The Hong Kong Polytechnic University Finance Essay - Free Essay Example

Sample details Pages: 8 Words: 2363 Downloads: 1 Date added: 2017/06/26 Category Finance Essay Type Research paper Did you like this example? The objective of this professional report is to discuss about engineering economic decision of a high technology firm, Google Inc. It is focused on the following two aspects. One is the role of engineer in making business decision. Another one is the tools and techniques to engineers for making capital investment decision. Background of Google Inc. Google Inc. is an international corporation. It provides a wide variety of internet-related products, such as internet search engine, software and cloud computing etc. It grows rapidly due to the chain of products, acquisitions and partnerships besides its core search engine business. It develops much internet-related software such as e-mail, online office suite and social networking. Every firm aims at making profit. To maximize the profit of a company, an appropriate economic decision plays an important role. Google has many products, like google map, Gmail, Picasa, Android etc. How does Google make economic decision to make profit? Taking Android as an example, it can be illustrated the way that Google has achieved splendid business outcomes. Don’t waste time! Our writers will create an original "The Hong Kong Polytechnic University Finance Essay" essay for you Create order Engineering Economic Decision of Google Inc. Android From the ensuing paragraphs, we can see how the Android system of Google Inc. makes profit by the revenues from advertisement and transaction fee from Play Store. Android is an operating system using Linux which uses an open source as base. Nowadays, it is widely used in smart phone and tablet. The Android operating system of Google becomes most popular. It occupies about sixty percent of smart phone operating system. It beats Apple, Nokia and Windows. Although the Android system is an open source project, it still makes profit. The majority of benefits come from advertising. Service providers are willing to place advertisements in Google Inc. if more people will visit its website. Page 1 Google makes profit by driving the users of smart phone to its Google search engine. The revenue earned from advertisement was used on the search engine. Hence, if there are more people using the search engine of Google.com, there will be great revenue earned by the company. It can be said that Google search is set as default in almost every Android device. From a research, it is revealed that twenty searches are conducted by every Android user in a month. Every hit on Google search engine by a user is counted as an impression. The revenue drawn on this item is $20 for every 1000 impression. From the research of Business Insider, Google is the dominator occupying about 90% of the $487.3 million mobile search market. Android also makes money from the Google Play Store. Thirty percent transaction fee for each app sold in its Play Store is taken by Google. The remaining seventy percent goes into the application developer. Also, Google recently levied a subscription charge on 10% revenues from publishers within the Android Market. Role of Engineers in Making Business Decisions To understand how Google Inc. can make profit from a free system Android, we have to learn about the role of engineers in making business decisions. Importance of Decision Making Decision making is an important process which affects the well-being of an organization. It is acknowledged that decision making can be enhanced by adopting a framework approach, i.e. decision engineering. Decision engineering is a structure that streamlines a series of best practices for organizational decision. It aims to tackle the problem of a decision making complexity ceiling. The special feature of complexity ceiling is a mismatch between organizational decision making practices and the complexity of circumstances in which those decisions must be made. In that case, decision engineering is a practical application of complex systems in which the organizations can navigate them. Page 2 It is also a structure that enables non-expert decision makers to have decision making by using advanced analytical skills and incorporating inductive reasoning and machine learning techniques to solve the problems specified in Black Swan theory. Engineers Role It seems that engineers are not related to making business decision. However, engineers play an important role in making economic decision making. In the case of engineering projects and systems, engineers are in the first priority to make economic decision making. Engineers are the most suitable because engineers have good knowledge of all the technicalities of machinery and production. Hence, they have good judgment on the useful lives of an asset. In addition, they also have the technical know-how to evaluate the quantity of units which a proposed plant will produce when it is in operation. When engineers deal with a business project, they need to create and design what types of engineering projects to do. After that, engineers have to analyze different problems. They have to evaluate which production methods can minimize the cost of production. Engineering safety and environmental influence are also needed to consider and study. Therefore, a market assessment will be conduct ed in the analyzing stage. For engineers to do business, the most essential factor has to be considered is the revenue and profit. The expected profit is estimated and the timing of cash flows is evaluated. Meanwhile, engineers also require thinking of the contingency like considering if there is any degree of financial and monetary risk and hazard. Finally, the influence on financial statements, market value of the firm and the stock price are evaluated by engineers. Processes of Making Engineering Economic Decisions To make engineering economic decisions of a high-technology firm, several processes have to be followed. The decision problem has to be recognized. The objectives and targets must be defined clearly. Researches on relevant topics must be conducted and the relevant information is collected. Among different sets of feasible alternatives, compare and identify which one is the best and choose to utilize. Page 3 Avoid making an incorrect economic decision, engineers have to foresee what will happen in the future when considering determination. For example, the required amount of investment is estimated, the quantity demanded of a product is predicted, the life of the product is estimated, a profitable manufacturing cost and selling price are also estimated as well. Engineering economic decision can assure improvements in the quality of decision made, the technique and skill to produce them in more prompt action, the ability to utilize the organizational resources in an effectiv e way and minimize the risk associated with decisions. Also, a designed engineering decision can be reused and modified to become a new idea. Major Factors to Understand Engineering Economic Decisions From the point of views of engineers, the chief and major factors to understand engineering economic decisions is the evaluation and analysis of costs and profit associated with making capital investment. There are five main types of strategic engineering economic decisions. They are (i) improvement of service or quality, (ii) new product or product expansion, (iii) equipment or process selection, (iv) reduction of cost and (v) replacement of equipment. Engineering economic decisions are affected by the elements of time and uncertainty. Improvement of Service or Quality If the service or quality improvements are concerned, the engineers choices are the most obvious matters that can deliver the service better such that the perceptions of customers are increased. The decision determining the service quality can be revealed and reflected by four primary aspects. They are design-based, culture-based, variation-based and failure-based improvement strategies. The service quality can be improved by addressing quality via design. There are three approaches using design-base to improve quality. They are: customer perceptions, customer needs and direct psychological manipulation of satisfaction through design. Page 4 New Product or Product Expansion It is common for a firm to develop new products or carry out product expansion. It is because this will increase the revenues of the company. If the number of output products is raised, investments in this class can expand the profit of the company. Equipment or Process Selection This category of engineering decision problems arises from selecting the best course of action among several which meet the requisites of a project. Reduction of Cost In order to maximize the revenue of a project, one of the ways is to minimize the cost of production. This attempt can decrease the operational cost of a firm. Replacement of Equipment This decision of investment requires the consideration of the cost involved in replacing worn-out or outmoded equipment. Tools and Techniques to Engineers for Making Capital Investment Decisions Developing a new operating system like Android, Goggle Inc. has to make capital investment decisions. The capital investment decision is related to accountancy and financial aspects. Combined business factors create that business investment becomes the essential financial management decision. Investment decisions of a firm are very important. It is because it can affect all departments of a firm vitally, like the production, marketing and logistics departments etc. Therefore, all executive staff are very concerned about the ways of the capital investment decisions are made. Meanwhile, they are aware of the importance of interaction in the process. Page 5 Evaluation of Capital Investment The capital investment decisions are closely related to the investment analysis tools and techniques. There are four phase approach including planning, project or capital evaluation, status reporting and post completion reviews which can be characterized to enhance investment program. Capital expenditure is the application of investment. Investments in plants and equipment are included in the capital expenditures. These expenditures will bring about the reduction of production cost, reduction of working capital investment, fast production, production capacity expanding, and enhancement of the quality of product. Utilizing the incremental cash flows, the investment results can be measured. Applying investment analysis to the business investments are considered as expenses. One of the examples is investment in an advertising campaign or research and development. The development of operating system Android by Google Inc. has illustrated an example of investment in research and development. To promote new products, marketing expenditure which includes promotions and advertising and investment in equipment is necessary. Before a new product is developed, an investment analysis is conducted to estimate the projected sales, revenue and the flows of cash. Hence, the economic viability of the new product is assessed and determined. Four-Phase Approach To invest a business, there is no guarantee of making profits. The chance of success can be increased if the four-phase approach is applied. The four phases are planning, project or capital evaluation, status reporting and post completion reviews. Certainly, successful investment can be achieved if the four phases can be implemented successfully. Page 6 Phase 1: Planning Strategic financial planning is regarded as the planning phase. Capital expenditure is estimated in the strategic financial plan. It can be categorized into cost savings, expansion of capacity, development of new products and miscellaneous. Phase 2: Capital Evaluation and Authorization A powerful investment evaluation and authorization can help an organization in communicating among executives of a firm and giving the correct business direction. Investment analysis affects many areas of a firm. There are many elements of the capital investment decision of a new product. They consist of finance, research and development, human resources, corporate communications, legal, production marketing, logistics and sales etc. In order to ease the process of investment analysis, a capital authorization request involves various supporting parts and or schedules. They are: summary cover page amounts, assumptions and net present-value analysis of decision case cash flow analysis of scenario components of investment potential vendor cost of basis quarterly expenditure budget Phase 3: Capital status reporting Status reporting can monitor the progress of the project investment. Utilizing this report, the initial investment can be compared with the authorized report by the project manager. Page 7 Phase 4: Post completion review Post completion review should be carried out regularly after the project has been completed. It may be yearly, bi-annually, quarterly or whenever. It compares economic evaluation indicators and the original approved cash flows of the project with the updated operating performance. Besides considering the four phases of the capital investment process, each company has to evaluate investment decisions by using capital investment evaluation techniques: payback period (PBP), net present value (NPV) internal rate of return (IRR) terminal rate of return (TRR) modified internal rate of return (MIRR) discounted payback period (DPBP) profitability index (PI). Among these capital investment techniques, the most commonly used procedures for ranking investment proposals are payback, net present value, internal rate of return and terminal rate of return. The definition of payback is the number of years needed to return the original investment. This method is freque ntly used, but there are significant conceptual defects as it ignores the fact that (1) some receipts are received beyond the payback period and (2) the money is less valuable in the future when comparing with today due to inflation. The definition of net present value (NPV) is the different between the present value of future returns, discounted at the cost of capital and the investment cost. The NPV method overcomes the conceptual weakness mentioned above. The definition of the internal rate of return (IRR) is the interest rate that equates the present value of future returns to the investment expense. Page 8 Terminal rate of return is defined as the interest rate that is equivalent to investment cost and the gathered future worth of the intermediate cash flows which is planned to be reinvested at a suitable risk-adjusted capital cost. Capital Investment Decisions The capital investment decision is significant to a firm. It is because the growth and health of a firm is improved. Thus, the value of shareholder is enhanced. The capital investment decision is the financial analysis which aims at maximizing the worth of a firm. When there are several capital budgeting standards, we can follow some techniques to make a decision. All of the cash flows are considered appropriately. The opportunity cost of capital determined by the cash flows at the suitable market is discounted. The project with maximum wealth of shareholders is chosen from a group of mutually exclusive projects. The value additivity principle states that each project should be considered independently from the project managers. Conclusion In order to get good business results, investment decisions and economic decisions are very significant. Google Inc. can become a well-known high technology firm is due to the strategies mentioned before. It is expected that the business of Google will be larger and larger in the future. Page 9

Diabetes Mellitus A Disease Affecting Multi Organ System

Diabetes mellitus or DM is a disease affecting multi-organ systems due to the abnormal insulin production, improper insulin usage or even both. It is a very serious health problem throughout the world effecting thousands of people.A survey conducted in United States showed that almost 6.2% of the population suffers from this disease. It is a matter of great issue that almost one -third of the population is unaware of the disease. Incidence Diabetes is actually the fifth leading cause of deaths in the country of United States. And the real incidence is expected to have a steady increase in the coming years. Diabetes has a very important role in leading to heart disease, adult blindness, stroke, non traumatic amputation of lower limb etc.†¦show more content†¦There are mainly three abnormalities or factors leading to type ii diabetes mellitus. One of them is insulin resistance, where insulin receptors are either minimal in number or will remain unresponsive. Another factor is the poor ability of pancreas to produce insulin. The final factor comes with inappropriate glucose production by the liver. Risks related to diabetes When we analyze the analyze risk group for developing diabetes mellitus, a condition that requires primary importance is impaired glucose tolerance or IGT. It is a disease condition caused by the mild alteration of beta cell function. Here the blood glucose level is usually high but not to a level to be called as a case of diabetes. But most people with impaired tolerance for glucose have a high risk for developing type ii diabetes within the next 10 years. Another important risk related to diabetes is insulin resistance syndrome, also known by the name syndrome x,it is in fact a cluster of abnormalities which will act in a synergistic manner so a stop increase the risk of cardiovascular disease. It is usually charactracterised by increase insulin levels, high amount of triglycerides, hypotension. 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Income Smoothing Free Essays

Journal of Economics, Business and Accountancy Ventura Accreditation No. 110/DIKTI/Kep/2009 Volume 14, No. 1, April 2011, pages 59 – 78 THE THEORETICAL CONSTRUCTION OF INCOME SMOOTHING MEASUREMENT Alwan Sri Kustono Jember University E-Mail: alwankustono@yahoo. We will write a custom essay sample on Income Smoothing or any similar topic only for you Order Now com Tegal Besar Permai 2-E1,Jember,Propinsi Jawa Timur,Indonesia ABSTRACT The income smoothing is a dimension of the accounts manipulation theme that has been a ttracting a great attention in the accounting literature. A goal of manipulation widely as cribed to managers is the desire to smooth. Reported income, Income smoothing reflects reducing the possible income fluctuations so as to make it as stable as possible throughout the ism. Almost of income smoothing research in Indonesia used Eckel’s index to clasify smoother non smoother firms. Empirical evidences have provided support for the existence of an income smoothing behavior. The studies showed inconsistent about factors determining this smoothing. The purpose of the present investigation is twofold. First, we seek to determine if Eckel index is a reliable instrument to measure income smoothing behavior. Second, we pretend to identify the new instrument to measure incidence of income smoothing. Our research sample comprises manufacturing companies listed on the Indonesia Stock Exchange, over period of 1999-2008. This study confirms Eckel’s index is not reliability instru ment. The new proposed index quantifies the incidence of income smoothing without depend on n periods. The results imply that researchers should re-examine the conclusion of previous studies, particularly that determinant, factors and effect of income smoothing practices. Key words: income smoothing, Eckel’s index, c oefficient of variation, reliability. INTRODUCTION It has been noticed that income statement is considered as one of the statements to be presented in financial reporting. For that reason, the company’s earning is considered vital information for it can be used to measure the corporate performance. In other words, information of the earning can be used to assess the performance or accountability of management and also predict the ability of companies in the effort of contributing to the following earning. In general, earning reporting is frequently not free from the accounting manipulation. Yet it appears different from the fraudulence. Accounting manipulation can be still in tolerant when it is put in the accounting rules. In contrast, fraudulence practices tend to be against the rules and accounting standards. Thus, it is delicately different from income smoothing. In fact, one 59 of the practices of accounting manipulation is income smoothing. In connection with the pursuit of analyzing income smoothing in the companies, some definitions of it can be inferred. First of all, income smoothing is defined as the emphasis on the fluctuations in income levels that are considered normal for the company (Barnea et al. 1976). For another thing, Beidleman, (1973) defines income smoothing as the management efforts to reduce abnormal variations in the earning to the extent permitted by the principles of good management and accounting. Income smoothing in such instances, is as a tool used by management to reduce the variability of reported income stream relative to the target which is intentionally smoothed by using artificia l or real variable. In addition, income smoothing is one-dimensional manipulation of accounts that attract the atten- ISSN 2087-3735 The Theoretical Construction †¦ (Alwan Sri Kustono) ion of many accounting literature in the realm of earnings management. Beside, income smoothing reflects the concern to reduce the possibility of fluctuations in income by making a steady flow Research on income smoothing in Indonesia generally examine several factors which are allegedly to motivate management to do income smoothing. They identify the existence of such practices and followed by testing management motivation. The results of these studies have identified those most public companies in Indonesia have conducted income smoothing. All in all, most of the studies are uniform in terms of inferring he end results. Testing the triggering factor of income smoothing policy by the company management has not consistently been recovered. Among the results of such studies are often inconsistent to one another. For example, Kustono (2010) stated that the inconsistency of their findings was caused by the measuring devices. These devices are thought to be unreliable. For example, Index Eckel does not have the ability to capture the practice of income smoothing between periods. In that situation, it shows that some companies are classified by grading only in one particular year. This is considered to have deviated from the definition of income smoothing. The classification based on Eckel index for one company may also change because of changes in the period used to determine the coefficient of variation. Change of classification shows that the index is not reliable as a tool. In other words, Eckel is as an identifier of smoothing and not merely for smoothing. Kustono (2010) asserted the idea of the need for new instruments. This research is intended to correct weaknesses of the Eckel and construct an index measuring instrument which is more reliable income smoothing factor. This construction is very important because the use of measuring instrument error will cause errors either in the phase of conclusions related to the classification of sample or the determinants and impact of such classification. THEORETICAL FRAMEWORK It is a fact that income smoothing becomes a phenomenon which has been often proved in some previous studies. This practice has been investigated through various levels of different samples. Furthermore, income smoothing is considered to be an important factor. Research by Moses (1987) and Atik Sensoy (2005) shows that at least 60% of he sample used in the study can be classified as smoothing the company earnings. Another proponent, such as Barnea et al. (1976) classified accounting income smoothing as inter-temporal smoothing and classification. Inter-temporal smoothing is based on the situation when cost and expenses are recognized and smoothing classification is done with the classification under ordinary cost and extraordinary one in which the ordinary post finally becomes flat. Eckel (1981) distinguishes between income smoothing as a natural smoothing and intended smoothing. Natural smoothing is he alignments resulting from transactions that inherently produce a smoothed earning. In other words, the company’s operations to generate income by collecting revenues and expenses are inherently to eliminate fluctuations in income flows. In other words, the process of generating income itself generates a stream of smoothed income. Alignment occurs without the intervention of any party. Income smoothing is accidentally triggered by the motivation which is based on the management actions. There are two types of income smoothing: intentional, that is income smoothing of the real intention nd the other one is artificial income smoothing. Real income smoothing indicates management actions that seek to control economic conditions that directly affect corporate earnings in the future. In addition, this real income smoothing affects cash flow. On the contrary, artificial income smoothing can show manipulation which is undertaken by management to smooth the earning. Thus, the action of this manipulation resulted in a fundamental or economic condition that can affect cash flow, but shifts 60 Journal of Economics, Business and Accountancy Ventura Accreditation No. 10/DIKTI/Kep/2009 the cost and/or income from one period to another. By taking for granted, such a trend can be traced from several research. Some studies, in fact, have been conducted to identify the smoothing behavior, such as motivation and its impact on future transactions, a company that has been doing income smoothing. This can also be found in other studies such as (Lev Kunitzky, 1974; Ammihud et al. , 1983, Wang Williams, 1994; Michelson et al. , 1995; Iniguez Poveda, 2004). These proponents also provide empirical support toward statement that management reduces he variability of cash flows and earning for the purpose of mini mizing the risk of the company. Income smoothing is also intended to increase the value of the firm (Gordon, 1964; Trueman Titman, 1988; Gibbins et al. , 1990; and Chaney Lewis, 1995; 1998). Estimator of Income smoothing Income smoothing can only be investigated through some periods by suspecting a certain earning rate of the targeted, e. g. , both highand low-digits earning reports. Some researchers use a two-period model by assuming that the earning target is proportional to the income report in the previous year Copeland, 1968). In other words, the size of alignment is the magnitude of changes in the earning from one year to the next. Other researchers also evaluated the earning target using multi-period test. The underlying assumption is that it should be an evenly increasing trend (Gordon, 1966). Some of the models used are the exponential model (Dascher and Malcolm, 1970), linear time series models (Barefield and Comiskey, 1972), time trend semi-logaritma (Beidleman, 1973) a nd model of the market return index (Ronen Sadan, 1975). For example, Dopuch Watts (1972) suggest the use of Box-Jenkins techniques to ensure the alignment model is applicable. Models of earning target are differentiated from the real earning. Often, these models contain errors inherent profit target 61 Volume 14, No. 1, April 2011, pages 59 – 78 because its validity can not be detected empirically. In that case, Ronen Sadan (1975) suggested that we do income smoothing approach. In particular, income smoothing can be identified if the researcher is faced by the following four questions. 1. What is the object alignment implemented by the management? 2. What is the dimension of management s used to perform smoothing. 3. What instrument of smoothing is used by management 4. What is the object of such smoothing behavior? In connection with the above efforts, Imhoff (1977) and Eckel (1981) developed a methodology based on testing the variability of income associated with the variability of sales. The model used to predict the existence of income smoothing or earnings variation is inter-p eriod variant. They assume that the level of earning depends on the level of sales. The basic idea is that the change in sales can affect the earning. If the variance of income is less than the variance f sales, it can be concluded that the smoothing has been done. Eckel (1981) model of the income smoothing is done by basing on the following premises. 1. Income is a linear function of the sales = sales-cost variable-fixed cost. 2. The ratio of variable costs to sales is in constant currency units 3. Fixed costs are constant or increasing from period to period, but not likely to decline. 4. Gross sales can only be smoothed by real smoothing; gross sales can not be artificially smoothed. Mathematically, Eckel illustrates all the above as the following: when, I=S-VS-FC, and FC;0, and FC t+1 ;=FC t, and 0 How to cite Income Smoothing, Essay examples

Global Business Whimsical and Fresh Approach

Question: Discuss about the Global Business Whimsical and Fresh Approach. Answer: Introduction Lazybones Australia provides a whimsical and fresh approach for designing home wares and clothing for the relaxed and modern living. The company continually evolves every season by designing products that delight and surprise the customers who love the brand globally for their sleepwear and soft furnishings (Lazybones.com.au, 2016). The company has intended to seek a suitable country in Latin America for manufacturing their clothing range via contract manufacturing and supply it to the market in the United States. Therefore, this report analyses and compares the business, political and socio-economic environments of Argentina and Brazil with respect to their potential for foreign contract manufacturing. The economic environment of Argentina and Brazil play a significant role in influencing the business and the external factors in the broader economy and business market. The economic environment of can be compared based on the factors of manufacturing value added (% of GDP) and GDP growth. Manufacturing Value Added (% of GDP) This factor indicates the measuring of the output of manufacturing as the part of the share of the economy of a country. Value added denotes the net output of the sector of manufacturing is calculated after adding the total amount of outputs and the intermediate inputs are subtracted (Johnson, 2014). It expresses the share of the GDP (Gross Domestic Product). The values of this factor for the countries Argentina and Brazil are 17.224 and 11.402 respectively which states that Argentina has better manufacturing abilities and share for the GDP of the country when compared to Brazil. However, the market size of Brazil is scored at 5.8 when compared to 5.0 of Argentina which states that Brazil has a bigger market size compared to Argentina. GDP Growth (Annual %) GDP measures the health of the economy of a country and represents the total value of all the services and goods that are produced over a specific period (Al-mulali et al., 2013). The size of the economy is determined by the growth of the GDP. The percentage of annual GDP growth of Argentina and Brazil are 2.372 and -3.847 respectively which states that the growth of Brazil is on a negative scale when compared to Argentina. This is primarily due to the annual inflation percentage or consumer prices that have lowered the growth of the economy. The inflation values for both Argentina and Brazil are 10.619 and 9.027 respectively which states that inflation is higher in Argentina compared to Brazil. This is a contrasting factor and clearly states that the economy of Brazil has taken a big setback compared to Argentina in terms of GDP growth. With reference to the two parameters of economic environment, it can be well stated that Argentina is more prepared for the contract manufacturing abilities due to its advanced economic status when compared to Brazil. The financial stability of Argentina is found to be more stable and supportive compared to that of Brazil. Political Environment and Risk The political environments of Argentina and Brazil play a significant role in the daily business activities that occurs on an international or local scale. The government policies are reflected in the production and growth facilities of the two countries and therefore, the factors of total tax rate and GDP per capita will be considered. Income tax is the share percentage of the earnings that the earners are expected to pay the government for funding the infrastructural development or to pay the salaries of the employees who are employed by the government (Leth-Petersen Skov, 2014). A total of the rate of the collected tax forms the total tax rate of a country and in this regard, the percentage rate of commercial profits of Argentina is 137.4% and that of Brazil is 69.2%. It is evident that the total tax rate of Argentina is far more than that of Brazil which states that the earning rate of Argentina is greater than that of Brazil. Greater the total tax rate, better the political environment of the country with lesser risks. GDP Per Capita GDP per capita measures the total output by dividing the GDP by the population of a country (Carlsson De Geer, 2015). Relative performance of two countries can be deduced from the GDP per capita. In comparison of this parameter of Argentina and Brazil, $17,674.37 and $15,359.33 are the GDP per capita of the two countries respectively on an international scale. Greater GDP per capita denotes the fact that the government policies promote production and development with lesser risks of business damage. Based on the information presented here, it can be stated that in both the parameters, Argentina leads over Brazil to establish the fact that the political environment supports business growth and development that can easily permit Lazybones to initiate its contract manufacturing with minimum risks. Business environment combines all the internal and external factors influencing a business. Both these factors influence each other for working together that affect a business. The possibilities of business can be assessed by the parameters of foreign direct investment and exports of goods and services. Investment and Export of Goods and Services Foreign direct investment in Argentina is -11.103 and of Brazil is -61.576 which clearly states that in both the countries, contract manufacturing by foreign countries is not a regular practice as both of them depicts negative values. Export of goods and services in Argentina is $64,485,724,928.2 and in Brazil, it is 231,471,940,845.83 and these figures state that both the countries are involved in export activities. In view of both these parameters, it can be stated that Argentina has a better investment prospect and Brazil has a better export record. Argentina can be a better option for contract manufacturing as it business environment favors foreign direct investment and as export of goods and services do not have a profound importance in it as the company has not intended for sales. Contract Manufacturing Potential Arrangements of contract manufacturing have been a global trend for furthering the economic concentration. In this regard, it can be stated that Argentina is a country with huge potential and rich in resources (Ehret, Kashyap Wirtz, 2013). This will facilitate the process of production of goods and since Argentina is a medium sized producer of cotton in South America, Lazybones will have a seamless supply of raw materials of high quality at low costs. Contrastively, Brazil also offers fair opportunities for contract manufacturing and is one of the worlds leading producers of cotton, however, the tax and tariff arrangements of the government are not very attractive with high rates of corruption in the country. Country Choice The country of choice can be determined by the weighted index table where several components of the two comparative countries are placed based on their relative importance. Since Lazybones will be undertaking contract manufacturing in the selected countries, several parameters will be considered for their selection through the weighted index. The variables included in the weighted index table have been selected considering the economic, political and business environments of the two countries and have been allocated in a descending order of weighting. It has been evident that the foreign direct investment in Argentina is comparatively higher than that of Brazil whereas the commercial service exports were found to be higher for Brazil than Argentina. Therefore, Argentina is preferable for contract manufacturing as the comparative scores have been favorable for the country with respect to all the variables of the weighted index table. Table 1: Weighted Index for Argentina and Brazil Variable Weighting Argentina Brazil Score Adjusted Score Score Adjusted Score Manufacturing Value Added (% of GDP) 35% 8 2.50 7 2.00 Investment and Export of Goods and Services 25% 7 1.50 6 1.50 Total Tax Rate 20% 7 1.75 5 1.50 GDP Growth (Annual %) 10% 3 1.50 2 0.60 GDP Per Capita 10% 4 0.60 2 0.90 Total 100% 7.85 6.50 Recommendations It is strongly recommended that Argentina is the country of choice for contract manufacturing for three main reasons. Firstly, the economy of Argentina is highly diversified with 20.6% of its GDP is supported by the manufacturing industries facilitated by advanced technologies and high productivity levels. Secondly, the available legal structures are facilitative for the foreign direct investment and a fast track formation process is offered for the new business entities in the country. Thirdly, Argentina provides several inventive programs for facilitating investment which includes free trade zones, provincial incentives and technological development fund. Therefore, considering these factors, it is recommended that Argentina is the country of choice for contract manufacturing by Lazybones as most of the environment is in favor of Argentina when compared to Brazil. References Al-mulali, U., Fereidouni, H. G., Lee, J. Y., Sab, C. N. B. C. (2013). Examining the bi-directional long run relationship between renewable energy consumption and GDP growth.Renewable and Sustainable Energy Reviews,22, 209-222. Canuto, O., Cavallari, M., Reis, J. G. (2013). Brazilian exports: climbing down a competitiveness cliff.World Bank Policy Research Working Paper, (6302). Carlsson, P., De Geer, A. (2015). Growth by Growth: How does differential birth rates affect per capita output?. Ehret, M., Kashyap, V., Wirtz, J. (2013). 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