The Medias Dumber Democracy Essay - 1557 Words

For the average American there is no escape from mass media. It can be found within our news papers, movies, television and internet, which account for most of our news and entertainment source. In Michael Parentis book, Make Believe Media, the Politics of Entertainment, Parenti attests that this mass media clouds our societys perception of reality by propagating prefabricated images that create and validate a superficial ideological world. Unfortunately, people are denied the opportunity to obtain and interpret information, which impacts our society, by media conglomerates that wish to keep their industry profitable and on the rise. Effectively, the American publics information and entertainment sources are controlled by some ten†¦show more content†¦Thus our notion of people, places, public policy, and even the world can be shaped by the ongoing storytelling within our news and entertainment media. Both children and adults are consumed by the storytelling of those few conglomerates that make up the media industry. While much of the American public is aware of the medias influential power over our society, many believe they are immune to these influences and therefore underestimate the actual effects it can have within our lives. Parenti believes media can even influences these immune Americans through the ideal of political entertainment. This ideal embodies a media with subtle hints of various political, cultural and systematic views that are embedded with in a programs or movies characters, contents or plots. While this influence may be indirect, much of it goes undetected by the wary public who claim immunity from such media. Furthermore, Parenti argues that such critiques of influential media by the wary public are biased in themselves, stating that, this editing is itself partly conditioned by the previously internalized images fed to audiences by the same media they are now viewing. Ultimately things ranging from style and social status, to love and relationships and even to our per ception of foreign culture is all influenced by media and its conglomerates. They are the ultimateShow MoreRelatedAnalysis Of Divided We Now Stand Essay1169 Words   |  5 Pagesmindset? Democracy doesn’t. Thus, our current government hinders in growth and productivity. The government is dysfunctional because its members focus on the like-minded beliefs of their prideful groups instead of being focused on the process of fixing government issues and approving policies. Although tribalism affects government officials it affects American citizens as well. Cass R. Sunstein author of â€Å"How Facebook Makes Us Dumber† uses data from a study that proves that social media users createRead MoreThe Common Core Standards Of The United States1912 Words   |  8 Pagescountry has been meticulously shaped to provide the world with the most knowledgeable and potentially successful citizens possible. From the beginning of adulthood, which is associated with the age of eighteen an d the ability to participate in the democracy our country stands for, young people have difficulty obtaining jobs without a diploma from a university. The standards aim to fulfill the necessary prerequisites of colleges, workforce training programs, and employers (â€Å"Frequently Asked Questions†Read MoreAmerican Popular Culture and Its Impact in a Globalized World8501 Words   |  35 Pagesexplained? Popular cultures influence in the world is different depending on the region. The larger question therefore is whether Americas dominance is due to the intrinsic strength of its culture Ââ€" its sheer flair and energy, its incarnation of democracy itself as marketable entertainment, its forging of a new international language (Rockwell 1994) Ââ€" or is it merely a function of Ameri-can military and economic domination, or capitalism run amok? Certainly, some of Americas success is due to aggressiveRead MoreDeveloping Management Skills404131 Words   |  1617 PagesInterior Design: Suzanne Duda and Michael Fruhbeis Permissions Project Manager: Shannon Barbe Manager, Cover Visual Research Permissions: Karen Sanatar Manager Central Design: Jayne Conte Cover Art: Getty Images, Inc. Cover Design: Suzanne Duda Lead Media Project Manager: Denise Vaughn Full-Service Project Management: Sharon Anderson/BookMasters, Inc. Composition: Integra Software Services Printer/Binder: Edwards Brothers Cover Printer: Coral Graphics Text Font: 10/12 Weidemann-Book Credits and acknowledgments

An Aristotelian Analysis of Othello - 1922 Words

Hansen Jiang Ms. Prendi ENG3U1 July 19, 2014 An Aristotelian Analysis of Othello A tragedy is an event causing great suffering, destruction, and distress. Considering Aristotelian beliefs, a tragic hero is a great character whose character flaws eventually lead to their fall. Aristotle’s writing is indicative of what he believed to be a tragic hero, and the character Othello possesses each quality, meaning he is a successfully written tragic hero. He is of high status and nobility, both in position and character. However, this status does not make him perfect- he has flaws. As well, Othello has tragic flaws, which lead to his downfall and make it partially his fault. However, the tragedy which ensues is not entirely of loss, as the†¦show more content†¦He reveals this when Iago pushes him to believe of Desdemona’s infidelity- â€Å"Haply, for I am black and have not those soft parts of conversation that chamberers have, or for I am declined into the vale of years—yet that’s not much—† (III.iii.304-07). These inse curities prove Othello to be an imperfect character, and in his imperfections we can connect to him. As a result of these imperfections, Othello’s downfall is not entirely attributed to Iago, but also to himself. Othello’s hamartia, or tragic flaw, leads to a series of tragedies which he himself causes. The story of Othello reveals that the character has multiple tragic flaws. One of the major ones is his poor sense of judgement. Othello trusts â€Å"Honest Iago† (I.iii.336) because of Iago’s clever wording and acting. He believes Iago is telling the truth though he may not be, and trusts his word beyond his trust for others, such as Cassio, or even his love for Desdemona. As well, he constantly reminds Iago and the audience of his trust- â€Å"A man he is of honesty and trust.† (I.iii.323), â€Å"Iago is most honest.† (II.iii.7), â€Å"Thy honesty and love doth mince this matter† (II.iii.263), â€Å"And for I know thou’rt full of love and honesty† (III.iii.136), â€Å"O brave Iago, honest and just,† (V.i.34), etc . Iago explores Othello’s insecurities, and Othello’s willingness to believe Iago is, at the very least, partially his own fault. Another tragic flaw Othello suffers is a result of trusting Iago- his insecurities and hisShow MoreRelatedThe Self Defeat of Heroes in Shakespeares Tragedies: A Character Analysis of Hamlet and Othello1495 Words   |  6 PagesThe Self-Defeat of Heroes in Shakespeares Tragedies: A Character Analysis of Hamlet and Othello Introduction Aristotle asserted that all tragic heroes had fundamental flaws that were the source of their undoing, and that were typically the source of their initial success, as well. Oedipus thinks he acts with justice, wisdom, and the assurance of success, and these things also cause him to completely destroy himself when he discovers the truth of his situation, as one prominent example. TheRead MoreA Scrutiny of Othellos Character as a Tragic Hero2197 Words   |  9 PagesIn Othello, the Moor of Venice, the titular character, Othello, is the protagonist and subject to scrutiny as to whether or not he is a tragic hero in the conventional Aristotelian definition of the term. Aristotle believed a tragedy served to exercise the mature citizens moral sensibilities (Ferrari, 1999, p. 181). There are several different components of Aristotles definition of a tragic hero, which essentially serve as a set of criteria to determine whether or not Othello truly is a tragicRead MoreWilliam Shakespeare s Othello, The Moor Of Venice1776 Words   |  8 Pagesevent that alters his fortune from good too bad. William Shakespeare’s play, Othello, the Moor of Venice is classified as an Aristotelian classical tragedy based on the guidelines Aristotle sets when examining a tragedy. Othello is a general in the Venetian army, and the husband of Desdemona, and well respected by society. The play describes how Othello’s fate has an undesirable change in fortune, the reversal. In brief, Othello is portrayed as a happy, powerful man in the beginning of the play, and byRead MoreShakespeares Use of Aristotles Guidelines to Tragedy in Creating the Play Othello1572 Words   |  7 Pagesof its ability to bring the viewer into the drama and feel for the characters, especially the tragic hero. This analysis of tragedy was formed by the Greek philosopher Aristotle, and also noted in his Poetics (guidelines to drama). As a playwright, Shakespeare used Aristotle’s guidelines to trag edy when writing Othello. The play that was created revolved around the tragic hero, Othello, whose tragic flaw transformed him from a nobleman, into a destructive creature, which would inevitably bring himRead MoreAristotle And William Shakespeare1781 Words   |  8 Pagesis an Aristotelian tragedy that displays the ideal plot of murders taking place at the castle. MacBeth is the tragic hero that began as noble warrior who turned into a murderer. MacBeth’s flaw is his deceitfulness and determination of being king leads to his failure and faces death. MacBeth’s life ends just as the lives that he took by murder and deceitfulness. His evil actions destroyed him in the end. Aristotle’s work is depicted in other tragedies written by Shakespeare. Othello is anotherRead MoreThe Obsessive Nature Of The Love Felt By Othello, By William Shakespeare2617 Words   |  11 Pagesthree texts seem to contain a fundamental principle which acts as a barrier for ‘love’ – whether it be religiously, culturally or evolutionary. Firstly, it is difficult to identify the obsessive nature of the love felt by Othello, at the beginning of William Shakespeare’s Othello, as his love towards Desdemona could be interpreted as ‘agape’ or certainly be seen as unconditional since the couplet persistently demonstrate a meaningful, more philosophical love towards one another. When used by Christians

Critical Thinking Strategies in Decision Making Free Essays

Critical thinking is the mental process of actively and skillfully conceptualizing, applying, analyzing, synthesizing, and evaluating information to reach an answer or conclusion (Dictionary. com, n. d. We will write a custom essay sample on Critical Thinking: Strategies in Decision Making or any similar topic only for you Order Now ). Critical thinking has two basic components: a set of information and belief generating and processing skills, and the habit of using those skills to guide behavior. Other aspects of critical thinking include working out situations and dilemmas, answer questions, and settling issues that are essential to ones welfare and interests. Thinking happens in every situation in every aspect of life. â€Å"The best thinkers use their ability to think well in every dimension of their lives† (Paul Elder, 2006). Critical Thinking Steps Critical thinking is used in all dimensions of life whether in personal situations or work related situations. Most of the time in personal issues people are more apt to make decisions that will benefit them more in the end. In work related issues, people tend to make decisions that will benefit the majority of everyone involved. Critical thinking is vital in the decision-making process when coming up with new ideas and finding the different point of views. As a critical thinker, there are a few steps while thinking. First, is to raise important questions and issues. Second, is the assembly and evaluation of significant information. Third, is coming up with well thought out answers, analyzing the answers with different outcomes and scenarios. Lastly, a critical thinker must keep an open mind and have the ability to consider all possible conclusions. If a problem arises, a critical thinker will have the ability to communicate well with others to gain a better perspective on the situation at hand. ? Personal Experience In a personal situation where I had to use critical thinking was in regards to my divorce. I had to think about how I would be affected by the decision as well as how my children would be affected by my decision. I had to weigh out the pros and cons of staying married versus getting a divorce. Weighing out the custody was another decision I faced. I wanted what was best for my children, and these decisions were not easy. Discussing the options with my ex-husband and being able to make these decisions jointly made things easier for the both our children and us. Work Related Experience Using critical thinking in work has proven beneficial. I worked for a company a few years ago where I held a position in customer care over the telephone. This position presented me with the opportunity to apply my critical thinking skills. When I first started with the company I was responsible for billing, but I decided to apply for a position in developing and maintaining the performance and payroll reporting for the lobby locations. I had an office, independence to complete my tasks without supervision, and had a prime shift – 8 to 5 Monday through Thursday and 7 to 4 on Friday. On the home front, I was able to put dinner on the table by 6 PM, did not bring work home, and was never on call. When the billing services ‘Subscriber Management Systems Specialist’, position was posted, I was very interested, but I had to weigh the benefits of both positions. I developed a table with pros and cons in order to assist with the decision. Based on the results I outlined, I chose to apply for the new position. It meant giving up some personal time with my husband – salary of course, means 40+ hours a week, but the challenge and growth opportunity outweighed the other factors. Had I not applied critical thinking, I would have gone with my gut, which told me to stay in the lobby where I was comfortable. Being able to put emotions aside allowed me to think clearly about a very important decision in my life. Critical thinking is important in decision-making. Some people develop thinking in a â€Å"weak sense† whereas others develop thinking in a â€Å"strong sense†. â€Å"Critical thinkers strive to develop essential traits and characteristics of the mind† (Paul Elder, 2006). I believe that critical thinkers do not allow emotions or bias to determine the outcome of the situation, but will have strong facts to support their position. I believe we all must strive to think at a higher level, and recognize our biases and rise above them to become effective critical thinkers. ? References Critical Thinking. (n. d. ). Dictionary. com’s 21st Century Lexicon. Retrieved December 13, 2009, from Dictionary. com website: http://dictionary. reference. com/browse/critical thinking Paul, R. , Elder, L. (2006). Critical thinking: Tools for taking charge of your learning and your life. Upper Saddle River, NJ: Prentice Hall. How to cite Critical Thinking: Strategies in Decision Making, Papers

Lufthansa Analysis free essay sample

The offices are positioned in Deutz, Cologne and main operations are based in Frankfurt. About 2. 8 billion euro was announced for the 2010 revenues. The transport volume was about 1. 8 million tons of cargo and also 8. 9 billion revenues were from ton-kilometers. Those figures make possible the Lufthansa Cargo to be in the forefront of companies engaged in the transport of air cargo. Till now there are 4500 people worldwide that work for this company. Growth of the company As mentioned before the company was founded in 1926, when flying wasn’t even percept. However times changed and it become very important transportation method. The company started to grow too. Although, it developed with high steps the seventies announced two oil crises, which resulted in a huge economy decline. Lufthansa Group found it very difficult to gain with that kind of crisis. However, the engineers applied methods to reduce fuel consumption and succeed. In 2001, Lufthansa’s focus was on innovation and quality. Since 2001 till 2005 crises of aviation industry occurred. The program called â€Å"Future European Operation† played crucial role in the remaining Lufthansa on the ascent. The 50th anniversary of Lufthansa took place in 2005. SWISS integrated in Lufthansa Group as an independent airline to consolidate Lufthansa’s position among Europe’s leading network carriers. Three years after, Lufthansa created new prospective for Germany’s future as a business location. The Lufthansa Aviation Centre became an architectural flagship. In addition, it becomes partner of Star Alliance. Rivalry among existing firms The main competitors of Lufthansa Airlines are DAX, British Airways and Air France. The competitors to Lufthansa Technic are on the one hand the original equipment manufacturers (OEMs) of aircraft, engines and components. They are joined by other airlines that offer maintenance services, such as Air France-KLM, as well as independent contractors (e. g. ST AERO, SR Technics). This competition is getting tougher, as new  MRO  capacities enter the market and increase price pressure, while cost and margin pressure on the airlines remains high. Lufthansa Technic quickly introduced programs to counteract this, by making capacities more flexible, cutting costs and increasing efficiency. The cost advantages of emerging economies are responsible for continued price decline and thus a trend towards shifting certain activities abroad. Combined solutions like those already offered by Lufthansa Systems in the airline sector are also becoming progressively significant. Under these conditions competitive cost structures and the ability to invest in new technological developments are the key success factors. However, the industry is fragmented because the price competition is severe. Concentration The main business for Lufthansa Group is the transportation of passengers. The company concentrates its activities into five strategic business segments: 1- Passenger Airline Group 73% Strengthening the Lufthansa’s position as a leading European premium carrier is the main objective of this segment. The three pillars on which the company resets its growth strategy are: a- Lufthansa is expanding its short and long-haul network in the medium term throw organic growth. This expansion is achieved through the centers in Frankfurt, Munich etc, in interest of cost efficiency. b- Lufthansa is expanding the cooperation with partners. The key role is played by Star Alliance, which opened new market. c- Lufthansa participates in the ongoing consolidation of the airline businesses. Logistics 10% The logistic service provider in the Lufthansa Group is the Lufthansa Cargo. By offering customers time-definite transport service, it is ranked among the largest cargo carries company. The Lufthansa Cargo activities cover these three segments: a- General Cargo with its td. Pro service b- The express segment with td. Flash c- Specials segment with four competence centers It als o operates in the airport-to-airport business, serving almost 300 destinations worldwide. 3- Maintenance Repair Overhaul 10% Technical segment is very important. Lufthansa Technik Group is an independent provider of airplanes technical services. Its portfolio includes the service of maintenance, repair, overhaul, all modifications and the components for commercial passenger planes. Due to innovations it is possible to low the costs and increase efficiency. The group is well-prepared for everything and challenge caused by their competitors. 4- Catering 6% Lufthansa Service Holding AG is the provider of in-flight services. The group is made with 133 companies around the world. Its products and services covers airline catering, in-flight service, airport services, etc. he changing of business strategy was one way to response to the increasing cost pressure and strong competition. It has been achieved according to these strategies: a- Making improvements by focusing on standardization and lean processes. b- Increasing sales beyond airline catering c- Developing partnerships in order to enter in the new markets. d- Appreciating growth potential in nearby markets. About 28499 people are employed in this segment business. 5- IT Services 1% In order to have efficient process management, Lufthansa has developed integrated IT solutions. Lufthansa Systems offer solutions for industries and operators. Their products provide added value for its customers in terms of efficiency. The IT solutions address all the business processes of an airline-from the passengers to the operations. They make possible for customers to optimize the business processes quickly. Long-term project experience is the base for the continuously expansion of this segment. Substitute products Lufthansa as a company operating in the airlines industry has to consider the threat of substitute products. The availability of substitute products in this industry depends on the routes of the flights. The threat might be higher for regional airlines than for international or intercontinental carriers. For regional flights, trains can be considered as a large threat because they show diverse advantages over flying such as: cheaper prices, central location of train stations, no check-ins and more commodities. Another substitute products could be also the use of own cars, but in this case it would be more time consuming, even though it has the advantage of increasing the flexibility of the travellers, the use of buses or even the use of ships. However, for intercontinental or overseas destinations there is no real substitute to flying considering the time needed to reach the destination. In our case switching comes from technology not only from the customers’ willing to switch. Buyers bargaining power Buyers can influence the quality and customer service through; the information that they possess, the volume of the tickets purchased, the brand identity, price sensitivity, buyer’s incentive (Porter’s five forces). On the other hand, these indicate a cost to the seller. In the Lufthansa case study, buyers are not concentrated, meaning there are many buyers and with little market share. Also customers do not purchase large volume of tickets, thus they are weak in this aspect. However, since the airlines industry has experienced many technological changes due to the impact of the Internet, the costumers’ influence on the prices has relatively increased. This happened because buyers can now switch easily among other alternatives when they browse the Internet for tickets purchasing without using an intermediary. They also benefit from network connectivity and number of destinations. In addition, the effects of previous plane crashes or 9/11 has made the customers to switch in other means of transportation such as trains. The price of a plane ticket is usually much more expensive than that of a train so the demand is rather elastic for most of the buyers. In the contrary, buyers can have less power when the airlines arrange prices among each other until there is a price war. Suppliers bargaining power The supplier’s power is also known as the market of inputs because it is composed of the labor services raw materials etc. In order to analyze hether the suppliers are weak or powerful, we should study the components of Lufthansa. The manufacturers of aircraft and fuel suppliers are the main components of Lufthansa suppliers. Since April 2011 Lufthansa has used agro fuel blend by Finnish oil and Neste Oil. However Neste Oil is the only company worldwide which produces large quantities of jet fuel from plant oil, especially palm oil. This is what makes Lufthan sa special. Also, LSG Sky Chefs and Lufthansa Technik are external and internal suppliers which have been included in joint projects to cut costs. On May 2011 Fokker Airinc was awarded as the â€Å"Excellent Supplier† by Lufthansa Technik. The Fokker aircraft is characterized by advanced technologies, low noise level and durability. On one hand the suppliers are powerful, because aircraft that operate in a long distance cannot be substituted by others. On the other hand the fuel suppliers share also strong bargaining power as they can raise the fuel prices. Firm’s competitive strategy When we analyzed the industry where Lufthansa and its main rivals operate we emphasized the importance that the industry structure has over a company’s profit potential. Through the model of five forces of Michael Porter, we investigated the opportunities offered airlines industry. But the profitability of a firm is influenced not only by the structure of the industry in which the company operates, but also it is influenced by the strategy the company uses to position itself in the market. There are two main competitive strategies: 1. ) cost leadership and 2. ) Differentiation. Lufthansa’s competitive strategy is based on cost-leadership. After being privatized, they realized the pressure of competitiveness, so they focused more on the strategically cost effective even more. Therefore, Lufthansa continues this revolution stage by implementing The Strategic Cost-Management Programme ‘15’, which intended to reduce overall unit cost by 20% within five years. Lufthansa’s cost leadership strategy is based on three main pillars that leads to strategic vision: 1. ) Cost flexibility – reduces share of fixed expenses, 2. ) Responsiveness – fast capacity adjustment, 3. ) Opportunities – secure markets, deploy for the economic revival. These three pillars help to navigate successfully through crisis times. While being more concentrated on internal costs and structural redevelopment, Lufthansa has worked more on its external relationships by executing the strategy: ‘growth through partnerships’. Thus, founding the STAR ALLIANCES was a logical consequence. The purpose of this partnership is to provide higher revenues and decrease costs by exploiting synergy effects. If parts of the Lufthansa were to merge with parts of other companies under the STAR ALLIANCES name, costs would reduce persistently and they would not be just a profitable company but also very competitive. Some parts of the STAR ALLIANCES that corporates to provide a successful company, leader in the market, are: 1. Lufthansa Cargo AG 2. Camp;N Tourism 3. LH Technik AG 4. Lufthansa LSG SkyChefs 5. GlobalGround 6. Lufthansa Systems GmbH 7. In All Areas Lufthansa remains on solid strategic track, continuously struggling for efficiency and higher quality. So, it also pays attention to the differentiation its products. It tries to provide differentiated products by catering service and one specialty of this airline company is trying to be always on time, not laying-off. Until now its strategy has proven to be successful, but the future will show if changes will be necessary in its competitive strategy. The main challenge of Lufthansa is currently facing is how to maintain the awareness of the crisis and the openness for changes. Lufthansa has developed strategies to overcome threats and work on eliminating its weaknesses in order to stay ahead of competition. However Lufthansa is more based on differentiation rather than on cost leadership because its tickets’ prices are quite high compared to the low-cost airlines’ tickets. Accounting Analysis The consolidated financial statements of Deutsche Lufthansa AG, Cologne, and its subsidiaries have been prepared in accordance with the International Financial Reporting Standards (IFRS). The method applied in the consolidated financial statements is historical cost. In 2010 the company experienced some changes in the reporting standards, thus previous years’ figures have been calculated as if the amended standards had already been applied last year. The other standards and interpretations applied after 2010 did not have a significant influence on the Group’s net assets, financial and earnings position in the reporting period. Revenue and other operating income are recognized when the service has been provided or when the risk has passed to the customer. Operating expenses are recognized when the product or service is used or the expense arises. Provisions for guarantees are made when the corresponding revenue is recognized. Interest income and expenses are accrued in the appropriate period. Dividends from shareholdings not accounted for using the equity method  are recognized when the legal claim has arisen. Annual impairment tests applied to goodwill are carried out using recognized discounted  cash flow methods. This is done on the basis of expected future cash flows from the latest management planning, which are extrapolated on the basis of long-term revenue growth rates and assumptions with regard to margin development, and discounted for the capital costs of the business unit. Tests are performed at the cash generating unit (CGU) level. The annual financial statements of foreign Group companies are translated into euros in accordance with the functional currency concept. Assets and liabilities are translated at the middle rates on the balance sheet date. Income statements are translated at the average exchange rates for the year. These translation differences are recognized directly in shareholders’ equity without effect on profit or loss. Goodwill from capital consolidation of foreign subsidiaries prior to 2005 is carried at historical cost net of amortization accumulated by the end of 2004. Goodwill arising since 2005 has been recognized in the currency of the company acquired. Transaction differences, however, are recognized in profit or loss. These differences arise in the financial statements of consolidated companies from assets and liabilities based on a currency other than the company’s functional currency. Any resulting exchange rate differences are included in other operating income as foreign currency transaction gains, or in other operating expenses as foreign exchange losses. Acquired intangible assets are carried at cost, internally generated intangible assets from which the Group expects to derive future benefit, and which can be measured reliably, are capitalized at cost of production and amortized regularly using the straight-line method over an estimated useful life. Tangible assets used in business operations for longer than one year are valued at cost less regular straight-line depreciation. The cost of production includes all costs directly attributable to the manufacturing process as well as appropriate portions of the indirect costs relating to this process. In addition to amortization and depreciation on intangible assets and property, plant and equipment,  impairment  losses are also recognized on the balance sheet date if the asset’s recoverable amount has fallen below its carrying amount. The recoverable amount is determined as the higher of an asset’s fair value less costs to sell, and the present value of the estimated net future cash flows from continued use of the asset (value in use). Property held exclusively for letting to companies outside the Group is classified as investment property and recognized at amortised cost. Equity investments accounted for using the  equity method  are capitalized at cost at the time of acquisition. Financial assets are classified within the Lufthansa Group as â€Å"at fair value through profit or loss†, â€Å"loans and receivables† and â€Å"available-for-sale financial assets†. Inventories include non-repairable spare parts, raw materials, consumables and supplies, purchased merchandise and advance payments made for inventories. They are measured at cost, determined on the basis of average prices, or at production costs. Individual, formerly non-current assets or groups of assets which are expected to be sold within the next twelve months are measured at the lower of their carrying amount at the time they are reclassified and fair value less costs to sell. Liabilities in foreign currencies are measured at the exchange rate on the balance sheet date. Quality of disclosure When analyzing the quality of disclosure for Lufthansa, we can say that there is a lot of transparency in its financial statements. The company gives detailed information about its operations, products and services. In the annual report for 2010 we can find not only information about the Management and the financial performance, but also letters to the Shareholders, which clarify the company’s conditions, making a description of the actual situation and future plans. In these letters are mentioned not only the positive developments of the company, but also the negative consequences of certain phenomena; such as the world financial and economic crises or other human and natural disasters like the volcanic eruption in Iceland and the ilots’ strike, which had negative impact on the profits of the company. Their reaction to bad news and situation is reported in their sites. In order to remain in the top of airlines companies they are using strategies to overcome not only world financial crisis, but they take preliminary measures for unpleasant surprises. Important elements are also the footnotes to expl ain changes and calculations made in balance sheet and other company operations. There are footnotes about losses and revenues resulting from different expenses that this company is doing annually. Lufthansa controls air traffic operations on the basis of network results not on the base of regional earnings contributions. The same applies to the catering service. The information on the Passenger Airline Group business segment and Logistics segment in the management report includes a presentation of traffic revenue generated by traffic region, rather than by original location of sale. It provides facilities to customers to book flights throught internet with competitive prices. All this information is reflected in its official website and brochures. Red flags Lufthansa is not a large company; hence, it is not very difficult for it to maintain control over its statements. This has result in a decrease of the potential â€Å"red flags† that can arise. Moreover, it’s based on only one country making it easier to report almost all the data. However there is always room for any red flag. One of the red flags is that the tax rate has declined comparing to the previous year. It was (129. 00) in 2009 and has gone (165. 00) in 2010. However this is not something to worry, because tax rates tend to increase up to normal level in the long run. A low tax rate might result in an artificially high reported profit. Since the company offers its service in nearly all over the world, it has to work with different currencies. At the end it has to translate all the operations into the Euro. This fact may result in a risk because if the Euro has depreciated towards that currency, it looks like it has made more sales but in fact it’s the currency who has appreciated. This is a potential red flag for all the companies that have a substantial amount of their trade with other countries, and for Lufthansa is particularly true since it operates in many countries around the world. Another red flag is that the current ratio is below 2. 0, which means that the company might experience difficulty paying its bills or keeping up with its payments to vendors, suppliers and contractors. This is something to worry about because it is not a cash-and-carry company (grocery store) that held few current assets. Financial Analysis Financial analysis is the best way to understand if the Lufthansa Airline’s growth is sustainable and if that company is increasing its profits. Also we want to know if this company makes an effective use of its resources. Evaluating the performance of a company based on its goals and objectives, is the duty of financial analysis. An important element that gives us an overview of how independent items of one firm are related to each other in order to play role in the growth of the company is ratio analysis. There are several tools that mangers can use to increase profitability of the firm: * Operating management * Investment management * Financing strategy * Dividend policy In order to make those words more concrete and to understand better the ratio analysis we will compare our company â€Å"Lufthansa† with another airline company â€Å"British Airways†. We chose â€Å"British Airways† because it is one of the strongest competitors of Lufthansa. Even though Lufthansa is one of the companies that offer the best service to its customers, it is necessary for us to analyze and see whether that company is really in better situation than its competitors. Moreover we want to know if that company gives investors good reason to invest on it. 1) PROFITABILITY RATIOS Return on Equity (ROE) ratio ROE is the ratio that gives us an overview of the profitability of the company because it provides an indication of how well managers are using the funds invested by firm’s shareholders to generate returns. In order to calculate that ratio we need to have the values of â€Å"net income† and â€Å"shareholder’s equity† Lufthansa | 2009| 2010| Total Net Income| (34M)| 1. 13B| Shareholder’s Equity| 6. 202B| 8. 340B| ROE| 65%| 43%| ROE is decreased from 2009 to 2010 so we can say that the efficiency of the company has decreased. This reduction of ROE came as the result of the raised of shareholders equity, which was much higher in 2010 due to the increased retained earnings. If we make an average of ROE for at least three years we can see that it is about 44. %. On the other hand, British Airways Company has a ROE 2010=66. 39% and in 2009 the ROE was 52. 25% so it increased. Also we did an average ROE for the latest three years and we observe that it was 47. 45%. ROE is affected by the profitability of the assets that are used and by the size of the firm’s asset relative to shareholders equity. Shareholders equity=assets-liabilities, which gives us what th e firm owns including short- and long-term debt. Thus, the more debt the company has, the less equity it has, the higher will be the ROE ratio. Furthermore, we know that ROE itself can be decomposed into: * Return on Asset (ROA) * Financial Leverage ROA can be decomposed further into: * Net Profit margin * Asset turnover Net profit margin ratio Net Profit margin comes out from income statement and shows the profitability of the company’s operating activities. It indicates how much the company is able to keep as profits for each dollar of sales it makes. In order to compute Net Profit margin ratio we need figures like â€Å"total net income† and â€Å"total sales†. Lufthansa | 2009| 2010| Total Net Income | (34M)| 1. 13B| Total Sales| 22. 8B| 27. 32B| BA| 2009| 2010| Total Net Income | (86M)| 1. 27B| Total Sales| 68. 28B| 64. 31B| Net Profit Margin| Lufthansa| BA| 2009| 0. 153%| 0. 126%| 2010| 4. 14%| 1. 97%| From what we said before, for each dollar of sales Lufthansa keeps $0. 0414 as earnings. As the net profit does have high levels of differentiation we can say that the company has been using the same business strategy. It also important to keep in mind that earning of the company does not reflect the true situation in which it is positioned because an increase in earning doesn’t mean a surely increase in net profit margin. For example, if the company has costs that are greater than sales, we would have a lower net profit margin. That is an indication that costs should be under a better control. Now we did an average of net profit margin for both companies. | Lufthansa| British Airways| Average Net Profit margin| 2. 15| 0. 922| Asset turnover ratio Asset turnover is a ratio that measures the efficiency of a firm by seeing how it uses assets in generating sales or revenues. The higher that ratio is the better is the company because it means that the firm is using its resources in an appropriate way. Moreover it points out a pricing strategy since companies that have high profit margins definitely have low asset turnover and vice-versa. The key figures in computing this ratio are â€Å"total sales or revenues† and â€Å"total assets†. Lufthansa | 2009| 2010| Total Revenues| 22. 28B| 27. 32B| Total Assets| 26. 39B| 29. 32B| | Lufthansa | British Airways| Asset turnover 2009| 0. 85| 0. 86| Asset turnover 2010| 0. 93| 0. 75| As we see the asset turnover ratio in 2010 has increased different from British Airways, which shows a decreasing of this ratio. As e result we can say that Lufthansa has used its assets more efficiently. Return on Equity (ROA) ratio ROA is a ratio that indicates how much profit a company is able to generate for each dollar of assets invested. As the result the higher the level of this ratio is, the better is for the company. Lufthansa | 2009| 2010| Net Income| (34M)| 1. 13B| Total Assets| 26. 39B| 29. 32B| | Lufthansa| British Airways| ROA 2009| 1. 3%| 4. 64%| ROA 2010| 3. 85%| 2. 28%| The ROA for Lufthansa has increased in 2010, which is also an indicator that the company is doing better. British Airways has not only a lower ROA than Lufthansa but it also has fallen from 4. 64% in 2009 to 2. 28% in 2010. Gross Profit margin ratio The price premium that a firm’s products or services command in the marketplace and the efficiency of the firm’s procurement and production process, are the two important factors that influence gross margin ratio. It is the case when direct costs are linked to the sales. Consequently, if the firm has higher level of gross profit margin than its competitor, than we can say that it is doing better and is more efficient. To compute gross profit margin we need figures like â€Å"sales† and â€Å"cost of sales†. Lufthansa | 2009| 2010| (Operating) Revenue| 22. 28B| 27. 32B| Cost of Sales| 19. 85B| 23. 47B| BA| 2009| 2010| Gross profit margin| 18. 5%| 19. 36%| Lufthansa| 2009| 2010| Gross profit margin| 10. 9%| 14,1%| As we see there is a small the difference between two years. We also computed the average gross profit margin for the latest three years which is 12. 5% and indicates a stable macroeconomic environment. | Lufthansa | British Airways| Average Gross Profit margin| 12. 5%| 18. 86%| By this comparison we has achieved in the conclusion that the British Airline is doing better. Also we can understand that this company has set aside more money that can be spent on other business operations; like, marketing or Ramp;D (research and development). Moreover, if the level of gross profit margin is high, we can say that the company is efficient in using labor and supply in the production process. If the costs of producing are increased, than the gross margin would be lower. LIQUIDITY RATIOS Current ratio Current ratio is a ratio that tells us if the firm is able to cover all its current liabilities from the cash realized by its current assets. As the result, it is considered a key index of a company’s short-term liquidity. In order for a company to be efficient, the current ratio level must be no less than one. A current ratio less than one indicate that the firm has problems because it is not able to cover all its obligations. As mentioned, we need â€Å"current assets† and â€Å"current liabilities† in order to calculate Current ratio. Lufthansa | 2009| 2010| Current Assets| 8. 7B| 10. 36B| Current Liabilities| 8. 78B| 9. 83B| | Lufthansa | British Airways| Current ratio 2009| 0. 99| 0. 84| Current ratio 2010| 1. 05| 1. 07| For both companies the year 2009 has been difficult to cover their obligations, but in 2010 they have improved their abilities to pay short term obligations. As we see British Airways could raise its current rate more than Lufthansa. Quick ratio Quick ratio like current ratio explains how able the company to cover its liabilities is. However, since it is more conservative than current ratio excludes inventory from current assets, a slight difference exist among the two. In quick ratio inventory is excluded because most of the firms face difficult to turn their inventory into cash quickly. The problem is created when some obligations need to be paid very soon. Thus there is a situation where the current ratio overestimates a company’s short-term financial strength. Cash, short-term investment, account receivables and current liabilities are the key elements needed for calculating quick ratio. Lufthansa | 2009| 2010| Cash | 1. 14B| 1. 1B| Short-term investment| 3. 56B| 4. 77B| Account receivables| 2. 04B| 2. 66B| Current liabilities| 8. 78B| 9. 83B| | Lufthansa | British Airways| Quick ratio 2009| 0. 92| 0. 54| Quick ratio 2010| 0. 99| 0. 69| We can see that Lufthansa has done better in the last two years than British Airways, being also more able to turn fast its current assets into liquid cash in order to pay obligations. Debt and coverage ratios The firm’s financial leverage is affected by its debt financing policy, too. There exist some benefits from using debt financing; such as, * Debt is cheaper than equity * Interest on debt financing is tax deductible; on the other hand dividend to shareholders is not tax deductible * Debt financing impose discipline on the way of management * For non-public debt, it’s easier for managers to communicate information on company’s strategies and prospects A firm is said to be in a good position if its debt ratio is less than one, because it shows that it has less liabilities than assets. Lufthansa | 2009| 2010| Total liabilities| 16. 308B| 17. 468B| Total assets| 26. 39B| 29. 32B| | Lufthansa | British Airways| Debt ratio 2009| 41. 86%| 39. 49%| Debt ratio 2010| 40. 86%| 35. 03%| According to the debt ratios, Lufthansa shows a higher level of debt. Even though it has been reduced in the last year, it is much higher than the debt ratio of it’s rival. Liabilities-to-equity ratio This ratio shows that what percentage of equity is used by the company to finance its assets. A high level of this ratio indicates that the company has been aggressive in financing its growth with debt. As the result of the additional interest expense, that can result in a unstable earnings. Lufthansa | 2009| 2010| Total liabilities| 20. 19B| 20. 98B| Total equity| 6. 2B| 8. 34B| | Lufthansa | British Airways| Liabilities-to-equity ratio 2009| 3. 26| 2. 24| Liabilities-to-equity ratio 2010| 2. 51| 1. 77| We also should take into consideration that if we have high debt-to-equity, which means that a huge amount of debt is used to finance increased operations, the company is able to generate more earnings. If those earnings coming from that strategy would be higher, then the shareholders benefit would be higher too. However when the cost of that debt financing increases in a high level that the firm cannot effort, there are lots of chances for bankruptcy. Dividend payout ratio This ratio shows the percentage of earnings paid to shareholders in dividends. Payout ratio provides an idea of how well earnings support the dividend payments. More mature companies tend to have a higher payout ratio. Dividend payout ratio = dividends/net income Sustainable growth rate= ROE*(1- Dividend Payout ratio) | Lufthansa | British Airways| Dividend payout ratio 2009| 64. 59%| 43. 78%| Dividend payout ratio 2010| 48. 6%| 66. 39%| Cash Flow Analysis Each company generates cash from financing activities,  operating activities and investing activities. According to the Cash Flow Statement of Lufthansa Airline Company in 2010, we saw that the cash flows generated from financing activities were (300,000,000)Euro, from operating activities were 3,075,000,000Eur and cash generated from investing were (2,878,000,000). Co mparing with 2009 we can observe an increased of cash flows from operating and investing activities, whereas for financing activities cash flows have been decreased.. In 2009, the cash flows generated from investing activities were (3,563,000,000) Eur. from operating activities were 1,991,000,000 and from financial activities were 1,271,0000,000Eur. As a result we can say that the cash generated from operating activities in 2010 has increased. Concerning the investments activities, the short-term and long-term investments of Lufthansa rose in 2010. The Corporation spent (2,298,000,000) to purchase long-term investments and (580,000,000) for short-term investments. From financing activities, we can notice a decrease of the amount of cash generated. The cause which led to this decline was the financial crisis. Forecasting Forecasted income statement Income statement is that kind of financial statement which indicates how the revenues generated from the sale of goods and services before expenses are taken out is transformed into net income. Differently from the balance sheet that represents the moment of time, income statement represents a period of time. One major element that we saw as crucial when we did the forecasted income statement was net revenues. We based forecasted revenues based on the sales because they are the main contributors to the revenues. Also growth is another element that affects the company’s profits. The percentage sales grow for previous three years are as follows: | 2008| 2009| 2010| Sales Growth in %| 10. 8| (10. 3)| 22. 62| From the table we can see that it is a drastic decline of the sales from 2008 to 2009. This surely might have come due to the well known financial crisis that affected the entire world’s economy. That decrease in sales means that Lufthansa was also affected by that crisis. Since Lufthansa is a kind of company that doesn’t have so many opportunities to differentiate; like an electronic company that can offer new product, the crisis were felt very deep. Another reason is that Lufthansa offering a service rather than an actual product; it concentrates on the amount of the assets rather than inventory. However, 2010 was the most successful year. The high increase in the sales growth might have come as the result of two main factors; such as, recovery of the world economy from financial crisis and the improvements that Lufthansa did in the service quality to satisfy the customers. In order to make the forecasted income statement we were based on the three previous years. We calculated the percentage change of each data we wanted to forecast. Than we did the average of the three years and then we assumed the same value for all the forecasted years. Based on those ratios and percentage changes, we achieved to forecast income statement for the five years. Forecasted BALANCE SHEET In order to make the forecasting for 5 years we first need to use the assumptions of at least the previous three years (average) respectively 2008, 2009, 2010. We make use of the consolidated financial statements in order to proceed with the forecasted balance sheet. We used the invoices of the balance sheet of three years 2008, 2009, 2010 and then we used the turnover ratio to forecast 2011 until 2015. In order to find the turnover ratio for the projected 5 years we use an average of the three years data that we have. For instance, inventory turnover for 2008 was calculated to be 2%, for 2009 was 3% and 2% for 2010. For the proceeding years we made an average of these three numbers, which is approximately 3% and then we put this number as a constant for each of the 5 years. We did the same with Accounts receivable turnover. For 2008, 2009, 2010 the values were respectively 13%, 14%, 13% and the average for the next 5 years was 13% constant. Forecasted cash flow statement Cash flow statement consists of cash flow from operating, investing and financing activities. Thus, to make the forecasted cash flow statement we use a combination of both forecasted balance sheet and forecasted income statement. For evaluating forecasted cash flow from operating activities, it was necessary to make the difference of the balance sheet data (actual year-previous year). On the other hand, forecasted cash flow from investment activities is linked to the capital expenditures which mean funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. The amount of capital expenditures a company is likely to have depends on the industry it occupies. Some of the most capital intensive industries include oil, telecom and utilities. As in our case Lufthansa, has negative level of capital expenditure, as it is an service company and is too linked with the oil, and the oil crisis highly effect the Lufthansa’s position. Changes in account receivable To find the adjusted Account Receivable we calculated it as a change between the A/R in the next year with the A/R in the prior year in the Balance Sheet. We applied this change of two years throughout the actual and forecasted years. A/R forecasted is calculated by multiplying Net Revenue with A/R turnover which is further explained in the forecasted balan ce sheet. b- Inventories We conducted the same calculation to find the change in inventories in the forecasted cash flow statement. Thus we subtracted inventories of the next year with the inventories of the prior year. Interest expense In order to find Interest Expense adjusted we calculated it by multiplying the tax rate which is 25% with the total interest expense which can be found in the income statement. d- Cash flows from operations can be founded by summing the cash flow from operations before interest with the interest. Cash flows from investing are calculated by adding CAPEX with investing cash flow items. These items can be found in the balance sheet. The forecasted CAPEX for 2011-2015 can be found by multiplying the %of CAPEX with the Net Revenues. The % of CAPEX can be found by dividing the CAPEX by Net Revenues in the actual years and then making an average of these data find a constant data for the forecasting years. We also calculated present value of the company in order to find the market value per share. WACC We forecast the free cash flow to firms and discount them by using the weighted average of capital (WACC). The formula for the WACC is: WACC  =  rD  (1-  Tc)*(D/V) +  rE  *(E  /V). All the values for the formula are given in the financial statements of the company, expect re. Firstly, we have to calculate the cost of equity. For the purpose of calculation, we use the CAPM thus: re = rf+ ? (rm-rf). We calculated re=10. 47% or 10. 5%. Another feature of Lufthansa Company is that it does have Debt, which is7,184,000,000, while Equity is 6671603000. So, the WACC=8. 54%. This is the percentage that will be used to discount the forecasted cash flow and as a result to value the company. Valuation We can conduct Valuation of Lufthansa because we have done the forecasting of the financial statements for 5 years. The first method we use is the Discounted Cash Flow Method. Free cash flows will provide us with an estimated share price for the firm. Respectively we have to go through three steps; the first is forecast FCFEE for 5 years, the second is forecast beyond terminal value based on assumption and the third is discount FCFE with the discounting rate which in our case is WACC (weighted average cost of capital) thus 8. 61% as we already calculated. We find the value per share by estimating the future cash flows of the firm for 5 years after 2010 in order to complete the first step. The values of cash flows are as seen in the table. Basically the value of cash flows each are calculated as follows: revenues-operating costs-taxes-net investments-changes in working capital. These values are then discounted by the discount factor which is WACC 8. 61%. For the first year the discount factor will be 1/(1+0. 861) for the second 1/(1+0. 861)^2 and so on for 5 years. The total value of the company for the years 2011 until 2015 is the sum of these values of cash flows, thus Euro 83,079,531,774. 44 We assume that Lufthansa will operate even after 2015 therefore we calculate the terminal value beyond 2015 in perpetuity. This is calculated cash flow of 2015 over (1+0. 0861) whereas the discounted terminal value (in order for us to find its present value) is calculated by discounting this terminal value by its factor that is, (1+. 0861)^5. Now the value of Lufthansa will be the sum of the discounted cash flows from 2011-2015 with the discounted terminal value beyond 2015. The total value after conducting these calculations will be 226,455,658,906 Euros. The value of one stock is calculated by subtracting FCFF with the value of debt and then dividing it by the number of shares outstanding. The value of one stock is 478. 86 compared to the actual value which is 14. 57Euro. Then we use the P/E ratio compared afterwards with that of the industry since this ratio shows the price paid for a share relative to the annual net income. In order to calculate this ratio we use the formula that is: P/E=P/B*1/ROE. P/E has decreased in these past 3 years. This trend means that the lower P/E ratio the less earnings investors are expecting and they will therefore pay lower premiums for the growth. We assumed the growth is 8% since the % increase in sales was also expected to be 8%.