Wednesday, January 30, 2013

Net Income, EBIT, EBITDA And SDCF - What Is The Right Metric To Use For Business Valuation?

The most commonly used "earnings figures" used for small to mid-market business valuation are Net income (NI), Earnings Before Interest and Taxes (EBIT), Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) and Seller's Discretionary Cash Flow (SDCF). With a variety of metrics to choose from it is natural for a business owner to ask "which is the right one to use for my business". To answer the question, first we need a quick background on what these earnings metrics are.

Ø NI: NI is the net profit of the business after deducting all expenses of the business including all operational expenses, owners' or officers' salary, interest expense, taxes, etc. Some people consider this as the "true earnings" but for many small to mid market companies, which are on a constant quest to minimize taxes, this number can be grossly understated and is not a true reflection of the company's earnings stream.

Ø EBIT: EBIT is the net profit of the business before factoring in financing and taxes. The rationale for using this metric is that tax payments are highly accounting and owner dependent and a pre tax view of the profits would be a better indicator of the profit stream. Similarly, interest payments that are a function of the company's financing strategy and vary widely depending on the debt to equity ratio preferred by the ownership. The resulting leverage factor can artificially inflate or deflate the NI. EBIT shows an earnings number that is adjusted for these variables to reflect a truer picture of the earnings.

Net Income, EBIT, EBITDA And SDCF - What Is The Right Metric To Use For Business Valuation?

Ø EBITDA: The accounting treatment of Depreciation and Amortization for many businesses is substantially different from the real cash flow impact these elements have on the business. EBITDA allows for looking at the profitability of the business before factoring in these two items. One needs to be aware that this can be a highly misleading indicator based on the depreciation and amortization characteristics of the business and adjustments to EBITDA are almost always necessary to get a true picture of the earnings.

Ø SDCF: For smaller businesses, where the owner may see the business as a "job", the true measure of profitability may be the sum of all the monies the owner derives from the business including salary, benefits and other perks.

Effectively,

Ø EBIT = Net Income + Interest + Taxes

Ø EBITDA = EBIT + Depreciation + Amortization

Ø SDCF = EBITDA + Owner/Officer's Salary + Benefits + Perks

So, the answer to the question, "Which earnings is the right one for my business?" depends on the nature and size of a business and an understanding of which metric may more accurately reflect the true earnings. For many mid-market businesses the appropriate metric is likely to be EBIT or EBITDA.

Once the correct metric is identified, the business owner needs to understand the range of multiples that may be applicable to the chosen metric. For example, the earnings multiples for most small companies tend to vary between 1 to 3 times SDCF and the earnings multiple for mid-market companies are more likely to be 3 to 5 times EBIT or 3 to 7 times EBITDA.

However, businesses tend to be more unique than typical and a multiple that is good for one business may be too low or too high for another. The more exceptional the business is, the more likely it is that the multiplier will be outside of the typical range.

Net Income, EBIT, EBITDA And SDCF - What Is The Right Metric To Use For Business Valuation?
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Chak Reddy is a Merger and Acquisition Advisor with Elite Mergers & Acquisitions, Inc http://www.EliteMandA.com Elite Mergers & Acquisitions specializes in selling California Central Valley businesses with revenues between million and 0 million - Businesses too large for business brokers to adequately handle but too small for the national M&A firms. Mr. Reddy is a business M&A and Marketing expert, and is the chief deal maker at Elite. Whether you are planning to market your business or looking to expand your business, Mr. Reddy's hard work, professionalism and integrity will assure a smooth, successful, and effective transaction. You can reach Mr. Reddy at 916-220-3052 or by email at creddy@elitemanda.com

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Saturday, January 26, 2013

Cognitive Development

While there is no general theory of cognitive development, the Swiss psychologist Jean Piaget is credited with developing some of the seminal ideas about how we mature on a cognitive level. Cognitive theory concerns itself with the way children and adolescents process information. The manner in which we learn is truly procedural in nature, and it is dictated by the physiological state of the brain.

Learning and cognition have their origins as a basic survival tool. In order to thrive, animals must have a good understanding of their environments and adapt to new challenges accordingly. However, a baby not born with its brain's potential fully realized. It takes most of childhood to develop it and Piaget conjectured that cognitive development occurs in stages. As these stages progress, the child's thought processes become more and more sophisticated.

We should first step back and understand how information is processed. According to Piaget's model, adaptation occurs when people encounter a previously unknown stimulus. This can be done in two ways: by assimilating the information into existing schema, or accommodating the information into a new schema.

Cognitive Development

As an example, let's imagine that a young child is told that an animal that has four legs and barks is a dog. On a camping trip, the child sees a wolf and it begins barking. This child (correctly) concludes that a wolf is a type of dog. This would be an example of assimilation.

On the other hand, imagine the child is watching television and draws the (incorrect) conclusion that any animal with four legs and fur is a dog. At a relative's house, he sees a cat and exclaims "Mom, look at the dog!" The mom explains to the child that not all furry, four-legged animals are dogs-this is a cat. The child accommodates this new information and learns that dogs and cats are different types of animals.

With an understanding of how information is processed, we can now explore the cognitive stages of Piaget's model. The sensorimotor stage occurs from birth until age two (Papaj, 2006). In addition to having an inexperienced and underdeveloped brain, toddlers lack the language skills necessary for self-reflection. Their ability to interact with the outer world and evaluate it is limited to experiencing it via the five major senses. This is why infants are often seen placing things in their mouths.

Following the sensorimotor stage is the preoperational stage that occurs until about the seventh year of childhood. This stage marks the beginning of rational thought. No longer is the child limited to experiencing the world via the senses. While the child can now make judgments about his or her environment, this takes an egocentric view. In other words, a child in this stage can not judge an object from another's viewpoint; in fact, a child will not even be aware that other people may have differing opinions. On the other hand, the child has gotten significantly better at evaluating objects. Given a group of items, the child can now arrange them by shape, size, and color.

From about ages seven to eleven, children are in the concrete operational stage. By these ages, children have grown accustomed to using symbols to represent objects; language and mathematical skills have progressed significantly. In addition, thought has become less egocentric. A child in this stage is quite comfortable seeing things from another's viewpoint. Children in this stage can also evaluate objects using more than one criterion at once. For example, a child can estimate how old someone is by studying multiple cues such as firmness of skin, height, and hair. In earlier stages, the child would use a single, unreliable cue such as height to estimate (Papaj, 2006).

The previous stages culminate with the final stage, formal operational. This stage takes place from about age eleven onwards. Beginning at this stage, children can think not only in concrete, tangible terms, but also in the abstract and hypothetical. Deductive reasoning is now possible, and children can use existing knowledge to form hypotheses about new experiences.

It's worth noting, however, that this stage is not always easy to reach. Epstein (2006) asserts that two-thirds of adults lack the critical thinking skills illustrative of the formal operational stage. That is to say, two out of every three adults in the United States does not develop beyond the concrete operational stage. I would posit that this is a serious problem in a society where we expect adults to understand the major political, environmental, and economical issues we face. A greater effort must be made to teach these skills in schools.

With an understanding of Piaget's model, we can now look at a theory by one of his contemporaries. Lev Vygotsky was a Russian psychologist that formulated the social development theory of learning. This theory states that development is shaped by a child's social interactions; physiology alone cannot account for cognitive development. This concept was referred to as the Zone of Proximal Development. Whereas Piaget believed that cognitive development took place mainly in childhood, Vygotsky believed that development is a continuous process. He believed it extended into one's adult life and continued until death, and is too complex to be compartmentalized into stages (Driscoll, 1994; Hausfather, 1996).

The Zone of Proximal Development is worth examining further. This concept is made apparent when a child is taught by someone with a greater skill level. A gap exists between the child's skill and the teacher's skill. As the child learns, this gap narrows and thus it can be argued that learning is a social process. Vygotsky reasoned that the skills, such as language, that developed in the preoperational stage only served to bridge the gap between the sensorimotor stage and higher rational thought. Viewed another way, Vygotsky believed that rational thought could not take place without language.

It's quite possible both Piaget's model and Vygotsky's model have merit. In fact, I don't even consider the models to be incompatible; perhaps Vygotsky simply misunderstood Piaget's intentions of creating an age-based model. The different stages of Piaget's cognitive development theory merely served as guidelines in understanding the way children develop. In addition, the notion that learning is a social process is self-evident-otherwise we could lock a child in a room for ten years and have her come out understanding multiplication and the proper use of analogies. Of course learning is a social process; to suggest otherwise is absurd-at least in the case of children. Finally, I don't believe Piaget thought that development ends during adolescence. The mere fact universities exist would suggest otherwise. Rather, Piaget believed that a properly socialized child would have all the tools necessary to use higher-level thinking by adolescence. From that point, it is up to the child to decide whether honing his or her skills is a worthwhile endeavor.

Now let's briefly explore the manner in which elementary schoolteachers can apply Piaget's theory. Kindergarten and first grade teachers have the responsibility of introducing children to numbers and letters. In this preoperational stage, children learn to read and do basic arithmetic. Perhaps more importantly, children begin the socialization process in earnest, away from parents and family members. The desired result of this socialization process is for children to lose their egocentric view of the world and begin displaying empathy.

In second to about fifth grade, children are in the concrete operational stage. Teachers of these children should provide students with numerous examples and demonstrations when introducing new material. Concepts that involve classification are best introduced during this stage-a good example would be taxonomy, which involves explaining the distinct characteristics of different types of animals.

In middle school and high school, students are in the formal operational stage and are now prepared for more abstract thought. Science becomes a much more important part of the curriculum at this stage, and students are expected to interpret and analyze much more complex ideas.

Applications of Vygotsky's ideas are a bit more nebulous, much like his model itself. Teachers of all grades should strive to improve their students' language skills, as all learning will be dependent upon a child's ability to communicate. Activities should be challenging and social in nature. In the later years of childhood, group work should be emphasized to allow reinforcement of ideas amongst peers; this smaller gap in proficiency may lead to more incremental learning.This may be easier for some students who find the material difficult.

The ability to think critically is the desired result of walking children through these stages of learning. Critical thought is perhaps the single most important thing a school can do for its students to prepare them for life as an adult. This would suggest that factual information is of secondary importance-the real duty is in teaching students to communicate and analyze information effectively.

Cognitive Development
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REFERENCES:

Bhattacharya, K. & Han, S. (2001). Piaget and cognitive development. Retrieved June 21, 2007, from Emerging perspectives on learning, teaching, and technology. Web site: [http://www.coe.uga.edu/epltt/piaget.htm].

Papaj, L. (2006). Jean Piaget's stage theory. Retrieved June 21, 2007, from Evolution, Learning and Culture Web site: [http://evolution.massey.ac.nz/].

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Wednesday, January 23, 2013

How to Articulate Your Career Achievements in 7 Steps

It's amazing how many people can't describe their achievements in order to maximize its impact. Whether its in a resume or in a job interview, your ability to describe your achievements is a critical factor for success.

So many people underplay their achievements! Question is, do YOU?

Are you submitting your resume for that job you want, or even need? Or perhaps you're preparing for an interview?

How to Articulate Your Career Achievements in 7 Steps

When you finally get the opportunity to talk about what you have achieved, it's an opportunity you won't want to waste. I've pulled together 7 keys to guide you on describing your achievements for maximum impact.

1. Clarify Your Involvement in the Achievement: Use powerful words that describe your contribution. For example, 'created', 'reorganized' or 'established'. Passive statements like 'did', 'performed' or 'was involved in' don't indicate your level of involvement - they're worthless, so don't use them.

2. Describe a Start, Middle and End: mention the starting conditions, such as 'poor performance', 'high costs', 'unpalatable risk', and follow with a statement on what you made happen (the project, change initiative, etc), and cap it off with the result - was the desired outcome achieved?

3. Quantify the Achievement: use numbers and hard measures where you can. For example, say 'saved ,000' rather than 'saved operating costs'. The more specific you are, the greater the value of your statement of achievement. In almost all cases, a percentage value has a higher-impact than an absolute number. In some cases, what might look like a minor achievement, when quantified, it could be a major achievement as perceived by others.

4. Don't Forget Over-Achievement!: If you set out to save ,000, but instead saved ,000, then make sure this is known. So many people forget to do this.

5. Indicate Your Personal Award: Some achievements warrant special reward, so mention them. If you were promoted, or awarded a bonus, then add it into your statement of achievement.

6. Include details of challenging circumstances: If the achievement was tough due to business events or conditions, then make sure you say what they were. It's important to describe any challenges you faced. For example, if there were many layoffs in your organization whilst you were tasked with improving team morale, then make these conditions clear.

7. State the Effect of the Achievement, 360-degree style: Describe the achievement not just from your own perspective; also describe what it meant for your colleagues, subordinates, management and customers (where appropriate.) Don't forget to quantify the effect for each of these groups of people too.

How to Articulate Your Career Achievements in 7 Steps
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The author of this article Simon Stapleton is a coach helping Information Technology professionals with their Career Development, Commercial Development and Personal Development. He has 15 years in the IT Industry and shares his knowledge and tips through his website http://www.simonstapleton.com You can sign up for his free newsletter to enjoy Development too.

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Sunday, January 20, 2013

What is Sustainable Development and How to Achieve Sustainable Waste Management

The Brundtland Commission report provides an excellent definition of sustainable development has been quoted and more recently, the United Kingdom government in the form of its Sustainable Development Strategy, published by the DETR also defined it, and that definition can be found on the web.

However, these definitions shouldn't be left to government only. The idea is after all very simple to understand and we thought we would give you our slant on their definition as follows:

Sustainable development starts with the idea that the most sustainable aim for all is a better quality of life for everyone, not only now, but for generations to come.

What is Sustainable Development and How to Achieve Sustainable Waste Management

To achieve this, sustainable development is concerned with achieving economic growth, in the form of higher living standards. It is definitely not about hair shirts and scrimping and saving, or punishing ourselves for enjoying the use of the world's resources now.

But it IS about our protecting and where possible enhancing the environment, not just for its own sake but for our own enlightened self interest, because a damaged environment would quite soon begin to hold back economic growth and lower the quality of life.

It IS egalitarian, because it to be truly sustainable as history shows, things only work in the long term if we all make sure that economic and environmental benefits are freely available to the whole society and not just a privileged few.

Sustainability is compatible with all the major faiths and can be supported by all.

So, it is commonly accepted that sustainable development must encompass four broad objectives.

These are; social progress which recognises the needs of everyone, the effective protection of the environment, prudent use of natural resources, and maintenance of high and stable levels of economic growth and employment.

One of the most important areas for society to act sustainably is in how it throws away its waste, its trash and detritus. Nothing else, other than fossil fuel energy over-use causing climate change, and war, has the potential to do so much accumulating damage.

Unsustainable waste management poisons watercourses and underground water, leaves litter around everywhere to maim and kill our wildlife, encourages rats and vermin, pollutes the air with odours and unhealthy aerosols and can render vast areas of land damaged or largely unusable.

What is Sustainable Waste Management

There is no one sustainable waste management solution which yet reigns supreme. There are still conflicting views as to the most practical, environmentally beneficial and effective means of achieving sustainable waste management.

The overall policy aims to achieve sustainable waste management, that have been established in recent years across the whole of the European Union and many other nations are:

* to reduce the amount of waste that society produces;
* to make best use of that that is produced; and
* to choose waste management practices which minimise the risks of immediate and future environmental pollution and harm to human health.

Over the last ten years or so the actions needed for the waste industry and individuals to follow, and which are most sustainable have been defined by the policy makers.

A waste disposal method for making the choice between waste treatment and disposal options which puts landfill disposal at the bottom of the list of possible waste disposal routes, has been provided throughout the EU, for use by everyone. It is known as the waste disposal hierarchy.

Landfill does have a role in this strategy in mopping up the residual waste after all pre-treatment of waste has already removed as much of the waste stream as possible, but it is a continually reducing one, and consensus among waste professionals still remains tenuously established at best.

Sustainable Landfill

Flushing bioreactor landfills have been suggested as the only way to achieve sustainable landfills but very real technical problems exist in developing these, not least obtaining enough fresh clean water for the flushing in the first place.

However, there is a general consensus on the objectives of sustainable landfill, which we list as follows:

- The contents of the landfill must be managed so that outputs are released to the environment in a controlled and acceptable way.
- The residues left in the site should not pose an unacceptable risk to the environment, and the need for aftercare and monitoring should not be passed on to the next generation.
- Future use of groundwater and other resources should not be compromised.

The striking point here though is it could be suggested that slow leakage to the environment can be better than a total containment if slow improvement and stabilisation is achieved without any irreversible harm being caused.

What is Sustainable Development and How to Achieve Sustainable Waste Management
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Steve Evans is a Mechanical Biological Treatment processes professional who holds extensive experience across the activities of the waste management industry.

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Saturday, January 5, 2013

Five Stages Of Reading Development

Learning to read doesn't just happen. It has to be taught through systematic, organized instruction. Reading is a skill which is built upon through stages and is an ongoing process.

If a stage of reading development has not been learned, students will flounder in their reading ability, which also affects their writing skills. It is imperative that teachers make certain students fully understand each stage of the reading/writing process before they move on to the next level.

Jean Chall, world renowned reading expert and psychologist for fifty years, and past professor emeritus at Harvard University cites her five stages of reading development below:

Five Stages Of Reading Development

Pre-reading Stage:

Unsystematic accumulation of understandings about reading between pre-school and kindergarten.

Stage 1:

Initial Reading or Decoding Stage (grades 1-2; Ages 6-7 )

Student's central task is learning arbitrary letters and associating them with corresponding parts of spoken words. Learner acquires knowledge about reading. Phonics.

Stage 2:

Confirmation, Fluency, Ungluing from Print, Automaticity Stage (grades 2-3; Ages 7-8)

Consolidation of what was learned in Stage 1. Requires reading many easy and familiar books for developmental reading. Gradual increase in functional and recreational reading. Common use of the basal readers. Functional reading important - content area texts - here's where we fail in our attempts to prepare our students. Range of possible recreational reading increases.

Stage 3:

Reading for Learning the New Stage: A First Step (Grades 4-8; ages 9-13)

Readers need to bring prior knowledge to their reading. Children acquire facts.

Stage 4:

Multiple Viewpoints Stage: (High School; Ages 14-18)

Should include instruction in reading/study skills, and reading strategies for success.

Stage 5:

Construction & Reconstruction Stage: College; Ages 18 & up)

Adult literacy should stress acquisition of skills useful to the participants and the ability to apply those skills.

These are the stair steps of reading development. They are built upon and climbed, as students grow in their literacy development. Sometimes students get stuck in one of the stages. It's my job as a literacy specialist to "unstick" them so they can move on to the next phase and beyond, empowering them to become enthuiastic readers and writers.

Copyright © 2006 by Pamela Beers. All rights reserved.

Five Stages Of Reading Development
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Pamela Beers is a freelance writer, educator, and horse trainer. Her work as a literacy specialist, using Jeanne Chall's stages of reading, has changed reluctant readers into enthusiastic readers by making sure each student understands the skills needed in each of the five reading stages.

This article is written in memory of Jeanne Chall whose teachings are immeasureable.

Visit Pamela's website: [http://www.FreelanceWritingEtc.com]

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