| Held-to-maturity securities| 7,042,610| Loans, advances and financing| 33,589,093|Other assets| 2,014,821| Total| 60,213,779| | | Earning assets 2:| | Interest Income Assets:| | Deposits and placements with banks and other financial institutions| 7,004,664| Securities held at fair value through profit or loss| 6,703,224| Available-for-sale securities| 3,859,367| Held -to-maturity securities| 7,042,610| Loans, advances and financing| 33,589,093| Other assets| 2,014,821| | | Non-Interest Income Assets:| | Investment in subsidiary companies (Note 31) earning dividend| 714,092| Investment in associated company (Note 31) earning dividend| 946,505| Total| 61,874,376| | |Interest sensitive assets 3:| | Cash and short-term funds| 13,421,408| Deposits and placements with banks and other financial institutions| 7,004,664| Available-for-sale securities| 681,619| Held-to-maturity securities| 1,705,674| Loans, advances and financing| 30,712,038| Total| 53,525,403| | | Interest bearing liabilities 4:| | Deposits from customers| 63,239,050| Deposits and placements of banks and other financial institutions| 3,791,129| Bills and acceptances payable| 285,366| Other liabilities| 3,890,295| Total| 71,205,840| | | Interest sensitive liabilities 5:| | Deposits from customers| 54,798,922|Deposits and placements of banks and other financial institutions| 3,784,376| Bil ls and acceptances payable| 25,453| Total| 58,608,751| | | | | Liquid assets 6:| | Cash and short-term funds| 13,928,247| Deposits and placements with banks and other financial institutions| 7,004,664| Loans, advances and financing (Note 8)| 9,057,329| Available for sales securities| 3859367| Total| 33,849,607| | | Deposits | 7,004,664| Shareholders’ fund = Total equity| 5,815,063| | | Net-write offs 7:| 202,219| NOTES: 1 Interest earning asset are assets that earns interest income. (Note 28 of pg113 of Hong. Leong Bank Annual Report 2010) Earning assets Income earning assets held by a bank typically include interest bearing balances, investment securities and loans. (Note 28 of pg113 & Note 31 of pg115 of Hong Leong Bank Annual Report 2010) 3 Interest sensitive assets are the dollar value of assets that either mature or can be repriced within within a selected time period such as one year. 4 Interest bearing liabilities are those liabilities that have to pay interest. 5 Interest sensitive liabilities are the dollar value of liabilities that either mature or can be reprised within a selected time period usually of one year.Liquid assets are unpledged, marketable short term securities that are classified as available for sale, plus federal funds sold and securities purchased under agreement to resell, a liquid asset can be easily and quickly converted into cash with minimum loss. 7 Net Write Offs is the amount written off under the assets of loans, advances and financing. (Note 8of pg95 of Hong Leong Bank Annual Report 2010) NOTES: 8 Interest Sensitive Assets RM’000 13,421,408 7,004,664 681,619 1,741,674 30,712,038 Interest Sensitive Liabilities RM’000 54,798,922 3,784,376 25,453 Interest Sensitive Assets RM’000 3,421,408 7,004,664 681,619 1,741,674 30,712,038 Interest Sensitive Liabilities RM’000 54,798,922 3,784,376 25,453 RHB Bank’s data of 2010 Interest Earning asset 1:| RM’000| Loans, advances and financ ing| 71,125,558| Money at call and deposit placements with banks and other financial institutions| 1,539,648| Securities purchased under resale agreement| 276,407| Financial assets held-for-trading| 129,583| Financial investments available-for-sale| 8,143,221| Financial investments held-to-maturity| 8,143,221| Total| 89,357,638| | | Earning assets 2:| | Loans, advances and financing| 71,125,558|Money at call and deposit placements with banks and other financial institutions| 1,539,648| Securities purchased under resale agreement| 276,407| Financial assets held-for-trading| 129,583| Financial investments available-for-sale| 8,143,221| Financial investments held-to-maturity| 8,143,221| Total| 89,357,638| | | Interest sensitive assets 1:| | Cash and short-term funds| 10,270,874| Securities under resale agreement| 276,398| Deposits and placements with banks and other financial institutions| 777,779| Financial investment available-for-sale | 1107052| Held-to-maturity securities| 3833825| Loans, advances and financing| 52741914| Total| 69,007,842| | | Interest bearing liabilities 4:| | Deposits and placements of banks and other financial institutions| 6,158,453| Deposits from customers| 80,567,577| Subordinated obligations| 3,018,157| Recourse obligation on loans sold to Cagamas Berhad| 818,503| Hybrid Tier I Capital Securities| 605,407| Long term borrowings| 819,362| Others liabilities| 868,165| Total | 92,855,624| Interest sensitive liabilities 2:| | Deposits from customers| 63,270,532| Deposits and placements of banks and other financial institutions| 5558376| Bills and acceptances payable| 2934533|Recourse obligation on loans sold to Cagamas Berhad| 147030| Long term borrowings| 817127| Total| 72,727,598| | | | | Liquid assets 3:| | Cash and short-term funds| 11093561| Securities purchased under resale agreements| 276,407| Deposits and placements with banks and other financial institutions| 782,462| Financial assets held-for-trading| 119,374| Financial investment available-for-sale| 1176035| Financial investment held-to-maturity| 3854749| Loans, advances and financing| 14124170| Other assets| 88835| Derivative assets| 190637| Total| 31,706,230| | | Deposits | 1,539,648|Shareholders’ fund = Total equity| 8,397,474| | | Net-write offs 7:| 1,033,573| NOTES: 1, 2, 3 – Please refer to appendix. | Hong Leong BankRM’000| RHB BankRM’000| Interest earning assets| 60,213,779| 89,357,638| Interest bearing liabilities| 71,205,840| 92,855,624| Earning Assets| 61,874,376| 89,357,638| Interest sensitive assets (RSA)| 53,525,403| 69,007,842| Interest sensitive liabilities (RSL)| 58,608,751| 72,727,598| Liquid assets | 33,849,607| 29,990,240| Shareholders’ fund| 5,815,063| 5,815,063| Net-write offs| 202,219| 1,033,573| Operating Income| 3,099,565| 5,253,455|Operating Expense| 2,040,931| 3113160| Other key indicators for the year ended 2010: Bank efficiency| Hong Leong Bank| RHB Bank| Efficiency ratio:Operating expenses Ope rating income| RM2,040,931,000RM3,099,565,000= 65. 85%| RM3,113,160,000RM5,253,455,000= 59. 26%| Cost to assets ratios:Operating expenses Total assets| RM2,040,931,000RM77,730,208,000= 2. 63%| RM3,113,160,000RM105,179,231,000= 2. 96%| Efficiency ratio measures the changes of costs in relation to income. Hong Leong Bank has an efficiency ratio of 65. 85% while RHB Bank is one with the lower which is 59. 26%.This implies that Hong Leong Bank’s rate in increasing the operating income is at lower rate compared to RHB Bank. In terms of rate of increase in operating income, Hong Leong has the lower efficiency compared to RHB. Cost to assets ratio is used to measure the costs incurred in relation to the assets size. RHB Bank has a higher cost to assets ratio that is 2. 96% compared to Hong Leong Bank that has a figure of 2. 63%. Therefore in term of cost of control relative to the total assets owned, Hong Leong is more efficient than RHB Bank. Interest differentials| Hong Leong Bank | RHB Bank|Net interest income:Interest earned -Interest expense| RM2,592,586,000 -RM1,209,792,000= RM1,382,794,000| RM4,530,637,000-RM1,811,153,000= RM2,719,484,000| % of interest margin:interest earned – interest expenses Earning assets| RM2,592,586,000-RM1,209,792,000RM61,874,376,000= 2. 23%| RM4,530,637,000-RM1,811,153,000RM89,357,638,000= 3. 04%| %interest spread(interest earned/interest earning assets) – (interest expense/ interest bearing liabilities)| (RM2,592,586,000/RM60,213,779,000)-(RM1,209,792,000/RM71,205,840,000)= 2. 1%| (RM4,530,637,000/RM89,357,638,000)-(RM1,811,153,000/RM92,855,624,000)= 3. 12%| Net interest income refers the difference between revenue that is generated from the bank’s assets and expenses associated with paying out its liabilities. In the table above, RHB Bank’s net income is RM2,719,484,000 which is higher than Hong Leong Bank which have a figure of RM1,382,794,000. This means that RHB Bank has higher excess revenue and interest income after deducting interest paid on deposit from interest earned on assets.Percentage interest margin shows the dollar difference between interests earned and interest expense, as a percentage of earnings assets. Hong Leong Bank’s% interest margin is 2. 23% which is lower than RHB Bank which is 3. 04%. This implies that RHB Bank made a better investment than Hong Leong Bank due to higher percentage interest margin. Percentage interest spread refers to the difference in borrowing and lending rates of financial institutions (such as banks) in nominal terms. RHB Bank’s % interest spread is 3. 12% which is higher than Hong Leong Bank’s 2. 23%. Risk management| Hong Leong Bank| RHB Bank|Interest rate riskinterest sensitive assets interest sensitive liabilities| RM53,525,403,000RM58,608,751,000= 0. 91| RM69,007,842,000RM72,727,598,000= 0. 95| Credit risk net write-offs total assets| RM202,219,000RM77,730,208,000= 0. 26%| RM1,033,573,000RM105,179,231,000= 0. 98%| Liquidity risk :liquid assets/total asset liquid assets/deposits| RM33,849,607,000/RM77,730,208000= 0. 44RM33,849,607,000/RM7,004,664,000= 4. 83| RM29,990,240,000/RM105,179,231,000= 0. 29RM29,990,240,000/RM1,539,648,000= 19. 48| Capital risk :shareholders’ funds total assets| RM5,815,063,000RM77,730,208,000= 7. 48%| RM8,397,474,000RM105,179,231,000= 7. 8%| Interest Sensitivity ratio measures the interest rate risk and it measures the level of repricing irregularities between the bank’s assets and liabilities. RHB bank has an interest sensitivity ratio of 0. 95 while Hong Leong has 0. 91 which is slightly lower than RHB Bank. This implies that RHB Bank can replace assets with higher yielding assets quicker than replacing the low cost deposits with more funds compared to RHB. Credit risk refers to risk of loss of principal due to the borrower’s failure to repay the loans or otherwise meet the contractual obligation. RHB bank has a higher credit risk which stands at 0. 8 % compared to Hong Leong that has a lower figure of 0. 26%. This shows that Hong Leong is better in managing its credit risk compared to RHB. Liquidity ratio is used to measure the ability of the bank to repay off its short term obligations. RHB Bank has lower liquidity ratios of 0. 29 while Hong Leong has a higher ratio of 0. 44. This shows that Hong Leong has higher liquid assets to meet short term obligation and able to repay all short term debt in time compared to RHB Bank. The capital risk ratio is used to calculate the capital risk and it measures the financial stability of the bank.RHB Bank has a higher simple capital ratio that has a figure 7. 98% compared to Hong Leong bank that has a value of 7. 48%. This implies that RHB is well protected against any operating losses incurred than Hong Leong. Overall, in terms of risk management RHB Bank is performing well compared to Hong Leong Bank for the year ended 2010. Question 3: Comparison of forms of loans between RHB and Hong Leong Bank OverdraftsTerm loans/financing-Housing and shop loans/financing- Syndicated term loans/financing- Hire purchase receivables- Lease receivables- Other term oans/financingCredit/charge card receivablesBills receivableTrust receiptsClaims on customers under acceptance creditsBlock discountingRevolving creditStaff loans/financingFloor stockingOther loans/financingUnearned interest and incomeGross loans, advances and financingFair value changes arising from fair value hedgesUnamortised fair value changes arising from terminated fairvalue hedgesAllowance for impaired loans and financing-individual impairment allowance-collective impairment allowance-general allowance-specific allowanceAllowance for bad and doubtful debts and financing:- specific- generalTotal net loans, advances and financing| RHB Bank (RM’000)5,976,56915,908,732835,5889,322,667-29,854,4431,644,4651,418,203325,1774,130,205-3,491,071336,5281,56973,245,217-(682,522)(1,437,137)—-71123,9 89| Hong Leong Bank (RM’000)2,086,55016,933,8161,458,6333,284,687-1,653,6902,017,519211,01992,9823,184,6968,2181,219,78096,668-44,390(613,549)31,679,09928,3858,714—(306,807)(471,305)30,938,086|Credit risk is the risk of financial loss due to a borrower or counterparty being unable or unwilling to deliver on its payment obligations to the Bank, which leads to a loss of revenue and the principal amount. It arises principally from lending, trade finance and treasury activities (Hong Leong Bank Annual Report 2010 pg. 150). Based on the above table shows the comparison of the total amount of loans for Hong Leong Bank and RHB Bank for the financial year ended 2010. RHB Bank has the highest number of loans that stands at RM71,125,558,000 while Hong Leong Bank has a total of RM 33,589,093,000. However, based on the credit risk ratio RHB Bank has a higher credit risk which stands at 0. 98 % compared to Hong Leong that has a lower figure of 0. 26%.This shows that Hong Leong is b etter in managing its credit risk compared to RHB Bank RHB Bank has 2. 1times more loans than Hong Leong Bank, but it’s credit risk is 3. 76times more than Hong Leong Bank. It implies that Hong Leong is better in managing its credit risk and loan portfolio because most borrowers able to pay back the loan to the bank. Therefore, Hong Leong provided the best of the credit risk quality. In order for the bank to increase and strengthen the risk management practices, RHB Bank ensures to maintain the credit quality of its loan portfolios, improve cost effectiveness, and ensure the liquidity and capital stay strong throughout the financial year in 2010.Therefore, RHB Bank manages risk through clearly defined guidelines that are approved by the Board of Directors, through a framework of established control and reporting process. Hong Leong Bank also gives a strong priority for managing effectively in credit management. It is also managed by high-experience personal with high level re view undertaken by the Management Credit Committee under the supervision of the Board Credit Supervisory Committee. The bank integrated risk management structure is similar to RHB Bank whereby credit risk framework that is compliant with Bank Negara Malaysia’s guidelines on ‘‘Best Practices for the Management of Credit Risk†.The Group Risk Management Committee (GRMC) had been established by RHB Bank for risk oversight within the bank. Among the committees of this group are namely the Group Credit Risk Management Committee (GCRMC), Group Operational Risk Management Committee (GORMC) and Group Assets and Liabilities Management Committee (GALCO) assist the GRMC in managing credit risk, operational risk as well as market and liquidity risk. The committee ensures the development and implementation of risk policies as well as the effectiveness of policies. Among the exposure of credit risk in RHB Bank may be categorized as primary exposure. Loans, advances and fin ancing are the credit risk that arises in the primary exposure.Most of the lending activities in the bank are guided by the Group’s Credit Policies and Guidelines, in line with Best Practices in the Management of Credit Risk, issued by Bank Negara Malaysia. The credit risk policy includes an overview of the lending organisation, and the responsibilities of the parties in the organisation whereby the Board have a loan committee that oversees major new loan and renewals and the performance of the loan portfolio (Gup et al, 2007). Example, Hong Leong will be redeveloping a new credit risk system for corporate and commercial borrowers while for the retail segment, the bank has implemented a credit application and behavioural scoring system in order to improve the Bank’s ability to control credit losses within predictive ranges and achieve a well balanced portfolio.This is accordance to the Basel II that RHB Bank is also practising whereby every bank requires to hold adequa te capital in order to fulfil the minimum capital adequacy of the bank. This is also supported by Hassan & Muhammad, (2007) whereby bank loans are the most largest and obvious credit risk. Therefore the Basel II is required so that most banks will know how much capital they must hold. The Bank’s credit risk management process is documented and processed In the Credit Manual. One of the functions of the Credit Manual that is introduced by Hong Leong Bank is to set out the lending policies, lending authorities, credit risk rating, credit reviews, collateral, credit administration and security documentation, and timely rehabilitation and restructuring of problematic and delinquent accounts.Apart from that, this is to ensure that structures are there to maintain to enhance the Bank’s risk assessment capabilities in key areas of credit that includes sound credit policies and procedures, quality credit approvals, appropriate risk measurement. ARHB Bank does not have this Credit Manual but they form a second line defence that formulate the risk management policies. The function of an internal audit is to provide independent reviews of the quality of the loans (Gup et al, 2007). Based on the Hong Leong Bank Annual Report (2010), it states that Internal Audit conducts independent post to reviews on the financial statements and the capital of the bank.This is to ensure that the qualities of credit risk and approval standards are in accordance with the credit standards and the lending policies and directives established and approved by the Bank’s management and Board of Directors. Question 4: Conclusion In conclusion, the performance of Hong Leong Bank for the financial year ended in 2010 is not as good as its peer bank RHB Bank. This is due to that the ROE is lower compared to RHB Bank. This can be improved by not relying too much on debt financing for its operations and to provide more return to investors. Also, Hong Leong Bank did not create m uch value to the shareholders due to low ROE. However, only the net margin part is the main strength of Hong Leong compared to RHB Bank This indicates that operating costs are well controlled by Hong Leong Bank compared to RHB Bank.This is a good indicator as this prevents wastage and smartly uses the assets to generate more income. The liquidity ratio for both the banks are below 1 which is not safe for both banks because they cannot meet the requirements to pay off the obligations and current assets are less than current liabilities they having. Based on the ratio analysis for year 2009 to 2010, the ROE, ROA and net margin ratio shows a good improvement due to economic boom and inflation happens during the period. However, in 2009, most of the ratio for Hong Leong Bank declines because may be due to economic recession and the decline in the economic activity of the bank.For the credit risk, RHB Bank did not manage its credit risk well compared to Hong Leong based on the credit ana lysis. RHB could improve their credit risk by having an internal audit to check on the loan defaulters and the accounts. Personal experience of visiting banks We visited Hong Leong Bank and RHB Bank in Ampang branch and Cheras branch. We asked the branch manager of RHB Bank for more details of their items on balance sheet and income statement. She did not know what items are called interest earning assets in Balance sheet. She does not know Income Statement and Balance Sheet. I was surprised, she is a manager and she does not know.She was kind enough to call the headquarter of RHB Bank and made me speak to the person in charge of financial statements. Well, I was told that each bank has different items calling interest earning assets and liquid assets. He cannot release those details. The RHB Bank and Hong Leong Bank in Ampang Branch have 400 to 500 customers daily and they are overcrowded during lunch hours. However, the RHB Bank has 100-150 customers daily and Hong Leong Bank has 50-100 customers daily in Cheras branch. Most customers come during the lunch hours. Ampang branch has more customers compared to RHB Bank. Thus it depends on location, the number of customers visit banks. Below are the cards of Hong Leong bank and RHB Bank:Ampang Branch Cheras Branch Part B: Virtual Bank Balance Sheet |   |   | |   |   |   | | Liabilities| |   | | Asset| | 1. Deposit| | |   | 1. Gold and foreign exchange| i. Current deposit | |   | 2. Cash and Liquid Assets| | ii. Fixed deposit| |   | 3. Securities| | iii. Certificates of deposit|   | i. Trading securities | | iv. Other deposits such as call deposits, cash| ii. Investment securities | | management accounts and savings account| iii. Short term discount security| 2. Non-deposit liabilities| |   | iv. Long term bonds or notes| Liabilities due to clearing houses and financial| 4.Loans and advances| | institutions and rank in priority after deposit| i. Overdraft | | i. Repurchase agreements|   | ii. Credit card outstanding| ii. Promissory notes| |   | iii. Housing finance | | iii. Liabilities on bill acceptances|   | iv. Other term loans| | iv. Corporate bonds and other long-term borrowings| v. Lease and hire purchase finance | 3. Due to other banks| |   | 5. Due from other banks| | 4. Trading derivatives| |   | 6. Trading derivatives| | 5. Other financial liabilities at fair value| 7. Other financial assets at fair value| 6. Other borrowings| |   | 8. All other asset| | 7. Bonds, notes, and subordinated debt| 9.Due from customer on acceptance | 8. Other debt issues| |   | | | | 9. All other liabilities| |   | | | | 10. Goodwill and other intangible asset| | | | | | |   | | | | | | |   | | | | | Capital| |   | | | | Capital acts as a buffer against unexpected losses and| | | | protects against insolvency. |   | | | | i. Debt capital : borrowed funds|   | | | | ii. Equity capital : shareholders' fund| | | | NOTES : Asset 1. Changes in this item reflec t transactions of the following kinds: a. the Bank's transactions in foreign exchange and foreign securities (including under repurchase agreements); b. earnings on foreign currency investments; and c. hanges in the valuation of foreign currency and gold, and changes in the market prices of the Bank's holdings of foreign currency securities. 2. Liquid assets are assets that can be converted into cash quickly without loss of value 3. i. Trading securities : banks plans to sell before maturity ii. Investment securities : banks plan to hold till maturity iii. Short term discount securities : pay face value at maturity iv. Long term bonds or notes which pay coupons during the life of the security and the face value of maturity. 4. Includes loans, deposits with central banks and other regulatory authorities and settlement account balances due from other banks.Amounts due from other banks are initially recognised at fair value and subsequently measured at amortised cost. Advances: non-der ivative financial assets with fixed payments that are not quoted in an active market i. Overdraft : – borrower can draw up to the limit * Interest payable on amount drawn * Commitment fee is payable on the undrawn amount| ii. Credit card outstanding: – borrower can purchase on credit| or take cash in advance -form of revolving credit -Interest payable on amount drawn -annual fee may be charged | | | | iii.Housing finance : – Mortgage where the collateral is real estate – loan application fees are charged – variable rates(up to 30 years) – fixed rates(3-5 years)| iv. Other term loans : – example such as fully drawn advance – maturity of 5-8 years – a single loan of a specific dollar amount – fixed interest rate – application fees, establishment fees – repayment maybe fully amortised or structured to match the profits Generated by project being finance. | v.Lease and hire purchase finance : – se cured loans where the collateral is an asset – term of loan related to the life of the collateral – fixed interest rate – application fees, establishment fees| | | 5. Trading derivatives have not been shown by contractual maturity because they are typically held for various periods of time. 6. Also called as market related contingencies such as futures, swaps, options, forward rate agreements 7. example: land, buildings 8.Due from customer on acceptance : customer who wants to borrow from the bank may be offered a â€Å"bill facility† and the customer must agree to repay the bank. The bank is the acceptor(promise to pay the holder the face value Liabilities: Deposit: 1. Current deposit : – No maturity and no minimum balance – Withdrawals by writing a cheque or through electronic transactions – May be interest bearings(variable interest rate) or non-interest bearing 2. Fixed deposit : – Minimum amount – Specific term eg. 1-5 years – Early withdrawals incur a penalty – Fixed interest rate 3. Certificates of deposit : – Face value at least $100,000 – Maturities between 14-270 days – Fixed interest rate – Originally issued at par but may trade above or below depending on Market yields. At maturity, receives face value plus interest 4. The deposits : a) Call deposit – must give notice of withdrawal, variable interest rate b) cash management accounts – minimum balance requirement, variable interest rate linked to money market yields c) savings account – no minimum balance or notice of withdrawal requirements – variable interest rate Non-Deposit: i. Repurchase agreements : – banks borrow for a short period (5 years) – sell securities with an agreement to repurchase on agreed date at agreed price ii. Promissory notes : – discount securities – bank sells to the market iii. Liabilities on bill acceptance : -bank is the acceptor and pays face value at maturity iv.Corporate bonds and other long term borrowings : example domestic bonds, eurobonds Due to Other Banks: Includes deposits, vostro balances, repurchase agreement and settlement account balances due to other banks. Trading derivatives: Financial liabilities at fair value are financial liabilities held for trading if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term. | Other financial liabilities at fair value Borrowings are initially recognised at fair value, net of transaction costs incurred. It is subsequently carried at amortised cost, any difference between initial recognised amount and the redemption value is recognised in the profit or loss.For example: borrowing from reverse bank, other banks, or borrowing from outside of the country. Other financial liabilities at fair value: Short term and long-term debt issues of the group including commercial paper, notes, term loans, medi um-term notes, mortgage backed securities and other discrete debt issues. All other liabilities: I) Bills Payable (drafts, telegraphic transfers, mail transfers payable, pay slip, bankers cheques, other miscellaneous items, etc) II) Inter-Office (The inter-office adjustments balance, if in credit, should be shown under this head. Only net position of interoffice accounts, inland as well as foreign should be shown here)III) Interest Accrued (Includes interest due and payable and interest accrued, but not due on deposits and borrowings Includes net provision for income tax and other taxes like interest tax (less advance payment, tax deducted at source, etc. ) IV) Deferred Tax (surplus provisions in bad debts provision account, surplus provisions or depreciation in securities, Contingency funds which are not disclosed as reserves but are actually in the nature of reserves, proposed dividend/transfer to Government. ) V) Others (which are not disclosed under any of the major heads such a s unclaimed dividend, provisions and funds kept for specific purposes, unexpired discount, outstanding charges like rent, conveyance, etc. certain types of deposits like staff security deposits, margin deposits, etc) Goodwill and other intangible asset:Goodwill arises on the acquisition of an entity and represents the excess of the aggregate of the fair value of the purchase consideration and the amount of any non-controlling interest in the entity over the fair value of the Group’s share of the identifiable net assets at the date of the acquisition. Capital Debt capital : borrowed funds, ranks higher than equity capital for the repayment of annual returns. Equity capital : -shareholders’ fund which represents the remaining interest in assets of a company. -permanent commitment of funds -earns the residual income of the firm after all interest and other costs -main components includes issue share, reserve and retained earnings References Hong Leong Bank. (2011). Annual Report: 2010. Retrieved September 14, 2011 from http://www. hlb. com. my/data/ar2010. pdf RHB Bank. 2011). Annual Report: 2010. Retrieved September 12, 2011 from http://www. rhb. com. my/corporate_profile/investor_relation/pdf/annual_reports/2010/RHB%20Bank%20Berhad%202010. pdf Gup, B. E. , Avram, K. , Beal, D. , Lambert, R. , ;amp; Kolari, J. W. (2007). Commercial Banking. Milton, Qld: John Willey ;amp; Sons Hassan, H. , ;amp; Mohammed, F. (2007). Banks’ risk management: a comparison study of UAE national and foreign banks. The Journal of Risk ;amp; Finance, 8(4), 394-409. Hong Leong Bank Berhard. (2009). Annual Report: 2009. Retrieved September 14, 2011 from http://www. hlb. com. my/data/ar20091. pdf Milbourn, G. , ;amp; Haight, T. (2005).Providing Students with an Overview of Financial Statements Using the Dupont Analysis Approach. The Journal of American Academy of Business, Cambridge. 9(3), 46-50 Narayanan, L. (2010). How DuPont Analysis Reveals Return on Equity Ratio. Managing Credit, Receivables ;amp; Collections. 2(1), 12-14. Pinsent, W. (2010). Decoding DuPont Analysis. Retrieved September 2, 2011, from http://www. investopedia. com/articles/fundamental-analysis/08/dupont-analysis. asp Class Dupont. (2010). Current Financial Accounting. Retrieved September 10, 2011, from http://www. sjrbiz. info/Current%20Classes/Financial%20Accounting%20Class/Dupont%20Model%20in%20a%20Nutshell. pdf