Day 248 Budgeting

Budgeting

In my opinion, there are five stages involved in creating an efficient and accurate budget. First of all, managers must determine the goal of the business, which the budget must comply. It will be an important factor to evaluate the budget and provide guideline during the preparation process. In the second stage, management will decide the type and period of the budget. These attributes should correspond to the objective from the first stage. Thirdly, the detailed budgets are developed through cross-department coordination (participative budget) or top management decisions (top-to-bottom implementation). During this stage, managers have to make reasonable assumptions on business future performance in specific areas. Such predictions are base on the managers’ perceptions and company’s past performance. Moreover, the bottlenecks (limitations) forecasts should be aware by the management to enable efficient resource allocation. After the planning stage, the budget committee is responsible for generating a further evaluation of the budget effectiveness. The committee assesses all factors such as systematic risks, potential conflicts with the current system, or internal business conditions. According to the result, management will make necessary adjustments to ensure the budget sufficiently support the objectives. At last, the final budget will be communicated to stakeholders, where all relevant matters should be clearly represented.

Managers participate in two major roles in budget preparation: developing and controlling. In fact, managers provide the data used in budget creation, where all the forecasts are suggested by their experience and assumptions. Also, a successful implementation of the budget depends on manager’s participation. Top management is responsible for communicating the budget to stakeholders and design simulation package for meeting the budget targets. Hence, managers control the preparation process to maintain the budget efficiency and effectiveness.

On the other hand, the budget committee oversees the budget establishment. It is their responsibility to make sure that the budget complies with the company goal. They are also required to resolve conflicts and impediments incurred during the preparation. (Garrison, Noreen & Brewer, 2015) Besides, the committee coordinates cross-functional departments to generate the budget, and the committee will evaluate the outcome before implementation.

Day 232 The GFC and monetary policy in U.S.

The GFC and monetary policy in U.S.

The Global Financial Crisis(GFC) is also referred as the U.S. sub-prime mortgage market crush between 2007 and 2008. This is because the collapse on sub-prime mortgage companies leaded the domino effect on the global financial markets. The drastic crush on the Mortgage Backed Securities MBS hit the bank hard and generated the chain reaction on the U.S. economy. 

According to the data, the U.S. economy experienced a nil to negative growth on GDP during 2008 and 2009. Both consumer expenditure and investment suffered a decline during the same period. Especially in the residential investment market, the burst of real-estate bubble immensely reduced the investment on related area. In addition, the export and import have been hit as well. The government expenditure increased due to the fiscal stimulation plan in 2008 and 2009.  

In response to the crisis, the Federal Reserve Bank (FRB) has lowered the effective interest rate since the GFC, which indicates a typical expansionary monetary policy. In fact, the federal fund rate has been reduced to 0.16 percent in 2009, and this near-zero interest rate generated several effects. Firstly, the low interest rate boosted households’ expenditure, since there were fewer incentives for them to invest money. The interest rate is treated as the premium to compensate investors’ risk bearing, therefore, the reduced interest rate became insufficient to perform such function. Consequently, the consumers’ consumption increased, as well as GDP. Secondly, the low interest rate encouraged firms to borrow funds, due to the cost of borrowing decreased. These debt capitals transferred into the company's asset, which was anticipated to create future economic benefits and employment opportunities. Thirdly, the implication of monetary policy is achieved by open market operations, where the FRB buys and sells securities to alter the money supply. Hence the FRB expansionary policy from 2007 increased the money supply by purchasing government bonds, for the purpose to reduce the interest rate. Obviously, the government obtained more funds to use on the fiscal stimulation package, which made the economy better off. Fourthly, the low interest rate had a negative impact on demand of U.S. currency, thereby the deprecation on the exchange rate benefited the net export as well). As a matter of fact, this expansionary monetary policy was very effective. According to the data in previous section, the U.S economy recovered in 2010. The growth rate on GDP, personal consumption expenditures and gross private investment were successfully inverted back to positive. In addition, the export and import also started to increase. The government expenditure declined, corresponding to the reduced requirement on economy stimulation policy. Besides controlling the interest rate, the FRB also enforced the communication to shape the market expectation. Several actions were taken to provide investors better understanding of the expansionary policy, including the Federal Open Market Committee (FOMC) indicated that exceptionally low" levels of the federal funds rate were to be maintained for an 'extended period' in 2009.

In conclusion, this expansionary policy combined with other fiscal economy stimulation package immensely eased the crisis and helped the U.S. economy get back on track.

Day 231 Greece debt crisis and effect over Australian economy

Greece debt crisis and effect over Australian economy

The European Debt Crisis, or Greece Debt Crisis fluctuated the world market once again since 2010. The problem was derived from the risk of Greece defaulting its public debt. The Global Financial Crisis had negative impact on Greece borrowing cost, which leaded to this huge government budget deficit.

The fluctuation in the Eurozone substantially reduced the export form China and U.S., so the Australia economy was indirectly impaired through these connections. 

According to data, the Reserve Bank Australia (RBA) has been continuously reducing the target cash rate from 2011. This expansionary monetary policy was aiming to carry the Australian economy out from its downturn. However, in our perspective, the policy seems quite ineffective on economy stimulation, even though the target cash rate has been successfully reached. In fact, the low interest rate did perform part of its role on spending aggregation. For example, the GDP growth rate was brought back to 4 percent, and the import increase 5.6 percent on 2014. Besides that, our export and private investment still showed a downward trend, and the household consumption growth dropped to 4.1% in 2015. There were several factors that hindering the effective expansionary policy implication. First of all, the mining boom has ended, suggested by the total private investment growth. This made the total demand of funds from the business sector dropped, hence the investment expenditure was shrinking. In addition, the EDC substantially affected the Chinese economy, which tremendously hurt Australian’s export to China (majorly iron ores and other minerals). Therefore, the net export was unstable as well. Moreover, the low interest rate did not provide much stimulation over households' spending. The recession on Australian business cycle and the global economy fluctuation caused a high unemployment rate, which increased individual’s precautionary need to hold money, instead of spend it. Furthermore, the cutting interest rate provided speculative opportunities on the real-estate market. The property price in Sydney and Melbourne was skyrocketing, which created another bubble. In fact, the APRA had to pass new regulations to raise the residential investment loan rate. 

In conclusion, the expansionary monetary policy aggregated the expenditure in a less effective manner, due to the factors we discussed above.   

Day 230 The RBA monetary policy effectiveness

The RBA monetary policy effectiveness

As the Greece Debt Crisis fluctuated the world economy, and Australia was indirectly affected through the connections with China and U.S.. As we can observe from the table, the Reserve Bank Australia (RBA) has been continuously reducing the target cash rate from 2011. This expansionary monetary policy was aiming to carry the Australian economy out from its downturn. However, in our perspective, the policy seems quite ineffective on economy stimulation, even though the target cash rate has been successfully reached. In fact, the low interest rate did perform part of its role on spending aggregation. For example, the GDP growth rate was brought back to 4 percent, and the import increase 5.6 percent on 2014. Besides that, our export and private investment still showed a downward trend, and the household consumption growth dropped to 4.1% in 2015. There were several factors that hindering the effective expansionary policy implication. First of all, the mining boom has ended, suggested by the total private investment growth. This made the total demand of funds from the business sector dropped, hence the investment expenditure was shrinking. In addition, the EDC substantially affected the Chinese economy, which tremendously hurt Australian’s export to China (majorly iron ores and other minerals). Therefore, the net export was unstable as well. Moreover, the low interest rate did not provide much stimulation over households' spending. The recession on Australian business cycle and the global economy fluctuation caused a high unemployment rate, which increased individual’s precautionary need to hold money, instead of spend it. Furthermore, the cutting interest rate provided speculative opportunities on the real-estate market. The property price in Sydney and Melbourne was skyrocketing, which created another bubble. In fact, the APRA had to pass new regulations to raise the residential investment loan rate.

In conclusion, the expansionary monetary policy aggregated the expenditure in a less effective manner, due to the factors we discussed above.  

Day 229 Savings and wealth

Savings and wealth

Saving and wealth are two essential measures of macroeconomic performance. They are separate factors yet hold mutual impact. 

Wealth is the value of assets minus total liabilities, and saving is the disposable income less current spending. Wealth is the stock figure which represents a value at a point of time, and saving is the flow represents the rate of change in wealth. In some extent, wealth will affect consumer’s saving pattern, on the other hand, change in wealth equals to saving plus net capital gain. The main motivation of savings are: life-cycle, precautionary and bequest saving. However, other outside factors like real interest rate, self-control and demonstration effects also have a substantial impact over saving behavior. The national saving level is the key determinant for the economy’s future growth, it is considered with two sectors, private and public saving. The private sector is the combined savings of households plus business. It equals to the after-tax income minus consumption expenditures. The public saving is the amount remains after the government covers its spending by the net tax collected(tax-transfer payments to the public). A negative public saving can be interpreted to government budget deficit, and a positive public saving means the government is experiencing the budget surplus. Even though some countries like Australia may have a low household saving level, it may not cause a problem due to the business saving, and public saving is large enough to cover it. As stated before, the saving defines the national ability to supply funds that used for investment on new capital goods. This relationship is directed by the real interest rate. It is straight-forward, since the high interest rate will increase the supply of saving and decrease the firm’s willingness to borrow for investment, vice versa. Moreover, the requirement of new technology will stimulate the demand of investment, therefore, raise the real interest rate. 

However, economist need to be aware of government budget deficit .It dramatically reduces the national saving supply, hence push the real interest rate as well. This is the crowding out effect that harms the economy’s propensity to invest on new capital goods, which will benefit the economy in the future.

Day 228 Globalization

Globalization

The globalization has become the trend of development in the past decade. When the economy opens to the world for trade, it is very common to see that domestic industry to be hurt by the foreign imported products. Since the imported goods will generally have lower price or higher quality.

The effect of this increased foreign import may have serious consequences. The demand of labor in the domestic industry will decline, due to the value of marginal product has dropped. The reduced real wage and employment quantities will drive workers mobilized to the exporting industry market, which benefited by the globalization. This market will offer more place and higher wages, since the firms are earning more than before. During this worker mobility process, government may provide transition aid such as training to workers. As we know, the technology change will boost the productivity of workers, but it may vary the real wage differently on different workers. For instance, the skill-biased technological effects the marginal products of higher-skilled workers differently from lower-skilled workers. Thus the firm will seek more higher-skilled workers and fewer lower-skilled workers. In addition, an accountant may lose his job, due to the fast development of accounting software such as MYOB, Quicken simply reduce the quantity needed for perform the task. By studying the labor market, we observe the quantity of labor demanded can be less than the labor supplied. Therefore, there are people experiencing unemployment. The unemployment is considered to be a cost for the society, due to the workforce is not fully utilized. It also creates physiological and social costs that make the society unstable. The unemployment has been divided into for types: firstly, there are always natural unemployment rates, which is independent of the economy’s performance. In addition, the frictional unemployment is less concerned because is the short-term situation caused by the workers searching for the right job. Besides the last two types of unemployment, the structural unemployment is the true burden over the government. People are unemployed due to the lack of skills of aspirations leads this long-term and chronic unemployment. Furthermore, the cyclical unemployment occurs when the economy is experiencing contraction. 

As an economist, the aim to fully utilize the workforce to product the maximum output, but there are other impediments to full employment. To illustrate, the minimum wage laws, labor unions, and other employee beneficiary regulations that increase the unit labor cost will prevent to an employer to hire the social optimal level of labors.

Day 219 Aggregate demand curve and the inflation rate

Aggregate demand curve and the inflation rate

The aggregate demand curve is used to describe the relation between the output (aggregate spending) and the inflation rate. It is downward sloping due to the higher inflation rate will create uncertainties for expenditure, reduce the wealth holding and enormously reduce the export value. 

Changes in exogenous factors that are independent from output or real interest rate will shift the aggregate demand curve. In addition, addition, the tighter monetary policy that set interest higher for each given rate of inflation will reduce the aggregate demand and shift it to the left. The aggregate supply is based on the short/long-run inflation rate. In short-term, we assume that firms do not adjust their price corresponding to the demand, so the SRAS is a horizontal line. The long-run aggregate supply indicates the economy potential output. The short-run equilibrium indicates the actual output level under the current inflation rate, the economy tends to correct itself when there is an output gap. Thus, if there is an expansionary gap, firms will raise the price to match the excess demand. It there is a contractionary gap, firms will cut the price as to sell more. As a result, a result, giving enough period of time, the economy itself will eliminate the output gap and achieve long-run equilibrium. By studying the AD-AS model, the source of inflation is clear. It can be caused by the increase in exogenous components that shift the AD curve to the right. That will create an expansionary gap, so the inflation will rise as stated before. Another source of inflation change is the inflation shock, which adverse inflation shock raises the current inflation rate, and favorable inflation shock reduces the inflation rate. The adverse inflation shock will bring the inflation rate up, therefore the reserve bank may choose to ease its monetary policy to eliminate the recessionary output gap. There is another type of shock to potential output, that will decrease the long-run aggregate supply, hence create an expansionary gap. As a consequence, the inflation rate will increase till the new long-run equilibrium. Both of the adverse shock in inflation and the shock to potential output are the aggregate supply shock, which will reduce output and increase inflation. For the purpose of inflation control, the central may choose to tighter their monetary police before an anticipated rise in inflation. This will deliberately create a recessionary gap with shifting the AD curve to the left, thereby the inflation rate can be expected to fall. 

Generally, the public’s expectation and the inflation rate are mutually affected. The higher the predicted inflation, the more proportion of wages people will ask to rise. This will make the firm to raise the price to cover the cost, so the inflation will increase. And vice versa.

Day 218 portfolio allocation decision

portfolio allocation decision

As we know, there are three major motivations for people to hold money: transaction requirement, precautionary requirement and speculative motive. Therefore every individual need to make decisions about distributing their funds to matching current and future objectives.

When an individual develops the portfolio allocation decision, he/she determined the individual demand of money. However, there is an opportunity cost of holding money on hand, the nominal interest rate determines that returns can be gained by investing the money into financial assets. According to the cost-benefit principle, people will choose to hold money only if the benefit exceeds the cost. In this case, the benefit for holding money is affected by the real income which increases the incentive to consume, and the price level due to more money is required to settle transactions for higher price. Therefore, individuals will choose to maintain more money on hand when the nominal interest is low, or the price and real income are high. On the other hand, the supply of money is determined by the reserve bank’s open-market operations, so the curve is vertical since its not affected by the nominal rate. Like other demand-supply curves, the interception indicates the equilibrium level in the money market. In order to explain the process of reserve bank adjusting nominal interest rate, it is critical to comprehend the bond price identification factors The essential part is, when the nominal interest is high, the bond price drops. That is because the buyer will rather to invest on other financial assets if the nominal rate is higher than the coupon rate. So the price of the bond needs to be lower to compensate the opportunity cost for buyers. Therefore, when the money market is at disequilibrium, individuals are not happy with the proportion to their wealth held as money, then they will purchase/sale bonds. These actions will increase/decrease the price of bonds, so the nominal interest rate will decrease/increase in the contrary of bonds price. The variation in nominal interest rate will affect people’s behavior to hold money until the equilibrium is reached. The borrowers and lenders in financial markets are considered rational. Hence if the reserve bank lowers the cash rate in the overnight market, it is reasonable the suppler of the bonds will seek to borrow at that market for the lower rate. In addition, the lender in the overnight cash market will become the demander in the bond's market, pursuing the higher rate of return. 

As a result, the demand of bonds will increase and the supply of bonds will decline. The rise in bond price will lead the reduction in nominal interest rate. Consequently, the aim of the reserve bank, which is to reduce the overall nominal rate is achieved. That is how central banks influence the demand of money by adjusting nominal interest rate. Although the reserve cannot control the supply of money and targeting an interest rate at the same time, the monetary policy enables it to adjust real interest rate in the short-run, since the inflation is slow to adjust. Because the higher interest rate will encourage saving and therefore, reduce spending, the reserve bank can reduce interest to stimulate aggregate expenditure. The contractionary gap can be eliminated as well as the expansionary gap.

Day 217 The fiscal policy

The fiscal policy

The fiscal policy is the economic policy imposed by government focus on the economy's stabilization.

 Generally, it aims to pull the country out of recession. It can be done with two methods. Firstly, the government can increase in its aggregate expenditure. Under the assumption o Keynesian model, it will pull the PAE cure up-ward vertically, so the planned aggregate expenditure will match the potential output quantities. In addition, the government can vary the tax rate, which indirectly affect the aggregate spending. As we learned in chapter 7, the induced factor of the PAE is expressed as(c-m)(1-t), therefore, the change in t will vary the slope of PAE, which is straight-forward, since the less tax charged on income, the more income can be spent. The transfer payment such as baby bonus is a balanced budget multiplier and will actually reduce the output. Because the reduction on exogenous components in tax is financed through the reduction in government spending, but the increased amount is combined with the savings plus additional spending.()The fiscal policy can affect the potential output by investing in public capital, which will raise the economy's productivity. However, the prolong legislative process reduces the flexibility for fiscal police to react timely as a stabilization tool. Furthermore, the fiscal policy creates budget deficits that decrease national savings to benefit the economy in the future. Although with these shortages, it is still an important stabilizing force, due to the automatic stabilization function. When there is a recessionary gap, the tax collection falls automatically, while other welfare transfer payments rise without explicit actions by government. Moreover, the fiscal policy can be used to against the deferred long-term contraction. Income in equalization has been a problem to industrial countries over many years, and the specific fiscal policy such as the progressive tax system will help to redistribute wealth. We should use the Gini coefficient and the Lorenze curve to gain a visualized idea of a society’s inequality. The lower the Gini coefficient the more equal we would say is the distribution of income. Related to the fiscal policy, the tax smoothing theory states that the government should run a budget surplus to save for the future anticipated high spending. The government spending has to be financed either through raising taxes or by government borrowings. With the same equation, we can conclude that if the government keeps running a budget surplus( where tax collected can cover the spending and transfer payments), the public debt will eventually be fully paid off. That is crucial to the concept of inter-generational equity. In conclusion, conclusion, the fiscal policy acts as the stabilizer of economy and society, it has to deal on the problems corresponding to the demo-graphical changes, as well as, the economy's recessions.

Day 216 The relative regulations establishment of company

The relative regulations establishment of company

The company as the most preferred investment vehicle faces more formal regulations than other types of business. In Australia, the formation of a company is not very complicated. The Corporations Act (2001) s.117 outlines the lodgment of a company, which requires the filling in the application form 201 from ASIC and pays the relevant fees. Once the process is completed, the company will be granted an ACN and the certificate of registration by ASIC. Section 119 clarifies at this point, the company comes into existence as a separate legal entity (body corporate). Prior of the business registration, the company is not treated as an entity, therefore it does not have the ability to enter a contract. However, the formation progress of the company requires making various contracts with third parties. For instance, the contract of payments to office location or the purchase of furniture. To solve this problem, the company normally would authorize a promoter to be bind into pre-incorporation contracts on behalf of the company. The common law imposes fiduciary duties on the promoters in order them to act as the company’s interest. S.131 determines the certain obligations of promoters and pre-registration contracts. The company becomes bond by the contract once it is registered and ratifies the contract. If the company refuses to ratify the contract, then the liability lies on the promoters, exceptions applied. 

Speaking of entering a contract, the company may do so directly or indirectly. To bind the company directly with a contract, there must be at least two directors, a director and a secretary or the sole director involved. On the other hand, the board may also appoint an agent to act on behalf of the company. Which incur the issues of authority. In most cases, the argumentations between both parities are about does the agent has the authority to sign the contract? On the purpose of protecting the third parties, the common law allows them to make assumptions of implied actual authority apparent authority and indoor management rules. The company would be held liable if either the common law assumption or the statuary assumption is sufficient. 

The formation and contract regulations of a company are strongly supported by the Corporations Act (2001) (Cth). Hence it requires us to do more study to compensate it. 

Day 215 controlled entity

controlled entity

legal practices, we may often see the term ‘controlled entity’ and ‘subsidiary’. Generally we consider the holding company has certain influence over its related body corporate. The only differences between these two definitions are the extend of scope. Where a company controls the subsidiary business, but being subsidiary does not necessarily means that the holding company has the control over it.

The Corporations Act (2001) Section 50AA identifies the detailed definition of the controlled entity. It states that the first body controls the second one only if it has the capacity to determine the outcome of the decisions about the financial and operational policies of the second entity. To be concise, when the second entity’s financial and operational decision is practically influenced by the first entity, we could say it is under the control. In addition, this capacity is also represented by the pattern of behavior that may be reasonable considered as having the impact over the controlled entity. However, if more than one party jointly carries this capacity, then the second body is not controlled by the first entity. That distinguishes the controlled entity with subsidiary entity, since the subsidiary may have shareholders, which also have an immense impact over the company decisions.

On the other hand, the section 46 Corporations Act (2001) explained the three validity tests of subsidiary company. Therefore, the entity must pass either following conditions in order to be classified as the subsidiary of the holding company. To illustrate, the specific body must control the composition of the first body’s board, obtain more than half of the voting rights or hold more than half of the issued shares. Actually, the second and third terms are the preconditions of the first one. That is because both of these two conditions will grant the entity with the power of majority of shareholders. As a corollary to the 51% of voting/ownership, the holding company is able to unanimously appoint/remove all or majorities of the board members. Hence it acquired the power of board composition.

On legislation perspective, this related body corporate is closely linked on the entity’s goal. Thus it is automatically assumed to perform on the best interest of each other. Consequently, we need to comprehend the diversification between these two concepts and apply them corresponding to appropriate situations. 

Day 214 Replaceable Rules V Constitution

 Replaceable Rules V Constitution

The internal governance is the instrument that defines the structure and management procedure of a company. It relates to the appoint, removal and distributing powers of officers, as well as disclosure of share classification plus rules regarding dividend payment. The Corporations Act(2001) S.134 states that the internal governance rule in a company consists of the replacement rule set by the C.A., the company’s own constitution or the combination use of both.

The replaceable rules are the model regulations spread out in the Corporations Act, and the section 141 provides a table to list all the terms. It is rare to see company that adopts these rules since they are rather rigid and unsuitable for diversify situations.

On the other hand, the constitution is the company own set of regulations, which is the collation of all internal governance principles. Under S.135(2), the replaceable rules can be replaced or modified by company constitution. More importantly, applying the constitution grants the company much flexibility to satisfy other requirements such as ASX listing rules. In addition, it also helps the company to avoid the unfavorable legislative adjustment towards the replacement rules. Section 136(1)(2) proclaims the requirements to adopt an constitution, where obtaining the written consent of all proposed members on registration, or generated by the special resolution process. Such process involves the pass of the resolution by at least 75% of entitled members’ votes. The special resolution is also the necessary proceeding to alter the constitution, justified by S.136(2). However, there are several limitations over the alteration to the company constitution for the purpose to protect the right of shareholders.

To illustrate, under the Corporations Act(2001) S.136(3), the constitution cannot be modified unless it passes the special resolutions and the entrenching provisions. Moreover, the alternation on constitution will lead to the compulsion on shareholders to buy more shares(S.140(2)) or the variation of class right on shares(S.246B) is not valid. At last, the section 232 espoused that the change must be fair and without oppression to a specific group of members, otherwise it will not be a legitimate alternation. Furthermore, the common law also provides restrictions on the variations of constitution, but only in the scenario involves expropriation of shares. The high court advocates that the adjustment made to constitution is valid if the expropriation is for proper purpose and fair(procedural and substantive).

Although the replaceable rules are part of the Corporations Act, the non-compliance of it will not breach the Act. The relevant party may refer to the contravention of statutory contract if necessary. 

Day 213 Strategy and procedure of planning

Strategy and procedure of planning

There are many challenges wait for us in our journey to success. Therefore, we must carefully plan for every stage in our life. In my opinion, we should understand the purpose behind our endeavor and establish a sophisticated structure to contribute our effort. Generally, there are three important factors that require us to comprehend: What we do, why we do it and how do we do it?

To define what we do, we actually determine our goals. In order to achieve maximum efficiency, we have to divide the ultimate goal into several subsidiaries. As a consequence, we may focus on a more practical target and work hard to reach it. For example, if a university student is trying to graduate early, then he/she will need to figure out the subject to be taken on each semester. Which is the secondary level of goal. In addition, there might be third or fourth level targets such as the expected grade and each assessment’s score. The benefit for applying this mechanism is these goals are relatively easy, so we can monitor our progress on the daily basis. It is crucial since we can obtain more confidence to complete them.

To understand why do we set these goals is critical, because it is the main source of our motivation. We will not be able to maintain endeavor based on our sudden passion or emotion. It may last for a while, but obviously not forever. Thus, our reorganization for the purpose behind our actions becomes vital. Personally, I suggest three elements that may assist us to profoundly read the issue: responsibility, accountability and liability. It is similar with the fundamental consents of ethics, but with slightly difference. The responsibility needs us to consider the obligations incurred with the issue, the accountability identifies the person who holds such obligation (in this case should be ourselves), and the liability is the consequence for achieve the goal or not. These three factors deeply interpret the goal, thereby we may develop respective structures to them.

At last, we must know how to do it, which involves the detail applications. In this segment, we need to act strictly according to the structure, otherwise the benefit derived from our endeavor cannot be maximized. Since we have fully interpreted our targets in the previous step, we should concentrate our power over that purpose. For instance, I am writing this blog as to practice my English writing skill. So I am aware of the reason for me to practice my writing is related to enhancing my future career. Hence I need to start intentionally organizing the topic form now on. As a result, this blog will provide more help on this ultimate goal.

This article is providing the basic ideas for planning. I hope it will help you to understand the concept.