Free Trade Among Developed Economies Research Paper

Free Trade Among Developed Economies - Research Paper Example The question then remains, should these be pursued by more economically developed nations? An example of this would be the North American Free Trade Agreement otherwise known as NAFTA which included Mexico, Canada and the United States in a limited free trade agreement. Unfortunately, this agreement has seen tariff wars occur, in some circumstances causing large deficits. According to one working paper from the California Western School of Law, published 2005. â€Å"In response to U.S. restrictions on Mexican sugar, President Vicente Fox placed a 20% tax on all soft-drinks not sweetened with Mexican sugar. The â€Å"sugar tax† followed shortly after the DSB’s determination in the HFCS case, in which the Body held that Mexico failed to prove HFCS imports were threatening the Mexican sugar industry so as to warrant the imposition of antidumping duties. As a result of the sugar tax, the United States filed another complaint with the DSB† (Vacek-Aranda, 2005). With t he increased taxation and import tariffs being bandied at this time it would seem to nullify the idea of free trade. However, once these disagreements are worked out there is a substantial benefit to be had for the economies of all involved nations. To understand better why free trade is a necessary aspect of international trade among developed nations we should review what a developed nation is. A developed nation is simply a more economically developed country. This term is obviously ambiguous, however, can apply readily to those nations classified as first world nations. Some of those more economically developed countries or MEDC, would be Great Britain, Germany, Brazil, United States, Spain, Denmark and similar. According to a policy brief from International Institute for Applied Systems Analysis dated 2008, â€Å"The scenarios show that investment in education pays off in terms of higher long-term economic growth† ("Economic growth in developing countries: Education prov es key," 2008). This means only that nations with a more solid educational system and opportunities are more likely to be higher developed economic powers. Some arguments against the implementation of free trade agreements do so based on the non-members losses or reductions in ability to trade. However, the argument must be made that the implementation of a free trade agreement is a positive benefit in most cases. Arvind Panagariya et.al. outlines; â€Å"clearly, the initial equilibrium matters since that is crucial to the determination of the absolute level of consumers’ surplus relative to producers’ surplus† (Panagariya & Duttagupta, 2000). Simply put the importance of an equal footing is initially necessary when looking at setting up a free trade agreement. The effects on surrounding nations that are not at the same stage of economic development are important to note as well. Primarily the argument can be made that pollution in underdeveloped nations will li kely increase. An article in American Economic Review dated 1998 says, â€Å"Under the pollution haven hypothesis, poor countries get dirtier with trade, whereas rich countries get cleaner† (Antweiler, Copeland, & Taylor, Sept, 1998). While this can be a detriment globally over time it should be noted that once a

Analysis of Lidls Marketing Strategy | 7Ps, SWOT

Analysis of Lidls Marketing Strategy | 7Ps, SWOT Introduction Lidls history begins in the 1930s, when their first store was created in Germany acting as a grocery wholesaler. Since then, Lidl has now become one of the largest grocery retailers in Europe, with over 600 stores operating in the UK, and thousands based across Europe (Butler, 2014). Although the amount of stores that Lidl have in operation is staggering, it is made even more amazing by the fact they only expanded out of Germany 20 years ago (Lidl, 2015). This rapid expansion has made them one of the most dominant and feared competitors in the UK grocery market, with major grocery retailers constantly trying to minimise Lidls portion of market share. Although Lidls market share in the UK is still relatively small, with them acquiring 3.5% at the beginning of 2015, they are one of the fastest growing grocery retailers. Whilst many supermarkets are losing their market share, Lidls was increased by a stagger 15.1% from 3.1% to 3.5% (FT, 2015). Figure 1 highlights the variation in market share, and how much market share each supermarket currently holds. As previously mentioned, although Lidl have a relatively low market share, they are currently one of the fastest growing retailers in the market. An analysis of Lidls current marketing strategy will be conducted, with particular emphasis on the 7 Ps of marketing. Furthermore, Porters Generic Strategies will be analysed in order to aid in the understanding of Lidls current strategies. This will then be concluded with a SWOT analysis, with recommendations being drawn up via the utilisation of a TOWS matrix. Marketing Strategy Analysis The five core concepts of marketing are; consumer needs/wants/demands, products and services, value/satisfaction/quality, exchanges/transactions/relationships and markets (Kotler, et al., 2008). One of the most efficient ways to analyse these factors is to conduct a marketing strategy analysis, which looks to explore the strategies an organisation utilises in order to grow and expand their market share. 7 Ps Analysis In order to successfully analyse Lidl marketing strategy, a 7 Ps analysis can be conducted, which seeks to analyse some very basic, but significant issues. Originally, the 7 Ps was only comprised of 4 Ps which aimed to address certain issues that would allow a firm to have a more developed understanding of their internal operations. The 4Ps are comprised of; product, price, place and promotion (CIM, 2009). However, due to the limited applicability of the 4 Ps, three more were added to form the 7Ps, which aims to encompass some service qualities the 4 Ps do not cover (Booms Bitner, 1981; Lusch, et al., 2007). Product (Quality, brand name, service line, warranty, capabilities, facilitating goods, tangible clues, price, personnel, physical environment and process of service delivery): Very solid brand name from being one of the cheapest supermarket retailers in the industry. Their main competition as a value supermarket is Aldi (Bosshart, 2006). The products sold in Lidl are often very similar to the goods sold in other supermarkets, such as Tesco or Asda. However, the main distinction would be the different brand names of the products in Lidl stores. Consumers could have a negative perception of the quality of Lidls products as they are sold for such a cheap price (Siro, et al., 2008). Price (Level, discounts and allowances, payment terms, customers own perceived value, quality/price interaction and differentiation): One of the key competitive advantages for Lidl is their clever pricing strategies. Lidl entered the market on the basis of being one of the most value-driven supermarkets in the industry (Dolgui Proth, 2010). All payments are made up before leaving the store at the check outs. As they offer goods at an incredibly cheap price, consumers may believe that the goods they sell are poor quality, however this is generally not the case (Siro, et al., 2008). Place (Location, accessibility, distribution channels and distribution coverage): Lidl have a plethora of stores across the UK and Europe. However, depending on the country, they operate in different segments of the supermarket industry, ranging from value to high-end goods (Butler, 2014). They have a variety of distribution hubs across the UK and Europe to ensure that stores are maintaining a constant level of stock (Brown, 2015). As their business model is to sell as many goods as possible in the shortest amount of time, ensuring stock levels are maintained is incredibly important. This means that it is imperative to have stores in reasonably close proximity to national distribution centres. Promotion (Advertisements, personal selling, sales promotion, publicity, personnel, physical environment, facilitating goods, tangible clues and process of service delivery): Lidl do not current have any loyalty schemes present in the UK, as they believe their pricing model is enough to incentivise consumers. Lidl often have in store promotions, but they do not discount their goods as highly as other retailers due to the low prices that already exist. People (Personnel training, discretion, commitment, incentives, appearance, interpersonal behaviour, attitudes and customer behaviour/degree of involvement): Employees are generally paid a very attractive salary, but have to work incredibly hard whilst on the job. The amount of items scanned is often used as a performance measurement indicator (Ruddick, 2015). High training standards to ensure employees can scan items fast enough and meet all customer needs. Consumers may feel that staff do not pay them enough attention as they are very rushed doing their job responsibilities. Process (Policies, procedures, mechanisation, employee discretion, customer involvement, customer direction and flow of activities): Primary process of Lidl is to purchase and sell as many goods as possible on a low-cost basis. Consumers are not very involved in any of the processes or procedures of Lidl, and would have little power over their business operations. Physical (Environment, furnishings, colour, layout, noise level, facilitating goods and tangible clues): The majority of Lidl stores are laid out in a very linear and traditional manner. This is to aid consumers in finding their goods as soon as possible and having easy access to purchase and leave (Lidl, 2015). Lidl will often exhibit their brand colours, yellow and blue, throughout their stores or surrounding areas. This will help consumers know there is a Lidl nearby. Porters Generic Strategies Porter outlines four generic strategies; differentiation, cost leadership, differentiation focus and cost focus (Porter, 1980). From utilising the information gathered from the 7 Ps analysis, it becomes quickly apparent as to what strategy Lidl are currently pursuing. Lidl have a reliant focus on selling quality products at the cheapest cost possible. This would suggest that they are utilising a cost leadership strategy, and are implemented it with incredible effectiveness (Morschett, et al., 2006). However, in order to maintain their current rate of growth and expansion, Lidl may have to diversify from their current strategies in order to stay competitive and innovative within the UK grocery market. SWOT Analysis Based on the 7 Ps analysis, a SWOT analysis can be conducted in regards to Lidl. The SWOT analysis will help an organisation measure and understand the internal strengths and weaknesses, and the external opportunities and threats facing the firm. Being able to identify these elements will help an organisation to formulate and develop strategies which may build on the strengths, negate the weaknesses, exploit the opportunities or counter the threats (Dyson, 2004). Strengths (Simon, et al., 2010; Kumar Steenkamp, 2007): Strong business structure allows them to sell their products at an incredibly cheap price. Wide range of private labels gives them exclusivity and security. Has a huge amount of stores across the whole of the UK and Europe giving Lidl great exposure. Online presence that showcases the products they have and any deals they may be running. Weaknesses (FT, 2015; Siro, et al., 2008): Does not quite have the market share of the other big supermarkets in the UK, such as Tesco or Asda. Has not been able to spread their operations outside of Europe very successfully. As their products are so cheap consumers can often think that the quality is not good enough. Opportunities (Felsted, 2014): Potential to expand in the UK and acquire a higher share of the UK grocery market. Successfully expanding abroad can provide more funds to invest in the UK. Expand their website to actually accept orders and sell products. Threats (Poulter, 2014): If Lidl were to engage with a price war with other major grocery retailers then they could force competitors prices down. International expansion of other global brands would cause more competition. Aldi surpassing their market share and becoming the dominant discount grocery retailer. Recommendations Together with the SWOT analysis, a TOWS matrix can be utilised in order to develop strategies and recommendations for Lidl to acquire a greater market share of the UK grocery industry (Weihrich, 1982). Based on the TOWS matrix, and the analysis of Lidls current market strategies, three recommendations can be laid that would help Lidl acquire a greater share of the UK grocery market. The three recommendations are; Extend the usability of their website to accept click collect orders or even delivery. This would expand their presence in the UK market. Develop and implement upper-class branded products in order to target a new demographic and compete with the major supermarket retailers on a more even environment. Construct firm barriers of entry to deter other organisations from entering the UK grocery market and potentially encroaching on Lidls market share. In order to stay competitive in the UK grocery industry, and continue to build upon their UK market share, Lidl should utilise the aforementioned strategies. Furthermore, this could result in them following a combination of generic strategies, as the introducing of upper-class brands, in combination with their current business structure, would suggest a differentiation strategy is in place. However, if Lidl pursue the adoption of other strategies, they must ensure that their current consumer base is not alienated, or they could end up losing market share. Furthermore, Lidl should continue to open more stores in the UK in order to expand their presence and accessibility, which will allow their operations to have similar exposure to the other major supermarket retailers. Bibliography Booms, B. H. Bitner, M. J., 1981. Marketing strategies and organization structures for service firms. In: Marketing of Services. Chicago: American Marketing Association, pp. 47-51. Bosshart, D., 2006. Cheap?: The Real Cost of Living in a Low Price, Low Wage World. London: Kogan Page Limited. Brown, G., 2015. Giant Lidl distribution hub to create 500 West Midlands jobs. [Online] Available at:Â  http://www.birminghampost.co.uk/business/business-news/giant-lidl-distribution-hub-create-8883111 Butler, S., 2014. http://www.theguardian.com/business/2014/jun/27/lidl-launches-store-expansion-programme. [Online] Available at:Â  http://www.theguardian.com/business/2014/jun/27/lidl-launches-store-expansion-programme CIM, 2009. Marketing and the 7Ps, s.l.: Chartered Institute of Marketing. Dolgui, A. Proth, J. M., 2010. Pricing strategies and models. Annual Reviews in Control, 34(1), pp. 101-110. Dyson, R. G., 2004. Strategic development and SWOT analysis at the University of Warwick. European Journal of Operational Research, Volume 152, pp. 631-640. Felsted, A., 2014. Lidl expansion to crank up pressure on big stores. [Online] Available at:Â  http://www.ft.com/cms/s/0/2465c426-fd53-11e3-bc93-00144feab7de.html#axzz3giD80B9c FT, 2015. Half of UK shoppers visited Lidl, Aldi over Xmas. [Online] Available at:Â  http://www.ft.com/fastft/260632/half-of-uk-shoppers-visited-lidl-aldi-over-xmas Kotler, P., Armstrong, G. Saunders, J., 2008. Principles of Marketing. 5th ed. s.l.:Prentice Hall. Kumar, N. Steenkamp, J. B. E. M., 2007. Private Label Strategy: How to Meet the Store Brand Challenge. Cambridge: Harvard Business Press. Lidl, 2015. Customer orientated expansion. [Online] Available at:Â  http://property.lidl.co.uk/cps/rde/xchg/lidl_uk/hs.xsl/5187.htm Lidl, 2015. http://www.lidl.co.uk/en/659.htm. [Online] Available at:Â  http://www.lidl.co.uk/en/659.htm Lusch, R. F., Vargo, S. L. OBrien, M., 2007. Competing through service: Insights from service-dominant logic. Journal of Retailing, 83(1), pp. 5-18. Morschett, D., Swoboda, B. Schramm-Klein, H., 2006. Porter outlines four generic strategies; differentiation, cost leadership, differentiation focus and cost focus (Porter, 1980).. Journal of Retailing and Consumer Services, 13(4), pp. 275-287. Porter, M. E., 1980. Competitive Strategy. s.l.:Free Press. Poulter, S., 2014. Aldi and Lidl to force big four supermarkets into price war to stop stampede of customers to discount chains. [Online] Available at:Â  http://www.dailymail.co.uk/news/article-2539064/Aldi-Lidl-force-big-four-supermarkets-price-war-stop-stampede-customers-discount-chains.html Ruddick, G., 2015. Supermarkets could increase prices to pay for living wage. [Online] Available at:Â  http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11736662/Supermarkets-could-increase-prices-to-pay-for-living-wage.html Simon, H., Gathen, A. V. D. Daus, P. W., 2010. Retail Pricing Higher Profits Through Improved Pricing Processes. In: Retailing in the 21st Century. Berlin: Springer Berlin Heidelberg, pp. 319-336. Siro, I., Kapolna, E., Kapolna, B. Lugasi, A., 2008. Functional food. Product development, marketing and consumer acceptance—A review. Appetite, 51(3), pp. 456-467. Weihrich, H., 1982. The TOWS Matrix A Tool for Situational Analysis, San Francisco: Long Range Planning .

Essay on Minorities in Song of Solomon -- Song Solomon essays

Minorities within Minorities in Song of Solomon    In a study about minorities, the groups that are differing from the dominant culture are seen as homogeneous. But, if we look deeper into the groups, we can see that there are distinctions among the minorities concerning lifestyle and social status. In Toni Morrison's Song of Solomon the author provides examples in the background of the story that shows people with differential identities of the general identity of the minority group.    The character Macon Dead and his family is represented as differing from the society they live in with their social status. They are rich and try to live like white people. It is important for Macon Dead to have a good impression on other people. Since he had to face a lot of difficulties as a child because of his race he wants to be as rich as possible to gain respect. These ambitions cause him to split ways with his sister Pilate, as we see in this part of the novel:    "Why can't you dress like a woman?"... "...What are you trying to make me look like in this town?" He trembled with the thought of the white men in the bank- the men who helped him buy and mortgage houses- discovering that this raggedy bootlegger was his sister. That the propertied Negro who handled his business so well and who lived in the big house on Not Doctor Street had a sister who had a daughter but no husband, and that daughter had a daughter but no husband. (20)    We see from this passage how important for Macon Dead the thoughts about him by others is important; especially the thoughts of white people. He already believes that he has a good impression on those people. "In 1936 there were very few among them who lived as well as Macon Dead" (32... ...anest unhung niggers in the world (270).    As we know from the end of the novel, Milkman will have all his feelings changed during his stay in the town: "He was curious about these people. He didn't feel close them, but he did feel connected, as though there was some cord or pulse or information they shared. Back home he had never felt that way, as though he belonged to anyplace or anybody" (293).    Song of Solomon provides an example of a minority with a minority. It is clear that social status is a factor in alienating people from the society.    Works Cited: Bloom, Harold, ed. Modern Critical Views: Toni Morrison. New York: Chelsea House Publishing, 1990. Morrison, Toni. Song of Solomon. New York: The Penguin Group, 1977. Peterson, Nancy J. Toni Morrison: Critical and Theoretical Approaches. Baltimore: Johns Hopkins UP, 1997.

Iphone vs Androind Compare and Contrast Essay

Over the last decade, electronic-based companies such as Samsung and Apple have collaborated with cellular-phone carriers, and have studied the average consumer to find endless ways to improve the cellular phone. As a result, the smart phone was born. With their ability to provide users with instant access to communication, entertainment, Internet access, calendar, news, social media, and much more, the smart phone revolutionized and shifted the path of modern technology. In 2006, Apple began this revolution with their release of the iPhone. Being the first proper smart phone, many other companies attempted to mimic the unbeatable features and technology that Apple had included with the iPhone. Though many had failed in doing so, Google managed to keep up with the iPhone with their Android software. Soon enough, Google’s Android software became the dominant smart phone based software for smart phones not manufactured by Apple. Because of this, Android phones had become just as popular as iPhones. This paper will explore the similarities and differences between both Apple’s iPhone and Google’s Android. One major similarity between the iPhone and Android phones is their shape. For example, all models of the iPhone have been similar in shape, which can be noted in their rectangular shape and rounded corners. This exact shape can also be seen in many of the Android phones, such as the Samsung Galaxy and HTC Evo. iPhones and Android phones have also been noted for their large touch screens occupying the majority of the front space of the phone, and their job in navigation in place of traditional buttons seen on non-smart phones. Though the trend of this rectangular shape, rounded corners, and large screen has lead to many disputes regarding who had originally designed the structure, manufacturers continue to use this as the basic structure for their smart phones. Though the iPhone and Android appear to be very similar, they have more differences than they do similarities. For example, because of Android’s alliance of over thirty phone manufacturers, there are currently seventy-seven different models of Android phones. However, because of the act that Apple refuses to allow other manufacturers to use the iPhone’s IOS software, there are only six models of the iPhone. Differences in appearance are evident as well. For example, higher-end Android phones have been noted for their screens that are much larger than that of the iPhone. However, this limits the screen’s resolution, which is much greater on the iPhone for this very reason. Another similarity between the iPhone and Android are their features. For example, both include a high-resolution camera and MP3 player. In terms of connectivity, they both allow 3G, 4G, and Wi-Fi connection. Like all modern smart phones, they are both based on very similar downloadable applications, and both include a very similar app store. Like the iPhone, the Android also includes a similar notification center, allowing users to view a log of missed calls, text messages, and other notifications from apps. As stated prior, iPhone and Android share many of the same applications, and both display similarities in their app stores. However, the systems of apps for both types of phone are almost entirely different. For example, the apps on the iPhone are of higher quality than that of the Android, and there is a much greater selection. However, Android phones allow users to download applications from third party sources, and the Android app store is much less strict to developers than that of the iPhone. Aside from applications, the software of both smart phones display differences as well. For example, the iPhone is known for its simplicity and user-friendliness, while the Android is known for allowing users to customize everything down to the theme of the keyboard. In conclusion, while the iPhone and Android appear to be very similar at first glance, it is evident that they have more differences then they do similarities. Because of this, both the iPhone and the Android typically tend to attract different groups of people based on what they believe should be in a smart phone, whether they prefer the iPhone’s simplicity and high quality applications, or the Android’s customizability and larger variety of apps. As the smart phone has evolved over the last six years, it will continue to do so as consumers continue to buy what smart phone fits them personally. This will evidently lead to new features, advanced screens, further personalization capabilities, and much more, partaking in the further evolution of the smart phone. In the end, the evolution of the smart phone will bring further advancement to modern technology.

Long term financing

The capital market you may remember deals with bonds and stocks. Within the capital market there exists both a primary and a secondary market. A primary market is a â€Å"new issues† market. It is here that funds rose through the sale of new securities flow from the buyers of securities to the issuers of securities. In a secondary market, existing securities are bought and sold. Transactions in these already existing securities do not provide additional funds to finance capital investment. A large company typically raises funds both publicly and privately. With a public issue, securities are sold to hundreds and often thousands of investors under a formal contract overseen by federal and state regulatory authorities. A private placement on the other hand, is made to a limited number of investors, sometimes only one, and with considerably less regulation. An example of a private placement might be a loan by a small group of insurance companies to a corporation. Thus, the two types of security issues differ primarily in the number of investors involved and in the regulations governing issuance. When a company opted for expansion, it obviously must be financed. Often the seed money (i.e. the initial financing) comes from the founders and their families and friends. For some companies, this is sufficient to get things launched, and by retaining future earnings they need no more external equity financing. For others infusions of additional external equity are necessary. Venture Capital: venture capital represents funds invested in a new enterprise. Wealthy investors and financial institutions are the major sources of venture capitals. Debt funds are sometimes provided, but it is mostly common stock that is involved. This stock is almost always initially placed privately. Initial Public Offerings: If the enterprise is successful, the owners may want to â€Å"take the company public† with a sale of common stock to outsiders. Often this desire is prompted by venture capitalists, who want to realize a cash return on their investment. In another situation, the founders may simply want to establish a value, and liquidity, for their common stock. Initial Public Offerings are accomplished through underwriters. Bonds: a bond is a long term debt instrument with a final maturity generally being 10 years or more. If the security has a final maturity shorter than 10 years, it is usually called a note. To fully understand bonds, we must be familiar with certain basic terms and common features. Par value for a bond represents the amount to be paid the lender at the bond’s maturity. It is also called face value or principal. Coupon rate is the interest rate on a bond for example a 13% coupon rate indicates that the issuer will pay bondholders $ 130 per annum for every $1000 par value bond that they hold. Bonds almost always have a stated maturity. This is the time when the company is obligated to pay the bondholder the par value of the bond. Preferred stocks: it is a hybrid form of financing, combining features of debt and common stock. In the event of liquidation a preferred stockholder’s claim on assets comes after that of creditors but before that of common stock holders. Usually, this claim is restricted to the par value of the stock, if the par value of a share of preferred stock is $100, the investors will be entitled to a maximum of $100 in settlement of the principal amount. Term loans: commercial banks are a primary source of term financing. Two features of a bank term loan distinguish it from other types of business loans. First, a term loan has a final maturity of more than 1 year. Second it most often represents credit extended under a formal loan agreement. For the most part, these loans are repayable in periodic installments. Quarterly, semiannually, or annual – that covers both interest and principal. Lease financing: a lease is a contract; by its terms the owner of an asset (the lessor) gives another party (the lessee) the exclusive right to use the asset, usually for a specific period of time, in return for the payment of rent. Most of us are familiar with leases of houses, apartments, officers or automobiles. Recent decades have seen an enormous growth in the leasing of business assets, such as cards and trucks, computers, machinery and even manufacturing plants. An obvious advantage, the lessee incurs several obligations. First and foremost is the obligation to make periodic lease payments, usually monthly or quarterly. Almost, the lease contact specifies who is to maintain the asset. The decision to borrow rests on the relative timing and magnitude of cash flows. Under the two financing alternatives, as well as on the discount rate employed. To evaluate whether or not a proposal for financing makes economic sense one should compare the proposal with financing the asset with debt. References Neil Seitz and Mitch Ellison (2004), Capital Budgeting and Long-Term Financing Decisions Richard H. Bernhard, (2005), Capital Budgeting and Long-Term Financing Decisions, 2d ed Robert G. Beaves (2005), Capital Budgeting and Long-Term Financing Decisions. Long Term Financing It offers powerful and intuitively pleasing predictions about how to measure risk and the relation between expected return and risk. The risk in this model comprise of systematic risk means risk undiversifiable risk or market risk. This Model basically takes into account asset’s sensitivity to non-diversifiable risk RE: (Capital asset pricing model From Wikipedia, the free encyclopedia). Earlier pricing models do not reflect changes in financial markets but with the emergence of Financial Pricing Models in form of Capital Pricing Models and Discounted Cash Flow models, changes in financial market, risk and return on individual investment can be easily ascertained RE: ( http://www.business.uiuc.edu/~s-darcy/present/ratemake.ppt#256,1,Ratemaking:   A Financial Economics Approach). CAPM is based on certain assumptions such as investors should be rational, fixed quantity of assets, perfect efficient capital markets, production plans are fixed, no inflation, no change in level of interest rate, similar expectation. However having numerous advantage of this model it is also affected by certain limitations and based on certain assumptions which does not perfectly exists. As it fails to appear adequate variation in stock returns, it assumes that there are no taxes or transaction cost which is not suitable in prevailing market situation. It assumes all assets of fixed quality which can never be possible, every market is not perfectly efficient, it varies on the basis of several factors. Inflation makes direct effect on the interest rate so can it be possible to remain unaffected with such change. In comparison to previous Model, Discounted Cash Flow Model (DCF) helps to determine that what one person is willing to pay today in order to obtain the expected cash flow in future years. In short, it can be said that Discounted cash Flow Model is the method of conversion of futures earning in today’s money. DCFM helps in calculation of cash needed to be invested to receive expected cash flow in future years. The DCFM reflects following Reference:- 1.   The time Value of money means investor must be compensated for the delay of their cash   flow. Risk Premium states that investor can demand high amount in form compensation.   The key inputs in Discounted Cash Flow Model are discount rate, cash flows and growth to get future cash flows. This model helps in determining  Ã‚   the company’s current value according to its estimated future cash flows. DCFM is an important tool in making judgment about company performance. However DCFM are powerful, but they have certain limitations as they are limited to mechanical valuation, small changes in inputs may result in large changes in the value of a company. DCFM are not suitable for short term investment as it focus on long term investing RE: (http://pages.stern.nyu.edu/~adamodar/pdfiles/dcfinput.pdf). So, from the study of both the model it can be concluding that both are suitable at their own place subject to consideration of certain assumption and limitation. The company’s evaluates various debts policy and dividend policy to arrive at final decision so that maximum benefit can be provided to company, shareholder, creditors or other persons. To valuate debts and equities various theories are discussed in connection with the sum of debt or equity needed in the organization. Cost of capital play a very important role in selection of the amount of debt and equity such as cost of debt, cost of preference shares, cost of debentures, cost of common shares etc. Then to identify factors which affect capital structure such as political risk, cash flows, discount rate and terminal value. Calculation of net present value, interest rate of return and adjusted net present value is done to ascertain the suitability of capital budget.   So first, cash flow forecasting is to be done by adopting various principles. Then categorization of cash require is made in form of shorter cash, medium term and long term. Then the capital structure is decided by considering various aspects such as cost of equity capital. Then after having profits the company decide whether whole or part of  Ã‚   profit is distributed. The factors should be considered while taking the decision policy decision. Then procedure for payment of dividend is sketched and then impact of divided is noted on the position of shareholders RE: (http://www.cma-srilanka.org/pub/professionalII.pdf). Hence it is clear from the evaluation of debt/equity mix and dividend policy that how much they are necessary to strengthen company’s position. Therefore it is advisable that there must be judicious mixture of debt and equity that must add value by reducing taxes and strengthening management as too much debt result in heavy loss of business and perhaps a costly organization. REFERENCE Referred to sites:- 1.   http://www.business.uiuc.edu/~s-darcy/present/ratemake.ppt#256, 1, Ratemaking:   A   Financial Economics Approach Ratemaking: A Financial economies Approach 2.   http://www.biu.ac.il/soc/sb/stfhome/lauterbah/794/part6/fama_capm.pdf The Capital Asset Pricing Model: Theory and Evidence Eugene F. Fama and Kenneth R. French 3.   http://www.valuebasedmanagement.net/methods_dcf.html DCF method Discounted Cash Flow 4.   http://www.cma-srilanka.org/pub/professionalII.pdf Internal Control & Risk Management (ICR) Dated 28th August 2007