Is this an help for Greece?

Is this an help for Greece?

I guess much more capital and brains are heading to Malta, just because they learn

Sometime you win…. sometime you learn….but only if you feel pain….otherwise you think to be invincible….. aren’t you ?

Is this an help for Greece?

Is this an help for Greece?

I guess much more capital and brains are heading to Malta, just because they learn

Sometime you win…. sometime you learn….but only if you feel pain….otherwise you think to be invincible….. aren’t you ?

DEBT DAY: A Refresher on Debt-to-Equity Ratio

A Refresher on Debt-to-Equity Ratio

Risultati immagini per Debt-to-Equity Ratio

When people hear “debt” they usually think of something to avoid — credit card bills and high interests rates, maybe even bankruptcy. But when you’re running a business, debt isn’t all bad. In fact, analysts and investors want companies to use debt smartly to fund their businesses.

That’s where the debt-to-equity ratio comes in. I talked with Joe Knight, author of the HBR TOOLS: Return on Investment and cofounder and owner of, to learn more about this financial term and how it’s used by businesses, bankers, and investors.

What is the debt-to-equity ratio?

“It’s a simple measure of how much debt you use to run your business,” explains Knight. The ratio tells you, for every dollar you have of equity, how much debt you have. It’s one of a set of ratios called “leverage ratios” that “let you see how —and how extensively—a company uses debt,” he says.

Don’t let the word “equity” throw you off. This ratio isn’t just used by publicly traded corporations. “Every company has a debt-to-equity ratio,” says Knight, and “any company that wants to borrow money or interact with investors should be paying attention to it.”

How is it calculated?

Figuring out your company’s debt-to-equity ratio is a straightforward calculation. You take your company’s total liabilities (what it owes others) and divide it by equity (this is the company’s book value or its assets minus its liabilities). Both of these numbers come from your company’s balance sheet. Here’s how the formula looks:


Consider an example. If your small business owes $2,736 to debtors and has $2,457 in shareholder equity, the debt-to-equity ratio is:


(Note that the ratio isn’t usually expressed as a percentage.)

So, of course the question is: Is 1.11 a “good” number? “Some ratios you want to be as high as possible, such as profit margins,” says Knight. “In those cases higher is always better.” But with debt-to-equity, you want it to be in a reasonable range.

In general, if your debt-to-equity ratio is too high, it’s a signal that your company may be in financial distress and unable to pay your debtors. But if it’s too low, it’s a sign that your company is over-relying on equity to finance your business, which can be costly and inefficient. A very low debt-to-equity ratio puts a company at risk for a leveraged buyout, warns Knight.

“Companies have two choices to fund their businesses,” explains Knight. “You can borrow money from lenders or get money from equity.” Interest rates on business loans tend to come with a 2-4% interest rate (at least at the moment), and that interest is deductible on your company’s tax returns, making it an attractive way to fund your business, especially when you compare it to the returns that an investor might expect when he or she buys your stock that shows up as equity on your balance sheet, which can be 10% or higher.

So you want to strike a balance that’s appropriate for your industry. Knight gives a few rules of thumb. Technology-based businesses and those that do a lot of R&D tend to have a ratio of 2 or below. Large manufacturing and stable publicly traded companies have ratios between 2 and 5. “Any higher than 5 or 6 and investors start to get nervous,” he explains. In banking and many financial-based businesses, it’s not uncommon to see a ratio of 10 or even 20, but that’s unique to those industries.

There are exceptions within industries as well. Take Apple or Google, both of which had been sitting on a large amount of cash and had virtually no debt. Their ratios are likely to be well below 1, which for some investors is not a good thing. That’s partly why, says Knight, Apple started to get rid of cash and pay out dividends to shareholders and added debt to its balance sheet in the last month or so.

How do companies use it?

The calculation is most often used by bankers or investors deciding whether to give your company money. It helps them understand how you’re paying for your business. They want to know, says Knight, “Does the company have the ability to develop revenue, profit, and cash flow to cover expenses?”

If the debt-to-equity ratio goes up, the perceived risk goes up. If you don’t make your interest payments, the bank or lender can force you into bankruptcy.

“Bankers, in particular, love the debt-to-equity ratio and use it in conjunction with other measures, like profitability and cash flow, to decide whether to lend you money,” explains Knight. “They know from experience what an appropriate ratio is for a company of a given size in a particular industry.” Bankers, Knight says, also keep and look at ratios for all the companies they do business with. They may even put covenants in loan documents that say the borrowing company can’t exceed a certain number.

The reality is that most managers likely don’t interact with this figure in their day-to-day business. But, says Knight, it’s helpful to know what your company’s ratio is and how it compares with your competitors. “It’s also a handy gauge of how senior management is going to feel about taking on more debt and and therefore whether you can propose a project that requires taking on more debt. A high ratio means they are likely to say no to raising more cash through borrowing,” he explains.

It’s also important for managers to know how their work impacts the debt-to-equity ratio. “There are lots of things managers do day in and day out that affect these ratios,” says Knight. How individuals manage accounts payable, cash flow, accounts receivable, and inventory — all of this has an effect on either part of the equation.

There’s one last situation where it can be helpful for an individual to look at a company’s debt-to-equity ratio, says Knight. “If you’re looking for a new job or employer, you should look at these ratios.” They will tell you how financially healthy a potential employer is, and therefore how long you might have a job.

What mistakes do people make when using the debt-to-equity ratio?

While there’s only one way to do the calculation — and it’s pretty straightforward— “there’s a lot of wiggle room in terms of what you include in each of the inputs,” says Knight. What people include in “liabilities” will differ. For example, he says, “some financiers take non-interest bearing debt such as accounts payable and accrued liabilities out of the liability number and others might look at short-term vs. long-term debt in comparison to equity.” So find out what exactly your company counts in its calculation.

Knight says that it’s common for smaller businesses to shy away from debt and therefore they tend to have very low debt-to-equity ratios. “Private businesses tend to have lower debt-to-equity because one of the first things the owner wants to do is get out of debt.” But that’s not always what investors want, Knight cautions. In fact, small—and large­—business owners should be using debt because “it’s a more efficient way to grow the business.” Which brings us back to the notion of balance. Healthy companies use an appropriate mix of debt and equity to make their businesses tick.

Urban residents shouldn’t buy cars. It’s both shockingly expensive and completely unnecessary. Urban Maltese this is for you

Urban residents shouldn’t buy cars. It’s both shockingly expensive and completely unnecessary. Urban Maltese this is for you

Bikers are growing….feed the bikers!

How much money could you save if you gave up your car? Let’s say, for the sake of argument, that the car is paid off, so your only running costs are gas, insurance, maintenance and depreciation.

Kati and Kurt Woock of Denver realized their car was costing $4,000 per year just to run. They decided to ditch the car and rely on bikes, car-sharing services, Uber and regular old car rental. The result? Well, given that Kurt was happy enough to write up the results in a blog post, you can probably guess. “The savings of not owning a car are insane,” he writes.

Which is to say that a car is almost useless in a city, where we have easy access to bike lanes, public transport and—increasingly—car-sharing schemes. But maybe you think you need a car for you out-of-town trips? Kurt has some great advice on that:

If you’re thinking of going carless, it’s tempting to fixate on trips that seem the most challenging without an engine — heading to the mountains, for example. Don’t do that. It’s discouraging. Instead, arrange all the trips you take in a year into a pyramid, with the most frequent trips (like your commute) at the bottom. Replace those trips first. Next, work your way up, replacing trips that repeat weekly, like the grocery store. Already you’ve replaced 75 percent of your car trips, which you’ll realize are only to a few different destinations. This discovery builds confidence.
And Kurt presumably had his own garage or similarly free parking space. Think about how many cars you could rent on parking costs alone. What about the convenience of hopping in the car to buy groceries? Well, a bike is great for grocery shopping if you use panniers (saddlebags), but if you don’t like that idea, there isn’t much that’s more convenient than dialing up an Uber on your smartphone. Better still, you don’t even have to park.

You could even order your boring groceries online and buy the fresh stuff daily from local stores. Imagine that. You might even rebuild your sense of community.

Outside of major cities, things are harder. Public transportation is sparse or non-existent. There are no car-sharing programs, and taking a bike down the highway isn’t something you do without some experience. But that’s fine. Rural and urban areas are quite different already. Leave the cars in the country, bus in from the ‘burbs, and cycle around the city.

Still not convinced? Unlike your car, which burns dirty gas, the engine of a bicycle runs on delicious pizza. And if you’re riding everywhere, you can eat as much as you like, which means you can also cancel that expensive gym membership.

The debt trap

The debt trap

ALMOST eight years have elapsed since the financial crisis took hold in August 2007 and still the same issues are being fought over. Who should suffer the most pain—creditors or debtors? Is the best way to achieve growth short-term fiscal stimulus or long-term structural reform? And, in Europe in particular, how does one reconcile local democracy with international obligations?

Debt is a claim on future wealth: lenders expect to be paid back. The stock of debt accordingly tends to expand at moments of economic optimism. Borrowers hope that their incomes are set to rise, or that the assets they are buying with borrowed money will increase in price; lenders share that enthusiasm.

But if wealth does not rise sufficiently to justify the optimism, lenders will be disappointed. Debtors will default. This causes creditors to cut back on further lending, creating a liquidity problem even for solvent borrowers. Governments then step in, as they did in 2008 and 2009.

The best way of coping with too much debt is to spur growth. But developed countries, even America, have struggled to reproduce their pre-crisis growth rates. So the choice has come down to three options: inflate, default or stagnate.

The inflation option means that nominal GDP rises rapidly, reducing the ratio of debt to GDP. The main constraint on this strategy is the speed with which creditors react by forcing up interest rates on newly-issued debt. The longer the maturity of their existing debt, the easier it is for governments to use this option.

In practice, there has been very little inflation in the developed world. (Countries in the euro zone do not control their own currencies so have no power to inflate the debt away in any case.) The debt burden has been controlled by “financial repression”: holding real rates at very low, or negative, levels. By making it easier for borrowers to service their debts, this has staved off a repayment crisis in many countries, but it has not made much of a dent in the overall debt burden.

The Greeks did manage to default on private-sector debt in 2012, but this wasn’t enough help given the collapse in their GDP in recent years. And the problem with default, when debt is so widespread, is that it simply shifts the liability somewhere else. If a country’s banks hold a large amount of government debt, and the government defaults, then the banks will need to be rescued by the government, making the problem circular (with bailIN not anymore…). Countries have been defaulting to foreign creditors for centuries, of course, and they tend to be forgiven by investors after a few years. But economic conditions get pretty scary in the interim, as the Greeks may find out.

So if inflation has been hard to achieve and default looks like a risky option, then stagnation (or near-stagnation) ends up being the outcome. That has been the case in Japan, where sluggish economic growth has been the norm since its asset bubble burst in the early 1990s. But stagnation only postpones the problem. Japan has faced less pressure than most, since it owes money mainly to its own citizens—it does not have to worry about foreign creditors. Yet even Japan has tired of the situation: Abenomics was designed to get the country out of the trap by generating more growth and inflation.

The EU has been heading down the Japanese route. Both places face demographic problems that will sap their growth indefinitely. That increases the need for offsetting improvements in productivity, but reforms to that end face fierce political resistance.

Like Japan, the euro zone has an internal, not an external, debt problem. However, the current crisis has shown that there is not enough political solidarity to support outright burden-sharing. Intra-European transfers are seen as a zero-sum game, in which any aid to Greece is a loss to other nations in the bloc.

This has been a flaw in the euro project from the start. The only answer is political union with a central fiscal authority. But that would require voters in the 19 euro-zone member states to give up sovereignty—something the Greeks are not alone in resisting. And the EU’s sluggish growth is adding to the disillusionment with Brussels among European electorates.

So what does all this mean?At the very least, an endless series of crises and European summits. It also means that Syriza will not be the last insurgent party to gain power, that central banks will have to keep interest rates low in order to keep the system going and that, given current high valuations, portfolio returns for investors are going to be mediocre for the foreseeable future.|newe|13-07-2015|

Do not move to Spain, they go from bad to worse. The End Of Freedom Of Speech, from the Economic crisis to the Thinking crisis

Do not move to Spain, they go from bad to worse. ‘1984’ Comes To Europe – The End Of Freedom Of Speech, from the Economic crisis to the Thinking crisis In Spain

1. If you photograph security personnel and then share these images on social media: up to €30.000 fine (particularly if photo exposes violence used against a member of the public). This fine could increase depending on the number of Instagram or social media followers you have.

2. Tweet or retweet information or the “location of an organized protest” can now be interpreted as an act of terrorism as it incites others to “commit a crime” (now that “demonstrating” in many ways has become a crime). Sound “1984”-ish? Read about Orwell and his time in Spain.

3. Snowden-like whistle blowing is now defined as an act of terrorism. If you write for a local publication, be careful what you print, whom you speak to, and whether the government is listening.

4. Visiting or consulting terrorist websites – even for investigative purposes – can be interpreted as an act of terrorism. Make sure you use “Tor” browser, reject cookies, and don’t allow pop-ups. Not to mention, don’t post it on your Facebook timeline!

5. Be careful with the royal jokes! Any satirical comment against the royal family is a new crime “against the Crown”. For example, “What did Leticia and the Bishop have to say after they ––“ (SORRY CENSORED).

6. No more hassling elected members of the government or local authorities – even if they say one thing in order to be elected, but then go and do the exact opposite. Confronting them about this hypocritical behavior. Even if you see them in the street chatting to a street cleaner, dining at their favorite expensive restaurant, or having their shoes shined by that physics graduate who cannot find a decent job in the country, hassling them about their behavior is now a criminal offence.

7. Has your local river been so polluted by that plastic factory along the edge that all life has extinguished? Well, tough! Greenpeace or similar protests are now finable from €601–€30.000.

8. Protests in a spontaneous way outside Parliament are now illegal. For example if Parliament passes a hugely unpopular bill, or are debating something extremely important to you or your community, it is now finable from €601 – €30.000. Tip: Use Google Maps to protest just around the corner – but don’t tweet the location!

9. Obstructing an officer in the course of their business, “resisting arrest”, refusing to leave a demonstration when told, or getting in the way of a swinging baton are all now finable offences from €601 – €30.000.

10. Showing lack of respect to officers of the law is an immediate fine of €100 – €600.Answering back, asking a disrespectful question, making a funny face, showing your bottom to an officer of the law, or telling him/her that their breath reminds you of your dog’s underparts is now, sadly, not advisable.

11. Occupying, squatting, or refusing to leave an office, business, bank or other place until your complaint has been heard as a protest is now a €100 – €600 fine (no more flash mobs).

12. Digital protests: Writing something that could technically “disturb the peace” is a now a crime.Bloggers beware, for no one has yet defined whose peace you could be disturbing.