Ernst and Young
Transcript: Ernst and Young Assuming Ceteribus Paribus..... The following graphs demonstrate the demand curve for the US segment of business per 2012 to 2013. As shown, you will see a leftward shift in demand for both the Assurance and Tax segments of business and a rightward shift in demand for the Advisory & Transactional Advisory segment. Which leads us to wonder...."How does a business experience increased revenues when demand decreased in two segments that make up overall business? Because Ernst and Young offers a wide range of services and overall clients are comprised of larger industries and corporations, there are a limited amount of choices for their clients to choose from. Therefore, Ernst and Young has an inelastic demand which enables the firm to raise prices and still increase overall revenue. This was demonstrated in both the Assurance and Tax segments of US business. Ultimately, an inelastic demand would represent an elasticity coefficient <1. Some examples of fixed costs that Ernst and Young incurrs are: Rent on office space Interest on Notes Payable Business Insurances Depreciation of Assets Furniture Office Equipment Some examples of variable expenses that Ernst and Young incurrs are: Labor- employee wages and salaries Human Capital Investments-ongoing training, tuition reimbursement, intern programs. Office Supplies Advertising Recruiting Reimbursement of Employee expenses; exam. Travel Political and Lobbying Contributions What? Political and Lobbying expenses? Revenues can be examined on multiple levels as operations span 150 countries worldwide. I have chosen to present both Global revenue and US revenue for 2012 and 2013. Ernst and Young has a fiscal year ending June 30th. Per 2012: Global Revenue = $24.2 Billion with the United States representing $8.2 Billion Per 2013, Global Revenue reached $25.8 Billion with the United States representing $9.1 Billion In the news.... Ernst and Young has agreed to pay Lehman Brothers $99 million, as a result of a lawsuit brought by former client claiming the firm misstated financials. Ernst and Young has denied liability but the resulting settlement will have an impact to the firm overall. First of all, the settlement of $99 million represents an additional variable cost the busines will incur. This will have an impact on future profit as it will now be offset by the additional expense. In the long run, new variable costs may be added if Ernst and Young analyzes current policies and puts in place new directives to ensure this type of lawsuit does not occur in the future. This would require minimally, a large amount of Labor Resources to create and put into motion. Source: Reuters October 19,2013 : http://www.moneycontrol.com/news/world-news/ernstyoung-to-pay-3699m-to-end-lehman-investor-lawsuit_972701.html?utm_source=ref_article://www.moneycontrol.com/news/world-news/ernstyoung-to-pay-3699m-to-end-lehman-investor-lawsuit_972701.html This reference implies that Ernst and Young operates in an Oligopoly Market Structure. This is due to : Small amount of large firms They are a pricemaker Products offered are similar, little differentation Barriers such as a lot of Government Regulation to get in. Who are the Big Four? Taken from:http://cassmba5.weebly.com/case-big-4.html Level of education required for specific positions directly relates to income distribution as there is an increased investment in Human Capital required for the higher salaried positions. A few examples to take note of are: Position: Assurance Senior- requires Bachelors Degree, 2 yrs. experience, preference for US CPA Cerification Position: Reporting Analyst Associate requires - Bachelors Degree or equivalent work experience along with systems knowledge of Visual Basic, Access and Oracle. Position: Distribution Services Rep; sorting and distributing mail requires only a High School Diploma Market Structure One of the more interesting variable expenses was the contributions made to political campaigns and lobbying efforts. The following will provide and interesting snapshot of this expense.... Ernst and Young belongs to a group of Accounting Firms most commonly known as the Big Four. The positions available with Ernst and Young are vast, ranging from internships, entry level all the way to executive level. Currently, in the US alone there are 1201 job openings. Openings are available in all segments of business as well as some entry level positions. Some positions require minimal education while others require varying degrees, resulting in a wide range of pay. For instance, interns average $25 an hour while a median salary in the Tax and Assurance positions is around $60-64K annually. (http://www.glassdoor.com/Salaries/index.htm 2012 Supply and Demand This is possible due to elasticity of demand............. Revenue (Billions) 2012 Revenue Labor Market Reflecting on the US segment of Ernst and Young, there are no Labor Unions affecting the demand for labor, and therefore not affecting the
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