22. What is ecological management?

Ecological Management - The management of human activities so that ecosystems, their structure, function, composition, and the physical, chemical, and biological processes that shape them, continue at appropriate temporal and spatial scales. Sometimes referred to as ecosystem management or an ecological approach to management.

23. What is the relationship between ecology and economy? Ecological economics is an approach to rather than a branch of economics that addresses the interdependence and co-evolution between human economies and natural ecosystems. Many ecological economists refer to it as a trans-discipline rather than a conventional discipline. It has similarities to green economics and human development theory. These schools also embrace integration among diverse intellectual thoughts, and deem neoclassical economics as myopic and closed-minded; ecological economics seeks greater trans-disciplinary connections to solve complex issues facing humanity.

Concept The objective of ecological economics (EE) is to ground economic thinking and practice in physical reality, especially in the laws of physics (particularly the laws of thermodynamics) and in knowledge of biological systems. It accepts as a goal the improvement of human wellbeing through economic development, and seeks to ensure achievement of this through planning for the sustainable development of ecosystems and societies. It distinguishes itself from neoclassical economics (NCE) primarily by its assertion that economics is a subfield of ecology, in that ecology deals with the energy and matter transactions of life and the earth, and the human economy is by definition contained within this system. In contrast, NCE has historically assumed implicitly (and, more recently, explicitly) that the environment is a subset of the human economy. (In this approach, if nature is valuable to our economies, that is because people will pay for its services: clean air, clean water, encounters with wilderness, etc.) It is largely this assertion which allows for NCE to claim theoretically that infinite economic growth is both possible and desirable. However, this belief disagrees with much of what the natural sciences have learned about the world, and, according to EE, completely ignores the contributions of natural capital to the creation of wealth. (Natural capital can be considered the planetary endowment of scarce matter and energy, along with the complex and biologically diverse ecosystems that provide goods and services directly to human communities: micro- and macro-climate regulation, water recycling, water purification, storm water regulation, waste absorption, pollination, protection from solar and cosmic radiation etc.)

While NCE deals with the efficient allocation of resources, it ignores two other fundamental economic problems: distribution (equity) and the overall optimum scale of the economy. EE also makes a clear distinction between growth (quantitative) and development (qualitative improvement of the quality of life) while arguing that NCE confuses the two. EE challenges the common normative approach taken towards natural resources, claiming that it undervalues natural capital by displaying it as interchangeable with human capital--labor and technology. EE counters this convention by asserting that human capital is instead complementary to and dependent upon natural capital, as human capital inevitably derives from natural capital. From these premises, it follows that economic policy has a fiduciary responsibility to the greater ecological world, and that, by undervaluing the importance of natural capital, sustainable development (as opposed to growth)--which is the only solution to elevating the standard of living for citizens worldwide--will not result. Furthermore, ecological economists point out that, beyond modest levels, increased per capita consumption (the economist's version of "standard of living") does not necessarily lead to improvements in human wellbeing, while this same consumption can have harmful effects on the environment and even on broader societal wellbeing.

It rejects the view of energy economics that growth in the energy supply is related directly to well being, focusing instead on biodiversity and creativity - or natural capital and individual capital, in the terminology sometimes adopted to describe these economically. In practice, ecological economics focuses primarily on the key issues of uneconomic growth and quality of life. Ecological economists are inclined to acknowledge that much of what is important in human well-being is not analyzable from a strictly economic standpoint and suggests interdisciplinarity with social and natural sciences as a means to address this.

History The origination of ecological economics as a specific field per se is credited to ecologist and University of Vermont Professor Robert Costanza, who founded the International Society for Ecological Economics (ISEE) and carried out much of the founding research while at the University of Maryland. His University of Maryland colleague, Herman Daly, who was trained as a conventional economist but who had also studied ecology, was a co-founder and has been a major intellectual contributor to the field. Economist Nicholas Georgescu-Roegen (1906-1994) who was among Daly's teachers at Vanderbilt University, provided ecological economics with a conceptual framework based on the material and energy flows of economic production and consumption. His magnum opus "The Entropy Law and the Economic Process" (1971) has been highly influential. Nobel prize-winning chemist, Frederick Soddy (1877-1956), and economist Kenneth Boulding (1910-1993) are among other intellectual pre-cursors. Furthermore, some key concepts of what is now ecological economics are evident in the writings of E.F. Schumacher, whose 1973 book "Small is Beautiful - A Study of Economics as if People Mattered" was published just a few years before the first edition of Daly's comprehensive and persuasive "Steady-State Economics" (1977). Ecological economics' intellectual ancestry may be traced in large part to political economy, a refinement of early economic theory that includes among its earlier researchers Thomas Malthus, David Ricardo and John Stuart Mill. Mill, in particular, by hypothesizing that the "stationary state" of an economy might be something that could be considered desirable, anticipated later insights of modern ecological economists, without having had their experience of the social and ecological costs of the dramatic post-World War II industrial expansion. CUNY geography professor David Harvey was one of the first to explicitly add ecological concerns to political economic literature. This parallel development in political economy has been continued by analysts such as sociologist John Bellamy Foster.

24. What are the sources of company finance?

Sources of Business Finance There is no escaping the fact that businesses need finance (funds), both in the short term, and long term, to expand, operate or just plain survive. A business represents, in many respects, a continuous flow of money in and out of the company in the form of income and expenditure. It’s important that a business is aware and willing to tap (зд. использовать) every possible source of finance available, particularly at critical stages of the firms development. We can initially segment sources of finance into those internally available to the business, and those that are available externally.

Internal Sources of Funds Profit The business can retain profit (after tax, interest and dividend payments have been deducted), to finance the businesses intended future expenditure.

Depreciation By deducting depreciation from profit, the business makes provision for the eventual replacement of worn-out machinery / plant. This can be seen as a further form of profit retention(сохранение), and thus an internal source of finance.

Sale of Assets Companies may choose or be forced to sell-off assets of the business in order to raise finance.

It is normally the case, that internal sources of finance are not sufficient to fund the total current and future planned expenditure of a business, and therefore the business must look externally for potential sources of finance. We can further segment Sources of Finance into those that address Short-Term Finance needs arising out of working capital requirements, Medium-Term Finance normally involving borrowing over a period greater than one year and less than five years, and Long-Term Finance capital required for a period of borrowing exceeding five years. In the following section we will consider external sources of short, medium and long-term finance.

Sources of Short Term Finance Trade Credit represents one of the main sources of short-term finance for a business, current assets such as raw materials may be purchased on credit with payment terms normally varying from between 30 to 90 days. As such, trade credit represents an interest free short-term loan, and constitutes approximately 60%, of current liabilities in the average non-financial business ( this percentage is often far higher for small businesses ). In a period of high inflation there are clear advantages to purchasing via trade credit, however these advantages must be weighed against the discount incentives suppliers offer for early payment.

Overdrafts are the most important source of short-term finance available to businesses. They can be arranged relatively quickly, and offer a level of flexibility with regard to the amount borrowed at any time, whilst interest is only paid when the account is overdrawn. In comparison loans normally involve higher rates of interest, and are inflexible in terms of the emphasis they place regular installment payments being made.

Factoring Instead of waiting for customers to pay invoices within the payment period, a company may enlist the services of a Debt Factoring firm. The factoring company provides the business with a percentage of the face value of the invoice, commonly 80%, within days of a invoice being raised. The factoring company then assumes responsibility for collecting payment of the invoice, on receipt of payment the factor will pay the business the remaining 20%, whilst charging a fee for the service they provide. There are many firms offering this service, one example being Independent Commercial Finance Limited, whose site also includes an interest calculator.

Sources of Medium Term Finance Leasing enables a business to acquire the use of assets such as plant and machinery without having to pay large sums of money for ownership of the equipment, initially. Instead a business simply leases the equipment from a leasing company who retain ownership. There are two main forms of lease in the UK, an Operating Lease, in which the company pays for use of the equipment for a set period of time after which it is returned to the leasing company, or a Finance Lease, where at the end of the lease period there is the option to purchase the equipment outright for a further nominal amount.

Whilst leasing does not inject money directly into the business, and in the long term usually costs more than buying the equipment outright, in cash flow terms its an effective method of a business getting the equipment it needs when its cash flow is tight. There are many examples of companies that offer leasing services to businesses, one example is the leasing-network, whose site also includes a neat little lease calculator.

A hire purchase agreement enables a business to purchase ownership of plant and machinery from a supplier, by paying by installments to a third party, a finance house. The buyer will normally place a down payment with the supplier who will then deliver the equipment, the finance house then pays the supplier the remaining amount owed for equipment, collecting installments from the buyer over a set period of time for this amount plus interest. Hire purchase agreements are curious creatures, in that ownership of the equipment first passes to the finance house, and will not pass to the buyer until the last installment is paid. If the business fails to pay installments the equipment will be repossessed by the finance house.

Sources of Long Term Finance The most important source of long-term finance for a limited company is usually that raised from shareholders, the owners of the business. Share Capital is raised through the sale of shares to individuals or institutions, who in return for their investment receive interest in the form of a dividend, which constitutes a share of the profits made by the business. In addition the shareholder may be able to make a Capital Gain on their invest by selling their share holding at a latter date. Dependent on the type of Share, the shareholder will also have certain voting rights. There are two main types of Share, the Ordinary Share and the Preference Share.

The majority of Share Capital will be raised through the issue of Ordinary Shares. Ordinary Shareholders, are the legal owners of the business, and are entitled to full shareholder voting rights at meetings - the Annual General Meeting (A.G.M.), or at Extra-Ordinary General Meetings (E.G.M.s). They are entitled to receive returns out of the companies profit, in the form of Dividends. Unfortunately dividends are not guaranteed on ordinary shares, and are dependent on the performance. Thus if the business has had a particularly poor year, the Directors of the company may decide that a dividend is not paid to the ordinary shareholder. There is considerable risk involved in being an Ordinary Shareholder / Owner of a business, particularly if the business is declared insolvent, however in good years the dividend, and potential Capital Gain may be high enough to justify this risk.

Preference Shares фre designed for investors who do not wish to take the degree of risk associated with being an ordinary shareholder. They offer a guaranteed dividend, although this fixed level of return can potentially be less than that received by an Ordinary Shareholder. Preference Shareholder are not strictly owners of the business and therefore have limited voting rights, in comparison to the Ordinary Shareholder.

Retained Profit A major source of long-term finance for a business is retained income, profit, which is not distributed to the shareholders in the form dividends at year end, but instead retained within the business. The amount of profit retained by the business over the years can be seen in the Profit & Loss Reserve on the companies Balance Sheet. One of the advantages of this form of internal finance is that it costs far less when compared to external sources of finance which will normally require additional interest. Further, the business is not answerable to any additional external financial institution for the use to which they put such funds.

Finance which is generated through external borrowing over the long-term is often referred to as Loan Capital.

Main Types of Loan Capital

Debentures are normally associated with limited companies. A business will offer potential investors the opportunity to invest in the company through the purchase of debentures which are divided into units, similar in principle to shares. The investors, called debenture holders, are deemed as creditors to the business and not owners, and will receive interest payments from the company until, at an agreed date, the loan is redeemed, paid back in full. Most debentures are Secured, in that the holder of the debenture will have claim over either specified assets of the business should the business default on interest payments, or claim over general assets of the business up to the value of the debenture loan.

Mortgages Business may take out mortgages to purchase assets such as land and buildings. The land and buildings concerned are the security for the loan, should the business default on repayments, fail to back repayments. If the value of the land / buildings concern increases during the period of the mortgage, or the mortgage incorporates a period of fixed interest - and interest rates rise, this reduces the real cost of borrowing for the business.

Venture Capital Venture Capitalists offer capital, normally Ј100,000 plus, to business ventures which other financial institutions / investors might consider too risky. Usually the Venture Capital firm will require shares in the business and influence in the running of the company at a strategic level, to protect their investments, normally in the form of a non-executive position on the board. Their aim is to see the value of their shares in the business grow, so that at some latter date they may sell their interests in the business at a profit. Often this may involve the business being floated on the stock-exchange.

Business Angels 'Business Angels' are private investors, who invest directly in private companies in return for an equity stake and perhaps a seat on the company's board. Investments are normally in the region of Ј10,000 to Ј100,000. The main motivation for the Business Angel is the potential capital gain from their investment. However many Business Angels also invests to help businesses they believe in, and play a part in the entrepreneurial process. It is often the case that the Business Angel is, or was, involved in running their own business venture, and the company can gain from their experience.

25. What is financial analysis of a firm for?

Financial analysis refers to an assessment of the viability, stability and profitability of a business, sub-business or project. It is performed by professionals who prepare reports using ratios that make use of information taken from financial statements and other reports. These reports are usually presented to top management as one of their basis in making business decisions. Based on these reports, management may:

• Continue or discontinue its main operation or part of its business;

• Make or purchase certain materials in the manufacture of its product;

• Acquire or rent/lease certain machineries and equipments in the production of its goods;

• Issue stocks or negotiate for a bank loan to increase its working capital.

• other decisions that allow management to make an informed selection on various alternatives in the conduct of its business.

Goals Financial analysts often assess(оценивать) the firm's:

1. Profitability- its ability to earn income and sustain growth in both short-term and long-term. A company's degree of profitability is usually based on the income statement, which reports on the company's results of operations; 2. Solvency- its ability to pay its obligation to debtors and other third parties in the long-term; 3. Liquidity- its ability to maintain positive cash flow, while satisfying immediate obligations; Both 2 and 3 are based on the company's balance sheet, which indicates the financial condition of a business as of a given point in time. 4. Stability- the firm's ability to remain in business in the long run, without having to sustain significant losses in the conduct of its business. Assessing a company's stability requires the use of both the income statement and the balance sheet, as well as other financial and non-financial indicators.

Methods Financial analysts often compare financial ratios(пропорция, коэффициент) (of solvency, profitability, growth...):

Past Performance: Across historical time periods for the same firm (the last 5 years for example), Future Performance: Using historical figures and certain mathematical and statistical tehcniques, including present and future values, This extrapolation method is the main source of errors in financial analysis as past statistics are poor predictors of future prospects. Comparative Performance: Comparison between similar firms.

Comparing financial ratios are merely one way of conducting financial analysis. Financial ratios face several theoretical challenges:

They say little about the firm's prospects in an absolute sense. Their insights about relative performance require a reference point from other time periods or similar firms. One ratio holds little meaning. As indicators, ratios can be logically interpreted in at least two ways. One can partially overcome this problem by combining several related ratios to paint a more comprehensive picture of the firm's performance. Seasonal factors may prevent year-end values from being representative. A ratio's values may be distorted as account balances change from the beginning to the end of an accounting period. Use average values for such accounts whenever possible. Financial ratios are no more objective than the accounting methods employed. Changes in accounting policies or choices can yield drastically different ratio values. They fail to account for exogenous factors like investor behavior that are not based upon economic fundamentals of the firm or the general economy (fundamental analysis) .

26. What is a financial administration of a firm?

The Financial Administration Division is responsible for the overall fiscal management, accounting, and financial reporting for the Department. The Division's other functions include budgeting, payroll, purchasing, facilities management, mail operations, records retention, bond accounting and investment activities. The Division is also responsible for the coordination of information and planning relating to the state budget / appropriations process. The annual financial audit, conducted by an independent auditor, is facilitated through the Financial Administration Division.

25