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Importance of Unions and collective bargaining in the current economic condition
Employment Relationships
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Importance of Unions and collective bargaining in the current economic condition
Collective bargaining refers to a tool or mechanism in industrial relations, which is used for the purpose of negotiation. It is a vital aspect in any employment relationship, in an organization. Unions have a role to play in collective bargaining as well as in negotiating. The latter represents the collective interest of all its members at the work place. Often, there is a public interest in matters concerning negotiations, as this is related to labor laws. Governments have a role to play in collective bargaining as they are responsible for workers in their country. According to the International Labor Organization, collective bargaining refers to voluntary negotiation, which exists in organizations, and it involves employers and their employees. They must all be aware that there are certain conditions and terms, which exist during this process. Furthermore, both parties should strive towards reaching an agreement (Susseles & Magid, 2005).
According to the unitary view, the employee and the employer must have an interesting identity. In case, there are any conflicts it is due to mischief or misunderstanding by the parties involved. Most times those in managerial positions over look this view as they believe that the employees share the same goals as them (Hogler, 2005). This means that it is associated with the approach that focuses on traditional human relations. Before, this approach was viewed as being unrealistic as well as old fashioned. This view has currently been done away with as it does not bring desirable advantages to organizations. Most managers used to deal with the employees directly and did not want any union members to be present during negotiations.
A system, which is political, should exist among various pressure groups, and this is according to an outlook, which is pluralistic. Some of these pressure groups include; political parties, unions, religious groups and business associations. Concessions can be made by the government in order to arrive at a compromise through effective dialogue. Pluralism advocates for there to be an intermediary during the process of negotiation. Democracy is achieved when the various groups are involved in collective bargaining (McDonald, 2000). It ensures that checks and balances exist, and this is extremely desirable. This means that, in organizations, which are pluralist, stability is brought about by collective bargaining. The latter is viewed as a tool, which is fundamental, in the process of negotiation. Moreover, unions and collective bargaining enhance freedom among employees. They will work well knowing that, in case of any work related problems, they will be represented.
Settlement is easily achieved through consensus and dialogue when collective bargaining is used during employee relations. This is far off better than using the approach of confrontation and conflict, which has a negative impact. Organizations, which do not use collective bargaining often, leave solutions to be determined by third parties. In collective bargaining, it is the party members who make decisions regarding their problems. In such economic times, making appropriate decisions and in a timely manner is needed. When all the parties are happy, work will resume, and this will be advantageous to the organization (Palokangas, 2000).
Collective bargaining leads to dialogue and in turn, brings about institutionalized settlement. Various methods of collective bargaining ensure that a decision will be made easily. It helps in forecasting whether there is a chance that an agreement will be achieved. In turn, disagreements will exist in the organization, and this will lead to more problems. When employers and employees are involved in collective bargaining, it enhances participation (Tyler, 2005). The union members and the employees all decide on what should be done about the situation at hand. Furthermore, it is a method of ensuring that power and rule making is shared. Before, matters concerning making rules were a function of those in top management. The latter were the only ones responsible for factors such as modernization, redundancy, transfer promotions and discipline. However, in some countries, like Malaysia and Singapore, some work functions are not accepted by law. They include; layoffs, promotions, transfers, retrenchments and promotions, among others.
Through the use of collective bargaining, disputes are settled through the actions of trade unions. In turn, industrial peace is easily achieved as the agreements guarantee it. In this modern time when there are many economic problems, this is extremely desirable. When peace prevails, workers focus their attention on working and this increases productivity. On the other hand, when workers are not at peace they will not focus on their jobs. The result is that the organization may lose out on profits, which it would be making (Armstrong & Goodman, 2009). Labor relations in many organizations are striving because of the social partnerships, which have been brought about by collective bargaining. This means that there will be mutually beneficial relationships between organized labor institutions and employer institutions. In turn, in case any disputes arise the employees and employees will be prepared. Collective bargaining leads to the maintenance of process of negotiation, which is non-confrontational.
The relationship, which exists between the parties benefits through by- products obtained from collective bargaining. Trust is created and enhanced due to the dealings that are considered being bona fide and successful. Furthermore, union members, employees and employers have a relationship, which is mutual. This means that it will lead to solving problems, rather than attacking the various party members. Union membership is stabilized through consequent bargains and collective bargaining. It will ensure that employees and employers do not keep on changing their union loyalties. When employees keep on changing their union membership, it affects the organization as it is expensive. Disputes, which exist between various unions, might lead to rivalry. Thus, union loyalty is a vital aspect of the process of collective bargaining (Wajcman, 2000).
Collective bargaining usually takes place at three levels, and these are enterprise, industry and national levels (Forth & Millward, 2000). No country in the world where it places exclusively on one level. In the United States, most collective bargains procedures take place at the enterprise level. It occurs in all other areas except for industries such as construction, trucking, steel and coal. According to research, it has been found out that performance of employees is enhanced when there is bargaining at the industry level. Employees believe that they have security, which is in the form of trade unions to offer them support. It is a common site in the media to hear that workers are striking, and they are not worried about losing their jobs.
The European Union is fully aware about the role, which unions and collective bargains play in this economic crisis. This means that its member countries will have to come up with standardized policies, which focus on collective bargaining. The European Monetary Union seeks to ensure that unions benefit from adjustments of exchange rates. As a member of the European Union, it will be easy to benefit from issues that affect organizations that are unionized. Furthermore, organizations will now be competitive and know how to balance off inequalities (Glassner & Watt, 2010). Moreover, there is a need for organizations to adjust the wages of their employees in order to meet the expectations of the European Union. Organizations were worried that the money regime, which exists, would make want to stop working. Fortunately, Europeans organizations have come up with effective instruments, which are known as wage formulas. In the public sector, many of the employees have had their salaries drastically reduced. Organizations in, which employees are in unions, are the ones which have not been affected as much by this crisis. They have actively negotiated with their employees. It has even reached a point whereby, some employees are given counter offers, so as not to go and work in the United States. It must be known that, in the future, such unions will be the ones, which will run matters concerning employee relationships.
In conclusion, the pluralist approach should be used by employers who are in managerial positions, in various organizations. It has been found out in various studies that employment relationships are strengthened through the process of collective bargaining. Most employees are now fully aware of their rights, and that is why they have joined various unions. The economy crisis affecting the world has made negotiations, and collective bargaining become hard to deal with. Fortunately, organizations have found ways to be constructive and gain from collective bargaining and becoming unionized.
References
Glassner, Vera. & Watt, Andrew. (2010). The Current Crisis reveals both : the importance and the limitations of the transnational coordination of collective bargaining policies. Social Europe Journal. 15, 45-78.
Forth, J. & Millward, N. (2000) High involvement management, unions and pay, mimeo,
National Institute of Social and Economic Research
Palokangas, T. (2000) Labour Unions, Public Policy and Economic Growth, Cambridge:
Cambridge University Press
Wajcman, J. (2000) Feminism Facing Industrial Relations in Britain’, British Journal of IndustrialRelations, 38, 2, 183-202.
Ackers, P. (2002) .Reframing employment relations: the case for neo-pluralism, Industrial
Relations Journal, 33, 1, 2–19.
Armstrong, P. & Goodman, J. (2009). Managerial and supervisory custom and
practice, Industrial Relations Journal, 10, 3, 12–24.
McDonald, Kathlene. (2000). Same goals, but another way of getting there.
Social Policy, 30, 4, 23.
Susseles, Elliot. & Magid, Marcia. (2005). “Pay for Performance in the Public Sector.” Benefits & Compensation Digest. 42, 1, 32-35.
Hogler, R. (2005). “The Changing Role of Unions: New Forms of Representation.” Choice, 42, 7, 1273
Tyler, Kathryn. (2005). Good-Faith Bargaining.” HR Focus, 50, 1, 8-53.
Freeman, Richard. (2005). What Do Unions Do? Journal of Labor Research, 26, 4,641-668.
Collective Bargaining Outlook: Expect a Hard Line on Benefits. HR Focus. 82, 4, 9.
EDU110 Exploring Play MOOC
EDU110 Exploring Play MOOC
Students Name
University Affiliation
Date
Introduction
Digital or online reading is considered to be a form of learning where the use of technology is involved. Technology motivated learning methods are included to support learners by use of many other ways of virtual learning. This method of learning is slowly but surely taking over from the traditional methods of learning with resources such as; Future learner.Com, Google, YouTube, and Evernote as the major platforms which are facilitating this form of learning. In the course of this assessment, we are going to evaluate and analyze the Exploring play MOOC developed based on the weekly concept of ditital learning. By the University of Sheffield will get its inclusivity to the diverseness of learners. We are also going to explain the merits and demerits associated with this theory. Massive open online courses (MOOC) are type of courses that are offered online, which are set to provide unlimited access and participation of learners via the Internet. MOOC is an online course that give options on free and open ended-cutcomes. Social networking, accessibility of resources on online platforms are integrated by MOOCs. Learners who participate on learning for common interests, prior for knowledge and skills and to attain learnig goals are build by MOOCs on such engagements. Learning by use of this new technology, therefore, opens up many opportunities to the learners mainly as a result of the nature of the web, which is quite resourceful. The use of tutorials and imagery tools, e.g., PowerPoint, enables the students to better/ quickly capture the information being taught to them and also retain it in their head for a longer time CITATION War07 l 1033 (Warschauer, 2007). This assessment will help us better understand the Exploring play MOOC with some references from Futurelearn.com and also understand how different learners use the technology resource instead of the traditional way in their learning process.
Critical Evaluation
For some time now, we have been living in a world where technology is almost applied in every field. On this note, the education sector has not been left behind in using technology to enhance and assist in the teaching process. Technology, in the education process, however, has proven to have setbacks that would cover in the course of Exploring the MOOC. Hence it has left many education stakeholders wondering about the effectiveness of this learning tool. Massive open online courses (MOOC) have allowed more and more students to enroll in classes and interact with tutors who, on the other hand, gain better skills in expanding their teaching methodologiesCITATION Hew03 p 31 l 1033 (Hewitt, 2003, p. 31). According to research conducted by seaman (2007), he found out that there was a sharp increase in the number of students enrolled in digital learning across America from 2002-2006. More universities have also tapped into this new technology. By the end of 2014, over 400 universities had started on massive open courses offering more than 2500 such courses to nearly 19 million students around the world CITATION Sha15 l 1033 (Shad, 2015). These results indicate the need to design and implement the existing Exploring play massive online course (MOOC) and also invent new ones. MOOCs can be presented in centralized platforms, for example, learning management systems (LMS), which can be located in a school as well as decentralized networks, for example, Blogs, social media sites, and education websites.
The inclusivity of learning theories in digital learning is clearly outlined by Egbert and CITATION Tho01 l 1033 (Thomas, 2001). Therefore, the first step in our evaluation of the Exploring play MOOC is to look at the critical theories in learning. The first theory is the behaviorism theory; this theory explains why a particular behavior happens as a result of external or internal factors. With the help of this theory, skills such as behavioral conditioning can be applied to enhance the learning process. Coming up with a rewarding system after the successful completion of a massive open online course can serve as an excellent example of behavioral conditioning as learners will now take this course more seriously, therefore, resulting in a massive success of the program.
The connectivism theory suggests that in comparison to the traditional forms of learning, learning on the technology era does not stop after completion of the necessary formal education. Instead, knowledge is bound to continue from other platforms, for example, job experiences, networking, and the use of the Internet as source information. Therefore, this allows the learner to be well equipped with knowledge that will be relevant to the learnerCITATION Ros l 1033 (Rose, 2002). The connectivism theory is also a learning theory that explains how technology has created new opportunities for learners to learn and share information
The humanism theory explains that learning happens naturally to learner’s right from birth, helping them in self-actualization and in performing their day to day activities. This theory has very little demerits, as all learners are open to going through this process of learning. The cognitivism theory (Jean Piaget) illustrates how a child learns how to respond to experiences. The (agent theory) categorizes the child development process into four stages, which a child goes through in the learning process.
The sensorimotor stage: birth to 2 years
The preoperational stage: ages 2 to 7
The concrete operational stage: ages 7 to 11
The formal operational stage: ages 12 and up
Piaget, in his study, revealed that children take an active role in their learning process, playing a character like that of a scientist as they perform experiments and later learn from those particular experiments after observing what happens during their operation and in that process learn about the word.
The theory of our emphasis on this essay is the constructivism theory. The constructivism theory founded by a philosopher is based on observations and study of how learners grasp information. It states that different learners come up with their understanding and knowledge based on their experiences before starting their education. This theory can be traced back to Jean Peagant in his educational psychology study. He lay most of his attention on how humans made meaning of their encounters and their ideologies and not what people learn from one another. Lev Vygotsky, on his study on social constructivism, showed the importance of interactions with people, for example, interactions with adults, interactions with teachers, and interactions with well-behaved peers, which are then internalized by the learner to form mind constructs. John Bruner, with the help of some of his career friends, advanced on this study and came up with the concept of Instructional Scaffolding, which describes how the environment plays a role in the learning process.
Teachers who use tech to facilitate their teaching tend to take a constructivist perspective about instructing their learners. According to this theory, the teachers are expected to not only to teach the learners but also play the role of an expert learner who can guide the learners into gaining skills. For example, asking questions and self-assessments, therefore, guiding the students into becoming expert learnersCITATION Hil94 p 30 l 1033 (Hillman, 1994, p. 30). The teacher should assist the students in making assessments on how various learning activities are helping them in gaining knowledge.
Constructivism is the best theory for digital learning as it focuses on knowledge construction about the student’s prior experiences hence assures that learning is taking place among the learners. The goal of constructivism in digital learning is to:
Encourage the learners to tap on to the knowledge gained from social experiences
Assist the digital learning process by encouraging the use of multiple representation styles.
Equip the learners with significant problem-solving skills
CITATION Koo12 l 1033 (Koohang, 2012) describes the three elements of constructivism as:
The design of learning activities
Learning evaluation
The teacher’s role
The goal of this student cantered model for designing digital learning activities is to encourage the students to gain new knowledge. The teacher gives the students a real-life situation, and the students are expected to come up with their ways based on their previous experiences or the knowledge they have gained to tackle the job. For example, a teacher might consider giving an individual self-assessment to his students, asking them to overview the business strategy of a company.
Constructivism enhances the ability to not only solve problems at a personal level but also in a group. Online collaborative learning (OCL) is not a new term in digital learning. It is the process where learners facilitate their digital learning by having a discussion using technology mediums to come up with solutions. Digitally mediated research methods, which include online surveys and text messaging for research, have a huge advantage over the traditional forms of research.
First of all, it is very convenient and cheap to use this method. This is as a result of the resourcefulness of the Internet where it is much easier to find a specialist or other research partners who can assist the learner in gaining new knowledge. Less money is also spent as compared to the traditional methods where one would have to pay for library fees to access information needed in their learning process. Lastly, information sourced digitally is more timely and easy to access. Learners using technology in their research and studies are more likely to retrieve the information they are after faster compared to those who still use the traditional ways. This is with the help of powerful search engines, for example, Goggle, Chrome, Yahoo, Bing, and Wikipedia, which can filter through information on the Internet and give the desired search result. The most common disadvantage seen since the introduction of technology in education is the risks and threats common in the cyber world. This threat may include malicious cyber-attacks, false information put by unqualified persons on the Internet, device viruses which target to spoil the technology devices, and the most common of all accessibility. Most people, especially in developing third world countries, may be disadvantaged when it comes to digital learning and digital research.
New Content
The digital divide remains to be the biggest challenge laying between the inclusivity of all learners in the digital studying platforms. Learners living in poor neighborhoods are usually left out, in this case, limiting their full potential. This is as a result of their economic status where internet access and a computer are a luxury.
MOOCs has extensively gained its significance in the education as a new paradigm. Exploring these online courses has helped learners to gain enough knowledge that has been of importance. MOOC are designed to help learners to open up minds and gain the relevant context for their knowledge. The play is a important part in innovation and inventiveness across a whole range of subjects, carrers, disciplines and industries. The new MOOC has helped in exploring the nature and value of the play in our lives on daily basis. Exploring the play helps us learn more about the dangers of technology for example, computer games.
A case study conducted during the global epidemic 2020, showed that many students from poor neighborhoods were being forced to fail, due to lack or poor connectivity of the Internet. This is a result of the school shutdown, which had resulted in all classes being done digitally. The saddest part is that some of the learners are excellent performers before the global epidemicCITATION Jia00 p 317 l 1033 (Jiang, 2000, p. 317). If a student does not have the same opportunity as the other, how do you then test them using the same standards?
Digital division greatly trembles education in poor neighborhoods. Learners living in these societies are truly limited to their full potential; this is because they do not have the same opportunities that the learners who can access the Internet have. The Internet is a quick and easy way for learners where they can fetch information that is important towards their further educational endeavors. Computers and the Internet are, therefore, of extreme importance to learning and being successful in their studies and other endeavors. My solution to finish the digital divide between the rich learners and the poor learners is to be able to access the Internet free of charge. This should be the responsibility of the leaders in the society and the major education stakeholders to whom it is their duty to ensure that every learner gets a fair share of the education programmer. As an example, the local government could install high capacity metropolitan Wi-Fi networks, which could reach a huge number of learners in a given area. This Wi-Fi network would be of great help in covering the huge mobile data costs the people in these areas cannot afford. The local authorities, in collaboration with the major education stakeholders, should also ensure that every learner has access to any digital communication electronic egg tablets, phones, laptops, etc. In areas where this appliance is not available, this authority should install well-equipped act centers or cyber cafes where the learners can access the internet resources CITATION Kir02 l 1033 (Kirschner, 2002). These learners may vary from kindergarten kids to a high level of education learners. Therefore, the relevant authorities should come up with initiatives for all learners from all groups.
As a result, the global economy is now shifting to a digital economy where every activity is converting its operations from manual operations to technological operations. Such change means that all learners should be well equipped with technological skills before completing their studies in readiness for their career lives. Countries like Singapore and China are best known for their technology inclusive education curriculums. Countries in the (third world) category fall last in this transformation.
The education stakeholders should come up with plans to construct well-equipped ICT rooms where students can access video conferencing services with their tutors and get the required assistance needed. The teacher and student must meet face to face at regular intervals. Both the teachers and all the students should be involved in this process.
Teachers handling kindergarten learners should also come up with creative presentations to deliver to the children virtually. This incentive could include animations for educational purposes and songs and poem presentations CITATION Gri141 l 1033 (Griffin, 2014). It is because children at that age are more likely to grasp information presented in that manner more as compared to the traditional ways of theoretical learning.
Conclusion
Digital/Online learning is, without a doubt, the future of learning in years to come. With the correct adjustments made, this form of education could yield better results. Due to the corona epidemic, many of us learners have turned to digital learning. According to my perspective, I don’t find this method of teaching favorable for everyone, but I like it. Suddenly I have more time to myself as compared to before the schools were shut down where I would spend most of my time at school and have little time for myself. However, there has been an enormous cut of interactions between my peers with whom together we would hold constructive discussions on various issues and me. There is also the problem of power blackouts and down Internet times. Power blackouts are a result of harsh weather or sometimes just other factors. The Internet sometimes is slow, and this dramatically affects my studies as it interferes with my connectivity with schooling resources, which was not the case before this. Digital learning has positively impacted the lives of many learners during this global pandemic. It has enabled learners to take up courses alongside their careers. Digital learning has also been helpful to education institutions in guiding the students in their studies while online during the school shut down period. As a recommendation, the school should put into consideration the factors discussed in this essay for not all students have access to reliable Internet. Assignments should also be reasonably marked, putting into account that students are making most of their interpretation by themselves with little assistance from the tutors. It is also upon the institutions to make sure that all its learners are included in this digital learning rollout. Exploring MOOC helps learners to create new ways of ainin knowledge hence making the process of learning more comfortable and enjoyable. This can only be achieved through knowning the basics element of MOOCs. The planning and production stage of MOOCs are crucial in producing a successful course for every learner since the play emphasizes on the importance of learning activities and various video lectures. Exploration of MOOCs plays very important role since to have the understanding the required material and more so, sustaining their engagement in the topic.
References
BIBLIOGRAPHY Griffin, P. &. (2014). Assessment and teaching of 21st century skills: Methods and approach. Springer.
Hewitt, J. (2003). How habitual online practices affect the development of asynchronous discussion threads. . Journal of Educational Computing Research, 28(1),, 31-45.
Hillman, D. C. (1994). Learner‐interface interaction in distance education: An extension of contemporary models and strategies for practitioners. American Journal of Distance Education, 8(2),, 30-42.
Jiang, M. &. (2000). A study of factors influencing students’ perceived learning in a web-based course environment. International Journal of Educational Telecommunications, 6(4), , 317-338.
Kirschner, P. A. (2002). Cognitive load theory: Implications of cognitive load theory on the design of learning.
Koohang, A. (2012). “Active learning in e-learning: Advancing a systematic model,”. Issues in Information Systems 13(1),, 68-76.
Rose, D. H. (2002). Teaching every student in the digital age: Universal design for learning. Association for Supervision and Curriculum Development, 1703 N. Beauregard St., Alexandria, VA 22311-1714.
Shad, D. (2015). MOOCs in 2015. Breaking Down the Numbers. Retrieved February 18, 2016, from https://www.edsurge.com/news/2015-12-28-moocs-in-2015-breaking-down-the-numbers.
Thomas, H. (2001). homas Hobiger MOOCs and Free Online Courses. Retrieved 10 March 2020, from https://www.mooc-list.com/instructor/thomas-hobiger.
Warschauer, M. (2007). The paradoxical future of digital learning. Learning Inquiry, 1(1), , 41-49.
Importance of paid-in capital separated from earned capital
Equity Paper
Contents
TOC o “1-3” h z u HYPERLINK l “_Toc377198043” Introduction PAGEREF _Toc377198043 h 1
HYPERLINK l “_Toc377198044” Importance of paid-in capital separated from earned capital PAGEREF _Toc377198044 h 1
HYPERLINK l “_Toc377198045” Paid-in capital or earned capital PAGEREF _Toc377198045 h 2
HYPERLINK l “_Toc377198046” Basic earnings per share or Diluted earnings per share PAGEREF _Toc377198046 h 3
HYPERLINK l “_Toc377198047” Conclusion PAGEREF _Toc377198047 h 4
IntroductionStockholders’ Equity has two sources of capital which include paid-in capital and earned capital. Paid-in capital must be kept alienated from earned capital to avoid misinterpretation of the sources which facilitate a clear distinction from operational capital acquired from profit making operation. Most of the investors are majorly concerned with the earned capital compared to the paid in capital. The reason behind this preference is the facts that earned capital represent the earning potential of a firm. Another major aspect is the dilution earning which is more detailed unlike the basic earnings per share earnings.
Importance of paid-in capital separated from earned capitalPaid-in capital is the capital that is raised from the sale of capital stock in the stock markets in form of shares while on the other hand, earned capital is the funds that a company or firm is able to acquire in form of profit accrued by the sale of services and goods. Both capitals are very significant to the growth and expansion of the firm’s operations. However, investors find it necessary to separate the two capitals because of several reasons.
Kimmel, et al (2010, P.577) observe that one reason for separating the two source of capital are very distinct funding source and that paid-in capital signifies the funds to be used in the enhancement of the earned capital. On the other hand, earned capital symbolises the funds accrued from the profitability of the operation of the firm and combining the two sources would lead to confusion. That is, the paid in capital accelerates and boost the earned capital. The intension of combining the two source of capital will lead to a misinterpretation and misrepresentation of the overall earning of the firm. Not only that, but can also cause complexity in calculations in regards to profits margins. The two sources of capital must be separated so that the shareholders and investors information can be clearly distinguished from one another.
The two capitals must be distinguishable in such a way that it provides a form of protection to companies offering capital in excess thus protect creditors and investors in case of liquidation. This is because the two values of capital depict the strength of the firm financially. Investors must be aware of the manipulation of earning which will be rendered difficult if the two capitals are combined making it very difficult to convince them on the method used to compute the earning.
Paid-in capital or earned capitalMajority of the investors in most case are concerned with the firm’s earned capital other than the paid-in capital. The reason behind this is that earned capital is a representation of the potential earnings that a firm can generate through it day to day operations. Therefore investors would like to venture into a business that yield dividend as per their expectation. While on the other hand, paid-in capital is the capital raised from the subscription of the shareholders through the sale of capital shares thus represent the capital that is invested by the shareholders and does not in any way represent the profitability of the firm. Despite the importance of the two forms of capital, paid-in capital is more significant that earned capital. Paid–in capital represents the amount the investors have raised above the par values of the firm’s stock. The par value is very important in calculating the stability of the firms in terms of financial status (Kimmel, et al, 2010, P.577).
As per the investor’s opinions, firms could rather earn money via operations other than selling capital stock. This is because the firm reporting their financial status using earned capital reveals their financial value to the stakeholders while on the other hand the firm that report using their paid-in capital in excess of the already earned capital does not necessarily imply that the firm is experiencing good investment opportunities. Brigham and Houston (2009, p.197) noted that earnings capital is also generally well thought-out as single and the most significant variable that is used in determining the share price in the market. Other issue that make an investor preference is that it is used in the computation of price to earnings valuation ration.
Basic earnings per share or Diluted earnings per shareThe diluted earnings per share is very important to all the venturing investors because of its detailed nature bearing a lot of information regarding the firms operation. This gives full details to the investors regarding the firm’s financial status for several duration of time unlike the basic earnings per share which is less detailed and lack vital and relevant information that allow an investor to make decisions. The diluted earnings as per each share reveals to the investors all the dilutive shares that are outstanding in a given financial period. As for the investor, it is important to inspect the diluted earnings per share because of it ideal computational techniques which shows the general and basic earning of the firm per share or dividends. Another reason for preference of diluted earnings per share is because of the fact that basic EPS does not take into account the potential dilutive impacts of the companies’ securities. Lacks of dilutive securities scare away potential investor due to lack of protection from the securities which can easily be converted into stock. The suitability of the diluted earnings per share is the calculation that is associates with it which is simple in the calculation of per share capital and dividends raised.
The reason why most investor opt for diluted earnings per share is because of it inclusion of the issues of security analysis. This therefore dictates that most investors do analyse the company presentation in terms of prospective investments. That is, majority of investors would opt to evaluate companies as a potential ventures by the use of the diluted earnings per share scheme (Stickney, et al, 2009, p.27).
ConclusionIt is wise to keep the earned capital alienated from the paid-in capital so as to avoid major issues that may lead to misinterpretation of the source in the final account balancing and also avoid the confusion that result from the unknown source of capital. Majorly, investors prefer to use earned capital instead of paid in capital because of its inclusions of security component. On the other hand dilution of earnings per share is embraced by the investors because of its detailed nature.
References
Brigham, E.F., & Houston, J.F. (2009). Fundamentals of Financial Management. Chicago:Cengage Learning. p.191-201.
Kimmel, P.D., Donald, Jerry, E.K., & Weygandt, J.(2010). Financial Accounting: Tools for Business Decision Making. New York, NY:John Wiley and Sons. p.570-597.
Stickney, C.P., Weil, R.L., Schipper, K., & Francis, J. (2009). Financial accounting: an introduction to concepts, methods, and uses. Chicago:Cengage Learning. P.25-31.