SFSU needs to replace JEPET

San Francisco State University has one of the most dreaded writing tests by students. This test is known as Junior English Proficiency Essay Test, JEPET. JEPET test is taken after the first two years of study, upon successful 48 semesters and before their 80th semester unit to fulfill the graduation writing requirement. Those who fail must take the English 414 whish will satisfy the university that a student has fulfilled their writing requirement for graduation.Advertising We will write a custom essay sample on SFSU needs to replace JEPET specifically for you for only $16.05 $11/page Learn More However a student must take JEPET before taking English 414. This is usually a timed exam handwritten and student must write a well organized argumentative essay on a given topic and base it on evidence provided. The only reference materials allowed are a dictionary, a thesaurus and a spell checker. This makes it a general writing proficiency test and students en d up not learning writing skills in the subjects they are taking. This essay is therefore aimed at explaining why JEPET should be scraped. The first major reason is that JEPET is a highly generalized one-time exam and not a writing course that only tests a student’s general writing proficiency. A one time exam is not a credible criterion of measuring a students writing proficiency. As it also only test a students general writing abilities and not subject oriented writing proficiency it therefore produces students â€Å"who cannot write† (Turner para 4). Therefore CFSU needs to replace JEPET with a more intensive and subjects based writing course. Secondly, because JEPET is just an exam and not a course, there is a very high failure rate (Turner para 17). This is occasioned by the fact that student who fail JEPET have to sit for English 414, when passed qualifies a student for graduation. The problem with this provision is that it encourages failure as students do not h ave to re-sit JEPET therefore defeating the purpose of the exam, which SFSU has made mandatory for graduation. Thirdly, JEPET is not in favor with SFSU students, many of whom prefer to have â€Å" a course intensive training within one major as it would make passing easier† (Turner para 17). Students will be motivated to be more attentive as they are being trained on subjects they have more appreciation for rather than a â€Å"general English exam† as they refer to JEPET (Turner para 23). This boosted learning morale will improve passing rates therefore necessitating the need to rethink JEPET. Last but not the least, is that JEPET is just an exam to facilitate exit from the university rather than test writing competence. A student must first write English 114 and English 214 before writing JEPET. JEPET seems to be a re writes of these two exams. If a student passes them but fails JEPET, it defeats the logic of SFSU refusing students to graduate until they write another exam (Turner para 34). In conclusion, even though JEPET was formulated with the intention of giving students writing proficiency it has not been successful. This is because it defeats the purpose of its own existence as students are not adequately trained to write. Furthermore those who pass only have general writing skills and not the relevant writing skills in their major subjects. This results in graduates who cannot write and if SFSU has this reputation, its graduates will loose market value as they will be unemployable.Advertising Looking for essay on education? Let's see if we can help you! Get your first paper with 15% OFF Learn More Work Cited Turner, Jack. New Writing Courses Set to Replace JEPET by 2010, [x]press. San Francisco: SFSU Journalism Department. September 2008. Web. This essay on SFSU needs to replace JEPET was written and submitted by user Bobby Jordan to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.

Gary Barnett the Motivator essays

Gary Barnett the Motivator essays Gary Barnett changed Northwestern football when he arrived there in 1991. He put a mindset into the players and the school that they can overcome this and turn this program around. Gary brought enthusiasm to the team and made believers out of his players. He had calmness in the rough times giving the kids a reason not to panic if they just lost one game. In the 1995 season, Northwestern opened up the season beating Notre Dame at Notre Dame. Then the following they lost to a bad Miami (OH) team at home. That week Gary was distraught, but stayed calm and asked his team if they wanted to be the team that beat Notre Dame or the team that lost to Miami (OH). The reason he was such a good leader was because the kids believed in what Gary said. The team thought if they could trust him and have faith, they could do anything. Gary Barnett had many motivational techniques to get his players motivated. He thought you had to believe in yourself, to become successful. Gary made t-shirts that said Me to We. That was a way to tell his players that the only way they could win is if they believe in one another. One of his players wrote a paper on his motivational techniques. Northwestern has the lowest enrollment out of the whole Big Ten. They have an enrollment of only 7,500 kids. Where the University of Ohio State has about 31,000 kids. Gary didnt understand why kids didnt want to come, so it was his doing to change that. He did change that by telling his recruits that if you come to Northwestern that not only will you play football, but you will get a degree at a very good school. The kids realized that football doesnt last forever, but degree from Northwestern will be with you until the day you die. Darnell Autry and Tuscon Waterman decided to go to Northwestern for the education and not just to play football. They knew that with a degree from Northwestern they could get a job anywher ...

Ground investigation in shallow offshore sites Article

Ground investigation in shallow offshore sites - Article Example t in situ where the installations are to be located, comprehensive data acquisition is required in the entire area affected and far down beneath the sea floor. Such processes that encompass offshore site investigations are varied in nature. They range from analyzing marine geological information, scrutiny of available geophysical data which is used to plan the actual investigations. Such processes that lead to the success of the above mentioned range consist of drilling, sampling as well as in situ testing which in essence includes penetrating into the seabed with the help of high technology drilling vessels. These processes encompass what is generally referred to as Geotechnical investigation. From The period 1985 to 1982 Lunne and Powell (1992) gave a review of developments in offshore investigations. They explored the various technological inventions that marked this period and discus the contributions of such developments to offshore studies with new in situ tests being tried out in the offshore environments, including several examples of field model testing. Lunne and Powell observed the general trend over the last 6-8 years which was the gradual increase in deep water developments. Due to the difficulty of taking undisturbed samples in deep water there has been a tendency to rely more on situ testing. Special geotechnical problems associated with geo-hazard evaluations have also inspired developments within the field of in situ testing. In addition the general competitiveness of the market has been a driver cost efficient solutions. Borings, the most efficient and probably accurate technique of shallow offshore studies come in two main varieties, large-diameter and small-diameter boring. Large-diameter borings Peres involve offshore drilling with large enormous machines that bore extensive areas. They are rarely used due to safety concerns and expense, but are sometimes used to allow a geologist or engineer to visually and manually examine the soil and

Alan Mulally, CEO, Ford Motor Company Essay Example | Topics and Well Written Essays - 1000 words

Alan Mulally, CEO, Ford Motor Company - Essay Example Leadership facilitates the establishment of a vision that is clear within the organization. It further facilitates the sharing of that vision with individuals in the organization so that they can follow it willingly. Leadership provides reliable information, skills, knowledge and ways through which the vision can be achieved in an efficient and effective manner. Also leadership coordinates and balances any interests of the members within the organization that might be conflicting (Tope 2001). Effective leadership emanates from the personality of an individual who posses the ability to think and take actions in ways that suggest creativity wherever difficult situations are encountered. Within any given organization leadership adversely impacts organizational performance. In a positive way it results to employee motivation enabling them to enjoy executing their roles. Productivity rises due to the fact that employees have the morale to work and are able to identify opportunities as wel l as save on time as they execute their tasks. All this is attributed to leadership that involves leaders communicating their expectations with clarity to their employees. It also involves leaders providing relevant feedbacks and fostering strong relationships with employees to improve their loyalty in the organization. ... The company has been seen to perform quite well under the leadership of Mulally. Its performance is attributed to Mulally’s leadership style which is basically a results oriented type of leadership. A results oriented type of leadership highly focuses on the impact or the outcome of exercising leadership. Based on a clear vision, measurable and attainable goals it aims at achieving maximum results that are desirable and expected in the organization. Mulally exercises his leadership in a crispy and authoritative manner (Vlasic 2009). This blends well with his leadership style due to the fact that he has to ensure that employees do not divert their working f rom the achievement of the expected results. By Mulally facilitating the installation of an operational discipline as well as initiating moves in a timely and strategic manner indicates that his leadership is result oriented. Through such actions he has contributed to the financial independence enjoyed by Ford Company and thus not depending on loans. Goal setting is a key factor that needs to be considered in regards to the performance of any given organization. Mulally came up with a plan that identified some specific for the ford company. He went step further creating a process that moved towards the achievement of those goals with a system to ensure that they are eventually achieved. Mulally demands to be updated regularly in line with the performance of the organization. Mulally's goal setting approach directed ford to moves characterized by smartness and good timeliness.

Critical thinking Essay Example | Topics and Well Written Essays - 1500 words - 1

Critical thinking - Essay Example g or valid reasoning is also widely used in reporting events that is happening around us, tell jokes to our friends and colleagues, extending an invitation to a special someone, making promises to other people, telling stories, giving orders or instructions to our subordinates or co-workers, describing something, entertaining other people, the act of evoking emotions, and a lot more (Fischer a, pp. 15 - 16). To have a good critical thinking, having a good logic is never enough in enabling us to solve problems. It is equally important for us to have positive attitude and the necessary skills and knowledge in terms of solving problems. With regards to the importance of critical thinking, the definition of critical thinking as mentioned by Alec Fisher and Friedrich Nietzsche will be discussed followed by comparing and contrasting the two traditions of critical thinking. As part of going through the main discussion, specific examples coming from its respective texts will be provided accordingly. As part of the conclusion, my personal reflection will be expressed in details explaining how I view the two traditions of critical thinking as explained by Fisher and Nietzsche. Alec Fisher acknowledges the different definitions of critical thinking as provided by the famous contributors behind the development of critical thinking which includes John Dewey, Edward Glaser, Robert Ennis, Richard Paul, and Michael Scriven. According to Fischer, John Dewey – known as the ‘father’ of the modern critical thinking tradition defined critical thinking or ‘critico-creative thinking as â€Å"active, persistent, and careful consideration of a belief or supposed form of knowledge in the light of the grounds which support it and the further conclusions to which it tends† (Fisher b, p. 2). Upon analyzing the definition of critical thinking as provided by Dewey, it simply means that critical thinking is an ‘active’ process or the process wherein the receiver of information or

Prospects and Perception of Islamic Life Insurance

Prospects and Perception of Islamic Life Insurance Chapter 1 Introduction Background to study: Insurance is a financial industry which has surfaced as a colossal industry for both in Muslim and Non Muslin world. In Conventional Insurance there are many elements, activities and procedures which are considered unethical, unlawful and unislamic by majority of Islamic scholars. Elements such as uncertainty, gambling and excessive interest are the main culprits. (Khair Bakhsh, 2009). For the satisfaction of Muslim concern, market experts and Islamic scholars introduced an insurance with the name of Takaful.The increase in demand of Takaful system and the presence of large markets for its products is compelling the entitled authorities to introduce it in Pakistan as soon as possible. Problem Statement: What are the prospects and perception of Islamic life insurance in Peshawar? Purpose of the study: To review why convention system is prohibited in Islam To compare Islamic Life Insurance (Takaful) with Contemporary Life Insurance. To find out justification of an Islamic Life Insurance (Takaful) Analysis of prospects of Takaful in Peshawar City. Methodology Applied Research: In this research I will be studying existing Islamic life insurance system and adding no new finds to body of knowledge. Scheme of study Type of investigation: This is a descriptive study: The format, which will be followed in this study, is to find out justification of an Islamic Life Insurance and what are its prospects in Peshawar. Cross-sectional Data: In this research I will observe and study secondary data regarding Islamic Life Insurance and Conventional life Insurance system. Unit of Study: My research unit of analysis will be organization Study Settings: Field Study: Study will be done in natural settings in which variables will not be controlled. Researchers interference: In this study researchers interference will be minimal and has no direct interference with the Islamic life insurance organizations because I am not allowed to interfere in the organizations. Methodology: The methods I will be using in the report are both Primary and Secondary data collection. Secondary Data: For this research I will use secondary data. Sources: Internet Leading newspaper articles Books related to Islamic life Insurance (Takaful) Research instruments: The instruments which will be used in my research to collect primary data are: Observations Questionnaires. Sample Size: I will be distributing questionnaires. Sampling Techniques: The sampling technique will be simple random sampling that will help in reducing the biasness factor in the research. Limitations: The scope of my research will be limited to students of universities in Peshawar because of time and other limited resources. Scheme of the report: The report will consist of the following parts. Introduction Literature Review Findings Analysis Conclusion and Recommendations Literature survey Meaning of Takaful: Takaful is a form of mutual assistance (Taawun) strengthened by aiding the ones who are in problems and deserve to be helped.(Dr.Masum) (2009). According to him, Islamic Scholars have begun to accept and conclude to the viewpoint that Takaful is according to Shariah principles. Numerous Islamic conferences are being held and Shariah Councils are emphasizing by creating awareness amongst the Muslims that Takaful operations are free from unIslamic elements thus the development of Takaful in the market is to cater to the needs of Muslim by providing them products and services in accordance to Islam. â€Å"Overtime, greater understanding on the concept of Islamic Insurance has emerged as the concept of Takaful, based on the contract of Tabarru (donation) and Mudarabah profit sharing.† â€Å"Takaful is an alternative form of Conventional Insurance based on the concept of trusteeship and cooperation inspired by the beliefs of the followers of Islamic teachings. Murtaza Ali (2007). It can be concluded that takaful is an Islamic way of dealing with uncertainties via mutual assistance and it is social scheme developed on the principals of brotherhood, solidarity and mutual assistance. Takaful is rooted from an Arabic word Kafal, which means that ones needs should be taken care of. According to this scheme participants jointly agree to bind themselves against damages caused by hazards. â€Å"Takaful is a legally binding agreement between all the participants of the scheme to pay any of the members who suffers a loss as specified in the Takaful certificate†. (Dr.Masum)(2009). Muhaimin Iqbal (2005), Abdul Rahim, Wahab and Kabir Hassan explain Takaful as a scheme that is derived from the concept of Taawun and the concept of Takaful is similar to Conventional mutual risk sharing. Takaful has a fixed maturity period and is considered long term saving tool. Apart from giving benefits of return it also provides a mutual financial assistance among participants. â€Å"A Programme that pools efforts to help the needy in times of need due to immediate deaths or mishaps resulting in personal injury or disablement†. (Bank Negara Malaysia) Scholars like Dr.Yusof Qaradawi (July 2007) state â€Å"Our observation that the modern current practices are objectable Islamic ally does not mean that Islam is against Insurance: it only opposes the means and methods.† According to the author the Islamic insurance companies will use the contract of donations and provide compensation and the operation of the company shall not get engaged in any unislamic elements. HISTORICAL PERSPECTIVE; â€Å"Muslims were involved in Marine activities in the Mediterranean and Indian Ocean from the seventh century on†. Chaim-Vardit (2009).† â€Å"The rough model of Takaful was practiced by Arabian tribes, holding to the principal of pooled resources to help the needy on the voluntary basis† Masum Billah (2001). Tamim become the first insurance term in Arabic only in 20th century and it is believed that Ibn Abidin, a Hanafite Jurist who died in 1836,is the First Muslim to coin name Insurance Sukara (security) influenced by Italian term Siguare and Turkish Sigorta. Chaim-Vardit (2009). Merchants of Mecca used to form a group of Mutual funds with a purpose to help the victims or survivors of natural hazards during their commercial ventures into Syria, Iraq and other countries. Such a practice was supported and even contributions were made by Prophet Muhammad (P.B.U.H) while trading with the capital of Hazrat Khadija. Aziz-Abdul (2005) â€Å"The period lasting from the fall of Rome until the Dawn of Islam was the darkest, most corrupt and unsettled period in the known history to man. Hence the Dawn of Islam removed darkness from the face of life and brought the environment of security and stability to the areas which came under the influence of Islam.† According to Chaim-Vardit, Shariah recognizes several transactions and institutions which function in a way similar to certain type of Insurance. The typical ones are: Daman (guarantee) is synonymous to â€Å"Kafala† is used with risk or responsibility that one bears with regard to property of which one enjoys profit. Daman Khatar al Tariq (guarantee against travel hazards). In this type of transaction, the person himself wishes to be compensated for a future possible loss. Wala al Muwalat-This type of transaction was prohibited by Prophet Muhammad (P.B.U.H). The problem was this type of transaction established new ties, as strong as blood ties, outside the family was unbearable. Diya (blood money)-compensation to victim or victims family for unintentional killing or bodily injury. Mudaraba-is not mentioned in Quran and there is much doubt whether it is mentioned in Hadith Zakat-means growth and purity. It is often mentioned as equal to modern social Insurance and there have been modern attempts made in Islamic states as Saudi Arabia and Pakistan to apply Zakat. The institution of Waaf (endowment)-the property endowed as Waaf was intended to support the poor, staff of mosques, hospitals, to maintain city facilities and the two holy cities. Jizya-tax levied on non-Muslims residing in Islamic State and provides then with security for their lives and property. Holy Prophet (P.B.U.H) emphasised that a Muslim should protect itself from hazards and risks via transfering the risk through Takaful Model.The life of a muslim is Controlled and destiny by Allah (S.A.T) but it does not mean that a Muslim cannot protect itself but indeed a Muslim in Islam should gurad itself from misfortunes, hazards, risks and uncertanities.Dr.Masum (2001). Types of Takaful Structures: â€Å"There is no single â€Å"best† model that exists for takaful. Shariah scholars worldwide concur on fundamental components that characterize a takaful scheme, yet in their judicial opinions (fatwas), operational differences are tolerated as long as they do not contradict essential religious tenets.† Ms Shakun Ashoka Raj (2007). There has been a tremendous research done on the takaful models which includes work of prominent authors like Dr.Masum (2001), Hassan, Rahim and Wahab (May June 2007). According to Hassan, Rahim and Wahab (2007) for the Mudarabah contract to be allowed and carried in Islam requires a number of elements to be present: The capital provider (participant); The entrepreneur (takaful operator); Capital an appropriate activity; Profit and loss sharing and offer and acceptance. In the mudaraba contract, the two parties know as provider (rab ul maal) and the entrepreneur or takaful operator (mudarib) operates on a joint venture basis. †An investment on a Mudarabah basis of 100 should at the end of the period give more then 100 to be termed as profit and for the operators to share that.† The other takaful model is known as agency or wakala model. On the basis of this principal, a person delegates his right or business to the other people/person to act as his agent or wakil. The agent is responsible to contribute his knowledge, skills, and abilities in performing the tasks assigned to him in the best manner. According to Dr.Masum (2001) in the Wakala model the salary of the agent who rendered the services is subtracted against the fool of funds. The net funds will be used for the purpose of investment and profits will be distributed accordingly. Similarly author Rahim, Wahab and Hassan â€Å"Under a typical wakala model, the Tabarru (donation) remains the property of the participants unless consumed, as they have the right to receive the surplus back and therefore it becomes a conditional gift.† Tijari model (business) commonly uses both the pure Mudarabah and modified Mudarabah approaches. Dr.masum is of the opinion, that modified Mudarabah approach is used where deduction of expenses is taken into consideration and as result more expensive premium is charged from the participants in order to cover the operational expenses while on the other hand Pure mudarabah approach is used where there are no operational expenses charged. Waqf model-this model operates on non-profit basis that collects donation from individuals or firms who willingly want to contribute something positive to the society. Social organizations and enterprise are engaged in such type of activity. Shakun Ashoka Raj (2007). Concepts of beneficiaries in Takaful It is vital to test the beneficiary in the policy inorder to find that whether the beneficiary is the right person to be tranferred the benefits.In order to do so the following concepts are under taken : Al-Wasiyah (bequest) Al-Mirath (inheritance) Al-Milkiyah (ownership) In the Takaful Model if the policy holder outlives the policy duration then under such circumstances the policy holder is entitled for the benefits and he is the only owner but in Waqf model the sole owner is Allah (S.A.T) and no one can claim the property or benefits. Dr.Masum (2001). After death of the policy holder the following stages are inoccured before the distribution of benefits of the policy. Wealth heald by the policy holder is adding with total benefits If there are any debts left by the policy holder then from the total weath those debts are paid off . For the remaining the funeral expenses will be deducted. The remaining property or any thing left is disrtibuted under the principals of Al wasiyah and Al mirath. Al Wasiyah Under the islamic principal the policy holder can give away via will 1/3 of the property. This is to reduces injustice that may be caused by the policy holder by giving his benefits not to his legal heirs . Al Mirath After making payments of loan taken by Policy holder, excluding funeral expenses from the remaining property and cash left by the deceased and executing his will, the remaing benefits ,property and cash left is distributed among the legal heirs of the policy holder via Islamic methods. CONVENTIONAL LIFE INSURANCE INSURANCE: Insurance is a medium via which people transfer the burden of uncertainty (financial loss) to the insurer, for an agreed financial attention known as â€Å"Premium†. In return, the issuer promises to provide financial compensation to the insured for particular loss occurring. The clients of the policy are known as policyholders. Human life is exposed to risks of death and disability due to natural disasters and accidents. Property possessed by man is exposed to various man made and natural hazards. Simultaneously man himself is exposed to different diseases, deadly viruses, the cure for which involves huge expenses. A family might have to face serious financial and moral hazards as a human life is lost or a person is disabled temporarily or permanently. If an individuals property is damaged, it might result in decline in income of the individual. Life insurance gives protection to an individual during his/her lifetime and after his death too. So we can say that it is an agreement that guarantees the payment of agreed amount of monetary benefit to the insured. There are number of companies offering Life insurance policies. The more the time period of the policy the greater its benefit e.g. if a person purchases a policy for the period of 10 years, he will get its benefit after 10 years but if he dies during this time frame, his family will get its benefit. The insurance company reviews variables that are likely to affect the health and how long and individual lives after receiving an application by individual for life insurance policy. Actuarys Statistical Analysis is performed by a person know as â€Å"Actuary† who determines whether the individual is a good â€Å"risk† to insure. Insurance premium is calculated, the older an individual, the higher the life insurance premium to be paid. Insurance premium can also be higher if an individual has health issues like higher cholesterol. If the insurance company agrees to provide insurance the agent will deliver the life insurance contract. The contract will include: The amount of money to be paid when the policyholder dies. How long the contract lasts. The amount of premium that needs to be paid by the policyholder. The policyholder will need to name the beneficiary to whom the benefit of the policy will be transferred in the event of death of policyholder. HISTORICAL DEVELOPMENT OF INSURANCE: Insurance is as old as the development of human society. In a society there are two types of economies Money economy Natural economy. Natural economy is more old then the money economy where people form community to help each other. For example if the house of a person gets burnt, the community members will pool in funds and reconstruct the house. Money economy practiced the transfer or distribution of risk by the Chinese and the Babylonian traders in the 2nd and 3rd millennium B.C. Achaemenian monarchs of Iran were the first to insure their people and that process was registered in the governmental notary offices. Life Insurance primarily established to provide protection against risk and catastrophes to people who were dieing very early, people who were aged and people who as a result of accident were disabled. This was practiced made possible by sharing and transferring risk with other individuals of the society. The idea of insuring oneself against risk is as old is mankind. Early times in England, societies were formed. Relief to the family of members of the societies would be given by making little sum of payments, if the grains of the farmers were damaged. The first life insurance company was established in England in 1705 and named the Amicable Society for Perpetual Assistance. Life insurance developed from these small beginnings into colossal industry, which gives people sense of security they require to maintain financial stability, moral and faith against inflation, deflation, wars, boom, panic and all sort of devastation. Life insurance gives individuals sound financial back up to move forward as it is based on scientific principles. Life Insurance companies were the only companies to pay their dues fully and survive the crisis of recession while the banks and other investment companies failed to do so. The purpose of selling life insurance is to make sure that it provides fresh air to people to start a life. In the larger view the life insurance policy becomes the reason for the beneficiary to begin a new life. Life insurance does active saving, utilization of funds and reserves for hazards and opportunities. It is a medium of savings, protection and growth and it has given people peace of mind and financial soundness. TYPES OF LIFE INSURANCE There are many different classification of life insurance each satisfying different need of individuals. Life insurance can be broadly divided into two main types: Term Assurance Whole Life Assurance Term Assurance: It is the least expensive Insurance and is available in various forms. This form of insurance is opted if the individual cannot afford other types of insurance or when temporary protection is needed. The premium from this type of insurance is free from element of investment. Term Assurance policy in case of death of policy holder during the specified years is bounded to provide lump sum amount of agreed money but if the individual outlives, then in such circumstances the contract is ceased and no money is to be provided to the policyholder. Term Life Insurance policy lengths for: One-year term policy- promises to pay the beneficiaries of the policyholder the agreed amount of money if the insurer dies within one-year tem policy. Five years promises to pay the beneficiaries of the policyholder the agreed amount of money if the insurer dies within five-year term policy. Ten years, fifteen and twenty year term policy is also known as long term policy. TYPES OF TERM ASSURANCE: Renewable term life policy –In this term life policy, the policyholder automatically qualifies to continue the policy when the specified time of the policy ends. Non-Renewable term life policy- this term life policy, the policy holder does not automatically qualifies to continue the policy when the specified time of the policy ends instead the individual has to re-qualify for the policy by undergoing physical examination in order to determine the health condition. Convertible term life policy-In this type of term policy the insured has the choice to covert this type of policy into permanent life insurance policy into variable insurance, whole or universal life insurance. Non-Convertible term life policy- simply means that policyholder cannot switch the policy to another type life insurance policy. WHOLE LIFE INSURANCE: This policy last the whole (entire) life of the insured. If the policyholder stops paying the premium he/she can get the benefit paid till date. Because of this reason it is an expensive life insurance policy. For example the funeral policy in which expenses are covered for the funeral of the person passed away. Full payment for the policy is taken at the time of purchases of policy. Whole life insurance policy can be divided into two types: Ordinary Life Insurance Limited Payment Life Insurance Ordinary life insurance: It is also know as straight life insurance. In this type of insurance policy the insurer is give lifetime security. For example if the insurer is alive at 100, then he is to be paid the benefit if the policy or the agreed amount of money. Under this policy of life insurance the policyholder is charged high premiums in the start of the policy and charged less premium during the last years of the policy. The life insurance company invests the premium of the policyholder to accumulate a cash surrender value. The policyholder can withdraw from the policy by taking the cash value or borrowing cash value at lower interest rates. The cash value is relatively small in the start of the year and increases with years. LIMITED PAYMENT LIFE INSURANCE: This life insurance policy is also known as â€Å"limited pay life insurance† in which individual pays for the specific time period and enjoys the policy for the rest of his/her life. The face amount of the policy is paid tax free to the beneficiaries the policyholder mentioned. This face amount can be paid on monthly basis or in lump sum amount. If the Policyholder mentioned to make payment to the beneficiary on monthly basis then the policyholder has four options to choose from: Life Income-In this policy the beneficiary of the policyholder is paid on the monthly basis as long as the beneficiary lives. Fixed Period Income-In this type of policy, the policyholder asks the insurance company to pay the beneficiary after his death the proceeds in equal amount over the period of ten years. The years determined are dependent on the wish of the policyholder. Fixed Amount Income-In this type of policy the policy holder asks the insurance company that after his death the nominated beneficiary should be paid lets suppose Rs.1000 a month till the proceeds are exhausted Interest Options-In this the policy holder asks the insurance company that after his death the benefit of the policy should be reinvested by the insurance company and the interest from the investment made should be provided to the nominated beneficiary each year. OTHER FORMS OF LIFE INSURANCE: Endowment Life Insurance- This policy is for a specific time period. The face value is paid to the nominated beneficiary if the policyholder dies during the specific period but if he is alive then the policyholder is paid the benefit of the policy. Variable Life Insurance-This policy is for the whole life. The policyholder is given option to decide the amount he wants to invest in life insurance and the amount he wants to invest in other investment opportunities like buying stocks. It has a guaranteed death benefit, which is based on forecasted interest rates. Theses rates are not fixed indeed vary from company to company. Universal Life Insurance-This policy charges less premium in the start but does not provide death benefit or cash value as this policy is flexible in terms of premium payments and timing. Second To Die Life Insurance- This policy is designed for couples.(married).The benefit of the policy is provided to the heirs of the policyholders only when the surviving spouse dies. Juvenile Life Insurance-The purpose of this policy is to provide safeguard to the children. The guardian or the parent of the child purchases policy in order to secure the minor from mishaps. Modified Life Insurance Policy-In this life insurance policy higher premium are charged at the later years of the specified time. It is suitable for those individuals who believe that their salary/income will increase in the future. METHODS FOR PROVIDING LIFE INSURANCE PROTECTION: There are two methods that are actively used to provide life insurance to individuals. Annual Renewable Term Level Premium method Annual Renewable Term: This type of life insurance policy has overcome the challenge of insurability simply meaning that the policyholder can renew the policy without under going medical examination or providing sound health evidence. Because of poor health or other mishaps the insurer might not be allowed to renew the policy. So annual renewable policy (ART) ignores the insurability element, they simply pay the renewal premium. The policy period varies from 10 to 30 years and for the till the age of 95 mostly. In such policy the premium to be paid is much higher then other life insurance policies. The more the age the higher the premium to be paid and thus the greater the return on the policy. The premium is calculated by determining the death rate of each age group. For Example: A group of 1000 males (non-alcoholic) at the age of 40 wants to get a life insurance for $1000.The death rate of males at the age of 40 is .332% out of 1000.This means that the insurance company would have to pay $.3220 for the death claim. The insurance company would have to collect $.3.20 from each policyholder in order to cover the death claims. The yearly renewable insurance premium increases, as the individual gets older. Premium sharply rises during the later years, because as the age grows the death rate also grows. LEVEL PREMIUM METHOD: In this type of life insurance policy the premium remains the same for the agreed number of years. The time frame varies from 10, 15, 20 to 30 years. This life insurance policy provides insurance to age 100.If the insurer survives till the age of 100 then the face value of the policy is paid to the policyholder. The premium charger in the early age is higher in order to cover for the morality expenses. Level Premium method is also know as ‘Legal Reserve† because the money invested by the company is according to the state law. The state requires the company to maintain a minimum amount of liquid so that it is able to pay for the agreed claims. The legal reserve that the insurance company maintains is equal to the present value of the future death claims minus present value of future premiums. The main objective of the legal reserve is to provide lifetime security. The policyholder has an option to withdraw from the policy by just taking the cash value which is less then the legal reserve because of deductions of expenses like sales. UNISLAMIC ELEMENTS IN CONVENTIONAL LIFE INSURANCE Conventional insurance contains the elements that are unacceptable in Islam which include Riba Maisir Gharar Riba –also termed as interest, is present in conventional life insurance. Loans granted by companies are charged on interest. An insured upon his death receives greater then he has paid. This is not permissible in Islam. Insurance funds stocks/bonds contain the element of interest Those who eat riba (usury) will not stand (on the Day of Resurrection) except like the standing of a person beaten by Shaitan (Satan) leading him to insanity. That is because they say, Trading is only like riba or usury, whereas Allah has permitted trading and forbidden riba. So whosoever receives an admonition from his Lord and stops eating riba shall not be punished for the past; his case is for Allah (to judge): but whoever returns to riba, are dwellers of the Fire they will abide therein. â€Å"Al-Quran, Al-Baqarah (2). 275 Maisar- It refers to gambling or game of chance. Gambling of all forms/types is prohibited in Islam. The gambler tries to win mass wealth without making an effort. When the policyholder dies after only paying a small amount of premium his/her nominated beneficiary receives the benefit in term of monetary, which the policyholder has no idea where the amount has come from. Al-Maisir is referred to in the Quran as follows: O you who believe intoxicants (all kind of alcoholic drinks) and gambling, and Al-Ansab (ways for seeking luck) are an abomination of Shaitan (Satan). So avoid strictly all that (abomination) in order that you may be successful. Al-Quran, AI-Maidah (5): 90 Uncertainty -It is an element which is termed as gharar, is prohibited in Islam. In business terms gharar means undertaking business deals which are riskier and individuals do not posses sufficient knowledge about them. A contract which contains uncertainty due to: Occurring time is not known. The amount payable is not known. Whether the payment will be accepted as agreed. HARAM/HALAL-Islam does not allow individuals to invest money in unIslamic activities. Insurance companies may invest in bonds or tobacco companies or any unethical activity which is not permissible in Islam then taking insurance from such companies is considered haram. ISLAMIC LIFE INSURANCE The transaction of an Islamic life insurance system aims to protect the life of widows, orphans and the dependents of the deceased against future risks and hazards. It follows the principal of Al-Mudaraba financing. Under this principal the insured and insurer mutually agree to co-operate. The insured dependants are protected of future hazards as well as donations are made for the uplift of poor individual who face accidents in Islamic society. This concept was present and practiced during the times of Holy Prophet (P.B.U.H). In Islamic life Insurance policy the nominee is just acting as a trustee and is not considered the absolute beneficiary. The purpose/responsibility of the individual nomination (nominee) by the assured is to distribute the benefit to the heirs of the deceased under the principal pf Mirath and Wasiyah. In Islamic life insurance policies there are two situation in which the benefits of the policy are transferred i) the insurer can claim from the insurer the benefi ts if he outlives the time mentioned in the policy a) the paid premiums b) the profits made upon the paid premiums and c) the dividends/bonus made according to the company policy. In the other situation if the insured is not alive or passed away during the policy, the benefits are transferred to the nominee (selected by insured) and it is mandatory for the nominee to distribute the benefits of the policy among the heirs of the policyholder. The benefits include a) paid premium b) profits made on the paid premiums c) bonus/dividends make the company policy and d) donations from the companys charitable funds according to the policy selected by the assured. The benefits of the Islamic life insurance policy are not just claimed by individuals who face natural death/accidents but the benefit are also provided to people insured and passing in unlawful death example suicide/murders. The reason for that is life and death can only be det Prospects and Perception of Islamic Life Insurance Prospects and Perception of Islamic Life Insurance Chapter 1 Introduction Background to study: Insurance is a financial industry which has surfaced as a colossal industry for both in Muslim and Non Muslin world. In Conventional Insurance there are many elements, activities and procedures which are considered unethical, unlawful and unislamic by majority of Islamic scholars. Elements such as uncertainty, gambling and excessive interest are the main culprits. (Khair Bakhsh, 2009). For the satisfaction of Muslim concern, market experts and Islamic scholars introduced an insurance with the name of Takaful.The increase in demand of Takaful system and the presence of large markets for its products is compelling the entitled authorities to introduce it in Pakistan as soon as possible. Problem Statement: What are the prospects and perception of Islamic life insurance in Peshawar? Purpose of the study: To review why convention system is prohibited in Islam To compare Islamic Life Insurance (Takaful) with Contemporary Life Insurance. To find out justification of an Islamic Life Insurance (Takaful) Analysis of prospects of Takaful in Peshawar City. Methodology Applied Research: In this research I will be studying existing Islamic life insurance system and adding no new finds to body of knowledge. Scheme of study Type of investigation: This is a descriptive study: The format, which will be followed in this study, is to find out justification of an Islamic Life Insurance and what are its prospects in Peshawar. Cross-sectional Data: In this research I will observe and study secondary data regarding Islamic Life Insurance and Conventional life Insurance system. Unit of Study: My research unit of analysis will be organization Study Settings: Field Study: Study will be done in natural settings in which variables will not be controlled. Researchers interference: In this study researchers interference will be minimal and has no direct interference with the Islamic life insurance organizations because I am not allowed to interfere in the organizations. Methodology: The methods I will be using in the report are both Primary and Secondary data collection. Secondary Data: For this research I will use secondary data. Sources: Internet Leading newspaper articles Books related to Islamic life Insurance (Takaful) Research instruments: The instruments which will be used in my research to collect primary data are: Observations Questionnaires. Sample Size: I will be distributing questionnaires. Sampling Techniques: The sampling technique will be simple random sampling that will help in reducing the biasness factor in the research. Limitations: The scope of my research will be limited to students of universities in Peshawar because of time and other limited resources. Scheme of the report: The report will consist of the following parts. Introduction Literature Review Findings Analysis Conclusion and Recommendations Literature survey Meaning of Takaful: Takaful is a form of mutual assistance (Taawun) strengthened by aiding the ones who are in problems and deserve to be helped.(Dr.Masum) (2009). According to him, Islamic Scholars have begun to accept and conclude to the viewpoint that Takaful is according to Shariah principles. Numerous Islamic conferences are being held and Shariah Councils are emphasizing by creating awareness amongst the Muslims that Takaful operations are free from unIslamic elements thus the development of Takaful in the market is to cater to the needs of Muslim by providing them products and services in accordance to Islam. â€Å"Overtime, greater understanding on the concept of Islamic Insurance has emerged as the concept of Takaful, based on the contract of Tabarru (donation) and Mudarabah profit sharing.† â€Å"Takaful is an alternative form of Conventional Insurance based on the concept of trusteeship and cooperation inspired by the beliefs of the followers of Islamic teachings. Murtaza Ali (2007). It can be concluded that takaful is an Islamic way of dealing with uncertainties via mutual assistance and it is social scheme developed on the principals of brotherhood, solidarity and mutual assistance. Takaful is rooted from an Arabic word Kafal, which means that ones needs should be taken care of. According to this scheme participants jointly agree to bind themselves against damages caused by hazards. â€Å"Takaful is a legally binding agreement between all the participants of the scheme to pay any of the members who suffers a loss as specified in the Takaful certificate†. (Dr.Masum)(2009). Muhaimin Iqbal (2005), Abdul Rahim, Wahab and Kabir Hassan explain Takaful as a scheme that is derived from the concept of Taawun and the concept of Takaful is similar to Conventional mutual risk sharing. Takaful has a fixed maturity period and is considered long term saving tool. Apart from giving benefits of return it also provides a mutual financial assistance among participants. â€Å"A Programme that pools efforts to help the needy in times of need due to immediate deaths or mishaps resulting in personal injury or disablement†. (Bank Negara Malaysia) Scholars like Dr.Yusof Qaradawi (July 2007) state â€Å"Our observation that the modern current practices are objectable Islamic ally does not mean that Islam is against Insurance: it only opposes the means and methods.† According to the author the Islamic insurance companies will use the contract of donations and provide compensation and the operation of the company shall not get engaged in any unislamic elements. HISTORICAL PERSPECTIVE; â€Å"Muslims were involved in Marine activities in the Mediterranean and Indian Ocean from the seventh century on†. Chaim-Vardit (2009).† â€Å"The rough model of Takaful was practiced by Arabian tribes, holding to the principal of pooled resources to help the needy on the voluntary basis† Masum Billah (2001). Tamim become the first insurance term in Arabic only in 20th century and it is believed that Ibn Abidin, a Hanafite Jurist who died in 1836,is the First Muslim to coin name Insurance Sukara (security) influenced by Italian term Siguare and Turkish Sigorta. Chaim-Vardit (2009). Merchants of Mecca used to form a group of Mutual funds with a purpose to help the victims or survivors of natural hazards during their commercial ventures into Syria, Iraq and other countries. Such a practice was supported and even contributions were made by Prophet Muhammad (P.B.U.H) while trading with the capital of Hazrat Khadija. Aziz-Abdul (2005) â€Å"The period lasting from the fall of Rome until the Dawn of Islam was the darkest, most corrupt and unsettled period in the known history to man. Hence the Dawn of Islam removed darkness from the face of life and brought the environment of security and stability to the areas which came under the influence of Islam.† According to Chaim-Vardit, Shariah recognizes several transactions and institutions which function in a way similar to certain type of Insurance. The typical ones are: Daman (guarantee) is synonymous to â€Å"Kafala† is used with risk or responsibility that one bears with regard to property of which one enjoys profit. Daman Khatar al Tariq (guarantee against travel hazards). In this type of transaction, the person himself wishes to be compensated for a future possible loss. Wala al Muwalat-This type of transaction was prohibited by Prophet Muhammad (P.B.U.H). The problem was this type of transaction established new ties, as strong as blood ties, outside the family was unbearable. Diya (blood money)-compensation to victim or victims family for unintentional killing or bodily injury. Mudaraba-is not mentioned in Quran and there is much doubt whether it is mentioned in Hadith Zakat-means growth and purity. It is often mentioned as equal to modern social Insurance and there have been modern attempts made in Islamic states as Saudi Arabia and Pakistan to apply Zakat. The institution of Waaf (endowment)-the property endowed as Waaf was intended to support the poor, staff of mosques, hospitals, to maintain city facilities and the two holy cities. Jizya-tax levied on non-Muslims residing in Islamic State and provides then with security for their lives and property. Holy Prophet (P.B.U.H) emphasised that a Muslim should protect itself from hazards and risks via transfering the risk through Takaful Model.The life of a muslim is Controlled and destiny by Allah (S.A.T) but it does not mean that a Muslim cannot protect itself but indeed a Muslim in Islam should gurad itself from misfortunes, hazards, risks and uncertanities.Dr.Masum (2001). Types of Takaful Structures: â€Å"There is no single â€Å"best† model that exists for takaful. Shariah scholars worldwide concur on fundamental components that characterize a takaful scheme, yet in their judicial opinions (fatwas), operational differences are tolerated as long as they do not contradict essential religious tenets.† Ms Shakun Ashoka Raj (2007). There has been a tremendous research done on the takaful models which includes work of prominent authors like Dr.Masum (2001), Hassan, Rahim and Wahab (May June 2007). According to Hassan, Rahim and Wahab (2007) for the Mudarabah contract to be allowed and carried in Islam requires a number of elements to be present: The capital provider (participant); The entrepreneur (takaful operator); Capital an appropriate activity; Profit and loss sharing and offer and acceptance. In the mudaraba contract, the two parties know as provider (rab ul maal) and the entrepreneur or takaful operator (mudarib) operates on a joint venture basis. †An investment on a Mudarabah basis of 100 should at the end of the period give more then 100 to be termed as profit and for the operators to share that.† The other takaful model is known as agency or wakala model. On the basis of this principal, a person delegates his right or business to the other people/person to act as his agent or wakil. The agent is responsible to contribute his knowledge, skills, and abilities in performing the tasks assigned to him in the best manner. According to Dr.Masum (2001) in the Wakala model the salary of the agent who rendered the services is subtracted against the fool of funds. The net funds will be used for the purpose of investment and profits will be distributed accordingly. Similarly author Rahim, Wahab and Hassan â€Å"Under a typical wakala model, the Tabarru (donation) remains the property of the participants unless consumed, as they have the right to receive the surplus back and therefore it becomes a conditional gift.† Tijari model (business) commonly uses both the pure Mudarabah and modified Mudarabah approaches. Dr.masum is of the opinion, that modified Mudarabah approach is used where deduction of expenses is taken into consideration and as result more expensive premium is charged from the participants in order to cover the operational expenses while on the other hand Pure mudarabah approach is used where there are no operational expenses charged. Waqf model-this model operates on non-profit basis that collects donation from individuals or firms who willingly want to contribute something positive to the society. Social organizations and enterprise are engaged in such type of activity. Shakun Ashoka Raj (2007). Concepts of beneficiaries in Takaful It is vital to test the beneficiary in the policy inorder to find that whether the beneficiary is the right person to be tranferred the benefits.In order to do so the following concepts are under taken : Al-Wasiyah (bequest) Al-Mirath (inheritance) Al-Milkiyah (ownership) In the Takaful Model if the policy holder outlives the policy duration then under such circumstances the policy holder is entitled for the benefits and he is the only owner but in Waqf model the sole owner is Allah (S.A.T) and no one can claim the property or benefits. Dr.Masum (2001). After death of the policy holder the following stages are inoccured before the distribution of benefits of the policy. Wealth heald by the policy holder is adding with total benefits If there are any debts left by the policy holder then from the total weath those debts are paid off . For the remaining the funeral expenses will be deducted. The remaining property or any thing left is disrtibuted under the principals of Al wasiyah and Al mirath. Al Wasiyah Under the islamic principal the policy holder can give away via will 1/3 of the property. This is to reduces injustice that may be caused by the policy holder by giving his benefits not to his legal heirs . Al Mirath After making payments of loan taken by Policy holder, excluding funeral expenses from the remaining property and cash left by the deceased and executing his will, the remaing benefits ,property and cash left is distributed among the legal heirs of the policy holder via Islamic methods. CONVENTIONAL LIFE INSURANCE INSURANCE: Insurance is a medium via which people transfer the burden of uncertainty (financial loss) to the insurer, for an agreed financial attention known as â€Å"Premium†. In return, the issuer promises to provide financial compensation to the insured for particular loss occurring. The clients of the policy are known as policyholders. Human life is exposed to risks of death and disability due to natural disasters and accidents. Property possessed by man is exposed to various man made and natural hazards. Simultaneously man himself is exposed to different diseases, deadly viruses, the cure for which involves huge expenses. A family might have to face serious financial and moral hazards as a human life is lost or a person is disabled temporarily or permanently. If an individuals property is damaged, it might result in decline in income of the individual. Life insurance gives protection to an individual during his/her lifetime and after his death too. So we can say that it is an agreement that guarantees the payment of agreed amount of monetary benefit to the insured. There are number of companies offering Life insurance policies. The more the time period of the policy the greater its benefit e.g. if a person purchases a policy for the period of 10 years, he will get its benefit after 10 years but if he dies during this time frame, his family will get its benefit. The insurance company reviews variables that are likely to affect the health and how long and individual lives after receiving an application by individual for life insurance policy. Actuarys Statistical Analysis is performed by a person know as â€Å"Actuary† who determines whether the individual is a good â€Å"risk† to insure. Insurance premium is calculated, the older an individual, the higher the life insurance premium to be paid. Insurance premium can also be higher if an individual has health issues like higher cholesterol. If the insurance company agrees to provide insurance the agent will deliver the life insurance contract. The contract will include: The amount of money to be paid when the policyholder dies. How long the contract lasts. The amount of premium that needs to be paid by the policyholder. The policyholder will need to name the beneficiary to whom the benefit of the policy will be transferred in the event of death of policyholder. HISTORICAL DEVELOPMENT OF INSURANCE: Insurance is as old as the development of human society. In a society there are two types of economies Money economy Natural economy. Natural economy is more old then the money economy where people form community to help each other. For example if the house of a person gets burnt, the community members will pool in funds and reconstruct the house. Money economy practiced the transfer or distribution of risk by the Chinese and the Babylonian traders in the 2nd and 3rd millennium B.C. Achaemenian monarchs of Iran were the first to insure their people and that process was registered in the governmental notary offices. Life Insurance primarily established to provide protection against risk and catastrophes to people who were dieing very early, people who were aged and people who as a result of accident were disabled. This was practiced made possible by sharing and transferring risk with other individuals of the society. The idea of insuring oneself against risk is as old is mankind. Early times in England, societies were formed. Relief to the family of members of the societies would be given by making little sum of payments, if the grains of the farmers were damaged. The first life insurance company was established in England in 1705 and named the Amicable Society for Perpetual Assistance. Life insurance developed from these small beginnings into colossal industry, which gives people sense of security they require to maintain financial stability, moral and faith against inflation, deflation, wars, boom, panic and all sort of devastation. Life insurance gives individuals sound financial back up to move forward as it is based on scientific principles. Life Insurance companies were the only companies to pay their dues fully and survive the crisis of recession while the banks and other investment companies failed to do so. The purpose of selling life insurance is to make sure that it provides fresh air to people to start a life. In the larger view the life insurance policy becomes the reason for the beneficiary to begin a new life. Life insurance does active saving, utilization of funds and reserves for hazards and opportunities. It is a medium of savings, protection and growth and it has given people peace of mind and financial soundness. TYPES OF LIFE INSURANCE There are many different classification of life insurance each satisfying different need of individuals. Life insurance can be broadly divided into two main types: Term Assurance Whole Life Assurance Term Assurance: It is the least expensive Insurance and is available in various forms. This form of insurance is opted if the individual cannot afford other types of insurance or when temporary protection is needed. The premium from this type of insurance is free from element of investment. Term Assurance policy in case of death of policy holder during the specified years is bounded to provide lump sum amount of agreed money but if the individual outlives, then in such circumstances the contract is ceased and no money is to be provided to the policyholder. Term Life Insurance policy lengths for: One-year term policy- promises to pay the beneficiaries of the policyholder the agreed amount of money if the insurer dies within one-year tem policy. Five years promises to pay the beneficiaries of the policyholder the agreed amount of money if the insurer dies within five-year term policy. Ten years, fifteen and twenty year term policy is also known as long term policy. TYPES OF TERM ASSURANCE: Renewable term life policy –In this term life policy, the policyholder automatically qualifies to continue the policy when the specified time of the policy ends. Non-Renewable term life policy- this term life policy, the policy holder does not automatically qualifies to continue the policy when the specified time of the policy ends instead the individual has to re-qualify for the policy by undergoing physical examination in order to determine the health condition. Convertible term life policy-In this type of term policy the insured has the choice to covert this type of policy into permanent life insurance policy into variable insurance, whole or universal life insurance. Non-Convertible term life policy- simply means that policyholder cannot switch the policy to another type life insurance policy. WHOLE LIFE INSURANCE: This policy last the whole (entire) life of the insured. If the policyholder stops paying the premium he/she can get the benefit paid till date. Because of this reason it is an expensive life insurance policy. For example the funeral policy in which expenses are covered for the funeral of the person passed away. Full payment for the policy is taken at the time of purchases of policy. Whole life insurance policy can be divided into two types: Ordinary Life Insurance Limited Payment Life Insurance Ordinary life insurance: It is also know as straight life insurance. In this type of insurance policy the insurer is give lifetime security. For example if the insurer is alive at 100, then he is to be paid the benefit if the policy or the agreed amount of money. Under this policy of life insurance the policyholder is charged high premiums in the start of the policy and charged less premium during the last years of the policy. The life insurance company invests the premium of the policyholder to accumulate a cash surrender value. The policyholder can withdraw from the policy by taking the cash value or borrowing cash value at lower interest rates. The cash value is relatively small in the start of the year and increases with years. LIMITED PAYMENT LIFE INSURANCE: This life insurance policy is also known as â€Å"limited pay life insurance† in which individual pays for the specific time period and enjoys the policy for the rest of his/her life. The face amount of the policy is paid tax free to the beneficiaries the policyholder mentioned. This face amount can be paid on monthly basis or in lump sum amount. If the Policyholder mentioned to make payment to the beneficiary on monthly basis then the policyholder has four options to choose from: Life Income-In this policy the beneficiary of the policyholder is paid on the monthly basis as long as the beneficiary lives. Fixed Period Income-In this type of policy, the policyholder asks the insurance company to pay the beneficiary after his death the proceeds in equal amount over the period of ten years. The years determined are dependent on the wish of the policyholder. Fixed Amount Income-In this type of policy the policy holder asks the insurance company that after his death the nominated beneficiary should be paid lets suppose Rs.1000 a month till the proceeds are exhausted Interest Options-In this the policy holder asks the insurance company that after his death the benefit of the policy should be reinvested by the insurance company and the interest from the investment made should be provided to the nominated beneficiary each year. OTHER FORMS OF LIFE INSURANCE: Endowment Life Insurance- This policy is for a specific time period. The face value is paid to the nominated beneficiary if the policyholder dies during the specific period but if he is alive then the policyholder is paid the benefit of the policy. Variable Life Insurance-This policy is for the whole life. The policyholder is given option to decide the amount he wants to invest in life insurance and the amount he wants to invest in other investment opportunities like buying stocks. It has a guaranteed death benefit, which is based on forecasted interest rates. Theses rates are not fixed indeed vary from company to company. Universal Life Insurance-This policy charges less premium in the start but does not provide death benefit or cash value as this policy is flexible in terms of premium payments and timing. Second To Die Life Insurance- This policy is designed for couples.(married).The benefit of the policy is provided to the heirs of the policyholders only when the surviving spouse dies. Juvenile Life Insurance-The purpose of this policy is to provide safeguard to the children. The guardian or the parent of the child purchases policy in order to secure the minor from mishaps. Modified Life Insurance Policy-In this life insurance policy higher premium are charged at the later years of the specified time. It is suitable for those individuals who believe that their salary/income will increase in the future. METHODS FOR PROVIDING LIFE INSURANCE PROTECTION: There are two methods that are actively used to provide life insurance to individuals. Annual Renewable Term Level Premium method Annual Renewable Term: This type of life insurance policy has overcome the challenge of insurability simply meaning that the policyholder can renew the policy without under going medical examination or providing sound health evidence. Because of poor health or other mishaps the insurer might not be allowed to renew the policy. So annual renewable policy (ART) ignores the insurability element, they simply pay the renewal premium. The policy period varies from 10 to 30 years and for the till the age of 95 mostly. In such policy the premium to be paid is much higher then other life insurance policies. The more the age the higher the premium to be paid and thus the greater the return on the policy. The premium is calculated by determining the death rate of each age group. For Example: A group of 1000 males (non-alcoholic) at the age of 40 wants to get a life insurance for $1000.The death rate of males at the age of 40 is .332% out of 1000.This means that the insurance company would have to pay $.3220 for the death claim. The insurance company would have to collect $.3.20 from each policyholder in order to cover the death claims. The yearly renewable insurance premium increases, as the individual gets older. Premium sharply rises during the later years, because as the age grows the death rate also grows. LEVEL PREMIUM METHOD: In this type of life insurance policy the premium remains the same for the agreed number of years. The time frame varies from 10, 15, 20 to 30 years. This life insurance policy provides insurance to age 100.If the insurer survives till the age of 100 then the face value of the policy is paid to the policyholder. The premium charger in the early age is higher in order to cover for the morality expenses. Level Premium method is also know as ‘Legal Reserve† because the money invested by the company is according to the state law. The state requires the company to maintain a minimum amount of liquid so that it is able to pay for the agreed claims. The legal reserve that the insurance company maintains is equal to the present value of the future death claims minus present value of future premiums. The main objective of the legal reserve is to provide lifetime security. The policyholder has an option to withdraw from the policy by just taking the cash value which is less then the legal reserve because of deductions of expenses like sales. UNISLAMIC ELEMENTS IN CONVENTIONAL LIFE INSURANCE Conventional insurance contains the elements that are unacceptable in Islam which include Riba Maisir Gharar Riba –also termed as interest, is present in conventional life insurance. Loans granted by companies are charged on interest. An insured upon his death receives greater then he has paid. This is not permissible in Islam. Insurance funds stocks/bonds contain the element of interest Those who eat riba (usury) will not stand (on the Day of Resurrection) except like the standing of a person beaten by Shaitan (Satan) leading him to insanity. That is because they say, Trading is only like riba or usury, whereas Allah has permitted trading and forbidden riba. So whosoever receives an admonition from his Lord and stops eating riba shall not be punished for the past; his case is for Allah (to judge): but whoever returns to riba, are dwellers of the Fire they will abide therein. â€Å"Al-Quran, Al-Baqarah (2). 275 Maisar- It refers to gambling or game of chance. Gambling of all forms/types is prohibited in Islam. The gambler tries to win mass wealth without making an effort. When the policyholder dies after only paying a small amount of premium his/her nominated beneficiary receives the benefit in term of monetary, which the policyholder has no idea where the amount has come from. Al-Maisir is referred to in the Quran as follows: O you who believe intoxicants (all kind of alcoholic drinks) and gambling, and Al-Ansab (ways for seeking luck) are an abomination of Shaitan (Satan). So avoid strictly all that (abomination) in order that you may be successful. Al-Quran, AI-Maidah (5): 90 Uncertainty -It is an element which is termed as gharar, is prohibited in Islam. In business terms gharar means undertaking business deals which are riskier and individuals do not posses sufficient knowledge about them. A contract which contains uncertainty due to: Occurring time is not known. The amount payable is not known. Whether the payment will be accepted as agreed. HARAM/HALAL-Islam does not allow individuals to invest money in unIslamic activities. Insurance companies may invest in bonds or tobacco companies or any unethical activity which is not permissible in Islam then taking insurance from such companies is considered haram. ISLAMIC LIFE INSURANCE The transaction of an Islamic life insurance system aims to protect the life of widows, orphans and the dependents of the deceased against future risks and hazards. It follows the principal of Al-Mudaraba financing. Under this principal the insured and insurer mutually agree to co-operate. The insured dependants are protected of future hazards as well as donations are made for the uplift of poor individual who face accidents in Islamic society. This concept was present and practiced during the times of Holy Prophet (P.B.U.H). In Islamic life Insurance policy the nominee is just acting as a trustee and is not considered the absolute beneficiary. The purpose/responsibility of the individual nomination (nominee) by the assured is to distribute the benefit to the heirs of the deceased under the principal pf Mirath and Wasiyah. In Islamic life insurance policies there are two situation in which the benefits of the policy are transferred i) the insurer can claim from the insurer the benefi ts if he outlives the time mentioned in the policy a) the paid premiums b) the profits made upon the paid premiums and c) the dividends/bonus made according to the company policy. In the other situation if the insured is not alive or passed away during the policy, the benefits are transferred to the nominee (selected by insured) and it is mandatory for the nominee to distribute the benefits of the policy among the heirs of the policyholder. The benefits include a) paid premium b) profits made on the paid premiums c) bonus/dividends make the company policy and d) donations from the companys charitable funds according to the policy selected by the assured. The benefits of the Islamic life insurance policy are not just claimed by individuals who face natural death/accidents but the benefit are also provided to people insured and passing in unlawful death example suicide/murders. The reason for that is life and death can only be det

moralhf Essays - Morality in The Adventures of Huckleberry Finn :: Adventures Huckleberry Huck Finn Essays

Morality in The Adventures of Huckleberry Finn In every persons life at one point they will have to make a choice based on their moral beliefs. These decisions can show what a person believes in right from the start. In Mark Twains' The Adventures of Huckleberry Finn the main character Huck, makes two very important moral decisions. The first being how he treats Jim when he first meets him at Jackson's Island and the second is to tear up the letter to Miss Watson out of his love for Jim. When Huck first runs away from Pap he goes to Jackson's Island and thinks that he is the only person there. He soon finds out that this is not true, and that "Miss Watsons Jim"(41) is taking refuge there as well. Many people would hate to be alone on an island with a "nigger"(43), but Huck is instead happy to have someone to converse with. At first Jim thinks he sees Hucks ghost and is petrified. Huck eases Jims feelings by changing the subject and saying "It's good daylight, le's get breakfast"(41), showing that Huck is not only real but he does not mind that Jim is black. Jim feels that Huck might tell on him for running away, but he then decides that it will be okay to tell him why he ran away from Miss Watson. Jim keeps asking Huck if he is going to tell anyone about his running away, and Huck replies "People would call me a low down abolitionist and despise me for keeping mum but that don't make no difference I aint gonna tell"(43). Hucks response truly shows that hi s ignorance has no bearing over his moral kindness. When taken into consideration good morality is much more important in the long run than being the most intelligent person. After journeying with Jim for quite some time Huck begins to feel bad about harboring a runaway slave. He decides to write a letter to Miss Watson explaining the whole story, because Jim had been sold and he does not know where he is. Huck was indeed confused about what he should do so he dropped he dropped to his knees and began to pray.

Regional Metropolis: Constantinople and Tenochtitlan Essay

Constantinople and Tenochtitlan were two great cities in their time. They both had many dominant physical features. They also had many cultural influences and their major function for each city was different. The two cities had important landmarks and their locations still exist. The cities both had religious affiliations and other important aspects. Constantinople and Tenochtitlan help to show you what cities were like between 1160-1520. Any two cities could have been chosen to show what it was like back then. These two show the global nature of this occurrence by contrasting the two. One is located in the Mediterranean and the other is in Mesoamerica so they are basically worlds apart. They also experience two different kinds of life. These two were also chosen to be compared because many of the Europeans went to these places and made their own accountable comparisons on what they had thought. Each city had its own dominant physical characteristics. Constantinople had St. Sophia and the hippodrome. It also had well-to-do houses and markets. Constantinople was in the center for trading on the Silk Road. It also had a great defense system because the city was surrounded by water. The city had the Old Horn Port on one of its edges. Tenochtitlan was built up in the marshes. The city also had special roads to connect it to the mainland. Each city had its way of living with their physical features. Constantinople and Tenochtitlan each had its own set of cultural influences. Constantinople was mostly Roman and Greek. They mainly spoke Greek there. They were also Christian Orthodox. Tenochtitlan was built by the inspiration of two older cities. The immigrants and visitors that came had to stay in their own neighborhoods. They also traded with the north and south. Constantinople and Tenochtitlan were influenced by their cultures. The major function for each city was different from each other. Constantinople was used as a political place. It was also very religious. Constantinople was also a major trade center. Tenochtitlan was mainly a religious center. It had different ritual sacrifices that went on. It also had a lot of religious ceremonies that went on. They both had different  functions. The cities had many important landmarks and their locations still exist. Constantinople had St. Sophia as well as the Mese Road or â€Å"Midway†. The Golden Gate was also located there. Other places located here are the Golden Horn and the Hippodrome. Tenochtitlan had the Pyramid of the Sun. They also had the Market. Old Horn Port is still around today. Tenochtitlan stood where present day Mexico City is. Each city had its own set of important places and each are still around in some way. Each city had its own religious affiliations. Constantinople was centered around the Orthodox Church. Tenochtitlan had many things that were religious. They had sacrifices in their city. They also had many Gods and were polytheistic. Tenochtitlan also had many priests and a chief to look up to. Constantinople and Tenochtitlan had their own way of believing in their religions. Constantinople and Tenochtitlan also had some other important characteristics. Constantinople was extremely wealthy. They also had inhabitant Greeks that were not made for war. The language of Tenochtitlan was Nahuatl. They also had a population of two hundred thousand. Their city was built by the Aztecs. The two cities had many important characteristics. Most Europeans had their part in thee decline of both of these cities. Many places say that their religions had an affect on their violence. They both had an obsession for gold and other wealthy material. They each had a big population for their time. Many believed that because of their great and different urban development went well with the fact that they had a modern economic development. Both were built in imitation of older cities and more well-known centers. They both were known more as imperial capitals, but now they are often referred to as cities. Constantinople was older, but its became more famous as a Roman capital later in history. Tenochtitlan was a younger city and quickly grew from a small place into the largest city of the Americas as their expansion of power grew over all of Mesoamerica. Constantinople and Tenochtitlan helped to demonstrate how cities developed and what their lives were like back then when they were developing cities. They both had their own set of physical characteristics. They also had their own share of cultural influences and what their major function for their city was. Constantinople and Tenochtitlan had important landmarks within each of their city limits and the site for their locations are still around in some form. They also had their own religious beliefs and ways of life. They also had some other important aspects to their cities to distinct themselves from other cities. Constantinople and Tenochtitlan were classified as a city, but do you think they could have become more than that? Bibliography Wiesner, Wheeler, Doeringer, Curtis. Discovering The Global Past. Houghton Mifflin Company; New York: 2007. Pages 268-300. Source 4, Illustrated Map of Constantinople, 13th Century Source 5, Interior Saint Sophia Source 10, Spanish Illustrated Map of Tenochtitlan

Stock and Berkshire Hathaway

1. What is the possible meaning of the changes in stock price for Berkshire Hathaway and Scottish Power plc on the day of the acquisition announcement? Specifically, what does the $2. 17-billion gain in Berkshire’s market value of equity imply about the intrinsic value of PacifiCorp? The significant change in stock prices for Berkshire Hathaway and Scottish Power plc is partially due to the wide variety of products produced under these names. The approval of these investments and products are indicated by the overall market because they are creating value for both the buyer and the seller. Berkshire Hathaway is responsible for eight different types of product ranging from insurance and financial products to retail including wholesale distributing and apparel along with an array of smaller businesses. Warren Buffett’s name goes a long way based on the type of work and success he has had in the past. His decision to run the company in the interests of the shareholders has proven to be successful. â€Å"In 1977, Berkshire Hathaway’s year-end closing share price was $102; on May 24, 2005 the closing price on Class A shares reached $85,500†. It seems that Warren Buffett refuses to ‘split’ the firm’s share price in order to make it more accessible to everyday investors is because of the value of the company and the contribution that these investors have made to Berkshire Hathaway. They make risky decisions and expect a successful outcome which in turn results in a profitable project. The $2. 17-billion gain in Berkshire’s market value implies that the intrinsic value of PacifiCorp is increasing as well. The market value may be different than the intrinsic value however the intrinsic value is the actual value of the company including assets and the underlying perception of that value. Both tangible and intangible factors may be included. Therefore the intrinsic value of the PacifiCorp is on the rise with the amount of revenue they are generating. 1. Based on the multiples for comparable regulated utilities, what is the range of possible values for PacifiCorp? What questions might you have about this range? PacifiCorp |Revenue |EBIT |EBITDA |Net Income |EPS |Book Value | |Median |$6. 252B |$8. 775B |$9. 023B |$7. 96B |$4. 277B |$5. 904B | |Mean |$6. 584B |$9. 289B |$9. 076B |$7. 553B |$4. 308B |$5. 678B | | For the most part, the means are higher than the medians for the enterprise financial value of PacifiCorp. 2. Assess the bid for PacifiCorp. How does it compare with the firm’s intrinsic value? As an alternative, the instructor could suggest that students perform a simple di scounted cash flow (DCF) analysis. Warren Buffett and Berkshire Hathaway’s bid of $5. 1 billion for PacifiCorp was a risky yet profitable move for the pair. With the average revenue earning of $6. 584 billion and an average net income of $7. 53 billion, the earnings seem to exceed the overall cost of purchasing this corporation. PacifiCorp had steady returns for numerous years as presented below. 5. 4 percent of their stock was preferred stock for two consecutive years with dividends of $1. 35 per share. With the wide range of businesses under their belt including, insurance, apparel, building products, finance and financial products, flight services, retail, grocery distribution and carpet and floor coverings along with an assortment of smaller businesses, PacifiCorp would just be another notch in the belt of Warren Buffet. His investment strategies have proven to be profitable and his decisions have proven to be knowledgeable and successful. The intrinsic value of the corporation will definitely be of value to Warren Buffett and Berkshire Hathaway based on PacifiCorp’s earnings, financial worth and the value of their assets in years prior to Warren Buffett’s acquisition. [pic][pic] 3. How well has Berkshire Hathaway performed? How well has it performed in the aggregate? What about its investment in MidAmerican Energy Holdings? Berkshire Hathaway has become an investing empire. Their enterprise value in 2005 was nearly $520 billion. Taking a look at their current value is no different. According to Berkshire Hathaway’s most recent 10K report (2010), they had 1,648,000 outstanding shares of class A stock. At the end of 2010 the price of the class A stock was $120,450 per share. If we use the formula for market capitalization we get: Market Capitalization = Outstanding shares * share price Market Capitalization = 1,648,000*120,450 Market Capitalization = 198,501,600,000 We then use the 10K to find their cash, cash equivalents and debt for 2010. According to their annual report they had cash and cash equivalents of $2,673,000,000 and a reported debt of $6,621,000,000. We then use these numbers to find the current enterprise value: Enterprise value = 198,501,600,000-2,673,000,000+6,621,000,000 Enterprise value = 202,449,600,000 These estimates from 2005 and 2010 show us that Berkshire Hathaway did lose some value; however they still have an enterprise value of over $200 billion. This shows us that even through the last few years when the United States has been in an economic recession overall they have remained strong. Using Yahoo Finance we see that there was a slight drop in stock A prices in February of 2009 when it reached a low of about $78,000 per share. But by the end of 2009, prices rose back to above $100,000 per share and have remained, showing consistency and continuing to build shareholder confidence. Berkshire Hathaway has increased its interest in MidAmerican from 88. 6% to 89. 8% since 2005. By doing this it only adds even more value to Berkshire Hathaway as MidAmerican is a leading provider of natural gas for more than 2. 4 million customers. The investment has surely paid off as the 2010 annual report showed 1. 13 billion dollars of earnings for Berkshire from MidAmerican. 4. What is your assessment of Berkshire’s investments in Buffett’s â€Å"Big Four†: American Express, Coca-Cola, Gillette (now part of Procter and Gamble), and Wells Fargo? With a little more than 150,000,000 shares of American Express, Berkshire Hathaway owns about 12. 6% of the company. It initially cost about $1,300,000,000 to invest in these shares. As of today the market value is right around $7,500,000,000. As you can see, Investing in American Express has turned out to be a smart move for Buffet as they have seen over $6. 2 Billion in profit. American Express shows a consistent trend year after year of making a profit and continues to be a safe and attractive purchase. Berkshire owns around 200,000,000 shares of Coca-Cola coming out to be about 8. 6% ownership of the company. The cost of these shares was about $1,300,000,000 and the market value of the shares today has grown to be almost $13,400,000,000. Again we see a smart investment, with Coca-Cola producing a $12. billion dollar profit for Berkshire. Coca-Cola continues to be a leader in effectively running their finances as it seems their stock prices rises every year. They carry low debt and our consistent fitting perfect into the Berkshire mold. Berkshire Hathaway owns close to 73,000,000 shares of Procter and Gamble. These shares are equal to a 2. 6% ownership of Procter and Gamble. When they invested this cost them $464,000,00 0. Today these shares are worth around $4,800,000,000. Again we see that this investment has worked out in favor of Buffet and Berkshire Hathaway. Proctor and Gamble carries a low amount of debt and produces a high net income and continues to grow year in and year out making Buffet and other investor’s very happy shareholders. The last company Wells Fargo, Berkshire has about a 6. 8% ownership of or roughly holds around 360,000,000 shares. The cost of the Wells Fargo stock to Berkshire was estimated at around $8,000,000,000. In today’s market these shares hold a value of about $10,600,000,000. Even though this is a profit of about $2. 6 billion I’m not sure if Buffett is extremely happy with this investment. Proctor and Gambles stock price is relatively low giving it much room to grow however over the last couple of years it has fluctuated quite a bit. Out of the four investments this is definitely the least effective and efficient. 5. From Warren Buffett’s perspective, what is the intrinsic value? Why is it accorded such importance? How is it estimated? What are the alternatives to intrinsic value? Why does Buffett reject them? As I already stated, intrinsic value is found by using a company’s stock price and their earnings per share. People tend to buy the stocks that they feel are worth more than what the market claims they are worth adding to the notion of a company’s intrinsic value. Warren Buffet obviously does much more than the average person when he chooses stocks to invest in as we can see from the amount of money he and Berkshire Hathaway have. When deciding whether or not to invest in a company he looks at the return on equity of a company to see the consistency of a company’s performance and how much equity they are able to generate for their shareholders. Buffet performs this calculation year after year to be sure that the company is consistent. Next, he looks at the company’s debt to equity ratio to be sure that the company is avoiding large amounts of debt. None of the companies he invests in have higher liabilities than assets as he believes that debt in large amounts is a bad thing. In order for him to be willing to invest he must see that the company is or will be highly profitable for years to come. If the company hasn’t been publically traded for at least 10 years more times than not, he won’t even consider investing. He does not believe in short-term success; he claims that â€Å"in the short-term, the market is a popularity contest. He chooses stocks by looking at the overall ability and potential of a company rather than how they perform in the short-term ignoring the supply/demand attraction. When Buffet considers companies for the long-term, he looks at them more as an owner than a shareholder concerned with receiving capital gains. He is concerned with the individual company and their abili ty to make money over the long-term. He prefers to act as almost an owner and less of a shareholder concerned with receiving capital gains. 6. Critically assess Buffett’s investment philosophy. Be prepared to identify points where you agree and disagree with him. . Economic reality, not accounting reality. When looking at a business, Warren Buffet looks at the economic reality as opposed to the accounting reality. Accounting reality looks at a company using the generally accepted accounting principles (GAAP) to determine the value of the company. GAAP covers revenue recognition, balance sheet item classification, and outstanding share measurements. Economic reality is broader than accounting reality and includes intangible assets, such as patents, trademarks, special managerial expertise, and reputation of the company. When looking at the value of a company looking at the economic reality makes more sense because it includes intangible assets that can’t be computed, but are an important factor for the value of a company. For example, the reputation of a company cannot be quantified, but reputation is valuable in the sense that a company with a good reputation will draw more favor from customers and investors while a company with a bad reputation will drive away customers and potential investors. 2. The cost of lost opportunity. This compares an investment opportunity against the next best alternative. What this means is that when making a decision as to whether to invest in one company or the other, choices are made as either/or decisions rather than yes/no. By looking at companies this way, Buffet is able to see how investing in one company would compare by looking at the potential returns on common stock from investing in another company. 3. Value creation: time is money. In terms of value creation, Buffet believes that intrinsic value is a better indicator of future expected performance as opposed to using book value. Intrinsic value is the discounted value of the cash that can be taken out of a business during its remaining life while, book value is the number of total assets a company has minus intangible assets and liabilities. What makes the intrinsic value a better indicator of future expected performance is the fact that book value may not reflect the economic reality because depending on the relationship between expected returns and the discount rate; value can either be gained or lost. What this means is that the estimates of the return on equity can drastically change whether or not a company is seen as valuable. . Measure performance by gain in intrinsic value. Performance is measured by gain in intrinsic value as opposed to accounting profit. Warren Buffet says that Berkshire’s performance is not measured by the size of the company, but by the companies per share progress. The gain of intrinsic value is modeled as the value added by a business compared to the cost for the use of capital in that business. Other forms of measuring performance look at the ability to earn returns in excess of the cost of capital. By looking at per share progress, it is easier to see growth in a company than by looking at how large it is because a large company does not mean that it is a profitable company or that their growth is related to an increase in profit, if anything their growth could just be related to a large number of acquisitions. 5. Risk and discount rates. When looking at risk and discount rates, instead of using the traditional capital asset pricing model (CAPM) to estimate discount rates, Buffet chooses to use the rate of return on the long term treasury bond to discount cash flows. The CAPM model of estimating discount rates adds in a risk premium to the long term risk free rate of return, while Buffet’s method avoids risk altogether and uses a risk-free discount rate. The reason behind this is that Buffet likes to invest in companies with predictable and stable earnings and avoid financing his firm with debt. Overall this is a smart strategy because if there was ever an economic crisis, like there was a few years ago, a company not financed with debt and low risk would pull through better than a company who had many high risk investments and was financed by debt. . Diversification. Buffet’s view on diversification is that it is an unnecessary precaution, and that instead of inventing in many stocks to avoid risk, it would be more profitable to wait for one exceptional company to invest in. The logic behind this makes sense, but the execution is difficult because of the fact that the stock market is so volatile and investors do not have all of the information necessary to make an informed decision with 100% confidence that there investment will pay off. There is also the fact that some investment opportunities may be missed if companies wait too long to find that one exceptional company to invest in. 7. Investing behavior should be driven by information, analysis, and self-discipline, not by emotion or â€Å"hunch†. Buffet believes that stock prices have become unreliable measure of intrinsic value of a company because they are influenced by the fear and greed of investors. He also doesn’t believe in the efficient markets hypothesis (EMH), which states that stock prices are fair in reflecting what was known about a company. Buffet disapproves of this theory because he believes that stock prices do not accurately portray the intrinsic value of the company and believing in this theory prevents investors from seeing the bigger picture on how the stock market really works. It is important to use information and analysis of companies when making an investment decision because you can’t always trust the information that is given and the information given may not give the whole picture on the value of a company. 8. Alignment of agents and owners. When it comes to investing Buffet believes that an alignment of agents and owners is important. This means that the needs of the company are that of the needs of the shareholders. Keeping the needs of the shareholders first is important to having a successful business. If shareholders are happy, businesses can expect to receive a good supply of cash flow from investments. Shareholder wealth can also lead to more profits in the company as well as the company will be focused on long term profit maximization and not just the short term. 7. Should Berkshire Hathaway’s shareholders endorse the acquisition of PacifiCorp? While looking at PacifiCorp’s Consolidated Financial Statement (Exhibit 7) PacifiCorp’s income from operations before tax fits the criteria 1 presented in Berkshire Hathaway’s acquisition criteria (Exhibit 8) by having more than $75 million in pretax earnings, (PacifiCorp has $4. 2 billion. ) However, they do carry about $3. 92 billion in long-term debt, which fails criteria 3 in Exhibit 8. They do however, fill criteria 2 in Exhibit 8 by bringing in about $3. 6 million more in net income from 2005 to 2004 (Exhibit 7) although more data would be needed to see if PacifiCorp was consistently earning a profit. Compared to 6 other companies in the same field in Exhibit 9, PacifiCorp doesn’t seem like the best investment. PacifiCorp is number 2 for total assets, but also number 2 for total liabilities. This goes in hand with their total long-term debt as they are also number 2, but for short-term debt they are number 5. For total debt they are number 2. For total revenue before taxes, PacifiCorp is number 4. What these numbers mean is that compared to other companies, it seems that PacifiCorp is a more risky investment. PacifiCorp generally has more debt and is not bringing in as much revenue, though they still have positive growth in net income. Another source of concern is that PacifiCorp has very low earnings per share with a EPS of just $0. 81 with the next competitor having an EPS of $1. 42 (Exhibit 10). From looking at the data presented in the tables, shareholders should not endorse the acquisition of PacifiCorp because the company fails several criteria that were established by Berkshire Hathaway as guidelines for acquiring corporations, and it is unlikely that the acquisition will result in the 15% annual growth of the intrinsic value of the firm.