Capital structure and approaches to capital structure

Capital structure and approaches to capital structure It is defined as the mix or proposition of a firms permanent long-term financing represented by debt, preference stock, and common stock equity. Capital structure theory suggests that firms determine what is often referred to as a target debt ratio, which is based on various tradeoffs between the costs and benefits of debt versus equity. The term capital structure refers to the percentage of capital (money) at work in a business by type. Broadly speaking, there are two forms of capital: equity capital and debt capital. Each has its own benefits and drawbacks and a substantial part of wise corporate stewardship and management is attempting to find the perfect capital structure in terms of risk / reward payoff for shareholders. This is true for Fortune 500 companies and for small business owners trying to determine how much of their startup money should come from a bank loan without endangering the business Lets look at each in detail: Equity Capital This refers to money put up and owned by the shareholders (owners). Typically, equity capital consists of two types: 1) contributed capital, which is the money that was originally invested in the business in exchange for shares of stock or ownership and 2)  retained earnings, which represents profits from past years that have been kept by the company and used to strengthen the  balance sheet  or fund growth, acquisitions, or expansion. Many consider equity capital to be the most expensive type of capital a company can utilize because its cost is the return the firm must earn to attract investment. A speculative mining company that is looking for silver in a remote region of Africa may require a much higher  return on equity  to get investors to purchase the stock than a firm such as Procter Gamble, which sells everything from toothpaste and shampoo to detergent and beauty products. Debt Capital The debt capital in a companys capital structure refers to borrowed money that is at work in the business. The safest type is generally considered long-term bonds  because the company has years, if not decades, to come up with the principal, while paying interest only in the meantime. Other types of debt capital can include short-term commercial paper utilized by giants such as Wal-Mart and General Electric that amount to billions of dollars in 24-hour loans from the capital markets to meet day-to-day working capital requirements such as payroll  and utility bills. The cost of debt capital in the capital structure depends on the health of the companys balance sheet a triple AAA rated firm is going to be able to borrow at extremely low rates versus a speculative company with tons of debt, which may have to pay 15% or more in exchange for debt capital. Other Forms of Capital There are actually other forms of capital, such as  vendor financing  where a company can sell goods before they have to pay the bill to the vendor, that can drastically increase return on equity but dont cost the company anything. This was one of the secrets to  Sam Waltons success at Wal-Mart. He was often able to sell Tide detergent before having to pay the bill to Procter Gamble, in effect, using PGs money to grow his retailer. In the case of an insurance company, the policyholder float represents money that doesnt belong to the firm but that it gets to use and earn an investment on until it has to pay it out for accidents or medical bills, in the case of an auto insurer. The cost of other forms of capital in the capital structure varies greatly on a case-by-case basis and often comes down to the talent and discipline of managers. SEEKING THE OPTIMAL CAPITAL STRUCTURE Many middle class individuals believe that the goal in life is to be debt-free. When you reach the upper echelons of finance, however, that idea is almost anathema. Many of the most successful companies in the world base their capital structure on one simple consideration: the cost of capital. If you can borrow money at 7% for 30 years in a world of 3% inflation and reinvest it in core operations at 15%, you would be wise to consider at least 40% to 50% in debt capital in your overall capital structure. Of course, how much debt you take on comes down to how secure the revenues your business generates are if you sell an indispensable product that people simply must have, the debt will be much lower risk than if you operate a theme park in a tourist town at the height of a boom market. Again, this is where managerial talent, experience, and wisdom comes into play. The great managers have a knack for consistently lowering their  weighted average cost of capital  by increasing productivity, seeking out higher return products, and more. To truly understand the idea of capital structure, you need to take a few moments to read Return on Equity: The DuPont Model  to understand how the capital structure represents one of the three components in determining the  rate of return  a company will earn on the money its owners have invested in it. Whether you own a doughnut shop or are considering investing in publicly traded stocks, its knowledge you simply must have. Question on our minds: Can the total valuation of a company (debt+equity) and the cost of capital be affected by changing the financing mix. The imperfections in the market play a vital role in the valuation of a company. This data is of utmost importance to the suppliers of capital. Changes in the financing mix are assumed to occur by issuing debt and repurchasing common stock or by issuing common stock and retiring debt. Example 1. Assume a company whose earnings are not expected to grow and which pays out all of its earnings to its shareholders in the form of dividends. All kinds of market imperfections are not considered in the current example, for simplicity in calculations. We are concerned mainly with 3 different rates of return. The first is The yield on companys debt, ki = = The second rate of return that we are concerned with is ke = = With our assumptions that the firms earnings are not expected to grow and which has a 100 percent dividend payout, the firms earning per price represents the market rate of discount that equates the present value of the perpetual stream of expected constant future dividends with the current market price of the common stock. The third rate to be calculated is ko = = These 3 different rates of return affect the amount of financial leverage, which is the debt to equity ratio. ko is defined as the overall capitalization rate of the firm. It is designed as the weighted average cost of capital, and can also be expressed as ko = ki [] + ke [] Calculating A Companys Capital Structure Review your companys most recent financial statements to find all of the capital components. Highlight all of the debt of the company and the equity (including common and preferred shares, capital contributions and retained earnings). Add up the total debt and equity It will be equal to your companys assets on the balance sheet because the debt and equity is what paid for those assets. Your capital structure is the percentage that each funding source represents of your companys total funding. Lets look at an example. Lets say you have the following capital components: bank loan $176,500, retained earnings $54,300, common stock $12,500. That makes your total capital $243,300. To calculate your capital structure, take the dollar amount of each capital source and divide it by the total capital. In the above example, the bank loan is 72.5%, retained earnings 22.3%, capital stock 5.2% for a total of 100%. Monitor your companys capital structure over time. Debt tends to be the most expensive source of capital and, over time, you will determine the most effective blend of debt versus equity financing for your particular situation. Calculating your actual capital structure will allow you to track how closely you are following your ideal capital structure. Factors Affecting Capital Structure The factors that affect the decisions taken regarding capital structure can be divided into three major types: Internal Factors External Factors General Factors INTERNAL FACTORS Cost of Capital The cost of capital is the cost of the companys funds. It consists of debts and equity. When a company raises funds for its operations there are certain costs involved. When decisions regarding the capital structure are taken, managers ensure that the earnings on the capital are more than this cost of capital. In general, the cost of borrowing capital is less than the cost of equity capital. This is because the interest rate on loans and borrowings is less than the dividend rates and also the dividends are a function of the companys profits and not expenditure. Risk Factor When decisions regarding capital structure are to be taken, the risk factors considerations are an important issue. If company raises its funds through debts, the risks involved are of two types: The company has to repay the lenders in a fixed time period and at a fixed rate, whether or not the company makes profit or goes into loss. The borrowed capital is secured capital. Hence, if the company fails to make the payments, the lenders can take possession of the companys assets. If the company goes for funds through equity capital there are minimum risks. As the dividends are an appropriation of the companys profits, if it does not make any profit, it is not obliged to make the payments. In contrast to debt capital, here the company is not expected to repay its equity capital. And also the equity capital is not secured. Control Factor When additional funds are to be raised, the control factors are very essential in deciding the capital structure of the company. When a company decides to issue further equity shares the control of the company may be at stake. Hence, it may not be acceptable to its shareholders and owners. This factor is not vital in case of debt financing, except when financing institutions stipulate the appointment of nominee directors in the Board of Directors of the company. Objects of Capital Structure Planning They are- Maximize profit of the owners Issue transferable securities Issue further securities in a way that does not dilute the holdings of the present owners EXTERNAL FACTORS General Economic Conditions: If the economy is in the state of depression, equity funding is considered as it involves less risk. While, if the economy is booming and the interest rates are forecasted to fall, debt funding is given preference. Interest Rate Levels: If the interest rates are high in the capital market, equity funding is preferred until the interest rate levels fall down. Policy of Lending Institutions: If the terms and policies of the financing institutions are rigid and harsh, debt financing should be ignored and equity financing should be tapped. Taxation Policy: The government has taxation policies which include corporate taxes as well as individual taxes. The government includes individual taxes on both borrowings as well as dividends. Also income tax deductions are offered on interests paid on borrowings. All these factors have to be considered while planning capital structure. Statutory Risks: While planning Capital Structure, the statutory risks given by the Government and other statutes are to be considered. GENERAL FACTORS Constitution of the company: If the company is private limited, the control factors are essential while if the company is public limited, the cost factors are essential. Characteristics of the company: Companies which are small and in the early stage have weak credit standings and bargaining capacity, hence they have to rely on equity financing. While big companies have strong credit standings and they can source their funds from borrowings with acceptable interest rates. Stability of earnings: The companies which have stable earnings and the risks involved are less, go for debt funding as they can handle the high risk factors. While companies whose earnings are forecasted to be fluctuating, usually go for less risky equity funding. Attitude of the Management: For a company with conservative management, the control factor is more important, while a company with a liberal management considers the cost factors to be more important. Approaches to Capital Structure Net Operating Income Approach Traditional Approach Net Income Approach Modigliani Miller Approach Net Operating Income Approach David Durand proposed the net income approach to capital structure. This approach looks at the consequence of alterations in capital structure in terms of net operating income. Under this approach, on the basis of net operating income, the overall value of the firm is measured. Therefore this approach is identified as net operating income approach. The NOI approach entails that: Largely the value of the firm does not depend on the degree of leverage in capital structure and hence whatever may be the change in capital structure the overall value of the firm is not affected. In the same way, the overall cost of capital is not affected by any change in the degree of leverage in capital structure. The overall cost of capital is independent of leverage. Under the net income approach, the overall cost of capital is unaffected and remains constant irrespective of the change in the ratio of debts to equity capital when the cost of debt is less than that of equity capital whereas it is assumed the overall cost of capital must decrease with the increase in debts. How is this assumption justified? With the increase in the amount of debts the degree of risk of business increases. As a result the rate of equity over investment in equity shares thus on one hand the WACC decreases with the increase in the amount of debts; on the other hand cost of equity capital increases to the same tune. Therefore the benefit of leverage is mopped away and the overall cost of capital remains at the same level. In other words there are two parts of the cost of capital. Interest charges on debentures. The increase in the rate of equity capitalization resulting from the increase in risk of business due to higher level of debts. OPTIMUM CAPITAL STRUCTURE This approach suggests that whatever the degree of indebtedness of the company, market value remains constant. Despite the change in the ratio of debt to capital in the market value of its equity shares remains constant. This means that there is no optimal capital structure. Each capital structure is optimal in approach of net operating income The market value of the firm is determined as follows:   The value of equity can be determined by the following equation and   The Net Operating Income Approach is based on the following assumptions: Example: ABC Ltd., is expecting an earnings before interest tax of Rs.1,80,00,000 and belongs to risk class of 10%. You are required to find out the value of firm % cost of equity capital if it employs 8% debt to the extent of 20%, 35% or 50% of the total financial requirement of Rs. 90000000. Solution Statement showing value of firm and cost of equity capital   20% Debt 35% Debt 50% Debt Earnings before interest tax EBIT ($) 18000000 18000000 18000000 Overall cost of capital 10% 10% 10% Value of firm (V) = EBIT Cost of Capital{EBIT/Cost of Capital} 180000000 180000000 180000000 Value of 8% debt (D) 18000000 (20% ÃÆ'- 90000000) 31500000 (35% ÃÆ'- 90000000) 45000000 (50% ÃÆ'- 90000000) Value of equity (V D) 162000000 148500000 135000000 Net profit (EBIT Interest) 16560000 (18000000 1440000) 15480000 (18000000 2520000) 14400000 (18000000 3600000) (Cost of equity (Kc) 10.22% 10.42% 10.66% (Net profit/value of equity) ÃÆ'- 100 (16560000/ 162000000) ( 15480000/ 148500000) ( 14400000/ 135000000) It is apparent from the above computation that the overall cost of capital value of firm; re-constant at different levels of debt i.e., at 20%, 35% and 50%. The benefit of debt content is offset by increase in the cost of equity. The overall cost of capital (k0) remains constant and can be verified as follows: Overall Cost of Capital k0 = kd   (D/D+S) + Ke   (S/D+S) 20% Debt K0 =   $4,00,000/$40,00,000   ÃÆ'-8% + $36,00,000/$40,00,000 X   10.22% = 0.008 + 0.092 = 0.10 or 10% 35% Debt K0 = $7,00,000/$40,00,000   ÃÆ'-8% + $33,00,000/$40,00,000 X   10.42% = 0.014 + 0.0859 = 0.0999 Or 10% 50% Debt K0 = $10,00,000/$40,00,000   ÃÆ'- 8% + $30,00,000/$40,00,000 X   10.66% = 0.02 + 0.07995 = 0.0995 or 10% Traditional Approach Traditional approach is a  middle-way approach between net operating income approach the net income approach. According to this approach: (1) A best  capital structure  does exist. (2) Market value of the firm can be increased and average cost of capital can be reduced through a prudent manipulation of leverage. (3) The cost of debt capital increases if debts are increases beyond a definite limit. This is because the greater the risk  of business  the higher the  rate of interest  the creditors would ask for. The rate of equity capitalization will also increase with it. Thus there remains no benefit of leverage when debts are increased beyond a certain limit. The cost of capital also goes up. Traditional Approach Thus at a definite level of mixture of debts to equity capital, average cost of capital also increases. The  capital structure  is optimum at this level of the mix of debts to equity capital. The effect of change in  capital structure  on the overall cost of capital can be divided into three stages as follows; First stage In the first stage the overall cost of capital falls and the value of the firm increases with the increase in leverage. This leverage has beneficial effect as debts as debts are less expensive. The cost of equity remains constant or increases negligibly. The proportion of risk is less in such a firm. Second stage A stage is reached when increase in leverage has no effect on the value or the cost of capital, of the firm. Neither the cost of capital falls nor the value of the firm rises. This is because the increase in the cost of equity due to the assed financial risk offsets the advantage of low cost debt. This is the stage wherein the value of the firm is maximum and cost of capital minimum. Third stage Beyond a definite limit of leverage the cost of capital increases with leverage and the value of the firm decreases with leverage. This is because with the increase in debts investors begin to realize the degree of financial risk and hence they desire to earn a higher rate of return on equity shares. The resultant increase in equity capitalization rate will more than offset the advantage of low-cost debt. It follows that the cost of capital is a function of the degree of leverage. Hence, an optimum  capital structure  can be achieved by establishing an appropriate degree of leverage in  capital structure. Net Income Approach This approach states that, the cost of debt and the cost of equity do not change with a change in the leverage ratio(when D/E changes), due to which it is observed that there is a weakening in the cost of capital as the leverage increases. The cost of capitalcan be calculated by the use Net income approach; weighted average of cost of capitalcan be explained by the following equation; http://lh6.ggpht.com/cemismailsezer/R4_ZkNJ-ThI/AAAAAAAAADY/RZYaGVynnUw/image%5B5%5D where: Ko: average cost of capital Kd: cost of debt Ke: cost of equity B: market value of debt S: market value of equity As we know that cost of debt is less than cost of equity (Kd http://lh6.ggpht.com/cemismailsezer/R4_ZlNJ-TjI/AAAAAAAAADo/de5aDk2tbUo/image%5B8%5D The Net Income Approach assembles the investment structure of the firm which has a major influence on the value of the firm. Therefore, the use of control will change both the worth of the organisation cost of capital. Net Income is exploited in approaching the market value that firm possesses. In this analysis Ka decreases when the D/E ratio increases as the proportion of debt, cheaper source of finance, increase in the capital structure vice versa. Assumptions of net income approach the perception of risk is not altered by the use of liability for the investors; as a result, the equity capitalisation rate i.e. ke, and the debt capitalisation rate kd, remain constant with changes in leverage The debt capitalization rate is less than the equity capitalization rate The corporate income taxes are not considered. Numerical example: Assume that a firm has an expected annual net operating income of Rs.2, 00, 000, an equity rate, ke, of 10% and Rs. 10, 00,000 of 6% debt. The value of the firm according to NET INCOME approach: Net Operating Income NOI 2, 00,000 Total cost of debt Interest= KdD, (10, 00,000 x .06) 60,000 Net Income Available to shareholders, NOI I 1, 40,000 Therefore: Market Value of Equity (Rs. 140,000/.10) 14, 00,000 Market value of debt D (Rs. 60,000/.06) 10, 00,000 Total 24, 00,000 Note: The cost of equity and debt are respectively 10% and 6% and are assumed to be constant under the Net Income Approach Ko = Kd (D/V) + Ke (S/V) = 0.06 (10, 00,000/24, 00,000) + 0.10 (14, 00,000/24, 00,000) = 0.025 + 0.0583 = 0.0833 or 8.33% Modigliani Miller (MM) Approach Assumptions of the MM Approach Capital market is perfect. It is so when: Information is freely available Problem of asymmetric information does not exist Transaction cost is nil There is no bankruptcy cost Securities are fully divisible 100% payout ratio Investors and managers are rational Managers act in interest of shareholders Combination of risk and return is rationally chosen Expectations are homogenous Equivalent risk class No taxes Investors can borrow in personal A/C at same terms of firm. Proposition I Value of the form is equal to the expected operating income divided by discount rate appropriate to its risk class. It is independent of capital structure i.e. where, V = Market Value of the Firm D = Market Value of the debt E = Market value of the equity O = Expected Operating Income r = Discount rate applicable to risk class to which firm belongs Proposition I is almost similar to the Net Operating Income Approach. MM used arbitrage argument to prove this approach. MM argues that identical assets must sell for same price, irrespective of how they are financed. Arbitrage Process If the price of a product is unequal in two markets, traders buy it in the market where price is low and sell it in the market where price is high. This phenomenon is known as price differential or arbitrage. As a result of this process of arbitrage, price tends to decline in the high-priced market and price tends to rise in the low-priced market unit the differential is totally removed. Modigliani and Miller explain their approach in terms of the same process of arbitrage. They hold that two firms, identical in all respects except leverage cannot have different market value. If two identical firms have different market values, arbitrage will take place until there is no difference in the market values of the two firms. Example: Let us suppose that there are two firms, P and Q belonging to the same group of homogenous risk. Firm P is unlevered as its capital structure consists of equity capital only Firm Q is levered as its capital structure includes 10% debentures of Rs.10,00,000 According to traditional approach, the market value of firm Q would be higher than that of firm P. But according to M-M approach, this situation cannot persist for long. The market value of the equity share of firm Q is high but investment in it is more risky while the market value of the equity share of firm P is low but investment in it is safe. Hence investors will sell out equity shares of firm Q and purchase equity shares of firm P. Consequently the market value of the equity shares of firm Q while fall, while the market value of the equity shares of firm P will rise. Through this process of arbitrage therefore, the market values of the firms P and Q will be equalized. This is true for all firms belonging to the same group. In equilibrium situation, the average cost of capital will be same for all firms in the group. The opposite will happen if the market value of the firm P is higher than that of the firm Q. In this case investors will sell equity shares of P and buy those of Q. Consequently market values of these two firms will be equalised. Proposition II MM Proposition II states that the value of the firm depends on three things: Required  rate  of return on the firms assets (ra) Cost of debt of the firm (rd) Debt/Equity ratio of the firm (D/E) An increase in financial leverage increases expected Earnings per Share (EPS) but not share prices. Proposition II states that an expected rate of return of shareholders increases with financial leverage. Expected ROE is equal to expected rate of return on assets plus premium. The formula for re is: re = ra + (ra-rd)x(D/E) Implications of Proposition II- rd is independent of D/E and hence re increases with D/E. The debt crosses an optimal level, the risk of default increases and expected return on debt rd increases. Limitations of MM Approach- Leverage irrelevance theory of MM is valid if perfect market assumption is correct but actually it is not so. Firms are able to pay taxes and investors also pay taxes. Bankruptcy cost can be very high. Managers have their own preference of a type of finance. Managers are better informed than shareholders i.e. asymmetry of information exists. Personal leverage is not possible to be substitute of corporate leverage. 100% payout ratio is not possible normally. Analysis of Companies TVS Motors: TVS Motors hold one of the top ten two wheeler manufacturer and number three positions in Indian market, with turnover of $1 billion in 2008-2009 and is the flagship division of TVS group which is of worth $4 billion. TVS Motors manufactures wide range of two wheelers ranging from two wheelers for domestic use to two wheelers for racing. Manufacturing units are located at Housar and Mysore Himachal Pradesh Indonesia Has production capacity of 2.5 million units per year with strength in design and development TVS has recently launched 7 new products. Till now TVS has sold more than 15 million two wheelers and has employed 40000. TVS motor is the only Indian company to win Deming award for quality control in 2002. TVS Network spans over 48 countries. Particulars 2007-08 (in crores) 2008-09(in crores) OPERATING INCOME 45.31 121.08 INTEREST ON DEBT( I) 11.47 64.61 EQUITY EARNING 33.84 56.47 COST OF EQUITY (Ke) 4.13% 4.21% MARKET VALUE OF EQUITY 819.37 1341.33 COST OF DEBT (Kd) 1.72% 7.13% MARKET VALUE OF DEBT 666.34 905.98 VALUE OF FIRM 1485.71 2247.31 COST OF CAPITAL (Ko) 3.05% 5.39% WACC Calculation: For 2007-08 WACC= weke + wdkd We = E/(D+E) Wd = D/(D+E) = 1/(1.84) x 0.413 + 0.84/(1.84) x 0.172 = 0.2284 +0.078 = 3.051% For 2008-2009 WACC= weke + wdkd We = E/(D+E) Wd = D/(D+E) = 1/(2.11) x 4.21 + 1.11/(2.11) x 7.13 =1.995 +3.750 = 5.75% Hero Honda: Hero Honda Motors Limited is largest and most successful two wheeler manufacturers in India and it is India based. Hero Honda was a joint venture between Hero group and Honda of Japan till 2010 when Honda sold its entire stake to Hero. In 2008-09 Hero Honda sold 3.7 million bikes with 12% growth rate and captured 57% of Indian markets share. Hero Honda Splendor is worlds largest selling motorcycle sold more than 1 million units in 2001-03.C:UsersAAdityaDesktopindex.jpg In December 2010, the Board of Directors of the Hero Honda Group have decided to terminate the joint venture between Hero Group of India and Honda of Japan in a phased manner. The Hero Group of India would buy out the 26% stake of the Honda in JV Hero Honda. Under the joint venture Hero Group could not sell into international markets and the termination would mean that Hero Group can exploit global opportunities now. Since last 25 years the Hero Group relied on their Japanese partner Honda for R D for new bike models. So there are concerns that the Hero Group might not be able to sustain the performance of the Joint Venture alone. WACC calculation: For 2007-08 WACC= weke + wdkd We = E/(D+E) Wd = D/(D+E) = 1/(1.07)x34.73%+0.07/(1.07) x 8.33% = 33% For 2008-09 WACC= weke + wdkd We = E/(D+E) Wd = D/(D+E) = 1/(1.04)x32.41%+1.04/(1.04)x10.20% = 31.55% Particulars 2007-08 (in crores) 2008-09 (in crores) OPERATING INCOME 1201.96 1367.77 INTEREST ON DEBT( I) 13.76 13.47 EQUITY EARNING 1188.22 1354.3 COST OF EQUITY (Ke) 34.73% 32.41% MARKET VALUE OF EQUITY 3421.25 4178.65 COST OF DEBT (Kd) 8.33% 10.20% MARKET VALUE OF DEBT 165.18 132.05 VALUE OF F

Feedback to my classmate Essay

1.The four points about giving feedback that I plan to utilize while providing my classmate feedback on their skills check are as follows: Equality – My classmate is a valuable and worthwhile human being. Communication is generally more effective when feeling of equality exists. We are both equal in every way as we are both taking the Health Care Assistant program and both have home lives. Supportiveness – There has to be an atmosphere of trust and mutual support for effective communication between myself and my classmate Positiveness – To transmit positive feeling to other people. My classmate needs to feel liked and accepted by me and then they will be more apt to become involved in communication with me. Empathy – To try and feel as my classmate being assessed on their skills check would feel and to try and understand what they are experiencing. 2. Of the five components of caring communication the two that I utilized the most while providing constructive feedback to my classmate with regards to their skills check were supportiveness and equality. I utilized the two components as follows: Supportiveness – I felt I created an atmosphere of trust and mutual support with my classmate by reiterating that my classmate had requested me to provide constructive feedback on three components of their skills check and that I would only give feedback on the three components identified. When my classmate had completed the skills check, I proceeded to give my classmate constructive positive feedback on the three components identified. I addressed each component specifically and stated how my classmate had supported the component and where I felt the component had not been supported. I identified strengths and areas for improvement. Even if my classmate had successfully completed the identified component, I verbally identified the component and what behaviour my classmate performed to support the component. I explained descriptively on how my classmate’s actives matched their intention. At this point the instructor that was performing my classmates’ skills check asked if there were any other items that I would like to comment on. Before I proceeded, I took into consideration the reason for this exercise and considered what my classmate required and what had been requested of me. I questioned my classmate if they would like any additional feedback and  stated that I had not written any other comments on the feedback skills check form. My classmate indicated that they did want additional feedback. I provided by classmate with additional comments on 2 additional behaviours that had room for improvement. I asked my classmate if I should write the additional comments on the feedback formfor skills check, which was agreed on. Equality – Once my classmate had completed the skills check and before I proceeded to give any constructive feedback on the three components of the skills check that my classmate had identified for feedback, I thanked my classmate for asking me to give feedback and stated that this was the first time that I had given constructive feedback. I smiled and laughed a little stated that I was also nervous just as they were. I reiterated that we are peers and classmates and that giving constructive feedback can be difficult and that I hoped any feedback I gave was helpful to my classmate. 3. While I received feedback on my skills check, I took into consideration that constructive feedback is to give my classmate and myself the opportunity to learn. Constructive feedback is not about me or us, but about the behaviours that we are performing. I felt elated when I received positive feedback, so in turn receiving constructive feedback on behaviour where I needed improvement was much more positive. I felt receiving feedback that was descriptive and that identified strength and areas for improvement very informative and a creative learning tool. I found I was listening closely was able to rephrase the feedback that I had received. I felt very positive about the whole skills check feedback and was able to understand that it was â€Å"constructive feedback† and not criticism which in turn allowed me to thank all that were involved with a smile. 4.Upon reflection of giving and receiving feedback, I feel that it was a very positive experience. When I received the feedback from my classmate on my skills check, my classmate proceeded to give me additional comments. I was not prepared for this, nor did I expect this. I feel I may have projected this to my classmate by way of body language. I knew and I feel that I regrouped quickly and I did listen to what my classmate had to say. I understood that this was a learning tool for me, and that my classmate was  trying to help me with my behaviours that needed improvement and was not being critical of me. When I gave feedback I am not sure that I finished with a positive statement to my classmate. I now realize how important this is and I feel somewhat ashamed that I may have missed this step. Receiving any type of feedback can be daunting whether it is positive or meant to assist with areas that require improvement.

Book Review “Prejudice and Pride” by Krishna Kumar Essay

The piece of work which is being reviewed is authored by an eminent educationist Krishna Kumar. The title of the book is Prejudice and Pride which has been published by Penguin Books India Limited,Viking in the year 2001. The subtitle of the book ‘School Histories of the Freedom Struggle in India and Pakistan’ reflects major concern as well as the prime area of investigation in this book by the author. It is a comparative study between the school history textbooks of the neighboring countries India and Pakistan. The impetus to take up this path of exploration by Krishna Kumar can also be seen somewhere as his response to the several decades of hostility between India and Pakistan. The writer takes this despair further and observes the general gloom prevailing in the education system of both the countries. However, according to him this becomes clearer by looking on the situation of children’s education in both India and Pakistan, which can be seen as a recipient o f a certain degree of despondency giving it a low priority. Moving on to history teaching more specifically we can see that this problem aggravates as the focus of teaching history only arises political concern without translating it as a concern for the children who are at the receiving end. Therefore with the study of school history textbooks of both the countries Krishna Kumar seems to be tracing different trajectories of ideological presentation of a shared past. This can be seen as also adding up to the hostile attitude of both the countries towards each other. This study is thus based on a comparative study of the school history textbooks of India and Pakistan. Out of this comparison the author brings forth a number of concepts and ideas where both countries who share a common historical background have different takes on its account and staging. However the basic question which the author enquires into is the perception of the past that Indian and Pakistani children encounter at school. Following this research question the major objectives of the author while writing this book can be stated as follows. The one is to examine the rival ideologies of nationalism into which schools attempt to socialize the young. While another is to probe the politics of history writing as a means to understand the contribution that schooling makes to the Indo-Pak conflict. However the author is focusing only the master narratives available in the textbooks for the period of freedom struggle. The relevance of taking textbooks as the centre of observation to achieve these objectives  can be seen in the very nature of textbooks. This can be further explained as interrelation between economy, state and culture can be better understood through the textbooks. They are the clearest embodiments of these relations. Textbooks are simultaneously economic goods (they are often sold to students, parents, and schools), political objects (they are subject to state control and regulation and hence a re the result of political and ideological tensions and compromises), and cultural representations (what is included and not included, and how such knowledge is organized, is a form of cultural politics). Thus the textbooks can be seen as a real epitome of a nation’s ideological, cultural and social background. The central theme of this book thus revolves around the idea that history textbooks are also a recipient of certain kind of representation which is in accordance with the national ideology. This is further elaborated by the author during the course of study where he finds that how the knowledge about the past is selected, reconstructed and represented in the textbooks. This he assumes that holds a great significance for this type of study which intends to probe how a common past acquires distinct versions under two systems of education. He further adds to this argument that why history has taken such a symbolic form. He says that this is because education in India and Pakistan is conceived in both learning and committing to memory, sets of facts that encapsulate, rather than explicate and interpret meaning. This is evident in the examination system where a student is required to learn certain things and just reflect the same in the paper. This he makes clear by using a concept of memory posters which makes a child to remember the reconstructed past without giving much space for reasoned analysis. Thus the history textbook are also conceived as a storehouse of knowledge about the past, about the ‘great men’ of those times and their vision, which children have to learn, imbibe, as it were-never mind that this vision was seldom unified or synchronic in the manner that textbooks would have us believe. Therefore through this the author portrays how the formulation of history textbooks on these premises serves the abovementioned idea that they are primarily composed of nationalistic ideology. The central idea which is propagated through this book is explained very explicitly through various explanations and concepts. The book is divided into three parts excluding the introduction. The part one primarily consists of three chapters where he  focuses on the basic ideas of how the children are made familiar to past, the popular perception about the shared past in both the countries and how a certain ideology is propagated through textbooks. The chapter one possess the title Children and the Past. This chapter examines the psycho-social characteristics of children’s response to the past. Here he talks about the tacit knowledge which is imparted in a child during the course of early socialization in his home. This type of knowledge does not provide any room for rational enquiry. This further leads a child to build up a notion of self as a member of a society and also at the same time to build up a notion of ‘other’ for whom they have a fixed image whose me mory stocks are different to theirs. Thus we can see how the seed of otherness for the one having different historical picture is sowed in the primary socialization of a child. Later the child enters the realm of education in school. Here he explains the need to understand history as a subject with a capacity to enter into a time frame and perspective without being submerged in it. But to attain this he says becomes a hard task as the teaching of history faces challenges against the knowledge of past by children in the form of beliefs and attitude. His next chapter then comes toward the general conceptions of different popular perceptions of past in both India and Pakistan. The idea of freedom and partition is explained very differently in both the countries. The use of the images of Jinnah and Gandhi in Pakistan and India respectively can be seen as a means to portray the image of a reminder of the unfinished business of the freedom movement in both the countries. The chapter after this tends to focus on the relationship between ideology and textbooks. He uses the concept of ‘prescribed’ texts to define the nature of books used in the post colonial countries where teaching of history is highly related to larger socio-political milieu. He uses the concept given by Ayesha Jalal to reflect upon the argument that in both India and Pakistan textbooks represent the grammar of ‘national ideology’. Moving towards the second part of the book which is coined as Rival Histories has six chapters in it. The part initiates with a chapter on how freedom struggle is presented as a narrative in both the countries. The effort to consolidate the nation state is very much explicit in the history teaching. He uses the idea from Anderson that how ‘deep shaping of imagination’ among children is required to have faith in national community. This is the  chapter where he introduces the very important concepts which were used to compare the master narratives of both the countries. The first refers to how history textbooks in both countries choose or do not choose to represent events. Facts are chosen to illustrate the distinctive turn of the narrative that each nation favours at crucial moments in the freedom plot. The second concept is that of pacing. Pacing or the rhythm to which the historical tale is set in the textbooks of both countries is problematic. The tale in both instances is a fast paced one and children are expected to read on and on continuously. They actually slip upon several decades of historical account and focus mainly upon the great personalities and their constructed role. The third concept which he mentions is about the way they end the history writing. The history ends on a different note for both the countries master narratives. It is precisely due to the way they perceive the time of partition. For India the moment of freedom was a time of partial happiness and a sense of loss are reflected in the narration of partition. However for Pakistan it appears as a great triumph to be finally freed from the clutches of highly dominating Hindu country. It does not end only on this note but it also expresses how entering into the new era of self rule of will be exciting and what should be the goals to be attained. This is evident in the Pakistani books as an extension of historical account is visible there in comparison to India where the post partition problems and the activities related to it are also discussed. On the basis of these measures we can see how Krishna Kumar in further chapters investigates into the history from 1857 to 1947. In these chapters he proceeds with a very keen analysis of comparisons of the accounts on all events and their different interpretation. Moreover he also points that how some episodes are omitted and how some are given over emphasis. He takes up the accounts of 1857 and brings up the differences between the presentations. The major differences can be explained in context of portraying the causes of uprising. In India though the writers desist from using the term national but they do say that revolt made the Indian people more politically conscious than before. But what politics might mean in a mid-nineteenth century context is not explained. While in Pakistan a completely different picture is projected where emphasis is mostly on the role of Muslims. Moreover it goes beyond and this is seen as the dilemmas in history writing in Pakistan. This is because  the narrative should not only describe how colonial rule ended but also explain how Pakistan came into being. Thus to justify the happening of Pakistan it must also have a long national movement seeds of which can be seen in the revolt of 1857.Thus Krishna Kumar says that with the help of highly compressed story which does not allow the listener to ask for details therefore the aim of Pakistani textbooks can be seen in the indoctrination rather than explanation. In later chapters writer presents the difference in periodization. Pakistani textbooks put an emphasis on the period from 1907 to 1927 by contrast Indian textbooks generally select the year 1919 as marker of historical times which shaped the course of freedom struggle until the mid 1930s. He further brings above the motive behind focusing on different years as it makes way for the portrayal of Gandhi and Jinnah as heroes and their actions as the ultimate deeds. One more thing he points out is the vise-versa attempt on the portraying Gandhi as a Hindu leader and Jinnah as a Muslim leader in Pakistan and India respectively. Similarly in the book we can see several events which have been a shared experience for both India and Pakistan has been selected and depicted in very different manner. Both the nations form a different take on all the instances and personality. By using the three concepts which has been mentioned earlier i.e. politics of mention, pacing and concept of ending he thus brings forth different angles of the history textbooks in India and Pakistan. He points to how each of these time segments is recorded in the textbooks and reads both omissions and inclusions as symptomatic of larger national anxieties. Importantly, the choice or omission of an event che ats the child of an opportunity to know a situation in all its complexity. In fact, this is a recurring theme in the book the manner in which history textbooks conceives of and interpellates the intended child reader. Thus children are not made aware of the complex arguments in regard to certain historical events. Krishna Kumar ends this book on a very interesting note where he asks children from both the countries to write on the topic ‘The division of India and Pakistan’. He thus brings above a varying picture of opinions. In India he sees a dominant picture of Pakistan coming over where the children perceive it as a synonym for Muslims. This is evident in the idea of a Hindu India with a stereotype of Muslims which is based on hatred and distrust as writer points out. Moving to ideas of the Pakistani students  we can see whole range of historical periods mentioned where the aim is to show how Muslims suffered at the hands of Hindus and thus partition actually gave them the space of first class citizens. In both sides we can find a common bone of contention between India and Pakistan is Kashmir. Thus in this exercise also there is a reflection of the ideas which are propagated through textbooks. In the last chapter he brings forth the relationship between history and peace. The major argument which he traces in the whole book is that both India and Pakistan differ on the grounds of depicting freedom movement. In India which is defined in terms of tensions between communal and secular forces it actually reflects India’s national identity which also makes Pakistan come under suspicion. On the other hand the freedom movement in Pakistan attains the picture of an age long movement for the freedom of Muslims from a Hindu country. This is evident in the idea that an Indian historian focuses on as to why the partition took place whereas in Pakistan the new birth is celebrated by focusing on how the partition took place. This can be precisely the answer to the question he posed to enquire in the starting of the book. However in the different parts of book he tends to achieve the objectives of his study. The comparative study of history textbooks from both the countries thus helped him to probe into the reflection of the conflict between India and Pakistan in the history textbooks through which the ideologies of young minds are framed . This thus preserves the hostility between the two countries. However he ends on a very positive note where he sees role of education as vital one which can lead to overcome the unsettling effects of their interlocked frames of perceptions. This books thus in comparison to his earlier works can be on one hand as an extension of his focus on school and curriculum and their flaws. While in his book ‘What is worth teaching’ he focuses on fractured, contradictory and divisive nature of curriculum and school knowledge in our country and its insidious disempowerment of the teacher. His very important work the Political Agenda of Education also revolves around the concept of political ideologies involved in the education system. However this book in comparison to his other works comes up with a very different objective and method of investigation. While looking on for other books from other writers which have ventured into similar type of analysis cannot be found yet. Moving from the achievements of the writer we also come across certain gaps  visible in the work. It is known that he is building up a picture of investigation around the period of freedom struggle but he confines himself to a very limited events and personalities of that period. His projection that part of history comes up as if it is only in relevance to Pakistan. He also tends to omit the other popular beliefs of the time which was visible in the form of questions raised by Dalit leaders and also the division of India on the basis of language leading to a discontent in South India Thus the book can be seen as a very different creation with experiment of a new type. The central idea that national ideologies shape the history writing of school textbooks is very cogently presented in the books. The role of history teaching and its impact on the socialisation of the young minds and leading to their formulation of the notion of ‘other’ is also very much clear in this book. But this book also suffers loops and holes in course of omitting other aspects of freedom struggle like low caste and tribal resistances. Book Review Prejudice and Pride: School Histories of the Freedom Struggle in India and Pakitan

Essay about a Dream

Essay about a Dream What does a dream mean if taken on a scale of people’s life? Apparently, it means a lot; because people are used to hold on to their dreams, to protect them from the infringements of the other people, to strongly believe that without dreams their life will be ordinary and senseless. Those people, who do not have any cherished dreams, even though they will never be able to make it come true, seem to be deprived of something special, just like those people, who lack a sense of humor. The thing is, our ability to dream plays an important role in our life: it helps us, gives moral support in an hour of sadness, helps to believe in ourselves and to go through the difficulties and offences. As for me, I’ve always dreamt about the voyage around the world and many times before going to bed I have imagined myself on a huge cruise vessel full of large luxurious boutiques, night clubs and other entertainments. Just imagine marvelous sunset and tranquil ocean; you are sitting in the Jacuzzi with a glass of champagne and admiring the scenery! Although I realize that I am still far from my dream, I’m working hard to make it come true! Every person has the right to dream, though these dreams may be absolutely illusive, because there is nothing plain and simple in this world and the life will be bright, multi-colored and vivid only when we let us believe in it and see how changeable and manifold it may be.