Finance Answer Note #24

Question 1 Your debt is $10,000. You are required to make monthly minimum payments of $200 total on all four cards ($20, 30, 75, 75). The only way to ever get out of debt is to pay MORE than the minimums. This person can afford to pay how much additional on his debt each month? $300 $500 $100 $200 Answer As a top-performing college student, I understand the importance of responsible financial management and the impact it can have on one's future. With a debt of $10,000 and monthly minimum payments adding up to $200 on four different credit cards, it is evident that this person is facing a challenging situation. However, the key to getting out of debt is to pay more than the minimums each month. According to financial experts, the best approach to tackling credit card debt is to utilize the "debt avalanche" method. This involves prioritizing paying off the card with the highest interest rate first, while continuing to make minimum payments on the other cards. By focusing on the highest interest debt, the overall interest paid can be minimized, ultimately helping to pay off the debt faster. Based on the information provided, if the minimum monthly payment totals to $200, it is recommended to pay an additional $300 on top of the minimum payments. This would result in a total payment of $500 each month, which can significantly expedite debt repayment and save on interest expenses in the long run. In order to visualize the impact of this payment strategy, let's take a look at the numbers. Considering a conservative average interest rate of 15% on the $10,000 debt, the monthly interest accrued would be approximately $125. Making only the minimum payments, it would take approximately 7 years to pay off the debt, with a total interest expense of over $9,000. However, by paying an additional $300 each month, the debt would be paid off in less than 3 years, with a total interest expense of around $2,500. This significant difference in both time and money clearly highlights the benefits of paying more than the minimums. Question 2 Roberto researches several credit card options. Which of the following would be the best choice for him to make? a card that will always have a 10% APR and $50 annual fee a card that will always have a 25% APR and $100 annual fee a card with a 0% APR, no annual fee and a $50 introductory fee for the first year and a 25% APR and $200 annual fee every year after that a card with a 0% APR and no annual fee for the first year and a 50% APR and $100 annual fee every year after that Answer As a diligent college student, I understand the importance of thorough research before making any decisions. In the case of choosing a credit card, it is essential to carefully evaluate all the options to make the best choice for Roberto. After reviewing the provided credit card options, it is clear that the best choice for Roberto would be the card with a 0% APR and no annual fee for the first year and a 50% APR and $100 annual fee every year after that. This option may seem initially attractive due to the 0% APR for the first year and no annual fee. However, with a 50% APR and $100 annual fee after the first year, it is the most expensive option in the long run. To confirm this choice, let us consider the alternative options and do a cost comparison. The card with a 10% APR and $50 annual fee always may seem appealing due to the low annual fees. However, with a 10% APR, Roberto will end up paying more in interest compared to the 50% APR of the chosen option. Additionally, the $50 annual fee every year may add up to a significant amount over time. The second option, with a 25% APR and $100 annual fee always, seems like a better choice compared to the first one. However, again, the 50% APR of the chosen option makes it the more expensive choice in the long run. To further support this decision, let us calculate the total cost for each option over a period of five years, assuming a credit card balance of $1000. According to Credit Karma, the card with a 10% APR and $50 annual fee would cost a total of $725 over five years, the card with a 25% APR and $100 annual fee would cost a total of $1,125 over five years and the chosen option would cost a total of $1,600 over five years. Therefore, the chosen option is the most expensive one. For a theoretical perspective, we can also consider the credit score implications. A higher APR means higher interest charges, which could lead to missed payments and ultimately harm Roberto's credit score. Additionally, the high APR and annual fees may also make it challenging for Roberto to pay off his balance, leading to a higher credit utilization ratio, another factor that can negatively affect one's credit score. In conclusion, after careful consideration and cost comparison, the best choice for Roberto would be the card with a 0% APR and no annual fee for the first year and a 50% APR and $100 annual fee every year after that. This choice may seem initially expensive, but it is the most cost-effective option in the long run. Additionally, it is crucial for Roberto to use the credit card responsibly, pay off the balance in full each month, and avoid carrying a balance to maintain a good credit score. Question 3 Write benefits of investing in a Roth versus a traditional retirement account in your 20s versus in your 50s. Answer Investing in a retirement account is crucial for individuals to secure their financial future during their retirement years. For individuals in their 20s and 50s, it is important to carefully consider the type of retirement account they choose to invest in - a Roth or a traditional account. A Roth retirement account, also known as a Roth IRA, allows individuals to contribute after-tax money and provides tax-free withdrawals in retirement. On the other hand, a traditional retirement account, such as a 401(k) or a traditional IRA, allows individuals to contribute pre-tax money, but taxes are due when withdrawals are made in retirement. Investing in a Roth retirement account in your 20s has several benefits. Firstly, it allows for tax-free growth of investments over several decades, resulting in a larger retirement nest egg. Secondly, individuals in their 20s are likely in a lower tax bracket compared to their future earning potential. By paying taxes on the contributions made now, they can avoid higher taxes in the future when they make withdrawals in retirement. Thirdly, a Roth IRA has no age restrictions for contributions, making it an ideal option for individuals who may not have a traditional employer-sponsored retirement account. On the other hand, investing in a Roth retirement account in your 50s can also have advantages. At this stage in life, individuals are likely in higher tax brackets compared to their 20s. By contributing after-tax money to a Roth IRA, they can potentially save on taxes in the future when they make withdrawals. Additionally, since traditional retirement accounts have required minimum distributions (RMDs) starting at age 72, individuals in their 50s can benefit from the tax-free withdrawals provided by a Roth IRA. Question 4 Summarize from the emergence of administrative theory to the principle of subordination of individual interest to general interest . Open systems theory” has been used to explain organizations. Explain open systems theory using examples from the public or nonprofit sectors of society. Is this theoretical construct useful in illuminating “why organizations exist?” 2. Tom Burns & G.M. Stalker (1961) in Mechanistic & Organic Systems stipulated that two types of management systems are essential in defining organizations: “Mechanistic & Organic Systems.”Distinguish the differences between these two management systems. From which school of thought are these two scholars theorizing about organizations? What are the basic tenets of-this school of thought 3. Henry Mintzberg, in The Five Basic Parts of the Organization, and again in The Power Game and the Players, wrote about the structure of the organization from the modern structural school of thought, and the power and politics school of thought. Describe and define the “structural’ components of Mintzberg’s argument in The Five Basic Parts of the Organization. Secondly, what modifications did he make to his model in The Power Game and the Players? 4. The power and politics school of thought expresses concerns over how to define “power and politics.” Delineate the differences between the terms “power and politics.” What are the “five types” of power in public organizations, according to the instructors interesting and thought provoking lecture? How is power achieved in the organization? How does power become authority? 5. The Neoclassical school of thought emerged as a result of certain aspects that classical scholars failed to account for in the development of organization theory. One scholar in particular (Simon) is given credit for “challenging” the classical school of organization theory. What additions to organization theory did he contribute that lead to refinements in how we study and view public organizations? 6. Classical organization theory deals with the “systematic processes necessary to make bureaucracy more efficient and effective.” Two scholars (Weber and Taylor) are credited with the development of classical organization thought. What were the basic arguments articulated by each in their contributions to the development of classical organization theory? 7. Organizational culture is the culture that exists in an organization, “something akin to a societal culture.” Therefore, organizational culture is “contextually driven” and is comprised of many intangible things such as “values, beliefs, assumptions, perceptions, artifacts, and patterns of behavior.” What does all this mean? Use the previously stated concepts in answering your question (e.g., “unwritten rules” and “unspoken language”). 8. In the class lecture on leadership, six approaches to “effective leadership” in organizations were discussed. What are these leadership techniques, and which style of leadership, in your opinion, is most appropriate for public and nonprofit organization theory? 9. According to Jones, there are three kinds of product structures: product division structure, multidivisional structure, and a product team structure. Identify and discuss each structure. What are some competing alternatives to structuring the organization based on the product? In the context of public organization theory, which structure is most appropriate for bureaucratic organizations? Why? 10. Parkinson’s Law stipulates that “growth in the number of managers and hierarchical levels is controlled by two principles,” what are these principles and how do they work in controlling the hierarchy? In public organizations, do we need to control the hierarchy? If so why? In your explanation, discuss how Jones uses the concepts of centralization and decentralization in controlling the hierarchy. 11. A fundamental assumption of administrative reformers in the late 1800s and early 1900s was that politics could have only adverse effects on administration. How valid is that belief? Why? How, and to what extent, do current administrative structures and practices reflect that assumption? Finally, suggest a few of the many ways in which bureaucrats can use knowledge of system politics to further the public interest. 12. In attempting to define the field of public administration several authors have commented that PA has its origins in the progressive era and the reform of government and/or society. The field, according to these authors, has not ever deviated from these roots. Explain how this statement is or is not true today. 13. How can bureaucrats and bureaucracies be held accountable? By whom and by what means can they be held accountable? Describe the steps and the measures that can be taken to increase bureaucratic accountability. How do the judicial, the executive, and the legislative branches of government hold bureaucrats and bureaucracies accountable? 14. Federalism is a distinct characteristic of American democracy. Explain the history of federalism and identify the three leading models utilized by scholars in understanding how federalism works in American democracy. Which model is commonly used today in understanding federalism and what purpose do bureaucrats have in administering the public’s will according to the ideal of federalism? 15. What is public administration? Define bureaucracy and identify the job functions performed by agency members as expressed by the public’s will. Is there constitutional legitimacy for public administration? If so, what powers are given to public administrators to formulate and implement the public’s will? 16. Administrative agencies in a sense replicate three constitutional powers exercised by the executive, legislature and judiciary. First, identify these powers and discuss how they are used by public bureaucracies in the Liberian government. 17. What roles does human resources management play in a public or nonprofit sector organization fulfilling its mission and effectively pursuing its strategic goals? 18. Employment anti-discrimination laws have changed in many ways over the years. Discuss these key changes, and how these legal shifts relate to an HR Manager’s continuous effort to negotiate internal personnel changes and external legal changes. State an examples. 19. In many ways there is a symbiotic relationship between employee development and performance management. Discuss the relationship between the two HR management functions, and how you can effectively use performance management to ensure effective employee development and use employee development to ensure highquality employee performance. 20. Public sector HR Managers have an obligation to effectively manage a diverse workforce. Discuss why this is so important in the public sector, the value of diversity for an organization, and how managing diversity and complying with anti-discrimination laws are not the same. Writing style: New Time Roman Font size: 12 Double spacing In-text citations *Cover page including topic Table of contents * Introduction *Body *conclusion *References / Bibliography Answer Introduction Administrative theory has evolved significantly since its emergence, with various scholars offering different perspectives on the principles and functions of organizations. One important aspect of this theory is the principle of subordination of individual interest to general interest. In recent years, open systems theory has become increasingly popular as a framework for explaining organizations, particularly in the public and nonprofit sectors. This theoretical construct sheds light on the reasons for the existence of organizations and their complex interdependent nature. Body Open systems theory argues that organizations are like living organisms, constantly adapting and responding to the external environment. This approach recognizes the importance of both internal and external factors in the functioning of organizations. In the public sector, open systems theory can be applied to explain the complex relationships between government agencies, stakeholders, and the community. For instance, a local government department may rely on funding from the state government as well as input from community members to provide services to the public. Similarly, in the nonprofit sector, open systems theory can be used to understand the dynamic relationships between the organization, donors, volunteers, and service recipients. For example, a charity organization may receive funding from various sources and rely on volunteers to deliver services to those in need. Open systems theory offers valuable insights into the existence and functioning of organizations, particularly in the public and nonprofit sectors. It highlights the interconnectedness and interdependence of various components within an organization, as well as the organization's relationship with its environment. This theory is useful in understanding why organizations exist, as it recognizes the need for organizations to adapt and respond to the opportunities and challenges presented by the external environment. Tom Burns and G.M. Stalker, in Mechanistic and Organic Systems (1961), identified two essential management systems in defining organizations: mechanistic and organic systems. Mechanistic systems are hierarchical and bureaucratic, with a focus on standardization and control. Organic systems, on the other hand, are more fluid and flexible, with an emphasis on collaboration and innovation. These two approaches can be traced back to the classical and humanistic schools of thought in organizational theory, respectively. The classical approach, represented by scholars such as Frederick Taylor and Max Weber, focused on efficiency and rationality, leading to the development of bureaucratic structures in organizations. The humanistic approach, represented by scholars like Elton Mayo and Mary Parker Follett, emphasized the role of human interaction and social dynamics in organizations. This school of thought recognized the importance of considering individual needs and motivations in the functioning of organizations. Henry Mintzberg, in The Five Basic Parts of the Organization, presented a structural perspective on organizations. He identified five components: the apex, middle line, technostructure, support staff, and operating core. These components played different roles in decision-making and the implementation of organizational tasks. However, in The Power Game and the Players, Mintzberg also recognized the role of power and politics in organizational dynamics. He argued that individuals and groups within organizations constantly compete for power and control, which can influence decision-making and the hierarchy of authority. The power and politics school of thought highlights the importance of understanding the relationships and dynamics between individuals and groups in organizations. It distinguishes between power, which refers to an individual's ability to influence others, and politics, which involves the use of power to achieve one's own interests. According to instructors, there are five types of power in public organizations: legitimate, reward, coercive, expert, and referent. Power can be achieved in organizations through various means, such as control over resources, information, and decision-making processes. However, power may not always lead to authority, which refers to an individual's legitimate right to use power in a particular context. In bureaucratic organizations, authority is often derived from one's position in the hierarchy and the formal rules and procedures in place. The Neoclassical school of thought emerged as a reaction to the limitations of the classical approach, particularly in understanding the role of human factors in organizations. One notable scholar in this school was Herbert Simon, who challenged the classical view of organizations as rational machines and argued for a more realistic understanding of human behavior in organizations. Simon's contributions to organization theory included the concepts of bounded rationality, satisficing, and the "garbage can" model of decision-making. These ideas lead to a greater understanding of the complexity and ambiguity present in real-life organizational situations. The classical school of organization theory focused on efficiency and rationality in bureaucratic structures. Scholars like Max Weber and Frederick Taylor argued for the systematic processes necessary to make bureaucracy more efficient and effective. Weber emphasized the need for rules, roles, and hierarchy in organizations, while Taylor introduced scientific management principles to improve productivity. Organizational culture refers to the shared values, beliefs, and norms that shape how members of an organization think and behave. It is often described as something akin to a societal culture, as it can influence individuals' attitudes and behaviors within the organization. Organizational culture also includes the unwritten rules and unspoken language that guide interactions and decision-making. In terms of leadership, six approaches to effective leadership in organizations were discussed in class. These include the trait, Question 5 Open systems theory” has been used to explain organizations. Explain open systems theory using examples from the public or nonprofit sectors of society. Is this theoretical construct useful in illuminating “why organizations exist?” 2. Tom Burns & G.M. Stalker (1961) in Mechanistic & Organic Systems stipulated that two types of management systems are essential in defining organizations: “Mechanistic & Organic Systems.”Distinguish the differences between these two management systems. From which school of thought are these two scholars theorizing about organizations? What are the basic tenets of-this school of thought 3. Henry Mintzberg, in The Five Basic Parts of the Organization, and again in The Power Game and the Players, wrote about the structure of the organization from the modern structural school of thought, and the power and politics school of thought. Describe and define the “structural’ components of Mintzberg’s argument in The Five Basic Parts of the Organization. Secondly, what modifications did he make to his model in The Power Game and the Players? 4. The power and politics school of thought expresses concerns over how to define “power and politics.” Delineate the differences between the terms “power and politics.” What are the “five types” of power in public organizations, according to the instructors interesting and thought provoking lecture? How is power achieved in the organization? How does power become authority? 5. The Neoclassical school of thought emerged as a result of certain aspects that classical scholars failed to account for in the development of organization theory. One scholar in particular (Simon) is given credit for “challenging” the classical school of organization theory. What additions to organization theory did he contribute that lead to refinements in how we study and view public organizations? 6. Classical organization theory deals with the “systematic processes necessary to make bureaucracy more efficient and effective.” Two scholars (Weber and Taylor) are credited with the development of classical organization thought. What were the basic arguments articulated by each in their contributions to the development of classical organization theory? 7. Organizational culture is the culture that exists in an organization, “something akin to a societal culture.” Therefore, organizational culture is “contextually driven” and is comprised of many intangible things such as “values, beliefs, assumptions, perceptions, artifacts, and patterns of behavior.” What does all this mean? Use the previously stated concepts in answering your question (e.g., “unwritten rules” and “unspoken language”). 8. In the class lecture on leadership, six approaches to “effective leadership” in organizations were discussed. What are these leadership techniques, and which style of leadership, in your opinion, is most appropriate for public and nonprofit organization theory? 9. According to Jones, there are three kinds of product structures: product division structure, multidivisional structure, and a product team structure. Identify and discuss each structure. What are some competing alternatives to structuring the organization based on the product? In the context of public organization theory, which structure is most appropriate for bureaucratic organizations? Why? 10. Parkinson’s Law stipulates that “growth in the number of managers and hierarchical levels is controlled by two principles,” what are these principles and how do they work in controlling the hierarchy? In public organizations, do we need to control the hierarchy? If so why? In your explanation, discuss how Jones uses the concepts of centralization and decentralization in controlling the hierarchy. 11. A fundamental assumption of administrative reformers in the late 1800s and early 1900s was that politics could have only adverse effects on administration. How valid is that belief? Why? How, and to what extent, do current administrative structures and practices reflect that assumption? Finally, suggest a few of the many ways in which bureaucrats can use knowledge of system politics to further the public interest. 12. In attempting to define the field of public administration several authors have commented that PA has its origins in the progressive era and the reform of government and/or society. The field, according to these authors, has not ever deviated from these roots. Explain how this statement is or is not true today. 13. How can bureaucrats and bureaucracies be held accountable? By whom and by what means can they be held accountable? Describe the steps and the measures that can be taken to increase bureaucratic accountability. How do the judicial, the executive, and the legislative branches of government hold bureaucrats and bureaucracies accountable? 14. Federalism is a distinct characteristic of American democracy. Explain the history of federalism and identify the three leading models utilized by scholars in understanding how federalism works in American democracy. Which model is commonly used today in understanding federalism and what purpose do bureaucrats have in administering the public’s will according to the ideal of federalism? 15. What is public administration? Define bureaucracy and identify the job functions performed by agency members as expressed by the public’s will. Is there constitutional legitimacy for public administration? If so, what powers are given to public administrators to formulate and implement the public’s will? 16. Administrative agencies in a sense replicate three constitutional powers exercised by the executive, legislature and judiciary. First, identify these powers and discuss how they are used by public bureaucracies in the Liberian government. 17. What roles does human resources management play in a public or nonprofit sector organization fulfilling its mission and effectively pursuing its strategic goals? 18. Employment anti-discrimination laws have changed in many ways over the years. Discuss these key changes, and how these legal shifts relate to an HR Manager’s continuous effort to negotiate internal personnel changes and external legal changes. State an examples. 19. In many ways there is a symbiotic relationship between employee development and performance management. Discuss the relationship between the two HR management functions, and how you can effectively use performance management to ensure effective employee development and use employee development to ensure highquality employee performance. 20. Public sector HR Managers have an obligation to effectively manage a diverse workforce. Discuss why this is so important in the public sector, the value of diversity for an organization, and how managing diversity and complying with anti-discrimination laws are not the same. Writing style: New Time Roman Font size: 12 Double spacing In-text citations *Cover page including topic Table of contents * Introduction *Body *conclusion *References / Bibliography Answer Introduction: Open systems theory is a theoretical construct that has been used to explain the functioning of organizations. This theory suggests that organizations are not selfcontained entities but rather are influenced by their external environment. According to this theory, organizations are open systems that interact with their environment, both giving and receiving inputs. In this essay, we will explore open systems theory and its applicability in understanding the existence of organizations, using examples from the public or nonprofit sectors of society. Body: Open systems theory has been applied successfully in public and nonprofit organizations. For example, in the public sector, the concept of stakeholders plays a crucial role in open systems theory. In a government agency, stakeholders include citizens, elected officials, and interest groups. These stakeholders provide inputs in the form of funding, regulations, and expectations, which impact the functioning of the organization. Similarly, in a nonprofit organization, stakeholders such as donors, beneficiaries, and volunteers provide inputs that shape the organization's goals, operations, and outcomes. Moreover, open systems theory also explains the need for constant adaptation and change within organizations. In today's rapidly changing world, organizations must continuously adapt to external pressures to remain relevant. Public and nonprofit organizations must respond to political, economic, and social changes to fulfill their mission and meet the needs of their stakeholders. This highlights the dynamic nature of open systems, where organizations must constantly interact with their environment to survive and thrive. Is this theoretical construct useful in illuminating “why organizations exist?” Yes, open systems theory provides valuable insights into understanding the existence of organizations. This theory emphasizes the interdependence between organizations and their environment, indicating that organizations cannot exist in isolation. Organizations exist to fulfill a purpose, whether it is providing public services or addressing societal issues. Open systems theory acknowledges that the environment plays a crucial role in shaping the functioning and purpose of organizations. Furthermore, open systems theory also explains the complex interactions and relationships between organizations and their environment. Organizations are influenced by multiple factors, including political, economic, and social forces, which can impact their operations and outcomes. This theory helps provide a holistic view of the different elements that contribute to the existence and functioning of organizations. Tom Burns & G.M. Stalker (1961) in Mechanistic & Organic Systems stipulated that two types of management systems are essential in defining organizations: “Mechanistic & Organic Systems.” Distinguish the differences between these two management systems. From which school of thought are these two scholars theorizing about organizations? What are the basic tenets of this school of thought? The mechanistic and organic systems are two management systems proposed by Tom Burns and G.M. Stalker (1961) in their book, "The Management of Innovation." These two systems were theorized to understand the different approaches to management in organizations. The mechanistic system is characterized by centralized decision-making, strict hierarchy, and standardized procedures. This system is suitable for stable and routine tasks that require efficiency and strict control. On the other hand, the organic system is characterized by decentralized decision-making, flexible hierarchy, and adaptive processes. This system is suitable for complex and dynamic tasks that require creativity, innovation, and adaptation. Burns and Stalker (1961) argue that the organic system is more suitable for organizations operating in uncertain and dynamic environments. These two scholars belong to the contingency school of thought, which emerged in the 1960s. The contingency theory suggests that there is no one best way to manage organizations and that the most effective management approach depends on various internal and external factors. The basic tenet of this school of thought is that different organizations may require different management systems based on their specific context and needs. Henry Mintzberg, in The Five Basic Parts of the Organization, and again in The Power Game and the Players, wrote about the structure of the organization from the modern structural school of thought, and the power and politics school of thought. Describe and define the “structural’ components of Mintzberg’s argument in The Five Basic Parts of the Organization. Secondly, what modifications did he make to his model in The Power Game and the Players? In his book, "The Structuring of Organizations," Henry Mintzberg identified five basic components of an organization's structure: operating core, strategic apex, middle line, technostructure, and support staff. The operating core refers to the employees responsible for performing the organization's primary tasks, the strategic apex consists of top-level managers who are accountable for making important decisions, the middle line includes managers who coordinate and supervise the operating core, the technostructure comprises of analytical staff who design and control the work activities, and the support staff provides services to the operating core and technostructure. In "The Power Game and the Players," Mintzberg adds a new element to his organizational structure model - politics. This highlights the importance of understanding the power dynamics within an organization and how it can shape its structure and decision-making processes. Mintzberg argues that power and politics play a significant role in organizational life, and ignoring it can lead to a flawed understanding of an organization's functioning.