An Information Security Metrics Program Compliance With...

There are three primary goals for an information security metrics program: compliance with legal requirements; reduce risk by adding new or improving existing capabilities; improve efficiency or reduce cost. In order to achieve any of these goals it is extremely important to gather the appropriate data and formulate useful metrics. The need for useful security metrics cannot be overstated, but there can be confusion about what a metric is, and difficulty determining what a useful metric is. As a business USAA has a duty to protect and improve shareholder investments, and of course must comply with all applicable laws and regulations. There are a variety of laws and regulations that dictate security requirements for financial institutions.†¦show more content†¦These federal and state laws impact financial organizations in a few different ways but generally revolve around three functions: confidentiality; integrity; and compliance through audits. FACTA includes requirements fo r protection of consumer data including social security numbers, and credit card information. It also contains provisions for data integrity with consumer reports and disputes. SOX requires publicly traded organizations to conduct annual assessments of their audit controls to the government. Additionally they must be audited by an external third party. SOX is designed to protect investors from fraudulent financial reporting from the organization. GLB requires financial institutions to protect the privacy and integrity of their customers information. Additionally, the companies must implement fraud protection programs to prevent unauthorized disclosure of customer information. Regulation E has rules and restrictions for electronic funds transfers, and creates requirements for information disclosures, and records retention. FRCP outlines requirements for the collection, retention, and production of data that could be required for discovery for a civil lawsuit. A common thread for all of these federal laws is the need for information confidentiality and integrity, and the ability to effectively audit the systems for compliance of these

Segregation, By Luis J. Rodriguez - 1423 Words

Alvarez, Marlene May 13, 2015 Eng 101 Final Draft Modernly Segregated Upon thinking about segregation, Jim Crow laws come to mind. It is commonly mistaken that it is abolished, but there are ways that segregation continues to exist. It continues to exist in L.A, just not in the way of laws segregating them, it exists through marginalization. African Americans and Latinos are pushed into certain areas to live amongst each other while Anglos stay among specific areas, as well. There are several factors that contribute to this form of segregation such as: the amount of damaged properties, isolation of the underclass, poverty rising in these areas, the conditions of the city, the lack of retail stores, and employment. Always Running, a memoir by Luis J. Rodriguez, shows different aspects of marginalization through the school s Luis attended, the jobs he sustained, and the neighborhoods he resided . No one should feel as if they are underclass or that they cannot achieve what a superior race can achieve. These segregated views must end. African Americans and Latinos hold it against themselves that they cannot achieve the same thing that Anglos can achieve. It is based on the communities they live on. The youth of the community is mostly impacted. They absorb all aspects of their life as a waste, for example, they go home to find one or their parents unemployed or struggling to get by. They go to school to find that they have teachers that are notShow MoreRelatedSummary Of There Running, La Vida Loca By Luis J. Rodriguez Essay1709 Words   |  7 Pagesnothing and those in the middle. In Always Running, La Vida Loca: Gang Days in L.A. by Luis J. Rodriguez, we hear from an outcast of society, a young man so far removed from the opportunity this country promises. Rodriguez spent his formative years living a life of crime, drugs, and sex, completely on the margins of society, not out of choice but out of necessity to survive, being left with limited options. Rodriguez is the tale of many other young Mexican American boys in the U.S.A. Torn betweenRead MoreLos Angeles And Chicago Angeles3155 Words   |  13 PagesGang Days in L.A. by Luis J. Rodriguez, a former Los Angeles gang member, he eloquently describes his accounts of gang violence based on his own personal experiences. Loyalty is a very important value in the gang culture and Rodriguez illustrates this when he recalls what his friend Miguel Robles said, â€Å"We all taking a pledge, a pledge to be for each other. To stand up for the clica. Thee Impersonations will never let you down. Don’t ever let The Impersonations down† (Rodriguez 41). In order to combatRead MoreRacial Segregation Of Chicago And Explosive Gang Related Crime1671 Words   |  7 Pagesevery ‘transitional’ neighborhood, the ‘succession’ of African Americans out of their areas of ‘first settlement’ was systematically blocked† (Hagedorn 197). By doing the aforementioned the white gang’s behaviors have contributed to the racial segregation of Chicago and the explosive gang related crime in the present day south side of Chicago. Just like African Americans formed gangs to protect themselves against Chicago s white gangs, the Latin Kings formed in Chicago with the same intent. In

Wuthering Heights Victim vs. Victimizer - 1247 Words

Victim vs. Victimizer Readers often pity literary characters who play the role of a victim. In Wuthering Heights by Emily Bronte, Heathcliff: an outsider brought into the wealthy Earnshaw family, Hindley: the eldest Earnshaw child with a strong dislike for Heathcliff, and Hareton: the orphaned child Heathcliff takes in to raise, are victims, yet they evolve to perpetuate the abuse they suffered. Being able to be or become a victim or victimizer show the complexity of these characters. Emily Bronte manipulates readers to pity Heathcliff, Hindley, and Hareton, in spite of the hideous pain they inflict on others. John Hagan states, â€Å"Wuthering Heights is such a remarkable work partly because it persuades us to forcibly pity victims and†¦show more content†¦Heathcliff a man? If so, is he mad? And if not, is he a devil?† (Bronte 106). Isabella questions Heathcliff’s humanity, revealing that Heathcliff uses his pain to fuel the harm he inflicts on others. Hareton Earnshaw, a victim of Hindley, Heathcliff, and Cathy, stands up for himself, shocking the reader’s perception of his character. Hareton is a victim of his father’s alcohol abuse and gambling addiction. These addictions are a result of Frances’ death and the reader becomes sympathetic towards Hindley; however, Hareton is the innocent victim affected by the lack of care from his father. Hareton is a toddler when Hindley holds him over the railing of a staircase, threatening his life. Once Hindley dies, Heathcliff takes on the responsibility to care for young Hareton. He does not know that he is being used as part of Heathcliff’s plan to get revenge on Hindley for abusing him as a child. Heathcliff wishes to keep Hareton ignorant and uneducated in an effort to degrade him. When describing Hareton, Nelly, the house servant, says, â€Å"He appeared to have bent his malevolence on making him a brute: he was never taught to read or write; never rebuked for any bad habit which did not annoy his keeper; never led a single step towards virtue, or guarded by a single precept against vice† (Bronte 152). Hareton is a victim to society because he is kept an uncivilized and ignorant young man. The reader feels sympathetic towards him because he is made to be an inferior

The Purpose of Thornbury Castle Essay - 1766 Words

The Purpose of Thornbury Castle Thornbury castle Since Thornbury castle started being built in 1511 it has been in the centre of a debate with historians whether it is a castle built for defence or a luxurious palace for show. When I went to Thornbury castle you can see lots of different features that would confuse you in deciding what Thornbury castle was built for. There are lots of different features showing both. This picture shows some arrow slits. As you walk around the castle you see things like arrow slits and gun loops in the walls showing they were probably built in case of an attack. Around the outer and inner gateway walls there are portcullis grooves which were†¦show more content†¦These two sources show that there was meant to have been a moat, this is also a way of protecting castles from attack. The deep moat would have strengthened the defences of the gunports and the massive portcullis. When I visited Thornbury Castle their was an old ruined part this is meant to be the army barracks for the purpose of retaining men, on the ground floor it was meant to be stables and on the floors above reached by wooden staircases, were living quarters for the hired army its hard to say how many men Buckingham would have had it might have been hundreds or possibly a thousand, with which Buckingham intended to assert his independence and viewed of fortifying himself against the king. Under Henry the VIII no-one was meant to own their own army but why was Edward Stafford building room for so many people? Then in the outer court there is a wide open space which may have been meant to for a training ground for his army. These pictures show the old soldiers barracks. These are the things which make Thornbury castle look like it was built for defence:-  · Arrow stilts  · Gun loops  · Portcullis grooves  · crenellations  · machicolations  · army barracks  · moat  · massive court yard Thornbury castle was no rugged castle; rather, a development of the highly decorative defensible palace. There was no

The Color Purple By Alice Walker - 1474 Words

In the early 1900’s society s attitudes toward women were not always positive ones. Women often faced sexism, discrimination, racism, and abuse which is demonstrated throughout the book, The Color Purple by Alice Walker. When these prevailing attitudes came face to face with the diverse personalities of the women in this book they not only affected each other but their society as a whole. These attitudes included, but were not limited to, disrespect, jealousy, selfishness,infidelity, and abuse. These women were forced to survive their own struggles in their own way, and whether they chose to do it alone or together they did survive. Although they may have been weakened at times these women had unbreakable spirits that by the end were†¦show more content†¦This helps illustrate the blatant personality differences between Celie and Sofia (Harpo’s wife). Sofia was conscious of her worth and never for one second doubted it. She was a powerful woman both mentally a nd physically. When Harpo attempted to break her spirits and beat her into submission he soon realized that, that was an impossible task. Although Harpo did love Sofia he let the societal standards of that time period ruin their marriage. â€Å" I loves Harpo, she say. God knows I do. But I’ll kill him dead before I let him beat me.† Harpo and Sofia had love in their marriage, a rarity at the time, but their love was not enough to save it. Instead of being beaten or having to constantly fight in her own home Sofia left. This situation highlights the differences between Celie and Sofia and how they reacted to their abuse. This difference leads us to our next topic. Jealousy was also a persistent theme throughout this book and is the motive for many characters actions. This theme is mostly found among the women but not exclusively. Previously, the differences between Sofia and Celie were brought up. This distinction in character personalities did not go unnoticed. â€Å" ‘You told Harpo to beat me,’ she said. ‘No I didn’t’, I said. ‘Don’t lie’, she said. ‘I didn’t mean it,’ I said. ‘Then what you say it for?’ she ast. She standing there looking me straight in the eye. She look tired and her jaws full of air. ‘I say it cause I’m a fool, I say. I say it cause I’mShow MoreRelatedThe Color Purple By Alice Walker1355 Words   |  6 PagesDecember, 2015 Just A Single Purple Wildflower In A Field Of Weeds Alice walker once said, â€Å"No person is your friend (or kin) who demands your silence, or denies your right to grow and be perceived as fully blossomed as you were intended. Or who belittles in any fashion the gifts you labor so to bring into the world.† The color purple has timelessly been used to convey pictures of power and ambition, it is also associated with the feeling of independence. The Color Purple is the story of the constantRead MoreThe Color Purple By Alice Walker710 Words   |  3 PagesThe Series of unfortunate events in The Color Purple The Color Purple by Alice Walker starts off with a rather graphic view of a young black woman denominated as Celie. Celie has to learn how to survive her abusive past. She also has to figure out a way she can release her past in search of the true meaning of love. Alice walker wrote this book as an epistolary novel to further emphasize Celie`s life events. From the beginning of the novel Alice Walker swiftly establishes an intimate contact withRead MoreThe Color Purple by Alice Walker1192 Words   |  5 Pagesas a novel containing graphic violence, sexuality, chauvinism, and racism, The Color Purple was banned in numerous schools across the United States. Crude language, brutality, and explicit detail chronicle the life of Celie, a young black woman exposed to southern society’s harshness. While immoral, the events and issues discussed in Alice Walker’s The Color Purple remain pervasive in today’s society. The Color Purple epitomizes the hardships that African A mericans faced at the turn of the centuryRead MoreThe Color Purple by Alice Walker675 Words   |  3 Pagesthe world exist for their own reasons. They were not made for humans any more than black people were made for white, or women created for men.† Straight from the mouth of Alice Walker this quote was spoken in order to point out that fact that none of God’s creatures were put on this Earth to be someone else’s property. Alice Walker is an African-American novelist and poet who took part in the 1960’s civil rights movement in Mississippi. Walkers creative vision was sparked by the financial sufferingRead MoreThe Color Purple by Alice Walker921 Words   |  4 PagesAlice Walker’s realistic novel, The Color Purple revolves around many concerns that both African American men and women faced in an era, where numerous concerns of discrimination were raised. Religious and gender issues are confronted by the main characters which drive the plot and pa int a clear image of what life may possibly have been like inside an African American home. Difficulties were faced by each and every character specifically Celie and Nettie who suffered heavy discrimination throughoutRead MoreThe Color Purple By Alice Walker1540 Words   |  7 Pages Alice Walker is an award winning   author, most famously recognized for her novel   The Color Purple ;aside from being a novelist Walker is also a poet,essayist and activist .Her writing explores various social aspects as it concerns women and also celebrates political as well as social revolution. Walker has gained the reputation of being a prominent spokesperson and a symbolic figure for black feminism. Proper analyzation   of Walker s work comes from the   knowledge on her early life, educationalRead MoreThe Color Purple By Alice Walker3360 Words   |  14 Pagesâ€Å"Womanist is to feminist as purple is to lavender† (Yahwon). Alice Walker views herself as a womanist. Although a womanist and feminist are similar, the two terms are not exactly the same. According to Professor Tamara Baeouboeuf-Lafonant: [Womanism] focuses on the experiences and knowledge bases of black women [which] recognizes and interrogates the social realities of slavery, segregation, sexism, and economic exploitation this group has experienced during its history in the United States. FurthermoreRead MoreThe Color Purple by Alice Walker1100 Words   |  5 PagesThe Color Purple by Alice Walker is a story written in 1982 that is about the life struggles of a young African American woman named Celie. The novel takes the reader through several main topics including the poor treatment of African American women, domestic abuse, family relationships, and also religion. The story takes place mostly in rural Georgia in the early 1900’s and demonstrates the difficult life of sharecropper families. Specifically how life was endured from the perspective of an AfricanRead MoreThe Color Purple by Alice Walker926 Words   |  4 PagesThe award-winning novel, â€Å"The Color Purple† by Alice Walker, is a story about a woman going through cruel things such as: incest, rape, and physical abuse. This greatly written novel comes from a very active feminist author who used many of her own experiences, as well as things that were happening during that era, in her writing. â€Å"The Color Purple† takes place in the early 1900s, and symbolizes the economic, emotional, and social deprivation that African American women faced in Southern statesRead MoreThe Color Purple By Alice Walker1495 Words   |  6 PagesThe Color Purple, is a novel written by the American author Alice Walker. The novel won the 1983 Pulitzer Prize for Fiction and is also regarded to be her most successful piece of work. It has developed into an award winning film and was recently made into a Broadway play. The story continues to impress readers throughout the decades due to its brutal honesty. The novel successfully and truthfully demonstrates what life was like for black women during the early twentieth century. The book discusses

Global Financial System for Critical Audit Matter -myassignmenthelp

Question: Discuss about theGlobal Financial System for Critical Audit Matter. Answer: Introduction This assignment is about the recently changed audit models of the U.S public accounting oversight board. The changed model now requires the auditors to present the high risk area of business in the audit report itself. An auditor is a person, who inspects the accounts of the company or an organization and detects if there is any wrong entry of financial or non financial transactions has been done or skipped purposely to bring the actual true financial condition or financial report of the company to the interested peoples(Glenda Marty, 2010). An audit is done by a certified accountant or an auditor, in this assignment we are going to discuss in detail the need of auditing and the auditing models changed in the PCAOB. Key Changes to Audit Report with Focus on Similarities As Well As Any Differences The international auditing and assurance standards board (IAASB) is an international auditing standard body that is working internationally. This body of international auditing standards was set in 1978 march, and it is working on stabilizing the global financial system, enhancing the role, relevance and quality of assurance and implementation of auditing standards(Philips, 2014). The public company accounting board is similar to that of IAASB; however it is a private sector and a nonprofit corporation that works in keeping an eye on the work of the public companies to protect the interest of the investors(Mehta, 2013). Recently the PCAOB has made some changes into the auditing report models, these changes suggested that the auditors have to disclose the areas of high audit risk to in the audit report. The recent changes of the PCAOB now require the auditors report to be more specific and more relevant and to provide more additional information about the audit to the client. The newl y developed standard now requires the auditor to communicate the critical audit matters (CAM) for audits that are conducted under the standards of PCAOB. Critical audit matter (CAM) are the matters that comes out while conducting an audit and these matters are now according to the new changes are required to be communicated to the client. An auditor for determining the critical audit matters will require working upon the audit risk assessment, unusual significant transactions etc. if in case there are no critical audit matters the auditor will prepare a disclosure stating that no critical audit matter occurred while conducting the audit(Sherlotte, 2015). Another change that has been made by the public company accounting oversight board is that, the auditor now will have to state that when and in which year the audit began and when it ending it comes under the tenure. Third major change made in by PCAOB is the independence of the auditor; this change means that the audit report will include a statement stating that the auditor must be independent. Another major change is the address; the auditors report will be addressed to the companys share holders and to the board of directors(Katz, 2017). Now if we talk about the similarities or the differences between the standards of the international auditing assurance standard board and the public company accounting oversight board then these are as follow: We will first talk about the similarities between the IAASB and the PCAOB(Hesabras, 2017): KAM/CAM is those matters that arise when the audit is conducted by a certified auditor and these matters are of much importance for the company that the auditor wants to put before everything. Now there is a similarity between this standard of IAASB PCAOB as both states that KAM/CAM requires to put forward matters of more importance in the auditing report and there is also a similarity of preparing the pattern of the KAM/CAM in the IAASB and PCAOB. Documentation of important or critical matters is required under IAASB and PCAOB, whether or not the matter is considered to be a KAM/CAM. Similarity here is that both the auditing standard bodies requires to document matters that are of significant nature. The ordering of basis for opinion and opinion section in IAASB is done by presenting opinion section first following to it the basis for opinion section, in PCAOB the ordering is of basis of opinion and opinion section is as same as international auditing and assurance standard board. Now we will talk about the differences between the IAASB PCAOB standards: The tenure of the auditors is not being disclosed in the IAASB, whereas the date of starting the tenure of the auditor needs to be disclosed in the report in public company accounting oversight board. In IAASB the responsibilities of the auditor are expanded, these responsibilities needs to be prepared in a separate section of auditors report. While if we talk about Public company accounting oversight board, the responsibilities of the auditors needs to be mentioned not in a separate section but in a the basis of opinion section. Reasons/Motivation for the Changes The changes made in the auditing models of PCAOB are made for the first time in the 70 years since its establishment. This is the first and the most important motivation or the reason behind the changes made to the audit report by the PCAOB. The investors of the firm seek for more and more information from the company about its profits or loss and about other things as well. The members of PCAOB said in a statement that the main purpose of changing the audit report was to prepare informative, accurate and independent audit reports. Impact of the changes in Audit Reporting The changes made in public company accounting oversight board will pump life into the audit reports made by the auditors and the investors will get all the information they have been asking from the auditors from a long time(R.Doty, 2017). The changes are likely to protect the interest of the investors by providing them an accurate and an appropriate report about the financial condition of the firm. These changes made in the PCAOB models for auditing will not only protect the interest of the investors but it is going to increase the working responsibilities of the investors and more transparency will come into the process of auditing. Bibliography Glenda Marty. (2010). The Work responsibilities of an Auditor (Vol. 1). Bath: London Works and Press. Hesabras. (2017, July 1). Retrieved July 1, 2017, from Hesabras: https://www.hesabras.com/Content/media/filepool3/2017/8/569.pdf Katz, D. M. (2017, June 1). CFO. Retrieved 2014 5, 2015, from An Agryle Company : https://ww2.cfo.com/auditing/2017/06/pcaob-auditors-report/ lotey, i. (2010). skill in businesses. In g. garg, business skills (pp. 145-166). Garg Publishers. Mehta, H. (2013). Changes Made in the Auditing Structure of the PCAOB. In J. Harish, The Standards of PCAOB (pp. 119-130). Amsterdam: Geo Publishers. Philips, J. M. (2014). The Standards of IAASB. In D. o. board, Australian Auditing (13th ed., pp. 85-112). sydney: Wolter Kluver. R.Doty, J. (2017, June 1). PCAOB. Retrieved 2017 2017, from Public Company Accounting Oversight Board: https://pcaobus.org/News/Releases/Pages/auditors-report-standard-adoption-6-1-17.aspx Reserve Bank of Australia. (2017). Retrieved September 2017, from https://www.rba.gov.au/monetary-policy/about.html Sherlotte, D. (2015). New Auditing Standards. New York Business world , 5 (115), 10.

Capital Reconstruction free essay sample

The act of placing a company into voluntary liquidation and then selling its assets to another company with the same name and same stockholders, but with a larger capital base. It is the  complete  overhaul of the  capital  of a distressed company  to save it from  liquidation. The object of it is to enable the company to continue as a going concern by the removal of the burden of immediate debt, the attraction of additional  capital  and the creation of a viable financial structure. Definition:- The reconstruction of  capital, which is also known as  capital  reconstruction, is defined as the plans made by  a company  for the restructuring of its capital  base. Capital  reconstruction involves major  alterations  in the  capital  base of  a company. It is related to the term  capital  restructuring. OR A company gains the agreement of its shareholders and creditors to vary the rights of its members and creditors, by altering the capital structure in a way that allows the existing company to continue in business. Types of Capital Reconstruction:- There are two types of  capital  reconstruction. These are splits and  consolidations. Split is an easy  principle  to understand. 1. Splits:- Under the principle of splits,  a company  basically splits its  capital  base. For instance,  a company  may split its base of  capital  by issuing two new  shares  for every  one share  held by the shareholder. For example, if the company has 50, 000, 000  shares  at its disposal, it can split its base of  capital  to 100, 000, 000  shares. Capital  reconstruction may or may not include a return on  capital. 2. Consolidations:- On the other hand,  consolidations  are the opposite of splits. In the above example, the company split its 50, 000, 000  shares  into 100, 000, 000  shares. In the case of consolidations, however, the company may consolidate the 100, 000, 000 ordinary  shares  at its disposal into 50, 000, 000 ordinary  shares  by giving shareholders only one new shares  for every two  shares  they hold. The process of re-engineering the capital base of a company could be done internally or externally. Internal construction is a process where capital is reconstructed within the existing shareholder, while external is where capital is reconstructed among the existing and prospective shareholders. Accounting for Capital  Reconstruction Rationale for Capital Reconstruction To eliminate 3 issues that prevent a distressed company from recovering 1. Negative retained earnings * Companies with accumulated losses are not allowed to pay dividends. One reason is that it prevents the shareholders from withdrawing money and leaving the debt holders high and dry. * This discourages potential investors from investing in the company. * The company will find it difficult to obtain debt financing as well. 2. Overdue interest and debt * Distressed companies are cash strapped. Needing to pay interest puts burden on the company, and prevents it from committing necessary capital to turn around the business. The debt and interest also results in high gearing and low interest coverage ratios, which again prevents the company from obtaining additional debt financing. 3. Overdue dividends on cumulative preference shares * Same reasons as per debt, since preference shares are essentially debt. Types of Entity Construction Schemes (accounting speak) 1. Capital reduction 2. Re construction 3. Liquidation via a new company Capital Reduction Scheme This addresses the 1st point above. A capital reduction scheme essentially recognizes the loss that the equity holders have incurred by adjusting equity reserve accounts. A company * Resets any negative retained earnings account by offsetting it with equity reserve accounts (e. g. share premium account first, followed by share capital account) * Writes off any unpaid share capital by reducing the value of its share capital and restating as fully paid shares. * Writes off share capital not backed by available assets (e. g. reducing intangibles and share capital) Since this would allow equity holders to pay themselves dividends again, court approval is typically required so as to take into account the interests of other stakeholders (e. . debt holders). Reconstruction Schemes This addresses the 2nd and 3rd points above. This involves the company * Writing off overdue debt interest and restructuring debt to have lower interest and extended maturity * Writing off cumulative preference shares dividend owed * Writing off amounts owed to suppliers * Issuing new shares (crediting equity reserves) to the previous debt holders, preference shares holders, suppli ers for accepting to restructure the debts. Essentially debt holders convert to being equity holders, possibly retaining  a lower debt amount. This allows them to recover their funds through the company’s recovery, as opposed to not recovering their funds when the company collapses. Liquidation via a New Company This involves: * Selling assets to another company * Using the proceeds to pay down remaining debts, and liquidating the business. * Profit recognized is based on proceeds less carrying costs of remaining net assets. * The buyer of the assets will still recognize Goodwill based on the fair value of the assets bought. Any of a range of financing transactions aimed at significantly altering the shape of a firms liabilities (cf. ecapitalization; reconstructing). There are three basic ways in which this can happen: increases/decreases in the amount of equity, increases/decreases in debt, and lengthening/shortening debt maturities (cf. buy-out; debt-equity swap; going private; highly-leveraged transaction; refunding; stock repurchase plan). In a capital reconstruction, or capital reorganization, a company gains th e agreement of its shareholders and creditors to vary the rights of its members and creditors, by altering the capital structure in away that allows the existing company to continue in business. Many large companies, including Marconi, attempted to solve problems related to interest payment and principal repayments by converting debt into equity in 2001/2. Reasons for Capital Reconstruction There are a number of reasons why a restructuring may be necessary: ? The company may have become too highly geared and a solution may be to issue equity in place of debt capital. ? The existing capital structure may have become over-complicated with perhaps too many classes of shareholder with different rights to each class. They can be consolidated into one or two classes, but care must be taken to ensure that the relative voting strength remains in the same proportion. ? Capital with prior rights may carry a high fixed dividend which then gives a misleading impression of the company, or preference shareholders may have control of the company. In such cases the structure should be reorganized into a more convenient nature. ? The company may decide to replace preference shares with debentures in order to reduce the corporation tax on the company’s shares. Reasons for Capital Reorganization There are a number of reasons why capital reorganization may be necessary: (a) The company may be at risk of insolvency, due to poor profitability, overtrading or other problems related to cash management. (b) The company may have become too highly geared and a solution may be to issue equity in place of debt capital. (c) The existing capital structure may have become over-complicated with, perhaps, too many classes of shareholder with different rights to each class; they can be consolidated into one or two classes, but care must be taken to ensure that the relative voting strength remains in the same proportion. d) Capital with prior rights may carry a high fixed dividend, which then gives a misleading impression of the company, or preference shareholders may have control of the company. In such cases the structure should be reorganized into a more convenient form. (e) The company may decide to replace preference shares with debentures to reduce corporation tax. If a company needs t o undertake a capital reconstruction because it is short of cash, it is likely to need to raise new capital and make changes in the capital structure that allow it to defer or reduce payments to lenders and creditors. Additional finance may come from existing shareholders or from a bank, generally in the form of equity finance, although some may be in the form of loan stock. Those providing such finance will require profit and cash flow forecasts to show how the business can be turned round and provide a good return for their additional money. In such cases it is wise to maintain the income position of a particular class under the scheme as far as possible. Often more income will be offered as an incentive to the holders of a particular security to agree to the capital restructuring. Different classes of creditors are ranked in order of priority for payment in the event of a liquidation. The order is: _ creditors with fixed charges (for example, bank loans secured on specific fixed assets); _ preferred creditors including employees and tax creditors; _ creditors with floating charges over the assets (generally the current assets of the business) that crystallize on liquidation; _ unsecured creditors, including trade creditors; _ shareholders. Some creditors can have a fixed charge on an asset, with a floating charge over a group of assets for the balance of their loan. This is known as a fixed and floater. A bank that has made a loan secured by shares or other financial securities which have fallen in value since the loan was made could be in this position. Each class must have its claims satisfied completely before any money is available to pay the next class. Depending on the assets tat are likely to be available, this may mean that some classes of creditors can expect nothing in the event of a liquidation, and have an interest in agreeing proposals that will keep the company in operation. Different kinds of creditors have different income objectives and attitudes to risk. It may be possible to devise changes in the capital structure that leave all classes better off than they would be in a liquidation. For example, loan stock holders may be willing to convert some of their loan stock into ordinary shares and have payment of interest deferred if the interest rate on their stock is increased. Trade creditors may be willing to wait for payment if they are paid interest, and may be prepared to exchange part of what they are owed for loan stock. Ordinary shareholders may be willing to have the nominal value of their shares reduced and to subscribe for new shares. Secured lenders may have little to lose in pressing for a winding up (provided there are sufficient assets for them to be paid what they are owed) and may have to be paid in full as part of any reconstruction. A reconstruction scheme must treat all parties fairly and not favor one group over others. The outcome of the scheme should be more beneficial to all classes of creditors than if the company goes into liquidation. If it is not, the class of creditors that does not stand to benefit from the reconstruction may press for the winding up of the company. The increased benefits to creditors (and investors) from the reconstruction scheme can be shown by comparing the liquidation value of the firm and the situation of different classes of creditors in a liquidation with the estimated future results arising from the reconstruction scheme. Each class of creditors must agree to the reconstruction proposals by a 75 per cent majority at a separate class meeting. Given this agreement, the company can apply to the court for approval, after which the reconstruction becomes binding on all parties. Principles of Capital Reconstruction There are a number of points of principle in the design of a scheme of reconstruction. (a)  Firstly, if the company is having problems it is likely to require more finance which may come from either existing shareholders or a bank, generally in the form of equity finance, although some may be in  the form of  loan stock. This new equity may replace existing share capital, or may have a different nominal value to it. Those providing such finance will require profit and cash flow forecasts to show how the business can be turned round and provide a good return for their additional money. In such cases it is wise to maintain the income position of a particular class under the scheme as far as it is  possible. Often more income will be offered as an incentive to the  holders of a particular security to agree to the capital restructuring. (b)  In addition, a reconstruction scheme must treat all parties fairly, and not favor one group over others. The outcome of the scheme should be more beneficial to creditors than if the company went into liquidation, or they may press for the winding-up of the company. Often this is avoided by including in the  scheme provision for paying off the company’s debts in full. The increased benefits to creditors (and investors) from the reconstruction scheme can be shown by comparing the liquidation value of the firm with the estimated future results arising from the reconstruction scheme. (c)  The company must also take account of fixed charges (e. g. a mortgage on a factory) on assets of the business used as security for loans. These charges mean that the creditor is â€Å"secured† and thus entitled to first claim in the process of liquidation (if there are insufficient funds, the creditor becomes unsecured for the balance of the loan unpaid). The charges mean that such creditors may have less incentive to keep the business afloat. Second charges are when the lender has the prior claim on the surplus from the sale of a secured asset after the prior claim has been met. (d)  In addition, the company may have to consider the existence of floating charges over  the assets (generally the current assets of the business which are continually turned over during trading) that crystallize on liquidation thus providing the charge owner with prior call on the funds realized from these assets. Similarly to above, such creditors may have less incentive to keep a business afloat, unless it can be shown that it would be financially beneficial to them to do so. You may also find in practice that certain creditors can have a fixed charge on an asset, with a floating charge over a group of assets for the balance of their loan – this is known as a fixed and floater. Practical Study – Bahria Town Paint Factory amp; Awami Villas Factory:-