For generations, the mortgage market has efficiently and successfully extended credit to millions of families, enabling them to achieve the American dream of owning their own homes. Indeed, the homeownership rate reached a record high of 69.2 percent in the second quarter of 2004. The growth of subprime mortgages that contributed to this record, moreover, meant that many families or individuals deemed to be less creditworthy were provided with greater opportunities to purchase homes.
Unfortunately, a system born of good intentions veered horribly off track, derailed by poor risk-management practices, too many assets funded with too little owner-contributed equity, and lax regulatory oversight.
The herbal related market includes herbs used as food or food additives, cosmetic ingredients, and herbal medicines. The current estimates for this market ranges between USD 40-100 billion with an average annual growth rate of 15 to 20% (Merican 2003 and Exim Bank 2003). Malaysians have consumed RM 2 billion worth of herbal products in 1997, which was double the amount spent per person as compared to consumers in the US (Merican 2003) These statistics show the significance of this industry.
Dr. Paul Zane Pilzer (2001), in his book entitled ‘The Next Trillion’ values the US healthcare industry to be above 1 trillion dollars for both pharmaceutical and food based products each. He predicts that the spending will shift fromillness oriented products, such as pharmaceuticals, to wellness promoting products, such as herbs and nutraceuticals. Table 1 lists out several common forms of herbal related products and their commonly accepted definitions.
Earnings growth is a primary determinant of equity value. Firms may deliver earnings growth either by improving the profitability of capital (i.e., the accounting rate of return on invested capital) or by increasing the capital base on which that profitability is earned. Economic theory suggests that earnings growth achieved through incremental capital investments is less valuable to existing shareholders than growth obtained by improving profitability. Unlike improvements in profitability, increases in capital generate an incremental cost of capital.
