Debt is BAD...or is it?

Sometimes it can take years for the light to go on, for me to grasp a concept.

I was brought up to believe that debt is bad. Don’t spend more on your credit card than you can afford to pay off each moth. Don’t buy and finance a new car unless you have the ability to make the payments for the four or five years and then drive the vehicle for another four or five years after it is paid off. Don’t buy a house unless you can afford the 30-year fixed. Pay off all debts as quickly as possible. Make extra payments where you can. Pay off debts as fast as possible to save money on interest.

I never understood, until now, why it is better for a business to carry debt. I remember in my undergrad finance class my professor telling us that debt can be good I flat-out didn’t believe him. I answered the questions the way he wanted, got a decent grade in the class, but his lectures didn’t change my fundamental belief system.

I don’t claim to have a complete understanding of why businesses should carry debt, but the light is starting to come on. I am taking a class right now called “Maximizing Shareholder Wealth”. I am currently reading about capital structure and how to determine the ideal amount of debt for a firm. Interest on debt decreases a firm’s taxes, therefore increasing the overall value of a firm. However, there is a point at which this ceases to be true. With debt comes added risk. The more debt a firm has the higher their risk of default.

The bottom line is to find the balance between a capital structure of debt and equity. I am learning how to compute that “break-even point” but I’m still trying to figure it all out. The light is coming on though. This is a tough topic for me because it goes against my personal belief system. As I learn, I grow.

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Now playing: Magnatune - 2008-03-03 New Age podcast from Magnatune
via FoxyTunes

Corporate Takeover Jargon

I just came across a funny section in my Corporate Finance book. It is a sort of glossary of business jargon relating to corporate takeovers and ways to avoid them.

In my many years in business I have never heard these terms. It might be because I am from the world of small business and have never dealt with a merger or acquisition, but I would think I might have at least heard the terminology somewhere...maybe in undergrad? If these terms were ever mentioned I certainly don't remember.

1. Golden parachutes - Some target firms provide compensation to top-level management if a takeover occurs. This can be viewed as a payment to management to make it less concerned for its own welfare and more interested in stockholders when considering a takeover bid. Alternatively, the payment can be seen as an attempt to enrich management at the stockholders’ expense.
2. Crown jewels - Firms often sell major assets—crown jewels—when faced with a takeover threat. This is sometimes referred to as the scorched earth strategy.
3. Poison pill - Poison pill is a term taken from the world of espionage. Agents are supposed to bite a pill of cyanide rather than permit capture. Presumably this prevents enemy interrogators from learning important secrets. In finance, poison pills are used to make a stock repellent to others. A poison pill is generally a right to buy shares in the merged firm at a bargain price. The right is granted to the target firm’s shareholders, contingent on another firm acquiring control. The right dilutes the stock so much that the bidding firm loses money on its shares. Thus, wealth is transferred from the bidder to the target.
4. White knight - A firm facing an unfriendly merger offer might arrange to be acquired by a different friendly suitor. The firm is thereby rescued by the white knight.
5. Lockup - A lockup is an option granted to a friendly suitor (perhaps a white knight) giving the right but not the obligation to purchase stock or a portion of the assets (perhaps the crown jewels) of the target firm at a fixed price in the event of an unfriendly takeover.
6. Shark repellent - A shark repellent is any tactic that makes the firm less attractive to a potential unfriendly offerer.
7. Bear hug - A bear hug is an unfriendly takeover that is so attractive that the target firm’s management has little choice but to accept it.

Excerpt taken from Corporate Finance (2004 Edition) by Stephen Ross, Randolph Westerfield, & Jeffrey Jaffe

These cracked me up! I think shark repellent is my favorite. This would also be a great term for avoiding lawyers or other legal action.

They don't exactly embody what I would expect for "high class" corporate lingo. I guess people get creative, not only with tactics, but with describing those tactics when they feel their business or livelihood is threatened.

Does anyone else have examples of quirky corporate lingo? If so, please add them to the comments. I'd love to expand my vocabulary!

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Now playing: Franz Joseph Haydn - Piano Concerto No. 4 In G Major: 3: Rondo: Presto
via FoxyTunes

Photography Copyright Information

Even though I hesitate to make a serious business out of my photography I decided that it was time to research what I need to do to protect my pictures that are floating around on the internet via my blog.

I was inspired yesterday after perusing a website built by another Navy wife here in Sicily, Pinch My Salt. She has built an amazing site based on food and life and recently won an award for best food blog.

As I scanned her "about me" section I noticed the copyright information she had posted. The link led me to creativecommons.org. Still unsure as to what their purpose was I navigated to the FAQs and then clicked a link to the copyright.gov website and clicked on Copyright Basics.

Here are a few of the things that I learned (items in bold are quoted from the copyright.gov website):

1. Copyright protection subsists from the time the work is created in fixed form. Basically this means that from the moment I put pen to paper or click the shutter on my camera and an image exists on my memory card that work is protected by copyright law.
2. No publication or registration or other action in the Copyright Office is required to secure copyright.
3. The use of a copyright notice is no longer required under U.S. law, although it is often beneficial.
4. The notice for visually perceptible copies should contain all the following three elements: The symbol © (the letter C in a circle), or the word “Copyright,” or the abbreviation “Copr.”; The year of first publication of the work; The name of the owner of copyright in the work. (Example: © 2006 John Doe)
5. Copyright registration is not a condition of copyright protection...however copyright registration provides several advantages such as before an infringement suit may be filed in court, registration is necessary for works of U.S. origin. (Visit copyright.gov for complete list)

Once I had a general understanding of the basics I went back to the creativecommons.org website. Reading through their FAQ I discovered the following:

Creative Commons licenses give you the ability to dictate how others may exercise your copyright rights—such as the right of others to copy your work, make derivative works or adaptations of your work, to distribute your work and/or make money from your work.

I decided to utilize their website to develop code to post on my personal blog, establishing what uses my photos may and may not be used for. I was also able to download graphics to imprint onto my pictures as a reminder that they are protected by copyright laws and are licensed for limited uses.

I feel like a weight has been lifted. I knew that I needed to research and understand copyright basics but, as with anything legal, I was intimidated and didn't want to misunderstand or miss something. It was much simpler than I expected.

Disclaimer: This website does not offer legal advice. If you are interested in copyrighting your work please start by visiting copyright.gov to see how the laws apply to you.

The things I think about when I'm trying to sleep

"Choose a job you love, and you will never have to work a day in your life." Confucius

How many times have you heard this quote or some derivative of it? It sounds good in theory, but my personal experience has been that doing something you love and trying to earn a living at it can bleed the passion from what you once loved.

When I applied to colleges I was convinced that I wanted to major in music. I loved music. I played piano, clarinet, and had played with a number of accomplished ensembles. Making a career out of my passion seemed like a great idea. Unfortunately the reality wasn't what I expected.

My freshman year of college completely changed the way I looked at my talents, and drained a great deal of the passion that I had for music. In the past I had always excelled in music classes and in my lessons. Even through the classroom work in college I did well, but it was in my college level lessons that I faltered.

I took lessons from the department chair, supposedly the best teacher on campus and was sorely disappointed. I was hardly his star pupil and though he was never outright rude he made it known in other ways that I wasn't very high on his priority list. For example, he rarely showed up for my lessons on time. When I asked about this he said it was my responsibility to find him...I ran this by a couple of my peers, other pianists that were far more accomplished than I and were also taking lessons from him, and they were appalled and expressed that they had never had a similar problem with him. Little things like this hit my confidence pretty hard.

I switched teachers and found a great instructor. He was attentive and I felt like I was finally starting to make progress and my love of the piano was being revived. Unfortunately when I received my report card I was stunned to see that I had received less than an 'A' (I don't remember what the grade was, only that it wasn't an 'A'). I was crushed. I had worked so hard but when I asked my instructor about the grade I was told that I hadn't made 'A' level progress.

My decision to switch majors didn't happen overnight, but a less than good grade in piano lessons was the catalyst that started me thinking in new directions. I needed a career that I didn't dread waking up to do every day and one that I was good at. That is why I chose business. I love my business, my job. I enjoy the customers that I've worked with and the work that I've done for them. It isn't what I'd choose to do in my time off but I've discovered that mixing my artistic passions and the demands of a career can drain me of my inspiration.

The decision to pursue a business degree was made about ten years ago and again I am facing a similar dilemma. I love photography. I love it when others see my work and it makes them feel something positive. It is a tremendous compliment when someone buys my work. Lately my husband has been encouraging me to do more to market my pictures, but I'm scared that making it a "job" will take the fun out of it. I don't want my artwork to become something I have to do.

Artistic inspiration cannot be forced and the moment I'm put on the spot I get a mental block about what to do next. I need to be inspired, without that my work is lifeless, forced, and mediocre.

I'm still trying to find a way to follow Confucius' advice, but until I figure it out I probably need to keep my job and hobbies separate. I still play music, but not at the level or with the passion that I once did. I don't want to lose my passion for photography.

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Now playing: James Horner - Through The Fires, Achilles... And Immortality
via FoxyTunes

New SLO Plastering, Inc. Website Launched

The new SLO Plastering, Inc. website is up and running! I have been promising my parents for several years that I would build a website for their business and I have finally finished it. I would love to know what you think and if you have suggestions for improvements.

Return to Productivity

After several months of silence, I'm back!

My husband & I have successfully moved to Sicily and are finally set up. I've been playing housewife for several weeks and I'm finally going crazy. I miss feeling productive. Since there are a shortage of opportunities for a self-employed military spouse in Europe I have decided to go back to school. I am planning on enrolling this week in University of Phoenix for my MBA!

University of Phoenix has an amazing program set up for the military that spouses can take advantage of. Basically, the dollars and cents work out in such a way that it doesn't make sense for me NOT to! It is not free by any stretch of the imagination, but the price is so reasonable that I can't ignore it.

Three months ago I read an article in Business Week about the top business schools in the U.S. My dream had been to attend Northwestern for my masters degree, but I saw in that article that they were up to $45,000 a year for tuition. I became completely discouraged and put getting my masters out of my head. I didn't want to work as hard as I'd have to, to make a $90,000 degree worthwhile - there are too many things to do and see in this world to spend the rest of my life cooped up in an office working to repay student loans!

When the opportunity from University of Phoenix first presented itself I must admit I was skeptical. It seemed a bit too good to be true. Plus, I wasn't bored yet so I didn't seriously consider it. Once we got settled and I fell into the daily routine of clean house, cook, do laundry, watch Dr. Phil, etc. I decided that I was pathetic and something needed to change, NOW. I made a few phone calls, visited the college office on base and I now have the documentation in hand. I plan to apply this week and start classes January 2, 2007!

Wish me luck! It's been a few years since I was in school, and I'll admit that it makes me a little nervous, but I'm so excited!

I love my job

Nothing makes you realize how much you like your job until you have to give it up.

I feel incredibly fortunate to be one of the few people who LOVE what they do for a living. Thanks to the support of my wonderful husband, about a year and a half ago I had the courage to quit my day job and start my own business. I had initially wanted to focus more on the art and graphic design side of my interests, but I ended up doing very little of that and focusing on financial consulting for local businesses.

I built up a great regular client base in record time and was off and running. Working with different businesses, different people and different issues every day is what I love about being a consultant. I NEVER get bored.

I really enjoy fixing companies that are a mess. Don't get me wrong, working with healthy companies is great because you get to move above and beyond the day to day and take it to the next step, but there is something very gratifying when a company is a mess, really needs you, and you are the one that picks it up and makes it healthy.

Today I am off to Las Vegas to sit in on a meeting for one of my primary clients AttorneyGuide.com. This will be the last major project that I participate in with them for a few months. I truely hope that while I am overseas I can continue to work with this company and be a part of the changes taking place.

Giving up the bulk of my business to move is tough. I didn't expect to feel such a loss at quitting my job and being a "kept wife" for awhile, but I'm really going to miss it.

Gratification in a Hard Day's Work

There is something so gratifying in a long hard day at work. Walking to my car I felt elated. No, not just because I was done for the day, but because I worked hard and finished a HUGE project! When I work I put everything in to what I am doing. To see the payoff feels so good.

It is my impression that there are way too many people in the world who go to work and do the bare minimum to take home their paycheck. I'm not saying that work has be consume you entire being, I'm all about working hard and playing hard, but while you work, you should wholly apply yourself.

Although I like to receive praise for a job well done, ultimately I am the one who has live with myself. If I perform poorly, even if I get away with it, at the end of the day I know that I didn't do my best. Sometimes my extra efforts go unnoticed, but more often than not, my clients and former employers notice that I go above and beyond. It is great to know that I, and my work, are appreciated.