U.s. Energy Boom May Signal A New Export Era - 874 Words

The article used was : U.S. energy boom may signal a new export era March 22, 2014|By Ralph Vartabedian http://articles.latimes.com/2014/mar/22/nation/la-na-energy-exports-20140323 The United States has proved based on previous statistics in the past that they are dependent on imports and exports to and from different counties. The US has always been dependent on getting gas and oil from other countries in the world however, construction started in Louisiana on an industrial facility that will be able to liquefy natural gas and enable the US to export it around the globe which would allow the U.S. to be a first time exporter of natural gas and oil. If we look back 5 or even 10 years ago the idea of the U.S. exporting oil and gas would be unimaginable and in some cases illegal because they U.S. was dealing with descending sale of domestically made supplies and at the same time were being very unknowingly generous to many foreign producers. The four main key concepts this article co vers is ; production cost, Unemployment, economic growth, and monopoly. Construction of this $12- billion project not only will benefit the U.S. economy’s growth in the future but will also enable many individuals who are currently unemployed to obtain jobs. This project has helped 3,000 individuals to get work. The U.S. has also predicted that they development and success of this facility will enable other gas plants to sprout up and start they production of liquid natural gas, this wouldShow MoreRelatedThe Iranian Game : Teherans Moves On The Global Oil Markets1603 Words   |  7 Pagespercent increase in the Iranian vehicle production in 2015. European and American players are exploring a re-entry in the Iranian market, should a permanent agreement on the nuclear programme be reached, BMI said. INFOBOX:NEGOTIATIONS AND JPA This boom is due to the Joint Plan of Action, an initial agreement over the Islamic country’s nuclear programme reached by Iran and the so-called P5+1, namely the United States, Russia, China, France, Germany and the United Kingdom, on November 24, 2013. TeheranRead MoreRise and Fall of Lehman Brothers11214 Words   |  45 Pagesaccounts. The brothers traded the cotton for cash or merchandise, becoming brokers for buyers and sellers of the crop. In 1858, they opened an office in New York, which was the commodity trading center of the country. The Civil War disrupted the Lehmans business. When hostilities ended, the brothers moved north and concentrated their operations in New York, where they helped establish the Cotton Exchange. The post-war period witnessed the rapid growth of railroads, sparking the transformation of theRead MorePre-Columbian Period9302 Words   |  38 PagesAmericans in the United States and Alaskan Native peoples, as well as all indigenous peoples of the Americas. Many indigenous peoples were semi-nomadic tribes of hunter-gatherers; others were sedentary and agricultural civilizations. Many formed new tribes or confederations in response to European colonization. Well-known groups included the Huron, Apache Tribe, Cherokee, Sioux, Delaware, Algonquin, Choctaw, Mohegan, Iroquois (which included the Mohawk nation, Oneida tribe, Seneca nation, CayugaRead MoreAmerican Popular Culture and Its Impact in a Globalized World8501 Words   |  35 Pageseven necessary to make correct use of the terminology in order to come to a thorough understanding and, finally, a critical evaluation of the problem to be discussed. Various nations have been complaining about a McDonaldization (yet another word for U.S. cultural power worldwide) of their domestic cultures. The present discussion tries to investigate whether American popular culture truly poses a threat to national and regional cul-tural traditions, values and tastes or whether Americas popular commoditi esRead MoreComparative Management6809 Words   |  28 Pagesguideline that can serve as a basis for effective action by mgt of enterprises. 4) Formulate policies for direct foreign investment by MNCs 5) To study cross cultural mgt. 6) To manage international technology transfer. 7) To seek new mgt frontier. 8) To gather experiences from emergency economy. 9) To focused the imargin issues in international management. Comparative management 2nd chapter 1) What is Environment 2) The environment is something you are veryRead MoreWhat Factors Do You Think Attributed to Suraj Bhais Success? Was He Merely in the Right Place at the Right Time’’, or Are There Characteristics About Him That Contribute to His Success?9099 Words   |  37 Pagesthan ever before. With rapid advancement in technology as well as Management Theory and Practice, the concept techniques of productivity have undergone a change over time, thereby creating a need for devising fresh approaches, coining new message and adopting a new idiom to spread the message to the stakeholders. There is an urgent need to redefine and re-structure the Productivity Movement in such a way that it becomes a self perpetuating process, more so, because the general environment earlier Read MoreWhat Factors Do You Think Attributed to Suraj Bhais Success? Was He Merely ``in the Right Place at the Right Time’’, or Are There Characteristics About Him That Contribute to His Success?9106 Words   |  37 Pagesthan ever before. With rapid advancement in technology as well as Management Theory and Practice, the concept techniques of productivity have undergone a change over time, thereby creating a need for devising fresh approaches, coining new message and adopting a new idiom to spread the message to the stakeholders. There is an urgent need to redefine and re-structure the Productivity Movement in such a way that it becomes a self perpetuating process, more so, because the general environment earlierRead MoreOne Significant Change That Has Occurred in the World Between 1900 and 2005. Explain the Impact This Change Has Made on Our Lives and Why It Is an Important Change.163893 Words   |  656 PagesAutotown, U.S.A. Van Gosse and Richard Moser, eds., The World the Sixties Made: Politics and Culture in Recent America Joanne Meyerowitz, ed., History and September 11th John McMillian and Paul Buhle, eds., The New Left Revisited David M. Scobey, Empire City: The Making and Meaning of the New York City Landscape Gerda Lerner, Fireweed: A Political Autobiography Allida M. Black, ed., Modern American Queer History Eric Sandweiss, St. Louis: The Evolution of an American Urban Landscape Sam WineburgRead MoreDubais Political and Economic Development: Essay38738 Words   |  155 PagesDEVELOPMENT: AN OASIS TN THE DESERT? by CHRISTOPHER DeNICOLA A thesis submitted in partial fulfillment of the requirements for the Degree of Bachelor of Arts with Honors in Political Science WILLIAMS COLLEGE Williamstown, Massachusetts MAY 10,2005 Table of Contents I Persian Gulf Development Literature Oil Curse Literature Arab and Islamic Factors Regional Ovemiew and Historical Background Dubais Development History I1 PI1 Explaining Dubai9sDevelopment Outcome WhyRead MoreInternational Management67196 Words   |  269 PagesMANAGEMENT: CULTURE, STRATEGY, AND BEHAVIOR, EIGHTH EDITION Published by McGraw-Hill, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY 10020. Copyright  © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Previous editions  © 2009, 2006, and 2003. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill Companies,

Essay on Ethnic Literature - 959 Words

American Literature Paper Randy Hale University of Phoenix ENG.301 American Ethic Literature Michael Cromwell December 24, 2012 American Ethic Literature Paper What makes American literature American? American literature is just that American literature. American literature is stories of people lives that are based on American standards. Early American standards where based around slavery and oppression but now they are based on freedoms like freedom of speech and press. America has been through many time periods that has shaped it into the wonderful nation that we have today. True American literature is about life in the United States. This paper will create an understanding about American ethnic literature. What is†¦show more content†¦Ethnic literature is piece of writing that is written by people from different cultures, languages, or religion. For example, Native American literature includes â€Å"memories of creation stories, the tragic wisdom of native ceremonies, trickster narratives, and the outcome of chance and other occurrences in the most diverse cultures in the world† (Vizenor, 1995, p. 1). People with the mix of Spanish, Native American, and African cultures have created Hispanic American literature (Kanellos, 1995). In my opinion, there are many reasons why ethnic literature should be studied. Reason One: When you read true literature writing from other religions, you can gain true understanding of what the religion is all about. For example I’m a member of The Church of Jesus Christ of Latter-Day Saints. The LDS or Mormon Church as known by many is a very misunderstood religion. A study of true ethnic literature in this case would eliminate any misunderstanding that people have about the LDS Church. Reason Two: There are certain cultures that we do not know anything about and when we read about them, we will be able to understand why they do certain things. I want to call this cultural understanding. We have all heard the saying, You cant judge a book by its cover. then we shouldnt judge a religion or a culture by the things they do until we understand why they do those things. How do ethnic writersShow MoreRelatedEthnic Literature : Ethnic American Literature1381 Words   |  6 Pagesto introduce and analyze the topic of Ethnic American Literature. Specifically it will discuss the meaning and definition of Ethnic American literature. Ethnic American literature is a rich and varied treasure of poetry, fiction, drama, and much more. Written by some of America s greatest authors, this ethnic legacy opens up a world of diversity to readers, but it also illustrates the struggles and prejudice that still exist in our country today. Ethnic authors use their own experiences to illustrateRead MoreEssay on Ethnic Literature1266 Words   |  6 PagesThe Power in a Name The term â€Å"ethnic† when in conjunction with the word â€Å"literature† in the academic discourse community of students, often brings out mixed feelings of excitement and dread. On the one hand, students understand that they will be getting away from the canonical American literature – which can equal boring in their eyes; on the other hand, students interpret the term â€Å"ethnic literature† to mean distinctive – which can equal confusing or ambiguous – and perhaps at times not relatableRead MoreAmerican Ethnic Literature Differs From American Literature1378 Words   |  6 PagesAmerican ethnic literature differs from American literature. The author’s background is considered to determine which category is fitting. American ethnic authors include immigrants who have arrived in the United States and become a citizen or first-generation Americans. 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EarlyRead MoreEssay on Why Read Literature?671 Words   |  3 Pages nbsp;nbsp;nbsp;nbsp;nbsp;Nothing teaches us better than literature to see, in ethnic and cultural differences, the richness of the human patrimony, and to prize those differences as manifestation humanity’s multi-faceted creativity. Reading good literature is an experience of pleasure, of course; but it is also an experience of learning what and how we are, on our human integrity and our human imperfection, with our actions, our dreams, and our ghosts, alone and in a relationship that linkRead MoreCritical Analysis Skills Developed Through Writing a Reflection Paper870 Words   |  4 Pagesfeelings down about what I had learned in a class that I had to read literature and then interpret those readings into journal entries addressed to my fellow students. This left me a little intimidated. So to start the ideas flowing, I went back to the beginning. 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It’s already possible to speak of a social group when two or more humans interact with each other and share similar characteristics. Think about women, immigrants, professions, ethnic minorities but also families, friends and church members. Only someone who lives as a recluse in complete isolation from society can be considered ‘non-member’. The importance of social groups is clearly present when you take a look at the mediaRead MoreReflecting on Literature and Community in The Lesson† by Toni Cade Bambara1101 Words   |  5 Pages Also, it is not uncommon for people to write about a fictional community that is based from their own community. As community affects how we write, writing can also affect the community. In other words, communities influence authors of literature and literature can also influence communities. Language is how we express ourselves. There are many different languages in our world. Within those languages there are different dialects. 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Test Bank Ch8 3616 Butler Free Essays

PART IV Managing the Risks of Multinational Operations Chapter 9 The Rationale for Hedging Currency Risk True/False 1. In a perfect financial market, financial contracts are zero-NPV investments. ANS: True. We will write a custom essay sample on Test Bank Ch8 3616 Butler or any similar topic only for you Order Now 2. If hedging currency risk is to add value to the stakeholders of the firm, then hedging must impact either expected future cash flows or the cost of capital or both. ANS: True. 3. If financial markets are informationally efficient, then corporate financial policy is irrelevant. ANS: False. Don’t confuse informational efficiency with a perfect market. Although the perfect market conditions ensure informational efficiency, informationally efficient markets can be imperfect. 4. Perfect financial markets are a necessary condition for corporate risk hedging to have value. ANS: False. Market imperfections are necessary conditions. 5. In perfect financial markets, corporate financial policy is irrelevant. ANS: True. 6. In a perfect financial market, the law of one price holds. ANS: True. 7. Equal access to perfect financial markets ensures that individual investors can replicate any financial action that the firm can take. ANS: True. 8. In perfect financial markets, corporate hedging policy has no value. ANS: True. 9. In perfect financial markets, corporate investment policy is irrelevant. ANS: False. Firm value depends entirely on the firm’s investments in a perfect financial market. 10. If corporate financial policy is to have value, then at least one of the perfect market assumptions cannot hold. ANS: True. 11. Real-world financial markets are perfect markets. ANS: False. Perfect markets are a theoretical ideal and not a practical reality. 12. Market imperfections are greater across national boundaries than within national boundaries. ANS: True. 13. In perfect financial markets, multinational corporations have an advantage over domestic firms in financing their investments. ANS: False. The law of one price holds in perfect financial markets. 14. Multinationals have a comparative advantage over domestic firms in exploiting cross-border differences in financial markets. ANS: True. 15. Progressive taxation is a system in which larger taxable incomes receive a higher tax rate. ANS: True. 16. Tax preference items are goods that are sold on a tax-free basis. ANS: False. Tax preference items are items such as tax loss carryforwards and carrybacks and investment tax credits that are used to shield corporate taxable income from taxes. 17. A call option is an option to buy an underlying asset at a predetermined price. ANS: True. 18. A call option is an option to â€Å"call in† or demand payment on a loan. ANS: False. A call option is an option to buy an underlying asset at a predetermined price. 19. Indirect financial distress costs are relatively unimportant for firms selling products for which quality and after-sale service are important. ANS: False. Reputation is easily eroded in these instances. 20. Managerial gamesmanship is least prevalent during financial distress. ANS: False. Gamesmanship is more prevalent during hard times. 21. Option values increase with an increase in the volatility of the underlying asset. ANS: True. 22. A decrease in the variability of firm value is good news for debt and bad news for the equity call option, other things held constant. ANS: True. 23. Corporate hedging of business risk unambiguously increases shareholder wealth when the firm is in financial distress. ANS: False. Because debtholders have first claim on corporate assets, corporate hedging of business risk helps debtholders first and may or may not help equityholders. 24. In the real world, corporate hedging policy can change expected future cash flows but is unlikely to reduce the cost of debt. ANS: False. Hedging policy can decrease the variability of firm value and can thus reduce the risk of debt and the required return charged by debtholders. 25. Direct costs of financial distress are far more important to corporate hedging decisions than are indirect costs. ANS: False. The indirect costs of financial distress influence the activities of firms not just in bankruptcy but prior to bankruptcy as well. 26. Underinvestment occurs when debtholders refuse to invest additional capital into the firm during financial distress. ANS: False. Underinvestment occurs when equity foregoes positive-NPV investments. 27. In financial distress, equity has an incentive to take on large risks in order to increase the value of the equity call option. ANS: True. 28. In Miller-Modigliani’s perfect world, the firm’s optimal investment criterion is â€Å"Accept all positive-NPV projects. ANS: True. 29. In practice, management’s objective is to maximize shareholder wealth. ANS: False. Managers act nominally as equity’s agents but, in actuality, in their own best interests. 30. Managers have little incentive to hedge company-specific risks. ANS: False. As undiversified stakeholders, managers are concerned with both systematic and unsystematic risk. 3 1. Managers have an incentive to hedge their unit’s transaction exposure to currency risk. ANS: True. 32. Hedging can increase firm value by reducing the costs of agency conflicts between managers and shareholders. ANS: True. 33. Exchange-traded options and futures contracts have a fixed cost per contract so that costs are proportional to the number of contracts traded. ANS: True. 34. The costs of hedging through operations are likely to be less burdensome for a large multinational corporation with diversified operations than for a small, less-diversified firm. ANS: True. Multiple Choice 1. The perfect market assumptions include each of the following except ____. a. equal access to market prices b. equal access to costless information c. frictionless markets d. rational investors e. table governments ANS: E 2. Frictionless financial markets could have which of the following? a. agency costs b. bid-ask spreads c. brokerage fees d. government intervention e. irrational investors ANS: E 3. Which risk management guidelines in a) through d) is not recommended by the Group of Thirty Global Derivatives Study Group? a. assess the credit risk arising from derivatives activities b. combine authority over trading and bookkeeping functions into a single department c. quantify market risk under adverse market conditions and perform stress tests d. alue derivatives positions at market e. all of the above are recommended ANS: B 4. Which of a) through d) is unlikely to result in a decision to hedge currency risk? a. bid-ask spreads on foreign exchange b. costs of financial distress c. differential taxes on income from different tax jurisdictions d. stakeholder game-playing e. all of the above are incentives to hedge ANS:A 5. Which of the following factors does not contribute to tax schedule convexity? a. Alternative Minimum Tax (AMT) rules in the United States b. progressive taxation c. sales taxes d. ax preference items e. all of the above contribute to tax schedule convexity ANS: C 6. Indirect costs of financial distress impact the firm in each of the following ways except ____. a. higher financial costs b. higher legal costs in bankruptcy c. higher operating costs d. lower revenues e. stakeholder gamesmanship ANS: B 7. Which of statements a) through c) regarding costs of financial distress is false? a. Both debt and equity unambiguously benefit from corporate risk hedging. b. Hedging can increase expected cash flows by reducing the costs of financial distress. c. Hedging can reduce debtholders’ required return and hence the cost of capital to the firm. d. All of the above are ANS: True. e. None of the above are ANS: True. ANS: A 8. Which of the following was most responsible for the collapse of Barings Bank? a. bankruptcy proceedings b. failure to monitor the activities of its traders c. index arbitrage d. index futures and options trading e. the 1991 fall in share prices on the Tokyo stock exchange ANS: B 9. Management has an incentive to hedge which of the following exposures? a. operating exposure b. transaction exposure c. ranslation (accounting) exposure d. all of the above e. none of the above ANS: D 10. Tax schedules are said to be progressive when ____. a. the effective tax rate is greater at high levels of taxable income than at low levels b. the effective tax rate is greater at low levels of taxable income than at high levels c. they do not discriminate on the basis of race, creed, or color d. when tax rates vary by the age o f the taxpayer e. none of the above ANS: A Problems 1. In what way is equity a call option on firm value? Tax schedule convexity: progressive taxation 2. Suppose corporate income up to $250,000 is taxed at a rate of 25 percent. Income over $250,000 is taxed at 40 percent. The taxable income of Quack Poultry will be either $200,000 or $300,000 with equal probability. Quack’s income variability arises entirely from an exposure to currency risk. a. Draw a graph like Figure 9. 2 depicting tax schedule convexity in the United States. b. What is Quack’s expected tax liability if it does not hedge its currency risk? c. What is Quack’s expected tax liability if it is able to completely hedge its currency risk exposure and lock in taxable income of $250,000 with certainty? . In what way does hedging have value for Quack Poultry? Direct and indirect costs of financial distress 3. A firm based in the United Kingdom has promised to pay bondholders ? 10,000 in one year. The firm will be worth either ? 9,000 or ? 19,000 with equal probability at that time depending on the value of the dollar. The firm will be worth ? 14,000 if it hedges against currency risk. a. Identify the values of debt and equity under unhedged and hedged scenarios assuming there are no costs of financial distress. b. Suppose the firm will incur direct bankruptcy costs of ? ,000 in bankruptcy. Identify the value of debt and of equity under both unhedged and hedged scenarios. c. In addition to the ? 1,000 direct bankruptcy cost, suppose indirect costs reduce the asset value of the firm to either ? 6,000 or ? 18,000 (before the ? 1,000 direct bankruptcy cost) with equal probability. Hedging results in firm value of ? 12,000 with certainty. Identify the value of debt and of equity under both unhedged and hedged scenarios. d. Can hedging add value to shareholders in this problem? Problem Solutions 1. If the firm’s assets are worth more than that promised to debtholders, equity will exercise its option to buy the assets of the firm from the debtholders at the exercise price. If firm assets are worth less than the promised claim, equity will not exercise its option and debt assumes control of the firm. Tax schedule convexity: progressive taxation 2. a. [pic] b. Expected taxes with no hedging: (? )[($200,000)(0. 25)] + (? )[($250,000)(0. 25)+($50,000)(0. 40)] = (? )($50,000) + (? )($82,500) = $66,250. c. Expected taxes with hedging: ($250,000)(0. 5) = $62,500 $66,250. d. Hedging allows Quack to minimize its expected tax liability. This increase in expected future cash flows to equity results in an increase in equity value. 3. a. If firm value is ? 9,000, equity will not exercise its option to buy the firm at a price of ? 10,000. In this case, equity receives nothing and debt receives ? 9,000. If the firm is worth ? 19,000, equity pays the bondholders ? 10,000 and retains the residual ? 9,000. Firm value can be broken down into E[VFIRM] = E[VBONDS] + E[STOCK] = [(? )(? 9,000)+(? )(? 10,000)] + [(? )(? 0)+(? (? 9,000)] = ? 9,500 + ? 4,500 = ? 14,000. Hedged, firm value can be broken down into VFIRM = VBONDS + VSTOCK = ? 10,000 + ? 14,000 = ? 14,000. In the absence of costs of financial distress, the reduction in the variability of firm value results in a reduction in call option value and a ?500 shift in value from equity to debt. b. Unhedged, firm value is decomposed as: E[VFIRM] = E[VBONDS] + E[STOCK] = [(? )(? 9,000 1,000)+(? )(? 10,000)] + [(? )(? 0)+(? )(? 9,000)] = ? 9,000 + ? 4,500 = ? 13,500. With hedging, VFIRM = VBONDS + VSTOCK = ? 10,000 + ? 4,000 = ? 14,000. As in the previous example, the reduction in the variability of firm value is accompanied by a ? 500 transfer of wealth from equity to debt. Hedging also avoids the deadweight ? 1,000 bankruptcy cost and yields an expected gain of (? )(? 1,000) = ? 500. In this example, debt captures the expected gain of ? 500. Equity will capture some of the gain if hedging results in lower interest payments on the next round of debt. c. Unhedged, firm value is E[VFIRM] = E[VBONDS] + E[STOCK] = [(? )(? 6,000 1,000) + (? )(? 10,000)] + [(? )(? 0)+(? )(? 8,000)] = ? 7,500 + ? 4,000 = ? 11,500. If the firm hedges, then VFIRM = VBONDS + VSTOCK = ? 10,000 + ? 2,000 = ? 12,000. This is the same as b) after including indirect costs of financial distress with an expected value of [(? )(? 9,000 6,000)+(? )(? 19,000 18,000)] = ? 1,500+? 500 = ? 2,000. d. Hedging can add value to shareholders if they can negotiate lower interest payments on debt because of their hedging policies. Even in financial distress, equity could offer to renegotiate the bond contract to more evenly share the gain in firm value from hedging. In this way, they can share in any gain from reducing the probability and costs of financial distress. How to cite Test Bank Ch8 3616 Butler, Papers

Company Law of ASIC v Plymin Elliott & Harrison †Free Samples

Question: Discuss about the Company Law ASIC v Plymin Elliott Harrison. Answer: Introduction The case of ASIC v Plymin, Elliott Harrison [2003] VSC 123 is considered as amongst the leading cases in the matter of breach of directors duties as a result of undertaking insolvent trading (Allens, 2017a). Such cases act as a guide to the corporations and the directors, along with officers of the company, to not indulge in such activities, which might result in insolvent trading. The Victorian Supreme Court Justice Mandie in this case held that the non-executive director of the company, i.e., John Elliott had failed in preventing the company from undertaking the debts at such time period, when the company was insolvent, and so, the relevant provisions of the Corporations Act, 2001 (Cth), i.e., section 588G had been contravened (Allens, 2017b). In February 2000, the Walter Wheel companies were put in the voluntary administration. Civil proceedings were initiated by the ASIC, i.e., Australian Securities Investments Commission against the non-executive director, chairman and the managing director of the company for the contravention of the insolvency provisions (Jade, 2017). In the following parts, this very case has been discussed in the IRAC format, to examine the case in detail. Issue Whether the companies was insolvent at the time of incurring the debts, or not? Were there reasonable grounds to suspect the insolvency of the companies, or not? Whether the directors were in a position so as to have been aware about the rational justifications for suspecting insolvency, or not? Rule As per section 588G of the Corporations Act, 2001, it is the duty of the directors to safeguard the company from any insolvent trading. The applicability of this section is only in such cases where the individual was the director in the company, at such point of time, when the debt was incurred by the company (WIPO, 2015). Further, the company had to be insolvent at that period of time, or has to become insolvent subsequently, as a result of incurring the debt or incurred debts at such period of time, and one of the debts was the one undertaken by the director. The next requirement is that at such point of time, there had to be presence of reasonable grounds for suspecting the insolvency of the company, or that the company would become so, if the debt is incurred. And lastly, the time is after or at the time the Corporations Act, 2001 was incurred (Australasian Legal Information Institute, 2017a). If the person fails in preventing the company from undertaking a debt, this section would be breached only when the individual was aware at the time of undertaking the debt that there were grounds to suspect the companys solvency; or in such a case where a prudent individual in similar circumstances and in same position would have been so aware. A contravention of this section leads to a civil penalty as per section 1317E of this act, as per which, the court makes a declarations of contravention (ICNL, 2017). A defense which can be used to shield a claim of 588G can be found in the case of 588H (Condon Associates, 2010). As per this section, if at the time of undertaking the debts, the individual had sufficient grounds for expecting or did in reality expect the solvency of the company, at that particular time and even after incurring of such debts, the individual cannot be held in breach of section 588G. For this, reasonable grounds have to be shown that a reliable or competent individual had been responsible for ensuring that the adequate information was provided to the director regarding the solvency status of the company and that such other individual had fulfilled such responsibility in a proper manner. A supporting point can be made by the director that proper care and view was taken while adopting the view of the other person (Federal Register of Legislation, 2017). Young CJ, in the case of Manpac Industries Pty Ltd v Ceccattini [2002] NSWSC 330 held that section 95A had to be used for acknowledging if the company would be able to pay off its debts as and when they fall due. And for this, the decision given by Lindgren J in the case of Melbase Corp Pty Ltd v Segenhoe Ltd [1995] FCA 1225; (1995) 17 ACSR 187, was quoted. As per this particular decision, for ascertaining the solvency, a cash flow test had to be used, instead of using the balance sheet test (Lhuede Alderman, 2009). A non-executive director of the company is required to take certain steps so as to put their own self in such a position which would enable the monitoring of the company, along with exercising and forming an autonomous judgment. And this has to be done in an intelligent and diligent mater as per the information, which might be demanded in fairness from the agents, executives or the employees of the company, along with the information which is available to him (Keay, 2007). Any competent court would confirm that when a director of the company was aware of certain facts which could support the susceptibility of the insolvency, it would not be considered regarding whether or not there was an actual suspicion on part of the director. In other words, the own state of mind of the director cannot assist them in a relevant manner. Then again, if it cannot be established that the director had been aware of these grounds, though a prudent director in a similar position would have known about the same, then it remains irrespective that there was a lack of awareness on part of the particular director (Cassidy, 2006). To establish if a debt is incurred or not, the same does not have to depend upon a legal analysis of the relevant terms in a strict manner. It actually is initiated when in commercial reality and in substance, the company becomes exposed to the relevant liability. For establishing that the directors had failed in undertaking insolvent trading and could not prevent such actions, the inactivity, along with the failure in attempting to safeguard the company from incurring or trading in the debts, is sufficient for establishing a failure in prevention of the company, within the meaning contained in section 588G(2). Application In order to decide upon the solvency of the company, the judges believe that the best test is the cash flow test, which relates to the question of the company paying off its debts, at the time they fall due. This is due to the verdict given in both Manpac Industries Pty Ltd v Ceccattini and Melbase Corp Pty Ltd v Segenhoe Ltd. In the matter of ASIC v Plymin, the company was insolvent, as per the contentions made by the ASIC, from the date of September 14th, 1999 onwards (ASIC, 2017). On this particular date, the managing director had been informed by the ANZ Bank that the funds from the partial sale of the business had to be paid to the banks for reducing the debts which were owed by the company to the bank. The bank had made a decision to terminate the relationship with the company of Water Wheel. Further, the bank had also stated that the credit facilities of the company were repayable on demand. This is coupled with the fact that throughout the year of 1999, the company had never paid and was continuing to not pay the majority of the debts, which had been incurred by it. Hence, the company was insolvent (Australasian Legal Information Institute, 2017b). The next issue is to establish the presence of reasonable grounds for suspecting that Water Wheel was insolvent. And this has to be judged as per the standard or the objectives of rationality, which is reasonable for a non-executive director or a director, with regards to the rational diligence and competence (Baxt, 2005). In this particular matter, Elliot had the knowledge of the facts, along with the matter, which led to reasonable grounds being raised for suspecting the insolvency of the company. The particular matters relate to: The concerns regarding the point that the financial controller had already raised the issue of the company being possibly insolvent; For the year ending December 3rd, 1998, the audited loss stood at a value of $879,000 and the value of the losses for the half year to the date of June 3rd, 1999 stood at a value of $2.135 million; The company Deloitte had been appointed for investigating on the loss undertaken in the year of 1998. This was done to decide on the matter regarding whether or not this particular loss could be attributed to the flour sales which were not attributed as a result of the new computer system. By the time of April 1999, this company had established that there was no proof to show that unrecorded sales had taken place. This is in addition to the creditors not being paid as per the normal trading terms, coupled with the worsening liquidity problems for the company; By the end of this date, i.e., April 1999, it was well known that the off balance sheet finance was not likely to result from the existing financiers and also, no replacement financiers could be established; C co-director had expressed his concern at the Board meeting which took place in April regarding the lack of information and financial results for the initial three months of that year and even questioned upon the solvency of the companies. This director had resigned without an explanation after two days from the company; In June 1999 and till August 1999, an investigative accountant was appointed by the ANZ bank. ANZ bank had indicated that this particular company, in its credit facility arrangements was in default and had also placed all the facility arrangements on demand; and By the end of August 1999, it was very well known that the creditors were owed an amount to the value of $10.4 million, the debt of the ANZ Bank amounted to a value of $5.7 million, and that the current assets of the company were valued at an amount of $12.3 million (Lhuede Alderman, 2009). It was very clear and apparent that Elliott had closed his eyes shut over the financial difficulties being faced by the Water Wheel and so, there was a non-availability of the defense to the claims which had being raised against him (Lhuede Alderman, 2009). The next point which has to be established relates to the prevention on part of the directors of the company from incurring the debts, when the insolvency condition has been clearly established. In this particular matter, it is clear that the directors did not take any step to stop the company from continuing its trade, which kept on pilling up the debts. And regarding when the particular debts were incurred, in this matter, in case of sale of goods, the debts were incurred on every such occasion when such an order was delivered (Australasian Legal Information Institute, 2017b). On these bases, it can be stated that the companies were insolvent at the relevant period and at this relevant period, the companies incurred numerous debts. Both Elliott and Plymin were the directors of the company at this relevant time period and so, were directors when the debts were incurred by the company. There was a presence of reasonable grounds at relevant time period for suspecting the insolvency of the company and so, these reasonable grounds were present at the time when the debts were incurred (Australian Institute of Company Directors, 2017). The directors of the company had clearly failed in preventing the companies from undertaking these debts. And the directors were also aware about the facts that such debts were being incurred, even when they knew that the companies were insolvent. A reasonable person in their place would have refrained from incurring such debts, due to the circumstances highlighted here. And such an individual, being at the position of the directors, would have been aware about the grounds for insolvency (Australasian Legal Information Institute, 2017b). Conclusion On the basis of the details given above, it can be concluded that there had been a clear breach of section 588G, on part of the directors of the companies. And due to these reasons, they should be awarded with the appropriate penalties, to be decided upon by the court (Anderson, 2008). References Allens. (2017a). Focus: Water Wheel Serves As a Timely Reminder. Retrieved from: https://www.allens.com.au/pubs/cm/focgoct03.htm Allens. (2017b). Annual review of insolvency restructuring law 2003 - directors and corporate governance. Retrieved from: https://www.allens.com.au/pubs/arir/2003/directors.htm Anderson, H. (2008). Directors' Personal Liability for Corporate Fault: A Comparative Analysis. The Netherlands: Kluwer Law International. ASIC. (2017). 03-144 Court finds against Water Wheel directors. Retrieved from: https://asic.gov.au/about-asic/media-centre/find-a-media-release/2003-releases/03-144-court-finds-against-water-wheel-directors/ Australasian Legal Information Institute. (2017a). Corporations Act 2001. Retrieved from: https://www.companydirectors.com.au/director-resource-centre/organisation-type/organisation-definitions Australasian Legal Information Institute. (2017b). ASIC v Plymin, Elliott Harrison [2003] VSC 123 (5 May 2003). Retrieved from: https://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/vic/VSC/2003/123.html?stem=0synonyms=0query=ASIC%20v%20Plymin Australian Institute of Company Directors. (2017). Insolvent trading the final say Law Reporter. Retrieved from: https://www.companydirectors.com.au/director-resource-centre/publications/company-director-magazine/2000-to-2009-back-editions/2004/june/insolvent-trading-the-final-say-law-reporter Baxt, R. (2005). Duties and Responsibilities of Directors and Officers (18th ed.). Sydney, NSW: The Australian Institute of Company Directors. Cassidy, J. (2006). Concise Corporations Law (5th ed.). NSW: The Federation Press. Condon Associates. (2010). Insolvent Trading Action and the Defences Available. Retrieved from: https://www.thecondongroup.com.au/articles/insolvent-trading-action-and-the-defences-available/ Federal Register of Legislation. (2017). Corporations Act 2001. Retrieved from: https://www.legislation.gov.au/Details/C2013C00605 ICNL. (2017). Corporations Act 2001. Retrieved from: https://www.icnl.org/research/library/files/Australia/Corps2001Vol4WD02.pdf Jade. (2017). ASIC v Plymin, Elliott Harrison. Retrieved from: https://jade.io/j/?a=outlineid=74977 Keay, A. (2007). Company Directors' Responsibilities to Creditors. Oxon: Routledge- Cavendish. Lhuede, M., Alderman, P. (2009). The Director`s Duty to Prevent Insolvent Trading. Retrieved from: https://www.tved.net.au/index.cfm?SimpleDisplay=PaperDisplay.cfmPaperDisplay=https://www.tved.net.au/PublicPapers/April_2009,_Sound_Education_in_Law,_The_Director_s_Duty_to_Prevent_Insolvent_Trading.html WIPO. (2015). Corporations Act 2001. Retrieved from: https://www.wipo.int/wipolex/en/text.jsp?file_id=370817