QUESTION 5

Calcium and Iron are most likely to fall short in the diet. What is the result of this inadequate intake? 2 pts.

What dietary changes can promote improved intake and reduce risk of deficiency? 4 pts.

Respond to the following in a minimum of 175 words:

Global information technologies have evolved over time. What are some ways these technologies have changed? How can being aware of these changes help you in global business?

[The following information applies to the questions displayed below.]

rev: 04_28_2016_QC_CS-49731

1.

value:
0.50 points

Required information

References

eBook & Resources

WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI.

Difficulty: 2 MediumLearning Objective: 09-02 Compute residual income and understand its strengths and weaknesses.

Check my work

2.

value:
0.50 points

Required information

References

eBook & Resources

WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI.

Difficulty: 2 MediumLearning Objective: 09-02 Compute residual income and understand its strengths and weaknesses.

Check my work

3.

value:
0.50 points

Required information

References

eBook & Resources

WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI.

Difficulty: 2 MediumLearning Objective: 09-02 Compute residual income and understand its strengths and weaknesses.

Check my work

4.

value:
0.50 points

Required information

References

eBook & Resources

WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI.

Difficulty: 2 MediumLearning Objective: 09-02 Compute residual income and understand its strengths and weaknesses.

Check my work

5.

value:
0.50 points

Required information

References

eBook & Resources

WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI.

Difficulty: 2 MediumLearning Objective: 09-02 Compute residual income and understand its strengths and weaknesses.

Check my work

6.

value:
0.50 points

Required information

References

eBook & Resources

WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI.

Difficulty: 2 MediumLearning Objective: 09-02 Compute residual income and understand its strengths and weaknesses.

Check my work

7.

value:
0.50 points

Required information

References

eBook & Resources

WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI.

Difficulty: 2 MediumLearning Objective: 09-02 Compute residual income and understand its strengths and weaknesses.

Check my work

8.

value:
0.50 points

Required information

References

eBook & Resources

WorksheetLearning Objective: 09-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI.

Difficulty: 2 Medium

Beckett Organics

John Beckett enjoys vegetables, so much so that he has given up his full-time job as a lawyer to concentrate on growing and marketing organic vegetables. He started growing vegetables 20 years ago in his back garden and eventually became fully self-sufficient in supplying vegetables for the family. Partly bored with his legal job and tempted by an attractive severance package, John decided he would try to establish his own vegetable supply business. Eighteen months ago he looked around for two fields to lease in which he could grow organic vegetables.

Organic products including vegetables, is a growth market in the UK. Growers must adhere to strict guidelines in order to gain organic certification. Increasing awareness of the problems associated with many pesticides and fertilizers, coupled with an increased interest in healthy eating habits and ‘wholesome’ food, has meant that many consumers are now either purchasing or interested in purchasing organic vegetables. This is true not only of household customers, but in addition, many restaurants are using the lure of organic produce to give them a distinctive edge in the market place.

All this has meant that many of the larger supermarkets in the UK have begun to stock more and more organic produce from what was a relatively specialized market in the 1990s; the market has grown to where overall organic produce accounts for some 12% of the total UK grocery market and in worldwide terms as of January 2010 it accounts for approximately 3% of all food sales. The market for organic vegetables has grown more rapidly than other organic products and it is estimated that by 2014 some 25% of all vegetables marketed in the UK will be organic. This growth has been sustained at a rate of around 20% per year in developed countries. However, organic yields are between 10% and 20% lower than conventional agriculture, with crops like potatoes some 40% lower. Unsurprisingly, this makes organic produce on average around 40% more expensive than non-organic produce.

A.C.Nielsen Co. cite the case of the United States where organic sales eased in the second half of 2009 as middle- and upper-income families have felt the strain of layoffs and declining investment portfolios. Sales in December 2009 were up 5.6 percent, year on year, against a 25.6 percent rise a year earlier.

Organic vegetables offer several advantages over their non-organic counterparts:

• They are generally tastier, and because they are not treated in the same way, are usually fresher than nonorganic products.
• They are good for a healthy lifestyle as they contain no pesticides and chemicals.
• The fact that no pesticides or herbicides are used in their production means that they are much ‘greener’. For example, they help to reduce the problems associated with nitrates in the soil and water supplies.
• On the downside, organic vegetables are generally less uniform, and as far as some consumers are concerned, are less attractive in appearance. This lack of uniformity has also been a problem in the past with supermarket buyers who have traditionally looked for uniformity in fresh products to aid merchandising and marketing in retail outlets.

• Generally, organic vegetables are more expensive than their non-organic counterparts. Currently, on average they are somewhere in the region of 40% more expensive.

In the UK, anyone wishing to claim that their produce is organic, and market it in this way, needs to obtain the approval of the Soil Association, which checks the organic credentials of a supplier. For example in this case, they check the conditions under which the produce is grown and how the seeds used.

Two interesting developments are taking place in the organic produce market. One is the growth of home supplies. This is where the producer supplies direct to the householder. There are a variety of ways of doing this. Some smaller growers use mail-shots and leafleting to build up a client base. They then deliver locally to customers who order from a list. Very often the supplier will simply make up a box of a pre-determined value or weight containing a selection of vegetables which are in season and ready for picking. Other suppliers are using a similar system, but take their orders via the Internet. This is particularly suitable for this type of product as customers can check on a regular basis what is available and order from home. The produce is then delivered at a pre-arranged time.

The second development in the organic produce market is the growth of farmers’ markets. These markets are usually run by local authorities, often on Saturdays or Sundays. Local and other producers attend these markets, paying a small fee for a stall and then sell their produce direct to the consumer. These farmers’ markets partly came about as a result of the frustration felt by many farmers and growers at the way they were being treated by retailers and at the margins they were receiving. In addition, such markets have been successful because consumers feel they are getting fresh produce at lower prices than they might be able to obtain through supermarkets.

Despite the growth in the market for organic vegetables, after 18 months in his business, John is worried. Quite simply, his business has not been as successful as he envisaged it would be, and as a result he is not earning enough to make a living. The real worry is that he is not sure why this is the case. His produce, he believes, is as good as anything in the business. He is a very good grower and the land he has leased is perfect for the range of produce he wishes to grow. Starting with organic potatoes he now produces a range of organic vegetables including beans, sprouts, carrots, lettuce and his latest venture organic tomatoes and corn grown in poly-tunnels. Although customers he currently supplies are very loyal to John, indeed many are friends and acquaintances he has known over the years when he grew vegetables in his back garden, there are simply not enough of them.

As a result, his turnover which increased rapidly over the first year of the business has for the last six months has stagnated. He mainly supplies locally and has tried to increase his customer base by taking leaflets out and posting them through letterboxes in the area. He has done this by dividing up the housing areas in a ten mile radius around his growing area and dropping leaflets throughout the area to as many houses as he can cover on a systematic basis. Only some 2% of customers have responded with an order, usually contacting by telephone. These customers seem to come from the middle class areas. He has considered taking a stall at one of the farmers’ markets, the nearest of which is some 40 miles away and operates one day per month, but he realises this would not be enough to reach the turnover levels he requires. He has in the past supplied one or two local restaurants and hotels, but usually only when they have contacted him because they have had a problem with their existing supplier.

He has never followed these up. His growing area is currently too small to supply a major retailer, although he has been approached on an informal basis by the buyer of a voluntary chain of local grocers representing some 40 retail outlets in the county.

John is wondering where he goes from here. He cannot understand why his superior products are not selling well. A friend has suggested that John needs a more strategic approach to marketing. John is not convinced. He feels his business is too small to warrant any kind of marketing, never mind strategic marketing, and he has always felt that a good product should sell itself. He is, however, anxious to grow the business and become a leading organic vegetable supplier.

Questions 1:

What advice would you give to John about developing his business through more effective strategic marketing?

Questions 2:

What are the strategies that John should use to market his Organic vegetables since this is a new and upcoming area of business?

Questions 3:

What would be the appropriate strategy that you would suggest if this company is to start marketing its products in your home country? Explain with reasons.

Questions 4:

What in your opinion should be the marketing strategy that an organization of this type should indulge in? Bring out the advantages and disadvantages of the strategy.

Case:

Delta's New Song:

A Case on Cost Estimation in the Airline Industry

INTRODUCTION

Founded in 1924, Delta Airlines is the third largest U.S. airline in operating revenues and revenue passenger miles flown. 1 Traditionally, Delta's primary competition came from the other full-service airlines, including United Airlines and American Airlines. However, in recent years, the major airlines have increasingly been forced to compete with low-cost, no-frill airlines pioneered by "fly for peanuts" Southwest Airlines. The significant downturn in passenger volume in the third quarter of 2001 (following the September 11 attacks) served only to increase the head-to-head competition between the majors and the low-cost competitors.

AIRLINE LABOR COSTS

Industry Challenges

Airlines must operate within a low-margin, high-fixed-cost environment, making profitability particularly sensitive to decreases in volume, either from environmental factors (e.g., the September 11,2001 attacks) or from competition. Moreover, the airline business is labor-intensive. Labor costs as a percentage of revenues ranges from a low of about 25 percent for the low-fare airlines to almost 50 percent for the large, full-service airlines such as United (see Exhibit 1).

For many airlines labor unions at various levels of the organization are strong, presenting an additional challenge in the management of costs. Labor union (re)negotiations were on the rise during 2003, as airlines tried to pass along an increasing share of the cost cutting to its employees. In the summer of 2002, US Airways won concessions from its workers corresponding to a 27 percent reduction from its prior year labor costs. Plans to terminate the airline's pilot pension plan, however, met with objections and will likely be resolved in US Airway's bankruptcy hearings. In January of 2003, American Airlines requested an $8 billion concession from the three labor unions representing its labor force. Northwest similarly argued for salary concessions as part of a $ 1 billion cutback (Gary and McCartney 2003).

"Labor costs, especially pilot-labor costs, are on the point of the spear again," Capt John Prater, chairman of the pilot union at Continental Airlines, recently wrote to his members. "Airline managements, Wall Street, the [Bush] administration and Congress are once again looking for a scapegoat to blame for the industry's ailments; so-called 'high-priced, under-worked' pilots have once again become their primary target." A senior pilot in the industry typically earns about $250,000 a year, while a senior mechanic would make about $70,000 and a senior flight attendant about $40,000. (Gary and McCartney 2003)

Delta Airlines

With over 81,000 employees, salaries are a significant component of Delta's cost structure, accounting for over 42 percent of the company's total operating expenses and over 46 percent of total revenues in fiscal year 2002 (see Exhibit 2). As with other airlines, Delta pilots and flight attendants are paid for hours flown. Contracts for unionized personnel guarantee a certain level of hours to unionized employees (with federal regulations providing caps on the number of hours that can be flown by an individual in a month). As a consequence, salaries are largely fixed in the short term for unionized employees. However, Delta is the least unionized of the major airlines. In fact, Delta's pilots are the only unionized employee group (with the exception of a very small contingency of flight operations personnel). Delta's flight attendants and ticket agents are not under union contract; consequently, their salaries, as well as hourly personnel (e.g., ticket counter and ramp operations personnel), represent salaries that are more variable in nature. Moreover, contracted maintenance work creates additional flexibility in salaries costs for Delta.

Since interim wage concessions by pilots of United Airlines (which also filed for bankruptcy protection in December 2002), Delta pilots are the highest paid in the industry with an average hourly wage rate for a Boeing 757 captain of $245. The same pilot would earn $178 per hour at Continental Airlines and only $172 per hour at United (post-concession) (Harris 2003b). In February 2003, the Airline Pilots Association (ALPA) successfully blocked Delta's plan to furlough an additional 1,700 pilots (Delta had already furloughed 1,600 pilots citing September 11 traffic declines as "circumstances beyond its control"). The ALPA, however, argued that the furloughs were in fact the result of the general economic difficulties the industry was experiencing and, therefore, were in violation of ALPA contracts that prohibit layoffs due to the company's economic

and financial situation. Delta representatives continue to assert the "continuing need to address overall pilot costs to enable Delta to return to a competitive cost structure and to preserve Delta's long-term future" (Setaishi 2003).

DELTA'S SONG

In November 2002, Delta Airlines announced that it would form a new low-cost carrier, Song. Song began service on April 15, 2003 with its first flight between John F. Kennedy International Airport in New York and West Palm Beach, Florida (Wong 2003). This was not Delta's first attempt to enter the low-fare market. A previous attempt, Delta Express, was initially profitable but eventually failed because of "a lack of a management team to fight budget wars, cost creep, and brand confusion" (Daniel 2003). Despite this prior unsuccessful attempt to operate a low-cost carrier under the Delta umbrella, Delta asserts its belief that Song will be able to successfully compete in the low-fare industry segment, a segment that has been relatively prosperous amid the industry downturn.

Song operations will be based on the low-cost model of Southwest Airlines (e.g., low fares, low frills, and quick turnarounds) and is targeted to compete with successful newcomer JetBlue. Song will be supported by a single-airliner fleet of 36 Boeing 757s and will provide service to Florida and the East Coast. Like JetBlue, Song flights will feature in-flight entertainment competitive with JetBlue's satellite televisions (Harris 2002).

Can Delta Succeed Where It Has Failed Before?

Overall, Delta expects cost per available seat mile to be about 20 percent lower for Song than it is for its current operations. John Selvaggio, Delta executive and future Song president indicates that airplane utilization will be increased and pilots and flight attendants will experience "more flying and less sitting time" (Harris 2002). What Delta won't do, however, is pay its Song pilots less than the current Delta pilots. Given that Delta pilots' per hour wage rates are, on average, $100 more than those of Southwest and JetBlue, industry analysts are skeptical of the ability of Delta to compete in the low-cost carrier segment. "It's very hard for me to see how they can come very close to the costs of JetBlue and Southwest without closing the labor-cost gaps," said Michael Roach, an associate with Unisys R2A Transportation Management Consultants in Hayward, California (Harris 2003a). In fact, Roach estimates that JetBlue and Southwest would still have 10 percent and 30 percent cost advantages, respectively, over Song.

Delta is in a position of evaluating entry into a new product market, namely, the low-cost carrier market. The question is, can Delta succeed where it has failed before? Can the airline create for itself a business model that can compete with the JetBlues and Southwest Airlines of the industry? Moreover, it may be that their options for operational investments are more limited than those of a brand new carrier such as JetBlue, thereby putting Song at a disadvantage. For example, they will be using their current airline fleet and, as a result, will be unable to take advantage of favorable lease terms offered to new carriers (Daniel 2003). The key to success for this endeavor lies in the ability to create a very different cost structure than the one under which it currently operates. Delta must understand how its current costs behave and, more importantly, anticipate how they will behave in the new business model outlined for Song. Can Delta rely on historical data to predict costs into the future for Delta and for Song? Or has the business model (and the environment) changed in such a fundamental way that Delta can no longer assume "business as usual"?

Questions:

What would be the effect of a sharp decline in passengers for a firm with a microeconomic structure such as the one Delta had in place during 2001? Is Delta’s operating leverage high or low?

Analyze the proposal to launch Song as a response to the situation the firm is facing.

Estimate the salary cost function for Delta. Despite the fact you can choose between some feasible drivers, please use Revenue Passenger Miles for this part of the case. Use the High Low method.

Estimate the salary cost function for JetBlue. Use the high low method.

What conclusion can you make out of the comparison of both cost functions?

Maybe it the method. Please redo 3 and 4 by using simple linear regression?

Did the result of your analysis change?

Can Delta be successful on the new segment? Is the strategy aligned with the microeconomic structure of Delta? (THIS IS A VERY RELEVANT QUESTION)

Some years after Delta’s case situation, salaries were no longer the highest cost for Delta. Fuel prices increased dramatically after 2001. How can you deal with this new profitability threat from a cost management perspective?

If costs cannot come down, how can we improve the profitability of a firm such as Delta? While answering this question remember the components of a profit function.

CASE

Delta's New Song:

A Case on Cost Estimation in the Airline Industry

INTRODUCTION

Founded in 1924, Delta Airlines is the third largest U.S. airline in operating revenues and revenue passenger miles flown. 1 Traditionally, Delta's primary competition came from the other full-service airlines, including United Airlines and American Airlines. However, in recent years, the major airlines have increasingly been forced to compete with low-cost, no-frill airlines pioneered by "fly for peanuts" Southwest Airlines. The significant downturn in passenger volume in the third quarter of 2001 (following the September 11 attacks) served only to increase the head-to-head competition between the majors and the low-cost competitors.

AIRLINE LABOR COSTS

Industry Challenges

Airlines must operate within a low-margin, high-fixed-cost environment, making profitability particularly sensitive to decreases in volume, either from environmental factors (e.g., the September 11,2001 attacks) or from competition. Moreover, the airline business is labor-intensive. Labor costs as a percentage of revenues ranges from a low of about 25 percent for the low-fare airlines to almost 50 percent for the large, full-service airlines such as United (see Exhibit 1).

For many airlines labor unions at various levels of the organization are strong, presenting an additional challenge in the management of costs. Labor union (re)negotiations were on the rise during 2003, as airlines tried to pass along an increasing share of the cost cutting to its employees. In the summer of 2002, US Airways won concessions from its workers corresponding to a 27 percent reduction from its prior year labor costs. Plans to terminate the airline's pilot pension plan, however, met with objections and will likely be resolved in US Airway's bankruptcy hearings. In January of 2003, American Airlines requested an $8 billion concession from the three labor unions representing its labor force. Northwest similarly argued for salary concessions as part of a $ 1 billion cutback (Gary and McCartney 2003).

"Labor costs, especially pilot-labor costs, are on the point of the spear again," Capt John Prater, chairman of the pilot union at Continental Airlines, recently wrote to his members. "Airline managements, Wall Street, the [Bush] administration and Congress are once again looking for a scapegoat to blame for the industry's ailments; so-called 'high-priced, under-worked' pilots have once again become their primary target." A senior pilot in the industry typically earns about $250,000 a year, while a senior mechanic would make about $70,000 and a senior flight attendant about $40,000. (Gary and McCartney 2003)

Delta Airlines

With over 81,000 employees, salaries are a significant component of Delta's cost structure, accounting for over 42 percent of the company's total operating expenses and over 46 percent of total revenues in fiscal year 2002 (see Exhibit 2). As with other airlines, Delta pilots and flight attendants are paid for hours flown. Contracts for unionized personnel guarantee a certain level of hours to unionized employees (with federal regulations providing caps on the number of hours that can be flown by an individual in a month). As a consequence, salaries are largely fixed in the short term for unionized employees. However, Delta is the least unionized of the major airlines. In fact, Delta's pilots are the only unionized employee group (with the exception of a very small contingency of flight operations personnel). Delta's flight attendants and ticket agents are not under union contract; consequently, their salaries, as well as hourly personnel (e.g., ticket counter and ramp operations personnel), represent salaries that are more variable in nature. Moreover, contracted maintenance work creates additional flexibility in salaries costs for Delta.

Since interim wage concessions by pilots of United Airlines (which also filed for bankruptcy protection in December 2002), Delta pilots are the highest paid in the industry with an average hourly wage rate for a Boeing 757 captain of $245. The same pilot would earn $178 per hour at Continental Airlines and only $172 per hour at United (post-concession) (Harris 2003b). In February 2003, the Airline Pilots Association (ALPA) successfully blocked Delta's plan to furlough an additional 1,700 pilots (Delta had already furloughed 1,600 pilots citing September 11 traffic declines as "circumstances beyond its control"). The ALPA, however, argued that the furloughs were in fact the result of the general economic difficulties the industry was experiencing and, therefore, were in violation of ALPA contracts that prohibit layoffs due to the company's economic

and financial situation. Delta representatives continue to assert the "continuing need to address overall pilot costs to enable Delta to return to a competitive cost structure and to preserve Delta's long-term future" (Setaishi 2003).

DELTA'S SONG

In November 2002, Delta Airlines announced that it would form a new low-cost carrier, Song. Song began service on April 15, 2003 with its first flight between John F. Kennedy International Airport in New York and West Palm Beach, Florida (Wong 2003). This was not Delta's first attempt to enter the low-fare market. A previous attempt, Delta Express, was initially profitable but eventually failed because of "a lack of a management team to fight budget wars, cost creep, and brand confusion" (Daniel 2003). Despite this prior unsuccessful attempt to operate a low-cost carrier under the Delta umbrella, Delta asserts its belief that Song will be able to successfully compete in the low-fare industry segment, a segment that has been relatively prosperous amid the industry downturn.

Song operations will be based on the low-cost model of Southwest Airlines (e.g., low fares, low frills, and quick turnarounds) and is targeted to compete with successful newcomer JetBlue. Song will be supported by a single-airliner fleet of 36 Boeing 757s and will provide service to Florida and the East Coast. Like JetBlue, Song flights will feature in-flight entertainment competitive with JetBlue's satellite televisions (Harris 2002).

Can Delta Succeed Where It Has Failed Before?

Overall, Delta expects cost per available seat mile to be about 20 percent lower for Song than it is for its current operations. John Selvaggio, Delta executive and future Song president indicates that airplane utilization will be increased and pilots and flight attendants will experience "more flying and less sitting time" (Harris 2002). What Delta won't do, however, is pay its Song pilots less than the current Delta pilots. Given that Delta pilots' per hour wage rates are, on average, $100 more than those of Southwest and JetBlue, industry analysts are skeptical of the ability of Delta to compete in the low-cost carrier segment. "It's very hard for me to see how they can come very close to the costs of JetBlue and Southwest without closing the labor-cost gaps," said Michael Roach, an associate with Unisys R2A Transportation Management Consultants in Hayward, California (Harris 2003a). In fact, Roach estimates that JetBlue and Southwest would still have 10 percent and 30 percent cost advantages, respectively, over Song.

Delta is in a position of evaluating entry into a new product market, namely, the low-cost carrier market. The question is, can Delta succeed where it has failed before? Can the airline create for itself a business model that can compete with the JetBlues and Southwest Airlines of the industry? Moreover, it may be that their options for operational investments are more limited than those of a brand new carrier such as JetBlue, thereby putting Song at a disadvantage. For example, they will be using their current airline fleet and, as a result, will be unable to take advantage of favorable lease terms offered to new carriers (Daniel 2003). The key to success for this endeavor lies in the ability to create a very different cost structure than the one under which it currently operates. Delta must understand how its current costs behave and, more importantly, anticipate how they will behave in the new business model outlined for Song. Can Delta rely on historical data to predict costs into the future for Delta and for Song? Or has the business model (and the environment) changed in such a fundamental way that Delta can no longer assume "business as usual"?

Questions:

What would be the effect of a sharp decline in passengers for a firm with a microeconomic structure such as the one Delta had in place during 2001? Is Delta’s operating leverage high or low?

Analyze the proposal to launch Song as a response to the situation the firm is facing.

Estimate the salary cost function for Delta. Despite the fact you can choose between some feasible drivers, please use Revenue Passenger Miles for this part of the case. Use the High Low method.

Estimate the salary cost function for JetBlue. Use the high low method.

What conclusion can you make out of the comparison of both cost functions?

Maybe it the method. Please redo 3 and 4 by using simple linear regression?

Did the result of your analysis change?

Can Delta be successful on the new segment? Is the strategy aligned with the microeconomic structure of Delta? (THIS IS A VERY RELEVANT QUESTION)

Some years after Delta’s case situation, salaries were no longer the highest cost for Delta. Fuel prices increased dramatically after 2001. How can you deal with this new profitability threat from a cost management perspective?

If costs cannot come down, how can we improve the profitability of a firm such as Delta? While answering this question remember the components of a profit function.

Recent changes in how employees receive retirement, e.g. through a defined contribution plan vs. a defined benefit plan, have caused many to question whether they can retire at the age they expected.

Please address responses to the following questions:

What is the main difference between the 401(k)-type, e.g. defined contribution plans, vs. traditional pension plans, e.g. defined benefit plans?

Which type of retirement plan do you prefer and why?

A large manufacturing firm has been selling on a 3/10, net 30 basis. The firm changes its credit terms to 3.5/9, net 25. What change might be expected on the

• Decreased receivables and increased bank loans.

• Increased receivables and increased bank loans.

• Decreased payables and increased bank loans.

• Increased payables and increased bank loans.