BT Group: Financial Performance Analysis

BT Group: Financial Performance Analysis BT Group (BT) is the leading UK company providing landline telecommunication services and equipment. It also had the mobile telecommunication business which was subsequently sold as MMO2. After the sale of mobile business, BT’s profile has now changed from a growth company to a mature cash generating company. A)  Financial performance The most common objective assessment of the financial performance of a firm is the return it generates on its assets and the quantity and quality of the returns. Quantity is measured by the absolute and percent change in total profits. The profit and loss account of an organisation and its analysis are the prime and first indicators of a firm’s financial performance. The latest annual results of BT is for the period ending 31 March 2005. Appendix I shows the summary of key profit and loss figures over the last three years. BT’s turnover and profit after tax in 2005 have increased as compared to 2004 but are still lower than those in 2003. The turnover has declined by 5.7% only whereas profit after tax has declined by 32.7% over the two year period. This shows that the business has very low variable costs which is in line with the heavy fixed cost investments normally made by telecommunication companies in establishing their networks and subsequent very low variable costs in carrying data. While turnover increased in 2005, operating profits have declined. This indicates that the business is facing some pricing pressures or is spending more on advertisement as the operating profit declined by 0.5% only. BT’s 2005 profit after tax was  £1,820m and was substantially higher than  £1,406m. Though the absolute profit is very high number compared to most of the businesses and indicates that the company is in strong financial position, it also shows that BT has high financial leverage. The company paid a significant high interest and if revenues and operating margins come under more pressure, it could have trouble paying interest costs. BT is aware of this issue and has focused on reducing its net debt. After facing tough times in early 2000s, it has sold many previous investments to raise money for repaying debt. BT’s share price rose after it announced its strategic decision to reduce net debt by raising money through divestments. The net interest payments have declined from  £1,439m in 2003 to  £801m in 2005. Not only that, the net interest payment has declined from 49.5% of operating profit to 29.0% from 2003 to 2005. The reduction in net interest as a percent of operating profit is an important improvement as it gives investors comfort that even if operating margins come under pressure, the company would still be able to meet its interest liabilities. One quick way to analyse a company’s performance is to look at the earnings per share pattern. The earnings per share had also a change pattern similar to that of profit after tax. It first decreased from 31.4p in 2003 to 16.4p in 2004 before increasing to 21.4p in 2005. The 2005 increase in earnings per share highlights the improvement in performance. Though the profits did decrease in 2004, BT kept on increasing total dividend paid to shareholders. This shows the management’s faith in business going forward and its ability to meet higher dividend expectations in future. The returns generated on assets is measured by Return on Capital employed (ROCE). Appendix II shows the calculation of ROCE for BT. BT had a healthy ROCE of 19.0% and 20.7% in 2004 and 2005. The quality of returns is measured by their consistency and by the spread of profits, i.e., the percent of profits being generated from different divisions and locations. The less reliance of profits on any one division and/or location means the company is in better shape to withstand downturns in its markets. None of BT’s business contributed more than 50% in its turnover in the year ended 31 March 2005 (BT, 2005). This indicates that BT Group is reasonably well protected from the declines in a business line. The situation is slightly different if we look at the operating profits where BT Wholesale division contributes more than 50% of net operating profits. Any more margin pressures in this business could reduce future earnings. Most of BT’s earnings originate from UK and hence it earnings are susceptible to changes in UK economy. Financial position The financial position of a company covers its financial structure, its assets and liabilities, its liquidity and risk management approach (Accounting Standards 2004/2005). Appendix III gives the highlights of BT Group’s balance sheet from 2004 to 2005. The total fixed assets have increased by  £639m in the last year. While total fixed assets have increased, the total current assets have decreased by  £254m, so total assets have increased by  £385m. The lower increase in total assets as compared to increase in fixed assets is mainly due to decrease in cash and investments. The major change in financial structure has occurred on the liabilities side. The total current liabilities have gone up by  £3,938m due to increase in current loans and borrowings of  £3,227m. This shows that BT is financing much more of its assets from current borrowings. The massive increase in current loans and borrowings has reversed the net current assets (liabilities) position. BT had net current assets of  £2,027m in 2004 and had net current liabilities of  £2,165m in 2005, a net decrease in current assets of  £4,192m. While the current liabilities have increased, the long term creditors have decreased by  £4,335m. If we just look at long-term creditors, the reduction is impressive and it gives more confidence to the investors that company is in better financial position now. But when we combine the decrease in long term creditors with the increase in current liabilities, the net change is very less. And the fact that changes in current liabilities is mainly due to borrowing instead of increase in trade creditors means that the financing of assets has merely shifted from long term borrowings to short term borrowings. The current assets to current liabilities ratio has declined from 1.24 to 0.83 in the last one year, a sign of concern in terms of liquidity especially when the increase in liabilities is not mainly due to higher trade creditors. Debt to equity ratio indicates the financing of assets. BT had total debt of  £13,697m in 2004 and the corresponding figure for 2005 was  £12,589m, a decrease of  £1,108m. If we now exclude cash and short term investments from total debt, BT’s net debt was  £8,425m and  £7,786m in 2004 and 2005 respectively. The net debt to book value of equity ratio declined from 2.75 in 2004 to 2.02 in 2005. This means that debt finances almost twice assets as being financed by equity. Higher amount of debt results in lower weighted average cost of capital as debt is cheaper equity. But as BT reduces more debt, its weighted average cost of capital will increase. The increase would be partially offset by lower cost of equity due to lower chances of bankruptcy. Risk of bankruptcy is measured by interest cover ratio which is defined as the ratio of cash available for interest payments to net interest. Appendix IV shows the EBITDA calculation and interest cover ratio. The interest cover ratio has increased from 6.1 in 2004 to 7.0 in 2005. The healthy interest cover ratio shows that BT has further reduced the risk of bankruptcy and is in better financial position now. The debt level is now very much within manageable levels and is more like a cash rich mature company. Companies normally tend to follow certain dividend trend to signal market of their assessment of future earnings. Dividend declaration is also part of risk management as it is based on management’s assessment of future cash generation and expenditure expectations. The hike in dividend in 2004 and 2005 inspite of decline in profits in 2004 shows the management assessment of future low risks to cash flows. Financial Adaptability An entity’s financial adaptability is its ability to take effective action to alter the amount and timing of its cash flows so that it can respond to unexpected needs or opportunities (Accounting Standards 2004/2005, page 26). Appendix V shows the main elements of consolidated cash flow statement of BT Group. BT Group is generating high amounts of cash inflow from operating activities. During the year ended 31 March 2005, the company generated  £5,900m of net cash from operating activities. BT is in telecommunication business which demands relatively high level of absolute investments. It spent  £2,408m on capital expenditure during the year ended 31 March 2005. Even if we believe that all of capital expenditure was required under normal operations, BT was still left with  £2,282m of surplus cash in 2005. As we can see from the Appendix III that BT has now focused on repayment of loans. During the last three years, the company has reduced borrowings by  £7,395m. Though BT is able to generate significant amount of cash before disposals but that was not enough in 2003 and 2004 to repay loans. The company then sold some of its investments to generate cash for loan repayments. BT also pays a significant amount of dividend to its shareholders. So if its net cash from operations do decrease in future, it has still some buffer in terms of dividend payments to take care of loan repayments. B) The objective of financial statement is to provide information about the reporting entity’s financial performance and financial position that is useful to a wide range of users for assessing the stewardship of the entity’s management and for making economic decisions (Accounting Standards, 2004, page 22). The compliance of an entity’s financial reports with UK’s Accounting Standards can be gauged over two main areas – content and format. Content is important to give true and correct picture of a firm’s financial performance and position. Different users need different information. Financial statements are used by investors to base their investment decision. So it is important that financial statements have the right content to help achieve this goal. It is also important to have right format of presentation. Investors are more likely to feel comfortable if they see familiar presentation style and can then evaluate the company easily. We will look at the content and major financial statements to see whether they comply with UK Accounting Standards. We will then also at few additional notes to financial statements to see whether they are also in line with true and fair principle and give the readers a clear picture of the entity. First of all we compare profit and loss statement with FRS 3 ‘Reporting financial performance’. BT’s consolidated profit and loss statement clearly shows the total turnover and share from joint venture and associates, and in doing so gives more clarity of its earning base. The financial statement format is similar to the example formats shown in Accounting Standards 2004/2005. BT’s 2005 Annual Report however doesn’t show share of turnover and profits from discounted operations (BT, 2005). It is because BT didn’t sell any business in 2005. If we look at the 2002 Annual Report (BT, 2002), it shows the turnover and profits from discounted operations also. The financial statement also has statement of total recognised gains and losses in line with FRS 3 practices. So the accounts meet profit and loss statement UK Accounting Standards in terms of both content and format. We now compare BT’s cash flow statement with the format prescribed in FRS 1 ‘Cash flow statements’. BT’s cash flow statement has not only got all the headings but they are also in the same order as mentioned in FRS 1. BT report also gives sub-categories under the major headings and hence is a genuine effort to educate investors as much as possible on the generation and use of cash flows. BT cash flow statement uses the format prescribed for the ‘Group’ accounts. The notes to financial statement also has detailed reporting on reconciliation of operating profit to operating cash flows, analysis of net debt, acquisition and disposals in line with formats for the ‘Group’ accounts. The next section we analyse is on segmental reporting and check its comparability with SSAP 25 ‘Segmental Reporting’. SSAP 25 says that a public limited company should provide segmental analysis on lines of business class and geographical location. The notes to financial statement section in the 2005 Annual Report has a section on segmental reporting wherein BT shows the turnover, operating profit/(loss) and net assets/(liabilities) of different business lines. It also provides the above data based on the geographical location of reverse generation. The above meets SSAP 25 requirements and also helps investors make a better judgment of risks faced by BT. BT is in telecommunication business where technology change is rapid. BT has acquired many companies in recent years to keep pace with the technological developments. So it is important to analyse the acquisition policies and disclosures are in line with the UK Accounting Standards. FRS 6 ‘Acquisitions and Mergers’ and FRS 7 ‘Fair values in acquisition accounting’ govern the acquisition accounting policies. BT’s annual report under ‘Notes to financial statements’ gives detailed disclosure of total and fair value of the acquisitions made by it. BT’s financial statements not only give the book and fair value of acquisitions but also a detailed explanation of them for each acquisition. The clear and easy to understand format of financial statements and the depth of information in them signals that BT not only just do the minimum to meet UK Accounting Standards but also follows them in true spirit. Appendix I – Highlight of BT Group’s profit and loss accounts (Source: BT Annual Report and Form 20-F; http://www.btplc.com/Sharesandperformance/Howwehavedone/Financialreports/Annualreports/AnnualReports.htm) Appendix II – ROCE of BT Group (Source: BT Annual Report and Form 20-F; http://www.btplc.com/Sharesandperformance/Howwehavedone/Financialreports/Annualreports/AnnualReports.htm) Appendix III – Highlight of BT Group’s balance sheet (Source: BT Annual Report and Form 20-F; http://www.btplc.com/Sharesandperformance/Howwehavedone/Financialreports/Annualreports/AnnualReports.htm) Appendix IV – Interest cover ratio (Source: BT Annual Report and Form 20-F; http://www.btplc.com/Sharesandperformance/Howwehavedone/Financialreports/Annualreports/AnnualReports.htm) Appendix V – Highlight of BT Group’s cash flow statements (Source: BT Annual Report and Form 20-F; http://www.btplc.com/Sharesandperformance/Howwehavedone/Financialreports/Annualreports/AnnualReports.htm) Bibliography and references Accounting Standards 2004/2005 – Extant at 30 April 2004 (2004); Wolters Kluwer (UK) Limited. BT (2005); BT Annual Report and Form 20-F for the year ended 31 March 2005; http://www.btplc.com/Sharesandperformance/Howwehavedone/Financialreports/Annualreports/AnnualReports.htm BT (2002); BT Annual Report and Form 20-F for the year ended 31 March 2002; http://www.btplc.com/Sharesandperformance/Howwehavedone/Financialreports/Annualreports/Annualreportsarchive.htm

The Path to Happiness and Success

When I ask people what do you want out of life, the majority of people say, â€Å"I just want to be happy† or â€Å"I want to be successful† It seems like that they are not achieving anywhere near the â€Å"happiness† or â€Å"success† So It has opened me new ways of thinking. It made me think about what I want in the future and that I want to be happy and successful at the same time. It is tremendously important for people to have a definite aim of what they want because without such an aim, your life cannot move forward powerfully and progressively. It marks your first point toward success. It is what put your life into real action mode. Without this step, the other steps of achievement cannot take place. To being with, my family is one of the reasons that I am a happy person today. My family is a safe place where I can be myself. I never have to explain myself to my family because they really know who I am. I can cry too hard or laugh too loud and never worry what they will think of me. It is happy when I have a home to come back after a bad or long day. I don’t need to fear that someone may lie to me or hurt me, because I know that my family will do the best thing to me. Moreover, my family members will give me advice if I want it, but they will not judge me or make me ashamed of my behavior.When I was a kid, I always see my parents working so hard to get what they want and that they could be able to provide for me and my family. Thanks to my working-hard parents, it made me want to have a college education and be successful in order to make them more proud. My parents always ask me how I do in college and what I want to study because they just want to make sure that I am on the track to success. Even though I am struggling academically and personally, my parents always make sure that they give me greatest love and support, so that way I will know I have my family by my side.My family are my strength and inspiration, so th ey are the reason I continue to work and study hard. Also having a college experience is the most important thing that has occurred in my life and one of the reasons that I am a happy person today because college is great in the fact that it allows us to expand our knowledge, provides job connections to our chosen field, and we can gain and develop skills (organization, teamwork, time management, etc.) When I arrive at college, I was afraid because I was not sure what to do on my own and that I  would make new friends that quick but I found many that are similar with my interests, values, and even sense of humor, so it was a wonderful feeling to make new friends when you have none.Also I made connections with some college graduates and a few of the professors, which is an important aspect of the college experience because they are further along in their careers than me. When it comes time to search for a job, I am going to take advantage of it, so I can call on those in the networ k that I have built in order to make this process much easier. During my time as a student in RIT, I was starting to find a strong interest in business major that National Technology Institute for the Deaf (NTID) provides because business opens the door to a huge number of potential careers such as accountants and marketers.I completed Associates degree in NTID Business, so I plan on receiving a Bachelor of Science degree from College of Business because I want to continue learning. Also Associates degree is not enough because I want to improve myself and the standard of living for my future family through higher education. My plans are to not only use education as a tool to prepare me for a vocation, but also to help me become a self-sufficient individual who is fully prepared for life. When I completed AS degree, I applied to get in College of Business two times but unfortunately they rejected me twice. I was really upset and heartbroken because getting in College of Business was one of my goals when I starting studying business in NTID.When I was starting to realize that it’s not the end of my life and that I must move on with my life, so I decided to go with Multidisciplinary studies program. Then I choose to study concentrations in Business Administration and Public Relations because those particular concentrations will help me to understand the business world better and increase my knowledge about aspects of running a business. I always want to be involved in Business because it is a growing, dynamic field of study, which opens the door to a huge number of potential business careers, as well as enhances my access to careers in other fields. So I strongly believe concentrations in Business Administration and Public Relations will help my chosen career because it keeps my options open, both for further study and for my chosen career.I once was very uncertain about any career goals I may have had, but now, I am more sure of the direction my life is g oing. When I was young, I never really knew what I wanted to become. when I got older, I always had very high aspirations for myself so I want to own any business someday but In order to be a successful businessman, you must have a career first because it can teach me a lot of things about owning an business. Before running or owing a business, I always want to have a career in any corporate company because they provide good pay and great benefits such as continuing learning for advanced degrees, health insurance, and paid vacation.I have a strong interest in working at SHI International Corp (www.shi.com), headquartered in Somerset, New Jersey. It is a global provider of information technology software, hardware and professional services to small and medium businesses, large enterprises, healthcare providers, government organizations and educational institutions. My sister-in-law works at SHI corporate as an account manager. She told me that SHI International Corp has a range of di fferent job positions from accountants to marketers/salespersons and also they provide continuing learning for employees so they can study for advanced degrees.For instance, SHI pay accountants to study for accountant certification such as CPAs and CMAs only if they work full-time. Also employees can study for any Master’s degree that’s related to their careers. So my most important career goal is growth because there is never a limit for the growth of an individual in a job. In fact, even if a person becomes a CEO of a company, the next level of growth for the individual on a professional level is being an entrepreneur or becoming a proprietor. However, growth does not happen overnight, and being hard-working and committed to a job is one of the most important aspects of growing. Therefore, one should be dedicated and serious about the job.Only when I achieve consistency in my productivity, I will be able to achieve comprehensive growth on a professional level. As you can see, I want to be very happy and successful as I can be. My goals are high, and I intend to challenge myself. I cannot wait to work in the real world because I want to start to boost my success. As for my philosophy, I believe that in order to be successful, you have to want to do it, take time to do it well, and be willing to give it your all. Success is not the key to happiness. Happiness is the key to success.If you love what you are doing, you will be successful. In today’s world, there are a lot of successful people such as lawyers, doctors, and CEOs but many of them are not happy because they are not happy doing what they do or living with no purpose. So I strongly  believe that happiness is the most important thing in our lives because it is the only way that our lives can be moved powerfully and progressively.

Reflective Report for Introduction to Financial Accounting

Reflective Report During the last term, i have had learned some knowledge from the subject called introduction to finical accounting. For me, this is the first time I had chance to learn this subject, before that I just heard some information about IFA by reading the FT newspaper and watching the news. When I start learning that, this subject gives me the impression that it is difficult to understand. During the past few months, I can say I already mastered some of the skills in IFA.I can still remember the first lecture I had learned was the definition of the â€Å"Accounting Equation†, I can conclude that the most important thing you must master is you should try to distinguish the meaning of the capital, assets and liability. Assets are economic resources of the business that are expected to bring benefits for the business in the future, the Important point is it can bring you benefits in the future instead of consuming at the end of the year. Capital, we can also called ow ners’ equity is the economic resources that was contributed by the owners of the business to the business.The last component is liability which is the name given to the amounts owing to these people or organizations for these assets. The format of the accounting equation is capital + liabilities = assets. When I learn this subject, I think the interesting part is the double entry which is the basic part of the whole subject. What I have learned is each transaction requires one debit entry and one credit entry and for each pair of entries: the left hand side must therefore equal right hand , only you know how to put the items into debit part or credit part can you prepare the account correctly.In my opinion, mastering this skill essentially is very necessary for my future careers. I think the future financial professional is not limited in numeracy skills. The reason is this area is requiring the accountant have ability to be able to explain and analyze the transactions, maste ring numeracy skills is essential for every accountants but I think the most important factor is having an analytical ability in order to deal with different types of transactions efficiently.Back to the subject, besides the double entry, the next basic point is the transactions analysis, which is very significant to future professional, always be awareness of professional judgment and personal effectiveness. When we going to analyze one transaction, the first thing we should concentrate on is transaction whether cause stock to increase or decrease. Stock increasing consists of the purchase of additional goods and the return into the business goods previously sold. However, stock decreasing involves the sale of goods and goods bought by the business now being returned out to a supplier.When you handle one transaction the first step is going to prepare Journals, determine nature and double entry of each of the transactions. The second step is open up T-account and post entries as you go through the Journals. Once posting complete, â€Å"Close† accounts for the month. The third step is transferring all ledgers to trial balance. It required the total of all debit balances should equal the total of credit balances. I also learn how to prepare the statement of income, according to the format gross profit= sales – cost of sales, calculate the gross profit then plus other income and minus expenses calculate net profit or loss.The next stage is starting to prepare the balance sheet. The balance sheet comprises those accounts with balances that not included in the income statement. A properly drawn up balance sheet should have five categories of entries: Non-current assets, Current assets, Non-current liabilities and Capital. All above these skills support me to develop the technical and functional expertise gradually. The skills I have developed are all for preparing accounts manually. Tutor also takes highly of the importance of using MYOB project.In ou r day-to-day studying time, most of time we prepare accounts manually, but we also should try to use a computer package to prepare accounts. Let me indicate my feeling when I use MYOB. When I handle one transaction I should create one computer and write related information in detail, then start to prepare a journal according to the transaction. Write the date accordingly, when I use this software, I don’t know where to start. I find the significance of understanding double entry; you should know each transaction whether is assets account capital account liability account.If put it in a wrong entry, what we have done is all in vain. I ought to also prepare account for bank, purchase, sales and depreciation, this procedure is a little complex. When I prepare T-account at the same time I must recorded. Return back the main menu select the report, it shows the trial-balance, different statement of income and statement of financial position, all of that will appear automatically i n place of preparing manually. Have ability to good use of MYOB project is very necessary, which will avoid existing of errors so as to save time and help you become professional.Through MYOB project and prepare account manually, I am aware of the importance of numeracy skills to a future financial professional. Numeracy skill means have ability of counting correctly, distinguishing between sets of unequal quantities, operations such as subtraction and addition. So, numeracy is a foundation of the financial professional in order to make sure the transaction smooth going. Moreover, IT skills are playing an important role to the financial professional, according to Professor Jane K.Winn (2000) of the University Of Washington School Of Law, â€Å"Financial institutions were at the forefront in creating the global information economy as it exists today. † We can conclude that finance cannot live without information technology skills. Information technology concentrates on the gro wth of electronic networks that exchange information. The reason why IT is so important for financial professional is that all financial transactions contain the exchange of information, the increasing popularity of online finance accorded with advances in IT fields.After finishing the bookkeeping test, I can summarize some of my learning experience and I have my own notions in learning some of difficulty parts. The learning style I preferred is when you are taught a new topic, you should fully understand it immediately in case of delaying it into another day. In addition, you’d better do a revision at the end of the weekend; this will help you master this topic better. However, I also suffered some difficulties during the last few months, when I learn a topic called depreciation; I always confused with depreciation for non-current assets and disposal.Therefore, . I always prepares wrong account for disposal and provision for depreciation due to the wrong depreciation figure. Though, I try to find out the effective method to solve this problem. Try to distinguish the time that owner buy or sale the machinery so as to prepare the cost account and provision for depreciation account properly. The core point is loss/profit on disposal that will always ignored. I always remind myself to balance the disposal account as the first step, after that working out the loss/profit on disposal, finally put it into the income statement.The provision for doubtful debts account has a similar issue as the disposal account. In my view, the most annoying thing is combine the expense account with the accrual and prepayment account, it always made me crazy. But I never give up; always keep the faith to solve these problems. I think the best way to avoid this confusion is totally up to you. Once you have made a mistake, you must discover the weakness of this part and try your best to solve this problem so that you will never make the same mistake over and over again.This metho d would not only be helpful for your learning in the future, but also would bring a surprise and achievability to you. Another main point is being awareness of cooperation. Through discussing with your friends, you can also easy to find the solution. My tutor helps me a lot during the last few months as well. He told me how to analyze the workshop questions step by step. When I was in trouble, he inspires me a lot and helps me to solve the problems. As the year progresses, I changed a lot. Those skills I have developed helped me become more logical and meticulous when deal with the different types of accounting transactions.Additionally, I have made my brain more clearly by writing the reflective report. I can reflect on what I have learnt last term and which parts should I improve? After doing my learning experience, I find an effective way to prepare accounts and analyze transactions. Thinking a lot and doing more exercise will also bring me more benefits for my exam and future ca reer. Reference: Jane K. W (2000), University of Washington School of Law: Catalytic Impact of Information Technology on the New International Financial Architecture†

Megadiversity Definition and Presence in Ecuador

Like economic wealth, biological wealth is not distributed evenly across the globe. Some countries hold vast amounts of the worlds plants and animals. In fact, seventeen of the worlds nearly 200 countries hold over 70% of the earths biodiversity. These countries are labeled Megadiverse by Conservation International and the United Nations Environment Programs World Conservation Monitoring Center. They are Australia, Brazil, China, Colombia, the Democratic Republic of the Congo, Ecuador, India, Indonesia, Madagascar, Malaysia, Mexico, Papua New Guinea, Peru, Philippines, South Africa, United States, and Venezuela. What Is Megadiversity? One of the patterns that dictate where extreme biodiversity occurs is the distance from the equator to the poles of the earth. Therefore, most of the Megadiverse countries are found in the tropics: the areas that surround the Earths equator. Why are the tropics the most biodiverse areas in the world? The factors that influence biodiversity include temperature, rainfall, soil, and altitude, among others. The warm, moist, stable environments of the ecosystems in tropical rainforests in particular allow floral and fauna to thrive. A country like the United States qualifies mainly due to its size; it is big enough to holds various ecosystems. Plant and animal habitats are also not distributed evenly within a country, so one may wonder why the nation is the unit of Megadiversity. While somewhat arbitrary, the nation unit is logical in the context of conservation policy; national governments are often the most responsible for conservation practices within the country. Megadiverse Country Profile: Ecuador Ecuador is the first country in the world to recognize the Rights of Nature, enforceable by law, in its 2008 constitution. At the time of the constitution, close to 20% of the countrys land was designated as preserved. Despite this, many ecosystems in the country have been compromised. According to the BBC, Ecuador has the highest rate of deforestation per year after Brazil, losing 2,964 square-kilometers yearly. One of the biggest current threats in Ecuador is in Yasuni National Park, located in the Amazon Rainforest region of the country, and one of the biologically richest areas in the world, as well as home to multiple indigenous tribes. However, an oil reserve worth over seven billion dollars was discovered in the park, and while the government proposed an innovative plan to ban oil extraction, that plan has fallen short; the area is under threat, and is currently being explored by oil companies. Conservation Efforts Tropical forests are also home to millions of indigenous people, who are impacted in many ways from both forest exploitation and conservation. Deforestation has disrupted many native communities, and has at times triggered conflict. Furthermore, the presence of indigenous communities in areas that governments and aid agencies wish to preserve is a contentious issue. These populations are often the ones who have the most intimate contact with the diverse ecosystems they inhabit, and many advocates assert that biological diversity preservation should inherently include cultural diversity preservation as well.