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# Creating Products and Pricing Strategies to Meet Customers' Needs ## What Is a Product? 1. What is a product, and how is it classified? The goal of marketing research is to create products that are desired by the target market(s) chosen as strategic markets in line with the organization’s goals. In marketing, a product (a good, service, or idea), along with its perceived attributes and benefits, creates value for the customer. Attributes can be tangible or intangible. Among the tangible attributes are packaging and warranties as illustrated in . Intangible attributes are symbolic, such as brand image. Intangible attributes can include things like image as well as the depth of the relationship between a service provider and a customer. People make decisions about which products to buy after considering both tangible and intangible attributes of a product. For example, when a consumer buys a pair of jeans, they consider price, brand, store image, and style before making the purchase. These factors are all part of the marketing mix. ### Classifying Consumer Products Consumers are really buying packages of benefits that deliver value, which always includes some tangible aspects and some intangible aspects. The person who buys a plane ride on United Airlines is looking for a quick way to get from one city to another (the benefit). Providing this benefit requires a tangible part of the product (a plane) and an intangible part of the product (ticketing, maintenance, and piloting services). A person who purchases accounting services buys the benefit of having taxes completed on the correct tax form (tangible part of the service) and having the taxes prepared correctly by a trusted person (intangible part of the service). Marketers must know how consumers view the types of products their companies sell so that they can design the marketing mix to appeal to the selected target market. To help them define target markets, marketers have devised product categories. Products that are bought by the end user are called consumer products. They include electric razors, sandwiches, cars, stereos, magazines, and houses. Consumer products that get used up, such as Nexxus shampoo and Lay’s potato chips, are called consumer nondurables. Those that last for a long time, such as Whirlpool washing machines and Apple computers, are consumer durables. Another way to classify consumer products is by the amount of effort consumers are willing to make to acquire them. The four major categories of consumer products are unsought products, convenience products, shopping products, and specialty products, as summarized in . Unsought products are products unplanned by the potential buyer or known products that the buyer does not actively seek. Convenience products are relatively inexpensive items that require little shopping effort. Soft drinks, candy bars, milk, bread, and small hardware items are examples. Consumers buy them routinely without much planning. This does not mean that such products are unimportant or obscure. Many, in fact, are well known by their brand names—such as Pepsi-Cola, Pepperidge Farm breads, Domino’s pizza, Sure deodorant, and UPS shipping. In contrast to convenience products, shopping products are bought only after a brand-to-brand and store-to-store comparison of price, suitability, and style. Examples are furniture, automobiles, a vacation in Europe, and some items of clothing. Convenience products are bought with little planning, but shopping products may be purchased after months or even years of search and evaluation. Specialty products are products for which consumers search long and hard and for which they refuse to accept substitutes. Expensive jewelry, designer clothing, state-of-the-art stereo equipment, limited-production automobiles, and gourmet restaurants fall into this category. Because consumers are willing to spend much time and effort to find specialty products, distribution is often limited to one or two sellers in a given region, such as Neiman-Marcus, Gucci, or a Porsche dealer. ### Classifying Business Products Products bought by businesses or institutions for use in making other products are called business products. These products can be commercial, industrial, or services products. A commercial product would be an 18-wheeler truck used by a major transportation company as part of the business. An industrial product might be a major robotics installation in a state-of-the-art manufacturing facility. A services product (for business) might be telecommunications consulting for a large corporation setting up offices in Singapore. Business products are classified as either capital products or expense items. Capital products are usually large, expensive items with a long life span. Examples are buildings, large machines, and airplanes. Expense items are typically smaller, less expensive items that usually have a life span of less than a year. Examples are printer cartridges and paper. Industrial products are sometimes further classified in the following categories: 1. Installations: These are large, expensive capital items that determine the nature, scope, and efficiency of a company. Capital products such as General Motors’ truck assembly plant in Fort Wayne, Indiana, represent a big commitment against future earnings and profitability. Buying an installation requires longer negotiations, more planning, and the judgments of more people than buying any other type of product. 2. Accessories: Accessories do not have the same long-run impact on the firm as installations, and they are less expensive and more standardized. But they are still capital products. Minolta photocopy machines, HP laptops, and smaller machines such as Black & Decker table drills and saws are typical accessories. Marketers of accessories often rely on well-known brand names and extensive advertising as well as personal selling. 3. Component parts and materials: These are expense items that are built into the end product. Some component parts are custom-made, such as a drive shaft for an automobile, a case for a computer, or a special pigment for painting U.S. Navy harbor buoys; others are standardized for sale to many industrial users. Intel’s Pentium chip for PCs and cement for the construction trade are examples of standardized component parts and materials. 4. Raw materials: Raw materials are expense items that have undergone little or no processing and are used to create a final product. Examples include lumber, copper, and zinc. 5. Supplies: Supplies do not become part of the final product. They are bought routinely and in fairly large quantities. Supply items run the gamut from pencils and paper to paint and machine oil. They have little impact on the firm’s long-run profits. Bic pens, Champion copier paper, and Pennzoil machine oil are typical supply items. 6. Services. These are expense items used to plan or support company operations—for example, janitorial cleaning and management consulting services. ### Summary of Learning Outcomes 1. What is a product, and how is it classified? A product can be a good, service, or idea, along with its perceived attributes and benefits, that creates customer value. Tangible attributes include the good itself, packaging, and warranties. Intangible attributes can include the brand’s image or relational attributes such as the credibility of its service providers. Products are categorized as either consumer products or business-to-business products, which can be commercial, industrial, or services products. Consumer products are bought and used by the end user, sometimes called “the ultimate consumer.” They can be classified as unsought products, convenience products, shopping products, or specialty products, depending on how much effort consumers are willing to exert to get them. Business-to-business products are those bought by organizations for use in making other products or in rendering services to other organizations and include capital products and expense items.

# Creating Products and Pricing Strategies to Meet Customers' Needs ## Creating Products That Deliver Value 1. How do organizations create new products? New products pump life into company sales, enabling the firm not only to survive but also to grow. Companies like Allegheny Ludlum (steel), Dow (chemicals), Samsung (electronics), Campbell Soup (foods), and Stryker (medical products) get most of their profits from new products. Companies that lead their industries in profitability and sales growth get a large percentage of their revenues from products developed within the last five years. A recent McKinsey survey found that 94 percent of top executives believed that their companies’ innovation approach and process needed to be updated, signaling how important new products are as the lifeblood of a company. Marketers have several different terms for new products, depending on how the product fits into a company’s existing product line. When a firm introduces a product that has a new brand name and is in a product category new to the organization, it is classified as a new product. A new flavor, size, or model using an existing brand name in an existing category is called a line extension. Diet Cherry Coke and caffeine-free Coke are line extensions. The strategy of expanding the line by adding new models has enabled companies like Seiko (watches), Kraft (cheeses), Oscar Mayer (lunch meats), and Sony (consumer electronics) to tie up a large amount of shelf space and brand recognition in a product category. Crayola now offers Crayola bubble bath shampoo. Services companies also develop new products—new services based on market research—or make changes in ongoing services. Services companies can often introduce and adapt their products faster than companies that manufacture goods because service delivery can be more flexible and changes can often be made immediately. Due to this, customers often expect and require immediate improvements to services. ### How New Products Are Developed Developing new products is both costly and risky, especially for companies that sell products that are goods. New-product failure rates for household and grocery products can approach 80 percent. Overall, companies report that only 3 percent of their products exceed their initial sales targets in Year 1. Even companies such as Facebook, which launched Facebook Home in 2013 at an initial price of $99 per year, have experienced new product failures. Industrial goods failure rates tend to be lower than those for consumer goods. To increase their chances for success, most firms use the following product development process, which is also summarized in . 1. 2. Brainstorming is also used to generate new-product ideas. With 3. 4. While the product is tested, the marketing strategy is refined. Channels of distribution are selected, pricing policies are developed and tested, the target market is further defined, and demand for the product is estimated. Management also continually updates the profit plan. As the marketing strategy and prototype tests mature, a communication strategy is developed. A logo and package wording are created. As part of the communication strategy, promotion themes are developed, and the product is introduced to the sales force. 5. Companies that don’t test-market their products run a strong risk of product failure. In essence, test-marketing is the “acid test” of new-product development. The product is put into the marketplace, and then the manufacturer can see how it performs against the competition. 6. For services companies, the new product develop process is similar, but developing the prototype can take less time and resources. It will mean developing the service and training service personnel on the new service in order to test it in the market. ### The Role of the Product Manager When a new product enters the marketplace in large organizations, it is often placed under the control of a product or brand manager. A product manager develops and implements a complete strategy and marketing program for a specific product or brand of product. Some companies may have numerous brands of the same type of product, such as many versions of laundry soap, each with different target markets, brand names, and attributes. Product management first appeared at Procter & Gamble in 1929. A new company soap, Camay, was not doing well, so a young Procter & Gamble executive was assigned to devote his exclusive attention to developing and promoting this product. He was successful, and the company soon added other product managers. Since then, many firms, especially consumer products companies, have set up product management organizations. ### Summary of Learning Outcomes 1. How do organizations create new products? To succeed, most firms must continue to design new products to satisfy changing customer demands. But new-product development can be risky. Many new products fail. The steps in new-product development are setting new-product goals, exploring ideas, screening ideas, developing the concept (creating a prototype and building the marketing strategy), test-marketing, and introducing the product. When the product enters the marketplace, it is often managed by a product manager.

# Creating Products and Pricing Strategies to Meet Customers' Needs ## The Product Life Cycle 1. What are the stages of the product life cycle? Product managers create marketing mixes for their products as they move through the life cycle. The product life cycle is a pattern of sales and profits over time for a product (Ivory dishwashing liquid) or a product category (liquid detergents). As the product moves through the stages of the life cycle, the firm must keep revising the marketing mix to stay competitive and meet the needs of target customers. ### Stages of the Life Cycle As illustrated in , the product life cycle consists of the following stages: 1. 2. Distribution becomes a major key to success during the growth stage, as well as in later stages. Manufacturers scramble to acquire dealers and distributors and to build long-term relationships. Without adequate distribution, it is impossible to establish a strong market position. Toward the end of the growth phase, prices normally begin falling, and profits peak. Price reductions result from increased competition and from cost reductions from producing larger quantities of items (economies of scale). Also, most firms have recovered their development costs by now, and their priority is in increasing or retaining market share and enhancing profits. 3. 4. ### The Product Life Cycle as a Management Tool The product life cycle may be used in planning. Marketers who understand the cycle concept are better able to forecast future sales and plan new marketing strategies. is a brief summary of strategic needs at various stages of the product life cycle. Marketers must be sure that a product has moved from one stage to the next before changing its marketing strategy. A temporary sales decline should not be interpreted as a sign that the product is dying. Pulling back marketing support can become a self-fulfilling prophecy that brings about the early death of a healthy product. ### Summary of Learning Outcomes 1. What are the stages of the product life cycle? After a product reaches the marketplace, it enters the product life cycle. This cycle typically has four stages: introduction, growth, maturity, and decline (and possibly death). Profit margins are usually small in the introductory phase, reach a peak at the end of the growth phase, and then decline. Price indicates value, helps position a product in the marketplace, and is the means for earning a fair return on investment. If a price is too high, the product won’t sell well and the firm will lose money. If the price is too low, the firm may lose money even if the product sells well. Prices are set according to pricing objectives.

# Creating Products and Pricing Strategies to Meet Customers' Needs ## Pricing Strategies and Future Trends 1. What strategies are used for pricing products, and what are the future trends? An important part of the marketing planning process is setting the right price. Price is the perceived value that is exchanged for something else. Value in our society is most commonly expressed in dollars and cents. Thus, price is typically the amount of money exchanged for a product. Note that perceived value refers to the perception of the product’s value at the time of the transaction. After a consumer has used a product, the consumer may decide that its actual value was less than its perceived value at the time it was purchased. The price paid for a product is based on the expected satisfaction that the customer will receive and not necessarily the actual satisfaction of the customer. Although price is usually a dollar amount, it can be anything with perceived value. When products are exchanged for each other, the trade is called barter. If a student exchanges this book for a math book at the end of the term, that student has engaged in barter. ### Pricing Objectives Price is important in determining how much a firm earns. The prices charged customers times the number of units sold equals the gross revenue for the firm. Revenue is what pays for every activity of the company (production, finance, sales, distribution, and so forth). The money that is left over (if any) is profit. Managers strive to charge a price that will allow the firm to earn a fair return on its investment and will maximize return on investment to the highest extent while still maintaining a fair return. The chosen price must be neither too high nor too low, and the price must equal the perceived value to target consumers. If consumers think the price is too high, sales opportunities will be lost. Lost sales mean lost revenue. If the price is too low, consumers may view the product as a great value, but the company may not meet its profit goals. Sometimes, as in the case of services, a price that is too low will cause the product to viewed as less than credible and lose sales for the company. ### Product Pricing Managers use various pricing strategies when determining the price of a product, as this section explains. Price skimming and penetration pricing are strategies used in pricing new products; other strategies such as leader pricing and bundling may be used for established products as well. ### Price Skimming The practice of introducing a new product on the market with a high price and then lowering the price over time is called price skimming. As the product moves through its life cycle, the price usually is lowered because competitors are entering the market. As the price falls, more and more consumers can buy the product. Recent example are DVD players and flat-screen televisions. When they first came out, DVD players were priced at around $500 while flat-screen televisions were priced at over $1,000. Over time, the price of DVD players has sunk to under $100, while 4-inch Insignia brand flat-screen TVs can be purchased for under $220. Price skimming has four important advantages. First, a high initial price can be a way to find out what buyers are willing to pay. Second, if consumers find the introductory price too high, it can be lowered. Third, a high introductory price can create an image of quality and prestige. Fourth, when the price is lowered later, consumers may think they are getting a bargain. The disadvantage is that high prices attract competition. Price skimming can be used to price virtually any new products, such as high-definition televisions, new cancer drugs, and color computer printers. For example, the Republic of Tea recently launched Emperor’s White Tea, which it says is among the rarest of teas. Because it is minimally processed, white tea is said to retain the highest level of antioxidants and has a lower caffeine content than black and green teas. The company says the tea is picked only a few days each year, right before the leaf opens, yielding a small harvest. The product retails for $16 per tin of 50 bags. Products don’t have to cost hundreds of dollars to use a skimming strategy. ### Penetration Pricing A company that doesn’t use price skimming will probably use penetration pricing. With this strategy, the company offers new products at low prices in the hope of achieving a large sales volume. Procter & Gamble did this with its SpinBrush toothbrush. Penetration pricing requires more extensive planning than skimming does because the company must gear up for mass production and marketing. When Texas Instruments entered the digital-watch market, its facilities in Lubbock, Texas, could produce 6 million watches a year, enough to meet the entire world demand for low-priced watches. If the company had been wrong about demand, its losses would have been huge. Penetration pricing has two advantages. First, the low initial price may induce consumers to switch brands or companies. Using penetration pricing on its jug wines, Gallo has lured customers away from Taylor California Cellars and Inglenook. Second, penetration pricing may discourage competitors from entering the market. Their costs would tend to be higher, so they would need to sell more at the same price to break even. ### Leader Pricing Pricing products below the normal markup or even below cost to attract customers to a store where they wouldn’t otherwise shop is leader pricing. A product priced below cost is referred to as a loss leader. Retailers hope that this type of pricing will increase their overall sales volume and thus their profit. Items that are leader priced are usually well known and priced low enough to appeal to many customers. They also are items that consumers will buy at a lower price, even if they have to switch brands. Supermarkets often feature coffee and bacon in their leader pricing. Department stores and specialty stores also rely heavily on leader pricing. ### Pricing of Services Pricing of services tends to be more complex than pricing of products that are goods. Services may be priced as standard services, such as the price a hair stylist might charge for a haircut, or pricing may be based on tailored services designed for a specific buyer, such as the prices charged for the design of a new building by an architect. ### Bundling Bundling means grouping two or more related products together and pricing them as a single product. Marriott’s special weekend rates often include the room, breakfast, and free Wi-Fi. Department stores may offer a washer and dryer together for a price lower than if the units were bought separately. The idea behind bundling is to reach a segment of the market that the products sold separately would not reach as effectively. Some buyers are more than willing to buy one product but have much less use for the second. Bundling the second product to the first at a slightly reduced price thus creates some sales that otherwise would not be made. For example, Aussie 3-Minute Miracle Shampoo is typically bundled with its conditioner because many people use shampoo more than conditioner, so they don’t need a new bottle of conditioner. ### Odd-Even Pricing Psychology often plays a big role in how consumers view prices and what prices they will pay. Odd-even pricing (or psychological pricing) is the strategy of setting a price at an odd number to connote a bargain and at an even number to imply quality. For years, many retailers have priced their products in odd numbers—for example, $99.95 or $49.95—to make consumers feel that they are paying a lower price for the product. ### Prestige Pricing The strategy of raising the price of a product so consumers will perceive it as being of higher quality, status, or value is called prestige pricing. This type of pricing is common where high prices indicate high status. In the specialty shops on Rodeo Drive in Beverly Hills, which cater to the super-rich of Hollywood, shirts that would sell for $65 elsewhere sell for at least $150. If the price were lower, customers would perceive them as being of low quality. Prestige pricing is also very prevalent in services because services providers with reputations for excellent service are more in demand, often with a waiting list. This is due to the fact that services are tied directly to the people who provide them and those people have only so much time in a week in which to provide services. Once the calendar fills up, the demand goes up, and the prices become prestige prices. ### Summary of Learning Outcomes 1. What strategies are used for pricing products, and what are the future trends? The two main strategies for pricing a new product are price skimming and penetration pricing. Price skimming involves charging a high introductory price and then, usually, lowering the price as the product moves through its life cycle. Penetration pricing involves selling a new product at a low price in the hope of achieving a large sales volume. Pricing tactics are used to fine-tune the base prices of products. Sellers that use leader pricing set the prices of some of their products below the normal markup or even below cost to attract customers who might otherwise not shop at those stores. Bundling is grouping two or more products together and pricing them as one. Psychology often plays a role in how consumers view products and in determining what they will pay. Setting a price at an odd number tends to create a perception that the item is cheaper than the actual price. Prices in even numbers denote quality or status. Raising the price so an item will be perceived as having high quality and status is called prestige pricing. Pricing for services is more complicated and is often tailored to specific services for a specific customer.

# Creating Products and Pricing Strategies to Meet Customers' Needs ## Trends in Developing Products and Pricing 1. What trends are occurring in products and pricing? As customer expectations increase and competition becomes fiercer, perceptive managers will find innovative strategies to satisfy demanding consumers and establish unique products in the market. Satisfying customers requires the right prices. The internet has delivered pricing power to both buyers and sellers. Another significant trend is the use of one-to-one marketing to create a customized marketing mix for each consumer. ### Impact of the Internet on Pricing The internet, corporate networks, and wireless setups are linking people, machines, and companies around the globe—and connecting sellers and buyers as never before. This link is enabling buyers to quickly and easily compare products and prices, putting them in a better bargaining position. At the same time, the technology enables sellers to collect detailed data about customers’ buying habits, preferences, and even spending limits so that they can tailor their products and prices. Amazon, as well as online businesses from traditional retailers such as Walmart, have drastically changed the retail landscape. Amazon’s Prime membership, which offers free shipping and other amenities for an annual fee, has also taken market share from traditional low-cost warehouse clubs such as Costco and Sam’s Club. Online price-comparison engines, known as shopbots, are continuing to add new features. ShopSmarter.com now includes coupons and additional retailer discounts in its price results. In the past, consumers had to click deep into a retailer’s site to find out about these additional savings. Vendio eCommerce introduced a toolbar that people can download. If a person is on the web page of a particular product—whether it’s an iPhone or a Canon digital camera—the toolbar flashes a blinking alert when it finds a lower price for that same item somewhere else. The person can then open a window on the side of the site to learn details of the cheaper price—or simply ignore the alert. BuySAFE introduced a website that lets consumers search among about 1.5 million products that are backed by antifraud guarantees. If a buyer purchases one of the items and the seller fails to deliver, the buyer can get reimbursed for the full cost up to $25,000. Merchants on the site include those that sell on eBay and Overstock.com. Use of these sites has boomed in the past few years as people have become more reliant on the web both as a research tool and as a place to shop. According to a recent survey, more than 90 percent of consumers have used a smartphone when comparison-shopping in stores. Much of the growth has come from the more-established sites such as Shopify, Bizrate, and NexTag, as well as the shopping sections of Amazon, Microsoft’s MSN, and Google. The big attraction with shopping comparison services, of course, is the hunt for a better bargain. Merchants like the sites because they help drive consumer spending. Consumers who use comparison-shopping sites for product information or in-store discount coupons spend more than those who don’t. ### One-to-One Marketing One-to-one marketing is creating a unique marketing mix for every consumer. The key to creating one-to-one marketing is a good marketing database. The information contained in a marketing database helps managers know and understand customers, and potential customers, on an individual basis. A marketing database is a computerized file of customers’ and potential customers’ profiles and purchase patterns. In the 1960s, network television enabled advertisers to “get the same message to everyone simultaneously.” Database marketing can get a customized, individual message to everyone simultaneously through direct mail or through the internet. This is why database marketing is sometimes called micromarketing. Database marketing can create a computerized form of the old-fashioned relationship that people used to have with the corner grocer, butcher, or baker. “A database is sort of a collective memory,” says Richard G. Barlow, president of Frequency Marketing, Inc., a Cincinnati-based consulting firm. “It deals with you in the same personalized way as a mom-and-pop grocery store, where they knew customers by name and stocked what they wanted.” You have also probably heard the term big data. Companies such as Facebook and Google can process information and then tailor information to provide marketers with higher-probability targets. For instance, imagine that you and some friends are discussing a spring break vacation and you are searching for possible locations on the Florida gulf coast. That data, along with the social group considering the vacation, can be sold to companies that provide travel services, airline flights, hotel rentals, and the like. Suddenly, you and your friends see travel offers and alternate destinations on your Facebook page. Likewise, imagine you are looking for a mystery novel to read on a long flight. Let’s say that you are also searching for ways to remove a rust stain on a favorite sweater. When you go to your Amazon page, you see several new mystery novels as well as cleaning solutions highlighted on your page. All of this was done through the use of big data and analytics to provide consumers solutions they are looking for as well as products that they don’t even know that they want. contrasts the differences in approaches in traditional advertising versus targeted marketing using big data. The size of some databases is impressive: Ford Motor Company’s is about 50 million names; Kraft General Foods, 30 million; Citicorp, 30 million; and Kimberly Clark, maker of Huggies diapers, 10 million new parents. American Express can pull from its database all cardholders who made purchases at golf pro shops in the past six months, who attended symphony concerts, or who traveled to Europe more than once in the past year, as well as the very few people who did all three. Companies are using their marketing databases to implement one-to-one marketing. For example, Novartis Seeds, Inc., a Minneapolis-based agriculture business, produces individually customized, full-color brochures for 7,000 farmers. Each piece features products selected by Novartis dealers specifically for the farmer based on information collected about the farm operation and the types of crops grown. Instead of the 30-page catalog Novartis traditionally sent, these customers get a one-page brochure with only the five or six products they need, plus other complementary products dealers feel they should consider. ### Summary of Learning Outcomes 1. What trends are occurring in products and pricing? The internet has given pricing power to both buyers and sellers. A second trend is that many firms are using databases to create one-to-one marketing. Also, the large amount of information that is available to marketers is being mined and analyzed to target specific customers with personalized messages rather than creating one message that is aimed at a broad audience. ### Preparing for Tomorrow’s Workplace Skills 1. Can the marketing concept be applied effectively by a sole proprietorship, or is it more appropriate for larger businesses with more managers? Explain. (Information) 2. Before starting your own business, you should develop a marketing strategy to guide your efforts. Choose one of the business ideas listed below, and develop a marketing strategy for the business. Include the type of market research you will perform and how you will define your target market. (Information, Systems) 3. “Market segmentation is the most important concept in marketing.” Why do you think some marketing professionals make this statement? Give an example of each form of segmentation. (Systems) 4. Pick a specific product that you use frequently, such as a cosmetic or toiletry item, snack food, article of clothing, book, computer program, or video game. What is the target market for this product, and does the company’s marketing strategy reflect this? Now consider the broader category of your product. How can this product be changed and/or the marketing strategy adjusted to appeal to other market segments? (Systems) 5. Under what circumstances would a jeans maker market the product as a convenience product? A shopping product? A specialty product? (Information) 6. Go to the library, and look through magazines and newspapers to find examples of price skimming, penetration pricing, and value pricing. Make copies and show them to the class. (Information) 7. Explain how something as obvious as a retail price can have a psychological dimension. (Information) 8. Team Activity Divide the class into teams. Create a single market list of products. Each team should go to a different supermarket chain store or an independent supermarket and write down the prices of the goods selected. Report your findings to the class. (Interpersonal) 9. How does the stage of a product’s life cycle affect price? Give some examples. (Informational) ### Ethics Activity As cosmetics companies roll out line after line of products to satisfy consumers’ quest for youth, the shelves are getting crowded. How can a company stand out? Products such as the Cosmedicine and Rodan+Fields lines promote their affiliation with research institutions and medical doctors to distinguish them from their competition. Shortly after Johns Hopkins University began consulting with the then-owner of the company that produced Cosmedicine products, medical ethicists criticized Johns Hopkins for this arrangement. Hopkins initially defended its position, claiming that its consulting work does not imply any endorsement of Cosmedicine. “We have been pretty clear about our role,” said Hopkins CEO Edward Miller. “We are reporting on the scientific validity of studies that were done by outside testing agencies.” Cosmedicine packaging includes a disclaimer that discloses the nature of the research and financial relationship between Hopkins and the cosmetics company. Similarly, Rodan+Fields was established as a cosmetics company by two medical doctors. They began their company by starting out as a multi-level marketing company. The practice of multi-level marketing by companies like Herbalife, Rodan+Fields, Beachbody, and Plexus also is controversial to some. Basically, multi-level marketing enlists a new salesperson by making the individual purchase training and inventory of the company product at a discount and begin selling the product at retail prices, while also recruiting new salespeople as their “downline” salespeople. The idea is that eventually you will make most of your income via the results of your downline salespeople—the people you brought into the business. There are numerous critiques of multi-level marketing, the most notable being investor Bill Ackman’s accusation that weight loss company Herbalife was engaging in a pyramid scheme. A pyramid scheme is an arrangement whose entire whole purpose is the enrichment of the top of the pyramid at the expense of new recruits. Herbalife was able to refute Ackman’s accusations in a lawsuit brought against them by showing that their results were based on product sales rather than recruitment and that they offered money-back guarantees if the recruits were unable to sell the product. Ethical Dilemma: Is it ethical for research institutions like Johns Hopkins and medical doctors to endorse products such as skin care? Is the practice of multi-level marketing ethical? Does the money-back guarantee provided by Herbalife provide evidence that they are not engaged in a pyramid scheme? Sources: “Multi-Level Marketing,” Investopedia, http://www.investopedia.com, accessed October 1, 2017; Alissa Fleck, “How Women Making Men Rich Has Been Misbranded as Feminism,” Huffington Post, http://www.huffingtonpost.com, August 28, 2017; Kristen Calderaro, “Why Are Doctors Becoming Rodan+Fields Consultants?” LinkedIn, https://www.linkedin.com, October 29, 2015; Rhonda L. Rundle, “A New Name in Skin Care: Johns Hopkins,” The Wall Street Journal, April 11, 2006, p. B1. ### Working the Net 1. You want to start a job at a company like Herbalife or Rodan+Fields and work at home. Do a search of the U.S. Census database at http://www.census.gov to get information about the work-at-home market. Then visit http://www.jbsba.com to expand your research. Then visit the Rodan+Fields (http://www.rodanandfields.com) or Herbalife (http://www.herbalife.com) website and explore the career opportunities. Summarize your findings. 2. Visit the Strategic Business Insights website at http://www.strategicbusinessinsights.com, and click on the VALSTM link. First, read about the VALS survey and how marketers can use it. Describe its value. Then take the survey to find out which psychographic segment you’re in. Do you agree or disagree with the results? Why or why not? 3. How good was the marketing strategy you developed in Question 2 of Preparing for Tomorrow’s Workplace? Using advice from the marketing section of Entrepreneur (http://www.entrepreneur.com) or other resources, revisit your marketing strategy for the business you selected, and revise the plan accordingly. (Entrepreneur’s article “Write a Simple Marketing Plan” is a good place to start.) What did you overlook? (If you didn’t do this exercise, pick one of the businesses and draft a marketing strategy using online resources to guide you.) 4. Visit an online retailer such as Amazon.com (http://www.amazon.com), PCConnection.com (http://www.pcconnection.com), or cvs.com (). At the site, try to identify examples of leader pricing, bundling, odd-even pricing, and other pricing strategies. Do online retailers have different pricing considerations than “real-world” retailers? Explain. 5. Do a search on Yahoo! (http://www.yahoo.com) for online auctions for a product you are interested in buying. Visit several auctions, and get an idea of how the product is priced. How do these prices compare with the price you might find in a local store? What pricing advantages or disadvantages do companies face in selling their products through online auctions? How do online auctions affect the pricing strategies of other companies? Why? 6. Pick a new consumer electronic product such as a digital camera, HDTV, or laptop computer. Then go to shopping bot http://www.dealio.com. Compare prices, information, and ease-of-use of the site. Report your findings to the class. ### Creative Thinking Case ### The Brandfather Strikes Gold Coca-Cola is promoting its new Full Throttle energy drink, PepsiCo Inc. is marketing energy drinks under its SoBe and Mountain Dew brands, and smaller companies are challenging the soft drink giants with products such as Powerade, Rockstar, and FUZE Mega Energy. With concerns about the amount of sugar in soft drinks and the negative health effects that can cause, brands such as Vitaminwater and Bai have garnered significant market share and have been acquired by soft drink giants such as Coca-Cola and Dr Pepper. The person behind the success of Powerade, Vitaminwater, and Bai is Rohan Oza. After graduating from the University of Michigan’s business school, Oza began working at Coca Cola, where he worked on brands such as Sprite and Powerade. After Oza left Coca Cola for more entrepreneurial challenges, he scored a coup with Smartwater, where he was able to approach Jennifer Aniston to become the endorser of the product. He also was able to attract rapper 50 Cent as an endorser of Vitaminwater. On the arrangement with 50 Cent, he took no fees for the endorsement, instead opting for equity in the company. It looks like this was a sound strategy, since Vitaminwater parent Glaceau sold to Oza’s former employer, Coca Cola, for $4.2 billion in 2007. Oza did not stop after the Vitaminwater success. He started Bai and partnered with Justin Timberlake to establish that brand. Just as he did with Jennifer Aniston and Smartwater, and with 50 Cent and Vitaminwater, Oza works on making sure that he has the correct strategy to match the features and benefits of the brand with just the right celebrity endorser. With Bai, a sparkling drink that features antioxidants as a product benefit, Oza was able to convince Timberlake, an entrepreneur in his own right, to invest in Bai. So Timberlake was not only an endorser but a part owner, and he has been intimately involved in the brand strategy. This partnership worked as well, because Bai was sold to the Dr Pepper Snapple Group for $1.7 billion in 2016. 2. Oza has established several successful products in the competitive beverage industry. Why has he been able to achieve this success when large organizations with more resources, such as Coca Cola and Pepsi, are forced to buy these new successful brands? 3. What types of unique marketing support helped to sustain Vitaminwater and Bai’s tremendous growth? 4. Suggest a celebrity endorsement with a beverage brand, and tell why that pairing would lead to success. What are the brand attributes and the reputation of the endorser that would resonate with specific consumer segments? Sources: John Lynch, “Hollywood’s ‘Brandfather’ Talks About His New Role on ‘Shark Tank,’ Working with 50 Cent and Justin Timberlake,” Business Insider, http://www.businessinsider.com, October 1, 2017; Heidi Parker, “She Has Great Ideas and Is Savvy,” The Daily Mail, http://www.dailymail.co.uk, September 17, 2017; Katie Benner, “He’s Like to Buy the World Something Other Than a Coke,” The New York Times, https://www.nytimes.com, January 6, 2017. ### Hot Links Address Book 1. What’s the latest in customer loyalty programs? For the answer, do a search for “loyalty programs” at SearchCRM.com, http://searchcrm.techtarget.com. 2. Considering a career in marketing? Read articles about different marketing topics of interest and visit the Marketing Jobs and Career Services and Student Resources areas at the American Marketing Association site, http://www.marketingpower.com. 3. What’s different about business-to-business marketing? Find out at the Business Marketing Association site, http://www.marketing.org. 4. How satisfied are American consumers today? The American Customer Satisfaction Index (ACSI) is an economic indicator based on modeling of customer evaluations. Find the latest survey results at http://www.theacsi.org. 5. So what’s so important about branding? Learn more about branding products at http://www.allaboutbrands.com. 6. See how one consulting firm helps clients pick the right name by pointing your web browser to http://www.namebase.com. 7. At Brandchannel.com, an online exchange, you’ll find branding success stories, failures, debates, and more: http://www.brandchannel.com. 8. Companies are turning to smart-pricing software to improve margins on products. Find out how one company’s software works at Zilliant’s website, http://www.zilliant.com. 9. If you have ever wondered how manufacturers make certain types of products, this is the site for you! At How Products Are Made, you can find the details on everything from accordions and action figures to zippers, and everything in between: http://www.madehow.com.

# Distributing and Promoting Products and Services ## Introduction ### Learning Outcomes After reading this chapter, you should be able to answer these questions: 1. What is the nature and function of distribution (place)? 2. What is wholesaling, and what are the types of wholesalers? 3. What are the different kinds of retail operations? 4. How can supply-chain management increase efficiency and customer satisfaction? 5. What is promotion, and what are the key elements of a promotional mix? 6. How are advertising media selected? 7. What is personal selling? 8. What are the goals of a sales promotion, and what are several types of sales promotion? 9. How does public relations fit into the promotional mix? 10. What is social media, and how has it changed promotion? 11. What is e-commerce, and how does it affect promotion? This chapter continues to reveal the role of marketing, starting with a discussion of the distribution system and concluding with a look at traditional and nontraditional marketing channels. It explores how organizations use a distribution system to enhance the value of a product and examines the methods used to move products to locations where consumers wish to buy them. Distribution is also known as “place” in terms of the 5Ps, key components of the marketing mix. It is important to have an understanding of the members of a distribution system and to explore the role of wholesalers and retailers in delivering products to customers. In addition to understanding how the supply chain works to increase efficiency and customer satisfaction, marketers must also develop tactics for promotion, the last element of the marketing mix. Promotion is comprised of six parts, which include traditional advertising, sales promotion, personal selling, public relations, social media, and e-commerce.

# Distributing and Promoting Products and Services ## The Nature and Functions of Distribution (Place) 1. What is the nature and function of distribution (place)? Distribution is efficiently managing the acquisition of raw materials by the factory and the movement of products from the producer or manufacturer to business-to-business (B2B) users and consumers. It includes many facets, such as location, hours, website presence, logistics, atmospherics, inventory management, supply-chain management, and others. Logistics activities are usually the responsibility of the marketing department and are part of the large series of activities included in the supply chain. A supply chain is the system through which an organization acquires raw material, produces products, and delivers the products and services to its customers. illustrates a typical supply chain. Supply chain management helps increase the efficiency of logistics service by minimizing inventory and moving goods efficiently from producers to the ultimate users. On their way from producers to end users and consumers, products pass through a series of marketing entities known as a distribution channel. We will look first at the entities that make up a distribution channel and then examine the functions that channels serve. ### Marketing Intermediaries in the Distribution Channel A distribution channel is made up of marketing intermediaries, or organizations that assist in moving goods and services from producers to end users and consumers. Marketing intermediaries are in the middle of the distribution process, between the producer and the end user. The following marketing intermediaries most often appear in the distribution channel: 1. Agents and brokers: Agents are sales representatives of manufacturers and wholesalers, and brokers are entities that bring buyers and sellers together. Both agents and brokers are usually hired on commission basis by either a buyer or a seller. Agents and brokers are go-betweens whose job is to make deals. They do not own or take possession of goods. 2. Industrial distributors: Industrial distributors are independent wholesalers that buy related product lines from many manufacturers and sell them to industrial users. They often have a sales force to call on purchasing agents, make deliveries, extend credit, and provide information. Industrial distributors are used in such industries as aircraft manufacturing, mining, and petroleum. 3. Wholesalers: Wholesalers are firms that sell finished goods to retailers, manufacturers, and institutions (such as schools and hospitals). Historically, their function has been to buy from manufacturers and sell to retailers. 4. Retailers: Retailers are firms that sell goods to consumers and to industrial users for their own consumption. At the end of the distribution channel are final consumers and industrial users. Industrial users are firms that buy products for internal use or for producing other products or services. They include manufacturers, utilities, airlines, railroads, and service institutions such as hotels, hospitals, and schools. shows various ways marketing intermediaries can be linked. For instance, a manufacturer may sell to a wholesaler that sells to a retailer that in turn sells to a customer. In any of these distribution systems, goods and services are physically transferred from one organization to the next. As each takes possession of the products, it may take legal ownership of them. As the exhibit indicates, distribution channels can handle either consumer products or industrial products. ### Nontraditional Channels Often nontraditional channel arrangements help differentiate a firm’s product from the competition. For example, manufacturers may decide to use nontraditional channels such as the internet, mail-order channels, or infomercials to sell products instead of going through traditional retailer channels. Although nontraditional channels may limit a brand’s coverage, they can give a producer serving a niche market a way to gain market access and customer attention without having to establish channel intermediaries. Nontraditional channels can also provide another avenue of sales for larger firms. For example, a London publisher sells short stories through vending machines in the London Underground. Instead of the traditional book format, the stories are printed like folded maps, making them an easy-to-read alternative for commuters. Kiosks, long a popular method for ordering and registering for wedding gifts, dispersing cash through ATMs, and facilitating airline check-in, are finding new uses. Ethan Allen furniture stores use kiosks as a product locator tool for consumers and salespeople. Kiosks on the campuses of Cheney University allow students to register for classes, see their class schedule and grades, check account balances, and even print transcripts. The general public, when it has access to the kiosks, can use them to gather information about the university. Small and medium-sized New Orleans food and beverage companies and restaurants banded together to promote their goods and establishments over the internet on a specific website at http://www.nolacuisine.com. They also have found that they can successfully sell their offerings through the websites of the profiled restaurants and food outlets, such as Cochon Butcher (https://cochonbutcher.com). With technology rapidly evolving, downloading first-run movies to mobile devices may not be far off. The changing world of technology opens many doors for new, nontraditional distribution channels. ### The Functions of Distribution Channels Why do distribution channels exist? Why can’t every firm sell its products directly to the end user or consumer? Why are go-betweens needed? Channels serve a number of functions. ### Channels Reduce the Number of Transactions Channels make distribution simpler by reducing the number of transactions required to get a product from the manufacturer to the consumer. For example, if there are four students in a course and a professor requires five textbooks (each from a different publisher), a total of 20 transactions would be necessary to accomplish the sale of the books. If the bookstore serves as a go-between, the number of transactions is reduced to nine. Each publisher sells to one bookstore rather than to four students. Each student buys from one bookstore instead of from five publishers (see ). Dealing with channel intermediaries frees producers from many of the details of distribution activity. Producers are traditionally not as efficient or as enthusiastic about selling products directly to end users as channel members are. First, producers may wish to focus on production. They may feel that they cannot both produce and distribute in a competitive way. On the other hand, manufacturers are eager to deal directly with giant retailers, such as Walmart, which offer huge sales opportunities to producers. ### Channels Ease the Flow of Goods Channels make distribution easier in several ways. The first is by sorting, which consists of the following: 1. Sorting out: Breaking many different items into separate stocks that are similar. Eggs, for instance, are sorted by grade and size. Another example would be different lines of women’s dresses—designer, moderate, and economy lines. 2. Accumulating: Bringing similar stocks together into a larger quantity. Twelve large Grade A eggs could be placed in some cartons and 12 medium Grade B eggs in other cartons. Another example would be to merge several lines of women’s dresses from different designers together. 3. Allocating: Breaking similar products into smaller and smaller lots. (Allocating at the wholesale level is called breaking bulk.) For instance, a tank-car load of milk could be broken down into gallon jugs. The process of allocating generally is done when the goods are dispersed by region and as ownership of the goods changes. Without the sorting, accumulating, and allocating processes, modern society would not exist. Instead, there would be home-based industries providing custom or semicustom products to local markets. In short, society would return to a much lower level of consumption. A second way channels ease the flow of goods is by locating buyers for merchandise. A wholesaler must find the right retailers to sell a profitable volume of merchandise. A sporting-goods wholesaler, for instance, must find the retailers who are most likely to reach sporting-goods consumers. Retailers have to understand the buying habits of consumers and put stores where consumers want and expect to find the merchandise. Every member of a distribution channel must locate buyers for the products it is trying to sell. Channel members also store merchandise so that goods are available when consumers want to buy them. The high cost of retail space often means many goods are stored by the wholesaler or manufacturer. ### Summary of Learning Outcomes 1. What is the nature and function of distribution (place)? Distribution (place) includes the efficient managing of the acquisition of raw materials by the factory and the movement of products from the producer or manufacturer to business-to-business users and consumers. Place includes such activities as location selection, store layout, atmosphere and image-building for the location, inventory, transportation, and logistics. Logistics activities are usually the responsibility of the marketing department and are part of the large series of activities included in the supply chain. Distribution channels are the series of marketing entities through which goods and services pass on their way from producers to end users. Distribution systems focus on the physical transfer of goods and services and on their legal ownership at each stage of the distribution process. Channels reduce the number of transactions and ease the flow of goods.

# Distributing and Promoting Products and Services ## Wholesaling 1. What is wholesaling, and what are the types of wholesalers? Wholesalers are channel members that buy finished products from manufacturers and sell them to retailers. Retailers in turn sell the products to consumers. Wholesalers also sell products to institutions, such as manufacturers, schools, and hospitals, for use in performing their own missions. A manufacturer, for instance, might buy computer paper from Nationwide Papers, a wholesaler. A hospital might buy its cleaning supplies from Lagasse Brothers, one of the nation’s largest wholesalers of janitorial supplies. Sometimes wholesalers sell products to manufacturers for use in the manufacturing process. A builder of custom boats, for instance, might buy batteries from a battery wholesaler and switches from an electrical wholesaler. Some wholesalers even sell to other wholesalers, creating yet another stage in the distribution channel. ### Types of Wholesaler Intermediaries The two main types of wholesalers are merchant wholesalers and agents and brokers. Merchant wholesalers take title to the product (ownership rights); agents and brokers simply facilitate the sale of a product from producer to end user. ### Merchant Wholesalers Merchant wholesalers make up 80 percent of all wholesaling establishments and conduct slightly less than 60 percent of all wholesale sales. A merchant wholesaler is an institution that buys goods from manufacturers and resells them to businesses, government agencies, other wholesalers, or retailers. All merchant wholesalers take title to the goods they sell. ### Agents and Brokers As mentioned earlier, agents represent manufacturers and wholesalers. Manufacturers’ representatives (also called manufacturers’ agents) represent noncompeting manufacturers. These salespeople function as independent agents rather than as salaried employees of manufacturers. They do not take title to or possession of merchandise. They get commissions if they make sales—and nothing if they don’t. They are found in a variety of industries, including electronics, clothing, hardware, furniture, and toys. Brokers bring buyers and sellers together. Like agents, brokers do not take title to merchandise, they receive commissions on sales, and they have little say over company sales policies. They are found in markets where the information that would join buyers and sellers is scarce. These markets include real estate, agriculture, insurance, and commodities. ### Summary of Learning Outcomes 1. What is wholesaling, and what are the types of wholesalers? Wholesalers typically sell finished products to retailers and to other institutions, such as manufacturers, schools, and hospitals. The two main types of wholesalers are merchant wholesalers and agents and brokers. Merchant wholesalers buy from manufacturers and sell to other businesses. Agents and brokers are essentially independents who provide buying and selling services. They receive commissions according to their sales and don’t take title (ownership) of the merchandise.

# Distributing and Promoting Products and Services ## The Competitive World of Retailing 1. What are the different kinds of retail operations? Some 15 million Americans are engaged in retailing. Of this number, almost half work in service businesses such as barbershops, lawyers’ offices, and amusement parks. Although most retailers are involved in small businesses, most sales are made by the giant retail organizations, such as Walmart, Target, and Macy’s. Half of all retail sales come from fewer than 10 percent of all retail businesses. This small group employs about 40 percent of all retail workers. Retailers feel the impact of changes in the economy more than many other types of businesses. Survival depends on keeping up with changing lifestyles and customer shopping patterns. In recent years, online retailing trends have significantly impacted retailing organizations, providing more opportunity for smaller retailers and more competition for larger retailers. ### Types of Retail Operations There is a great deal of variety in retail operations. The major types of retailers are described in , which divides them into two main categories: in-store and nonstore retailing. Examples of in-store retailing include Walmart, Target, Macy’s, and Neiman Marcus. These retailers get most of their revenue from people who come to the store to buy what they want. Many in-store retailers also do some catalog and telephone sales. Nonstore retailing includes vending, direct selling, direct-response marketing, home shopping networks, and internet retailing. Vending uses machines to sell food and other items, usually as a convenience in institutions such as schools and hospitals. ### Atmosphere and Retail Image In considering retailing as a distribution strategy (place in the 5Ps), it is important to understand that place includes more than channel members or logistics. It also includes atmospherics—the image of the actual retailing store (or, in the case of nonstore retailing, the platform from which the product is offered, such as a website or vending machine). An important task in retailing is to create this image. Marketers combine the store’s merchandise mix, service level, and atmosphere to make up a retail image. Atmosphere refers to the physical layout and décor of the store. They can create a relaxed or busy feeling, a sense of luxury, a friendly or cold attitude, and a sense of organization or clutter. These are the most influential factors in creating a store’s atmosphere: 1. Employee type and density: Employee type refers to an employee’s general characteristics—for instance, neat, friendly, knowledgeable, or service-oriented. Density is the number of employees per 1,000 square feet of selling space. A discount retailer such as Target has a low employee density that creates a “do-it-yourself” casual atmosphere. 2. Merchandise type and density: The type of merchandise carried and how it is displayed add to the atmosphere the retailer is trying to create. A prestigious retailer such as Saks or Nordstrom carries the best brand names and displays them in a neat, uncluttered arrangement. Other retailers such as Dollar Tree may display goods in a more cluttered, crowded, disheveled way because their target market (lower-income individuals) equates clutter with open markets (and with lower prices and “deals”). 3. Fixture type and density: Fixtures can be elegant (rich woods) or trendy (chrome and smoked glass), or they can be old, beat-up tables, as in an antique store. The fixtures should be consistent with the general atmosphere the store is trying to create. By displaying its merchandise on tables and shelves rather than on traditional pipe racks, the Gap creates a relaxed and uncluttered atmosphere that enables customers to see and touch the merchandise more easily. In addition to traditional display racks, Cabela’s retail stores feature two 5,000-gallon aquariums stocked with carp, trout, and other fish and a diorama featuring elephants, lions, zebras, hyenas, and other animals. A typical Cabela’s has several million customers a year. It is not unusual for someone to drive many miles to get to a Cabela’s, where you can often see license plates from many states and Canadian provinces. 4. Sound: Sound can be pleasant or unpleasant for a customer. Classical music at a nice Italian restaurant helps create ambiance, just as country and western music does at a truck stop. Music can also entice customers to stay in the store longer and buy more, or it can encourage them to eat quickly and leave a table for others. 5. Odors: Smell can either stimulate or detract from sales. The wonderful smell of pastries and breads entices bakery customers, as does the smell of freshly brewed coffee in a shopping mall. Conversely, customers can be repulsed by bad odors, such as cigarette smoke, musty smells, antiseptic odors, and overly powerful room deodorizers. ### Summary of Learning Outcomes 1. What are the different kinds of retail operations? Some 15 million Americans are engaged in retailing. Retailing can be either in-store or nonstore. In-store retail operations include department stores, specialty stores, discount stores, off-price retailers, factory outlets, and catalog showrooms. Nonstore retailing includes vending machines, direct sales, direct-response marketing, home shopping networks, and internet retailing. The most important factors in creating a store’s atmosphere are employee type and density, merchandise type and density, fixture type and density, sound, and odors.

# Distributing and Promoting Products and Services ## Using Supply Chain Management to Increase Efficiency and Customer Satisfaction 1. How can supply-chain management increase efficiency and customer satisfaction? Distribution (place) is an important part of the marketing mix. Retailers don’t sell products they can’t deliver, and salespeople don’t (or shouldn’t) promise deliveries they can’t make. Late deliveries and broken promises may mean the loss of a customer. Accurate order filling and billing, timely delivery, and arrival in good condition are important to the success of the product. The goal of supply-chain management is to create a satisfied customer by coordinating all of the activities of the supply-chain members into a seamless process. Therefore, an important element of supply-chain management is that it is completely customer driven. In the mass-production era, manufacturers produced standardized products that were “pushed” through the supply channel to the consumer. In contrast, in today’s marketplace, products are being driven by customers, who expect to receive product configurations and services matched to their unique needs. For example, Dell builds computers according to its customers’ precise specifications, such as the amount of memory, type of monitor, and amount of hard-drive space. The process begins with Dell purchasing partly built laptops from contract manufacturers. The final assembly is done in Dell factories in Ireland, Malaysia, or China, where microprocessors, software, and other key components are added. Those finished products are then shipped to Dell-operated distribution centers in the United States, where they are packaged with other items and shipped to the customer. Through the channel partnership of suppliers, manufacturers, wholesalers, and retailers along the entire supply chain who work together toward the common goal of creating customer value, supply-chain management allows companies to respond with the unique product configuration demanded by the customer. Today, supply-chain management plays a dual role: first, as a communicator of customer demand that extends from the point of sale all the way back to the supplier, and second, as a physical flow process that engineers the timely and cost-effective movement of goods through the entire supply pipeline. Accordingly, supply-chain managers are responsible for making channel strategy decisions, coordinating the sourcing and procurement of raw materials, scheduling production, processing orders, managing inventory, transporting and storing supplies and finished goods, and coordinating customer-service activities. Supply-chain managers are also responsible for the management of information that flows through the supply chain. Coordinating the relationships between the company and its external partners, such as vendors, carriers, and third-party companies, is also a critical function of supply-chain management. Because supply-chain managers play such a major role in both cost control and customer satisfaction, they are more valuable than ever. For products that are services, the distribution channel is based primarily on location of the services, such as where the company has its headquarters; the layout of the area in which the service is provided (for example, the interior of a dry cleaners’ store); alternative locations for the presentation of services, such as an architect visiting a client’s site location; and elements of atmosphere, such as dark wooden bookcases for bound legal volumes in an attorney’s office, which provide credibility. Services companies also utilize the traditional entities of distribution for any actual goods they sell or supplies they must purchase. ### Summary of Learning Outcomes 1. How can supply-chain management increase efficiency and customer satisfaction? The goal of supply-chain management is to coordinate all of the activities of the supply-chain members into a seamless process, thereby increasing customer satisfaction. Supply-chain managers have responsibility for main channel strategy decisions, coordinating the sourcing and procurement of raw materials, scheduling production, processing orders, managing inventory, transporting and storing supplies and finished goods, and coordinating customer-service activities.

# Distributing and Promoting Products and Services ## Promotion Strategy 1. What is promotion, and what are the key elements of a promotional mix? Promotion is an attempt by marketers to inform, persuade, or remind consumers and B2B users to influence their opinion or elicit a response. Most firms use some form of promotion. Because company goals vary widely, so do promotional strategies. The goal is to stimulate action from the people or organizations of a target market. In a profit-oriented firm, the desired action is for the consumer to buy the promoted item. Mrs. Smith’s, for instance, wants people to buy more frozen pies. Not-for-profit organizations seek a variety of actions with their promotions. They tell us not to litter, to buckle up, to join the military, or to attend the ballet. (These are examples of products that are ideas marketed to specific target markets.) Promotional goals include creating awareness, getting people to try products, providing information, retaining loyal customers, increasing the use of products, and identifying potential customers, as well as teaching potential service clients what is needed to “co-create” the services provided. Any promotional campaign may seek to achieve one or more of these goals: 1. Large companies often use catchy slogans to build brand awareness. For example, Dodge’s wildly successful ads where a guy in a truck yells over to another truck at a stoplight, “Hey, that thing got a Hemi?” has created a huge number of new customers for Dodge trucks. Hemi has become a brand within a brand. Now, 2. 3. People typically will not buy a product or support a not-for-profit organization until they know what it will do and how it may benefit them. Thus, an informative ad may stimulate interest in a product. Consumer watchdogs and social critics applaud the informative function of promotion because it helps consumers make more intelligent purchase decisions. 4. Firms can also help keep customers loyal by telling them when a product or service is improved. 5. 6. 7. ### The Promotional Mix The combination of traditional advertising, personal selling, sales promotion, public relations, social media, and e-commerce used to promote a product is called the promotional mix. Each firm creates a unique promotional mix for each product. But the goal is always to deliver the firm’s message efficiently and effectively to the target audience. These are the elements of the promotional mix: 1. Traditional advertising: Any paid form of nonpersonal promotion by an identified sponsor that is delivered through traditional media channels. 2. Personal selling: A face-to-face presentation to a prospective buyer. 3. Sales promotion: Marketing activities (other than personal selling, traditional advertising, public relations, social media, and e-commerce) that stimulate consumer buying, including coupons and samples, displays, shows and exhibitions, demonstrations, and other types of selling efforts. 4. Public relations: The linking of organizational goals with key aspects of the public interest and the development of programs designed to earn public understanding and acceptance. Public relations can include lobbying, publicity, special events, internal publications, and media such as a company’s internal television channel. 5. Social media: The use of social media platforms such as Facebook, Twitter, Pinterest, Instagram, and various blogs to generate “buzz” about a product or company. The skills and knowledge needed to generate information as well as to defend the company against problems (such as incriminating videos “going viral”) are separate skills from those related to traditional advertising. Even promotional strategies such as paying celebrities to wear a specific line of clothing and posting these images on Twitter or Instagram (a form of advertising) requires different types of planning and expertise than traditional advertising. 6. E-commerce: The use of a company’s website to generate sales through online ordering, information, interactive components such as games, and other elements of the website. Website development is mandatory is today’s business world. Understanding how to develop and utilize a website to generate sales is imperative for any marketer. Ideally, marketing communications from each promotional-mix element (personal selling, traditional advertising, sales promotion, public relations, social media, and e-commerce) should be integrated. That is, the message reaching the consumer should be the same regardless of whether it comes from an advertisement, a salesperson in the field, a magazine article, a blog, a Facebook posting, or a coupon in a newspaper insert. ### Integrated Marketing Communications This disjointed approach to promotion has propelled many companies to adopt the concept of integrated marketing communications (IMC). IMC involves carefully coordinating all promotional activities—traditional advertising (including direct marketing), sales promotion, personal selling, public relations, social media and e-commerce, packaging, and other forms of promotion—to produce a consistent, unified message that is customer focused. Following the concept of IMC, marketing managers carefully work out the roles the various promotional elements will play in the marketing mix. Timing of promotional activities is coordinated, and the results of each campaign are carefully monitored to improve future use of the promotional mix tools. Typically, a company appoints a marketing communications director who has overall responsibility for integrating the company’s marketing communications. Southwest Airlines relied on IMC to launch its “Transfarency” campaign. The campaign integrated and promoted the concept on its website, as well as through advertising and airport signage. The campaign has resonated with consumers because most competitors add extra fees for baggage and premium seats. One of the taglines Southwest uses is “Reward seats only on days ending with the letter ‘y.’” The integrated marketing campaign was created in collaboration with Southwest’s advertising agency, GSD&M, based in Dallas, Texas. The sections that follow examine the elements of the promotional mix in more detail. ### Summary of Learning Outcomes 1. What is promotion, and what are the key elements of a promotional mix? Promotion aims to stimulate demand for a company’s goods or services. Promotional strategy is designed to inform, persuade, or remind target audiences about those products. The goals of promotion are to create awareness, get people to try products, provide information, keep loyal customers, increase use of a product, identify potential customers, and even teach clients about potential services. The unique combination of advertising, personal selling, sales promotion, public relations, social media, and e-commerce used to promote a product is called the promotional mix. Advertising is any paid form of nonpersonal promotion by an identified sponsor. Personal selling consists of a face-to-face presentation in a conversation with a prospective purchaser. Sales promotion consists of marketing activities—other than personal selling, advertising, and public relations—that stimulate consumers to buy. These activities include coupons and samples, displays, shows and exhibitions, demonstrations, and other selling efforts. Public relations is the marketing function that links the policies of the organization with the public interest and develops programs designed to earn public understanding and acceptance. IMC is being used by more and more organizations. It is the careful coordination of all of the elements of the promotional mix to produce a consistent, unified message that is customer focused.

# Distributing and Promoting Products and Services ## The Huge Impact of Advertising 1. How are advertising media selected? Most Americans are bombarded daily with advertisements to buy things. Traditional advertising is any paid form of nonpersonal presentation by an identified sponsor. It may appear on television or radio; in newspapers, magazines, books, or direct mail; or on billboards or transit cards. In the United States, children between the ages of two and 11 are exposed to more than 25,600 exposures to advertising through TVs and online exposures a year. Adults are exposed to three times as many—more than two million commercials in a lifetime. The money that big corporations spend on advertising is mind-boggling. Total advertising expenses in this country were estimated at more than $206 billion in 2017. Global advertising expenditures are approximately $546 billion annually. General Motors is America’s largest advertiser, spending over $3.1 billion annually. This is slightly over $350,000 per hour, seven days a week, 24 hours per day. America’s biggest global spender on advertising is Procter & Gamble at $4.6 billion. Nissan was a sponsor of the 2016 Rio Olympic Games and provided 5,000 vehicles for the events. Ads for the 2018 Super Bowl cost between $5 million and $5.5 million for a 30-second commercial. A 30-second spot on NBC’s Sunday Night Football costs about $650,000. ### The Impact of Technology and the Internet on Traditional Advertising Many new media are not hardwired or regulated, and digital technology is delivering content anytime, anywhere. Cable, satellite, and the internet have highly fragmented audiences, making them tougher than ever to reach. In the late 1950s, Gunsmoke on CBS captured a 65 percent share of the TV audience nearly every Saturday night. Only one event, the Super Bowl, has a chance to do that now. Traditional forms of entertainment are being rapidly digitized. Magazines, books, movies, shows, and games can be accessed through a laptop or a cell phone. In 2017, 93 million U.S. homes have broadband connections—nearly as many as the 119.6 million that now have cable and satellite hookups. Technology is driving many of the changes, but so is consumer behavior. Advertiser questions abound. How do you market a product to young people when millions of them are glued to video game screens instead of TVs? How do you reach TV audiences when viewers can TiVo their way past your ads? How do you utilize social media to get the word out about your product, and once you do, how do you control the message if something goes viral? What role do influencers play in promoting products and services via various electronic platforms? What should you make of blogs? How do you plan a website that fosters sales and continually provides information and other forms of value for your customers? Product placements in films and streaming content? Podcasts? We will touch on each of these later in the chapter. ### Choosing Advertising Media The channels through which advertising is carried to prospective customers are the advertising media. Both product and institutional ads appear in all the major advertising media. Each company must decide which media are best for its products. Two of the main factors in making that choice are the cost of the medium and the audience reached by it. ### Advertising Costs and Market Penetration Cost per contact is the cost of reaching one member of the target market. Naturally, as the size of the audience increases, so does the total cost. Cost per contact enables an advertiser to compare media vehicles, such as television versus radio or magazine versus newspaper, or, more specifically, versus An advertiser debating whether to spend local advertising dollars for TV spots or radio spots could consider the cost per contact of each. The advertiser might then pick the vehicle with the lowest cost per contact to maximize advertising punch for the money spent. Often costs are expressed on a cost per thousand (CPM) contacts basis. Reach is the number of different target consumers who are exposed to a commercial at least once during a specific period, usually four weeks. Media plans for product introductions and attempts at increasing brand awareness usually emphasize reach. For example, an advertiser might try to reach 70 percent of the target audience during the first three months of the campaign. Because the typical ad is short-lived and often only a small portion of an ad may be perceived at one time, advertisers repeat their ads so consumers will remember the message. Frequency is the number of times an individual is exposed to a message. Average frequency is used by advertisers to measure the intensity of a specific medium’s coverage. Media selection is also a matter of matching the advertising medium with the product’s target market. If marketers are trying to reach teenage females, they might select Seventeen magazine. If they are trying to reach consumers over 50 years old, they may choose AARP: The Magazine. A medium’s ability to reach a precisely defined market is its audience selectivity. Some media vehicles, such as general newspapers and network television, appeal to a wide cross section of the population. Others—such as Brides, Popular Mechanics, Architectural Digest, MTV, ESPN, and Christian radio stations—appeal to very specific groups. Marketers must also consider utilizing various social media platforms and which platforms are most likely to reach the targeted market. ### Summary of Learning Outcomes 1. How are traditional advertising media selected? Cost per contact is the cost of reaching one member of the target market. Often costs are expressed on a cost per thousand basis. Reach is the number of different target customers who are exposed to a commercial at least once during a specific period, usually four weeks. Frequency is the number of times an individual is exposed to a message. Media selection is a matter of matching the advertising medium with the target audience. Technology continues to drive many of the recent changes to traditional advertising strategies.

# Distributing and Promoting Products and Services ## The Importance of Personal Selling 1. What is personal selling? Advertising acquaints potential customers with a product and thereby makes personal selling easier. Personal selling is a face-to-face sales presentation to a prospective customer. Sales jobs range from salesclerks at clothing stores to engineers with MBAs who design large, complex systems for manufacturers. About 6.5 million people are engaged in personal selling in the United States. Slightly over 45 percent of them are women. The number of people who earn a living from sales is huge compared, for instance, with the nearly 300,000 workers employed in the traditional advertising sector. Personal selling offers several advantages over other forms of promotion: 1. Personal selling provides a detailed explanation or demonstration of the product. This capability is especially desirable for complex or new goods and services. 2. The sales message can be varied according to the motivations and interests of each prospective customer. Moreover, when the prospect has questions or raises objections, the salesperson is there to provide explanations. In contrast, advertising and sales promotion can respond only to the objections the copywriter thinks are important to customers. 3. Personal selling can be directed only to qualified prospects. Other forms of promotion include some unavoidable waste because many people in the audience are not prospective customers. 4. Personal selling costs can be controlled by adjusting the size of the sales force (and resulting expenses) in one-person increments. In contrast, advertising and sales promotion must often be purchased in fairly large amounts. 5. Perhaps the most important advantage is that personal selling is considerably more effective than other forms of promotion in obtaining a sale and gaining a satisfied customer. ### The Selling Process Selling is a process that can be learned. Experts have spelled out the steps of the selling process, shown in , and professional salespeople use them all the time. These steps are as follows: 1. For many companies, the inquiries generated by advertising and promotion are the most likely source of prospects. Inquiries are also known as sales leads. Leads usually come in the form of letters, cards, e-mail addresses, telephone calls, or through social media sites. Some companies supply salespeople with prospect lists compiled from external sources, such as Chamber of Commerce directories, newspapers, public records, club membership lists, internet inquiries, and professional or trade publication subscription lists. Meetings, such as professional conventions and trade shows, are another good source of leads. Sales representatives attend such meetings to display and demonstrate their company’s products and to answer the questions of those attending. The firm’s files and records can be another source of prospects. Correspondence with buyers can be helpful. Records in the service department can identify people who already own equipment and might be prospects for new models. Finally, friends and acquaintances of salespeople can often supply leads. One guideline is that not all prospects are “true” opportunities for a sale. Just because someone has been referred or has made an inquiry does not mean that the person is a genuine prospect. Salespeople can avoid wasting time and increase their productivity by qualifying all prospects. 2. 3. 4. Often employed in business, the “higher authority” objection is frequently used when one of the parties says, “This agreement looks good, but I’ll have to run it by my committee” (or wife or any other “higher authority”). The result is that that sales presentation turns out to be just a preliminary, nonbinding round. After the higher authority responds, often disapproving the agreement, the sale goes into round two or starts all over again. For example, when a customer wants to buy a house, car, or anything expensive, the salesperson will say, “If we find the house (or car) that you really like, is there any reason you could not make the purchase today?” Once they get the green light, the salesperson will spend whatever time it takes to find the right product for the customer. However, if the client says his uncle has to give the final approval because he will be loaning the money, the salesperson will try and set up an appointment when the uncle can be present. 5. 6. After the product is delivered to the customer, the salesperson must make a routine visit to see that the customer is satisfied. This follow-up call may also be a chance to make another sale. But even if it isn’t, it will build goodwill for the salesperson’s company and may bring future business. Repeat sales over many years are the goal of professional salespeople. ### Summary of Learning Outcomes 1. What is personal selling? About 6.5 million people in the United States are directly engaged in personal selling. Personal selling enables a salesperson to demonstrate a product and tailor the message to the prospect; it is effective in closing a sale. Professional salespeople are knowledgeable and creative. They also are familiar with the selling process, which consists of prospecting and qualifying, approaching customers, presenting and demonstrating the product, handling objections, closing the sale, and following up on the sale.

# Distributing and Promoting Products and Services ## Sales Promotion 1. What are the goals of sales promotion, and what are several types of sales promotion? Sales promotion helps make personal selling and advertising more effective. Sales promotions are marketing events or sales efforts—not including traditional advertising, personal selling, and public relations—that stimulate buying. Sales promotion can be developed as part of the social media or e-commerce effort just as advertising can, but the methods and tactics are much different. Sales promotion is a $300 billion—and growing— industry. Sales promotion is usually targeted toward either of two distinctly different markets. Consumer sales promotion is targeted to the ultimate consumer market. Trade sales promotion is directed to members of the marketing channel, such as wholesalers and retailers. The goal of many promotion tactics is immediate purchase. Therefore, it makes sense when planning a sales-promotion campaign to target customers according to their general behavior. For instance, is the consumer loyal to the marketer’s product or to the competitor’s? Does the consumer switch brands readily in favor of the best deal? Does the consumer buy only the least expensive product, no matter what? Does the consumer buy any products in your category at all? Procter & Gamble believes shoppers make up their mind about a product in about the time it takes to read this paragraph. This “first moment of truth,” as P&G calls it, is the three to seven seconds when someone notices an item on a store shelf. Despite spending billions on traditional advertising, the consumer-products giant thinks this instant is one of its most important marketing opportunities. It recently created a position entitled Director of First Moment of Truth, or Director of FMOT (pronounced “EFF-mott”), to produce sharper, flashier in-store displays. There is a 15-person FMOT department at P&G headquarters in Cincinnati as well as 50 FMOT leaders stationed around the world. One of P&G’s most prominent in-store promotions has been for a new line of Pampers. In the United States, P&G came up with what it calls a “shopper concept”—a single promotional theme that allows it to pitch products in a novel way. The theme for Pampers was “Babies First.” In stores, the company handed out information on childhood immunizations, car-seat safety, and healthy diets while promoting its diapers and wipes in other parts of the store. To market Pampers diapers in the United Kingdom, P&G persuaded retailers earlier this year to put fake doorknobs high up on restroom doors, to remind parents how much babies need to stretch. The objectives of a promotion depend on the general behavior of target consumers, as described in . For example, marketers who are targeting loyal users of their product don’t want to change behavior. Instead, they want to reinforce existing behavior or increase product usage. Frequent-buyer programs that reward consumers for repeat purchases can be effective in strengthening brand loyalty. Other types of promotions are more effective with customers prone to brand switching or with those who are loyal to a competitor’s product. Cents-off coupons, free samples, or an eye-catching display in a store will often entice shoppers to try a different brand. The use of sales promotion for services products depends on the type of services. Consumer services, such as hairstyling, rely heavily on sales promotions (such as providing half off the price of a haircut for senior citizens on Mondays). Professional services, however, use very little sales promotion. Doctors, for example, do not often use coupons for performing an appendectomy, for example. In fact, service product companies must be careful not to utilize too many sales-promotion tactics because they can lower the credibility of the firm. Attorneys do not have a sale on providing services for divorce proceedings, for example. Two growing areas of sales promotion are couponing and product placement. American consumers receive over $321 billion worth of coupons each year and redeem about $3 billion. Almost 85 percent of all Americans redeem coupons. Sunday newspaper supplements remain the number one source, but there has been explosive growth of online or consumer-printed coupons. General Mills, Kimberly-Clark, and General Electric like online coupons because they have a higher redemption rate. Coupons are used most often for grocery shopping. Do they save you money? One study found that people using coupons at the grocery store spent eight percent more than those who didn’t. Product placement is paid inclusion of brands in mass media programming. This includes movies, TV, books, music videos, and video games. So when you see Ford vehicles in the latest James Bond movie or Tom Hanks putting on a pair on Nikes on-screen, that is product placement. Product placement has become a huge business. For example, companies paid more than $6 billion in a recent year to have their products placed prominently in a film or television program; that figure is expected to reach more than $11 billion by 2019. It is easy to go overboard with this trend and be portrayed as a parody, however. The 2017 Emoji Movie is an example of failed product placements. The theme of the movie centered on various emojis caught in a smartphone as they are forced to play Candy Crush and say glowing things about such apps as Dropbox and Instagram as they make their way through the phone. Also, some have suggested that product placement might doom the products and companies. For example, Atari products appeared in the classic 1982 film Blade Runner, but the original company went out of business shortly after the movie was released, while another product, the Cuisinart food processor, had to settle a price-fixing scandal after making an appearance in the film. This has not stopped companies such as Sony, Peugeot, and Coca-Cola from tempting fate by appearing in the recently released Blade Runner 2049. Many large companies are cutting their advertising budgets to spend more on product placements. One area of product placement that continues to raise ethical issues is so-called “experts” being paid to mention brands on the air. ### Summary of Learning Outcomes 1. What are the goals of sales promotion, and what are several types of sales promotion? Immediate purchase is the goal of most sales promotion, whether it is aimed at consumers or the trade (wholesalers and retailers). The most popular sales promotions are coupons, samples, product placement, premiums, contests, and sweepstakes. Trade shows, conventions, and point-of-purchase displays are other types of sales promotion.

# Distributing and Promoting Products and Services ## Public Relations Helps Build Goodwill 1. How does public relations fit into the promotional mix? Like sales promotion, public relations can be a vital part of the promotional mix. Public relations is any communication or activity designed to win goodwill or prestige for a company or person. This could include publicity, information about a company or product that appears in the news media and is not directly paid for by the company. Publicity can be good or bad. Reports of children overeating fast food, which can lead to obesity, is an example of negative publicity. Public relations includes many other activities, such as lobbying, event planning, acting as a press agent, managing internal communication, and coordinating crisis management for communications. Naturally, firms’ public relations departments try to create as much good publicity as possible. They furnish company speakers for business and civic clubs, write speeches for corporate officers, and encourage employees to take active roles in such civic groups as the United Way and the Chamber of Commerce. One of the tools of the public relations department is the press release, a formal announcement of some newsworthy event connected with the company, such as the start of a new program, the introduction of a new product, or the opening of a new plant. Public relations departments may perform any or all of the functions described in . Much of sales promotion and publicity is about creating buzz. Buzz marketing (or viral marketing) is intense word-of-mouth marketing. Word-of-mouth is essentially a linear process with information passing from one individual to another, then to another. A marketer has successfully created a buzz when the interactions are so intense that the information moves in a matrix pattern rather than a linear one and everyone is talking about the topic. Leading-edge firms now feel that they get more bang for their buck using buzz marketing than other forms of promotion. ### Summary of Learning Outcomes 1. How does public relations fit into the promotional mix? Public relations is mostly concerned with getting good publicity for companies and other organizations. Publicity is any information about a company or product that appears in the news media and is not directly paid for by the company. Public relations departments furnish company speakers for business and civic clubs, write speeches for corporate officers, and encourage employees to take active roles in civic groups. These activities help build a positive image for an organization and create buzz, which is a good backdrop for selling its products.

# Distributing and Promoting Products and Services ## Trends in Social Media 1. What is social media, and how has it changed promotion? Advances in technology continue to change the marketing landscape. As you will see in the following sections, marketers are harnessing new technology to hone their marketing message and reach more customers. The business world now relies on the internet for much of its communications, marketing or otherwise. Almost all companies have Facebook accounts, and individual leaders of companies have separate individual accounts on Linked In, Twitter, Instagram, and other social media sites. New social media sites are popping up almost every week. The phenomenon of social media has created a business climate in which thousands of impressions can be made with one social media post. That impression could be positive or negative. Within social media, there are “stars” of social media—individuals who have developed audiences in the millions who follow their posts every day. Social media is a hugely powerful tool for marketers. It has it challenges, though, because the platforms are constantly changing and evolving. Also, the audiences being reached often read (or view) and believe the messages seen on various social media platforms without understanding the context of the message. A social media post that goes viral can close down a business, even if the post is not true. That’s what makes social media the newest challenge/opportunity for marketers. Companies that want to retain market share and build their image must develop tactics for the use of social media and for defending against problems created by the use of this powerful marketing tool. ### Promotion through Blogs Blogs provide marketers with a real-time dialogue with customers and an avenue to promote their products or services. A blog is an online journal with regularly updated content. This content is pushed to subscribers by RSS (really simple syndication) or e-mail and allows for response and discussion from site visitors. RSS enables users to automatically gather updates from various websites, especially news sites and blogs, and display headlines and a brief summary of those updates in a single location. Blogs can be considered to be offerings of social media unless the site is actually part of the company’s main web page. Well-run marketing blogs usually focus tightly on one niche area, product line, or vertical market segment. The aim is to provide the blog’s readers with a constantly renewing source of news and insight about that topic. About 366 million blogs are registered on Tumblr, and more than 23 million blog entries are posted daily. Many companies have set up their own blogs, including General Motors, Apple, the American Cancer Society, and Microsoft, to name a few. These companies blog because they: (1) get real-time input from customers and prospects; (2) create and maintain relationships; (3) can have a continuing dialogue with loyal customers and prospective clients; and (4) can zero in on specific marketing goals. For example, Disney uses a blog called Disney Baby to cater to the needs of new mothers. Each of their bloggers has a personal bio that helps provide a connection for the new mother to the blogger and provides a deeper connection to the Disney brand. Firms can also use emerging search tools such as BlogPulse, Feedster, PubSub, and Technorati to monitor conversations about their company and brands. A public relations department might then decide to feed new-product information to bloggers who are evangelists for their brand. ### Advertisers Jump on Podcasts and Videos Podcasts are basically blogs with a multimedia file. The trend developed when a new version of iTunes software made it easy for people to create their own podcasts and post them on a website. There are more than 8,000 podcasters in the United States. Besides individuals, companies are beginning to do their own podcasts as well as posting videos from the company on YouTube as another marketing channel. For listeners, the advantage of a podcast is convenience. Companies now have the ability to use streaming video, which potential customers can download to their mobile devices; for example, ABC News offering a digital version of its programming. The customers’ favorite programs download automatically from the internet, usually free of charge, and they can listen to the programs any time they wish. They can also listen wherever they wish, if they have a mobile device to receive the downloads. Gimlet Media is one of the nation’s largest podcasters, offering material from nearly 40 different stations as podcasts. At first ad-free, Gimlet’s podcasts are done for direct-to-consumer companies like Blue Apron, as well as for traditional advertisers like Pepsi and Ford. Gimlet now includes a short advertisement before the programming—short enough that people won’t fast-forward through it. Gimlet also received a $5 million investment from advertising giant WPP, a clear sign that the business community sees a bright future in podcasts. Pet owners can go to http://www.purina.com and opt in to receive Purina’s podcasts. The products will offer advice ranging from animal training to pet insurance to nutrition for older pets. Weekly tips will also be sent on things such as how to help your dog lose weight. Owners spend close to $25 billion a year on pet food. The aim of the podcasts is to build brand loyalty with a soft sell. Videos have become another important promotions channel. Literally hundreds of thousands of videos can be viewed on YouTube, the top video-hosting site on the internet. Many people now log in to YouTube to watch videos on a particular product and how the product can be used. Entrepreneurs and other small-business owners have made extensive use of YouTube to provide value to their customers by creating and uploading informational videos that highlight their products. ### Summary of Learning Outcomes 1. What is social media, and how does it affect promotion? Social media is a relatively new marketing channel that includes platforms such as Facebook, Twitter, LinkedIn, Pinterest, and Instagram. The phenomenon of social media has created a business climate in which thousands of impressions (marketing messages) can be achieved with one creative social media post. Social media is a hugely powerful tool for marketers. It has it challenges, though, because a social media post that goes viral can close down a business, even if it is not true. That’s what makes social media the newest challenge/opportunity for marketers. The internet and new technology are having a major impact on promotion and promotion expenditures. Traditional media are losing advertising funds to the internet. Many companies are now creating blogs to get closer to customers and potential customers. Podcasts offer advertisers a new medium to reach consumers. Streaming video and videos uploaded to YouTube are also important social media channels.

# Distributing and Promoting Products and Services ## Trends in E-Commerce 1. What is e-commerce, and how has it affected the retail sector? E-commerce is related to social media and other new online platforms because it utilizes the internet for marketing communication. E-commerce refers to the development and maintenance of a company’s website and the facilitation of commerce on the website, such as the ability for customers to order products online, to get questions answered about products, and for the company to introduce new products and ideas. E-commerce can include special components designed specifically for separate target market segments, such as information boxes or games. Anything associated with an actual company website related to marketing can be considered e-commerce. Estimates by various researchers say that more than half of all retail sales involve an online component; direct internet purchases in 2016 were more than 13 percent of all retail sales, and that percentage will continue to grow. Why? One reason is the economics of shopping. Think about time spent engaged in making a purchase in a brick-and-mortar location: the cost of fuel, finding a parking spot, locating your intended store, deciding on a purchase, and then driving home. Now think about the time spent reviewing products on a website, deciding what to purchase, and clicking a mouse or swiping a mobile device screen—it takes no time at all! Countless small businesses have taken the plunge to serve the growing army of online shoppers. Many e-commerce businesses, including e-jeweler Blue Nile, luggage site eBags, and shoe and accessory retailer Zappos, are experiencing sales of $100 million a year or more. The increasing sophistication of search technology and comparison-shopping sites have allowed online businesses to market their products to millions of potential customers cheaply and effectively. Often, these innovations are bringing less-well-known brands and merchants to consumers’ attention. Online merchants can offer a far broader array of merchandise than specialty brick-and-mortar retailers because they don’t have to keep the products on store shelves. In response to this challenge, traditional retailers are turning to technology to gain an advantage, outfitting their sales associates with voice headgear so they can look up prices and product information to assist customers. After a slow start, the world’s largest retailer, Walmart, has begun moving into e-retailing in a big way. It is now in almost every major category of web-related consumer commerce. It is estimated that Walmart has approximately 200 million items across all of its outlets, compared to 300 million items available through Amazon. The company has taken some innovative steps to leverage the web to drive people to its stores. In 2016, CEO Doug McMillon purchased Jet.com for $3.3 billion and put Jet.com’s CEO Mark Lore in charge of running Walmart’s online business. A case in point is the company’s online tire service, which allows you to order automobile tires to be picked up and mounted at a Walmart tire center. Customers can order prescription refills for delivery by mail or for pickup at a Walmart pharmacy department. Walmart’s online photo service, in addition to providing a way to store pictures on the web, allows customers to send digital pictures to be printed in a Walmart store of their choice, with a one-hour turnaround. ### Summary of Learning Outcomes 1. What is e-commerce, and how does it affect promotion? E-commerce refers to the development and maintenance of a company’s website and the facilitation of commerce on the website, such as the ability for customers to order products on line, to get questions answered about products, and for the company to introduce new products and ideas. E-commerce can include special components designed specifically for separate target market segments, such as information boxes or games. The ease of use and ability to comparison-shop is driving millions of people to the internet to purchase goods and services. Major retailers such as Walmart are quickly increasing their web presence in an effort to stay relevant in this ever-changing business environment and to attract even more loyal customers who have made the switch to doing most of their shopping on line. ### Preparing for Tomorrow’s Workplace Skills 1. Team Activity Divide the class into two groups with one taking the “pro” position and the other the “con” position on the following issue: “The only thing marketing intermediaries really do is increase prices for consumers. It is always best to buy direct from the producer.” (Interpersonal) 2. Trace the distribution channel for some familiar product. Compose an e-mail that explains why the channel has evolved as it has and how it is likely to change in the future. (Systems) 3. You work for a small chain of department stores (six stores total) located within a single state. Write a memo to the president explaining how e-retailing may affect the chain’s business. (Technology) 4. How does supply-chain management increase customer value? (Systems) 5. Think of a product that you use regularly. Find several examples of how the manufacturer markets this product, such as ads in different media, sales promotions, and publicity. Assess each example for effectiveness in meeting one or more of the six promotional goals described in the chapter. Then analyze them for effectiveness in reaching you as a target consumer. Consider such factors as the media used, the style of the ad, and ad content. Present your findings to the class. (Information) 6. Go to the blogging search sites listed in the text and find personal blogs, both positive and negative, for a brand. Also report on a consumer good manufacturer’s blogging site. Was it appealing? Why or why not? (Technology) 7. The internet and technology has changed the world of promotion forever. Explain the meaning of this sentence. (Technology) 8. What advantages does personal selling offer over types of promotion? (Information) 9. Choose a current advertising campaign for a beverage product. Describe how the campaign uses different media to promote the product. Which media is used the most, and why? What other promotional strategies does the company use for the product? Evaluate the effectiveness of the campaign. Present your results to the class. (Information) 10. The Promotional Products Association International is a trade association of the promotional-products industry. Its website, http://www.ppai.org, provides an introduction to promotional products and how they are used in marketing. Read its FAQ page and the Industry Sales Volume statistics (both reached through the Education link). Then go to the Resources and Technology section, then case studies, and link to the most recent Golden Pyramid Competition. Choose three to four winners from different categories. Now prepare a short report on the role of promotional products in the promotional mix. Include the examples you selected, and explain how the products helped the company reach its objective. (Technology) ### Working the Net 1. Visit Industry Week’s website at http://www.industryweek.com. Under Archives, do a search using the search term “supply-chain management.” Choose an article from the results that describes how a company has used supply-chain management to improve customer satisfaction, performance, or profitability. Give a brief presentation to your class on your findings. 2. What are some of the logistics problems facing firms that operate internationally? Visit the Logistics Management magazine website at http://www.logisticsmgmt.com, and see if you can find information about how firms manage global logistics. Summarize the results. 3. Go to http://www.woot.com. Why do you think that this e-retailer is successful? How can it expand its market? Why do you think that the site has such a cult following? 4. A competitive advantage of the internet is the ability to comparison-shop like never before. To compare brands, features, and prices of products, go to two of these sites: http://www.pricegrabber.com or http://mysimon.com, or, for the best bargains, http://www.overstock.com, http://www.smartbargains.com, http://www.bluefly.com, http://www.nextag.com, or http://www.shopzilla.com. Which is the easiest site to use? The most difficult? Which site provides the most information? 5. The Zenith Media site at http://www.zenithmedia.com is a good place to find links to internet resources on advertising. Research the leading brands listed on the site. Pick three of the company sites listed, and review them using the concepts in this chapter. 6. Go to the Sales and Marketing magazine site at http://www.salesandmarketing.com. Read several of the free recent articles from the magazine as well as online exclusives, and prepare a brief report on current trends in one of the following topics: sales strategies, marketing strategies, customer relationships, or training. Also check out their new blog, “Closers.” What is your opinion of this blog? 7. Entrepreneurs and small businesses don’t always have big sales promotion budgets. The Guerrilla Marketing page at http://www.gmarketing.com has many practical ideas for those with big ideas but small budgets. After exploring the site, explain the concept of guerrilla marketing. Then list five ideas or tips that appeal to you, and summarize why they are good marketing strategies. 8. Press releases are a way to get free publicity for your company and products. Visit the following site to learn how to write a press release: http://www.press-release-examples.com. Was this helpful, and why? Develop a short “how-to” guide on press releases for your classmates. Then write a press release that announces the opening of your new health food restaurant, Zen Foods, located just two blocks from campus. ### Ethics Activity After working really hard to distinguish yourself, you’ve finally been promoted to senior account executive at a major advertising agency and placed in charge of the agency’s newest account, a nationally known cereal company. Their product is one you know contains excessive amounts of sugar as well as artificial colorings and lacks any nutritional value whatsoever. In fact, you have never allowed your own children to eat it. Your boss has indicated that the cereal company would like to use the slogan “It’s good for you” in their new television and print advertising campaign. You know that a $2 billion lawsuit has been filed against the Kellogg and Viacom corporations for marketing junk food to young children. The suit cited “alluring product packaging, toy giveaways, contests, collectibles, kid-oriented websites, magazine ads, and branded toys and clothes.” In addition, two consumer groups have brought suit against children’s television network Nickelodeon for “unfair and deceptive junk-food marketing.” Your new role at the agency will be tested with this campaign. Doing a good job on it will cement your position and put you in line for a promotion to vice president. But as a responsible parent, you have strong feelings about misleading advertising targeted at susceptible children. Using a web search tool, locate articles about this topic and then write responses to the following questions. Be sure to support your arguments and cite your sources. Ethical Dilemma: Do you follow your principles and ask to be transferred to another account? Or do you help promote a cereal you know may be harmful to children in order to secure your career? Sources: James Schroeder, “To the Heart of the Matter: We Are What We Eat,” Evansville Courier & Press, http://www.courierpress.com, September 11, 2017; Lizzie Parry, “Popular Cereals Contain Up to a Third of Your Kids’ Sugar Intake,” The Sun, https://www.thesun.co.uk, February 8, 2017; Stephanie Thompson, “Kellogg Co. Might as Well Have Painted a Bull’s-eye on Itself,” Advertising Age, January 23, 2006; and Abbey Klaassen, “Viacom Gets Nicked,” Advertising Age, January 23, 2006. ### Creative Thinking Case ### Advertisers Score with the Super Bowl What sporting event is televised in 170 countries and has created a quasi–national holiday in the United States? The Super Bowl is considered by football fans as the ultimate game and known as the largest advertising opportunity for media companies that broadcast the game and companies that want to reach a large audience. The history of impactful advertising shown as part of Super Bowl viewing includes the famous 1984 Apple advertisement that “breaks” the PC wall. The ad was only shown once, but it is recognized as one of the most iconic moments in the history of advertising. In recent years companies have used football’s popularity and the Super Bowl as a global program to get their message out to a worldwide audience. While the high cost of advertising during the Super Bowl may deter some advertisers, the impact of an ad like Clint Eastwood’s 2012 “Halftime in America” for Chrysler or the 2017 Heinz “Dachhund” ad has been hailed as dramatic and created buzz that ads running in traditional spots do not generate. One additional thing that advertisers have to consider is the infusion of politics into more aspects of life and how players or outside groups might create a diversion that could impact advertisers, and the amount that the networks pay the NFL for the right to air the Super Bowl. NFL games, and the Super Bowl in particular, provide a large audience for players to voice their concerns with issues such as race, or a newsworthy protest of kneeling for the National Anthem prior to the game. Likewise, controversy can occur during a halftime show or by protesters unfurling a banner, as occurred at a Minnesota Vikings game in 2017. Just as advertisers would rather not show their ads during natural disasters or live coverage of a plane crash or terrorist attack, a large-scale live event always provides the possibility of something happening that could not be anticipated. Companies with creative and adept social media departments can, however, make a positive impact by reacting to events as they occur. For example, during the 2013 Super Bowl in New Orleans, a faulty transformer caused a power outage just before halftime, which caused a 30-minute delay. A clever worker in the Oreo’s social media department sent out a Tweet saying, “Power out? No problem. You can still dunk in the dark,” with a picture of an Oreo cookie on a dark background. 2. Name some of the challenges marketers encounter when developing advertising and promotional campaigns. How does the type of product affect the promotional strategies? 3. You work for an ad agency that has a Super Bowl sponsor as a client. What approach would you recommend for your agency as it develops a campaign—universal, customized for each geographical region, or something else, and why? 4. What types of companies could benefit from placing ads on the NFL website, and how can they use the internet effectively to promote their products? Sources: Benjamin Hoffman, Victor Mather, and Jacey Fortin, “After Trump Blasts N.F.L., Players Kneel and Lock Arms in Solidarity,” The New York Times, http://www.nytimes.com, September 25, 2017; Jason Notte, “How NFL Sponsors Get Ambushed at the Super Bowl," The Street, https://www.thestreet.com, January 24, 2017; Rochelle Olsen and Andrew Krammer, “Two Pipeline Protesters Arrested after Hanging Banner in U.S. Bank Stadium during Vikings Game," Star Tribune, http://www.startribune.com, January 2, 2017; Rick Porter, “The 100 Most-Watched TV Programs of 2016: Super Bowl 50 Leads by a Mile,” TV by the Numbers, http://tvbythenumbers.zap2it.com, December 27, 2016; Angele Watercutter, “How Oreo Won the Marketing Super Bowl with a Timely Blackout Ad on Twitter,” Wired, https://www.wired.com, February 4, 2013; “Super Bowl XLVI: Most Watched TV Show Ever!” http://www.justjared.com, February 6, 2012. ### Hot Links Address Book 1. Consumers can now comparison-shop like never before. To compare brands, features, and prices of products, go to one of these sites: http://www.pricegrabber.com, http://www.mysimon.com, or http://www.compare.net.http://www.bottomdollar.com 2. At the National Retail Federation’s website, you’ll find current retail statistics, links to retailing resources, and information about retailing careers: http://www.nrf.com. 3. The American Wholesale Marketers Association is an international trade organization for distributors of convenience products in the United States. Visit its website to browse the latest issue of Distribution Channels magazine and learn more about this field: http://www.awmanet.org. 4. Stores magazine offers hundreds of ideas for putting together a successful retail strategy: http://www.stores.org. 5. Freightworld offers detailed information on various modes of transportation and links to transportation companies: http://www.freightworld.com. 6. For articles on supply-chain management along with information on the latest technology in the field, check out Supply Chain Management Review: http://scmr.com. 7. A good site for the latest on interactive and internet marketing is ClickZ network, where you’ll find news, advice from experts, statistics, feature articles, and more: http://www.clickz.com. 8. How can you find the right magazine in which to advertise? The Media Finder website has a searchable database of thousands of magazines: http://www.mediafinder.com. 9. What should a media kit for the press include? 101 Public Relations provides the answer, along with other good information about getting publicity for your company: http://www.101publicrelations.com. 10. Advertising Age magazine has a wealth of information about the latest in advertising, including videos and ratings of new ads: http://www.adage.com.

# Using Technology to Manage Information ## Introduction ### Learning Outcomes After reading this chapter, you should be able to answer these questions: 1. How has information technology transformed business and managerial decision-making? 2. Why are computer networks an important part of today’s information technology systems? 3. What types of systems make up a typical company’s management information system? 4. How can technology management and planning help companies optimize their information technology systems? 5. What are the best ways to protect computers and the information they contain? 6. What are the leading trends in information technology? This chapter focuses on the role of information technology (IT) in business, examining the details of MIS organization, as well as the challenges companies encounter in an increasingly technological world. As John Daly learned, harnessing the power of information technology gives a company a significant competitive advantage.

# Using Technology to Manage Information ## Transforming Businesses through Information 1. How has information technology transformed business and managerial decision-making? Information technology (IT) includes the equipment and techniques used to manage and process information. Information is at the heart of all organizations. Without information about the processes of and participants in an organization—including orders, products, inventory, scheduling, shipping, customers, suppliers, and employees—a business cannot operate. In less than 70 years, we have shifted from an industrial society to a knowledge-based economy driven by information. Businesses depend on information technology for everything from running daily operations to making strategic decisions. Computers are the tools of this information age, performing extremely complex operations as well as everyday jobs such as word processing and creating spreadsheets. The pace of change has been rapid since the personal computer became a fixture on most office desks. Individual units became part of small networks, followed by more sophisticated enterprise-wide networks. and summarize the types of computer equipment and software, respectively, most commonly used in business management information systems today. Although most workers spend their days at powerful desktop computers, other groups tackle massive computational problems at specialized supercomputer centers. Tasks that would take years on a PC can be completed in just hours on a supercomputer. With their ability to perform complex calculations quickly, supercomputers play a critical role in national security research, such as analysis of defense intelligence; scientific research, from biomedical experiments and drug development to simulations of earthquakes and star formations; demographic studies such as analyzing and predicting voting patterns; and weather and environmental studies. Businesses, too, put supercomputers to work by analyzing big data to gain insights into customer behavior, improving inventory and production management and for product design. The speed of these special machines has been rising steadily to meet increasing demands for greater computational capabilities, and the next goal is quadrillions of computations per second, or petaflops. Achieving these incredible speeds is critical to future scientific, medical, and business discoveries. Many countries, among them the United States, China, France, and Japan, have made petascale computing a priority. In addition to a business’s own computers and internal networks, the internet makes it effortless to connect quickly to almost anyplace in the world. As Thomas Friedman points out in his book “We are now connecting all of the knowledge centers on the planet together into a single global network, which . . . could usher in an amazing era of prosperity and innovation.” The opportunities for collaboration on a global scale increase daily. A manager can share information with hundreds of thousands of people worldwide as easily as with a colleague on another floor of the same office building. The internet and the web have become indispensable business tools that facilitate communication within companies as well as with customers. The rise of electronic trading hubs is just one example of how technology is facilitating the global economy. Electronic trading hubs are not reserved for large companies of developed economies, however. Alibaba is piloting an e-hub called eWTP in Malaysia that will provide access to small businesses. As Jack Ma, Alibaba co-founder, said at eWTP’s launch, “There are a lot of free-trade zones for efficient trade facilitation, but only for big companies. There is no free-trade zone designed for small companies. I have been shouting everywhere, screaming, that every government should do it.” Many companies entrust an executive called the chief information officer (CIO) with the responsibility of managing all information resources. The importance of this responsibility is immense. In addition to the massive expansion of information gathered by today’s businesses, most of us are knowledge workers who develop or use knowledge. Knowledge workers contribute to and benefit from information they use to perform planning, acquiring, searching, analyzing, organizing, storing, programming, producing, distributing, marketing, or selling functions. We must know how to gather and use information from the many resources available to us. Because most jobs today depend on information—obtaining, using, creating, managing, and sharing it—this chapter begins with the role of information in decision-making and goes on to discuss computer networks and management information systems. The management of information technology—planning and protection—follows. Finally, we’ll look at the latest trends in information technology. Throughout the chapter, examples show how managers and their companies are using computers to make better decisions in a highly competitive world. ### Data and Information Systems Information systems and the computers that support them are so much a part of our lives that we almost take them for granted. These management information systems methods and equipment that provide information about all aspects of a firm’s operations provide managers with the information they need to make decisions. They help managers properly categorize and identify ideas that result in substantial operational and cost benefits. Businesses collect a great deal of data—raw, unorganized facts that can be moved and stored—in their daily operations. Only through well-designed IT systems and the power of computers can managers process these data into meaningful and useful information and use it for specific purposes, such as making business decisions. One such form of business information is the database, an electronic filing system that collects and organizes data and information. Using software called a database management system (DBMS), you can quickly and easily enter, store, organize, select, and retrieve data in a database. These data are then turned into information to run the business and to perform business analysis. Databases are at the core of business information systems. For example, a customer database containing name, address, payment method, products ordered, price, order history, and similar data provides information to many departments. Marketing can track new orders and determine what products are selling best; sales can identify high-volume customers or contact customers about new or related products; operations managers use order information to obtain inventory and schedule production of the ordered products; and finance uses sales data to prepare financial statements. Later in the chapter, we will see how companies use very large databases called data warehouses and data marts. Companies are discovering that they can’t operate well with a series of separate information systems geared to solving specific departmental problems. It takes a team effort to integrate the systems described and involves employees throughout the firm. Company-wide enterprise resource planning (ERP) systems that bring together human resources, operations, and technology are becoming an integral part of business strategy. So is managing the collective knowledge contained in an organization, using data warehouses and other technology tools. Technology experts are learning more about the way the business operates, and business managers are learning to use information systems technology effectively to create new opportunities and reach their goals. ### Summary of Learning Outcomes 1. How has information technology transformed business and managerial decision-making? Businesses depend on information technology for everything from running daily operations to making strategic decisions. Companies must have management information systems that gather, analyze, and distribute information to the appropriate parties, including employees, suppliers, and customers. These systems are comprised of different types of computers that collect data and process it into usable information for decision-making. Managers tap into databases to access the information they need, whether for placing inventory orders, scheduling production, or preparing long-range forecasts. They can compare information about the company’s current status to its goals and standards. Company-wide enterprise resource planning systems that bring together human resources, operations, and technology are becoming an integral part of business strategy.

# Using Technology to Manage Information ## Linking Up: Computer Networks 1. Why are computer networks an important part of today’s information technology systems? Today most businesses use networks to deliver information to employees, suppliers, and customers. A computer network is a group of two or more computer systems linked together by communications channels to share data and information. Today’s networks often link thousands of users and can transmit audio and video as well as data. Networks include clients and servers. The client is the application that runs on a personal computer or workstation. It relies on a server that manages network resources or performs special tasks such as storing files, managing one or more printers, or processing database queries. Any user on the network can access the server’s capabilities. By making it easy and fast to share information, networks have created new ways to work and increase productivity. They provide more efficient use of resources, permitting communication and collaboration across distance and time. With file-sharing, all employees, regardless of location, have access to the same information. Shared databases also eliminate duplication of effort. Employees at different sites can “screen-share” computer files, working on data as if they were in the same room. Their computers are connected by phone or cable lines, they all see the same thing on their display, and anyone can make changes that are seen by the other participants. The employees can also use the networks for videoconferencing. Networks make it possible for companies to run enterprise software, large programs with integrated modules that manage all of the corporation’s internal operations. Enterprise resource planning systems run on networks. Typical subsystems include finance, human resources, engineering, sales and order distribution, and order management and procurement. These modules work independently and then automatically exchange information, creating a company-wide system that includes current delivery dates, inventory status, quality control, and other critical information. Let’s now look at the basic types of networks companies use to transmit data—local area networks and wide area networks—and popular networking applications such as intranets and virtual private networks. ### Connecting Near and Far with Networks Two basic types of networks are distinguished by the area they cover. A local area network (LAN) lets people at one site exchange data and share the use of hardware and software from a variety of computer manufacturers. LANs offer companies a more cost-effective way to link computers than linking terminals to a mainframe computer. The most common uses of LANs at small businesses, for example, are office automation, accounting, and information management. LANs can help companies reduce staff, streamline operations, and cut processing costs. LANs can be set up with wired or wireless connections. A wide area network (WAN) connects computers at different sites via telecommunications media such as phone lines, satellites, and microwaves. A modem connects the computer or a terminal to the telephone line and transmits data almost instantly, in less than a second. The internet is essentially a worldwide WAN. Communications companies, such as AT&T, Verizon, and Sprint, operate very large WANs. Companies also connect LANs at various locations into WANs. WANs make it possible for companies to work on critical projects around the clock by using teams in different time zones. Several forms of WANs—intranets, virtual private networks (VPN), and extranets—use internet technology. Here we’ll look at intranets, internal corporate networks that are widely available in the corporate world, and VPNs. Although wireless networks have been around for more than a decade, they are increasing in use because of falling costs, faster and more reliable technology, and improved standards. They are similar to their wired LAN and WAN cousins, except they use radio frequency signals to transmit data. You use a wireless WAN (WWAN) regularly when you use your cellular phone. WANs’ coverage can span several countries. Telecommunications carriers operate using wireless WANs. Wireless LANs (WLAN) that transmit data at one site offer an alternative to traditional wired systems. WLANs’ reach is a radius of 500 feet indoors and 1,000 feet outdoors and can be extended with antennas, transmitters, and other devices. The wireless devices communicate with a wired access point into the wired network. WLANs are convenient for specialized applications where wires are in the way or when employees are in different locations in a building. Hotels, airports, restaurants, hospitals, retail establishments, universities, and warehouses are among the largest users of WLANs, also known as Wi-Fi. For example, the Veterans Administration Hospital in West Haven, Connecticut, recently added Wi-Fi access in all patient rooms to upgrade its existing WLAN to improve patient access, quality, and reliability. The new WLAN supports many different functions, from better on-site communication among doctors and nurses through both data transmission and voice-over-internet phone systems to data-centric applications such as its Meditech clinical information system and pharmacy management. ### An Inside Job: Intranets Like LANs, intranets are private corporate networks. Many companies use both types of internal networks. However, because they use internet technology to connect computers, intranets are WANs that link employees in many locations and with different types of computers. Essentially mini-internets that serve only the company’s employees, intranets operate behind a firewall that prevents unauthorized access. Employees navigate using a standard web browser, which makes the intranet easy to use. They are also considerably less expensive to install and maintain than other network types and take advantage of the internet’s interactive features such as chat rooms and team workspaces. Many software providers now offer off-the-shelf intranet packages so that companies of all sizes can benefit from the increased access to and distribution of information. Companies now recognize the power of intranets to connect employers and employees in many ways, promoting teamwork and knowledge-sharing. Intranets have many applications, from human resource (HR) administration to logistics. For instance, a benefits administration intranet can become a favorite with employees. Instead of having to contact an HR representative to make any changes in personnel records or retirement plan contributions or to submit time sheets, staff members simply log on to the intranet and update the information themselves. Managers can also process staffing updates, performance reviews, and incentive payments without filing paperwork with human resources. Employees can regularly check an online job board for new positions. Shifting routine administrative tasks to the intranet can bring additional benefits such as reducing the size of the HR department by 30 percent and allowing HR staff members to turn their attention to more substantive projects. ### Enterprise Portals Open the Door to Productivity Intranets that take a broader view serve as sophisticated knowledge management tools. One such intranet is the enterprise portal, an internal website that provides proprietary corporate information to a defined user group. Portals can take one of three forms: business to employee (B2E), business to business (B2B), and business to consumer (B2C). Unlike a standard intranet, enterprise portals allow individuals or user groups to customize the portal home page to gather just the information they need for their particular job situations and deliver it through a single web page. Because of their complexity, enterprise portals are typically the result of a collaborative project that brings together designs developed and perfected through the effort of HR, corporate communications, and information technology departments. More companies use portal technology to provide: 1. A consistent, simple user interface across the company 2. Integration of disparate systems and multiple sets of data and information 3. A single source for accurate and timely information that integrates internal and external information 4. A shorter time to perform tasks and processes 5. Cost savings through the elimination of information intermediaries 6. Improved communications within the company and with customers, suppliers, dealers, and distributors ### No More Tangles: Wireless Technologies Wireless technology has become commonplace today. We routinely use devices such as cellular phones, mobile devices, garage door openers, and television remote controls—without thinking of them as examples of wireless technology. Businesses use wireless technologies to improve communications with customers, suppliers, and employees. Companies in the package delivery industry, such as UPS and FedEx, were among the first users of wireless technology. Delivery personnel use handheld computers to send immediate confirmation of package receipt. You may also have seen meter readers and repair personnel from utility and energy companies send data from remote locations back to central computers. Bluetooth short-range wireless technology is a global standard that improves personal connectivity for users of mobile phones, portable computers, and stereo headsets, and Bluetooth wirelessly connects keyboards and mice to computers and headsets to phones and music players. A Bluetooth-enabled mobile phone, for example, provides safer hands-free phone use while driving. The technology is finding many applications in the auto industry as well. Bluetooth wireless technology is now standard in many vehicles today. Many car, technology, and cell phone companies—among them Amazon, Apple, Audi, BMW, DaimlerChrysler, Google, Honda, Saab, Toyota, and Volkswagen—already offer Bluetooth hands-free solutions. Other uses include simplifying the connection of portable digital music players to the car’s audio system and transferring downloaded music to the system. ### Private Lines: Virtual Private Networks Many companies use virtual private networks to connect two or more private networks (such as LANs) over a public network, such as the internet. VPNs include strong security measures to allow only authorized users to access the network and its sensitive corporate information. Companies with widespread offices may find that a VPN is a more cost-effective option than creating a network using purchased networking equipment and leasing expensive private lines. This type of private network is more limited than a VPN, because it doesn’t allow authorized users to connect to the corporate network when they are at home or traveling. As shows, the VPN uses existing internet infrastructure and equipment to connect remote users and offices almost anywhere in the world—without long-distance charges. In addition to saving on telecommunications costs, companies using VPNs don’t have to buy or maintain special networking equipment and can outsource management of remote access equipment. VPNs are useful for salespeople and telecommuters, who can access the company’s network as if they were on-site at the company’s office. On the downside, the VPN’s availability and performance, especially when it uses the internet, depends on factors largely outside of an organization’s control. VPNs are popular with many different types of organizations. Why? Security is one of the main reasons to always use a VPN to access the internet. Because all your data is encrypted once tunneled, if a hacker were trying to intercept your browsing activity, say, while you were entering your credit card number to make an online purchase, the encryption would stymie their efforts. That’s why it’s a particularly good idea to use VPNs in public settings such as coffee shops and airports. ### Software on Demand: Application Service Providers As software developers release new types of application programs and updated versions of existing ones every year or two, companies have to analyze whether they can justify buying or upgrading to the new software—in terms of both cost and implementation time. Application service providers (ASP) offer a different approach to this problem. Companies subscribe, usually on a monthly basis, to an ASP and use the applications much like you’d use telephone voice mail, the technology for which resides at the phone company. Other names for ASPs include on-demand software, hosted applications, and software-as-a-service. shows how the ASP interfaces with software and hardware vendors and developers, the IT department, and users. The simplest ASP applications are automated—for example, a user might use one to build a simple e-commerce site. ASPs provide three major categories of applications to users: 1. Enterprise applications, including customer relationship management (CRM), enterprise resource planning, e-commerce, and data warehousing 2. Collaborative applications for internal communications, e-mail, groupware, document creation, and management messaging 3. Applications for personal use—for example, games, entertainment software, and home-office applications According to recent surveys, more companies are currently using an ASP, and even moving their legacy systems to the cloud. Estimates suggest revenues from subscriptions to on-demand cloud services were about $180 billion in 2017. This sector is growing much more rapidly—three times faster—than traditional hardware and software. As this market grows, more companies are adding on-demand offerings to their traditional software packages. Amazon (Amazon Web Services), IBM, Microsoft, and Salesforce.com are among the leading cloud service providers. Until recently, many companies were reluctant to outsource critical enterprise applications to third-party providers. As ASPs improved their technologies and proved to be reliable and cost-effective, attitudes have changed. Companies, both large and small, seek cost advantages such as the convenience ASPs provide. The basic idea behind subscribing to an ASP is compelling. Users can access any of their applications and data from any computer, and IT can avoid purchasing, installing, supporting, and upgrading expensive software applications. ASPs buy and maintain the software on their servers and distribute it through high-speed networks. Subscribers rent the applications they want for a set period of time and price. The savings in licensing fees, infrastructure, time, and staff are significant. Managed service providers (MSP) represent the next generation of ASPs, offering greater customization and expanded capabilities that include business processes and complete management of the network servers. The global market for managed IT services reached $149.1 billion in 2016. This market is estimated to reach $256.5 billion in 2021, from $166.7 billion in 2017, at a compound annual growth rate of 11.5 percent for the period 2018 through 2021. ### Summary of Learning Outcomes 1. Why are computer networks an important part of today’s information technology systems? Today companies use networks of linked computers that share data and expensive hardware to improve operating efficiency. Types of networks include local area networks, wide area networks, and wireless local area networks. Intranets are private WANs that allow a company’s employees to communicate quickly with one other and work on joint projects, regardless of their location. Companies are finding new uses for wireless technologies such as tablets, cell phones, and other mobile devices. Virtual private networks give companies a cost-effective secure connection between remote locations by using public networks such as the internet.

# Using Technology to Manage Information ## Management Information Systems 1. What types of systems make up a typical company’s management information system? Whereas individuals use business productivity software such as word processing, spreadsheet, and graphics programs to accomplish a variety of tasks, the job of managing a company’s information needs falls to management information systems: users, hardware, and software that support decision-making. Information systems collect and store the company’s key data and produce the information managers need for analysis, control, and decision-making. Factories use computer-based information systems to automate production processes and order and monitor inventory. Most companies use them to process customer orders and handle billing and vendor payments. Banks use a variety of information systems to process transactions such as deposits, ATM withdrawals, and loan payments. Most consumer transactions also involve information systems. When you check out at the supermarket, book a hotel room online, or download music over the internet, information systems record and track the transaction and transmit the data to the necessary places. Companies typically have several types of information systems, starting with systems to process transactions. Management support systems are dynamic systems that allow users to analyze data to make forecasts, identify business trends, and model business strategies. Office automation systems improve the flow of communication throughout the organization. Each type of information system serves a particular level of decision-making: operational, tactical, and strategic. shows the relationship between transaction processing and management support systems as well as the management levels they serve. Let’s take a more detailed look at how companies and managers use transaction processing and management support systems to manage information. ### Transaction Processing Systems A firm’s integrated information system starts with its transaction processing system (TPS). The TPS receives raw data from internal and external sources and prepares these data for storage in a database similar to a microcomputer database but vastly larger. In fact, all the company’s key data are stored in a single huge database that becomes the company’s central information resource. As noted earlier, the database management system tracks the data and allows users to query the database for the information they need. The database can be updated in two ways: batch processing, where data are collected over some time period and processed together, and online, or real-time, processing, which processes data as they become available. Batch processing uses computer resources very efficiently and is well-suited to applications such as payroll processing that require periodic rather than continuous processing. Online processing keeps the company’s data current. When you make an airline reservation, the information is entered into the airline’s information system, and you quickly receive confirmation, typically through an e-mail. Online processing is more expensive than batch processing, so companies must weigh the cost versus the benefit. For example, a factory that operates around the clock may use real-time processing for inventory and other time-sensitive requirements but process accounting data in batches overnight. ### Decisions, Decisions: Management Support Systems Transaction processing systems automate routine and tedious back-office processes such as accounting, order processing, and financial reporting. They reduce clerical expenses and provide basic operational information quickly. Management support systems (MSS) use the internal master database to perform high-level analyses that help managers make better decisions. Information technologies such as data warehousing are part of more advanced MSSs. A data warehouse combines many databases across the whole company into one central database that supports management decision-making. With a data warehouse, managers can easily access and share data across the enterprise to get a broad overview rather than just isolated segments of information. Data warehouses include software to extract data from operational databases, maintain the data in the warehouse, and provide data to users. They can analyze data much faster than transaction-processing systems. Data warehouses may contain many data marts, special subsets of a data warehouse that each deal with a single area of data. Data marts are organized for quick analysis. Companies use data warehouses to gather, secure, and analyze data for many purposes, including customer relationship management systems, fraud detection, product-line analysis, and corporate asset management. Retailers might wish to identify customer demographic characteristics and shopping patterns to improve direct-mailing responses. Banks can more easily spot credit-card fraud, as well as analyze customer usage patterns. According to Forrester Research, about 60 percent of companies with $1 billion or more in revenues use data warehouses as a management tool. Union Pacific (UP), a $19 billion railroad, turned to data warehouse technology to streamline its business operations. By consolidating multiple separate systems, UP achieved a unified supply-chain system that also enhanced its customer service. “Before our data warehouse came into being we had stovepipe systems,” says Roger Bresnahan, principal engineer. “None of them talked to each other. . . . We couldn’t get a whole picture of the railroad.” UP’s data warehouse system took many years and the involvement of 26 departments to create. The results were well worth the effort: UP can now make more accurate forecasts, identify the best traffic routes, and determine the most profitable market segments. The ability to predict seasonal patterns and manage fuel costs more closely has saved UP millions of dollars by optimizing locomotive and other asset utilization and through more efficient crew management. In just three years, Bresnahan reports, the data warehouse system had paid for itself. At the first level of an MSS is an information-reporting system, which uses summary data collected by the TPS to produce both regularly scheduled and special reports. The level of detail would depend on the user. A company’s payroll personnel might get a weekly payroll report showing how each employee’s paycheck was determined. Higher-level mangers might receive a payroll summary report that shows total labor cost and overtime by department and a comparison of current labor costs with those in the prior year. Exception reports show cases that fail to meet some standard. An accounts receivable exception report that lists all customers with overdue accounts would help collection personnel focus their work. Special reports are generated only when a manager requests them; for example, a report showing sales by region and type of customer can highlight reasons for a sales decline. ### Decision Support Systems A decision support system (DSS) helps managers make decisions using interactive computer models that describe real-world processes. The DSS also uses data from the internal database but looks for specific data that relate to the problems at hand. It is a tool for answering “what if” questions about what would happen if the manager made certain changes. In simple cases, a manager can create a spreadsheet and try changing some of the numbers. For instance, a manager could create a spreadsheet to show the amount of overtime required if the number of workers increases or decreases. With models, the manager enters into the computer the values that describe a particular situation, and the program computes the results. Marketing executives at a furniture company could run DSS models that use sales data and demographic assumptions to develop forecasts of the types of furniture that would appeal to the fastest-growing population groups. Companies can use a predictive analytics program to improve their inventory management system and use big data to target customer segments for new products and line extensions. ### Executive Information Systems Although similar to a DSS, an executive information system (EIS) is customized for an individual executive. These systems provide specific information for strategic decisions. For example, a CEO’s EIS may include special spreadsheets that present financial data comparing the company to its principal competitors and graphs showing current economic and industry trends. ### Expert Systems An expert system gives managers advice similar to what they would get from a human consultant. Artificial intelligence enables computers to reason and learn to solve problems in much the same way humans do, using what-if reasoning. Although they are expensive and difficult to create, expert systems are finding their way into more companies as more applications are found. Lower-end expert systems can even run on mobile devices. Top-of-the-line systems help airlines appropriately deploy aircraft and crews, critical to the carriers’ efficient operations. The cost of hiring enough people to do these ongoing analytical tasks would be prohibitively expensive. Expert systems have also been used to help explore for oil, schedule employee work shifts, and diagnose illnesses. Some expert systems take the place of human experts, whereas others assist them. ### Summary of Learning Outcomes 1. What types of systems make up a typical company’s management information system? A management information system consists of a transaction processing system, management support systems, and an office automation system. The transaction processing system collects and organizes operational data on the firm’s activities. Management support systems help managers make better decisions. They include an information-reporting system that provides information based on the data collected by the TPS to the managers who need it; decision support systems that use models to assist in answering “what if” types of questions; and expert systems that give managers advice similar to what they would get from a human consultant. Executive information systems are customized to the needs of top management.

# Using Technology to Manage Information ## Technology Management and Planning 1. How can technology management and planning help companies optimize their information technology systems? With the help of computers, people have produced more data in the last 30 years than in the previous 5,000 years combined. Companies today make sizable investments in information technology to help them manage this overwhelming amount of data, convert the data into knowledge, and deliver it to the people who need it. In many cases, however, the companies do not reap the desired benefits from these expenditures. Among the typical complaints from senior executives are that the company is spending too much and not getting adequate performance and payoff from IT investments, these investments do not relate to business strategy, the firm seems to be buying the latest technology for technology’s sake, and communications between IT specialists and IT users are poor. ### Optimize IT! Managing a company’s enterprise-wide IT operations, especially when those often stretch across multiple locations, software applications, and systems, is no easy task. IT managers must deal not only with on-site systems; they must also oversee the networks and other technology, such as mobile devices that handle e-mail messaging, that connect staff working at locations ranging from the next town to another continent. At the same time, IT managers face time constraints and budget restrictions, making their jobs even more challenging. Growing companies may find themselves with a decentralized IT structure that includes many separate systems and duplication of efforts. A company that wants to enter or expand into e-commerce needs systems flexible enough to adapt to this changing marketplace. Security for equipment and data is another critical area, which we will cover later in the chapter. The goal is to develop an integrated, company-wide technology plan that balances business judgment, technology expertise, and technology investment. IT planning requires a coordinated effort among a firm’s top executives, IT managers, and business-unit managers to develop a comprehensive plan. Such plans must take into account the company’s strategic objectives and how the right technology will help managers reach those goals. Technology management and planning go beyond buying new technology. Today companies are cutting IT budgets so that managers are being asked to do more with less. They are implementing projects that leverage their investment in the technology they already have, finding ways to maximize efficiency and optimize utilization. ### Managing Knowledge Resources As a result of the proliferation of information, we are also seeing a major shift from information management to a broader view that focuses on finding opportunities in and unlocking the value of intellectual rather than physical assets. Whereas information management involves collecting, processing, and condensing information, the more difficult task of knowledge management (KM) focuses on researching, gathering, organizing, and sharing an organization’s collective knowledge to improve productivity, foster innovation, and gain competitive advantage. Some companies are even creating a new position, chief knowledge officer, to head up this effort. Companies use their IT systems to facilitate the physical sharing of knowledge. But better hardware and software are not the answer to KM. KM is not technology-based, but rather a business practice that uses technology. Technology alone does not constitute KM, nor is it the solution to KM. Rather, it facilitates KM. Executives with successful KM initiatives understand that KM is not a matter of buying a major software application that serves as a data depository and coordinates all of a company’s intellectual capital. According to Melinda Bickerstaff, vice president of knowledge management at Bristol-Myers Squibb (BMS), any such “leading with technology” approach is a sure path to failure. “Knowledge management has to be perceived as a business problem solver, not as an abstract concept,” Bickerstaff explains. Effective KM calls for an interdisciplinary approach that coordinates all aspects of an organization’s knowledge. It requires a major change in behavior as well as technology to leverage the power of information systems, especially the internet, and a company’s human capital resources. The first step is creating an information culture through organizational structure and rewards that promotes a more flexible, collaborative way of working and communicating. Moving an organization toward KM is no easy task, but it is well worth the effort in terms of creating a more collaborative environment, reducing duplication of effort, and increasing shared knowledge. The benefits can be significant in terms of growth, time, and money. At Bristol-Meyers Squibb, a major pharmaceutical company, Bickerstaff began the KM implementation by looking for specific information-related problems to solve so that the company would save time and/or money. For example, she learned that company scientists were spending about 18 percent of their time searching multiple databases to find patents and other information. Simply integrating the relevant databases gave researchers the ability to perform faster searches. A more complex project involved compiling the best practices of drug-development teams with the best FDA approval rates so that other groups could benefit. Rather than send forms that could be easily set aside, Bickenstaff arranged to conduct interviews and lessons-learned sessions. The information was then developed into interesting articles rather than dry corporate reports. ### Technology Planning A good technology plan provides employees with the tools they need to perform their jobs at the highest levels of efficiency. The first step is a general needs assessment, followed by ranking of projects and the specific choices of hardware and software. poses some basic questions departmental managers and IT specialists should ask when planning technology purchases. Once managers identify the projects that make business sense, they can choose the best products for the company’s needs. The final step is to evaluate the potential benefits of the technology in terms of efficiency and effectiveness. For a successful project, you must evaluate and restructure business processes, choose technology, develop and implement the system, and manage the change processes to best serve your organizational needs. Installing a new IT system on top of inefficient business processes is a waste of time and money! ### Summary of Learning Outcomes 1. How can technology management and planning help companies optimize their information technology systems? To get the most value from IT, companies must go beyond simply collecting and summarizing information. Technology planning involves evaluating the company’s goals and objectives and using the right technology to reach them. IT managers must also evaluate the existing infrastructure to get the best return on the company’s investment in IT assets. Knowledge management focuses on sharing an organization’s collective knowledge to improve productivity and foster innovation. Some companies establish the position of chief knowledge officer to head up KM activities.

# Using Technology to Manage Information ## Protecting Computers and Information 1. What are the best ways to protect computers and the information they contain? Have you ever lost a term paper you worked on for weeks because your hard drive crashed or you deleted the wrong file? You were upset, angry, and frustrated. Multiply that paper and your feelings hundreds of times over, and you can understand why companies must protect computers, networks, and the information they store and transmit from a variety of potential threats. For example, security breaches of corporate information systems—from human hackers or electronic versions such as viruses and worms—are increasing at an alarming rate. The ever-increasing dependence on computers requires plans that cover human error, power outages, equipment failure, hacking, and terrorist attacks. To withstand natural disasters such as major fires, earthquakes, and floods, many companies install specialized fault-tolerant computer systems. Disasters are not the only threat to data. A great deal of data, much of it confidential, can easily be tapped or destroyed by anyone who knows about computers. Keeping your networks secure from unauthorized access—from internal as well as external sources—requires formal security policies and enforcement procedures. The increasing popularity of mobile devices—laptops, tablets, and cell phones—and wireless networks requires new types of security provisions. In response to mounting security concerns, companies have increased spending on technology to protect their IT infrastructure and data. Along with specialized hardware and software, companies need to develop specific security strategies that take a proactive approach to prevent security and technical problems before they start. However, a recent CIO article lamented the lack of basic security policies that companies only implement after a hack or data crisis. ### Data Security Issues Unauthorized access into a company’s computer systems can be expensive, and not just in monetary terms. Juniper Networks estimates that cybercrime will cost businesses more than $2 trillion in 2019, compared to just $450 million in 2001. The most costly categories of threats include worms, viruses, and Trojan horses (defined later in this section); computer theft; financial fraud; and unauthorized network access. The report also states that almost all U.S. businesses report at least one security issue, and almost 20 percent have experienced multiple security incidents. Computer crooks are becoming more sophisticated all the time, finding new ways to get into ultra-secure sites. “As companies and consumers continue to move towards a networked and information economy, more opportunity exists for cybercriminals to take advantage of vulnerabilities on networks and computers,” says Chris Christiansen, program vice president at technology research firm IDC. Whereas early cybercrooks were typically amateur hackers working alone, the new ones are more professional and often work in gangs to commit large-scale internet crimes for large financial rewards. The internet, where criminals can hide behind anonymous screen names, has increased the stakes and expanded the realm of opportunities to commit identity theft and similar crimes. Catching such cybercriminals is difficult, and fewer than 5 percent are caught. Firms are taking steps to prevent these costly computer crimes and problems, which fall into several major categories: 1. Unauthorized access and security breaches. Whether from internal or external sources, unauthorized access and security breaches are a top concern of IT managers. These can create havoc with a company’s systems and damage customer relationships. Unauthorized access also includes employees, who can copy confidential new-product information and provide it to competitors or use company systems for personal business that may interfere with systems operation. Networking links also make it easier for someone outside the organization to gain access to a company’s computers. One of the latest forms of cybercrime involves secretly installing keylogging software via software downloads, e-mail attachments, or shared files. This software then copies and transmits a user’s keystrokes—passwords, PINs, and other personal information—from selected sites, such as banking and credit card sites, to thieves. 2. Computer viruses, worms, and Trojan horses. Computer viruses and related security problems such as worms and Trojan horses are among the top threats to business and personal computer security. A computer program that copies itself into other software and can spread to other computer systems, a computer virus can destroy the contents of a computer’s hard drive or damage files. Another form is called a worm because it spreads itself automatically from computer to computer. Unlike a virus, a worm doesn’t require e-mail to replicate and transmit itself into other systems. It can enter through valid access points. Viruses can hide for weeks, months, or even years before starting to damage information. A virus that “infects” one computer or network can be spread to another computer by sharing disks or by downloading infected files over the internet. To protect data from virus damage, virus protection software automatically monitors computers to detect and remove viruses. Program developers make regular updates available to guard against newly created viruses. In addition, experts are becoming more proficient at tracking down virus authors, who are subject to criminal charges. 3. Deliberate damage to equipment or information. For example, an unhappy employee in the purchasing department could get into the company’s computer system and delete information on past orders and future inventory needs. The sabotage could severely disrupt production and the accounts payable system. Willful acts to destroy or change the data in computers are hard to prevent. To lessen the damage, companies should back up critical information. 4. Spam. Although you might think that spam, or unsolicited and unwanted e-mail, is just a nuisance, it also poses a security threat to companies. Viruses spread through e-mail attachments that can accompany spam e-mails. Spam is now clogging blogs, instant messages, and cell phone text messages as well as e-mail inboxes. Spam presents other threats to a corporation: lost productivity and expenses from dealing with spam, such as opening the messages and searching for legitimate messages that special spam filters keep out. 5. Software and media piracy. The copying of copyrighted software programs, games, and movies by people who haven’t paid for them is another form of unauthorized use. Piracy, defined as using software without a license, takes revenue away from the company that developed the program—usually at great cost. It includes making counterfeit CDs to sell as well as personal copying of software to share with friends. ### Preventing Problems Creating formal written information security policies to set standards and provide the basis for enforcement is the first step in a company’s security strategy. Unfortunately, a recent survey of IT executives worldwide revealed that over two-thirds expect a cyberattack in the near future. Stephanie Ewing, a data security expert, states, “Having a documented, tested process brings order to chaotic situations and keeps everyone focused on solving the most pressing issues.” Without information security strategies in place, companies spend too much time in a reactive mode—responding to crises—and don’t focus enough on prevention. Security plans should have the support of top management, and then follow with procedures to implement the security policies. Because IT is a dynamic field with ongoing changes to equipment and processes, it’s important to review security policies often. Some security policies can be handled automatically, by technical measures, whereas others involve administrative policies that rely on humans to perform them. Examples of administrative policies are “Users must change their passwords every 90 days” and “End users will update their virus signatures at least once a week.” shows the types of security measures companies use to protect data. Preventing costly problems can be as simple as regularly backing up applications and data. Companies should have systems in place that automatically back up the company’s data every day and store copies of the backups off-site. In addition, employees should back up their own work regularly. Another good policy is to maintain a complete and current database of all IT hardware, software, and user details to make it easier to manage software licenses and updates and diagnose problems. In many cases, IT staff can use remote access technology to automatically monitor and fix problems, as well as update applications and services. Companies should never overlook the human factor in the security equation. One of the most common ways that outsiders get into company systems is by posing as an employee, first getting the staffer’s full name and username from an e-mail message and then calling the help desk to ask for a forgotten password. Crooks can also get passwords by viewing them on notes attached to a desk or computer monitor, using machines that employees leave logged on when they leave their desks, and leaving laptop computers with sensitive information unsecured in public places. Portable devices, from handheld computers to tiny plug-and-play flash drives and other storage devices (including mobile phones), pose security risks as well. They are often used to store sensitive data such as passwords, bank details, and calendars. Mobile devices can spread viruses when users download virus-infected documents to their company computers. Imagine the problems that could arise if an employee saw a calendar entry on a mobile device like “meeting re: layoffs,” an outsider saw “meeting about merger with ABC Company,” or an employee lost a flash drive containing files about marketing plans for a new product. Manufacturers are responding to IT managers’ concerns about security by adding password protection and encryption to flash drives. Companies can also use flash drive monitoring software that prevents unauthorized access on PCs and laptops. Companies have many ways to avoid an IT meltdown, as describes. ### Keep IT Confidential: Privacy Concerns The very existence of huge electronic file cabinets full of personal information presents a threat to our personal privacy. Until recently, our financial, medical, tax, and other records were stored in separate computer systems. Computer networks make it easy to pool these data into data warehouses. Companies also sell the information they collect about you from sources like warranty registration cards, credit-card records, registration at websites, personal data forms required to purchase online, and grocery store discount club cards. Telemarketers can combine data from different sources to create fairly detailed profiles of consumers. The September 11, 2001, tragedy and other massive security breaches have raised additional privacy concerns. As a result, the government began looking for ways to improve domestic-intelligence collection and analyze terrorist threats within the United States. Sophisticated database applications that look for hidden patterns in a group of data, a process called data mining, increase the potential for tracking and predicting people’s daily activities. Legislators and privacy activists worry that such programs as this and ones that eavesdrop electronically could lead to excessive government surveillance that encroaches on personal privacy. The stakes are much higher as well: errors in data mining by companies in business may result in a consumer being targeted with inappropriate advertising, whereas a governmental mistake in tracking suspected terrorists could do untold damage to an unjustly targeted person. Increasingly, consumers are fighting to regain control of personal data and how that information is used. Privacy advocates are working to block sales of information collected by governments and corporations. For example, they want to prevent state governments from selling driver’s license information and supermarkets from collecting and selling information gathered when shoppers use barcoded plastic discount cards. With information about their buying habits, advertisers can target consumers for specific marketing programs. The challenge to companies is to find a balance between collecting the information they need while at the same time protecting individual consumer rights. Most registration and warranty forms that ask questions about income and interests have a box for consumers to check to prevent the company from selling their names. Many companies now state in their privacy policies that they will not abuse the information they collect. Regulators are taking action against companies that fail to respect consumer privacy. ### Summary of Learning Outcomes 1. What are the best ways to protect computers and the information they contain? Because companies are more dependent on computers than ever before, they need to protect data and equipment from natural disasters and computer crime. Types of computer crime include unauthorized use and access, software piracy, malicious damage, and computer viruses. To protect IT assets, companies should prepare written security policies. They can use technology such as virus protection, firewalls, and employee training in proper security procedures. They must also take steps to protect customers’ personal privacy rights.

# Using Technology to Manage Information ## Trends in Information Technology 1. What are the leading trends in information technology? Information technology is a continually evolving field. The fast pace and amount of change, coupled with IT’s broad reach, make it especially challenging to isolate industry trends. From the time we write this chapter to the time you read it—as little as six months—new trends will appear, and those that seemed important may fade. However, some trends that are reshaping today’s IT landscape are digital forensics, the shift to a distributed workforce, and the increasing use of grid computing. ### Cyber Sleuthing: A New Style of Crime Busting What helped investigators bring suit against Enron, Merck’s Vioxx medication, and the BTK serial killer? Digital evidence taken from an individual’s computer or corporate network—web pages, pictures, documents, and e-mails are part of a relatively new science called digital forensics. Digital-forensics software safeguards electronic evidence used in investigations by creating a duplicate of a hard drive that an investigator can search by keyword, file type, or access date. Digital forensics is also evolving into areas such as cloud computing and blockchain technology. For instance, it is estimated that as much as 3.9 million of the original 21 million bitcoins are “lost” on hard drives confined to landfills and flash drives located in the back of old office desks. But nowadays digital sleuthing is not limited to law enforcement. Companies such as Walmart, Target, and American Express have their own secret in-house digital forensics teams. And what if you’re in New York and need to seize a hard drive in Hong Kong? No problem. Over 75 members of the Fortune 500 now use technology that allows them to search hard drives remotely over their corporate networks. Digital forensics makes it possible to track down those who steal corporate data and intellectual property. Broadcom, a semiconductor chip designer, used computer forensics to investigate and apprehend former employees who were attempting to steal trade secrets. In the process, Broadcom gathered incriminating e-mails, including deleted documents, that gave it solid evidence to use the 2013 Federal Computer Fraud and Abuse Act to stop the former employees from starting up a rival firm. However, there is a downside to having these advanced capabilities. If this kind of software falls into the wrong hands, sophisticated hackers could access corporate networks and individual computers as easily as taking candy from a baby—and the victims would not even know it was happening. In an age of corporate wrongdoing, sexual predators, and computer porn, your hard drive will tell investigators everything they need to know about your behavior and interests, good and bad. Cybersleuthing means we are all potential targets of digital forensics. As evidenced by the huge increase in identity theft, personal privacy—once an unassailable right—is no longer as sacred as it once was. ### The Distributed Workforce Insurance company Aetna shuttered 2.7 million square feet of office space, saving the company $78 million, while American Express estimates it saved between $10 to $15 million dollars per year by expanding its distributed workforce. Was this a sign that these company were in trouble? Far from it. Instead of maintaining expensive offices in multiple locations, they sent employees home to work and adopted a new model for employees: the distributed workforce. Employees have no permanent office space and work from home or on the road. The shift to virtual workers has been a huge success, and not only do companies save on their personnel and related costs, but they also have happier, more productive employees. Aetna and American Express are not alone in recognizing the benefits of distributed workers, especially in companies that depend on knowledge workers. Work Design Collaborative LLC in Prescott, Arizona, estimates that about 12 percent of all workers in the United States fall into this category, and in urban areas the number could be as high as 15 percent. There are estimates that this trend could eventually reach 40 percent over the next decade, as long commutes, high gas costs, and better connecting tools and technologies make this an attractive option for many workers who like the flexibility of not working in an office. Already, employees use the internet to conduct video-conferenced meetings and collaborate on teams that span the globe. On the downside, working from home can also mean being available 24/7—although most workers consider the trade-off well worth it. According to recent statistics, close to four million U.S. workers work from home at least half of the time. Remote workers continue to be recruited by companies of all sizes, including Amazon, Dell, Salesforce, and others. Intel has a successful virtual-work program that has been popular with working parents. “Technology allows working remotely to be completely invisible,” says Laura Dionne, the company’s director of supply-chain transformation. At Boeing, thousands of employees participate in the virtual-work program, and it has been a critical factor in attracting and retaining younger workers. Almost half of Sun Microsystems’ employees are “location-independent,” reducing real estate costs by $300 million. Additional benefits for Sun are higher productivity from these workers and the ability to hire the best talent. “Our people working these remote schedules are the happiest employees we have, and they have the lowest attrition rates,” says Bill MacGowan, senior vice president for human resources at Sun. “Would I rather settle on someone mediocre in the Bay Area, or get the best person in the country who is willing to work remotely?” ### Grid and Cloud Computing Offer Powerful Solutions How can smaller companies that occasionally need to perform difficult and large-scale computational tasks find a way to accomplish their projects? They can turn to grid or cloud computing, also called utility computing or peer-to-peer computing. Cloud and grid technology provides a way to divide the job into many smaller tasks and distribute them to a virtual supercomputer consisting of many small computers linked into a common network. Combining multiple desktop machines results in computing power that exceeds supercomputer speeds. A hardware and software infrastructure clusters and integrates computers and applications from multiple sources, harnessing unused power in existing PCs and networks. This structure distributes computational resources but maintains central control of the process. A central server acts as a team leader and traffic monitor. The controlling cluster server divides a task into subtasks, assigns the work to computers on the grid with surplus processing power, combines the results, and moves on to the next task until the job is finished. shows how typical grid and cloud setups work, and the differences between the two. With utility computing, any company—large or small—can access the software and computer capacity on an as-needed basis. One of the big advantages of cloud computing is that companies can update their inventory in real time across their entire organization. For example, suppose you are an appliance retailer and have several outlets throughout the Midwest. If you have one model of a Whirlpool washing machine in your Des Moines, Iowa, store, and a salesperson in your Chicago location can sell that model in Chicago, the sale can be accomplished pretty easily. They can finalize the sale, create the shipping instructions, and update the inventory record automatically—and the Chicago consumer’s needs will be met. Amazon, Google, IBM, Salesforce.com, Oracle, and Hewlett-Packard Enterprise are among the companies providing as-needed cloud and grid services. Although cloud and grid computing appears similar to outsourcing or on-demand software from ASPs, it has two key differences: 1. Pricing is set per-use, whereas outsourcing involves fixed-price contracts. 2. Cloud and grid computing goes beyond hosted software and includes computer and networking equipment as well as services. The cloud and grids provide a very cost-effective way to provide computing power for complex projects in areas such as weather research and financial and biomedical modeling. Because the computing infrastructure already exists—they tap into computer capacity that is otherwise unused—the cost is quite low. The increased interest in cloud and grid technology will continue to contribute to high growth. ### Summary of Learning Outcomes 1. What are the leading trends in information technology? IT is a dynamic industry, and companies must stay current on the latest trends to identify ones that help them maintain their competitive edge, such as digital forensics, the distributed workforce, and grid computing. With digital forensics techniques, corporations, government agencies, attorneys, and lawmakers can obtain evidence from computers and corporate networks—web pages, pictures, documents, and e-mails. Many knowledge workers now work remotely rather than from an office. Companies adopting the distributed workforce model gain many benefits, such as cost savings, more satisfied and productive employees, and increased employee retention. Cloud computing harnesses the power of computers, online software, and data storage to create a virtual computing environment that is invisible to the user. A company can access the cloud on an as-needed basis instead of investing in its own supercomputer equipment. Outsourcing a portion of the company’s computing needs provides additional flexibility and cost advantages. Companies can also set up internal grids. ### Preparing for Tomorrow’s Workplace Skills 1. How has information technology changed your life? Describe at least three areas (both personal and school- or work-related) where having access to better information has improved your decisions. Are there any negative effects? What steps can you take to manage information better? (Information, Technology) 2. Visit or conduct a phone interview with a local small-business owner about the different ways her or his firm uses information technology. Prepare a brief report on your findings that includes the hardware and software used, how it was selected, benefits of technology for the company, and any problems in implementing or using it. (Interpersonal, Information) 3. Your school wants to automate the class-registration process. Prepare a memo to the dean of information systems describing an integrated information system that would help a student choose and register for courses. Make a list of the different groups that should be involved and questions to ask during the planning process. Include a graphic representation of the system that shows how the data become useful information. Indicate the information a student needs to choose courses and its sources. Explain how several types of management support systems could help students make better course decisions. Include ways the school could use the information it collects from this system. Have several students present their plans to the class, which will take the role of university management in evaluating them. (Resources, Systems, Technology) 4. You recently joined the IT staff of a midsized consumer products firm. After a malicious virus destroys some critical files, you realize that the company lacks a security strategy and policies. Outline the steps you’d take to develop a program to protect data and the types of policies you’d recommend. How would you present the plan to management and employees to encourage acceptance? (Resources, Technology) 5. Team Activity Should companies outsource IT? Some executives believe that IT is too important to outsource and that application service providers don’t have a future. Yet spending for ASP subscriptions, MSPs, and other forms of IT outsourcing such as cloud computing continue to grow. What’s your position? Divide the class into groups designated “for” or “against” outsourcing and/or ASPs. Have them research the current status of ASPs using publications such as CIO and Computerworld and websites such as Enterprise Apps Today, http://www.enterpriseappstoday.com. (Interpersonal, Information) ### Ethics Activity As the owner of a small but growing business, you are concerned about employees misusing company computers for personal matters. Not only does this cost the company in terms of employee productivity, but it also ties up bandwidth that may be required for company operations and exposes the firm’s networks to increased risks of attacks from viruses, spyware, and other malicious programs. Installing e-mail monitoring and web security and filtering software programs would allow you to track e-mail and internet use, develop use policies, block access to inappropriate sites, and limit the time employees can conduct personal online business. At the same time, the software will protect your IT networks from many types of security concerns, from viruses to internet fraud. You are concerned, however, that employees will take offense and consider such software an invasion of privacy. Using a web search tool, locate articles about this topic and then write responses to the following questions. Be sure to support your arguments and cite your sources. Ethical Dilemma: Should you purchase employee-monitoring software for your company, and on what do you base your decision? If you install the software, do you have an obligation to tell employees about it? Explain your answers and suggest ways to help employees understand your rationale. Sources: KC Agu, “6 Software Tools for Monitoring Employee Productivity,” Huffington Post, https://www.huffingtonpost.com, December 6, 2017; Marissa Lang, “Electronic Tracking Spurs Workplace Privacy Debate,” Government Technology, http://www.govtech.com, October 18, 2017; Mike Rogoway, “Jive’s Buyer Responds to Employee Anxiety over Workplace Monitoring Tool,” The Oregonian, http://www.oregonlive.com. ### Working the Net 1. Enterprise resource planning is a major category of business software. Visit the site of one of the following companies: SAP (http://www.sap.com), or Oracle (http://www.oracle.com). Prepare a short presentation for the class about the company’s ERP product offerings and capabilities. Include examples of how companies use the ERP software. What are the latest trends in ERP? 2. What can intranets and enterprise portals accomplish for a company? Find out by using such resources as Brint.com’s Intranet Portal, http://www.brint.com/Intranets.htm. Look for case studies that show how companies apply this technology. Summarize the different features an intranet or enterprise portal provides. 3. Learn more about the CERT Coordination Center (CERT/CC), which serves as a center of internet security expertise. Explore its website, https://www.cert.org/index.cfm. What are the latest statistics on incidents reported, vulnerabilities, security alerts, security notes, mail messages, and hotline calls? What other useful information does the site provide to help a company protect IT assets? 4. Research the latest developments in computer security at Computerworld’s site, http://computerworld.com/. What types of information can you find here? Pick one of the categories in this area (Cybercrime, Encryption, Disaster Recovery, Firewalls, Hacking, Privacy, Security Holes, Viruses and Worms, and VPN), and summarize your findings. 5. How can someone steal your identity? Using information at the Federal Trade Commission’s central website for information about identity theft, https://www.consumer.ftc.gov/features/feature-0014-identity-theft, compile a list of the ways thieves can access key information to use your identity. What steps should you take if you’ve been a victim of identity theft? Summarize key provisions of federal laws dealing with this crime and the laws in your state. ### Creative Thinking Case ### Novartis’s Prescription for Invoice Processing What do you do when you have more than 600 business units operating through 360 independent affiliates in 140 countries around the world—processing complex invoices in various languages and currencies? You seek out the best technology solution to make the job easier. At global pharmaceutical giant Novartis, the IT department is a strategic resource, a community of 2,000 people serving 63,000 customers in 200 locations and 25 data centers. Because most of the company’s invoices come from international suppliers, they have differences in design, language, taxes, and currency. Consequently, many ended up as “query items” requiring manual resolution by Novartis accounting staff—which delayed payments and made those invoices extremely costly to process. In fact, finance personnel spent so much of their time resolving queried invoices that other work suffered. A solution was badly needed. To maximize its investment, Novartis needed a flexible solution that would meet its current and future needs and function in other business departments in a variety of geographic locations. It should provide fast, accurate document capture and multi-language support, and should extend to other types of information—such as faxes and electronic data—in addition to paper documents. Finally, in order to obtain financing for the project, return on investment (ROI) was required within nine months of project implementation. InputAccel for Invoices from EMC/Captiva was the answer. The software extracts data from paper documents, applies intelligent document recognition (IDR) technology to convert them to digital images, and sends relevant data to enterprise resource planning, accounts payable (A/P), and other back-end management systems. The specialized InputAccel server manages output by recognizing and avoiding holdups in the workflow process. It also ensures if a server goes offline, others will carry on functioning, thus avoiding downtime. Now Novartis scans incoming invoices at a centrally located site, and the images are transmitted to the InputAccel for Invoices server for image improvement. Invoice data is then extracted and validated against supplier information. Most invoices are transferred directly for payment, with relatively few invoices requiring transfer to one of three accounts payable clerks who deal with queries manually. Novartis is a global leader in research and development of products that improve health issues. InputAccel was selected by Novartis to be part of its accounting system. Thanks to IT, overall efficiency has increased, processing errors are reduced, and accounting personnel can use their time and expert knowledge for more meaningful tasks than resolving invoice errors. For Novartis, it is “mission accomplished.” 2. What factors contributed to Novartis’s invoice processing being so complex? 3. How did IT help the company solve that problem? 4. What other uses and functions does InputAccel serve, and how will this be useful to Novartis over the long term? (You may want to visit the EMC/Captiva website, https://www.emc.com, for more information on InputAccel’s capabilities.) Sources: “OpenText Acquires EMC Enterprise Division,” MetaSource, http://www.metasource.com, September 20, 2016; Novartis corporate website, http://www.novartis.com, March 20, 2006; “Processing Invoices From Around the World,” ECM Connection, https://www.ecmconnection, February 2, 2006; Kathryn Balint, “Captiva’s Paper Chase Paying Off,” San Diego Union-Tribune, December 9, 2005, pp. C1, C5. ### Hot Links Address Book 1. If you want to know the definition of a computer term or more about a particular topic, Webopedia has the answer: http://www.webopedia.com. 2. Can’t tell a LAN from a WAN? Learn more about networking at Lifewire’s Internet & Networking pages, https://www.lifewire.com. 3. To find out if that e-mail alerting you to another virus threat is real or a hoax, check out the latest information at http://www.snopes.com. 4. How can you “inoculate” your computer against viruses? Symantec’s Security Center has the latest details on virus threats and security issues: http://www.symantec.com. 5. The CIO digital magazine offers helpful articles that provide a good introduction to key IT topics: http://www.cio.com. 6. Curious about how companies are using on-demand grid computing? Read the Grid FAQ at the Grid Computing Technology Centre, http://www.gridcomputing.com, and then check out some of the many links to other resources.

# Using Financial Information and Accounting ## Introduction ### Learning Outcomes After reading this chapter, you should be able to answer these questions: 1. Why are financial reports and accounting information important, and who uses them? 2. What are the differences between public and private accountants, and how has federal legislation affected their work? 3. What are the six steps in the accounting cycle? 4. In what terms does the balance sheet describe the financial condition of an organization? 5. How does the income statement report a firm’s profitability? 6. Why is the statement of cash flows an important source of information? 7. How can ratio analysis be used to identify a firm’s financial strengths and weaknesses? 8. What major trends affect the accounting industry today? Financial information is central to every organization. To operate effectively, businesses must have a way to track income, expenses, assets, and liabilities in an organized manner. Financial information is also essential for decision-making. Managers prepare financial reports using accounting, a set of procedures and guidelines for companies to follow when preparing financial reports. Unless you understand basic accounting concepts, you will not be able to “speak” the standard financial language of businesses. This module examines the role of accounting in business, how accounting contributes to a company’s overall success, the three primary financial statements, and careers in accounting.

# Using Financial Information and Accounting ## Accounting: More than Numbers 1. Why are financial reports and accounting information important, and who uses them? Prior to 2001, accounting topics rarely made the news. That changed when Enron Corp.’s manipulation of accounting rules to improve its financial statements hit the front pages of newspapers. The company filed bankruptcy in 2001, and its former top executives were charged with multiple counts of conspiracy and fraud. Arthur Andersen, Enron’s accounting firm, was indicted and convicted of obstruction of justice, and in 2002, the once-respected firm went out of business. Soon financial abuses at other companies—among them Tyco, Adelphia, WorldCom, and more recently Madoff Investment Securities—surfaced. Top executives at these and other companies were accused of knowingly flouting accepted accounting standards to inflate current profits and increase their compensation. Many were subsequently convicted: 1. Investment securities broker Bernard Madoff and his accountant bilked investors out of more than $65 billion; Madoff is currently serving a 150-year prison term. 2. Andrew Fastow, Enron’s former chief financial officer, and Ben Glisan Jr., its former treasurer, pleaded guilty and received prison terms of 10 and five years, respectively. The company’s former chairman, Ken Lay, and CEO, Jeffrey Skilling, were convicted of multiple charges. 3. Bernard Ebbers, WorldCom’s CEO, was sentenced to 25 years in prison for conspiracy, securities fraud, and filing false reports with regulatory agencies—crimes that totaled $11 billion in accounting fraud. 4. Tyco’s CEO L. Dennis Kozlowski was fined $70 million and sentenced to 8 to 25 years. These and other cases raised critical concerns about the independence of those who audit a company’s financial statements, questions of integrity and public trust, and issues with current financial reporting standards. Investors suffered as a result because the crisis in confidence sent stock prices tumbling, and companies lost billions in value. So it’s no surprise that more people are paying attention to accounting topics. We now recognize that accounting is the backbone of any business, providing a framework to understand the firm’s financial condition. Reading about accounting irregularities, fraud, audit (financial statement review) shortcomings, out-of-control business executives, and bankruptcies, we have become very aware of the importance of accurate financial information and sound financial procedures. All of us—whether we are self-employed, work for a local small business or a multinational Fortune 100 firm, or are not currently in the workforce—benefit from knowing the basics of accounting and financial statements. We can use this information to educate ourselves about companies before interviewing for a job or buying a company’s stock or bonds. Employees at all levels of an organization use accounting information to monitor operations. They also must decide which financial information is important for their company or business unit, what those numbers mean, and how to use them to make decisions. This chapter starts by discussing why accounting is important for businesses and for users of financial information. Then it provides a brief overview of the accounting profession and the post-Enron regulatory environment. Next it presents an overview of basic accounting procedures, followed by a description of the three main financial statements—the balance sheet, the income statement, and the statement of cash flows. Using these statements, we then demonstrate how ratio analysis of financial statements can provide valuable information about a company’s financial condition. Finally, the chapter explores current trends affecting the accounting profession. ### Accounting Basics Accounting is the process of collecting, recording, classifying, summarizing, reporting, and analyzing financial activities. It results in reports that describe the financial condition of an organization. All types of organizations—businesses, hospitals, schools, government agencies, and civic groups—use accounting procedures. Accounting provides a framework for looking at past performance, current financial health, and possible future performance. It also provides a framework for comparing the financial positions and financial performances of different firms. Understanding how to prepare and interpret financial reports will enable you to evaluate two companies and choose the one that is more likely to be a good investment. The accounting system shown in converts the details of financial transactions (sales, payments, purchases, and so on) into a form that people can use to evaluate the firm and make decisions. Data become information, which in turn becomes reports. These reports describe a firm’s financial position at one point in time and its financial performance during a specified period. Financial reports include financial statements, such as balance sheets and income statements, and special reports, such as sales and expense breakdowns by product line. ### Who Uses Financial Reports? The accounting system generates two types of financial reports, as shown in : internal and external. Internal reports are used within the organization. As the term implies, managerial accounting provides financial information that managers inside the organization can use to evaluate and make decisions about current and future operations. For instance, the sales reports prepared by managerial accountants show how well marketing strategies are working, as well as the number of units sold in a specific period of time. This information can be used by a variety of managers within the company in operations as well as in production or manufacturing to plan future work based on current financial data. Production cost reports can help departments track and control costs, as well as zero in on the amount of labor needed to produce goods or services. In addition, managers may prepare very detailed financial reports for their own use and provide summary reports to top management, providing key executives with a “snapshot” of business operations in a specific timeframe. Financial accounting focuses on preparing external financial reports that are used by outsiders; that is, people who have an interest in the business but are not part of the company’s management. Although they provide useful information for managers, these reports are used primarily by lenders, suppliers, investors, government agencies, and others to assess the financial strength of a business. To ensure accuracy and consistency in the way financial information is reported, accountants in the United States follow generally accepted accounting principles (GAAP) when preparing financial statements. The Financial Accounting Standards Board (FASB) is a private organization that is responsible for establishing financial accounting standards used in the United States. Currently there are no international accounting standards. Because accounting practices vary from country to country, a multinational company must make sure that its financial statements conform to both its own country’s accounting standards and those of the parent company’s country. Often another country’s standards are quite different from U.S. GAAP. In the past, the U.S. Financial Accounting Standards Board and the International Accounting Standards Board (IASB) worked together to develop global accounting standards that would make it easier to compare financial statements of foreign-based companies. However, as of this writing, the two organizations have not agreed on a global set of accounting standards. Financial statements are the chief element of the annual report, a yearly document that describes a firm’s financial status. Annual reports usually discuss the firm’s activities during the past year and its prospects for the future. Three primary financial statements included in the annual report are discussed and shown later in this chapter: 1. The balance sheet 2. The income statement 3. The statement of cash flows ### Summary of Learning Outcomes 1. Why are financial reports and accounting information important, and who uses them? Accounting involves collecting, recording, classifying, summarizing, reporting, and analyzing a firm’s financial activities according to a standard set of procedures. The financial reports resulting from the accounting process give managers, employees, investors, customers, suppliers, creditors, and government agencies a way to analyze a company’s past, current, and future performance. Financial accounting is concerned with the preparation of financial reports using generally accepted accounting principles. Managerial accounting provides financial information that management can use to make decisions about the firm’s operations.

# Using Financial Information and Accounting ## The Accounting Profession 1. What are the differences between public and private accountants, and how has federal legislation affected their work? When you think of accountants, do you picture someone who works in a back room, hunched over a desk, wearing a green eye shade and scrutinizing pages and pages of numbers? Although today’s accountants still must love working with numbers, they now work closely with their clients to not only prepare financial reports but also help them develop good financial practices. Advances in technology have taken the tedium out of the number-crunching and data-gathering parts of the job and now offer powerful analytical tools as well. Therefore, accountants must keep up with information technology trends. The accounting profession has grown due to the increased complexity, size, and number of businesses and the frequent changes in the tax laws. Accounting is now a $95 billion-plus industry. The more than 1.4 million accountants in the United States are classified as either public accountants or private (corporate) accountants. They work in public accounting firms, private industry, education, and government, and about 10 percent are self-employed. The job outlook for accountants over the next decade is positive; the Bureau of Labor Statistics projects that accounting and auditing jobs will increase 11 percent faster than many other industries in the U.S. economy. ### Public Accountants Independent accountants who serve organizations and individuals on a fee basis are called public accountants. Public accountants offer a wide range of services, including preparation of financial statements and tax returns, independent auditing of financial records and accounting methods, and management consulting. Auditing, the process of reviewing the records used to prepare financial statements, is an important responsibility of public accountants. They issue a formal auditor’s opinion indicating whether the statements have been prepared in accordance with accepted accounting rules. This written opinion is an important part of a company’s annual report. The largest public accounting firms, called the Big Four, operate worldwide and offer a variety of business consulting services in addition to accounting services. In order of size, they are Deloitte, PwC (PricewaterhouseCoopers), EY (Ernst & Young), and KPMG International. A former member of this group, Arthur Andersen, disbanded in 2002 as a result of the Enron scandal. To become a certified public accountant (CPA), an accountant must complete an approved bachelor’s degree program and pass a test prepared by the American Institute of CPAs (AICPA). Each state also has requirements for CPAs, such as several years’ on-the-job experience and continuing education. Only CPAs can issue the auditor’s opinion on a firm’s financial statements. Most CPAs first work for public accounting firms and later may become private accountants or financial managers. Of the more than 418,000 accountants who belong to the AICPA, 47 percent work in public accounting firms and 39 percent in business and industry. ### Private Accountants Accountants employed to serve one particular organization are private accountants. Their activities include preparing financial statements, auditing company records to be sure employees follow accounting policies and procedures, developing accounting systems, preparing tax returns, and providing financial information for management decision-making. Whereas some private accountants hold the CPA designation, managerial accountants also have a professional certification program. Requirements to become a certified management accountant (CMA) include passing an examination. ### Reshaping the Accounting Environment Although our attention was focused on big-name accounting scandals in the late 1990s and early 2000s, an epidemic of accounting irregularities was also taking place in the wider corporate arena. The number of companies restating annual financial statements grew at an alarming rate, tripling from 1997 to 2002. In the wake of the numerous corporate financial scandals, Congress and the accounting profession took major steps to prevent future accounting irregularities. These measures targeted the basic ways, cited by a report from the AICPA, that companies massaged financial reports through creative, aggressive, or inappropriate accounting techniques, including: 1. Committing fraudulent financial reporting 2. Stretching accounting rules to significantly enhance financial results 3. Following appropriate accounting rules but using loopholes to manage financial results Why did companies willfully push accounting to the edge—and over it—to artificially pump up revenues and profits? Looking at the companies involved in the scandals, some basic similarities have emerged: 1. A company culture of arrogance and above-average tolerance for risk 2. Interpretation of accounting policies to their advantage and manipulation of the rules to get to a predetermined result and conceal negative financial information 3. Compensation packages tied to financial or operating targets, making executives and managers greedy and pressuring them to find sometimes-questionable ways to meet what may have been overly optimistic goals 4. Ineffective checks and balances, such as audit committees, boards of directors, and financial control procedures, that were not independent from management 5. Centralized financial reporting that was tightly controlled by top management, increasing the opportunity for fraud 6. Financial performance benchmarks that were often out of line with the companies’ industry 7. Complicated business structures that clouded how the company made its profits 8. Cash flow from operations that seemed out of line with reported earnings (You’ll learn about this important difference between cash and reported earnings in the sections on the income statement and statement of cash flows.) 9. Acquisitions made quickly, often to show growth rather than for sound business reasons; management focused more on buying new companies than making the existing operations more profitable Companies focused on making themselves look good in the short term, doing whatever was necessary to top past performance and to meet the expectations of investment analysts, who project earnings, and investors, who panic when a company misses the analysts’ forecasts. Executives who benefited when stock prices rose had no incentive to question the earnings increases that led to the price gains. These number games raised serious concerns about the quality of earnings and questions about the validity of financial reports. Investors discovered to their dismay that they could neither assume that auditors were adequately monitoring their clients’ accounting methods nor depend on the integrity of published financial information. ### Better Numbers Ahead Over the past 15 years, a number of accounting reforms have been put in place to set better standards for accounting, auditing, and financial reporting. Investors, now aware of the possibility of various accounting shenanigans, are avoiding companies that use complicated financial structures and off-the-books financing. In 2002, the Sarbanes-Oxley Act (commonly referred to as SOX) went into effect. This law, one of the most extensive pieces of business legislation passed by Congress, was designed to address the investing public’s lack of trust in corporate America. It redefines the public corporation–auditor relationship and restricts the types of services auditors can provide to clients. The Act clarifies auditor-independence issues, places increased accountability on a company’s senior executives and management, strengthens disclosure of insider transactions (an employee selling stock based on information not known by the public), and prohibits loans to executives. An independent five-member Public Company Accounting Oversight Board (PCAOB) was given the authority to set and amend auditing, quality control, ethics, independence, and other standards for audit reports. The Act specifies that all PCAOB members be financially literate. Two members must have their CPA designation, and the other three cannot be or have been CPAs. Appointed and overseen by the Securities and Exchange Commission (SEC), the PCAOB can also inspect accounting firms; investigate breaches of securities law, standards, competency, and conduct; and take disciplinary action. The corporate Board registers public accounting firms, as the Act now requires. Altering or destroying key audit documents now carries felony charges and increased penalties. Other key provisions of the Act cover the following areas: 1. Auditing standards: The Board must include in its standards several requirements, such as maintaining audit work papers and other documentation for audit reports for seven years, the review and approval of audit reports by a second partner, and audit standards for quality control and review of internal control procedures. 2. Financial disclosure: Companies must clearly disclose all transactions that may have a material current or future effect on their financial condition, including those that are off the books or with unconsolidated entities (related companies whose results the company is not required to combine with its own financial statements under current accounting rules). Management and major stockholders must disclose transactions such as sales of company stock within two days of the transaction. The company must disclose its code of ethics for senior financial executives. Any significant changes in a company’s operations or financial condition must be disclosed “on a rapid and current basis.” 3. Financial statement certification: Chief executive officers and chief financial officers must certify company financial statements, with severe criminal and civil penalties for false certification. If securities fraud results in restatement of financial reports, these executives will lose any stock-related profits and bonuses they received prior to the restatement. 4. Internal controls: Each company must have appropriate internal control procedures in place for financial reporting, and its annual report must include a report on implementation of those controls to assure the integrity of financial reports. 5. Consulting work: The Act restricts the non-auditing work auditors may perform for a client. In the past, the large accounting firms had expanded their role to include a wide range of advisory services that went beyond their traditional task of validating a company’s financial information. Conflicts of interest arose when the same firm earned lucrative fees for both audit and consulting work for the same client. Other regulatory organizations also took steps to prevent future abuses. In September 2002, the AICPA Auditing Standards Board (ASB) issued expanded guidelines to help auditors uncover fraud while conducting audits. The New York Stock Exchange stiffened its listing requirements so that the majority of directors at listed companies must be independent and not employees of the corporation. Nor can auditors serve on clients’ boards for five years. Companies listed in the Nasdaq marketplace cannot hire former auditors at any level for three years. In response to the passage of Sarbanes-Oxley and other regulations, companies implemented new control measures and improved existing ones. The burdens in both cost and time have been considerable. Many companies had to redesign and restructure financial systems to improve efficiency. Some finance executives believe that their investment in increased controls has improved shareholder perceptions of their company’s ethics. Others, however, reported that costs depressed earnings and negatively affected stock prices. Despite the changes and costs associated with SOX compliance, 15 years after the law’s implementation, many business executives believe that the process has helped them fine-tune financial activities and reporting while addressing dynamic changes in the market and other economic challenges. ### Summary of Learning Outcomes 1. What are the differences between public and private accountants, and how has federal legislation affected their work? Public accountants work for independent firms that provide accounting services—such as financial report preparation and auditing, tax return preparation, and management consulting—to other organizations on a fee basis. Private accountants are employed to serve one particular organization and may prepare financial statements, tax returns, and management reports. The bankruptcies of companies such as Enron and WorldCom, plus widespread abuses of accounting practices, raised critical issues of auditor independence and the integrity and reliability of financial reports. To set better standards for accounting, auditing, and financial reporting and prevent future accounting irregularities, Congress passed the Sarbanes-Oxley Act in 2002. This Act created an independent board to oversee the accounting profession, set stricter auditing and financial disclosure standards, and placed increased accountability on a company’s senior executives and management. In addition, the law restricts auditors from providing certain types of consulting services to clients. Other organizations such as the SEC, the New York Stock Exchange, and accounting industry professional associations issued new regulations and guidelines related to compliance with the Act.

# Using Financial Information and Accounting ## Basic Accounting Procedures 1. What are the six steps in the accounting cycle? Using generally accepted accounting principles, accountants record and report financial data in similar ways for all firms. They report their findings in financial statements that summarize a company’s business transactions over a specified time period. As mentioned earlier, the three major financial statements are the balance sheet, income statement, and statement of cash flows. People sometimes confuse accounting with bookkeeping. Accounting is a much broader concept. Bookkeeping, the system used to record a firm’s financial transactions, is a routine, clerical process. Accountants take bookkeepers’ transactions, classify and summarize the financial information, and then prepare and analyze financial reports. Accountants also develop and manage financial systems and help plan the firm’s financial strategy. ### The Accounting Equation The accounting procedures used today are based on those developed in the late 15th century by an Italian monk, Brother Luca Pacioli. He defined the three main accounting elements as assets, liabilities, and owners’ equity. Assets are things of value owned by a firm. They may be tangible, such as cash, equipment, and buildings, or intangible, such as a patent or trademarked name. Liabilities—also called debts—are what a firm owes to its creditors. Owners’ equity is the total amount of investment in the firm minus any liabilities. Another term for owners’ equity is net worth. The relationship among these three elements is expressed in the accounting equation: The accounting equation must always be in balance (that is, the total of the elements on one side of the equals sign must equal the total on the other side). Suppose you start a coffee shop and put $10,000 in cash into the business. At that point, the business has assets of $10,000 and no liabilities. This would be the accounting equation: The liabilities are zero and owners’ equity (the amount of your investment in the business) is $10,000. The equation balances. To keep the accounting equation in balance, every transaction must be recorded as two entries. As each transaction is recorded, there is an equal and opposite event so that two accounts or records are changed. This method is called double-entry bookkeeping. Suppose that after starting your business with $10,000 cash, you borrow another $10,000 from the bank. The accounting equation will change as follows: Now you have $20,000 in assets—your $10,000 in cash and the $10,000 loan proceeds from the bank. The bank loan is also recorded as a liability of $10,000 because it’s a debt you must repay. Making two entries keeps the equation in balance. ### The Accounting Cycle The accounting cycle refers to the process of generating financial statements, beginning with a business transaction and ending with the preparation of the report. shows the six steps in the accounting cycle. The first step in the cycle is to analyze the data collected from many sources. All transactions that have a financial impact on the firm—sales, payments to employees and suppliers, interest and tax payments, purchases of inventory, and the like—must be documented. The accountant must review the documents to make sure they’re complete. Next, each transaction is recorded in a journal, a listing of financial transactions in chronological order. The journal entries are then recorded in ledgers, which show increases and decreases in specific asset, liability, and owners’ equity accounts. The ledger totals for each account are summarized in a trial balance, which is used to confirm the accuracy of the figures. These values are used to prepare financial statements and management reports. Finally, individuals analyze these reports and make decisions based on the information in them. ### Technological Advances Over the past decade, technology has had a significant impact on the accounting industry. Computerized and online accounting programs now do many different things to make business operations and financial reporting more efficient. For example, most accounting packages offer basic modules that handle general ledger, sales order, accounts receivable, purchase order, accounts payable, and inventory control functions. Tax programs use accounting data to prepare tax returns and tax plans. Point-of-sale terminals used by many retail firms automatically record sales and do some of the bookkeeping. The Big Four and many other large public accounting firms develop accounting software for themselves and for clients. Accounting and financial applications typically represent one of the largest portions of a company’s software budget. Accounting software ranges from off-the-shelf programs for small businesses to full-scale customized enterprise resource planning systems for major corporations. Although these technological advances in accounting applications have made the financial aspects of running a small business much easier, entrepreneurs and other small-business owners should take to time to understand underlying accounting principles, which play an important role in evaluating just how financially sound a business enterprise really is. ### Summary of Learning Outcomes 1. What are the six steps in the accounting cycle? The accounting cycle refers to the process of generating financial statements. It begins with analyzing business transactions, recording them in journals, and posting them to ledgers. Ledger totals are then summarized in a trial balance that confirms the accuracy of the figures. Next the accountant prepares the financial statements and reports. The final step involves analyzing these reports and making decisions. Computers have simplified many of these labor-intensive tasks.

# Using Financial Information and Accounting ## The Balance Sheet 1. In what terms does the balance sheet describe the financial condition of an organization? The balance sheet, one of three financial statements generated from the accounting system, summarizes a firm’s financial position at a specific point in time. It reports the resources of a company (assets), the company’s obligations (liabilities), and the difference between what is owned (assets) and what is owed (liabilities), or owners’ equity. The assets are listed in order of their liquidity, the speed with which they can be converted to cash. The most liquid assets come first, and the least liquid are last. Because cash is the most liquid asset, it is listed first. Buildings, on the other hand, have to be sold to be converted to cash, so they are listed after cash. Liabilities are arranged similarly: liabilities due in the short term are listed before those due in the long term. The balance sheet as of December 31, 2018, for Delicious Desserts, Inc., a fictitious bakery, is illustrated in The basic accounting equation is reflected in the three totals highlighted on the balance sheet: assets of $148,900 equal the sum of liabilities and owners’ equity ($70,150 + $78,750). The three main categories of accounts on the balance sheet are explained below. ### Assets Assets can be divided into three broad categories: current assets, fixed assets, and intangible assets. Current assets are assets that can or will be converted to cash within the next 12 months. They are important because they provide the funds used to pay the firm’s current bills. They also represent the amount of money the firm can quickly raise. Current assets include: 1. Cash: Funds on hand or in a bank 2. Marketable securities: Temporary investments of excess cash that can readily be converted to cash 3. Accounts receivable: Amounts owed to the firm by customers who bought goods or services on credit 4. Notes receivable: Amounts owed to the firm by customers or others to whom it lent money 5. Inventory: Stock of goods being held for production or for sale to customers Fixed assets are long-term assets used by the firm for more than a year. They tend to be used in production and include land, buildings, machinery, equipment, furniture, and fixtures. Except for land, fixed assets wear out and become outdated over time. Thus, they decrease in value every year. This declining value is accounted for through depreciation. Depreciation is the allocation of the asset’s original cost to the years in which it is expected to produce revenues. A portion of the cost of a depreciable asset—a building or piece of equipment, for instance—is charged to each of the years in which it is expected to provide benefits. This practice helps match the asset’s cost against the revenues it provides. Because it is impossible to know exactly how long an asset will last, estimates are used. They are based on past experience with similar items or IRS guidelines for assets of that type. Notice that, through 2018, Delicious Desserts has taken a total of $16,000 in depreciation on its bakery equipment. Intangible assets are long-term assets with no physical existence. Common examples are patents, copyrights, trademarks, and goodwill. Patents and copyrights shield the firm from direct competition, so their benefits are more protective than productive. For instance, no one can use more than a small amount of copyrighted material without permission from the copyright holder. Trademarks are registered names that can be sold or licensed to others. One of Delicious Desserts’ intangible assets is a trademark valued at $4,500. Goodwill occurs when a company pays more for an acquired firm than the value of its tangible assets. Delicious Desserts’ other tangible asset is goodwill of $7,000. ### Liabilities Liabilities are the amounts a firm owes to creditors. Those liabilities coming due sooner—current liabilities—are listed first on the balance sheet, followed by long-term liabilities. Current liabilities are those due within a year of the date of the balance sheet. These short-term claims may strain the firm’s current assets because they must be paid in the near future. Current liabilities include: 1. Accounts payable: Amounts the firm owes for credit purchases due within a year. This account is the liability counterpart of accounts receivable. 2. Notes payable: Short-term loans from banks, suppliers, or others that must be repaid within a year. For example, Delicious Desserts has a six-month, $15,000 loan from its bank that is a note payable. 3. Accrued expenses: Expenses, typically for wages and taxes, that have accumulated and must be paid at a specified future date within the year although the firm has not received a bill 4. Income taxes payable: Taxes owed for the current operating period but not yet paid. Taxes are often shown separately when they are a large amount. 5. Current portion of long-term debt: Any repayment on long-term debt due within the year. Delicious Desserts is scheduled to repay $5,000 on its equipment loan in the coming year. Long-term liabilities come due more than one year after the date of the balance sheet. They include bank loans (such as Delicious Desserts’ $10,000 loan for bakery equipment), mortgages on buildings, and the company’s bonds sold to others. ### Owners’ Equity Owners’ equity is the owners’ total investment in the business after all liabilities have been paid. For sole proprietorships and partnerships, amounts put in by the owners are recorded as capital. In a corporation, the owners provide capital by buying the firm’s common stock. For Delicious Desserts, the total common stock investment is $30,000. Retained earnings are the amounts left over from profitable operations since the firm’s beginning. They are total profits minus all dividends (distributions of profits) paid to stockholders. Delicious Desserts has $48,750 in retained earnings. ### Summary of Learning Outcomes 1. In what terms does the balance sheet describe the financial condition of an organization? The balance sheet represents the financial condition of a firm at one moment in time, in terms of assets, liabilities, and owners’ equity. The key categories of assets are current assets, fixed assets, and intangible assets. Liabilities are divided into current and long-term liabilities. Owners’ equity, the amount of the owners’ investment in the firm after all liabilities have been paid, is the third major category.

# Using Financial Information and Accounting ## The Income Statement 1. How does the income statement report a firm’s profitability? The balance sheet shows the firm’s financial position at a certain point in time. The income statement summarizes the firm’s revenues and expenses and shows its total profit or loss over a period of time. Most companies prepare monthly income statements for management and quarterly and annual statements for use by investors, creditors, and other outsiders. The primary elements of the income statement are revenues, expenses, and net income (or net loss). The income statement for Delicious Desserts for the year ended December 31, 2018, is shown in . ### Revenues Revenues are the dollar amount of sales plus any other income received from sources such as interest, dividends, and rents. The revenues of Delicious Desserts arise from sales of its bakery products. Revenues are determined starting with gross sales, the total dollar amount of a company’s sales. Delicious Desserts had two deductions from gross sales. Sales discounts are price reductions given to customers that pay their bills early. For example, Delicious Desserts gives sales discounts to restaurants that buy in bulk and pay at delivery. Returns and allowances is the dollar amount of merchandise returned by customers because they didn’t like a product or because it was damaged or defective. Net sales is the amount left after deducting sales discounts and returns and allowances from gross sales. Delicious Desserts’ gross sales were reduced by $4,500, leaving net sales of $270,500. ### Expenses Expenses are the costs of generating revenues. Two types are recorded on the income statement: cost of goods sold and operating expenses. The cost of goods sold is the total expense of buying or producing the firm’s goods or services. For manufacturers, cost of goods sold includes all costs directly related to production: purchases of raw materials and parts, labor, and factory overhead (utilities, factory maintenance, machinery repair). For wholesalers and retailers, it is the cost of goods bought for resale. For all sellers, cost of goods sold includes all the expenses of preparing the goods for sale, such as shipping and packaging. Delicious Desserts’ cost of goods sold is based on the value of inventory on hand at the beginning of the accounting period, $18,000. During the year, the company spent $109,500 to produce its baked goods. This figure includes the cost of raw materials, labor costs for bakery workers, and the cost of operating the bakery area. Adding the cost of goods manufactured to the value of beginning inventory, we get the total cost of goods available for sale, $127,500. To determine the cost of goods sold for the year, we subtract the cost of inventory at the end of the period: The amount a company earns after paying to produce or buy its products but before deducting operating expenses is the gross profit. It is the difference between net sales and cost of goods sold. Because service firms do not produce goods, their gross profit equals net sales. Gross profit is a critical number for a company because it is the source of funds to cover all the firm’s other expenses. The other major expense category is operating expenses. These are the expenses of running the business that are not related directly to producing or buying its products. The two main types of operating expenses are selling expenses and general and administrative expenses. Selling expenses are those related to marketing and distributing the company’s products. They include salaries and commissions paid to salespeople and the costs of advertising, sales supplies, delivery, and other items that can be linked to sales activity, such as insurance, telephone and other utilities, and postage. General and administrative expenses are the business expenses that cannot be linked to either cost of goods sold or sales. Examples of general and administrative expenses are salaries of top managers and office support staff; utilities; office supplies; interest expense; fees for accounting, consulting, and legal services; insurance; and rent. Delicious Desserts’ operating expenses totaled $115,100. ### Net Profit or Loss The final figure—or bottom line—on an income statement is the net profit (or net income) or net loss. It is calculated by subtracting all expenses from revenues. If revenues are more than expenses, the result is a net profit. If expenses exceed revenues, a net loss results. Several steps are involved in finding net profit or loss. (These are shown in the right-hand column of .) First, cost of goods sold is deducted from net sales to get the gross profit. Then total operating expenses are subtracted from gross profit to get the net profit before taxes. Finally, income taxes are deducted to get the net profit. As shown in , Delicious Desserts earned a net profit of $32,175 in 2018. It is very important to recognize that profit does not represent cash. The income statement is a summary of the firm’s operating results during some time period. It does not present the firm’s actual cash flows during the period. Those are summarized in the statement of cash flows, which is discussed briefly in the next section. ### Summary of Learning Outcomes 1. How does the income statement report a firm’s profitability? The income statement is a summary of the firm’s operations over a stated period of time. The main parts of the statement are revenues (gross and net sales), cost of goods sold, operating expenses (selling and general and administrative expenses), taxes, and net profit or loss.

# Using Financial Information and Accounting ## The Statement of Cash Flows 1. Why is the statement of cash flows an important source of information? Net profit or loss is one measure of a company’s financial performance. However, creditors and investors are also keenly interested in how much cash a business generates and how it is used. The statement of cash flows, a summary of the money flowing into and out of a firm, is the financial statement used to assess the sources and uses of cash during a certain period, typically one year. All publicly traded firms must include a statement of cash flows in their financial reports to shareholders. The statement of cash flows tracks the firm’s cash receipts and cash payments. It gives financial managers and analysts a way to identify cash flow problems and assess the firm’s financial viability. Using income statement and balance sheet data, the statement of cash flows divides the firm’s cash flows into three groups: 1. Cash flow from operating activities: Those related to the production of the firm’s goods or services 2. Cash flow from investment activities: Those related to the purchase and sale of fixed assets 3. Cash flow from financing activities: Those related to debt and equity financing Delicious Desserts’ statement of cash flows for 2018 is presented in . It shows that the company’s cash and marketable securities have increased over the last year. And during the year the company generated enough cash flow to increase inventory and fixed assets and to reduce accounts payable, accruals, notes payable, and long-term debt. ### Summary of Learning Outcomes 1. Why is the statement of cash flows an important source of information? The statement of cash flows summarizes the firm’s sources and uses of cash during a financial-reporting period. It breaks the firm’s cash flows into those from operating, investment, and financing activities. It shows the net change during the period in the firm’s cash and marketable securities.

# Using Financial Information and Accounting ## Analyzing Financial Statements 1. How can ratio analysis be used to identify a firm’s financial strengths and weaknesses? Individually, the balance sheet, income statement, and statement of cash flows provide insight into the firm’s operations, profitability, and overall financial condition. By studying the relationships among the financial statements, however, one can gain even more insight into a firm’s financial condition and performance. A good way to think about analyzing financial statements is to compare it a fitness trainer putting clients through various well-established assessments and metrics to determine whether a specialized fitness program is paying dividends for the person in terms of better strength, endurance, and overall health. Financial statements at any given time can provide a snapshot of a company’s overall health. Company management must use certain standards and measurements to determine whether they need to implement additional strategies to keep the company fit and making a profit. Ratio analysis involves calculating and interpreting financial ratios using data taken from the firm’s financial statements in order to assess its condition and performance. A financial ratio states the relationship between financial data on a percentage basis. For instance, current assets might be viewed relative to current liabilities or sales relative to assets. The ratios can then be compared over time, typically three to five years. A firm’s ratios can also be compared to industry averages or to those of another company in the same industry. Period-to-period and industry ratios provide a meaningful basis for comparison, so that we can answer questions such as, “Is this particular ratio good or bad?” It’s important to remember that ratio analysis is based on historical data and may not indicate future financial performance. Ratio analysis merely highlights potential problems; it does not prove that they exist. However, ratios can help managers monitor the firm’s performance from period to period to understand operations better and identify trouble spots. Ratios are also important to a firm’s present and prospective creditors (lenders), who want to see if the firm can repay what it borrows and assess the firm’s financial health. Often loan agreements require firms to maintain minimum levels of specific ratios. Both present and prospective shareholders use ratio analysis to look at the company’s historical performance and trends over time. Ratios can be classified by what they measure: liquidity, profitability, activity, and debt. Using Delicious Desserts’ 2018 balance sheet and income statement ( and ), we can calculate and interpret the key ratios in each group. summarizes the calculations of these ratios for Delicious Desserts. We’ll now discuss how to calculate the ratios and, more important, how to interpret the ratio value. ### Liquidity Ratios Liquidity ratios measure the firm’s ability to pay its short-term debts as they come due. These ratios are of special interest to the firm’s creditors. The three main measures of liquidity are the current ratio, the acid-test (quick) ratio, and net working capital. The current ratio is the ratio of total current assets to total current liabilities. Traditionally, a current ratio of 2 ($2 of current assets for every $1 of current liabilities) has been considered good. Whether it is sufficient depends on the industry in which the firm operates. Public utilities, which have a very steady cash flow, operate quite well with a current ratio well below 2. A current ratio of 2 might not be adequate for manufacturers and merchandisers that carry high inventories and have lots of receivables. The current ratio for Delicious Desserts for 2018, as shown in , is 1.4. This means little without a basis for comparison. If the analyst found that the industry average for small bakeries was 2.4, Delicious Desserts would appear to have low liquidity. The acid-test (quick) ratio is like the current ratio except that it excludes inventory, which is the least-liquid current asset. The acid-test ratio is used to measure the firm’s ability to pay its current liabilities without selling inventory. The name acid-test implies that this ratio is a crucial test of the firm’s liquidity. An acid-test ratio of at least 1 is preferred. But again, what is an acceptable value varies by industry. The acid-test ratio is a good measure of liquidity when inventory cannot easily be converted to cash (for instance, if it consists of very specialized goods with a limited market). If inventory is liquid, the current ratio is better. Delicious Desserts’ acid-test ratio for 2018 is 1.1. Because the bakery’s products are perishable, it does not carry large inventories. Thus, the values of its acid-test and current ratios are fairly close. At a manufacturing company, however, inventory typically makes up a large portion of current assets, so the acid-test ratio will be lower than the current ratio. Net working capital, though not really a ratio, is often used to measure a firm’s overall liquidity. It is calculated by subtracting total current liabilities from total current assets. Delicious Desserts’ net working capital for 2018 is $23,050. Comparisons of net working capital over time often help in assessing a firm’s liquidity. ### Profitability Ratios To measure profitability, a firm’s profits can be related to its sales, equity, or stock value. Profitability ratios measure how well the firm is using its resources to generate profit and how efficiently it is being managed. The main profitability ratios are net profit margin, return on equity, and earnings per share. The ratio of net profit to net sales is the net profit margin, also called return on sales. It measures the percentage of each sales dollar remaining after all expenses, including taxes, have been deducted. Higher net profit margins are better than lower ones. The net profit margin is often used to measure the firm’s earning power. “Good” net profit margins differ quite a bit from industry to industry. A grocery store usually has a very low net profit margin, perhaps below 1 percent, whereas a jewelry store’s net profit margin would probably exceed 10 percent. Delicious Desserts’ net profit margin for 2018 is 11.9 percent. In other words, Delicious Desserts is earning 11.9 cents on each dollar of sales. The ratio of net profit to total owners’ equity is called return on equity (ROE). It measures the return that owners receive on their investment in the firm, a major reason for investing in a company’s stock. Delicious Desserts has a 40.9 percent ROE for 2018. On the surface, a 40.9 percent ROE seems quite good. But the level of risk in the business and the ROE of other firms in the same industry must also be considered. The higher the risk, the greater the ROE investors look for. A firm’s ROE can also be compared to past values to see how the company is performing over time. Earnings per share (EPS) is the ratio of net profit to the number of shares of common stock outstanding. It measures the number of dollars earned by each share of stock. EPS values are closely watched by investors and are considered an important sign of success. EPS also indicates a firm’s ability to pay dividends. Note that EPS is the dollar amount earned by each share, not the actual amount given to stockholders in the form of dividends. Some earnings may be put back into the firm. Delicious Desserts’ EPS for 2018 is $3.22. ### Activity Ratios Activity ratios measure how well a firm uses its assets. They reflect the speed with which resources are converted to cash or sales. A frequently used activity ratio is inventory turnover. The inventory turnover ratio measures the speed with which inventory moves through the firm and is turned into sales. It is calculated by dividing cost of goods sold by the average inventory. (Average inventory is estimated by adding the beginning and ending inventories for the year and dividing by 2.) Based on its 2018 financial data, Delicious Desserts’ inventory, on average, is turned into sales 6.8 times each year, or about once every 54 days (365 days ÷ 6.8). The acceptable turnover ratio depends on the line of business. A grocery store would have a high turnover ratio, maybe 20 times a year, whereas the turnover for a heavy equipment manufacturer might be only three times a year. ### Debt Ratios Debt ratios measure the degree and effect of the firm’s use of borrowed funds (debt) to finance its operations. These ratios are especially important to lenders and investors. They want to make sure the firm has a healthy mix of debt and equity. If the firm relies too much on debt, it may have trouble meeting interest payments and repaying loans. The most important debt ratio is the debt-to-equity ratio. The debt-to-equity ratio measures the relationship between the amount of debt financing (borrowing) and the amount of equity financing (owners’ funds). It is calculated by dividing total liabilities by owners’ equity. In general, the lower the ratio, the better. But it is important to assess the debt-to-equity ratio against both past values and industry averages. Delicious Desserts’ ratio for 2018 is 89.1 percent. The ratio indicates that the company has 89 cents of debt for every dollar the owners have provided. A ratio above 100 percent means the firm has more debt than equity. In such a case, the lenders are providing more financing than the owners. ### Summary of Learning Outcomes 1. How can ratio analysis be used to identify a firm’s financial strengths and weaknesses? Ratio analysis is a way to use financial statements to gain insight into a firm’s operations, profitability, and overall financial condition. The four main types of ratios are liquidity ratios, profitability ratios, activity ratios, and debt ratios. Comparing a firm’s ratios over several years and comparing them to ratios of other firms in the same industry or to industry averages can indicate trends and highlight financial strengths and weaknesses.

# Using Financial Information and Accounting ## Trends in Accounting 1. What major trends affect the accounting industry today? The post-SOX business environment has brought many changes to the accounting profession. When the public accounting industry could no longer regulate itself back in the late 1990s and early 2000s, it became subject to formal regulation for the first time. This regulatory environment set higher standards for audit procedures, which actually helped public companies fine-tune their financial reporting procedures, despite the added costs and labor hours needed to comply with SOX. Once again the core auditing business, rather than financial advisory and management consulting services, became the primary focus of public accounting firms. The relationship between accountants and their clients has also changed, and the role of chief audit executive has taken on more visibility in many large organizations. In addition, the FASB has made slow but steady progress in making changes related to GAAP, including a separate decision-making framework for users and preparers of private company financial statements. There are several other important trends that may affect the accounting industry over the next several years, including cloud computing services, automation, and staffing challenges. ### Cloud-Based Services The internet and cloud technology continue to disrupt many industries, including accounting, and clients expect their accountants to be up to speed on how financial data and other accounting information can be entered, accessed, and discussed in a very short period of time. For the most part, gone are the days when accountants and their support staff spend hours manually inputting data that gets “re-hydrated” into standardized accounting and financial statements, and reams of paper generate a company’s weekly, monthly, or yearly reports. According to recent research, cloud-based accounting firms add five times more clients than traditional accounting firms because businesses expect their accountants to be able to use technology to create the company’s financial picture in real time, while assisting them in decision-making about where to go next in terms of profitability, sales, expansion, etc. In addition, it is estimated that more than 90 percent of small and medium-sized companies use cloud-based accounting software, which helps them synthesize the information they collect for their many important financial statements. This use of computerized accounting programs offers many opportunities to accountants to shift their focus when it comes to attracting and retaining business clients. ### Automation In addition to cloud-based services, automation will continue to play an important role in the accounting industry, particularly in auditing services, where the manual gathering and inputting of information can be an inefficient and sometimes inaccurate process. Being able to automate this process will help generate complete sets of data that will improve the overall details of the auditing process. In addition, accountants who can use a client’s data files from their business operations and import this information into a tax or accounting software package will streamline the overall accounting process and lessen the tedious work of data entry. ### Staffing Challenges As these and other disruptive technologies change the focus of accounting work, the challenge of hiring the right staff to use these new tools intensifies. With accounting processes becoming automated and less time-intensive, some accounting firms are becoming more connected to their clients and increasing their advisory services when it comes to daily business operations. This change in approach will likely have an impact on the type of experienced employees accountants hire in the future. In addition, because most services are now cloud-based and financial data is available rather quickly, businesses are apt to change accounting firms faster than in the past if they are unsatisfied with the services they receive. Accountants have a great opportunity to expand their business portfolios and increase their client list by leveraging technology as part of their overall corporate strategies. ### Summary of Learning Outcomes 1. What major trends affect the accounting industry today? The post-SOX business environment has brought many changes to the accounting profession, including higher standards for audit procedures. In addition, the FASB has made slow but steady progress in making changes related to GAAP; however, the implementation of global accounting standards may not occur anytime soon. Several important trends will continue to impact the accounting industry going forward, including cloud-based services, automation, and staffing challenges, as accountants shift the focus of their practice to one incorporating technological advances and a more comprehensive approach to their companies’ and clients’ overall business environment. ### Preparing for Tomorrow’s Workplace Skills 1. Your firm has been hired to help several small businesses with their year-end financial statements. 2. During the year ended December 31, 2018, Lawrence Industries sold $2 million worth of merchandise on credit. A total of $1.4 million was collected during the year. The cost of this merchandise was $1.3 million. Of this amount, $1 million has been paid, and $300,000 is not yet due. Operating expenses and income taxes totaling $500,000 were paid in cash during the year. Assume that all accounts had a zero balance at the beginning of the year (January 1, 2018). Write a brief report for the company controller that includes calculation of the firm’s (a) net profit and (b) cash flow during the year. Explain why there is a difference between net profit and cash flow. (Information, Systems) 3. A friend has been offered a sales position at Draper Media, Inc., a small publisher of computer-related publications, but wants to know more about the company. Because of your expertise in financial analysis, you offer to help analyze Draper’s financial health. Draper has provided the following selected financial information: Calculate the following ratios for 2018: acid-test (quick) ratio, inventory turnover ratio, net profit margin, return on equity, debt-to-equity ratio, and earnings per share. Summarize your assessment of the company’s financial performance, based on these ratios, in a report for your friend. What other information would you like to have to complete your evaluation? (Information, Systems) 4. Use the internet and business publications to research how companies and accounting firms are implementing the provisions of the Sarbanes-Oxley Act. What are the major concerns they face? What rules have other organizations issued that relate to Act compliance? Summarize your findings. (Information) 5. 6. One of the best ways to learn about financial statements is to prepare them. Put together your personal balance sheet and income statement, using After you complete your personal financial statements, use them to see how well you are managing your finances. Consider the following questions: ### Ethics Activity As the controller of a medium-sized financial services company, you take pride in the accounting and internal control systems you have developed for the company. You and your staff have kept up with changes in the accounting industry and been diligent in updating the systems to meet new accounting standards. Your outside auditor, which has been reviewing the company’s books for 15 years, routinely complimented you on your thorough procedures. The passage of the Sarbanes-Oxley Act, with its emphasis on testing internal control systems, initiated several changes. You have studied the law and made adjustments to ensure you comply with the regulations, even though it has created additional work. Your auditors, however, have chosen to interpret SOX very aggressively—too much so, in your opinion. The auditors have recommended that you make costly improvements to your systems and also enlarged the scope of the audit process, raising their fees. When you question the partner in charge, he explains that the complexity of the law means that it is open to interpretation and it is better to err on the side of caution than risk noncompliance. You are not pleased with this answer, as you believe that your company is in compliance with SOX, and consider changing auditors. Using a web search tool, locate articles about this topic and then write responses to the following questions. Be sure to support your arguments and cite your sources. Ethical Dilemma: Should you change auditors because your current one is too stringent in applying the Sarbanes-Oxley Act? What other steps could you take to resolve this situation? Sources: Loren Kasuske, “The 4 Biggest Pros and Cons of the Sarbanes-Oxley Act,” https://ktconnections.com, June 8, 2017; Terry Sheridan, “Financial Services Spend More than $1M Annually on SOX,” https://www.accountingweb.com, August 2, 2016; “Sarbanes-Oxley Is Paying Off for Companies Despite Increased Costs and Hours, Protiviti Survey Finds,” http://www.prnewswire.com, June 2, 2016; Daniel Kim, “Top 3 Ways to Reduce SOX Compliance Costs,” https://www.soxhub.com, December 14, 2015. ### Working the Net 1. Visit the website of one of the following major U.S. public accounting firms: Deloitte (http://www.deloitte.com), Ernst & Young (http://www.ey.com), KPMG (http://www.kpmg.com), PricewaterhouseCoopers (http://www.pwc.com), Grant Thornton (http://www.grantthornton.com), or BDO (http://www.bdo.com). Explore the site to learn the services the firm offers. What other types of resources does the firm have on its website? How well does the firm communicate via the website with existing and prospective clients? Summarize your findings in a brief report. 2. Do annual reports confuse you? Many websites can take the mystery out of this important document. See IBM’s Guide to Understanding Financials at https://www.ibm.com/investor/help/guide/ Moneychimp’s “How to Read an Annual Report” features an interactive diagram that provides a big-picture view of what the report’s financial information tells you: http://www.moneychimp.com. Which site was more helpful to you, and why? 3. Corporate reports filed with the SEC are now available on the web at the EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) website, https://www.sec.gov/edgar. First, read about the EDGAR system; then go to the search page. To see the type of information that companies must file with the SEC, use the search feature to locate a recent filing by Microsoft. What types of reports did you find, and what was the purpose of each report? ### Creative Thinking Case ### Accountingfly Changes How CPAs Get Hired Filling accounting positions, especially at the CPA level, can be a challenge. Until a few years ago, businesses other than the Big 4 firms basically had two options: post openings on general job platforms such as Monster and Indeed, or go through a staffing agency that charged a hefty fee for finding just the right accounting professional. Jeff Phillips, a professional recruiter who previously worked for Monster.com, saw the opportunity to create a job site that caters strictly to accounting and bookkeeping jobs and started Accountingfly.com with brothers John and James Hosman. After studying various industries, the founders decided to focus on accounting because of the “massive imbalance” when it came to recruiting for private and public accountants. In their research, the trio found that most of the talent was snapped up by Big 4 accounting firms, leaving other accounting businesses struggling to find the right experienced people to fill key positions. Despite the record number of students currently majoring in accounting, Phillips discovered the number of graduates taking the CPA exam was declining rapidly, signaling to him that people were losing interest in public accounting jobs. He sees Accountingfly as a way to alert job seekers (and companies) about the good jobs available for new and experienced CPAs outside of the four major players in the accounting field. As the accounting talent pool evolves, millennials are looking to make their mark in the industry and tend to look for new jobs with organizations that pay competitive salaries, encourage job flexibility, and offer multiple career opportunities for the long haul. Accountingfly attracts both experienced CPAs and college students to its website by providing job boards, webinars, and virtual career fairs. There are more than one million job seekers and 200,000 user profiles on the website. Recently Accountingfly acquired Going Concern, a leading accounting news website that features original content and an insider’s perspective on the people, firms, and culture that shape the accounting profession in this country. According to Phillips, Going Concern has a large, well-informed, highly engaged audience of early-career accountants who could benefit from connecting with accounting firms seeking exceptional talent. 2. How does the company’s focus on recruiting accountants and related services give Accountingfly a competitive advantage? 3. Do you think Accountingfly’s approach can compete with the Big 4’s expensive and comprehensive recruiting efforts for new accountants? Explain your reasoning. 4. How can Accountingfly use its recent acquisition of Going Concern as a recruiting tool for experienced CPAs who desire a different career track? Provide some examples to support your answer. Sources: “Who We Are,” https://accountingfly.com, accessed August 11, 2017; Ian Welham, “How Accountingfly Is Revolutionizing the Way CPAs Are Hired,” http://cpatrendlines.com, August 5, 2017; “Millennial Businesses to Accounting Firms: Diversify Services, Go Digital and Embrace the Cloud,” https://www.bill.com, May 30, 2017; Carlos Gieseken, “Accountingfly Gains Influence in Industry,” http://www.pnj.com, October 5, 2015; Sherman G. Mohr, Jr., “Meet Jeff Phillips, CEO of Accountingfly. Tech Is Thriving in the Florida Panhandle,” LinkedIn, https://www.linkedin.com, August 24, 2015; “Accountingfly Acquires Going Concern, a Leading Accounting News Publication,” http://www.prweb.com, August 20, 2015. ### Hot Links Address Book 1. What issues is the FASB working on now? Check it out at http://www.fasb.org. 2. Two good sites to learn about the latest news in the accounting industry are Accounting Today, http://www.accountingtoday.com, and AccountingWEB, http://www.accountingweb.com. 3. To become more familiar with annual reports and key financial statements, head for IBM’s Guide to Financial Statements. The material offers a good overview of financial reporting and shows you what to look for when you read these documents: https://www.ibm.com/investor/help/guide. 4. To find free information about business statistics and financial ratios, go to the BizStats website at http://www.bizstats.com. There you will find industry financial ratios for corporations in more than 200 different industries. 5. To find out more about the accounting profession and becoming a CPA, visit the American Institute of CPAs’ website at http://www.aicpa.org, and click on the Career tab to explore various career paths in the accounting industry. 6. Forensic accountants combine their accounting knowledge with investigative skills in various legal and investigative settings, looking for fraud in various accounting transactions. To learn more about this accounting specialty, go to the website of the Association of Certified Fraud Examiners at http://www.acfe.com. 7. A comprehensive site with information about careers in accounting, certification programs, internships, and links to many related websites can be found at http://accountingmajors.com. 8. At their websites, you can learn about the types of services the Big Four accounting firms are now offering their clients: http://www.deloitte.com, http://www.kpmg.com, http://www.ey.com, and https://www.pwc.com/us/en.html.

# Understanding Money and Financial Institutions ## Introduction ### Learning Outcomes After reading this chapter, you should be able to answer these questions: 1. What is money, what are its characteristics and functions, and what are the three parts of the U.S. money supply? 2. How does the Federal Reserve manage the money supply? 3. What are the key financial institutions, and what role do they play in the process of financial intermediation? 4. How does the Federal Deposit Insurance Corporation (FDIC) protect depositors’ funds? 5. What roles do U.S. banks play in the international marketplace? 6. What trends are reshaping financial institutions? Advanced technology, globalization of markets, and the relaxation of regulatory restrictions continue to accelerate the pace of change in the financial services industry. These changes are giving businesses and consumers new options for conducting their financial transactions. The competitive landscape for financial institutions is also changing, creating new ways for these firms to increase their market share and boost profits. This chapter focuses on the role of financial institutions in U.S. and international economies. It discusses different types of financial institutions, how they are set up and how they function internally, and government oversight of their operations. Because financial institutions connect people with money, this chapter begins with a discussion of money, its characteristics and functions, and the components of the U.S. money supply. Next, it explains the role of the Federal Reserve System in managing the money supply. Then it describes different types of financial institutions and their services and the organizations that insure customer deposits. The chapter ends with a discussion of international banking and trends in financial institutions.

# Understanding Money and Financial Institutions ## Show Me the Money 1. What is money, what are its characteristics and functions, and what are the three parts of the U.S. money supply? Money is anything that is acceptable as payment for goods and services. It affects our lives in many ways. We earn it, spend it, save it, invest it—and often wish we had more of it. Businesses and government use money in similar ways. Both require money to finance their operations. By controlling the amount of money in circulation, the federal government can promote economic growth and stability. For this reason, money has been called the lubricant of the machinery that drives our economic system. Our banking system was developed to ease the handling of money. ### Characteristics of Money For money to be a suitable means of exchange, it should have these key characteristics: 1. Scarcity: Money should be scarce enough to have some value but not so scarce as to be unavailable. Pebbles, which meet some of the other criteria, would not work well as money because they are widely available. Too much money in circulation increases prices and inflation. Governments control the scarcity of money by limiting the quantity of money in circulation. 2. Durability: Any item used as money must be durable. A perishable item such as a banana becomes useless as money when it spoils. Even early societies used durable forms of money, such as metal coins and paper money, which lasted for a long time. 3. Portability: Money must be easily moved around. Large or bulky items, such as boulders or heavy gold bars, cannot be transported easily from place to place. 4. Divisibility: Money must be capable of being divided into smaller parts. Divisible forms of money help make transactions of all sizes and amounts possible. provides some interesting facts about our money. ### Functions of Money Using a variety of items as money would be confusing. Thus, societies develop a uniform money system to measure the value of goods and services. For money to be acceptable, it must function as a medium of exchange, as a standard of value, and as a store of value. As a medium of exchange, money makes transactions easier. Having a common form of payment is much less complicated than having a barter system, wherein goods and services are exchanged for other goods and services. Money allows the exchange of products to be a simple process. Money also serves as a standard of value. With a form of money whose value is accepted by all, goods and services can be priced in standard units. This makes it easy to measure the value of products and allows transactions to be recorded in consistent terms. As a store of value, money is used to hold wealth. It retains its value over time, although it may lose some of its purchasing power due to inflation. Individuals may choose to keep their money for future use rather than exchange it today for other types of products or assets. ### The U.S. Money Supply The U.S. money supply is composed of currency, demand deposits, and time deposits. Currency is cash held in the form of coins and paper money. Other forms of currency include travelers’ checks, cashier’s checks, and money orders. The amount of currency in circulation depends on public demand. Domestic demand is influenced primarily by prices for goods and services, income levels, and the availability of alternative payment methods such as credit cards. Until the mid-1980s, nearly all U.S. currency circulated only domestically. Today domestic circulation totals only a small fraction of the total amount of U.S. currency in circulation. Over the past decade, the amount of U.S. currency has doubled to more than $1.56 trillion and is held both inside and outside the country. Foreign demand is influenced by the political and economic uncertainties associated with some foreign currencies, and recent estimates suggest that between one-half and two-thirds of the value of currency in circulation is held abroad. Some residents of foreign countries hold dollars as a store of value, whereas others use it as a medium of exchange. Federal Reserve notes make up more than 99 percent of all U.S. currency in circulation. Each year the Federal Reserve Board determines new currency demand and submits a print order to the Treasury’s Bureau of Engraving and Printing (BEP). The order represents the Federal Reserve System’s estimate of the amount of currency the public will need in the upcoming year and reflects estimated changes in currency usage and destruction rates of unfit currency. shows how long we can expect our money to last on average. Demand deposits consist of money kept in checking accounts that can be withdrawn by depositors on demand. Demand deposits include regular checking accounts as well as interest-bearing and other special types of checking accounts. Time deposits are deposits at a bank or other financial institution that pay interest but cannot be withdrawn on demand. Examples are certain savings accounts, money market deposit accounts, and certificates of deposit. Economists use two terms to report on and discuss trends in the U.S. monetary system: M1 and M2. M1 (the M stands for money) is used to describe the total amount of readily available money in the system and includes currency and demand deposits. As of August 2017, the M1 monetary supply was $3.5 trillion. M2 includes all M1 monies plus time deposits and other money that is not immediately accessible. In August 2017, the M2 monetary supply was $13.6 trillion. Credit cards, sometimes referred to as “plastic money,” are routinely used as a substitute for cash and checks. Credit cards are not money; they are a form of borrowing. When a bank issues a credit card to a consumer, it gives a short-term loan to the consumer by directly paying the seller for the consumer’s purchases. The consumer pays the credit card company after receiving the monthly statement. Credit cards do not replace money; they simply defer payment. ### Summary of Learning Outcomes 1. What is money, what are its characteristics and functions, and what are the three parts of the U.S. money supply? Money is anything accepted as payment for goods and services. For money to be a suitable means of exchange, it should be scarce, durable, portable, and divisible. Money functions as a medium of exchange, a standard of value, and a store of value. The U.S. money supply consists of currency (coins and paper money), demand deposits (checking accounts), and time deposits (interest-bearing deposits that cannot be withdrawn on demand).

# Understanding Money and Financial Institutions ## The Federal Reserve System 1. How does the Federal Reserve manage the money supply? Before the twentieth century, there was very little government regulation of the U.S. financial or monetary systems. In 1907, however, several large banks failed, creating a public panic that led worried depositors to withdraw their money from other banks. Soon many other banks had failed, and the U.S. banking system was near collapse. The panic of 1907 was so severe that Congress created the Federal Reserve System in 1913 to provide the nation with a more stable monetary and banking system. The Federal Reserve System (commonly called the Fed) is the central bank of the United States. The Fed’s primary mission is to oversee the nation’s monetary and credit system and to support the ongoing operation of America’s private-banking system. The Fed’s actions affect the interest rates banks charge businesses and consumers, help keep inflation under control, and ultimately stabilize the U.S. financial system. The Fed operates as an independent government entity. It derives its authority from Congress but its decisions do not have to be approved by the president, Congress, or any other government branch. However, Congress does periodically review the Fed’s activities, and the Fed must work within the economic framework established by the government. The Fed consists of 12 district banks, each covering a specific geographic area. shows the 12 districts of the Federal Reserve. Each district has its own bank president who oversees operations within that district. Originally, the Federal Reserve System was created to control the money supply, act as a borrowing source for banks, hold the deposits of member banks, and supervise banking practices. Its activities have since broadened, making it the most powerful financial institution in the United States. Today, four of the Federal Reserve System’s most important responsibilities are carrying out monetary policy, setting rules on credit, distributing currency, and making check clearing easier. ### Carrying Out Monetary Policy The most important function of the Federal Reserve System is carrying out monetary policy. The Federal Open Market Committee (FOMC) is the Fed policy-making body that meets eight times a year to make monetary policy decisions. It uses its power to change the money supply in order to control inflation and interest rates, increase employment, and influence economic activity. Three tools used by the Federal Reserve System in managing the money supply are open market operations, reserve requirements, and the discount rate. summarizes the short-term effects of these tools on the economy. Open market operations—the tool most frequently used by the Federal Reserve—involve the purchase or sale of U.S. government bonds. The U.S. Treasury issues bonds to obtain the extra money needed to run the government (if taxes and other revenues aren’t enough). In effect, Treasury bonds are long-term loans (five years or longer) made by businesses and individuals to the government. The Federal Reserve buys and sells these bonds for the Treasury. When the Federal Reserve buys bonds, it puts money into the economy. Banks have more money to lend, so they reduce interest rates, which generally stimulates economic activity. The opposite occurs when the Federal Reserve sells government bonds. Banks that are members of the Federal Reserve System must hold some of their deposits in cash in their vaults or in an account at a district bank. This reserve requirement ranges from 3 to 10 percent on different types of deposits. When the Federal Reserve raises the reserve requirement, banks must hold larger reserves and thus have less money to lend. As a result, interest rates rise, and economic activity slows down. Lowering the reserve requirement increases loanable funds, causes banks to lower interest rates, and stimulates the economy; however, the Federal Reserve seldom changes reserve requirements. The Federal Reserve is called “the banker’s bank” because it lends money to banks that need it. The interest rate that the Federal Reserve charges its member banks is called the discount rate. When the discount rate is less than the cost of other sources of funds (such as certificates of deposit), commercial banks borrow from the Federal Reserve and then lend the funds at a higher rate to customers. The banks profit from the spread, or difference, between the rate they charge their customers and the rate paid to the Federal Reserve. Changes in the discount rate usually produce changes in the interest rate that banks charge their customers. The Federal Reserve raises the discount rate to slow down economic growth and lowers it to stimulate growth. ### Setting Rules on Credit Another activity of the Federal Reserve System is setting rules on credit. It controls the credit terms on some loans made by banks and other lending institutions. This power, called selective credit controls, includes consumer credit rules and margin requirements. Consumer credit rules establish the minimum down payments and maximum repayment periods for consumer loans. The Federal Reserve uses credit rules to slow or stimulate consumer credit purchases. Margin requirements specify the minimum amount of cash an investor must put up to buy securities or investment certificates issued by corporations or governments. The balance of the purchase cost can be financed through borrowing from a bank or brokerage firm. By lowering the margin requirement, the Federal Reserve stimulates securities trading. Raising the margin requirement slows trading. ### Distributing Currency: Keeping the Cash Flowing The Federal Reserve distributes the coins minted and the paper money printed by the U.S. Treasury to banks. Most paper money is in the form of Federal Reserve notes. Look at a dollar bill and you’ll see “Federal Reserve Note” at the top. The large letter seal on the left indicates which Federal Reserve Bank issued it. For example, bills bearing a D seal are issued by the Federal Reserve Bank of Cleveland, and those with an L seal are issued by the San Francisco district bank. ### Making Check Clearing Easier Another important activity of the Federal Reserve is processing and clearing checks between financial institutions. When a check is cashed at a financial institution other than the one holding the account on which the check is drawn, the Federal Reserve’s system lets that financial institution—even if distant from the institution holding the account on which the check is drawn—quickly convert the check into cash. Checks drawn on banks within the same Federal Reserve district are handled through the local Federal Reserve Bank using a series of bookkeeping entries to transfer funds between the financial institutions. The process is more complex for checks processed between different Federal Reserve districts. The time between when the check is written and when the funds are deducted from the check writer’s account provides float. Float benefits the check writer by allowing it to retain the funds until the check clears—that is, when the funds are actually withdrawn from its accounts. Businesses open accounts at banks around the country that are known to have long check-clearing times. By “playing the float,” firms can keep their funds invested for several extra days, thus earning more money. To reduce this practice, in 1988 the Fed established maximum check-clearing times. However, as credit cards and other types of electronic payments have become more popular, the use of checks continues to decline. Responding to this decline, the Federal Reserve scaled back its check-processing facilities over the past decade. Current estimates suggest that the number of check payments has declined by two billion annually over the last couple of years and will continue to do so as more people use online banking and other electronic payment systems. ### Managing the 2007–2009 Financial Crisis Much has been written over the past decade about the global financial crisis that occurred between 2007 and 2009. Some suggest that without the Fed’s intervention, the U.S. economy would have slipped deeper into a financial depression that could have lasted years. Several missteps by banks, mortgage lenders, and other financial institutions, which included approving consumers for home mortgages they could not afford and then packaging those mortgages into high-risk financial products sold to investors, put the U.S. economy into serious financial trouble. In the early 2000s, the housing industry was booming. Mortgage lenders were signing up consumers for mortgages that “on paper” they could afford. In many instances, lenders told consumers that based on their credit rating and other financial data, they could easily take the next step and buy a bigger house or maybe a vacation home because of the availability of mortgage money and low interest rates. When the U.S. housing bubble burst in late 2007, the value of real estate plummeted, and many consumers struggled to pay mortgages on houses no longer worth the value they borrowed to buy the properties, leaving their real estate investments “underwater.” Millions of consumers simply walked away from their houses, letting them go into foreclosure while filing personal bankruptcy. At the same time, the overall economy was going into a recession, and millions of people lost their jobs as companies tightened their belts to try to survive the financial upheaval affecting the United States as well as other countries across the globe. In addition, several leading financial investment firms, particularly those that managed and sold the high-risk, mortgage-backed financial products, failed quickly because they had not set aside enough money to cover the billions of dollars they lost on mortgages now going into default. For example, the venerable financial company Bear Stearns, which had been a successful business for more than 85 years, was eventually sold to JP Morgan for less than $10 a share, even after the Federal Reserve made more than $50 billion dollars available to help prop up financial institutions in trouble. After the collapse of Bear Stearns and other firms such as Lehman Brothers and insurance giant AIG, the Fed set up a special loan program to stabilize the banking system and to keep the U.S. bond markets trading at a normal pace. It is estimated that the Federal Reserve made more than $9 trillion in loans to major banks and other financial firms during the two-year crisis—not to mention bailing out the auto industry and buying several other firms to keep the financial system afloat. As a result of this financial meltdown, Congress passed legislation in 2010 to implement major regulations in the financial industry to prevent the future collapse of financial institutions, as well to put a check on abusive lending practices by banks and other firms. Among its provisions, the Dodd-Frank Wall Street Reform and Consumer Protection Act (known as Dodd-Frank) created an oversight council to monitor risks that affect the financial industry; requires banks to increase their cash reserves if the council feels the bank has too much risk in its current operations; prohibits banks from owning, investing, or sponsoring hedge funds, private equity funds, or other proprietary trading operations for profit; and set up a whistle-blower program to reward people who come forward to report security and other financial violations. Another provision of Dodd-Frank legislation requires major U.S. banks to submit to annual stress tests conducted by the Federal Reserve. These annual checkups determine whether banks have enough capital to survive economic turbulence in the financial system and whether the institutions can identify and measure risk as part of their capital plan to pay dividends or buy back shares. In 2017, seven years after Dodd-Frank became law, all of the country’s major banks passed the annual examination. ### Summary of Learning Outcomes 1. How does the Federal Reserve manage the money supply? The Federal Reserve System (the Fed) is an independent government agency that performs four main functions: carrying out monetary policy, setting rules on credit, distributing currency, and making check clearing easier. The three tools it uses in managing the money supply are open market operations, reserve requirements, and the discount rate. The Fed played a major role in keeping the U.S. financial system solvent during the financial crisis of 2007–2009 by making more than $9 trillion available in loans to major banks and other financial firms, in addition to bailing out the auto industry and other companies and supporting congressional passage of Dodd-Frank federal legislation.

# Understanding Money and Financial Institutions ## U.S. Financial Institutions 1. What are the key financial institutions, and what role do they play in the process of financial intermediation? The well-developed financial system in the United States supports our high standard of living. The system allows those who wish to borrow money to do so with relative ease. It also gives savers a variety of ways to earn interest on their savings. For example, a computer company that wants to build a new headquarters in Atlanta might be financed partly with the savings of families in California. The Californians deposit their money in a local financial institution. That institution looks for a profitable and safe way to use the money and decides to make a real estate loan to the computer company. The transfer of funds from savers to investors enables businesses to expand and the economy to grow. Households are important participants in the U.S. financial system. Although many households borrow money to finance purchases, they supply funds to the financial system through their purchases and savings. Overall, businesses and governments are users of funds. They borrow more money than they save. Sometimes those who have funds deal directly with those who want them. A wealthy realtor, for example, may lend money to a client to buy a house. Most often, financial institutions act as intermediaries—or go-betweens—between the suppliers and demanders of funds. The institutions accept savers’ deposits and invest them in financial products (such as loans) that are expected to produce a return. This process, called financial intermediation, is shown in Households are shown as suppliers of funds, and businesses and governments are shown as demanders. However, a single household, business, or government can be either a supplier or a demander, depending on the circumstances. Financial institutions are the heart of the financial system. They are convenient vehicles for financial intermediation. They can be divided into two broad groups: depository institutions (those that accept deposits) and nondepository institutions (those that do not accept deposits). ### Depository Financial Institutions Not all depository financial institutions are alike. Most people call the place where they save their money a “bank.” Some of those places are indeed banks, but other depository institutions include thrift institutions and credit unions. ### Commercial Banks A commercial bank is a profit-oriented financial institution that accepts deposits, makes business and consumer loans, invests in government and corporate securities, and provides other financial services. Commercial banks vary greatly in size, from the “money center” banks located in the nation’s financial centers to smaller regional and local community banks. As a result of consolidations, small banks are decreasing in number. A large share of the nation’s banking business is now held by a relatively small number of big banks. There are approximately 5,011 commercial banks in the United States, accounting for nearly $16 trillion in assets and $9 trillion in total liabilities. Banks hold a variety of assets, as shown in the diagram in . lists the top 10 insured U.S.-chartered commercial banks, based on their consolidated assets. Customers’ deposits are a commercial bank’s major source of funds, the main use for which is loans. The difference between the interest the bank earns on loans and the interest it pays on deposits, plus fees it earns from other financial services, pays the bank’s costs and provides a profit. Commercial banks are corporations owned and operated by individuals or other corporations. They can be either national or state banks, and to do business, they must get a bank charter—an operating license—from a state or federal government. National banks are chartered by the Comptroller of the Currency, who is part of the U.S. Treasury Department. These banks must belong to the Federal Reserve System and must carry insurance on their deposits from the Federal Deposit Insurance Corporation. State banks are chartered by the state in which they are based. Generally, state banks are smaller than national banks, are less closely regulated than national banks, and are not required to belong to the Federal Reserve System. ### Thrift Institutions A thrift institution is a depository institution formed specifically to encourage household saving and to make home mortgage loans. Thrift institutions include savings and loan associations (S&Ls) and savings banks. S&Ls keep large percentages of their assets in home mortgages. Compared with S&Ls, savings banks focus less on mortgage loans and more on stock and bond investments. Thrifts are declining in number. At their peak in the late 1960s, there were more than 4,800. But a combination of factors, including sharp increases in interest rates in the late 1970s and increased loan defaults during the recession of the early 1980s, has reduced their ranks significantly. By year-end 2016, due mostly to acquisitions by or conversions to commercial banks or other savings banks, the number of thrifts had fallen to fewer than 800. ### Credit Unions A credit union is a not-for-profit, member-owned financial cooperative. Credit union members typically have something in common: they may, for example, work for the same employer, belong to the same union or professional group, or attend the same church or school. The credit union pools their assets, or savings, in order to make loans and offer other services to members. The not-for-profit status of credit unions makes them tax-exempt, so they can pay good interest rates on deposits and offer loans at favorable interest rates. Like banks, credit unions can have either a state or federal charter. The approximately 5,700 credit unions in the United States have more than 108 million members and over $1.34 trillion in assets. The five largest credit unions in the United States are shown in . Although the U.S. credit union system remained strong during the 2007–2009 financial crisis, consumer-owned credit unions in several regions weakened as a result of home foreclosures, business failures, and unemployment rates. Today, the credit union system continues to demonstrate its resilience as the economy continues to rebound. ### Services Offered Commercial banks, thrift institutions, and credit unions offer a wide range of financial services for businesses and consumers. Typical services offered by depository financial institutions are listed in . Some financial institutions specialize in providing financial services to a particular type of customer, such as consumer banking services or business banking services. ### Nondepository Financial Institutions Some financial institutions provide certain banking services but do not accept deposits. These nondepository financial institutions include insurance companies, pension funds, brokerage firms, and finance companies. They serve both individuals and businesses. ### Insurance Companies Insurance companies are major suppliers of funds. Policyholders make payments (called premiums) to buy financial protection from the insurance company. Insurance companies invest the premiums in stocks, bonds, real estate, business loans, and real estate loans for large projects. ### Pension Funds Corporations, unions, and governments set aside large pools of money for later use in paying retirement benefits to their employees or members. These pension funds are managed by the employers or unions themselves or by outside managers, such as life insurance firms, commercial banks, and private investment firms. Pension plan members receive a specified monthly payment when they reach a given age. After setting aside enough money to pay near-term benefits, pension funds invest the rest in business loans, stocks, bonds, or real estate. They often invest large sums in the stock of the employer. U.S. pension fund assets total nearly $3.4 trillion. ### Brokerage Firms A brokerage firm buys and sells securities (stocks and bonds) for its clients and gives them related advice. Many brokerage firms offer some banking services. They may offer clients a combined checking and savings account with a high interest rate and also make loans, backed by securities, to them. ### Finance Companies A finance company makes short-term loans for which the borrower puts up tangible assets (such as an automobile, inventory, machinery, or property) as security. Finance companies often make loans to individuals or businesses that cannot get credit elsewhere. Promising new businesses with no track record and firms that can’t get more credit from a bank often obtain loans from commercial finance companies. Consumer finance companies make loans to individuals, often to cover the lease or purchase of large consumer goods such as automobiles or major household appliances. To compensate for the extra risk, finance companies usually charge higher interest rates than banks. ### Summary of Learning Outcomes 1. What are the key financial institutions, and what role do they play in the process of financial intermediation? Financial institutions can be divided into two main groups: depository institutions and nondepository institutions. Depository institutions include commercial banks, thrift institutions, and credit unions. Nondepository institutions include insurance companies, pension funds, brokerage firms, and finance companies. Financial institutions ease the transfer of funds between suppliers and demanders of funds.

# Understanding Money and Financial Institutions ## Insuring Bank Deposits 1. How does the Federal Deposit Insurance Corporation (FDIC) protect depositors’ funds? The U.S. banking system worked fairly well from when the Federal Reserve System was established in 1913 until the stock market crash of 1929 and the Great Depression that followed. Business failures caused by these events resulted in major cash shortages as people rushed to withdraw their money from banks. Many cash-starved banks failed because the Federal Reserve did not, as expected, lend money to them. The government’s efforts to prevent bank failures were ineffective. Over the next two years, 5,000 banks—about 20 percent of the total number—failed. President Franklin D. Roosevelt made strengthening the banking system his first priority. After taking office in 1933, Roosevelt declared a bank holiday, closing all banks for a week so he could take corrective action. Congress passed the Banking Act of 1933, which empowered the Federal Reserve System to regulate banks and reform the banking system. The act’s most important provision was the creation of the Federal Deposit Insurance Corporation (FDIC) to insure deposits in commercial banks. The 1933 act also gave the Federal Reserve authority to set reserve requirements, ban interest on demand deposits, regulate the interest rates on time deposits, and prohibit banks from investing in specified types of securities. In 1934 the Federal Savings and Loan Insurance Corporation (FSLIC) was formed to insure deposits at S&Ls. When the FSLIC went bankrupt in the 1980s, the FDIC took over responsibility for administering the fund that insures deposits at thrift institutions. Today, the major deposit insurance funds include the following: 1. The Deposit Insurance Fund (DIF): Administered by the FDIC, this fund provides deposit insurance to commercial banks and thrift institutions. 2. The National Credit Union Share Insurance Fund: Administered by the National Credit Union Administration, this fund provides deposit insurance to credit unions. ### Role of the FDIC The FDIC is an independent, quasi-public corporation backed by the full faith and credit of the U.S. government. It examines and supervises about 4,000 banks and savings banks, more than half the institutions in the banking system. It insures trillions of dollars of deposits in U.S. banks and thrift institutions against loss if the financial institution fails. The FDIC insures all member banks in the Federal Reserve System. The ceiling on insured deposits is $250,000 per account. Each insured bank pays the insurance premiums, which are a fixed percentage of the bank’s domestic deposits. In 1993, the FDIC switched from a flat rate for deposit insurance to a risk-based premium system because of the large number of bank and thrift failures during the 1980s and early 1990s. Some experts argue that certain banks take too much risk because they view deposit insurance as a safety net for their depositors—a view many believe contributed to earlier bank failures. ### Enforcement by the FDIC To ensure that banks operate fairly and profitably, the FDIC sets guidelines for banks and then reviews the financial records and management practices of member banks at least once a year. Bank examiners perform these reviews during unannounced visits, rating banks on their compliance with banking regulations—for example, the Equal Credit Opportunity Act, which states that a bank cannot refuse to lend money to people because of their color, religion, or national origin. Examiners also rate a bank’s overall financial condition, focusing on loan quality, management practices, earnings, liquidity, and whether the bank has enough capital (equity) to safely support its activities. When bank examiners conclude that a bank has serious financial problems, the FDIC can take several actions. It can lend money to the bank, recommend that the bank merge with a stronger bank, require the bank to use new management practices or replace its managers, buy loans from the bank, or provide extra equity capital to the bank. The FDIC may even cover all deposits at a troubled bank, including those over $250,000, to restore the public’s confidence in the financial system. With the fallout from the financial crisis of 2007–2009 still having an effect on banking and financial markets in this country and abroad, the FDIC works closely with the Federal Reserve to make sure that banks continue to maintain healthy balance sheets by “testing” their solvency on a regular basis. Although the future of Dodd-Frank regulations is open to speculation in 2017, the consequences of thinking that banks and other financial institutions were “too big to fail” has had a positive impact on banking and financial transactions with the hope that such a financial crisis can be avoided in the future. ### Summary of Learning Outcomes 1. How does the Federal Deposit Insurance Corporation (FDIC) protect depositors’ funds? The Federal Deposit Insurance Corporation insures deposits in commercial banks through the Bank Insurance Fund and deposits in thrift institutions through the Savings Association Insurance Fund. Deposits in credit unions are insured by the National Credit Union Share Insurance Fund, which is administered by the National Credit Union Administration. The FDIC sets banking policies and practices and reviews banks annually to ensure that they operate fairly and profitably.

# Understanding Money and Financial Institutions ## International Banking 1. What roles do U.S. banks play in the international marketplace? The financial marketplace spans the globe, with money routinely flowing across international borders. U.S. banks play an important role in global business by providing loans to foreign governments and businesses. Multinational corporations need many special banking services, such as foreign-currency exchange and funding for overseas investments. U.S. banks also offer trade-related services, such as global cash management, that help firms manage their cash flows, improve their payment efficiency, and reduce their exposure to operational risks. Sometimes consumers in other nations have a need for banking services that banks in their own countries don’t provide. Therefore, large banks often look beyond their national borders for profitable banking opportunities. Many U.S. banks have expanded into overseas markets by opening offices in Europe, Latin America, and Asia. They often provide better customer service than local banks and have access to more sources of funding. Citibank, for example, was the first bank to offer banking by phone and 24-hour-a-day ATM service in Japan. For U.S. banks, expanding internationally can be difficult. Banks in other nations are often subject to fewer regulations than U.S. banks, making it easier for them to undercut American banks on the pricing of loans and services. Some governments also protect their banks against foreign competition. For example, the Chinese government imposes high fees and limits the amount of deposits that foreign banks can accept from customers. It also controls foreign-bank deposit and loan interest rates, limiting the ability of foreign banks to compete with government-owned Chinese banks. Despite the banking restrictions for foreign banks in China, many of the large U.S. banking institutions continue to do business there. International banks operating within the United States also have a substantial impact on the economy through job creation—they employ thousands of people in the United States, and most workers are U.S. citizens—operating and capital expenditures, taxes, and other contributions. According to March 2017 Federal Reserve data, the combined banking and nonbanking assets of the U.S. operations of foreign banks total more than $24 trillion. The United States has four banks listed in the top 10 world’s biggest banks, as shown in . Political and economic uncertainty in other countries can make international banking a high-risk venture. European and Asian banks were not immune to the financial crisis of 2007–2009. In fact, several countries, including Greece, Portugal, Spain, and Ireland, continue to rebound slowly from the near-collapse of their economic and financial systems they experienced a decade ago. Financial bailouts spearheaded by the European Union and the International Monetary Fund have helped stabilize the European and global economy. It is unclear at this writing, however, whether the impending “Brexit” move by the United Kingdom (leaving the European Union) will impact international banking, as many of the world’s top financial institutions seek to move their global operations out of London and shift them to other financial capitals within the eurozone. ### Summary of Learning Outcomes 1. What role do U.S. banks play in the international marketplace? U.S. banks provide loans and trade-related services to foreign governments and businesses. They also offer specialized services such as cash management and foreign-currency exchange.

# Understanding Money and Financial Institutions ## Trends in Financial Institutions 1. What trends are reshaping financial institutions? What factors will influence financial institutions in the coming years? The latest reports suggest there will be a continued focus on regulatory and compliance issues (especially after the recent financial crisis), as well as on operational efficiency and technological advances. Banks will continue to tackle customer engagement and technology initiatives over the next few years. According to a report by Aite Group, a Boston-based firm that forecasts U.S. banking trends, technology continues to empower consumers to control their banking and commerce experiences. Financial institutions have become better at using data and data analytics to help them better understand their customers’ needs and behaviors, which may provide them the competitive advantage they seek in the retail banking industry. Financial technology (or “fintech” services) will continue to disrupt the banking industry and provide opportunities for banks and other institutions to work closely with fintech companies that can help them innovate and streamline their business practices. According to recent research by Goldman Sachs, fintech startups have the potential to take away billions of dollars in business from traditional investment and lending institutions. Some of the services offered by fintech firms include payment transaction processing, mobile and web payment services for e-commerce firms, peer-to-peer lending, and integrated financial software programs. Mobile financial apps will continue to be a strategic advantage that separates traditional banking approaches from innovative companies that can offer their clients a connected, digital experience when it comes to their money and investments. Consumers will expect personalization of bank products and services as part of their routine interaction with financial institutions. Otherwise, they will look elsewhere for a competitive platform to meet all of their financial and banking needs. Although most banks continue to offer local branch offices, the next few years will see branch banking become less prevalent as online and mobile services become more popular. Most banking institutions already offer apps that allow customers to move money between accounts or deposit a check via their smartphones, which happens almost instantaneously, rather than get in a car, drive to the bank, and deposit the check in person. In addition, online payment platforms such as PayPal, Apple Pay, Google Wallet, Shopify, Stripe, and others continue to make personal and business transactions seamless. In this 24/7 world, consumers expect their banking and financial transactions to happen quickly and efficiently. ### Summary of Learning Outcomes 1. What trends are reshaping financial institutions? There will be a continued focus on regulatory and compliance issues, especially after the recent financial crisis, as well as on operational efficiency and technological advances. Banks will continue to tackle customer engagement and technology initiatives, as consumers will control more than 85 percent of their ongoing relationships with banks and other financial institutions. Fintech services will continue to disrupt the banking industry and will enable some banks to increase innovation and streamline operational efficiencies. Mobile financial apps will continue to provide banks with a strategic advantage, as well as enable them to collect and utilize customer data as part of their overall business strategy. Finally, online payment platforms will play an integral role in the banking and financial sector, as consumers’ expectations continue to drive innovation in the banking industry. ### Preparing for Tomorrow’s Workplace Skills 1. How much does a checking account cost? Call or visit websites of several local banks and weigh prices and services. Take into consideration how you use your checking account, how many checks a month you write, and the average balances you keep. On the internet, BankRate.com (http://www.bankrate.com) lets you digitally compare bank products, including those banking institutions that are strictly internet-based. Could you pay lower fees elsewhere? Could you earn interest on your checking account at a credit union? Would you be better off paying a monthly fee with unlimited check-writing privileges? Crunch the numbers to find the best deal. (Resources, Information) 2. You are starting a small business selling collectible books over the internet and need to establish a business banking account that will provide the following services: business checking, credit-card processing, a business savings account, and perhaps a line of credit. Call or visit at least three banks, including an internet-based one, to gather information about their business banking services, including data about fees, service options, and other features of interest to entrepreneurs. Write a short summary of each bank’s offerings and benefits and make a recommendation about which bank you would choose for your new business. (Interpersonal, Information) 3. If you watch the news, you’ve undoubtedly heard mention that the Fed is going to raise or lower interest rates. What exactly does this mean? Explain how the Fed’s decision to raise and lower its discount rate might affect (a) a large manufacturer of household appliances, (b) a mid-sized software firm, (c) a small restaurant, (d) a family hoping to purchase their first home, and (e) a college student. (Information) 4. Research the banking system of another country, and write a report on your findings by answering these questions: Is there a central banking system similar to the U.S. Federal Reserve System in place? Which government agency or department controls it, and how does it operate? How stable is the country’s central banking system? How does it compare in structure and operation to the Federal Reserve System? How much control does the government have over banks operating in the country? Are there any barriers to entry specifically facing foreign banks? What would this mean to a foreign business attempting to do business in this country? (Information) 5. Banks use databases to identify profitable and unprofitable customers. Bankers say they lose money on customers who typically keep less than $1,000 in their checking and savings accounts and frequently call or visit the bank. Profitable customers keep several thousand dollars in their accounts and seldom visit a teller or call the bank. To turn unprofitable customers into profitable ones, banks have assessed fees on many of their services, including using a bank teller, although many of the fees are waived for customers who maintain high account balances. Bankers justify the fees by saying they’re in business to earn a profit. Discuss whether banks are justified in treating profitable and unprofitable customers differently. Defend your answers. (Information, Systems) 6. Team Activity During its regular meetings, the Federal Open Market Committee, the Federal Reserve’s monetary policy-making body, considers a number of economic indicators and reports before making decisions. The decisions made by the Fed include whether to sell or purchase Federal treasury bonds, whether to raise or lower bank reserve requirements, and whether to raise or lower the Federal Reserve discount rate. Divide your class into groups (if possible, try to use seven members, the size of the FOMC), and assign each group one of these decisions. As a group, identify the types of information used by the Fed in making their assigned decision and how that information is used. Find the most recent information (sources may include newspapers, business publications, online databases, etc.) and analyze it. Based on this information and your group’s analysis, what should the Fed do now? Present your findings and recommendations to the class. (Interpersonal, Information) ### Ethics Activity You are a loan officer with a financial company that specializes in auto loans. The senior vice president in charge of your area sets new loan quotas for your group and suggests that courting more subprime borrowers would make the new quotas easier to meet. He reminds you that the company can justifiably charge higher interest rates, loan fees, and servicing costs for these higher-risk loans. He also points out that the loans will earn you and your team larger commissions as well. “Everyone wins,” he tells you. “We help people who might otherwise not be able to get the financing they need, the company makes money, and so do you.” But you are uneasy about the company’s focus on subprime borrowers, low-income applicants with poor or limited credit histories, many of whom are also minorities. You suspect the company’s tactics could be considered “predatory lending” or “reverse redlining.” You are also convinced that the cost of the company’s subprime loans aren’t tied to the increased risk factor at all, but to how much profit the company can squeeze from a group of unsophisticated borrowers with few other options. Using a web search tool, locate articles about the topic of subprime auto loans, and then write responses to the following questions. Be sure to support your arguments and cite your sources. Ethical Dilemma: Should you seek out subprime loans, knowing that you will have to charge borrowers the high fees your company demands, while believing they may not be totally justified? Sources: Adam Tempkin, “‘Deep’ Subprime Car Loans Hit Crisis-Era Milestone,” Bloomberg Markets, https://www.bloomberg.com, August 15, 2017; Shannara Johnson, “Subprime Auto Loans Up, Car Sales Down: Why This Could Be Good for Gold,” Forbes, https://www.forbes.com, July 13, 2017; Mark Huffman, “Santander Settles Subprime Auto Loan Suit with Massachusetts,” Consumer Affairs, https://www.consumeraffairs.com, March 31, 2017; Michael Corkery and Jessica Silver-Greenberg, “Prosecutors Scrutinize Minority Borrowers’ Auto Loans,” The New York Times, https://www.nytimes.com, March 30, 2015. ### Working the Net 1. Banking on a great career? Go to http://www.careerbank.com to explore what positions are available in banking, finance, and accounting. Make a presentation on the type of job you might choose and its location. 2. Visit the International Money Laundering Network Services Association (http://www.imolin.org) for the latest information on what organizations are doing to ensure international monetary transfers remain out of terrorists’ hands. Summarize your findings. 3. Find out everything you want to know about financial institutions and banking careers from the latest edition of the Bureau of Labor Statistics’ Occupational Outlook Handbook. Visit the OOH’s website at https://www.bls.gov/ooh, and click on the A–Z Index to explore banking and other financial occupations, including the forecast for these careers in the coming decade. Explain why this information should be important to you. 4. Using an internet search engine, research information on digital banking branches used around the country by companies such as Citibank. Make a presentation describing the merits of this trend to your class. 5. The recent Wells Fargo scandal in which bank employees created more than three million fake customer accounts as a result of pressure from their managers to meet sales quotas still has the banking community and consumers up in arms regarding the ethics of fraudulent banking practices, ongoing credit issues, and customer privacy. Using an internet search engine, research what happened at Wells Fargo, what fallout it caused for consumers as well as bank employees, and what the Fed did to intervene. Summarize your findings, and provide recommendations on what banking executives and employees could have done differently. 6. What are your rights to privacy when dealing with financial institutions? Use the internet to research the specific privacy provisions related to banking and financial services, and write a paper on how you can use this information to protect your privacy and financial identity. ### Creative Thinking Case ### Stripe Revolutionizes Digital Payments Raised in Ireland, Patrick and John Collison were precocious, inquisitive youngsters who taught themselves computer coding at an early age. By the time they were teenagers, the brothers were developing iPhone apps and eventually became college dropouts after a few semesters at MIT (Patrick) and Harvard (John). During this time they started a company called Auctomatic Inc., which created an online marketplace management system for companies such as eBay, and then sold the company for $5 million in 2008. After selling the business, they continued to work on simplifying the payment process for startup businesses that use the internet to sell goods and services. As the internet entered its second decade and more and more entrepreneurs were using the web to do business, the Collisons recognized that the payment transaction process for online purchases needed an overhaul. In 2011, they opened their new company, Stripe, after testing their service and building relationships with banks, credit card companies, and regulators, so clients could focus their energies on building their businesses—and not building a payment infrastructure from scratch. Using Stripe, businesses only need to add seven lines of coding to their websites to handle payments—a process that previously could have taken weeks to perfect. Word spread quickly among developers that the Collison brothers’ simple coding architecture could indeed disrupt the payment processing industry. As more and more marketplace companies and other online services needed to divvy up payments between vendors and consumers, Stripe became the go-to company to figure out how to move money online quickly and to get people (and companies) paid. The company’s engineers determined how to separate payments for some of the internet’s startups such as Lyft, which needed consumers to pay for rides and drivers to be compensated quickly. Stripe engineers worked their magic to bypass typical banking protocol and linked payments to Lyft drivers via their debit cards, which allowed them to be paid promptly. After seven years in business, Stripe is now the financial “back office” for more than 100,000 businesses that take mobile payments—some of them startups and some of them big businesses such as Amazon, Salesforce, and Target. The company charges a 2.9 percent fee on credit card payments in exchange for its services. Although Stripe’s sales data is confidential, analysts estimate Stripe handles more than $50 billion in commerce annually, which translates to nearly $1.5 billion in revenue. With more than 750 employees, Stripe continues to expand its product offerings in an effort to give customers and potential clients new tools they can use to help grow their business. For example, Radar, Stripe’s fraud detection service, uses artificial intelligence to analyze payments on its extensive network to identify suspicious activity. By looking at such a large data set on its own network, Stripe can spot patterns better than a single company reviewing its own transactions. The company recently rolled out another tool called Atlas, which can help a local or overseas startup incorporate, get a taxpayer ID number and U.S. bank account, and receive legal and tax advice on forming a company—for a fee of $500 and a few simple clicks. Typically this process would take months, many visits to the United States (if a foreign business), and large legal fees. Stripe continues to disrupt the payment processing industry, and its Irish cofounders believe they have what it takes to continue building a simple internet infrastructure that will allow startups across the globe to do business and handle mobile payments efficiently—giving entrepreneurs more time to focus on growing successful businesses. 2. Do you think Stripe’s strategy of keeping things simple is a sound business plan? Explain your reasoning. 3. What impact do you think the company’s Atlas product offering will have on Stripe’s global expansion? 4. Do you think Stripe’s agility in working with so many different businesses provides the company with a competitive advantage over big banks and credit card companies? Justify your answer. Sources: “About Us,” https://stripe.com, accessed September 12, 2017; Matt Weinberger, “$9 Billion Stripe Has a Master Plan to Take Over the World—or at Least, Open It Up for Business,” Business Insider, http://www.businessinsider.com, August 10, 2017; Ashlee Vance, “How Two Brothers Turned Seven Lines of Code into a $9.2 Billion Startup,” Bloomberg Businessweek, https://www.businessweek.com, August 1, 2017; “Stripe CEO Patrick Collison on Recode Decode (Podcast transcript),” Recode, https://www.recode.net, June 13, 2017; Marguerite Ward, “Meet the 20-Something Stripe Founders Who Are Now Worth More Than $1 Billion Each,” CNBC, https://www.cnbc.com, March 20, 2017; Rolfe Winkler and Telis Demos, “Stripe’s Valuation Nearly Doubles to $9.2 Billion,” The Wall Street Journal, https://www.wsj.com, November 25, 2016. ### Hot Links Address Book 1. Tour the American Currency Exhibit to learn the history of our nation’s money at http://www.frbsf.org/currency. 2. The website of the Federal Reserve Bank of St. Louis offers an easy-to-understand explanation of how the Federal Reserve System works, called “In Plain English”: https://www.stlouisfed.org/in-plain-english/landing/home. 3. The FDIC gets so many requests about banks’ insurance status that it added an option to determine “Is my account fully insured?” on its website. Visit http://www.fdic.gov. 4. What goes on at a Federal Open Market Committee meeting? Find out by reading the minutes of the Committee’s latest meeting at http://www.federalreserve.gov/fomc. 5. Find out what other services the Federal Reserve provides to financial institutions at http://www.frbservices.org. 6. How did Abraham Lincoln do his banking? Take a cybertour of American banking history by clicking on the About the OCC tab at https://www.occ.treas.gov. 7. To find out if you’re eligible to join a credit union, visit the National Credit Union Administration’s credit union locator at https://www.ncua.gov.

# Understanding Financial Management and Securities Markets ## Introduction ### Learning Outcomes After reading this chapter, you should be able to answer these questions: 1. How do finance and the financial manager affect a firm’s overall strategy? 2. What types of short-term and long-term expenditures does a firm make? 3. What are the main sources and costs of unsecured and secured short-term financing? 4. What are the key differences between debt and equity, and what are the major types and features of long-term debt? 5. When and how do firms issue equity, and what are the costs? 6. How do securities markets help firms raise funding, and what securities trade in the capital markets? 7. Where can investors buy and sell securities, and how are securities markets regulated? 8. What are the current developments in financial management and the securities markets? In today’s fast-paced global economy, managing a firm’s finances is more complex than ever. For financial managers, a thorough command of traditional finance activities—financial planning, investing money, and raising funds—is only part of the job. Financial managers are more than number crunchers. As part of the top management team, chief financial officers (CFOs) need a broad understanding of their firm’s business and industry, as well as leadership ability and creativity. They must never lose sight of the primary goal of the financial manager: to maximize the value of the firm to its owners. Financial management—spending and raising a firm’s money—is both a science and an art. The science part is analyzing numbers and flows of cash through the firm. The art is answering questions such as these: Is the firm using its financial resources in the best way? Aside from costs, why choose a particular form of financing? How risky is each option? Another important concern for both business managers and investors is understanding the basics of securities markets and the securities traded on them, which affect both corporate plans and investor pocketbooks. About 52 percent of adult Americans now own stocks, compared to just 25 percent in 1981. This chapter focuses on the financial management of a firm and the securities markets in which firms raise funds. We’ll start with an overview of the role of finance and of the financial manager in the firm’s overall business strategy. Discussions of short- and long-term uses of funds and investment decisions follow. Next, we’ll examine key sources of short- and long-term financing. Then we’ll review the function, operation, and regulation of securities markets. Finally, we’ll look at key trends affecting financial management and securities markets.

# Understanding Financial Management and Securities Markets ## The Role of Finance and the Financial Manager 1. How do finance and the financial manager affect the firm’s overall strategy? Any company, whether it’s a small-town bakery or General Motors, needs money to operate. To make money, it must first spend money—on inventory and supplies, equipment and facilities, and employee wages and salaries. Therefore, finance is critical to the success of all companies. It may not be as visible as marketing or production, but management of a firm’s finances is just as much a key to the firm’s success. Financial management—the art and science of managing a firm’s money so that it can meet its goals—is not just the responsibility of the finance department. All business decisions have financial consequences. Managers in all departments must work closely with financial personnel. If you are a sales representative, for example, the company’s credit and collection policies will affect your ability to make sales. The head of the IT department will need to justify any requests for new computer systems or employee laptops. Revenues from sales of the firm’s products should be the chief source of funding. But money from sales doesn’t always come in when it’s needed to pay the bills. Financial managers must track how money is flowing into and out of the firm (see ). They work with the firm’s other department managers to determine how available funds will be used and how much money is needed. Then they choose the best sources to obtain the required funding. For example, a financial manager will track day-to-day operational data such as cash collections and disbursements to ensure that the company has enough cash to meet its obligations. Over a longer time horizon, the manager will thoroughly study whether and when the company should open a new manufacturing facility. The manager will also suggest the most appropriate way to finance the project, raise the funds, and then monitor the project’s implementation and operation. Financial management is closely related to accounting. In most firms, both areas are the responsibility of the vice president of finance or CFO. But the accountant’s main function is to collect and present financial data. Financial managers use financial statements and other information prepared by accountants to make financial decisions. Financial managers focus on cash flows, the inflows and outflows of cash. They plan and monitor the firm’s cash flows to ensure that cash is available when needed. ### The Financial Manager’s Responsibilities and Activities Financial managers have a complex and challenging job. They analyze financial data prepared by accountants, monitor the firm’s financial status, and prepare and implement financial plans. One day they may be developing a better way to automate cash collections, and the next they may be analyzing a proposed acquisition. The key activities of the financial manager are: 1. Financial planning: Preparing the financial plan, which projects revenues, expenditures, and financing needs over a given period. 2. Investment (spending money): Investing the firm’s funds in projects and securities that provide high returns in relation to their risks. 3. Financing (raising money): Obtaining funding for the firm’s operations and investments and seeking the best balance between debt (borrowed funds) and equity (funds raised through the sale of ownership in the business). ### The Goal of the Financial Manager How can financial managers make wise planning, investment, and financing decisions? The main goal of the financial manager is to maximize the value of the firm to its owners. The value of a publicly owned corporation is measured by the share price of its stock. A private company’s value is the price at which it could be sold. To maximize the firm’s value, the financial manager has to consider both short- and long-term consequences of the firm’s actions. Maximizing profits is one approach, but it should not be the only one. Such an approach favors making short-term gains over achieving long-term goals. What if a firm in a highly technical and competitive industry did no research and development? In the short run, profits would be high because research and development is very expensive. But in the long run, the firm might lose its ability to compete because of its lack of new products. This is true regardless of a company’s size or point in its life cycle. At Corning, a company founded more than 160 years ago, management believes in taking the long-term view and not managing for quarterly earnings to satisfy Wall Street’s expectations. The company, once known to consumers mostly for kitchen products such as Corelle dinnerware and Pyrex heat-resistant glass cookware, is today a technology company that manufactures specialized glass and ceramic products. It is a leading supplier of Gorilla Glass, a special type of glass used for the screens of mobile devices, including the iPhone, the iPad, and devices powered by Google’s Android operating system. The company was also the inventor of optical fiber and cable for the telecommunications industry. These product lines require large investments during their long research and development (R&D) cycles and for plant and equipment once they go into production. This can be risky in the short term, but staying the course can pay off. In fact, Corning recently announced plans to develop a separate company division for Gorilla Glass, which now has more than 20 percent of the phone market—with over 200 million devices sold. In addition, its fiber-optic cable business is back in vogue and thriving as cable service providers such as Verizon have doubled down on upgrading the fiber-optic network across the United States. As of 2017, Corning’s commitment to repurposing some of its technologies and developing new products has helped the company’s bottom line, increasing revenues in a recent quarter by more than 16 percent. As the Corning situation demonstrates, financial managers constantly strive for a balance between the opportunity for profit and the potential for loss. In finance, the opportunity for profit is termed return; the potential for loss, or the chance that an investment will not achieve the expected level of return, is risk. A basic principle in finance is that the higher the risk, the greater the return that is required. This widely accepted concept is called the risk-return trade-off. Financial managers consider many risk and return factors when making investment and financing decisions. Among them are changing patterns of market demand, interest rates, general economic conditions, market conditions, and social issues (such as environmental effects and equal employment opportunity policies). ### Summary of Learning Outcomes 1. How do finance and the financial manager affect the firm’s overall strategy? Finance involves managing the firm’s money. The financial manager must decide how much money is needed and when, how best to use the available funds, and how to get the required financing. The financial manager’s responsibilities include financial planning, investing (spending money), and financing (raising money). Maximizing the value of the firm is the main goal of the financial manager, whose decisions often have long-term effects.

# Understanding Financial Management and Securities Markets ## How Organizations Use Funds 1. What types of short-term and long-term expenditures does a firm make? To grow and prosper, a firm must keep investing money in its operations. The financial manager decides how best to use the firm’s money. Short-term expenses support the firm’s day-to-day activities. For instance, athletic-apparel maker Nike regularly spends money to buy such raw materials as leather and fabric and to pay employee salaries. Long-term expenses are typically for fixed assets. For Nike, these would include outlays to build a new factory, buy automated manufacturing equipment, or acquire a small manufacturer of sports apparel. ### Short-Term Expenses Short-term expenses, often called operating expenses, are outlays used to support current production and selling activities. They typically result in current assets, which include cash and any other assets (accounts receivable and inventory) that can be converted to cash within a year. The financial manager’s goal is to manage current assets so the firm has enough cash to pay its bills and to support its accounts receivable and inventory. ### Cash Management: Assuring Liquidity Cash is the lifeblood of business. Without it, a firm could not operate. An important duty of the financial manager is cash management, or making sure that enough cash is on hand to pay bills as they come due and to meet unexpected expenses. Businesses estimate their cash requirements for a specific period. Many companies keep a minimum cash balance to cover unexpected expenses or changes in projected cash flows. The financial manager arranges loans to cover any shortfalls. If the size and timing of cash inflows closely match the size and timing of cash outflows, the company needs to keep only a small amount of cash on hand. A company whose sales and receipts are fairly predictable and regular throughout the year needs less cash than a company with a seasonal pattern of sales and receipts. A toy company, for instance, whose sales are concentrated in the fall, spends a great deal of cash during the spring and summer to build inventory. It has excess cash during the winter and early spring, when it collects on sales from its peak selling season. Because cash held in checking accounts earns little, if any, interest, the financial manager tries to keep cash balances low and to invest the surplus cash. Surpluses are invested temporarily in marketable securities, short-term investments that are easily converted into cash. The financial manager looks for low-risk investments that offer high returns. Three of the most popular marketable securities are Treasury bills, certificates of deposit, and commercial paper. (Commercial paper is unsecured short-term debt—an IOU—issued by a financially strong corporation.) Today’s financial managers have new tools to help them find the best short-term investments, such as online trading platforms that save time and provide access to more types of investments. These have been especially useful for smaller companies who don’t have large finance staffs. Companies with overseas operations face even greater cash management challenges. Developing the systems for international cash management may sound simple in theory, but in practice it’s extremely complex. In addition to dealing with multiple foreign currencies, treasurers must understand and follow banking practices and regulatory and tax requirements in each country. Regulations may impede their ability to move funds freely across borders. Also, issuing a standard set of procedures for every office may not work because local business practices differ from country to country. In addition, local managers may resist the shift to a centralized structure because they don’t want to give up control of cash generated by their units. Corporate financial managers must be sensitive to and aware of local customs and adapt the centralization strategy accordingly. In addition to seeking the right balance between cash and marketable securities, the financial manager tries to shorten the time between the purchase of inventory or services (cash outflows) and the collection of cash from sales (cash inflows). The three key strategies are to collect money owed to the firm (accounts receivable) as quickly as possible, to pay money owed to others (accounts payable) as late as possible without damaging the firm’s credit reputation, and to minimize the funds tied up in inventory. ### Managing Accounts Receivable Accounts receivable represent sales for which the firm has not yet been paid. Because the product has been sold but cash has not yet been received, an account receivable amounts to a use of funds. For the average manufacturing firm, accounts receivable represent about 15 to 20 percent of total assets. The financial manager’s goal is to collect money owed to the firm as quickly as possible, while offering customers credit terms attractive enough to increase sales. Accounts receivable management involves setting credit policies, guidelines on offering credit, credit terms, and specific repayment conditions, including how long customers have to pay their bills and whether a cash discount is given for quicker payment. Another aspect of accounts receivable management is deciding on collection policies, the procedures for collecting overdue accounts. Setting up credit and collection policies is a balancing act for financial managers. On the one hand, easier credit policies or generous credit terms (a longer repayment period or larger cash discount) result in increased sales. On the other hand, the firm has to finance more accounts receivable. The risk of uncollectible accounts receivable also rises. Businesses consider the impact on sales, timing of cash flow, experience with bad debt, customer profiles, and industry standards when developing their credit and collection policies. Companies that want to speed up collections actively manage their accounts receivable, rather than passively letting customers pay when they want to. According to recent statistics, more than 90 percent of businesses experience late payments from customers, and some companies write off a percentage of their bad debt, which can be expensive. Technology plays a big role in helping companies improve their credit and collections performance. For example, many companies use some type of automated decision-making, whether that comes in the form of an ERP system or a combination of software programs and supplemental modules that help companies make informed decisions when it comes to credit and collection processes. Other companies choose to outsource financial and accounting business processes to specialists rather than develop their own systems. The availability of cutting-edge technology and specialized electronic platforms that would be difficult and expensive to develop in-house is winning over firms of all sizes. Giving up control of finance to a third party has not been easy for CFOs. The risks are high when financial and other sensitive corporate data are transferred to an outside computer system: data could be compromised or lost, or rivals could steal corporate data. It’s also harder to monitor an outside provider than your own employees. One outsourcing area that has attracted many clients is international trade, which has regulations that differ from country to country and requires huge amounts of documentation. With specialized IT systems, providers can track not only the physical location of goods, but also all the paperwork associated with shipments. Processing costs for goods purchased overseas are about twice those of domestic goods, so more efficient systems pay off. ### Inventory Another use of funds is to buy inventory needed by the firm. In a typical manufacturing firm, inventory is nearly 20 percent of total assets. The cost of inventory includes not only its purchase price, but also ordering, handling, storage, interest, and insurance costs. Production, marketing, and finance managers usually have differing views about inventory. Production managers want lots of raw materials on hand to avoid production delays. Marketing managers want lots of finished goods on hand so customer orders can be filled quickly. But financial managers want the least inventory possible without harming production efficiency or sales. Financial managers must work closely with production and marketing to balance these conflicting goals. Techniques for reducing the investment in inventory are inventory management, the just-in-time system, and materials requirement planning. For retail firms, inventory management is a critical area for financial managers, who closely monitor inventory turnover ratios. This ratio shows how quickly inventory moves through the firm and is turned into sales. If the inventory number is too high, it will typically affect the amount of working capital a company has on hand, forcing the company to borrow money to cover the excess inventory. If the turnover ratio number is too high, it means the company does not have enough inventory of products on hand to satisfy customer needs, which means they could take their business elsewhere. ### Long-Term Expenditures A firm also invests funds in physical assets such as land, buildings, machinery, equipment, and information systems. These are called capital expenditures. Unlike operating expenses, which produce benefits within a year, the benefits from capital expenditures extend beyond one year. For instance, a printer’s purchase of a new printing press with a usable life of seven years is a capital expenditure and appears as a fixed asset on the firm’s balance sheet. Paper, ink, and other supplies, however, are expenses. Mergers and acquisitions are also considered capital expenditures. Firms make capital expenditures for many reasons. The most common are to expand, to replace or renew fixed assets, and to develop new products. Most manufacturing firms have a big investment in long-term assets. Boeing Company, for instance, puts billions of dollars a year into airplane-manufacturing facilities. Because capital expenditures tend to be costly and have a major effect on the firm’s future, the financial manager uses a process called capital budgeting to analyze long-term projects and select those that offer the best returns while maximizing the firm’s value. Decisions involving new products or the acquisition of another business are especially important. Managers look at project costs and forecast the future benefits the project will bring to calculate the firm’s estimated return on the investment. ### Summary of Learning Outcomes 1. What types of short-term and long-term expenditures does a firm make? A firm incurs short-term expenses—supplies, inventory, and wages—to support current production, marketing, and sales activities. The financial manager manages the firm’s investment in current assets so that the company has enough cash to pay its bills and support accounts receivable and inventory. Long-term expenditures (capital expenditures) are made for fixed assets such as land, buildings, equipment and information systems. Because of the large outlays required for capital expenditures, financial managers carefully analyze proposed projects to determine which offer the best returns.

# Understanding Financial Management and Securities Markets ## Obtaining Short-Term Financing 1. What are the main sources and costs of unsecured and secured short-term financing? How do firms raise the funding they need? They borrow money (debt), sell ownership shares (equity), and retain earnings (profits). The financial manager must assess all these sources and choose the one most likely to help maximize the firm’s value. Like expenses, borrowed funds can be divided into short- and long-term loans. A short-term loan comes due within one year; a long-term loan has a maturity greater than one year. Short-term financing is shown as a current liability on the balance sheet and is used to finance current assets and support operations. Short-term loans can be unsecured or secured. ### Unsecured Short-Term Loans Unsecured loans are made on the basis of the firm’s creditworthiness and the lender’s previous experience with the firm. An unsecured borrower does not have to pledge specific assets as security. The three main types of unsecured short-term loans are trade credit, bank loans, and commercial paper. ### Trade Credit: Accounts Payable When Goodyear sells tires to General Motors, GM does not have to pay cash on delivery. Instead, Goodyear regularly bills GM for its tire purchases, and GM pays at a later date. This is an example of trade credit: the seller extends credit to the buyer between the time the buyer receives the goods or services and when it pays for them. Trade credit is a major source of short-term business financing. The buyer enters the credit on its books as an account payable. In effect, the credit is a short-term loan from the seller to the buyer of the goods and services. Until GM pays Goodyear, Goodyear has an account receivable from GM, and GM has an account payable to Goodyear. ### Bank Loans Unsecured bank loans are another source of short-term business financing. Companies often use these loans to finance seasonal (cyclical) businesses. Unsecured bank loans include lines of credit and revolving credit agreements. A line of credit specifies the maximum amount of unsecured short-term borrowing the bank will allow the firm over a given period, typically one year. The firm either pays a fee or keeps a certain percentage of the loan amount (generally 10 to 20 percent) in a checking account at the bank. Another bank loan, the revolving credit agreement, is basically a guaranteed line of credit that carries an extra fee in addition to interest. Revolving credit agreements are often arranged for a period of two to five years. ### Commercial Paper As noted earlier, commercial paper is an unsecured short-term debt—an IOU—issued by a financially strong corporation. Thus, it is both a short-term investment and a financing option for major corporations. Corporations issue commercial paper in multiples of $100,000 for periods ranging from 3 to 270 days. Many big companies use commercial paper instead of short-term bank loans because the interest rate on commercial paper is usually 1 to 3 percent below bank rates. ### Secured Short-Term Loans Secured loans require the borrower to pledge specific assets as collateral, or security. The secured lender can legally take the collateral if the borrower doesn’t repay the loan. Commercial banks and commercial finance companies are the main sources of secured short-term loans to business. Borrowers whose credit is not strong enough to qualify for unsecured loans use these loans. Typically, the collateral for secured short-term loans is accounts receivable or inventory. Because accounts receivable are normally quite liquid (easily converted to cash), they are an attractive form of collateral. The appeal of inventory—raw materials or finished goods—as collateral depends on how easily it can be sold at a fair price. Another form of short-term financing using accounts receivable is factoring. A firm sells its accounts receivable outright to a factor, a financial institution (often a commercial bank or commercial finance company) that buys accounts receivable at a discount. Factoring is widely used in the clothing, furniture, and appliance industries. Factoring is more expensive than a bank loan, however, because the factor buys the receivables at a discount from their actual value. ### Summary of Learning Outcomes 1. What are the main sources and costs of unsecured and secured short-term financing? Short-term financing comes due within one year. The main sources of unsecured short-term financing are trade credit, bank loans, and commercial paper. Secured loans require a pledge of certain assets, such as accounts receivable or inventory, as security for the loan. Factoring, or selling accounts receivable outright at a discount, is another form of short-term financing.

# Understanding Financial Management and Securities Markets ## Raising Long-Term Financing 1. What are the key differences between debt and equity, and what are the major types and features of long-term debt? A basic principle of finance is to match the term of the financing to the period over which benefits are expected to be received from the associated outlay. Short-term items should be financed with short-term funds, and long-term items should be financed with long-term funds. Long-term financing sources include both debt (borrowing) and equity (ownership). Equity financing comes either from selling new ownership interests or from retaining earnings. Financial managers try to select the mix of long-term debt and equity that results in the best balance between cost and risk. ### Debt versus Equity Financing Say that the Boeing Company plans to spend $2 billion over the next four years to build and equip new factories to make jet aircraft. Boeing’s top management will assess the pros and cons of both debt and equity and then consider several possible sources of the desired form of long-term financing. The major advantage of debt financing is the deductibility of interest expense for income tax purposes, which lowers its overall cost. In addition, there is no loss of ownership. The major drawback is financial risk: the chance that the firm will be unable to make scheduled interest and principal payments. The lender can force a borrower that fails to make scheduled debt payments into bankruptcy. Most loan agreements have restrictions to ensure that the borrower operates efficiently. Equity, on the other hand, is a form of permanent financing that places few restrictions on the firm. The firm is not required to pay dividends or repay the investment. However, equity financing gives common stockholders voting rights that provide them with a voice in management. Equity is more costly than debt. Unlike the interest on debt, dividends to owners are not tax-deductible expenses. summarizes the major differences between debt and equity financing. ### Debt Financing Long-term debt is used to finance long-term (capital) expenditures. The initial maturities of long-term debt typically range between 5 and 20 years. Three important forms of long-term debt are term loans, bonds, and mortgage loans. A term loan is a business loan with a maturity of more than one year. Term loans generally have maturities of 5 to 12 years and can be unsecured or secured. They are available from commercial banks, insurance companies, pension funds, commercial finance companies, and manufacturers’ financing subsidiaries. A contract between the borrower and the lender spells out the amount and maturity of the loan, the interest rate, payment dates, the purpose of the loan, and other provisions such as operating and financial restrictions on the borrower to control the risk of default. The payments include both interest and principal, so the loan balance declines over time. Borrowers try to arrange a repayment schedule that matches the forecast cash flow from the project being financed. Bonds are long-term debt obligations (liabilities) of corporations and governments. A bond certificate is issued as proof of the obligation. The issuer of a bond must pay the buyer a fixed amount of money—called interest, stated as the coupon rate—on a regular schedule, typically every six months. The issuer must also pay the bondholder the amount borrowed—called the principal, or par value—at the bond’s maturity date (due date). Bonds are usually issued in units of $1,000—for instance, $1,000, $5,000, or $10,000—and have initial maturities of 10 to 30 years. They may be secured or unsecured, include special provisions for early retirement, or be convertible to common stock. A mortgage loan is a long-term loan made against real estate as collateral. The lender takes a mortgage on the property, which lets the lender seize the property, sell it, and use the proceeds to pay off the loan if the borrower fails to make the scheduled payments. Long-term mortgage loans are often used to finance office buildings, factories, and warehouses. Life insurance companies are an important source of these loans. They make billions of dollars’ worth of mortgage loans to businesses each year. ### Summary of Learning Outcomes 1. What are the key differences between debt and equity, and what are the major types and features of long-term debt? Financial managers must choose the best mix of debt and equity for their firm. The main advantage of debt financing is the tax-deductibility of interest. But debt involves financial risk because it requires the payment of interest and principal on specified dates. Equity—common and preferred stock—is considered a permanent form of financing on which the firm may or may not pay dividends. Dividends are not tax-deductible. The main types of long-term debt are term loans, bonds, and mortgage loans. Term loans can be unsecured or secured and generally have maturities of 5 to 12 years. Bonds usually have initial maturities of 10 to 30 years. Mortgage loans are secured by real estate. Long-term debt usually costs more than short-term financing because of the greater uncertainty that the borrower will be able to make the scheduled loan payments.

# Understanding Financial Management and Securities Markets ## Equity Financing 1. When and how do firms issue equity, and what are the costs? Equity refers to the owners’ investment in the business. In corporations, the preferred and common stockholders are the owners. A firm obtains equity financing by selling new ownership shares (external financing), by retaining earnings (internal financing), or for small and growing, typically high-tech, companies, through venture capital (external financing). ### Selling New Issues of Common Stock Common stock is a security that represents an ownership interest in a corporation. A company’s first sale of stock to the public is called an initial public offering (IPO). An IPO often enables existing stockholders, usually employees, family, and friends who bought the stock privately, to earn big profits on their investment. (Companies that are already public can issue and sell additional shares of common stock to raise equity funds.) But going public has some drawbacks. For one thing, there is no guarantee an IPO will sell. It is also expensive. Big fees must be paid to investment bankers, brokers, attorneys, accountants, and printers. Once the company is public, it is closely watched by regulators, stockholders, and securities analysts. The firm must reveal such information as operating and financial data, product details, financing plans, and operating strategies. Providing this information is often costly. Going public is the dream of many small company founders and early investors, who hope to recoup their investments and become instant millionaires. Google, which went public in 2004 at $85 a share and soared to $475 in early 2006 before settling back to trade in the high-300 range in August 2006. More than a decade later, in October 2017, Google continues to be a successful IPO, trading at more than $990 per share. In recent years, the number of IPOs has dropped sharply, as start-ups think long and hard about going public, despite the promise of millions of dollars for investors and entrepreneurs. For example, in 2017, Blue Apron, a meal-kit delivery service, went public with an opening stock price of $10 per share. Several months later, the share price dropped more than 40 percent. Some analysts believe that Amazon’s possible entry into the meal-kit delivery sector has hurt Blue Apron’s value, as well as the company’s high marketing costs to attract and retain monthly subscribers. Some companies choose to remain private. Cargill, SC Johnson, Mars, Publix Super Markets, and Bloomberg are among the largest U.S. private companies. ### Dividends and Retained Earnings Dividends are payments to stockholders from a corporation’s profits. Dividends can be paid in cash or in stock. Stock dividends are payments in the form of more stock. Stock dividends may replace or supplement cash dividends. After a stock dividend has been paid, more shares have a claim on the same company, so the value of each share often declines. A company does not have to pay dividends to stockholders. But if investors buy the stock expecting to get dividends and the firm does not pay them, the investors may sell their stocks. At their quarterly meetings, the company’s board of directors (typically with the advice of its CFO) decides how much of the profits to distribute as dividends and how much to reinvest. A firm’s basic approach to paying dividends can greatly affect its share price. A stable history of dividend payments indicates good financial health. For example, cable giant Comcast has increased its dividend more than 20 percent over the past five years, giving shareholders a healthy return on their investment. If a firm that has been making regular dividend payments cuts or skips a dividend, investors start thinking it has serious financial problems. The increased uncertainty often results in lower stock prices. Thus, most firms set dividends at a level they can keep paying. They start with a relatively low dividend payout ratio so that they can maintain a steady or slightly increasing dividend over time. Retained earnings, profits that have been reinvested in the firm, have a big advantage over other sources of equity capital: They do not incur underwriting costs. Financial managers strive to balance dividends and retained earnings to maximize the value of the firm. Often the balance reflects the nature of the firm and its industry. Well-established and stable firms and those that expect only modest growth, such as public utilities, financial services companies, and large industrial corporations, typically pay out much of their earnings in dividends. For example, in the 2016 fiscal year, ExxonMobil paid dividends of $3.08 per share, Altria Group paid $2.64 per share, Apple paid $2.23 per share, and Costco paid $2.00 per share. Most high-growth companies, such as those in technology-related fields, finance much of their growth through retained earnings and pay little or no dividends to stockholders. As they mature, many decide to begin paying dividends, as Apple decided to do in 2012, after 17 years of paying no annual dividends to shareholders. ### Preferred Stock Another form of equity is preferred stock. Unlike common stock, preferred stock usually has a dividend amount that is set at the time the stock is issued. These dividends must be paid before the company can pay any dividends to common stockholders. Also, if the firm goes bankrupt and sells its assets, preferred stockholders get their money back before common stockholders do. Like debt, preferred stock increases the firm’s financial risk because it obligates the firm to make a fixed payment. But preferred stock is more flexible. The firm can miss a dividend payment without suffering the serious results of failing to pay back a debt. Preferred stock is more expensive than debt financing, however, because preferred dividends are not tax-deductible. Also, because the claims of preferred stockholders on income and assets are second to those of debtholders, preferred stockholders require higher returns to compensate for the greater risk. ### Venture Capital Venture capital is another source of equity capital. It is most often used by small and growing firms that aren’t big enough to sell securities to the public. This type of financing is especially popular among high-tech companies that need large sums of money. Venture capitalists invest in new businesses in return for part of the ownership, sometimes as much as 60 percent. They look for new businesses with high growth potential, and they expect a high investment return within 5 to 10 years. By getting in on the ground floor, venture capitalists buy stock at a very low price. They earn profits by selling the stock at a much higher price when the company goes public. Venture capitalists generally get a voice in management through seats on the board of directors. Getting venture capital is difficult, even though there are hundreds of private venture-capital firms in this country. Most venture capitalists finance only about 1 to 5 percent of the companies that apply. Venture-capital investors, many of whom experienced losses during recent years from their investments in failed dot-coms, are currently less willing to take risks on very early-stage companies with unproven technology. As a result, other sources of venture capital, including private foundations, states, and wealthy individuals (called angel investors), are helping start-up firms find equity capital. These private investors are motivated by the potential to earn a high return on their investment. ### Summary of Learning Outcomes 1. When and how do firms issue equity, and what are the costs? The chief sources of equity financing are common stock, retained earnings, and preferred stock. The cost of selling stock includes issuing costs and potential dividend payments. Retained earnings are profits reinvested in the firm. For the issuing firm, preferred stock is more expensive than debt because its dividends are not tax-deductible and its claims are secondary to those of debtholders but less expensive than common stock. Venture capital is often a source of equity financing for young companies.

# Understanding Financial Management and Securities Markets ## Securities Markets 1. How do securities markets help firms raise funding, and what securities trade in the capital markets? Stocks, bonds, and other securities trade in securities markets. These markets streamline the purchase and sales activities of investors by allowing transactions to be made quickly and at a fair price. Securities are investment certificates that represent either equity (ownership in the issuing organization) or debt (a loan to the issuer). Corporations and governments raise capital to finance operations and expansion by selling securities to investors, who in turn take on a certain amount of risk with the hope of receiving a profit from their investment. Securities markets are busy places. On an average day, individual and institutional investors trade billions of shares of stock in more than 10,000 companies through securities markets. Individual investors invest their own money to achieve their personal financial goals. Institutional investors are investment professionals who are paid to manage other people’s money. Most of these professional money managers work for financial institutions, such as banks, mutual funds, insurance companies, and pension funds. Institutional investors control very large sums of money, often buying stock in 10,000-share blocks. They aim to meet the investment goals of their clients. Institutional investors are a major force in the securities markets, accounting for about half of the dollar volume of equities traded. ### Types of Markets Securities markets can be divided into primary and secondary markets. The primary market is where new securities are sold to the public, usually with the help of investment bankers. In the primary market, the issuer of the security gets the proceeds from the transaction. A security is sold in the primary market just once—when the corporation or government first issues it. The Blue Apron IPO is an example of a primary market offering. Later transactions take place in the secondary market, where old (already issued) securities are bought and sold, or traded, among investors. The issuers generally are not involved in these transactions. The vast majority of securities transactions take place in secondary markets, which include broker markets, dealer markets, the over-the-counter market, and the commodities exchanges. You’ll see tombstones, announcements of both primary and secondary stock and bond offerings, in the Wall Street Journal and other newspapers. ### The Role of Investment Bankers and Stockbrokers Two types of investment specialists play key roles in the functioning of the securities markets. Investment bankers help companies raise long-term financing. These firms act as intermediaries, buying securities from corporations and governments and reselling them to the public. This process, called underwriting, is the main activity of the investment banker, which acquires the security for an agreed-upon price and hopes to be able to resell it at a higher price to make a profit. Investment bankers advise clients on the pricing and structure of new securities offerings, as well as on mergers, acquisitions, and other types of financing. Well-known investment banking firms include Goldman Sachs, Morgan Stanley, JP Morgan, Bank of America Merrill Lynch, and Citigroup. A stockbroker is a person who is licensed to buy and sell securities on behalf of clients. Also called account executives, these investment professionals work for brokerage firms and execute the orders customers place for stocks, bonds, mutual funds, and other securities. Investors are wise to seek a broker who understands their investment goals and can help them pursue their objectives. Brokerage firms are paid commissions for executing clients’ transactions. Although brokers can charge whatever they want, most firms have fixed commission schedules for small transactions. These commissions usually depend on the value of the transaction and the number of shares involved. ### Online Investing Improvements in internet technology have made it possible for investors to research, analyze, and trade securities online. Today almost all brokerage firms offer online trading capabilities. Online brokerages are popular with “do-it-yourself” investors who choose their own stocks and don’t want to pay a full-service broker for these services. Lower transaction costs are a major benefit. Fees at online brokerages range from about $4.95 to $8.00, depending on the number of trades a client makes and the size of a client’s account. Although there are many online brokerage firms, the four largest—Charles Schwab, Fidelity, TD Ameritrade, and E*Trade—account for more than 80 percent of all trading volume and trillions in assets in customer accounts. The internet also offers investors access to a wealth of investment information. ### Investing in Bonds When many people think of financial markets, they picture the equity markets. However, the bond markets are huge—the Securities Industry and Financial Markets Association (SIFMA) estimates that the global bond market is nearly $88 trillion. In the United States, companies and government entities sold about $2 billion in new bond issues in 2016. Average daily trading volume exceeded $760 billion, with U.S. Treasury securities accounting for more than 60 percent of the total. Bonds can be bought and sold in the securities markets. However, the price of a bond changes over its life as market interest rates fluctuate. When the market interest rate drops below the fixed interest rate on a bond, it becomes more valuable, and the price rises. If interest rates rise, the bond’s price will fall. Corporate bonds, as the name implies, are issued by corporations. They usually have a par value of $1,000. They may be secured or unsecured (called debentures), include special provisions for early retirement, or be convertible to common stock. Corporations can also issue mortgage bonds, bonds secured by property such as land, buildings, or equipment. Approximately $1.5 trillion in new corporate bonds were issued in 2016. In addition to regular corporate debt issues, investors can buy high-yield, or junk, bonds—high-risk, high-return bonds often used by companies whose credit characteristics would not otherwise allow them access to the debt markets. They generally earn 3 percent or more above the returns on high-quality corporate bonds. Corporate bonds may also be issued with an option for the bondholder to convert them into common stock. These convertible bonds generally allow the bondholder to exchange each bond for a specified number of shares of common stock. ### U.S. Government Securities and Municipal Bonds Both the federal government and local government agencies also issue bonds. The U.S. Treasury sells three major types of federal debt securities: Treasury bills, Treasury notes, and Treasury bonds. All three are viewed as default-risk-free because they are backed by the U.S. government. Treasury bills mature in less than a year and are issued with a minimum par value of $1,000. Treasury notes have maturities of 10 years or less, and Treasury bonds have maturities as long as 25 years or more. Both notes and bonds are sold in denominations of $1,000 and $5,000. The interest earned on government securities is subject to federal income tax but is free from state and local income taxes. According to SIFMA, a total of $1.7 trillion U.S. treasuries were issued in 2016, down 20 percent from 2015. Municipal bonds are issued by states, cities, counties, and other state and local government agencies. Almost $445.8 billion in municipal bonds were issued in 2016. These bonds typically have a par value of $5,000 and are either general obligation or revenue bonds. General obligation bonds are backed by the full faith and credit (and taxing power) of the issuing government. Revenue bonds, on the other hand, are repaid only from income generated by the specific project being financed. Examples of revenue bond projects include toll highways and bridges, power plants, and parking structures. Because the issuer of revenue bonds has no legal obligation to back the bonds if the project’s revenues are inadequate, they are considered more risky and therefore have higher interest rates than general obligation bonds. Municipal bonds are attractive to investors because interest earned on them is exempt from federal income tax. For the same reason, the coupon interest rate for a municipal bond is lower than for a similar-quality corporate bond. In addition, interest earned on municipal bonds issued by governments within the taxpayer’s home state is exempt from state income tax as well. In contrast, all interest earned on corporate bonds is fully taxable. ### Bond Ratings Bonds vary in quality, depending on the financial strength of the issuer. Because the claims of bondholders come before those of stockholders, bonds are generally considered less risky than stocks. However, some bonds are in fact quite risky. Companies can default—fail to make scheduled interest or principal payments—on their bonds. Investors can use bond ratings, letter grades assigned to bond issues to indicate their quality or level of risk. Ratings for corporate bonds are easy to find. The two largest and best-known rating agencies are Moody’s and Standard & Poor’s (S&P), whose publications are in most libraries and in stock brokerages. lists the letter grades assigned by Moody’s and S&P. A bond’s rating may change if a company’s financial condition changes. ### Other Popular Securities In addition to stocks and bonds, investors can buy mutual funds, a very popular investment category, or exchange-traded funds (ETFs). Futures contracts and options are more complex investments for experienced investors. ### Mutual Funds Suppose that you have $1,000 to invest but don’t know which stocks or bonds to buy, when to buy them, or when to sell them. By investing in a mutual fund, you can buy shares in a large, professionally managed portfolio, or group, of stocks and bonds. A mutual fund is a financial-service company that pools its investors’ funds to buy a selection of securities—marketable securities, stocks, bonds, or a combination of securities—that meet its stated investment goals. Each mutual fund focuses on one of a wide variety of possible investment goals, such as growth or income. Many large financial-service companies, such as Fidelity and Vanguard, sell a wide variety of mutual funds, each with a different investment goal. Investors can pick and choose funds that match their particular interests. Some specialized funds invest in a particular type of company or asset: in one industry such as health care or technology, in a geographical region such as Asia, or in an asset such as precious metals. Mutual funds are one of the most popular investments for individuals today: they can choose from about 9,500 different funds. Investments in mutual funds are more than $40 trillion worldwide, of which U.S. mutual funds hold more than $19 trillion. About 94 million individuals, representing 55 percent of all U.S. households, own mutual funds. Mutual funds appeal to investors for three main reasons: 1. They are a good way to hold a diversified, and thus less risky, portfolio. Investors with only $500 or $1,000 to invest cannot diversify much on their own. Buying shares in a mutual fund lets them own part of a portfolio that may contain 100 or more securities. 2. Mutual funds are professionally managed. 3. Mutual funds may offer higher returns than individual investors could achieve on their own. ### Exchange-Traded Funds Another type of investment, the exchange-traded fund (ETF), has become very popular with investors. ETFs are similar to mutual funds because they hold a broad basket of stocks with a common theme, giving investors instant diversification. ETFs trade on stock exchanges (most trade on the American Stock Exchange, AMEX), so their prices change throughout the day, whereas mutual fund share prices, called net asset values (NAVs), are calculated once a day, at the end of trading. Worldwide, ETF assets in 2016 were more than $3.5 trillion, with the U.S. ETF market accounting for 73 percent of the global market. Investors can choose from more than 1,700 ETFs that track almost any market sector, from a broad market index such as the S&P 500 (described later in this chapter), industry sectors such as health care or energy, and geographical areas such as a particular country (Japan) or region (Latin America). ETFs have very low expense ratios. However, because they trade as stocks, investors pay commissions to buy and sell these shares. ### Futures Contracts and Options Futures contracts are legally binding obligations to buy or sell specified quantities of commodities (agricultural or mining products) or financial instruments (securities or currencies) at an agreed-on price at a future date. An investor can buy commodity futures contracts in cattle, pork bellies (large slabs of bacon), eggs, coffee, flour, gasoline, fuel oil, lumber, wheat, gold, and silver. Financial futures include Treasury securities and foreign currencies, such as the British pound or Japanese yen. Futures contracts do not pay interest or dividends. The return depends solely on favorable price changes. These are very risky investments because the prices can vary a great deal. Options are contracts that entitle holders to buy or sell specified quantities of common stocks or other financial instruments at a set price during a specified time. As with futures contracts, investors must correctly guess future price movements in the underlying financial instrument to earn a positive return. Unlike futures contracts, options do not legally obligate the holder to buy or sell, and the price paid for an option is the maximum amount that can be lost. However, options have very short maturities, so it is easy to quickly lose a lot of money with them. ### Summary of Learning Outcomes 1. How do securities markets help firms raise funding, and what securities trade in the capital markets? Securities markets allow stocks, bonds, and other securities to be bought and sold quickly and at a fair price. New issues are sold in the primary market. After that, securities are traded in the secondary market. Investment bankers specialize in issuing and selling new security issues. Stockbrokers are licensed professionals who buy and sell securities on behalf of their clients. In addition to corporate securities, investors can trade U.S. government Treasury securities and municipal bonds, mutual funds, futures, and options. Mutual funds are managed by financial-service companies that pool the funds of many investors to buy a diversified portfolio of securities. Investors choose mutual funds because they offer a convenient way to diversify and are professionally managed. Exchange-traded funds (ETFs) are similar to mutual funds but trade on stock exchanges similar to common stock. Futures contracts are legally binding obligations to buy or sell specified quantities of commodities or financial instruments at an agreed-on price at a future date. They are very risky investments because the price of the commodity or financial instrument may change drastically. Options are contracts that entitle the holder the right to buy or sell specified quantities of common stock or other financial instruments at a set price during a specified time. They, too, are high-risk investments.

# Understanding Financial Management and Securities Markets ## Buying and Selling at Securities Exchanges 1. Where can investors buy and sell securities, and how are securities markets regulated? When we think of stock markets, we are typically referring to secondary markets, which handle most of the securities trading activity. The two segments of the secondary markets are broker markets and dealer markets, as shows. The primary difference between broker and dealer markets is the way each executes securities trades. Securities trades can also take place in alternative market systems and on non-U.S. securities exchanges. The securities markets both in the United States and around the world are in flux and undergoing tremendous changes. We present the basics of securities exchanges in this section and discuss the latest trends in the global securities markets later in the chapter. ### Broker Markets The broker market consists of national and regional securities exchanges that bring buyers and sellers together through brokers on a centralized trading floor. In the broker market, the buyer purchases the securities directly from the seller through the broker. Broker markets account for about 60 percent of the total dollar volume of all shares traded in the U.S. securities markets. ### New York Stock Exchange The oldest and most prestigious broker market is the New York Stock Exchange (NYSE), which has existed since 1792. Often called the Big Board, it is located on Wall Street in downtown New York City. The NYSE, which lists the shares of some 2,400 corporations, had a total market capitalization (domestic and foreign companies) of $25.8 trillion at year-end 2016. On a typical day, more than 3 billion shares of stock are traded on the NYSE. It represents 90 percent of the trading volume in the U.S. broker marketplace. Major companies such as IBM, Coca-Cola, AT&T, Procter & Gamble, Ford Motor Co., and Chevron list their shares on the NYSE. Companies that list on the NYSE must meet stringent listing requirements and annual maintenance requirements, which give them creditability. The NYSE is also popular with non-U.S. companies. More than 490 foreign companies with a global market capitalization of almost $63 trillion now list their securities on the NYSE. Until recently, all NYSE transactions occurred on the vast NYSE trading floor. Each of the companies traded at the NYSE is assigned to a trading post on the floor. When an exchange member receives an order to buy or sell a particular stock, the order is transmitted to a floor broker at the company’s trading post. The floor brokers then compete with other brokers on the trading floor to get the best price for their customers. In response to competitive pressures from electronic exchanges, the NYSE created a hybrid market that combines features of the floor auction market and automated trading. Its customers now have a choice of how they execute trades. In the trends section, we’ll discuss other changes the NYSE is making to maintain a leadership position among securities exchanges. Another national stock exchange, the American Stock Exchange (AMEX), lists the securities of more than 700 corporations but handles only 4 percent of the annual share volume of shares traded on U.S. securities exchanges. Because the AMEX’s rules are less strict than those of the NYSE, most AMEX firms are smaller and less well known than NYSE-listed corporations. Some firms move up to the NYSE once they qualify for listing there. Other companies choose to remain on the AMEX. Companies cannot be listed on both exchanges at the same time. The AMEX has become a major market, however, for exchange-traded funds and in options trading. ### Regional Exchanges The remaining 6 percent of annual share volume takes place on several regional exchanges in the United States. These exchanges list about 100 to 500 securities of firms located in their area. Regional exchange membership rules are much less strict than for the NYSE. The top regional exchanges are the Boston, Chicago, Philadelphia, and National (formerly the Cincinnati) exchanges. An electronic network linking the NYSE and many of the regional exchanges allows brokers to make securities transactions at the best prices. The regional exchanges, which have struggled to compete, benefited from the passage of the Securities and Exchange Commission’s (SEC’s) Regulation NMS (National Market System), which became fully effective in 2007. Regulation NMS makes price the most important factor in making securities trades, and all orders must go to the trading venue with the best price. ### Dealer Markets Unlike broker markets, dealer markets do not operate on centralized trading floors but instead use sophisticated telecommunications networks that link dealers throughout the United States. Buyers and sellers do not trade securities directly, as they do in broker markets. They work through securities dealers called market makers, who make markets in one or more securities and offer to buy or sell securities at stated prices. A security transaction in the dealer market has two parts: the selling investor sells his or her securities to one dealer, and the buyer purchases the securities from another dealer (or in some cases, the same dealer). ### NASDAQ The largest dealer market is the National Association of Securities Dealers Automated Quotation system, commonly referred to as NASDAQ. The first electronic-based stock market, the NASDAQ is a sophisticated telecommunications network that links dealers throughout the United States. Founded in 1971 with origins in the over-the-counter (OTC) market, today NASDAQ is a separate securities exchange that is no longer part of the OTC market. The NASDAQ lists more companies than the NYSE, but the NYSE still leads in total market capitalization. An average of 1.6 billion shares were exchanged daily in 2016 through NASDAQ, which is now the largest electronic stock market. It provides up-to-date bid and ask prices on about 3,700 of the most active OTC securities. Its sophisticated electronic communication system provides faster transaction speeds than traditional floor markets and is the main reason for the popularity and growth of the OTC market. In January 2006, the SEC approved NASDAQ’s application to operate as a national securities exchange. As a result, the NASDAQ Stock Market LLC began operating independently in August 2006. The securities of many well-known companies, some of which could be listed on the organized exchanges, trade on the NASDAQ. Examples include Amazon, Apple, Costco, Comcast, JetBlue, Microsoft, Qualcomm, and Starbucks. The stocks of most commercial banks and insurance companies also trade in this market, as do most government and corporate bonds. More than 400 foreign companies also trade on the NASDAQ. More than a decade ago, the NASDAQ changed its structure to a three-tier market: 1. The NASDAQ Global Select Market, a new tier with “financial and liquidity requirements that are higher than those of any other market,” according to NASDAQ. More than 1,000 NASDAQ companies qualify for this group. 2. The NASDAQ Global Market (formerly the NASDAQ National Market), which will list about 1,650 companies. 3. The NASDAQ Capital Market will replace the NASDAQ Small Cap Market and list about 550 companies. All three market tiers adhere to NASDAQ’s rigorous listing and corporate governance standards. ### The Over-the-Counter Market The over-the-counter (OTC) markets refer to those other than the organized exchanges described above. There are two OTC markets: the Over-the-Counter Bulletin Board (OTCBB) and the Pink Sheets. These markets generally list small companies and have no listing or maintenance standards, making them attractive to young companies looking for funding. OTC companies do not have to file with the SEC or follow the costly provisions of Sarbanes-Oxley. Investing in OTC companies is therefore highly risky and should be for experienced investors only. ### Alternative Trading Systems In addition to broker and dealer markets, alternative trading systems such as electronic communications networks (ECNs) make securities transactions. ECNs are private trading networks that allow institutional traders and some individuals to make direct transactions in what is called the fourth market. ECNs bypass brokers and dealers to automatically match electronic buy and sell orders. They are most effective for high-volume, actively traded stocks. Money managers and institutions such as pension funds and mutual funds with large amounts of money to invest like ECNs because they cost far less than other trading venues. ### Global Trading and Foreign Exchanges Improved communications and the elimination of many legal barriers are helping the securities markets go global. The number of securities listed on exchanges in more than one country is growing. Foreign securities are now traded in the United States. Likewise, foreign investors can easily buy U.S. securities. Stock markets also exist in foreign countries: more than 60 countries operate their own securities exchanges. NASDAQ ranks second to the NYSE, followed by the London Stock Exchange (LSE) and the Tokyo Stock Exchange. Other important foreign stock exchanges include Euronext (which merged with the NYSE but operates separately) and those in Toronto, Frankfurt, Hong Kong, Zurich, Australia, Paris, and Taiwan. The number of big U.S. corporations with listings on foreign exchanges is growing steadily, especially in Europe. For example, significant activity in NYSE-listed stocks also occurs on the LSE. The LSE also is getting a growing share of the world’s IPOs. Emerging markets such as India, whose economy has been growing 6 percent or more a year, continue to attract investor attention. The Sensex, the benchmark index of the Bombay Stock Exchange, increased close to 40 percent between 2013 and 2017 as foreign investors continue to pump billions into Indian stocks. Why should U.S. investors pay attention to international stock markets? Because the world’s economies are increasingly interdependent, businesses must look beyond their own national borders to find materials to make their goods and markets for foreign goods and services. The same is true for investors, who may find that they can earn higher returns in international markets. ### Regulation of Securities Markets Both state and federal governments regulate the securities markets. The states were the first to pass laws aimed at preventing securities fraud. But most securities transactions occur across state lines, so federal securities laws are more effective. In addition to legislation, the industry has self-regulatory groups and measures. ### Securities Legislation Congress passed the Securities Act of 1933 in response to the 1929 stock market crash and subsequent problems during the Great Depression. It protects investors by requiring full disclosure of information about new securities issues. The issuer must file a registration statement with the SEC, which must be approved by the SEC before the security can be sold. The Securities Exchange Act of 1934 formally gave the SEC power to regulate securities exchanges. The act was amended in 1964 to give the SEC authority over the dealer markets as well. The amendment included rules for operating the stock exchanges and granted the SEC control over all participants (exchange members, brokers, dealers) and the securities traded in these markets. The 1934 act also banned insider trading, the use of information that is not available to the general public to make profits on securities transactions. Because of lax enforcement, however, several big insider trading scandals occurred during the late 1980s. The Insider Trading and Fraud Act of 1988 greatly increased the penalties for illegal insider trading and gave the SEC more power to investigate and prosecute claims of illegal actions. The meaning of insider was expanded beyond a company’s directors, employees, and their relatives to include anyone who gets private information about a company. Other important legislation includes the Investment Company Act of 1940, which gives the SEC the right to regulate the practices of investment companies (such as mutual funds managed by financial institutions), and the Investment Advisers Act of 1940, which requires investment advisers to disclose information about their background. The Securities Investor Protection Corporation (SIPC) was established in 1970 to protect customers if a brokerage firm fails, by insuring each customer’s account for up to $500,000. In response to corporate scandals that hurt thousands of investors, the SEC passed new regulations designed to restore public trust in the securities industry. It issued Regulation FD (for “fair disclosure”) in October 2000. Regulation FD requires public companies to share information with all investors at the same time, leveling the information playing field. The Sarbanes-Oxley Act of 2002 has given the SEC more power when it comes to regulating how securities are offered, sold, and marketed. ### Self-Regulation The investment community also regulates itself, developing and enforcing ethical standards to reduce the potential for abuses in the financial marketplace. The Financial Industry Regulatory Authority (FINRA) oversees the nation’s more than 3,700 brokerage firms and more 600,000 registered brokers. It develops rules and regulations, provides a dispute resolution forum, and conducts regulatory reviews of member activities for the protection and benefit of investors. In response to “Black Monday”—October 19, 1987, when the Dow Jones Industrial Average plunged 508 points and the trading activity severely overloaded the exchange’s computers—the securities markets instituted corrective measures to prevent a repeat of the crisis. Now, under certain conditions, circuit breakers stop trading for a 15-minute cooling-off period to limit the amount the market can drop in one day. Under revised rules approved in 2012 by the SEC, market-wide circuit breakers kick in when the S&P 500 Index drops 7 percent (level 1), 13 percent (level 2), and 20 percent (level 3) from the prior day’s closing numbers. ### Summary of Learning Outcomes 1. Where can investors buy and sell securities, and how are securities markets regulated? Securities are resold in secondary markets, which include both broker markets and dealer markets. The broker market consists of national and regional securities exchanges, such as the New York Stock Exchange, that bring buyers and sellers together through brokers on a centralized trading floor. Dealer markets use sophisticated telecommunications networks that link dealers throughout the United States. The NASDAQ and over-the-counter markets are examples of dealer markets. In addition to broker and dealer markets, electronic communications networks (ECNs) can be used to make securities transactions. In addition to the U.S. markets, more than 60 countries have securities exchanges. The largest non-U.S. exchanges are the London, Tokyo, Toronto, Frankfurt, Hong Kong, and Taiwan exchanges. The Securities Act of 1933 requires disclosure of important information regarding new securities issues. The Securities Exchange Act of 1934 and its 1964 amendment formally empowered the Securities and Exchange Commission and granted it broad powers to regulate the securities exchanges and the dealer markets. The Investment Company Act of 1940 places investment companies such as companies that issue mutual funds under SEC control. The securities markets also have self-regulatory groups such as the Financial Industry Regulatory Authority (FINRA) and measures such as “circuit breakers” to halt trading if the S&P 500 Index drops rapidly.

# Understanding Financial Management and Securities Markets ## Trends in Financial Management and Securities Markets 1. What are the current developments in financial management and the securities markets? Many of the key trends shaping the practice of financial management echo those in other disciplines. For example, technology is improving the efficiency with which financial managers run their operations. In the wake of a slowing economy and corporate scandals, the SEC assumed a stronger role and implemented additional regulations to protect investors from fraud and misinformation. A wave of merger mania hit the global securities markets as the securities exchanges themselves have begun to consolidate to capture larger shares of the world’s trading volume in multiple types of securities. Online brokerage firms are seeking new ways to capture and keep their customers by broadening the services they offer and keeping the fees they charge highly competitive. Let’s now look at two key trends in greater detail. In the era of the Sarbanes-Oxley Act, CFOs find themselves balancing a strategic focus with overseeing corporate compliance with the act. The NYSE and NASDAQ are battling for supremacy as the regional exchanges look for niche markets to exploit. ### Finance Looks Outward No longer does finance operate in its own little world of spreadsheets and banking relationships. Most CFOs want the finance function to be viewed by their company’s business units as a strategic partner who can contribute to their success. Finance professionals therefore need a broad view of company operations to communicate effectively with business unit managers, board members, creditors, and investors. The goal is productive cooperation and teamwork between finance and the business units to meet corporate objectives. CFOs are more highly visible and active in company management than ever before. They serve as both business partner to the chief executive and a fiduciary to the board. In the aftermath of recent accounting scandals and the global recession of 2008–2009, CFOs consider accuracy of financial reporting their top priority, and they also must now provide more detailed explanations of what’s behind the numbers to board members and other stakeholders. Rather than showering the board with financial reports and statistics, CFOs are crafting more focused presentations that deal with the company’s overall financial health and future prospects. They must also educate board members about the implications of Sarbanes-Oxley and other legislation, such as Dodd-Frank, and what the company is doing to comply with federal regulations. ### Vying for the Crown The NYSE and NASDAQ continue to wage a heated battle for supremacy in the global securities markets. The NYSE fell behind its more nimble rival, which already had an electronic platform. Its answer was to make sweeping changes in its organizational structure by going public and merging with Archipelago, a major ECN, to enter the electronic marketplace. NASDAQ responded immediately by acquiring another ECN, Instinet’s INET. The NYSE then made history by signing an agreement to merge with Euronext and create the first exchange to span the Atlantic. Not to be outdone, the NASDAQ increased its ownership of shares in the London Stock Exchange to 25 percent. These transactions reduced the fragmentation in the marketplace and also eliminated many of the differences between the two exchanges. But the competition between the two companies continued in 2017, as the London Stock Exchange looks for a buyer after the European Commission refused to allow a merger between LSE and Germany’s Deutsche Borse. It remains to be seen whether either U.S. exchange is ready to purchase an international exchange; however, their recent strategic moves have made them stronger and more competitive. ### Summary of Learning Outcomes 1. What are the current developments in financial management and the securities markets? The role of the CFO has continued to expand since the passage of the Sarbanes-Oxley Act, with CFOs taking the central role in overseeing corporate compliance with the act and reestablishing public trust. CFOs must look outward and be business focused. Most CFOs are promoting strategic finance and encouraging finance staff to be team players who work closely with business units to achieve corporate goals. Competition among the world’s major securities exchanges has changed the composition of the financial marketplace. The NYSE and NASDAQ went head to head in the United States. The NYSE became a for-profit company, acquired Archipelago, an electronic exchange, and merged with Euronext to form the first transatlantic exchange. NASDAQ also expanded by acquiring its own ECN and buying a 25 percent stake in the London Stock Exchange, which continues to look for a potential buyer. ### Preparing for Tomorrow’s Workplace Skills 1. The head of your school’s finance department has asked you to address a group of incoming business students about the importance of finance to their overall business education. Develop an outline with the key points you would cover in your speech. (Information) 2. You are the chief financial officer of Discovery Labs, a privately held biotechnology company that needs to raise $3 million to fund the development of a new drug. Prepare a report for the board of directors that discusses the types of long-term financing available to the firm, their pros and cons, and the key factors to consider in choosing a financing strategy. (Information) 3. Team Activity Does paying dividends enhance the value of a company? Some financial experts caution companies to look long and hard before beginning to pay dividends. They believe that committing yourself to a regular dividend curtails financial flexibility and reduces debt capacity. Dividends might also signal that the company doesn’t have good growth opportunities in which to invest its excess cash. Others counter that dividends can help a company’s stock by making it less volatile. Standard & Poor’s data supports this; typically, dividend-paying stocks in the S&P 500 outperform nonpayers. Divide the class into two teams to debate whether dividends add value to a company’s stock. (Interpersonal, Information) 4. Research the trends in the IPO marketplace from 2009 to 2017. Then select two IPO success stories and two failures. Prepare a report for the class on their performance. What lessons about the securities markets can you learn from their stories? (Information) 5. While having dinner at a Manhattan restaurant, you overhear two investment bankers at the next table. They are discussing the takeover of Bellamco Industries by Gildmart Corp., a deal that has not yet been announced. You have been thinking about buying Bellamco stock for a while, so the next day you buy 500 shares for $30 each. Two weeks later, Gildmart announces its acquisition of Bellamco at a price of $45 per share. Have you fairly earned a profit, or are you guilty of insider trading? What’s wrong with insider trading? (Information) 6. Team Activity Is joining an investment club a good way to learn about investing in the stock market? Divide the class into groups of five to eight students to develop a strategy to form their own investment club. Use the National Association of Investors Corporation (NAIC) website at http://www.betterinvesting.org to learn how investment clubs operate and the investment strategy the organization teaches. Each group should then set up guidelines for their investment club and present their plan to the class. After the presentations, the class members should discuss whether they would prefer to start investing through an investment club or on their own. (Resources, Interpersonal, Information) ### Ethics Activity In late July 2017, senior management at Equifax, a U.S. credit-reporting company, discovered that hackers had stolen the personal data of more than 145 million U.S. customers, including names, birthdates, Social Security numbers, and driver’s license information. In addition, the hackers stole credit card information for more than 200,000 Equifax customers. If that weren’t bad enough, reports soon surfaced that three top executives, including Equifax’s chief financial officer, sold close to $2 million in shares of company stock days after learning about the breach and more than a month before the company announced the data hack publicly. In a company statement, Equifax says the executives “had no knowledge that an intrusion had occurred at the time they sold their shares.” The day after the company’s announcement about the breach, Equifax’s stock dropped by double digits, and the Department of Justice opened a criminal investigation. Less than three weeks after the public announcement, Equifax announced its CEO, Richard Smith, would retire, taking a multimillion-dollar payout with him—even after shareholders lost more than $5 billion in stock value after the data breach was acknowledged. Ethical Dilemma: Is it legal for company executives to sell stock shares for financial gain when they know impending bad news will cause the stock price to plummet? Does this constitute insider trading? Sources: Verne Kopytoff, “Equifax Board Reviews Executive Stock Sales after Data Breach,” Fortune, http://fortune.com, September 29, 2017; Jen Wieczner, “Equifax CEO Richard Smith Who Oversaw Breach to Collect $90 Million,” Fortune, http://www.fortune.com, September 26, 2017; Tom Schoenberg, Anders Melin, and Matt Robinson, “Equifax Stock Sales Are the Focus of U.S. Criminal Probe,” Bloomberg Markets, https://www.bloomberg.com, September 18, 2017; Liz Moyer, “Suspect Trading in Equifax Options before Breach Might Have Generated Millions in Profit,” CNBC, https://www.cnbc.com, September 8, 2017; Alina Selyukh, “3 Equifax Executives Sold Stock Days after Hack That Wasn’t Disclosed for a Month,” NPR, http://www.npr.org, September 8, 2017; Anders Melin, “Three Equifax Managers Sold Stock Before Cyber Hack Revealed,” Bloomberg News, https://www.bloomberg.com, September 7, 2017. ### Working the Net 1. If factoring accounts receivable is still a mystery to you, visit the 21st Financial Solutions site, http://www.21stfinancialsolutions.com. Follow the links on the home page to answer these questions: What are factoring’s advantages? What are the additional benefits, and what types of companies can use factoring to their advantage? Then summarize the factoring process. 2. Go to the AdvisoryHQ website at https://www.advisoryhq.com, and link to three different venture capital firms listed in the website’s “best” list. Compare the firms’ investment strategies (industry specialization, age of companies in which they invest, etc.). Also do a web search to check out two angel investor firms. How do their requirements differ from the venture firms? 3. Compare the listing requirements of the NYSE and NASDAQ, using the information at their websites: http://www.nyse.com and http://www.nasdaq.com. Search the sites for listing requirements. What types of companies qualify for listing on each exchange? Why does NASDAQ offer alternative listing standards? 4. Choose a company currently traded on the NYSE (http://www.nyse.com). Find the company’s website using a search engine such as Google. At the website, find the firm’s investor relations information. Review the information, including, if available, the most recent online annual report. Follow up by researching if any SEC actions have been taken against the firm at the SEC website, http://www.sec.gov. Summarize your findings in a brief report that discusses whether you would recommend this company’s stock as an investment. 5. Using the information and links available at the Securities Industry and Financial Markets Association’s (SIFMA) website, https://www.sifma.org, write a brief paper explaining the pros and cons of investing in corporate bonds. In your paper, provide at least three examples of currently available corporate bonds from a site such as http://www.investinginbonds.com, and explain why they would be good investments. 6. Research the job responsibilities of a corporate investor relations officer (IRO). If possible, try to interview an IRO, by either phone or email. The National Investor Relations Institute (http://www.niri.org), a trade association for IROs, is an alternate source of information. What types of experience and education does an IRO need in order to perform effectively? How are their roles changing? Write a paper summarizing your findings. (Interpersonal, Information) ### Creative Thinking Case ### Blue Apron IPO Leaves a Bad Taste Founded in 2012, Blue Apron is one of the top meal-kit delivery services doing business in the United States. Started by three cofounders—Matt Salzberg, Matt Wadiak, and Ilia Pappas—Blue Apron provides preportioned ingredients (and recipes) for a meal, delivered to consumers’ front doors. According to recent research, the U.S. meal-kit delivery industry is an $800 million business with the potential to scale up quickly, as more and more consumers struggle to find time to go grocery shopping, make meals, and spend time with family and friends in their hectic daily lives. As word spread among foodies about the quality and innovative meals put together by Blue Apron, the company’s popularity took off, supported by millions in start-up funding. Costs to scale the business have not been cheap—estimates suggest that Blue Apron’s marketing costs have been high. Despite the challenges, by early 2017 the company was selling more than 8 million meal kits a month and decided to go public in an effort to raise more money and scale its operations, including a new fulfillment facility in New Jersey. According to IPO paperwork filed with the SEC, the company had net revenues of $84 million in 2014, which increased to $795 million in 2016. However, those ambitious numbers were not without warnings: company losses increased in the same time period from $33 million to $55 million. Even with those larges losses on its balance sheet, Blue Apron decided to go ahead with the IPO and hired Goldman Sachs and Morgan Stanley, two top stock underwriters, to figure out the right price for the initial offering. While Blue Apron and its underwriters were finalizing stock prices, Amazon announced plans to acquire Whole Foods—a move that could negatively affect Blue Apron’s business going forward. Even after Amazon’s announcement, Blue Apron and its financial advisors priced the initial offering at $15 to $17 a share and met with investors across the country to inform them about the IPO, which would value the company on paper at more than $3 billion. As part of the IPO strategy, Blue Apron executives needed to communicate a strong financial picture while providing potential investors with an honest assessment of investor demand, especially for institutional investors, who typically are repeat buyers when it comes to IPOs. According to sources close to the IPO experience, Blue Apron’s bankers told investors late in the IPO pricing process that they were “closing their order books early,” which meant there was a heightened demand for the stock—a signal that the stock would be priced in the original $15–$17 range. A day later, however, Blue Apron amended its prospectus with a price range between $10 and $11 a share, which shocked potential investors—a move greeted with criticism that Blue Apron’s messaging now lacked credibility in the eyes of the investment community if the company priced the IPO $5 lower per share than originally estimated. With that sudden change in the IPO offering, investors walked away, and the $10 initial offering for Blue Apron stock actually declined on its first day of trading. As of this writing, the stock has lost close to 40 percent from the original $10-per-share price. With continued consolidation in the meal-kit delivery sector inevitable, Blue Apron is at a crossroads when it comes to generating revenue and stabilizing costs while trying to sign up more subscribers. One of its competitors, Plated, was recently acquired by the Alberstons grocery chain, and Amazon has already trademarked the phrase, “We do the prep. You be the chef,” as it relates to prepared food kits. Sources: Wolf Richter, “Blue Apron’s Cash Burn Is a Threat Just 3 Months after Its IPO,” Business Insider, http://www.businessinsider.com, October 19, 2017; Graham Rapier, “Blue Apron CEO: Amazon and Whole Foods Aren’t the Competition,” Business Insider, http://markets.businessinsider.com, September 13, 2017; Matthew Lynley, “Where Does Blue Apron Go after Amazon Wraps Up Its Whole Foods Deal?” Tech Crunch, https://techcrunch.com, August 27, 2017; Leslie Picker, “Inside Blue Apron’s IPO: Communication Lapse Chased Away Investors,” CNBC, https://www.cnbc.com, August 23, 2017; Imani Moise, “Blue Apron Co-Founder to Step Aside as Operating Chief,” The Wall Street Journal, https://www.wsj.com, July 25, 2017; Phil Lempert, “Understanding Blue Apron’s IPO and the Future of Meal Kits,” Forbes, http://www.forbes.com, June 2, 2017; John Kell, “Meals in the Mail: How Blue Apron Got Started and Where It’s Heading,” Fortune, http://fortune.com, September 11, 2016. 2. What issues should executives of a company such as Blue Apron consider before deciding to go public? In your opinion, was the company ready for an IPO? Why or why not? 3. How else could Blue Apron have raised funds to continue to grow? Compare the risks of raising private funding to going public. 4. Use a search engine and a site such as Yahoo! Finance to learn about Blue Apron’s current situation. Prepare a brief summary, including the company’s current financial situation. Is it still a public company, and how has its stock fared? Would you invest in it? Explain your reasoning. Sources: Wolf Richter, “Blue Apron’s Cash Burn Is a Threat Just 3 Months after Its IPO,” Business Insider, http://www.businessinsider.com, October 19, 2017; Graham Rapier, “Blue Apron CEO: Amazon and Whole Foods Aren’t the Competition,” Business Insider, http://markets.businessinsider.com, September 13, 2017; Matthew Lynley, “Where Does Blue Apron Go after Amazon Wraps Up Its Whole Foods Deal?” Tech Crunch, https://techcrunch.com, August 27, 2017; Leslie Picker, “Inside Blue Apron’s IPO: Communication Lapse Chased Away Investors,” CNBC, https://www.cnbc.com, August 23, 2017; Imani Moise, “Blue Apron Co-Founder to Step Aside as Operating Chief,” The Wall Street Journal, https://www.wsj.com, July 25, 2017; Phil Lempert, “Understanding Blue Apron’s IPO and the Future of Meal Kits,” Forbes, http://www.forbes.com, June 2, 2017; John Kell, “Meals in the Mail: How Blue Apron Got Started and Where It’s Heading,” Fortune, http://fortune.com, September 11, 2016. ### Hot Links Address Book 1. What challenges do today’s financial managers face? To find out, browse through recent issues of CFO magazine at http://www.cfo.com 2. Find an introduction to the types of cash management services banks offer their customers at the Royal Bank of Canada website, https://rbcbank.com 3. Start your online exploring at Yahoo! Finance, http://finance.yahoo.com, which offers everything from breaking business and world news to stock research, portfolio tracking tools, and educational articles. 4. For small businesses just starting out or entrepreneurs who have invented the next great product but need some financial assistance, several crowdfunding platforms can help. Both Kiva (https://www.kiva.org) and IndieGoGo (https://www.indiegogo.com) offer loans or financial backing to help people start up new businesses or match potential investors with entrepreneurs looking for some financial backing. 5. The Motley Fool, http://www.fool.com, is a favorite site for both novice and experienced investors. In addition to the latest stock picks, the website offers detailed information on a variety of topics, such as how to invest, retirement, and personal finance. 6. You’ll find a minicourse on municipal bonds when you click on “Learn More” at the top of the page at http://www.investingbonds.com. 7. Moneychimp (http://www.moneychimp.com) strives to educate investors by offering clear, practical articles on a complete range of finance and investing topics, including investment basics, understanding annual reports, stock valuation, and more. 8. Thinking of investing in a particular company? Go to the SEC’s website to access the EDGAR database of the financial reports filed by all public companies with the SEC: http://www.sec.gov.

# Your Career in Business ## Introduction ### Learning Outcomes After reading this chapter, you should be able to answer these questions: 1. How can you enhance your interpersonal skills? 2. Why is learning to plan so important in school and in the real world? 3. What skills should you develop in school that can transfer easily to your professional life and make it a success? 4. What are some strategies that will help you find, keep, and advance in your dream job? 5. What key attributes do employers look for when interviewing job candidates? You Are a Winner Because You Elected to Go to College! Never Quit Until You Have Your Degree in Hand! What makes someone a winner in life? A winner is someone who goes through the various stages of life satisfied in knowing that they have done their best: their best at work, home, and in all pursuits of life. A big part of having a happy life is pursuing a career that offers job satisfaction and financial rewards. If you are going to “be all that you can be,” you need a good education. A college degree unlocks doors to economic opportunity. Why get a degree? 1. Get and keep a better job. Because the world is changing rapidly and many jobs rely on new technology, more jobs require education beyond high school. With a college education, you will have more jobs from which to choose. 2. Earn more money. People who go to college usually earn more than those who do not. Currently, a bachelor’s degree is worth a minimum of $20,000 a year more than a high school diploma. If your career spans 45 years, you could earn close to $1 million more than a high school graduate. 3. Get a good start in life. A business college education helps you acquire a wide range of knowledge in many subjects as well as an advanced understanding of your specialized area of business. College also trains you to express your thoughts clearly in speech and in writing and to make informed decisions. Simply stated, a degree in business gives you the chance to achieve the quality of life you deserve. The lifestyle, the new friends, the purchasing power of a degree won’t guarantee happiness but will put you well on the road to finding it.

# Your Career in Business ## Learn the Basics of Business You might want to pursue a career as a physician, florist, game warden, systems analyst, or any of a thousand other opportunities. One thing that all careers have in common is that you need to have a basic understanding of business. We hope that you will consider a career in business, but if not, your success in whatever you choose will partially depend on your basic business skills. And that is why this text is so important. ### Choose a Career Because this introductory business course gives you a detailed overview of all of the areas of commerce, it will guide you in selecting a major should you elect to get a degree in business. Choosing a major in college is one of life’s true milestones. Your major essentially determines how you will spend the next four decades of your life. A marketing major will find a career in sales, marketing research, advertising, or other marketing-related fields. An accounting major will become (you guessed it) an accountant. Never take selecting a major lightly. If you work 40 hours a week for the next 45 years (less vacations), you will put in about 90,000 hours on the job. Don’t you think you should choose something that you will enjoy?

# Your Career in Business ## Developing Interpersonal Skills Is Key to Your Success A degree in business is going to offer you many great career opportunities. Once you take your first job, how rapidly you move up the ladder is up to you. People with great interpersonal skills will always do better on and off the job than those who lack them. It has been estimated that up to 90 percent of our workplace success depends on an understanding of other people. Here’s how to enhance your interpersonal skills: 1. Become a good listener. When you listen well, you are in effect telling the other person that they are worth listening to. Listening well includes listening to both what is said and what is not said. Learn to read unspoken gestures and expressions. When giving feedback, plan what you will say in advance. Be positive and specific. Ask the person receiving the feedback if they would like to discuss your comments further. 2. Persuasion rests on trust. You can build trust by being honest, fulfilling your commitments, being concerned about others, and minimizing problems and pain for others whenever possible. In short, if you have integrity, building trust becomes a simple task. When people raise objections to your plans or ideas, try to fully understand their comments and the motivation for making them. When you feel that you understand the true objection, answer the objection in the form of a benefit: “Yes, you will need to work next Saturday, but then you can have compensatory time off anytime you wish next month.” Determine your persuasion skills by taking the quiz in 3. It will not happen overnight, but you can become an outstanding thinker and speaker. A simple technique is to set a timer for two minutes and ask a friend to begin speaking. When the timer goes off, your friend stops speaking, and you begin talking. The challenge is to use the final thought that your friend spoke as the first word of your two-minute talk. Another technique is to have someone supply you with a series of quotes. Then, without hesitation, give your interpretation. 4. If you want to gain empowerment in your life and work, here are a few tips: be assertive, ask for credit for yourself when it is due, propose ideas to your group and your supervisor, initiate projects without being asked, tie your personal goals to those of the organization, develop your leadership skills, plan to learn on a continuous basis, be informed, don’t let others intimidate you, and don’t complain about a bad situation—instead, take action to improve it. 5. Here are some tips and techniques to be an effective player in the political game: Find out how well you play the political game by taking the quiz in 6. 7. When conflicts occur, try the K-I-N-D technique. The letters stand for: The technique involves your requesting a meeting with the difficult person, whether they are is having a conflict with you or with others. Start off with kind words, words that encourage cooperation, words that show your determination to make the conflict situation better. Next, demonstrate that you have taken the time to learn more about the person, what is important to them, what they prefers in terms of work. Show by your words that you have taken the time to become informed about the individual. The third step requires you to do something novel, something you have not tried before. Put your creativity to work, and discover a plan to which you can both subscribe (for example, keeping a journal regarding the problem and possible solutions). Finally, do not permit the exchange to conclude until you have made a definite overture to ensure future success. What can you promise the other person you will do differently? What are you asking him or her to do differently? Set a time to meet again and review your individual attempts to achieve collective improvement.

# Your Career in Business ## Make Your Future Happen: Learn to Plan There is a natural conflict between planning and being impulsive, between pursuing a long-range goal and doing what you feel like doing right now. If you have ever had to study while the rest of the family was watching television, you know what that conflict feels like. If you have ever been invited to go eat pizza and hang out with friends but stayed home to work on a class assignment, you know that sticking to a plan is not easy. Of course, planning and being impulsive are both good. They both have a place in your life. You need to balance them. Having a plan does not mean that you can’t act on the spur of the moment and do something that was not planned. Spontaneous events produce some of the happiest, most meaningful times of your life. Problems arise when you consistently substitute impulsive actions for goal-oriented planning. Success in life requires a balance between the two. If you do not engage in long-range planning and lack the discipline for it, you may limit your opportunities to be impulsive. You are not going to take a weekend fun trip just because you need a break if you have not saved the money to do it. In the short run, planning involves sacrifice, but in the long run, it gives you more options. ### What Is a Plan? A plan is a method or process worked out in advance that leads to the achievement of some goal. A plan is systematic, which means it relies on using a step-by-step procedure. A plan also needs to be flexible so that it may be adapted to gradual changes in your goal. ### The Planning Process Whether choosing a college or finding financial aid, you should understand how the planning process helps you accomplish your goals. The following steps outline the planning process. Step 1: Set a Goal. Identify something you want to achieve or obtain, your goal. The goal, which is usually longer term in nature, will require planning, patience, and discipline to achieve. Just living in the present moment is not a goal. Step 2: Acquire Knowledge. Gain an understanding of your goal and what will be required to achieve it. Gather information about your goal through research, conversation, and thought. Step 3: Compare Alternatives. Weigh your options, which are the different paths you might take to achieve your goal. Analyze the pluses and minuses of each—the costs, the demands, the likelihood of success. Step 4: Choose a Strategy. Select one option as the best plan of action. The choice is based on sound information, the experience of others, and your own interests and abilities. Step 5: Make a Commitment. Resolve to proceed step-by-step toward achieving your goal. Keep your eyes on the prize. Step 6: Stay Flexible. Evaluate your progress, and when necessary, revise your plan to deal with changing circumstances and new opportunities. ### An Example of Planning The following example illustrates the process of buying a new pair of wireless headphones using this planning process. Step 1: Set a Goal. Purchase a pair of wireless headphones. Step 2: Acquire Knowledge. Ask friends if you can try out their headphones. Study standards and specifications. Check on retailers, brands, models, and prices. Consult Consumer Reports. Step 3: Compare Alternatives. 1. Alternative 1: Purchase a pair of headphones from an online auction website such as eBay. 2. Alternative 2: Buy wireless headphones for $110. 3. Alternative 3: Buy a high-quality pair of headphones for $500. Step 4: Choose a Strategy. Decide to buy the high-quality headphones, but rather than using a credit card and paying interest, will delay the purchase for six months in order to save for them. Step 5: Make a Commitment. Give up going to the movies or buying coffee drinks from Starbucks for the six-month period, carry a lunch and stop eating out, and place the savings in a designated headphones fund. Step 6: Stay Flexible. Four months into the plan, a model change sale provides an opportunity to buy comparable equipment for $300. Make the purchase, paying cash. ### Planning for Your Life Using the planning process to make a buying decision is a simple exercise. Making a decision about major parts of your life is far more complex. You will see that no part of life is exempt from the need for planning. It is important to apply thought, creativity, and discipline to all the interrelated phases of our lives. These phases include the following: 1. Career: Choosing a field of work and developing the knowledge and skills needed to enter and move ahead in that field. We will offer you some tips to get started on a great career later in this chapter. 2. Self: Deciding who you are and what kind of person you want to be, working to develop your strengths and overcome your weaknesses, refining your values. 3. Lifestyle: Expressing yourself in the nature and quality of your everyday life, your recreation and hobbies, how you use your time and money. 4. Relationships: Developing friendships and learning to get along with people in a variety of contexts. Building family and community ties. 5. Finances: Building the financial resources and the economic security needed to pursue all the other dimensions of your life. ### Dreams and Plans People are natural dreamers. Dreams give us pleasure. They are also part of making a future. If you do not have dreams or think that you are not worthy of dreaming, something very important may be missing from your life. You have a right to your dreams, and you need them—even if there is little possibility that they will ever come true. Planning is not the same as dreaming, but it uses dreams as raw materials. It translates them into specific goals. It tests them. It lays out a course of action that moves you toward realizing these goals and sets up milestones you need to achieve. Planning brings dreams down to earth and turns them into something real and attainable. For example, assume you have a dream to visit Spain as an exchange student. To translate this dream into a specific goal, you will need to follow the planning process—gather information about the exchange process, discuss the program with parents and teachers, and improve your Spanish-language skills. ### Directions for Your Life One of the best things about pursuing our dreams is that, even when you fall short, the effort leads to growth and opens a path to other opportunities. The person who practices the piano every day may not achieve the dream of becoming a concert pianist but may eventually put appreciation of music to work as the director of an arts organization. A basketball player may not make it to a professional team but may enjoy a satisfying career as a coach or a sports writer. Without a plan, dreams simply dissolve. With a plan, they give shape and direction to our lives. Planning involves a lot of thinking and finding answers to lots of questions. The answers and even the plan will change over time as you gain more knowledge and life experience. Planning is a skill that is useful in every area of your life. It is something you have to pursue consciously and thoughtfully. When you plan, you translate your goals and dreams into step-by-step strategies, specific things you can do to test your goals and bring them to reality. You often have to revise your plans, but even when your plans are not fulfilled, planning will have a positive effect on the course of your life.

# Your Career in Business ## Going to College Is an Opportunity of a Lifetime—Never Drop Out You have already had one of your dreams come true—you are in college. It is indeed a rare privilege because far less than 1 percent of traditional college-age people around the world get to attend college. You’re lucky! So make the best of it by finishing your degree and learning the following college skills. ### Learn to Concentrate Concentration is the art of being focused, the ability to pay attention. Without concentration, you have no memory of what you hear, see, and read. Concentration is a frame of mind that enables you to stay centered on the activity or work you are doing. You know when you’re concentrating because time seems to go by quickly, distractions that normally take you off task don’t bother you, and you have a lot of mental or physical energy for the task. You are ultimately in charge of how well you concentrate. Here are some ways to make it happen: 1. Choose a workplace. Avoid the bed—you associate it with relaxing or sleeping. Try a desk or table for studying; you will concentrate better and accomplish more in less time. You will also have a convenient writing space and plenty of space to spread out. Be sure to have good lighting. 2. Feed your body right. What you eat plays an important role in how well or how poorly you concentrate. Protein foods (such as cheese, meat, fish, and vegetables) keep the mind alert, while carbohydrates (such as pasta, bread, and processed sugars) make you sleepy. Caffeine (commonly found in coffee, tea, soft drinks, and chocolate) acts as a stimulant in low doses. 3. Avoid food. Food and serious learning don’t mix well. Think about it. When you try to eat and study at the same time, which gets more of your concentration? The food, of course. You will be more effective if you eat first and then study. 4. Listen to your own thoughts. Listening to anything but your own thoughts interferes with good concentration. Eliminating distractions such as music, television, cell phones, email and text beeps, and other people can greatly increase the amount of studying you can accomplish. Hold all calls, and let email and texts wait. 5. Make a to-do list. If you are trying to study but get distracted by all of the things you need to do, take time to make a to-do list. Keeping track of your thoughts on paper and referring to the paper from time to time can be very effective for clearing your mind and focusing on your task. 6. Take short, frequent breaks. Since people concentrate for about 20 minutes or less at a time, it would make sense to capitalize on your natural body rhythms and take a short break every 20 to 30 minutes. If you feel you are fully concentrating and involved in a task, then work until a natural break occurs. ### Learn to Manage Your Time There are two ways to make sure you have more time in a day. The first and most important way to gain more time is to plan it. It’s like getting in a car and going somewhere. You need to know where you are going and have a plan to get there. Without a plan, you will waste your time and take longer to get to your destination—if you get there at all! A weekly project planner will allow you to keep track of your assignments in more detail. It contains a to-do list specific to one day. It looks like a calendar but is divided into five one-day periods with plenty of space to write. Using a weekly project planner is an effective way to keep track of assignments and plan study time according to the school calendar. Free calendars are available at https://calendar.google.com. A second way to gain more time in a day is to do more in less time. This can be as simple as doubling up on activities. For example, if you have three errands, you might try to combine them instead of doing one at a time, making one round-trip instead of three. If you commute on a bus, on a train, or in a carpool, you can study during your ride. At lunch, you can review notes. Use your imagination as to how you can get more done in less time. Here are some ideas to help you master your time: 1. Prepare for the morning the night before. Put out your clothes; make lunches; pack your books. 2. Get up 15 minutes earlier in the morning. Use the time to plan your day, review your assignments, or catch up on the news. 3. Schedule a realistic day. Avoid planning for every minute. Leave extra time in your day for getting to appointments and studying. 4. Leave room in your day for the unexpected. This will allow you to do what you need to do, regardless of what happens. If the unexpected never happens, you will have more time for yourself. 5. Do one thing at a time. If you try to do two things at once, you become inefficient. Concentrate on the here and now. 6. Learn to say “No.” Say no to social activities or invitations when you don’t have the time or energy. How well do you manage your time? Take the quiz in to find out. ### Use Your Money Wisely You can get college money from several different sources, including the following. 1. Grants and Scholarships. This refers to aid you do not have to repay. Grants are usually based on need while scholarships are frequently based on academic merit or other qualifying factors. 2. Educational Loans. These are usually subsidized by federal and state governments, private lenders, or the colleges themselves. Generally, the loans carry lower interest rates than commercial loans, and you do not have to pay them off until after graduation. 3. Work Aid. This is financial aid you have to work for, frequently 10 or 15 hours a week on campus. There are many ways to cut the cost of going to college. Consider these: 1. Going to a community college for the first two years and then transferring to a four-year institution 2. Attending a nearby college and living at home 3. Enrolling in one of thousands of college and universities with cooperative educational programs that alternate between full-time studies and full-time employment 4. Taking a full-time job at a company that offers free educational opportunities as an employee benefit To learn about college costs and financial aid, one of the first sources to consult is the website of The College Board, a not-for-profit organization that connects students to college success and opportunity. Some of the important topics covered at www.collegeboard.org include explaining financial aid, facilitating the application process, and finding colleges that fit. There are other websites that also offer information on financial aid: 1. http://www.fastweb.com: Fastweb has a database of more than 1.5 million private-sector scholarships, grants, and loans. 2. http://www.ed.gov: This is the U.S. Department of Education information site for federal aid programs, including student loans and grants. Gain some insight into your money management skills by taking the quiz in ### Study Well The first key to doing well in a subject is to complete your assignments on time. Most instructors base their assignments on what they will be discussing in class on a given day. So, if you read the pages you are assigned for the day they are due, you will better understand the day’s lecture. If you don’t complete an assignment when it is due, not only will you be at a disadvantage in the class, but you will also have twice as much work to do for the following class. Second, know what material to study. This may sound simple, but all too often students do not ask what material they should study and find out too late that they studied the wrong information. The easiest and most accurate way to learn what will be covered on a test is to ask your instructor or read the syllabus. Tests measure your working memory and knowledge base. To help yourself remember, you can use several memory devices to recall the information you need to study. Here are a few memory devices that have been proven to work: 1. 2. 3. The first letters of these words are: M V E M J S U N . An acronym using these letters would be difficult to remember. But if you create a sentence using the letters in order, you will remember the sequence better. For example: 4. helps you evaluate your study skills. ### Become a Master at Taking Tests Taking a formal test is like playing a game. The object is to get as many points as possible in the time you are allowed. Tests are evaluations of what you know and what you can do with what you know. Here are the rules of the test-taking game: 1. Rule 1: Act As If You Will Succeed. Thought is powerful. When you think negative thoughts, your stress level rises. Your confidence level may drop, which often leads to feelings of failure. When this happens, think about success. Smile and take deep, slow breaths. Close your eyes, and imagine getting the test back with a good grade written at the top. 1. Rule 2: Arrive Ahead of Time. Being on time or early for a test sets your mind at ease. You will have a better chance of getting your favorite seat, relaxing, and preparing yourself mentally for the game ahead. 2. Rule 3: Bring the Essential Testing Tools. Don’t forget to bring the necessary testing tools along with you, including extra pens, sharpened pencils, erasers, a calculator, laptop, dictionary, and other items you may need. 3. Rule 4: Ignore Panic Pushers. Some people become nervous before a test and hit the panic button, afraid they don’t know the material. Panic pushers are people who ask you questions about the material they are about to be tested on. If you know the answers, you will feel confident; however, if you don’t, you may panic and lose your confidence. Instead of talking with a panic pusher before a test, spend your time concentrating on what you know, not on what you don’t know. 4. Rule 5: Preview the Playing Field. Here’s how to do a preview: 5. Rule 6: Write in the Margin. Before you begin the test, write key terms, formulas, names, dates, and other information in the margin so you won’t forget them. 6. Rule 7: Complete the Easy Questions First. Answering easy questions first helps build your confidence. If you come across a tough question, mark it so you can come back to it later. Avoid spending so much time on a challenging question that you might run out of time to answer the questions you do know. 7. Rule 8: Know If There Is a Guessing Penalty. Chances are your tests will carry no penalty for guessing. If your time is about to run out and there is no penalty, take a wild guess. On the other hand, if your test carries a penalty for guessing, choose your answers wisely, and leave blank the answers you do not know. 8. Rule 9: Avoid Changing Your Answers. Have you ever chosen an answer, changed it, and learned later that your first choice was correct? Research indicates that three out of four times, your first choice is correct; therefore, you should avoid changing an answer unless you are absolutely sure the answer is wrong. 9. Rule 10: Write Clearly and Neatly. If you are handwriting your test (versus using a computer), imagine your instructor reading your writing. Is it easy to read or difficult? The easier your test is for the instructor to read, the better your chances of getting a higher grade. Here are some websites to help you learn more about taking tests: 1. 2. 3. 4.

# Your Career in Business ## Get Your Career Off on the Right Track Mark this section of the text with a permanent bookmark because you are going to want to refer back to it many times during the remainder of your college career. Yes, we are going to give you a road map to find, keep, and advance in that job that is perfect for you. ### Think Positively To be successful in life and in a career, you need to be positive. Positive thinking is making a conscious effort to think with an optimistic attitude and to anticipate positive outcomes. Positive behavior means purposely acting with energy and enthusiasm. When you think and behave positively, you guide your mind toward your goals and generate matching mental and physical energy. Positive thinking and behavior are often deciding factors in landing top jobs: your first job, a promotion, a change of jobs—whatever career step you are targeting. That’s because the subconscious is literal; it accepts what you regard as fact. Follow these steps to form the habit of positive thinking and to boost your success: 1. Deliberately motivate yourself every day. Think of yourself as successful, and expect positive outcomes for everything you attempt. 2. Project energy and enthusiasm. Employers hire people who project positive energy and enthusiasm. Develop the habit of speaking, moving, and acting with these qualities. 3. Practice this positive-expectation mindset until it becomes a habit. Applicants who project enthusiasm and positive behavior generate a positive chemistry that rubs off. Hiring decisions are influenced largely by this positive energy. The habit will help you reach your peak potential. 4. Dwell on past successes. Focusing on past successes to remind yourself of your abilities helps in attaining goals. For example, no one is ever born knowing how to ride a bicycle or how to use a computer software program. Through training, practice, and trial and error, you master new abilities. During the trial-and-error phases of development, remind yourself of past successes; look at mistakes as part of the natural learning curve. Continue until you achieve the result you want, and remind yourself that you have succeeded in the past and can do so again. You fail only when you quit trying! ### Take a Good Look at Yourself Once you’ve developed a positive, “can do” attitude, the next step is to better understand yourself. Ask yourself two basic questions: “Who am I?” and “What can I do?” Who Am I? This question is the start of self-assessment, examining your likes and dislikes and basic values. You may want to ask yourself the following questions: 1. Do I want to help society? 2. Do I want to help make the world a better place? 3. Do I want to help other people directly? 4. Is it important for me to be seen as part of a big corporation? Or do I prefer to be part of a smaller organization? 5. Do I prefer working indoors or outdoors? 6. Do I like to meet new people, or do I want to work alone? Are you assertive? Assess your assertiveness by taking the quiz in What Can I Do? After determining what your values are, take the second step in career planning by asking, “What can I do?” This question is the start of skill assessment, evaluating your key abilities and characteristics for dealing successfully with problems, tasks, and interactions with other people. Many skills—for instance, the ability to speak clearly and strongly—are valuable in many occupations. Be sure to consider the work experience you already have, including part-time jobs while going to school, summer jobs, volunteer jobs, and internships. These jobs teach you skills and make you more attractive to potential employers. It’s never too early or too late to take a part-time job in your chosen field. For instance, someone with an interest in accounting would do well to try a part-time job with a CPA (certified public accountant) firm. In addition to examining your job-related skills, you should also look at your leisure activities. Some possible questions: Am I good at golf? Do I enjoy sailing? Tennis? Racquetball? In some businesses, transactions are made during leisure hours. In that case, being able to play a skillful, or at least adequate, game of golf or tennis may be an asset. It’s hard to like your job if you don’t like the field that you’re in. Most career counselors agree that finding work you’re passionate about is one of the critical factors behind career success. That’s why so many career counselors love all those diagnostic tools that measure your personality traits, skill levels, professional interests, and job potential. The internet is virtually exploding with tests and assessments that you can take. Try, for example, http://www.self-directed-search.com. This test is based on the theory that people and work environments can be classified into six basic types: realistic, investigative, artistic, social, enterprising, and conventional. The test determines which three types best describe you, and it suggests occupations that could be a good match. The Keirsey Character Sorter (http://www.keirsey.com) is a first cousin of Myers-Briggs. It sorts people into four temperaments: idealists, rationals, artisans, and guardians. Like Myers-Briggs, it not only places you in an overall category, but it also offers a more detailed evaluation of your personality traits. To find a bunch of tests in one place, use a search engine and search “online personality tests.” ### Understand What Employers Want Employers want to hire people who will make their businesses more successful. The most desirable employees have the specific skills, transferable career competencies, work values, and personal qualities necessary to be successful in the employers’ organizations. The more clearly you convey your skills as they relate to your job target, the greater your chance of landing your ideal job. Job-Specific Skills. Employers seek job-specific skills (skills and technical abilities that relate specifically to a particular job). Two examples of job-specific skills are using specialized tools and equipment and using a custom-designed software program. Transferable Skills and Attitudes. Change is a constant in today’s business world. Strong transferable career skills are the keys to success in managing your career through change. The most influential skills and attitudes are the abilities to: 1. Work well with people. 2. Plan and manage multiple tasks. 3. Maintain a positive attitude. 4. Show enthusiasm. Employers need workers who have transferable career competencies—basic skills and attitudes that are important for all types of work. These skills make you highly marketable because they’re needed for a wide variety of jobs and can be transferred from one task, job, or workplace to another. Examples include these: 1. Planning skills 2. Research skills 3. Communication skills 4. Human relations and interpersonal skills 5. Critical thinking skills 6. Management skills 7. Project management skills Take, for example, a construction supervisor and an accountant. Both must work well with others, manage time and specific tasks, solve problems, read, and communicate effectively—all transferable competencies. They both must be competent in these areas even though framing a house and balancing a set of financial information (the job-specific skill for each field, respectively) are not related. In every occupation, transferable competencies are as important as technical expertise and job-specific skills. ### Find Your First Professional Job The next step is landing the job that fits your skills and desires. You need to consider not only a general type of work but also your lifestyle and leisure goals. If you like to be outdoors most of the time, you might be very unhappy spending eight hours a day in an office. Someone who likes living in small towns may dislike working at the headquarters of a big corporation in Los Angeles, New York City, or Chicago. But make sure that your geographic preferences are realistic. Some parts of the country will experience much greater growth in jobs than others in the coming years. According to recent research by Glassdoor, the online job listings and career site, the top 10 best cities for jobs in 2017 are: 1. Pittsburgh, PA 2. Indianapolis, IN 3. Kansas City, MO 4. Raleigh-Durham, NC 5. St. Louis, MO 6. Memphis, TN 7. Columbus, OH 8. Cincinnati, OH 9. Cleveland, OH 10. Louisville, KY You might start answering the question “What will I do?” by studying the Occupational Outlook Handbook, published every two years by the U.S. Department of Labor (https://www.bls.gov/ooh). The most recent Handbook edition projects job opportunities by industry through the year 2026. The Handbook is divided into 25 occupational clusters describing 325 job profiles (with a section on military careers). Among the clusters are education, sales and marketing, transportation, health, and social services. Each job description tells about the nature of the work, working conditions, required training, other qualifications, chances for advancement, employment outlook, earnings, related occupations, and sources of more information. Another good source of job information is the website for the National Association of Colleges and Employers (http://www.naceweb.org). If you are a member of a minority group, you might want to check out https://www.blackcareernetwork.com or http://www.saludos.com. ### Use the Internet to Find a Job Today, most job searches are done online. Rarely do job seekers use “snail mail” to send a résumé to a potential employer. Therefore, you need to do your homework when it comes to creating a résumé and posting it to various websites, as well as sending it electronically to a specific company’s careers web page. Let’s start with the résumé. There are thousands of job-related sites and millions of résumés on the internet. To break through the clutter, you must start with a great résumé—a written description of your education, work experience, personal data, and interests. There are plenty of online resources that can provide you with tips and actual templates to use when creating your résumé. For example, CollegeGrad (https://collegegrad.com) provides more than 100 preformatted templates for over 30 college majors on its website that you can use to tailor your résumé and highlight your specific skills and talents. Of course, there are many other sources for creating a résumé, including the actual websites of most online job-listing services. Once you have created an electronic résumé, you have several options when it comes to your job search. First, you can target specific companies where you would like to work. Then go to their corporate websites and look for a careers page on the website. For example, Google has an extensive careers section on its website that provides detailed information on how to apply to become a “Googler,” along with a section on what the company’s interview process entails and how Google makes hiring decisions. You can also try posting your résumé on the top 10 most popular job websites. They are so large that they are worth checking out first. They tend to have more jobs listed, represent more companies, and have larger résumé databases, which attract even more companies. 1. Indeed (https://www.indeed.com) 2. Monster (https://www.monster.com) 3. Glassdoor (https://www.glassdoor.com) 4. CareerBuilder (https://www.careerbuilder.com) 5. SimplyHired (https://www.simplyhired.com) 6. JobDiagnosis (https://www.jobdiagnosis.com) 7. Nexxt (https://www.nexxt.com) 8. ZipRecruiter (https://www.ziprecruiter.com) 9. USAJobs (https://www.usajobs.gov) ### The Multimedia Résumé If you are going to become a computer programmer, web developer, graphics designer, artist, sculptor, singer, dancer, actor, model, animator, cartoonist, or anyone who would benefit by the photographs, graphics, animation, sound, color, or movement inherent in a multimedia résumé, then this résumé is for you. For most people, however, a multimedia résumé and personal home page on the internet aren’t necessary. Most internet service providers and commercial online services provide some space on their sites for subscriber home pages. ### Getting Your Electronic Résumé into the Short Pile Applicant tracking systems (ATSs) screen for keywords, which either reject your résumé or move it on to the short list. Your task is to use keywords that will produce as many “hits” as possible. Keywords tend to be more of the noun or noun phrase type (Total Quality Management, Walmart, Sales Manager) as opposed to power action verbs often found in traditional résumés (developed, coordinated, organized). Every occupation and career field has its own jargon, acronyms, and buzzwords. There are also general keywords that apply to transferable skills important in many jobs, such as teamwork, writing, and planning. Use these tips for adding effective keywords to your résumé: 1. The best source of keywords is the actual job listing, which is likely to contain many, if not all, of the keywords that an employer will use to search the résumé database. 2. Include plenty of keyword nouns and noun phrases throughout your résumé. If you have a “Summary of Qualifications” section at the beginning of your résumé, try not to repeat verbatim the contents of this section. 3. If you are applying for technical positions, you can list your skills, separating each noun or phrase by a comma. 4. In some fields, a simple list of skills does not sufficiently describe the job seeker’s background. Where appropriate, include accomplishments, as well, but be sure to include enough keywords to satisfy the ATS searches. There are several ways to determine what keywords are appropriate for your industry and job. 1. Look through recent job postings online. Certain words will reappear consistently. Those are your “key” words. 2. Make sure your résumé contains the keywords and concepts used in the particular job listing you are applying to. 3. Talk to people in the career field you are targeting, and ask them what keywords are appropriate to the positions you are applying to. 4. Research specific company websites that appeal to you in terms of getting a job with that specific organization, and review the “About Us” section. Try to use some of the key words the company uses to describe its corporate environment as part of your résumé descriptions. 5. Visit professional association websites, and read the content carefully. Many of these are loaded with industry-related jargon that may be appropriate for your résumé. If you are still in college, try to get at least one internship in the career field you’re targeting. Even if your internship lasts only a few weeks, you will significantly increase your keyword count to build a resume, not to mention gain valuable experience that will get the attention of hiring professionals. ### I’ve Landed a Job Interview If some of the companies you contacted want to speak with you, your résumé achieved its goal of getting you a job interview. Look at the interview as a chance to describe your knowledge and skills and interpret them in terms of the employer’s specific needs. To make this kind of presentation, you need to do some research on the company. A great place to start is the company’s own corporate website. As you do your information search, you should build your knowledge in these three areas: 1. General Information about the Occupational Field. Learn about the current and predicted industry trends, general educational requirements, job descriptions, growth outlook, and salary ranges in the industry. 2. Information about Prospective Employers. Learn whether the organization is publicly or privately owned. Verify company names, addresses, products, or services (current and predicted, as well as trends); history; culture; reputation; performance; divisions and subsidiaries; locations (U.S. and global); predicted growth indicators; number of employees; company philosophies and procedures; predicted job openings; salary ranges; and listings of managers of your targeted department within the organization. Also learn about the competitors and customers. 3. Information about Specific Jobs. Obtain job descriptions; identify the required education and experience; and determine prevalent working conditions, salary, and fringe benefits. ### Interview Like a Pro An interview tends to have three parts: icebreaking (about five minutes), in which the interviewer tries to put the applicant at ease; questioning (directly or indirectly) by the interviewer; and questioning by the applicant. Almost every recruiter you meet will be trying to rate you in 5 to 10 areas. The questions will be designed to assess your skills and personality. Many firms start with a screening interview, a rather short interview (about 30 minutes) to decide whether to invite you back for a second interview. Sometimes screening interviews can take place online via Skype, FaceTime, or some other form of videoconferencing. Only about 20 percent of job applicants are invited back. The second interview is usually a half day or a day of meetings set up by the human resource department with managers in different departments. After the meetings, someone from the human resource department will discuss other application materials with you and tell you when a letter of acceptance or rejection is likely to be sent. (The wait may be weeks or even months.) Many applicants send follow-up letters in the meantime to show they are still interested in the firm. For the interview, you should dress conservatively. Plan to arrive about 10 to 15 minutes ahead of time. Try to relax. Smile and make eye contact with (but do not stare at) the interviewer. Body language is an important communicator. The placement of your hands and feet and your overall posture say a good deal about you. Here are some other tips for interviewing like a pro: 1. Concentrate on being likable. As simplistic as it seems, research proves that one of the most essential goals in successful interviewing is to be liked by the interviewer. Interviewers want to hire pleasant people others will like working with on a daily basis. Pay attention to the following areas to project that you are highly likable: 2. Project an air of confidence and pride. Act as though you want and deserve the job, not as though you are desperate. 3. Demonstrate enthusiasm. The applicant’s level of enthusiasm often influences employers as much as any other interviewing factor. The applicant who demonstrates little enthusiasm for a job will never be selected for the position. 4. Demonstrate knowledge of and interest in the employer. “I really want this job” is not convincing enough. Explain why you want the position and how the position fits your career plans. You can cite opportunities that may be unique to a firm or emphasize your skills and education that are highly relevant to the position. 5. State your name and the position you’re seeking. When you enter the interviewer’s office, begin with a friendly greeting and state the position you’re interviewing for: “Hello, Ms. Levine, I’m Bella Reyna. I’m here to interview for the accounting position.” If someone has already introduced you to the interviewer, simply say, “Good morning, Ms. Levine.” Identifying the position is important because interviewers often interview for many different positions. 6. Focus on how you fit the job. Near the beginning of your interview, as soon as it seems appropriate, ask a question similar to this: “Could you describe the scope of the job and tell me what capabilities are most important in filling the position?” The interviewer’s response will help you focus on emphasizing your qualifications that best match the needs of the employer. 7. Speak correctly. Grammatical errors can cost applicants the job. Use correct grammar, word choice, and a businesslike vocabulary, not an informal, chatty one. Avoid slang. When under stress, people often use pet phrases (such as you know) too often. This is highly annoying and projects immaturity and insecurity. Don’t use just or only. “I just worked as a waiter.” Don’t say “I guess.” Avoid the word probably because it suggests unnecessary doubt. Ask a friend or family member to help you identify any speech weaknesses you have. Begin eliminating these speech habits now. Also, you should avoid the following “disqualifiers” at all costs. Any one of these blunders could cost you your dream job: 1. Don’t sit down until the interviewer invites you to; waiting is courteous. 2. Don’t bring anyone else to the interview; it makes you look immature and insecure. 3. Don’t smoke or bring a beverage with you. 4. Don’t put anything on or read anything on the interviewer’s desk; it’s considered an invasion of personal space. 5. Don’t chew gum or have anything else in your mouth; this projects immaturity. 6. If you are invited to a business meal, don’t order alcohol. When ordering, choose food that’s easy to eat while carrying on a conversation. 7. Don’t offer a limp handshake; it projects weakness. Use a firm handshake. ### Select the Right Job for You Hard work and a little luck may pay off with multiple job offers. Your happy dilemma is deciding which one is best for you. Start by considering the “FACTS”: 1. Fit: Do the job and the employer fit your skills, interests, and lifestyle? 2. Advancement and growth: Will you have the chance to develop your talents and move up within the organization? 3. Compensation: Is the employer offering a competitive salary and benefits package? 4. Training: Will the employer provide you with the tools needed to be successful on the job? 5. Site: Is the job location a good match for your lifestyle and your budget? A great way to evaluate a new location is through Homefair (http://www.homefair.com). This site offers tools to help you calculate the cost of moving, the cost of living, and the quality of life in various places. The Moving Calculator helps you figure out how much it will cost to ship your worldly possessions to a particular city. The Relocation Crime Lab compares crime rates in various locations. The City Snapshots feature compares demographic, economic, and climate information for two cities of your choosing. The Salary Calculator computes cost-of-living differences between hundreds of U.S. and international cities and tells you how much you’d need to make in your new city to maintain your current standard of living. ### Start Your New Job No time is more crucial, and possibly nerve-racking, than the first few months at a new job. During this breaking-in period, the employer decides whether a new employee is valuable enough to keep and, if so, in what capacity. Sometimes the employee’s whole future with the company rides on the efforts of the first few weeks or months. Most firms offer some sort of formal orientation. But generally speaking, they expect employees to learn quickly—and often on their own. You will be expected to become familiar with the firm’s goals; its organization, including your place in the company; and basic personnel policies, such as coffee breaks, overtime, and parking. Here are a few tips on making your first job rewarding and productive: 1. Listen and learn: When you first walk into your new job, let your eyes and ears take everything in. Do people refer to one another by first names, or is the company more formal? How do people dress? Do the people you work with drop into one another’s open offices for informal chats about business matters? Or have you entered a “memo mill,” where anything of substance is put on email and talks with other employees are scheduled through their administrative assistants? Size up where the power lies. Who seems to most often assume a leadership role? Who is the person others turn to for advice? Why has that person achieved that position? What traits have made this person a “political leader”? Don’t be misled by what others say, but also don’t dismiss their evaluations. Make your own judgments based on what you see and hear. Effective listening skills help you learn your new job responsibilities quickly. Take the quiz in to see if you are a good listener. 2. Do unto others: Be nice. Nice people are usually the last to be fired and among the first to be promoted. Don’t be pleasant only with those who can help you in the company. Be nice to everyone. You never know who can help you or give you information that will turn out to be useful. Genuinely nice people make routine job assignments, and especially pressure-filled ones, more pleasant. And people who are dealt with pleasantly usually respond in kind. 3. Don’t start out as a maverick: If every new employee tried to change tried-and-true methods to suit his or her whims, the firm would quickly be in chaos. Individual needs must take a back seat to established procedures. Devote yourself to getting things done within the system. Every manager realizes that it takes time for a new person to adjust. But the faster you start accomplishing things, the faster the boss will decide that you were the right person to hire. 4. Find a great mentor: The leading cause of career unhappiness is working for a bad boss. Good jobs can easily be ruined by supervisors who hold you back. In contrast, your career will soar (and you will smile every day) when you have a great mentor helping you along the way. If you find a job with a super mentor, jump at the chance to take it. ### Moving Up Once you have been on the job for a while, you will want to get ahead and be promoted. offers several suggestions for improving your chances of promotion. The first item might seem a bit strange, yet it’s there for a practical reason. If you don’t really like what you do, you won’t be committed enough to compete with those who do. The passionate people are the ones who go the extra mile, do the extra work, and come up with fresh out-of-the-box ideas. So there you have it. Remember: it’s never too early to begin planning your career—the future is now.

# Your Career in Business ## Self-Test Scoring Guidelines After you answer the questions in each of the fun self-tests that appear in this chapter, determine your score and evaluate your skills using the following scoring guidelines. Table 1 Fun Self-Test: Can You Persuade Others? For questions 1, 2, 4, 8, 10, and 11, use the following to calculate your score: For questions 3, 5, 6, 7, and 9 use the following to calculate your score: If your score is between 40 and 55, you have an excellent ability to persuade others. A score between 30 and 39 means you have reasonably good persuasion skills. However, you may need to improve your listening and communicating skills. A score below 30 means that you should consider reading a book or taking a short course on how to persuade others. Table 2 Fun Self-Test: Are You Good at Office Politics? For questions 1, 3, 4, 7, 8, 10, 12, and 13, give yourself 1 point if you said “true.” For questions 2, 5, 6, 9, and 11, give yourself 1 point if you said “false.” If your score is 9 or below, you may be good at managing your work, but you need to improve your political skills. Being political means getting along with others in order to move them toward accomplishing a specific goal. If your score is low, consider reviewing the tips offered in the chapter on how to be an effective political player. Table 4 Fun Self-Test: How Well Do You Manage Your Time? For questions 2, 6, 8, 9, 11, 13, 14, and 15, use the following to calculate your score: For questions 1, 3, 4, 5, 7, 10, and 12, use the following to calculate your score: If your score is 60 or higher, you have excellent time management skills. Congratulations—you use your time well! If your score is below 60, consider reading a book on time management, taking a course on time management, or investing in time-management tools such as a weekly project planner. The chapter has additional tips that may be useful in improving your time-management skills. Table 5 Fun Self-Test: Are You Good at Managing Money? For questions 2, 3, 5, 6, 10, and 11, use the following to calculate your score: For questions 1, 4, 7, 8, and 9, use the following to calculate your score: If your score is 44 or higher, you are able to manage money while balancing your expenses and income. You will be ready to handle financial emergencies without turning to friends or relatives. If your score is between 36 and 43, your savings habits may be inconsistent. To achieve better savings, control your expenses and avoid unnecessary purchases. If your score is 35 or below, you spend too much! Remember: it’s a lot more painful to earn money than to spend it. You need to gain control of your finances by limiting your spending, paying off credit cards, or investing in a good personal finance book or course. You may also need to meet with a financial advisor to seek direction on your spending and saving habits. Table 6 Fun Self-Test: Do You Have Good Study Habits? If you answered “yes” to questions 3, 5, 7, 8, and 11, give yourself 1 point for each answer. If you answered “no” to questions 1, 2, 4, 6, 9, 10, and 12, give yourself 1 point for each answer. If your score is 10 or above, congratulations! You have good study habits. If your score is below 10, read the tips offered in the chapter on improving your study skills. You may also meet with someone at your school to help maximize your study time. Table 7 Fun Self-Test: How Assertive Are You? For questions 1, 3, 4, 7, 9, and 13, use the following to calculate your score: For questions 2, 5, 6, 8, 10, 11, and 12, use the following to calculate your score: If your score is 44 or higher, you stand up for your rights while showing respect for others. You quickly respond to unfair criticism. You should be able to fare well in office politics. If your score is 43 or lower, you may want to consider ways to become more comfortable communicating your ideas and opinions and managing your relationships with others. Table 8 Fun Self-Test: Are You a Good Listener? For questions 3, 4, 8, and 9, use the following to calculate your score: For questions 1, 2, 5, 6, 7, and 10, use the following to calculate your score: Listening is an important communication skill that will help you succeed in your career. By becoming an effective listener, you gain respect from your colleagues, pick up insights and ideas on improving your job performance, and develop a skill that is important in managing others. If you have a score of 32 or above, then you are a good listener. If your score falls below 32, you need to improve your listening skills. Search the internet for articles and ideas on becoming a better listener, and begin practicing your new skills with your friends and coworkers.

# Science and the Universe: A Brief Tour ## Introduction We invite you to come along on a series of voyages to explore the universe as astronomers understand it today. Beyond Earth are vast and magnificent realms full of objects that have no counterpart on our home planet. Nevertheless, we hope to show you that the evolution of the universe has been directly responsible for your presence on Earth today. Along your journey, you will encounter: 1. a canyon system so large that, on Earth, it would stretch from Los Angeles to Washington, DC (). 1. a crater and other evidence on Earth that tell us that the dinosaurs (and many other creatures) died because of a cosmic collision. 2. a tiny moon whose gravity is so weak that one good throw from its surface could put a baseball into orbit. 3. a collapsed star so dense that to duplicate its interior we would have to squeeze every human being on Earth into a single raindrop. 4. exploding stars whose violent end could wipe clean all of the life-forms on a planet orbiting a neighboring star (). 5. a “cannibal galaxy” that has already consumed a number of its smaller galaxy neighbors and is not yet finished finding new victims. 6. a radio echo that is the faint but unmistakable signal of the creation event for our universe. Such discoveries are what make astronomy such an exciting field for scientists and many others—but you will explore much more than just the objects in our universe and the latest discoveries about them. We will pay equal attention to the process by which we have come to understand the realms beyond Earth and the tools we use to increase that understanding. We gather information about the cosmos from the messages the universe sends our way. Because the stars are the fundamental building blocks of the universe, decoding the message of starlight has been a central challenge and triumph of modern astronomy. By the time you have finished reading this text, you will know a bit about how to read that message and how to understand what it is telling us.

# Science and the Universe: A Brief Tour ## The Nature of Astronomy Astronomy is defined as the study of the objects that lie beyond our planet Earth and the processes by which these objects interact with one another. We will see, though, that it is much more. It is also humanity’s attempt to organize what we learn into a clear history of the universe, from the instant of its birth in the Big Bang to the present moment. Throughout this book, we emphasize that science is a progress report—one that changes constantly as new techniques and instruments allow us to probe the universe more deeply. In considering the history of the universe, we will see again and again that the cosmos evolves; it changes in profound ways over long periods of time. For example, the universe made the carbon, the calcium, and the oxygen necessary to construct something as interesting and complicated as you. Today, many billions of years later, the universe has evolved into a more hospitable place for life. Tracing the evolutionary processes that continue to shape the universe is one of the most important (and satisfying) parts of modern astronomy.

# Science and the Universe: A Brief Tour ## The Nature of Science The ultimate judge in science is always what nature itself reveals based on observations, experiments, models, and testing. Science is not merely a body of knowledge, but a method by which we attempt to understand nature and how it behaves. This method begins with many observations over a period of time. From the trends found through observations, scientists can model the particular phenomena we want to understand. Such models are always approximations of nature, subject to further testing. As a concrete astronomical example, ancient astronomers constructed a model (partly from observations and partly from philosophical beliefs) that Earth was the center of the universe and everything moved around it in circular orbits. At first, our available observations of the Sun, Moon, and planets did fit this model; however, after further observations, the model had to be updated by adding circle after circle to represent the movements of the planets around Earth at the center. As the centuries passed and improved instruments were developed for keeping track of objects in the sky, the old model (even with a huge number of circles) could no longer explain all the observed facts. As we will see in the chapter on Observing the Sky: The Birth of Astronomy, a new model, with the Sun at the center, fit the experimental evidence better. After a period of philosophical struggle, it became accepted as our view of the universe. When they are first proposed, new models or ideas are sometimes called hypotheses. You may think there can be no new hypotheses in a science such as astronomy—that everything important has already been learned. Nothing could be further from the truth. Throughout this textbook you will find discussions of recent, and occasionally still controversial, hypotheses in astronomy. For example, the significance that the huge chunks of rock and ice that hit Earth have for life on Earth itself is still debated. And while the evidence is strong that vast quantities of invisible “dark energy” make up the bulk of the universe, scientists have no convincing explanation for what the dark energy actually is. Resolving these issues will require difficult observations done at the forefront of our technology, and all such hypotheses need further testing before we incorporate them fully into our standard astronomical models. This last point is crucial: a hypothesis must be a proposed explanation that can be tested. The most straightforward approach to such testing in science is to perform an experiment. If the experiment is conducted properly, its results either will agree with the predictions of the hypothesis or they will contradict it. If the experimental result is truly inconsistent with the hypothesis, a scientist must discard the hypothesis and try to develop an alternative. If the experimental result agrees with predictions, this does not necessarily prove that the hypothesis is absolutely correct; perhaps later experiments will contradict crucial parts of the hypothesis. But, the more experiments that agree with the hypothesis, the more likely we are to accept the hypothesis as a useful description of nature. One way to think about this is to consider a scientist who was born and lives on an island where only black sheep live. Day after day the scientist encounters black sheep only, so he or she hypothesizes that all sheep are black. Although every observed sheep adds confidence to the hypothesis, the scientist only has to visit the mainland and observe one white sheep to prove the hypothesis wrong. When you read about experiments, you probably have a mental picture of a scientist in a laboratory conducting tests or taking careful measurements. This is certainly the case for a biologist or a chemist, but what can astronomers do when our laboratory is the universe? It’s impossible to put a group of stars into a test tube or to order another comet from a scientific supply company. As a result, astronomy is sometimes called an observational science; we often make our tests by observing many samples of the kind of object we want to study and noting carefully how different samples vary. New instruments and technology can let us look at astronomical objects from new perspectives and in greater detail. Our hypotheses are then judged in the light of this new information, and they pass or fail in the same way we would evaluate the result of a laboratory experiment. Much of astronomy is also a historical science—meaning that what we observe has already happened in the universe and we can do nothing to change it. In the same way, a geologist cannot alter what has happened to our planet, and a paleontologist cannot bring an ancient animal back to life. While this can make astronomy challenging, it also gives us fascinating opportunities to discover the secrets of our cosmic past. You might compare an astronomer to a detective trying to solve a crime that occurred before the detective arrived at the scene. There is lots of evidence, but both the detective and the scientist must sift through and organize the evidence to test various hypotheses about what actually happened. And there is another way in which the scientist is like a detective: they both must prove their case. The detective must convince the district attorney, the judge, and perhaps ultimately the jury that his hypothesis is correct. Similarly, the scientist must convince colleagues, editors of journals, and ultimately a broad cross-section of other scientists that her hypothesis is provisionally correct. In both cases, one can only ask for evidence “beyond a reasonable doubt.” And sometimes new evidence will force both the detective and the scientist to revise their last hypothesis. This self-correcting aspect of science sets it off from most human activities. Scientists spend a great deal of time questioning and challenging one another, which is why applications for project funding—as well as reports for publication in academic journals—go through an extensive process of peer review, which is a careful examination by other scientists in the same field. In science (after formal education and training), everyone is encouraged to improve upon experiments and to challenge any and all hypotheses. New scientists know that one of the best ways to advance their careers is to find a weakness in our current understanding of something and to correct it with a new or modified hypothesis. This is one of the reasons science has made such dramatic progress. An undergraduate science major today knows more about science and math than did Sir Isaac Newton, one of the most renowned scientists who ever lived. Even in this introductory astronomy course, you will learn about objects and processes that no one a few generations ago even dreamed existed.

# Science and the Universe: A Brief Tour ## The Laws of Nature Over centuries scientists have extracted various scientific laws from countless observations, hypotheses, and experiments. These scientific laws are, in a sense, the “rules” of the game that nature plays. One remarkable discovery about nature—one that underlies everything you will read about in this text—is that the same laws apply everywhere in the universe. The rules that determine the motion of stars so far away that your eye cannot see them are the same laws that determine the arc of a baseball after a batter has hit it out of the park. Note that without the existence of such universal laws, we could not make much headway in astronomy. If each pocket of the universe had different rules, we would have little chance of interpreting what happened in other “neighborhoods.” But, the consistency of the laws of nature gives us enormous power to understand distant objects without traveling to them and learning the local laws. In the same way, if every region of a country had completely different laws, it would be very difficult to carry out commerce or even to understand the behavior of people in those different regions. A consistent set of laws, though, allows us to apply what we learn or practice in one state to any other state. This is not to say that our current scientific models and laws cannot change. New experiments and observations can lead to new, more sophisticated models—models that can include new phenomena and laws about their behavior. The general theory of relativity proposed by Albert Einstein is a perfect example of such a transformation that took place about a century ago; it led us to predict, and eventually to observe, a strange new class of objects that astronomers call black holes. Only the patient process of observing nature ever more carefully and precisely can demonstrate the validity of such new scientific models. One important problem in describing scientific models has to do with the limitations of language. When we try to describe complex phenomena in everyday terms, the words themselves may not be adequate to do the job. For example, you may have heard the structure of the atom likened to a miniature solar system. While some aspects of our modern model of the atom do remind us of planetary orbits, many other of its aspects are fundamentally different. This problem is the reason scientists often prefer to describe their models using equations rather than words. In this book, which is designed to introduce the field of astronomy, we use mainly words to discuss what scientists have learned. We avoid complex math, but if this course piques your interest and you go on in science, more and more of your studies will involve the precise language of mathematics.

# Science and the Universe: A Brief Tour ## Numbers in Astronomy In astronomy we deal with distances on a scale you may never have thought about before, with numbers larger than any you may have encountered. We adopt two approaches that make dealing with astronomical numbers a little bit easier. First, we use a system for writing large and small numbers called scientific notation (or sometimes powers-of-ten notation). This system is very appealing because it eliminates the many zeros that can seem overwhelming to the reader. In scientific notation, if you want to write a number such as 500,000,000, you express it as . The small raised number after the 10, called an exponent, keeps track of the number of places we had to move the decimal point to the left to convert 500,000,000 to 5. If you are encountering this system for the first time or would like a refresher, we suggest you look at Appendix C and for more information. The second way we try to keep numbers simple is to use a consistent set of units—the metric International System of Units, or SI (from the French Système International d’Unités). The metric system is summarized in Appendix D (see ). A common unit astronomers use to describe distances in the universe is a light-year, which is the distance light travels during one year. Because light always travels at the same speed, and because its speed turns out to be the fastest possible speed in the universe, it makes a good standard for keeping track of distances. You might be confused because a “light-year” seems to imply that we are measuring time, but this mix-up of time and distance is common in everyday life as well. For example, when your friend asks where the movie theater is located, you might say “about 20 minutes from downtown.” So, how many kilometers are there in a light-year? Light travels at the amazing pace of kilometers per second (km/s), which makes a light-year kilometers. You might think that such a large unit would reach the nearest star easily, but the stars are far more remote than our imaginations might lead us to believe. Even the nearest star is 4.3 light-years away—more than 40 trillion kilometers. Other stars visible to the unaided eye are hundreds to thousands of light-years away ().

# Science and the Universe: A Brief Tour ## Consequences of Light Travel Time There is another reason the speed of light is such a natural unit of distance for astronomers. Information about the universe comes to us almost exclusively through various forms of light, and all such light travels at the speed of light—that is, 1 light-year every year. This sets a limit on how quickly we can learn about events in the universe. If a star is 100 light-years away, the light we see from it tonight left that star 100 years ago and is just now arriving in our neighborhood. The soonest we can learn about any changes in that star is 100 years after the fact. For a star 500 light-years away, the light we detect tonight left 500 years ago and is carrying 500-year-old news. Because many of us are accustomed to instant news from the Internet, some might find this frustrating. “You mean, when I see that star up there,” you ask, “I won’t know what’s actually happening there for another 500 years?” But this isn’t the most helpful way to think about the situation. For astronomers, now is when the light reaches us here on Earth. There is no way for us to know anything about that star (or other object) until its light reaches us. But what at first may seem a great frustration is actually a tremendous benefit in disguise. If astronomers really want to piece together what has happened in the universe since its beginning, they must find evidence about each epoch (or period of time) of the past. Where can we find evidence today about cosmic events that occurred billions of years ago? The delay in the arrival of light provides an answer to this question. The farther out in space we look, the longer the light has taken to get here, and the longer ago it left its place of origin. By looking billions of light-years out into space, astronomers are actually seeing billions of years into the past. In this way, we can reconstruct the history of the cosmos and get a sense of how it has evolved over time. This is one reason why astronomers strive to build telescopes that can collect more and more of the faint light in the universe. The more light we collect, the fainter the objects we can observe. On average, fainter objects are farther away and can, therefore, tell us about periods of time even deeper in the past. Instruments such as the Hubble Space Telescope () and the Very Large Telescope in Chile (which you will learn about in the chapter on Astronomical Instruments), are giving astronomers views of deep space and deep time better than any we have had before.

# Science and the Universe: A Brief Tour ## A Tour of the Universe We can now take a brief introductory tour of the universe as astronomers understand it today to get acquainted with the types of objects and distances you will encounter throughout the text. We begin at home with Earth, a nearly spherical planet about 13,000 kilometers in diameter (). A space traveler entering our planetary system would easily distinguish Earth from the other planets in our solar system by the large amount of liquid water that covers some two thirds of its crust. If the traveler had equipment to receive radio or television signals, or came close enough to see the lights of our cities at night, she would soon find signs that this watery planet has sentient life. Our nearest astronomical neighbor is Earth’s satellite, commonly called the Moon. shows Earth and the Moon drawn to scale on the same diagram. Notice how small we have to make these bodies to fit them on the page with the right scale. The Moon’s distance from Earth is about 30 times Earth’s diameter, or approximately 384,000 kilometers, and it takes about a month for the Moon to revolve around Earth. The Moon’s diameter is 3476 kilometers, about one fourth the size of Earth. Light (or radio waves) takes 1.3 seconds to travel between Earth and the Moon. If you’ve seen videos of the Apollo flights to the Moon, you may recall that there was a delay of about 3 seconds between the time Mission Control asked a question and the time the astronauts responded. This was not because the astronauts were thinking slowly, but rather because it took the radio waves almost 3 seconds to make the round trip. Earth revolves around our star, the Sun, which is about 150 million kilometers away—approximately 400 times as far away from us as the Moon. We call the average Earth–Sun distance an astronomical unit (AU) because, in the early days of astronomy, it was the most important measuring standard. Light takes slightly more than 8 minutes to travel 1 astronomical unit, which means the latest news we receive from the Sun is always 8 minutes old. The diameter of the Sun is about 1.5 million kilometers; Earth could fit comfortably inside one of the minor eruptions that occurs on the surface of our star. If the Sun were reduced to the size of a basketball, Earth would be a small apple seed about 30 meters from the ball. It takes Earth 1 year ( seconds) to go around the Sun at our distance; to make it around, we must travel at approximately 110,000 kilometers per hour. (If you, like many students, still prefer miles to kilometers, you might find the following trick helpful. To convert kilometers to miles, just multiply kilometers by 0.6. Thus, 110,000 kilometers per hour becomes 66,000 miles per hour.) Because gravity holds us firmly to Earth and there is no resistance to Earth’s motion in the vacuum of space, we participate in this extremely fast-moving trip without being aware of it day to day. Earth is only one of eight planets that revolve around the Sun. These planets, along with their moons and swarms of smaller bodies such as dwarf planets, make up the solar system (). A planet is defined as a body of significant size that orbits a star and does not produce its own light. (If a large body consistently produces its own light, it is then called a star.) Later in the book this definition will be modified a bit, but it is perfectly fine for now as you begin your voyage. We are able to see the nearby planets in our skies only because they reflect the light of our local star, the Sun. If the planets were much farther away, the tiny amount of light they reflect would usually not be visible to us. The planets we have so far discovered orbiting other stars were found from the pull their gravity exerts on their parent stars, or from the light they block from their stars when they pass in front of them. We can’t see most of these planets directly, although a few are now being imaged directly. The Sun is our local star, and all the other stars are also enormous balls of glowing gas that generate vast amounts of energy by nuclear reactions deep within. We will discuss the processes that cause stars to shine in more detail later in the book. The other stars look faint only because they are so very far away. If we continue our basketball analogy, Proxima Centauri, the nearest star beyond the Sun, which is 4.3 light-years away, would be almost 7000 kilometers from the basketball. When you look up at a star-filled sky on a clear night, all the stars visible to the unaided eye are part of a single collection of stars we call the Milky Way Galaxy, or simply the Galaxy. (When referring to the Milky Way, we capitalize Galaxy; when talking about other galaxies of stars, we use lowercase galaxy.) The Sun is one of hundreds of billions of stars that make up the Galaxy; its extent, as we will see, staggers the human imagination. Within a sphere 10 light-years in radius centered on the Sun, we find roughly ten stars. Within a sphere 100 light-years in radius, there are roughly 10,000 stars—far too many to count or name—but we have still traversed only a tiny part of the Milky Way Galaxy. Within a 1000-light-year sphere, we find some ten million stars; within a sphere of 100,000 light-years, we finally encompass the entire Milky Way Galaxy. Our Galaxy looks like a giant disk with a small ball in the middle. If we could move outside our Galaxy and look down on the disk of the Milky Way from above, it would probably resemble the galaxy in , with its spiral structure outlined by the blue light of hot adolescent stars. The Sun is somewhat less than 30,000 light-years from the center of the Galaxy, in a location with nothing much to distinguish it. From our position inside the Milky Way Galaxy, we cannot see through to its far rim (at least not with ordinary light) because the space between the stars is not completely empty. It contains a sparse distribution of gas (mostly the simplest element, hydrogen) intermixed with tiny solid particles that we call interstellar dust. This gas and dust collect into enormous clouds in many places in the Galaxy, becoming the raw material for future generations of stars. shows an image of the disk of the Galaxy as seen from our vantage point. Typically, the interstellar material is so extremely sparse that the space between stars is a much better vacuum than anything we can produce in terrestrial laboratories. Yet, the dust in space, building up over thousands of light-years, can block the light of more distant stars. Like the distant buildings that disappear from our view on a smoggy day in Los Angeles, the more distant regions of the Milky Way cannot be seen behind the layers of interstellar smog. Luckily, astronomers have found that stars and raw material shine with various forms of light, some of which do penetrate the smog, and so we have been able to develop a pretty good map of the Galaxy. Recent observations, however, have also revealed a rather surprising and disturbing fact. There appears to be more—much more—to the Galaxy than meets the eye (or the telescope). From various investigations, we have evidence that much of our Galaxy is made of material we cannot currently observe directly with our instruments. We therefore call this component of the Galaxy dark matter. We know the dark matter is there by the pull its gravity exerts on the stars and raw material we can observe, but what this dark matter is made of and how much of it exists remain a mystery. Furthermore, this dark matter is not confined to our Galaxy; it appears to be an important part of other star groupings as well. By the way, not all stars live by themselves, as the Sun does. Many are born in double or triple systems with two, three, or more stars revolving about each other. Because the stars influence each other in such close systems, multiple stars allow us to measure characteristics that we cannot discern from observing single stars. In a number of places, enough stars have formed together that we recognized them as star clusters (). Some of the largest of the star clusters that astronomers have cataloged contain hundreds of thousands of stars and take up volumes of space hundreds of light-years across. You may hear stars referred to as “eternal,” but in fact no star can last forever. Since the “business” of stars is making energy, and energy production requires some sort of fuel to be used up, eventually all stars run out of fuel. This news should not cause you to panic, though, because our Sun still has at least 5 or 6 billion years to go. Ultimately, the Sun and all stars will die, and it is in their death throes that some of the most intriguing and important processes of the universe are revealed. For example, we now know that many of the atoms in our bodies were once inside stars. These stars exploded at the ends of their lives, recycling their material back into the reservoir of the Galaxy. In this sense, all of us are literally made of recycled “star dust.”

# Science and the Universe: A Brief Tour ## The Universe on the Large Scale In a very rough sense, you could think of the solar system as your house or apartment and the Galaxy as your town, made up of many houses and buildings. In the twentieth century, astronomers were able to show that, just as our world is made up of many, many towns, so the universe is made up of enormous numbers of galaxies. (We define the universe to be everything that exists that is accessible to our observations.) Galaxies stretch as far into space as our telescopes can see, many billions of them within the reach of modern instruments. When they were first discovered, some astronomers called galaxies island universes, and the term is aptly descriptive; galaxies do look like islands of stars in the vast, dark seas of intergalactic space. The nearest galaxy, discovered in 1993, is a small one that lies 70,000 light-years from the Sun in the direction of the constellation Sagittarius, where the smog in our own Galaxy makes it especially difficult to discern. (A constellation, we should note, is one of the 88 sections into which astronomers divide the sky, each named after a prominent star pattern within it.) Beyond this Sagittarius dwarf galaxy lie two other small galaxies, about 160,000 light-years away. First recorded by Magellan’s crew as he sailed around the world, these are called the Magellanic Clouds (). All three of these small galaxies are satellites of the Milky Way Galaxy, interacting with it through the force of gravity. Ultimately, all three may even be swallowed by our much larger Galaxy, as other small galaxies have been over the course of cosmic time. The nearest large galaxy is a spiral quite similar to our own, located in the constellation of Andromeda, and is thus called the Andromeda galaxy; it is also known by one of its catalog numbers, M31 (). M31 is a little more than 2 million light-years away and, along with the Milky Way, is part of a small cluster of more than 50 galaxies referred to as the Local Group. At distances of 10 to 15 million light-years, we find other small galaxy groups, and then at about 50 million light-years there are more impressive systems with thousands of member galaxies. We have discovered that galaxies occur mostly in clusters, both large and small (). Some of the clusters themselves form into larger groups called superclusters. The Local Group is part of a supercluster of galaxies, called the Virgo Supercluster, which stretches over a diameter of 110 million light-years. We are just beginning to explore the structure of the universe at these enormous scales and are already encountering some unexpected findings. At even greater distances, where many ordinary galaxies are too dim to see, we find quasars. These are brilliant centers of galaxies, glowing with the light of an extraordinarily energetic process. The enormous energy of the quasars is produced by gas that is heated to a temperature of millions of degrees as it falls toward a massive black hole and swirls around it. The brilliance of quasars makes them the most distant beacons we can see in the dark oceans of space. They allow us to probe the universe 10 billion light-years away or more, and thus 10 billion years or more in the past. With quasars we can see way back close to the Big Bang explosion that marks the beginning of time. Beyond the quasars and the most distant visible galaxies, we have detected the feeble glow of the explosion itself, filling the universe and thus coming to us from all directions in space. The discovery of this “afterglow of creation” is considered to be one of the most significant events in twentieth-century science, and we are still exploring the many things it has to tell us about the earliest times of the universe. Measurements of the properties of galaxies and quasars in remote locations require large telescopes, sophisticated light-amplifying devices, and painstaking labor. Every clear night, at observatories around the world, astronomers and students are at work on such mysteries as the birth of new stars and the large-scale structure of the universe, fitting their results into the tapestry of our understanding.

# Science and the Universe: A Brief Tour ## The Universe of the Very Small The foregoing discussion has likely impressed on you that the universe is extraordinarily large and extraordinarily empty. On average, it is 10,000 times more empty than our Galaxy. Yet, as we have seen, even the Galaxy is mostly empty space. The air we breathe has about 1019 atoms in each cubic centimeter—and we usually think of air as empty space. In the interstellar gas of the Galaxy, there is about one atom in every cubic centimeter. Intergalactic space is filled so sparsely that to find one atom, on average, we must search through a cubic meter of space. Most of the universe is fantastically empty; places that are dense, such as the human body, are tremendously rare. Even our most familiar solids are mostly space. If we could take apart such a solid, piece by piece, we would eventually reach the tiny molecules from which it is formed. Molecules are the smallest particles into which any matter can be divided while still retaining its chemical properties. A molecule of water (H2O), for example, consists of two hydrogen atoms and one oxygen atom bonded together. Molecules, in turn, are built of atoms, which are the smallest particles of an element that can still be identified as that element. For example, an atom of gold is the smallest possible piece of gold. Nearly 100 different kinds of atoms (elements) exist in nature. Most of them are rare, and only a handful account for more than 99% of everything with which we come in contact. The most abundant elements in the cosmos today are listed in ; think of this table as the “greatest hits” of the universe when it comes to elements. Note that the list includes the four elements most common in life on Earth—hydrogen, carbon, nitrogen, and oxygen. All atoms consist of a central, positively charged nucleus surrounded by negatively charged electrons. The bulk of the matter in each atom is found in the nucleus, which consists of positive protons and electrically neutral neutrons all bound tightly together in a very small space. Each element is defined by the number of protons in its atoms. Thus, any atom with 6 protons in its nucleus is called carbon, any with 50 protons is called tin, and any with 70 protons is called ytterbium. (For a list of the elements, see Appendix K.) The distance from an atomic nucleus to its electrons is typically 100,000 times the size of the nucleus itself. This is why we say that even solid matter is mostly space. The typical atom is far emptier than the solar system out to Neptune. (The distance from Earth to the Sun, for example, is only 100 times the size of the Sun.) This is one reason atoms are not like miniature solar systems. Remarkably, physicists have discovered that everything that happens in the universe, from the smallest atomic nucleus to the largest superclusters of galaxies, can be explained through the action of only four forces: gravity, electromagnetism (which combines the actions of electricity and magnetism), and two forces that act at the nuclear level. The fact that there are four forces (and not a million, or just one) has puzzled physicists and astronomers for many years and has led to a quest for a unified picture of nature.

# Science and the Universe: A Brief Tour ## A Conclusion and a Beginning If you are new to astronomy, you have probably reached the end of our brief tour in this chapter with mixed emotions. On the one hand, you may be fascinated by some of the new ideas you’ve read about and you may be eager to learn more. On the other hand, you may be feeling a bit overwhelmed by the number of topics we have covered, and the number of new words and ideas we have introduced. Learning astronomy is a little like learning a new language: at first it seems there are so many new expressions that you’ll never master them all, but with practice, you soon develop facility with them. At this point you may also feel a bit small and insignificant, dwarfed by the cosmic scales of distance and time. But, there is another way to look at what you have learned from our first glimpses of the cosmos. Let us consider the history of the universe from the Big Bang to today and compress it, for easy reference, into a single year. (We have borrowed this idea from Carl Sagan’s 1977 Pulitzer Prize-winning book, The Dragons of Eden.) On this scale, the Big Bang happened at the first moment of January 1, and this moment, when you are reading this chapter would be the end of the very last second of December 31. When did other events in the development of the universe happen in this “cosmic year?” Our solar system formed around September 10, and the oldest rocks we can date on Earth go back to the third week in September (). Where does the origin of human beings fall during the course of this cosmic year? The answer turns out to be the evening of December 31. The invention of the alphabet doesn’t occur until the fiftieth second of 11:59 p.m. on December 31. And the beginnings of modern astronomy are a mere fraction of a second before the New Year. Seen in a cosmic context, the amount of time we have had to study the stars is minute, and our success in piecing together as much of the story as we have is remarkable. Certainly our attempts to understand the universe are not complete. As new technologies and new ideas allow us to gather more and better data about the cosmos, our present picture of astronomy will very likely undergo many changes. Still, as you read our current progress report on the exploration of the universe, take a few minutes every once in a while just to savor how much you have already learned. ### For Further Exploration ### Articles Bakich, M., et al. “101 Cosmic Objects You Must See.” Astronomy (January 2022): 6. Talcott, R. “30 Years of Hubble’s Greatest Hits.” Astronomy (March 2020): 18. ### Books Miller, Ron, and William Hartmann. The Grand Tour: A Traveler’s Guide to the Solar System. 3rd ed. Workman, 2005. This volume for beginners is a colorfully illustrated voyage among the planets. Sagan, Carl. Cosmos. Ballantine, 2013 [1980]. This tome presents a classic overview of astronomy by an astronomer who had a true gift for explaining things clearly. (You can also check out Sagan’s television series Cosmos: A Personal Voyage and Neil DeGrasse Tyson’s current series Cosmos: A Spacetime Odyssey.) Tyson, Neil DeGrasse, and Don Goldsmith. Origins: Fourteen Billion Years of Cosmic Evolution. Norton, 2004. This book provides a guided tour through the beginnings of the universe, galaxies, stars, planets, and life. ### Websites If you enjoyed the beautiful images in this chapter (and there are many more fabulous photos to come in other chapters), you may want to know where you can obtain and download such pictures for your own enjoyment. (Many astronomy images are from government-supported instruments or projects, paid for by tax dollars, and therefore are free of copyright laws.) Here are three resources we especially like: 1. Astronomy Picture of the Day: apod.nasa.gov/apod/astropix.html. Two space scientists scour the internet and select one beautiful astronomy image to feature each day. Their archives range widely, from images of planets and nebulae to rockets and space instruments; they also have many photos of the night sky. The search function (see the menu on the bottom of the page) works quite well for finding something specific among the many years’ worth of daily images. 2. Hubble Space Telescope Images: https://www.spacetelescope.org/images/ or James Webb Space Telescope Images: https://esawebb.org/images. Here you can browse some of the remarkable images from these two space telescopes, select a particular subject in the menu boxes, or search for the name of an object that intrigues you in this book. 3. National Aeronautics and Space Administration’s (NASA’s) Planetary Photojournal: photojournal.jpl.nasa.gov. This site features thousands of images from NASA planetary exploration, with captions of varied length. You can select images by world, feature name, date, or catalog number, and download images in a number of popular formats. Use the Photojournal Search option on the menu at the top of the homepage to access ways to search their archives. See Appendix B for more sources of astronomical images. ### Videos Powers of Ten: www.youtube.com/watch?v=0fKBhvDjuy0. This classic short video is a much earlier version of Powers of Ten, narrated by Philip Morrison (9:00). The Known Universe: www.youtube.com/watch?v=17jymDn0W6U. This video tour from the American Museum of Natural History has realistic animation, music, and captions (6:30). Wanderers: apod.nasa.gov/apod/ap141208.html. This video provides a tour of the solar system, with narrative by Carl Sagan, imagining other worlds with dramatically realistic paintings (3:50).

# Observing the Sky: The Birth of Astronomy ## Thinking Ahead Much to your surprise, a member of the Flat Earth Society moves in next door. He believes that Earth is flat and all the NASA images of a spherical Earth are either faked or simply show the round (but flat) disk of Earth from above. How could you prove to your new neighbor that Earth really is a sphere? (When you’ve thought about this on your own, you can check later in the chapter for some suggested answers.) Today, few people really spend much time looking at the night sky. In ancient days, before electric lights robbed so many people of the beauty of the sky, the stars and planets were an important aspect of everyone’s daily life. All the records that we have—on paper and in stone—show that ancient civilizations around the world noticed, worshipped, and tried to understand the lights in the sky and fit them into their own view of the world. These ancient observers found both majestic regularity and never-ending surprise in the motions of the heavens. Through their careful study of the planets, the Greeks and later the Romans laid the foundation of the science of astronomy.

# Observing the Sky: The Birth of Astronomy ## The Sky Above ### Learning Objectives By the end of this section, you will be able to: 1. Define the main features of the celestial sphere 2. Explain the system astronomers use to describe the sky 3. Describe how motions of the stars appear to us on Earth 4. Describe how motions of the Sun, Moon, and planets appear to us on Earth 5. Understand the modern meaning of the term constellation Our senses suggest to us that Earth is the center of the universe—the hub around which the heavens turn. This geocentric (Earth-centered) view was what almost everyone believed until the European Renaissance. After all, it is simple, logical, and seemingly self-evident. Furthermore, the geocentric perspective reinforced those philosophical and religious systems that taught the unique role of human beings as the central focus of the cosmos. However, the geocentric view happens to be wrong. One of the great themes of our intellectual history is the overthrow of the geocentric perspective. Let us, therefore, take a look at the steps by which we reevaluated the place of our world in the cosmic order. ### The Celestial Sphere If you go on a camping trip or live far from city lights, your view of the sky on a clear night is pretty much identical to that seen by people all over the world before the invention of the telescope. Gazing up, you get the impression that the sky is a great hollow dome with you at the center (), and all the stars are an equal distance from you on the surface of the dome. The top of that dome, the point directly above your head, is called the zenith, and where the dome meets Earth is called the horizon. From the sea or a flat prairie, it is easy to see the horizon as a circle around you, but from most places where people live today, the horizon is at least partially hidden by mountains, trees, buildings, or smog. If you lie back in an open field and observe the night sky for hours, as ancient shepherds and travelers regularly did, you will see stars rising on the eastern horizon (just as the Sun and Moon do), moving across the dome of the sky in the course of the night, and setting on the western horizon. Watching the sky turn like this night after night, you might eventually get the idea that the dome of the sky is really part of a great sphere that is turning around you, bringing different stars into view as it turns. The early Greeks regarded the sky as just such a celestial sphere (). Some thought of it as an actual sphere of transparent crystalline material, with the stars embedded in it like tiny jewels. Today, we know that it is not the celestial sphere that turns as night and day proceed, but rather the planet on which we live. We can put an imaginary stick through Earth’s North and South Poles, representing our planet’s axis. It is because Earth turns on this axis every 24 hours that we see the Sun, Moon, and stars rise and set with clockwork regularity. Today, we know that these celestial objects are not really on a dome, but at greatly varying distances from us in space. Nevertheless, it is sometimes still convenient to talk about the celestial dome or sphere to help us keep track of objects in the sky. There is even a special theater, called a planetarium, in which we project a simulation of the stars and planets onto a white dome. As the celestial sphere rotates, the objects on it maintain their positions with respect to one another. A grouping of stars such as the Big Dipper has the same shape during the course of the night, although it turns with the sky. During a single night, even objects we know to have significant motions of their own, such as the nearby planets, seem fixed relative to the stars. Only meteors—brief “shooting stars” that flash into view for just a few seconds—move appreciably with respect to other objects on the celestial sphere. (This is because they are not stars at all. Rather, they are small pieces of cosmic dust, burning up as they hit Earth’s atmosphere.) We can use the fact that the entire celestial sphere seems to turn together to help us set up systems for keeping track of what things are visible in the sky and where they happen to be at a given time. ### Celestial Poles and Celestial Equator To help orient us in the turning sky, astronomers use a system that extends Earth’s axis points into the sky. Imagine a line going through Earth, connecting the North and South Poles. This is Earth’s axis, and Earth rotates about this line. If we extend this imaginary line outward from Earth, the points where this line intersects the celestial sphere are called the north celestial pole and the south celestial pole. As Earth rotates about its axis, the sky appears to turn in the opposite direction around those celestial poles (). We also (in our imagination) throw Earth’s equator onto the sky and call this the celestial equator. It lies halfway between the celestial poles, just as Earth’s equator lies halfway between our planet’s poles. Now let’s imagine how riding on different parts of our spinning Earth affects our view of the sky. The apparent motion of the celestial sphere depends on your latitude (position north or south of the equator). First of all, notice that Earth’s axis is pointing at the celestial poles, so these two points in the sky do not appear to turn. If you stood at the North Pole of Earth, for example, you would see the north celestial pole overhead, at your zenith. The celestial equator, 90° from the celestial poles, would lie along your horizon. As you watched the stars during the course of the night, they would all circle around the celestial pole, with none rising or setting. Only that half of the sky north of the celestial equator is ever visible to an observer at the North Pole. Similarly, an observer at the South Pole would see only the southern half of the sky. If you were at Earth’s equator, on the other hand, you see the celestial equator (which, after all, is just an “extension” of Earth’s equator) pass overhead through your zenith. The celestial poles, being 90° from the celestial equator, must then be at the north and south points on your horizon. As the sky turns, all stars rise and set; they move straight up from the east side of the horizon and set straight down on the west side. During a 24-hour period, all stars are above the horizon exactly half the time. (Of course, during some of those hours, the Sun is too bright for us to see them.) What would an observer in the latitudes of the United States or Europe see? Remember, we are neither at Earth’s pole nor at the equator, but in between them. For those in the continental United States and Europe, the north celestial pole is neither overhead nor on the horizon, but in between. It appears above the northern horizon at an angular height, or altitude, equal to the observer’s latitude. In San Francisco, for example, where the latitude is 38° N, the north celestial pole is 38° above the northern horizon. For an observer at 38° N latitude, the south celestial pole is 38° below the southern horizon and, thus, never visible. As Earth turns, the whole sky seems to pivot about the north celestial pole. For this observer, stars within 38° of the North Pole can never set. They are always above the horizon, day and night. This part of the sky is called the north circumpolar zone. For observers in the continental United States, the Big Dipper, Little Dipper, and Cassiopeia are examples of star groups in the north circumpolar zone. On the other hand, stars within 38° of the south celestial pole never rise. That part of the sky is the south circumpolar zone. To most U.S. observers, the Southern Cross is in that zone. (Don’t worry if you are not familiar with the star groups just mentioned; we will introduce them more formally later on.) At this particular time in Earth’s history, there happens to be a star very close to the north celestial pole. It is called Polaris, the pole star, and has the distinction of being the star that moves the least amount as the northern sky turns each day. Because it moved so little while the other stars moved much more, it played a special role in the mythology of several Native American tribes, for example (some called it the “fastener of the sky”). ### Rising and Setting of the Sun We described the movement of stars in the night sky, but what about during the daytime? The stars continue to circle during the day, but the brilliance of the Sun makes them difficult to see. (The Moon can often be seen in the daylight, however.) On any given day, we can think of the Sun as being located at some position on the hypothetical celestial sphere. When the Sun rises—that is, when the rotation of Earth carries the Sun above the horizon—sunlight is scattered by the molecules of our atmosphere, filling our sky with light and hiding the stars above the horizon. For thousands of years, astronomers have been aware that the Sun does more than just rise and set. It changes position gradually on the celestial sphere, moving each day about 1° to the east relative to the stars. Very reasonably, the ancients thought this meant the Sun was slowly moving around Earth, taking a period of time we call 1 year to make a full circle. Today, of course, we know it is Earth that is going around the Sun, but the effect is the same: the Sun’s position in our sky changes day to day. We have a similar experience when we walk around a campfire at night; we see the flames appear in front of each person seated about the fire in turn. The path the Sun appears to take around the celestial sphere each year is called the ecliptic (). Because of its motion on the ecliptic, the Sun rises about 4 minutes later each day with respect to the stars. Earth must make just a bit more than one complete rotation (with respect to the stars) to bring the Sun up again. As the months go by and we look at the Sun from different places in our orbit, we see it projected against different places in our orbit, and thus against different stars in the background ( and )—or we would, at least, if we could see the stars in the daytime. In practice, we must deduce which stars lie behind and beyond the Sun by observing the stars visible in the opposite direction at night. After a year, when Earth has completed one trip around the Sun, the Sun will appear to have completed one circuit of the sky along the ecliptic. The ecliptic does not lie along the celestial equator but is inclined to it at an angle of about 23.5°. In other words, the Sun’s annual path in the sky is not linked with Earth’s equator. This is because our planet’s axis of rotation is tilted by about 23.5° from a vertical line sticking out of the plane of the ecliptic (). Being tilted from “straight up” is not at all unusual among celestial bodies; Uranus and Pluto are actually tilted so much that they orbit the Sun “on their side.” The inclination of the ecliptic is the reason the Sun moves north and south in the sky as the seasons change. In Earth, Moon, and Sky, we discuss the progression of the seasons in more detail. ### Fixed and Wandering Stars The Sun is not the only object that moves among the fixed stars. The Moon and each of the planets that are visible to the unaided eye—Mercury, Venus, Mars, Jupiter, Saturn, and Uranus (although just barely)—also change their positions slowly from day to day. During a single day, the Moon and planets all rise and set as Earth turns, just as the Sun and stars do. But like the Sun, they have independent motions among the stars, superimposed on the daily rotation of the celestial sphere. Noticing these motions, the Greeks of 2000 years ago distinguished between what they called the fixed stars—those that maintain fixed patterns among themselves through many generations—and the wandering stars, or planets. The word “planet,” in fact, means “wanderer” in ancient Greek. Today, we do not regard the Sun and Moon as planets, but the ancients applied the term to all seven of the moving objects in the sky. Much of ancient astronomy was devoted to observing and predicting the motions of these celestial wanderers. They even dedicated a unit of time, the week, to the seven objects that move on their own; that’s why there are 7 days in a week. The Moon, being Earth’s nearest celestial neighbor, has the fastest apparent motion; it completes a trip around the sky in about 1 month (or moonth). To do this, the Moon moves about 12°, or 24 times its own apparent width on the sky, each day. The individual paths of the Moon and planets in the sky all lie close to the ecliptic, although not exactly on it. This is because the paths of the planets about the Sun, and of the Moon about Earth, are all in nearly the same plane, as if they were circles on a huge sheet of paper. The planets, the Sun, and the Moon are thus always found in the sky within a narrow 18-degree-wide belt, centered on the ecliptic, called the zodiac (). (The root of the term “zodiac” is the same as that of the word “zoo” and means a collection of animals; many of the patterns of stars within the zodiac belt reminded the ancients of animals, such as a fish or a goat.) How the planets appear to move in the sky as the months pass is a combination of their actual motions plus the motion of Earth about the Sun; consequently, their paths are somewhat complex. As we will see, this complexity has fascinated and challenged astronomers for centuries. ### Constellations The backdrop for the motions of the “wanderers” in the sky is the canopy of stars. If there were no clouds in the sky and we were on a flat plain with nothing to obstruct our view, we could see about 3000 stars with the unaided eye. To find their way around such a multitude, the ancients found groupings of stars that made some familiar geometric pattern or (more rarely) resembled something they knew. Each civilization found its own patterns in the stars, much like a modern Rorschach test in which you are asked to discern patterns or pictures in a set of inkblots. The ancient Chinese, Egyptians, and Greeks, among others, found their own groupings—or constellations—of stars. These were helpful in navigating among the stars and in passing their star lore on to their children. You may be familiar with some of the old star patterns we still use today, such as the Big Dipper, Little Dipper, and Orion the hunter, with his distinctive belt of three stars (). However, many of the stars we see are not part of a distinctive star pattern at all, and a telescope reveals millions of stars too faint for the eye to see. Therefore, during the early decades of the 20th century, astronomers from many countries decided to establish a more formal system for organizing the sky. Today, we use the term constellation to mean one of 88 sectors into which we divide the sky, much as the United States is divided into 50 states. The modern boundaries between the constellations are imaginary lines in the sky running north–south and east–west, so that each point in the sky falls in a specific constellation, although, like the states, not all constellations are the same size. All the constellations are listed in Appendix L. Whenever possible, we have named each modern constellation after the Latin translations of one of the ancient Greek star patterns that lies within it. Thus, the modern constellation of Orion is a kind of box on the sky, which includes, among many other objects, the stars that made up the ancient picture of the hunter. Some people use the term asterism to denote an especially noticeable star pattern within a constellation (or sometimes spanning parts of several constellations). For example, the Big Dipper is an asterism within the constellation of Ursa Major, the Big Bear. Students are sometimes puzzled because the constellations seldom resemble the people or animals for which they were named. In all likelihood, the Greeks themselves did not name groupings of stars because they looked like actual people or subjects (any more than the outline of Washington state resembles George Washington). Rather, they named sections of the sky in honor of the characters in their mythology and then fit the star configurations to the animals and people as best they could. The direct evidence of our senses supports a geocentric perspective, with the celestial sphere pivoting on the celestial poles and rotating about a stationary Earth. We see only half of this sphere at one time, limited by the horizon; the point directly overhead is our zenith. The Sun’s annual path on the celestial sphere is the ecliptic—a line that runs through the center of the zodiac, which is the 18-degree-wide strip of the sky within which we always find the Moon and planets. The celestial sphere is organized into 88 constellations, or sectors.

# Observing the Sky: The Birth of Astronomy ## Ancient Astronomy ### Learning Objectives By the end of this section, you will be able to: 1. Describe early examples of astronomy around the world 2. Explain how Greek astronomers were able to deduce that Earth is spherical 3. Explain how Greek astronomers were able to calculate Earth’s size 4. Describe the motion of Earth called precession 5. Describe Ptolemy’s geocentric system of planetary motion Let us now look briefly back into history. Much of modern Western civilization is derived in one way or another from the ideas of the ancient Greeks and Romans, and this is true in astronomy as well. However, many other ancient cultures also developed sophisticated systems for observing and interpreting the sky. ### Astronomy around the World Ancient Babylonian, Assyrian, and Egyptian astronomers knew the approximate length of the year. The Egyptians of 3000 years ago, for example, adopted a calendar based on a 365-day year. They kept careful track of the rising time of the bright star Sirius in the predawn sky, which has a yearly cycle that corresponded with the flooding of the Nile River. The Chinese also had a working calendar; they determined the length of the year at about the same time as the Egyptians. The Chinese also recorded comets, bright meteors, and dark spots on the Sun. (Many types of astronomical objects were introduced in Science and the Universe: A Brief Tour. If you are not familiar with terms like comets and meteors, you may want to review that chapter.) Later, Chinese astronomers kept careful records of “guest stars”—those that are normally too faint to see but suddenly flare up to become visible to the unaided eye for a few weeks or months. We still use some of these records in studying stars that exploded a long time ago. The Mayan culture in Mexico and Central America developed a sophisticated calendar based on the planet Venus, and they made astronomical observations from sites dedicated to this purpose a thousand years ago. The Polynesians learned to navigate by the stars over hundreds of kilometers of open ocean—a skill that enabled them to colonize new islands far away from where they began. In Britain, before the widespread use of writing, ancient people used stones to keep track of the motions of the Sun and Moon. We still find some of the great stone circles they built for this purpose, dating from as far back as 2800 BCE. The best known of these is Stonehenge, which is discussed in Earth, Moon, and Sky.For resources providing more information about the astronomy of diverse cultures around the world, please see ### Early Greek and Roman Cosmology Our concept of the cosmos—its basic structure and origin—is called cosmology, a word with Greek roots. Before the invention of telescopes, humans had to depend on the simple evidence of their senses for a picture of the universe. The ancients developed cosmologies that combined their direct view of the heavens with a rich variety of philosophical and religious symbolism. At least 2000 years before Columbus, educated people in the eastern Mediterranean region knew Earth was round. Belief in a spherical Earth may have stemmed from the time of Pythagoras, a philosopher and mathematician who lived 2500 years ago. He believed circles and spheres to be “perfect forms” and suggested that Earth should therefore be a sphere. As evidence that the gods liked spheres, the Greeks cited the fact that the Moon is a sphere, using evidence we describe later. The writings of Aristotle (384–322 BCE), the tutor of Alexander the Great, summarize many of the ideas of his day. They describe how the progression of the Moon’s phases—its apparent changing shape—results from our seeing different portions of the Moon’s sunlit hemisphere as the month goes by (see Earth, Moon, and Sky). Aristotle also knew that the Sun has to be farther away from Earth than is the Moon because occasionally the Moon passed exactly between Earth and the Sun and hid the Sun temporarily from view. We call this a solar eclipse. Aristotle cited convincing arguments that Earth must be round. First is the fact that as the Moon enters or emerges from Earth’s shadow during an eclipse of the Moon, the shape of the shadow seen on the Moon is always round (). Only a spherical object always produces a round shadow. If Earth were a disk, for example, there would be some occasions when the sunlight would strike it edge-on and its shadow on the Moon would be a line. As a second argument, Aristotle explained that travelers who go south a significant distance are able to observe stars that are not visible farther north. And the height of the North Star—the star nearest the north celestial pole—decreases as a traveler moves south. On a flat Earth, everyone would see the same stars overhead. The only possible explanation is that the traveler must have moved over a curved surface on Earth, showing stars from a different angle. (See the How Do We Know Earth Is Round? feature for more ideas on proving Earth is round.) One Greek thinker, Aristarchus of Samos (310–230 BCE), even suggested that Earth was moving around the Sun, but Aristotle and most of the ancient Greek scholars rejected this idea. One of the reasons for their conclusion was the thought that if Earth moved about the Sun, they would be observing the stars from different places along Earth’s orbit. As Earth moved along, nearby stars should shift their positions in the sky relative to more distant stars. In a similar way, we see foreground objects appear to move against a more distant background whenever we are in motion. When we ride on a train, the trees in the foreground appear to shift their position relative to distant hills as the train rolls by. Unconsciously, we use this phenomenon all of the time to estimate distances around us. The apparent shift in the direction of an object as a result of the motion of the observer is called parallax. We call the shift in the apparent direction of a star due to Earth’s orbital motion stellar parallax. The Greeks made dedicated efforts to observe stellar parallax, even enlisting the aid of Greek soldiers with the clearest vision, but to no avail. The brighter (and presumably nearer) stars just did not seem to shift as the Greeks observed them in the spring and then again in the fall (when Earth is on the opposite side of the Sun). This meant either that Earth was not moving or that the stars had to be so tremendously far away that the parallax shift was immeasurably small. A cosmos of such enormous extent required a leap of imagination that most ancient philosophers were not prepared to make, so they retreated to the safety of the Earth-centered view, which would dominate Western thinking for nearly two millennia. ### Measurement of Earth by Eratosthenes The Greeks not only knew Earth was round, but also they were able to measure its size. The first fairly accurate determination of Earth’s diameter was made in about 200 BCE by Eratosthenes (276–194 BCE), a Greek living in Alexandria, Egypt. His method was a geometric one, based on observations of the Sun. The Sun is so distant from us that all the light rays that strike our planet approach us along essentially parallel lines. To see why, look at . Take a source of light near Earth—say, at position A. Its rays strike different parts of Earth along diverging paths. From a light source at B, or at C (which is still farther away), the angle between rays that strike opposite parts of Earth is smaller. The more distant the source, the smaller the angle between the rays. For a source infinitely distant, the rays travel along parallel lines. Of course, the Sun is not infinitely far away, but given its distance of 150 million kilometers, light rays striking Earth from a point on the Sun diverge from one another by an angle far too small to be observed with the unaided eye. As a consequence, if people all over Earth who could see the Sun were to point at it, their fingers would, essentially, all be parallel to one another. (The same is also true for the planets and stars—an idea we will use in our discussion of how telescopes work.) Eratosthenes was told that on the first day of summer at Syene, Egypt (near modern Aswan), sunlight struck the bottom of a vertical well at noon. This indicated that the Sun was directly over the well—meaning that Syene was on a direct line from the center of Earth to the Sun. At the corresponding time and date in Alexandria, Eratosthenes observed the shadow a column made and saw that the Sun was not directly overhead, but was slightly south of the zenith, so that its rays made an angle with the vertical equal to about 1/50 of a circle (7°). Because the Sun’s rays striking the two cities are parallel to one another, why would the two rays not make the same angle with Earth’s surface? Eratosthenes reasoned that the curvature of the round Earth meant that “straight up” was not the same in the two cities. And the measurement of the angle in Alexandria, he realized, allowed him to figure out the size of Earth. Alexandria, he saw, must be 1/50 of Earth’s circumference north of Syene (). Alexandria had been measured to be 5000 stadia north of Syene. (The stadium was a Greek unit of length, derived from the length of the racetrack in a stadium.) Eratosthenes thus found that Earth’s circumference must be , or 250,000 stadia. It is not possible to evaluate precisely the accuracy of Eratosthenes solution because there is doubt about which of the various kinds of Greek stadia he used as his unit of distance. If it was the common Olympic stadium, his result is about 20% too large. According to another interpretation, he used a stadium equal to about 1/6 kilometer, in which case his figure was within 1% of the correct value of 40,000 kilometers. Even if his measurement was not exact, his success at measuring the size of our planet by using only shadows, sunlight, and the power of human thought was one of the greatest intellectual achievements in history. ### Hipparchus and Precession Perhaps the greatest astronomer of antiquity was Hipparchus, born in Nicaea in what is present-day Turkey. He erected an observatory on the island of Rhodes around 150 BCE, when the Roman Republic was expanding its influence throughout the Mediterranean region. There he measured, as accurately as possible, the positions of objects in the sky, compiling a pioneering star catalog with about 850 entries. He designated celestial coordinates for each star, specifying its position in the sky, just as we specify the position of a point on Earth by giving its latitude and longitude. He also divided the stars into apparent magnitudes according to their apparent brightness. He called the brightest ones “stars of the first magnitude”; the next brightest group, “stars of the second magnitude”; and so forth. This rather arbitrary system, in modified form, still remains in use today (although it is less and less useful for professional astronomers). By observing the stars and comparing his data with older observations, Hipparchus made one of his most remarkable discoveries: the position in the sky of the north celestial pole had altered over the previous century and a half. Hipparchus deduced correctly that this had happened not only during the period covered by his observations, but was in fact happening all the time: the direction around which the sky appears to rotate changes slowly but continuously. Recall from the section on celestial poles and the celestial equator that the north celestial pole is just the projection of Earth’s North Pole into the sky. If the north celestial pole is wobbling around, then Earth itself must be doing the wobbling. Today, we understand that the direction in which Earth’s axis points does indeed change slowly but regularly—a motion we call precession. If you have ever watched a spinning top wobble, you observed a similar kind of motion. The top’s axis describes a path in the shape of a cone, as Earth’s gravity tries to topple it (). Because our planet is not an exact sphere, but bulges a bit at the equator, the pulls of the Sun and Moon cause it to wobble like a top. It takes about 26,000 years for Earth’s axis to complete one circle of precession. As a result of this motion, the point where our axis points in the sky changes as time goes on. While Polaris is the star closest to the north celestial pole today (it will reach its closest point around the year 2100), the star Vega in the constellation of Lyra will be the North Star in 14,000 years. ### Ptolemy’s Model of the Solar System The last great astronomer of the Roman era was Claudius Ptolemy (or Ptolemaeus), who flourished in Alexandria in about the year 140. He wrote a mammoth compilation of astronomical knowledge, which today is called by its Arabic name, Almagest (meaning “The Greatest”). Almagest does not deal exclusively with Ptolemy’s own work; it includes a discussion of the astronomical achievements of the past, principally those of Hipparchus. Today, it is our main source of information about the work of Hipparchus and other Greek astronomers. Ptolemy’s most important contribution was a geometric representation of the solar system that predicted the positions of the planets for any desired date and time. Hipparchus, not having enough data on hand to solve the problem himself, had instead amassed observational material for posterity to use. Ptolemy supplemented this material with new observations of his own and produced a cosmological model that endured more than a thousand years, until the time of Copernicus. The complicating factor in explaining the motions of the planets is that their apparent wandering in the sky results from the combination of their own motions with Earth’s orbital revolution. As we watch the planets from our vantage point on the moving Earth, it is a little like watching a car race while you are competing in it. Sometimes opponents’ cars pass you, but at other times you pass them, making them appear to move backward for a while with respect to you. shows the motion of Earth and a planet farther from the Sun—in this case, Mars. Earth travels around the Sun in the same direction as the other planet and in nearly the same plane, but its orbital speed is faster. As a result, it overtakes the planet periodically, like a faster race car on the inside track. The figure shows where we see the planet in the sky at different times. The path of the planet among the stars is illustrated in the star field on the right side of the figure. Normally, planets move eastward in the sky over the weeks and months as they orbit the Sun, but from positions B to D in , as Earth passes the planets in our example, it appears to drift backward, moving west in the sky. Even though it is actually moving to the east, the faster-moving Earth has overtaken it and seems, from our perspective, to be leaving it behind. As Earth rounds its orbit toward position E, the planet again takes up its apparent eastward motion in the sky. The temporary apparent westward motion of a planet as Earth swings between it and the Sun is called retrograde motion. Such backward motion is much easier for us to understand today, now that we know Earth is one of the moving planets and not the unmoving center of all creation. But Ptolemy was faced with the far more complex problem of explaining such motion while assuming a stationary Earth. Furthermore, because the Greeks believed that celestial motions had to be circles, Ptolemy had to construct his model using circles alone. To do it, he needed dozens of circles, some moving around other circles, in a complex structure that makes a modern viewer dizzy. But we must not let our modern judgment cloud our admiration for Ptolemy’s achievement. In his day, a complex universe centered on Earth was perfectly reasonable and, in its own way, quite beautiful. However, as Alfonso X, the King of Castile, was reported to have said after having the Ptolemaic system of planet motions explained to him, “If the Lord Almighty had consulted me before embarking upon Creation, I should have recommended something simpler.” Ptolemy solved the problem of explaining the observed motions of planets by having each planet revolve in a small orbit called an epicycle. The center of the epicycle then revolved about Earth on a circle called a deferent (). When the planet is at position x in on the epicycle orbit, it is moving in the same direction as the center of the epicycle; from Earth, the planet appears to be moving eastward. When the planet is at y, however, its motion is in the direction opposite to the motion of the epicycle’s center around Earth. By choosing the right combination of speeds and distances, Ptolemy succeeded in having the planet moving westward at the correct speed and for the correct interval of time, thus replicating retrograde motion with his model. However, we shall see in Orbits and Gravity that the planets, like Earth, travel about the Sun in orbits that are ellipses, not circles. Their actual behavior cannot be represented accurately by a scheme of uniform circular motions. In order to match the observed motions of the planets, Ptolemy had to center the deferent circles, not on Earth, but at points some distance from Earth. In addition, he introduced uniform circular motion around yet another axis, called the equant point. All of these considerably complicated his scheme. It is a tribute to the genius of Ptolemy as a mathematician that he was able to develop such a complex system to account successfully for the observations of planets. It may be that Ptolemy did not intend for his cosmological model to describe reality, but merely to serve as a mathematical representation that allowed him to predict the positions of the planets at any time. Whatever his thinking, his model, with some modifications, was eventually accepted as authoritative in the Muslim world and (later) in Christian Europe. Ancient Greeks such as Aristotle recognized that Earth and the Moon are spheres, and understood the phases of the Moon, but because of their inability to detect stellar parallax, they rejected the idea that Earth moves. Eratosthenes measured the size of Earth with surprising precision. Hipparchus carried out many astronomical observations, making a star catalog, defining the system of stellar magnitudes, and discovering precession from the apparent shift in the position of the north celestial pole. Ptolemy of Alexandria summarized classic astronomy in his Almagest; he explained planetary motions, including retrograde motion, with remarkably good accuracy using a model centered on Earth. This geocentric model, based on combinations of uniform circular motion using epicycles, was accepted as authority for more than a thousand years.

# Observing the Sky: The Birth of Astronomy ## Astrology and Astronomy ### Learning Objectives By the end of this section, you will be able to: 1. Explain the origins of astrology 2. Explain what a horoscope is 3. Summarize the arguments that invalidate astrology as a scientific practice Many ancient cultures regarded the planets and stars as representatives or symbols of the gods or other supernatural forces that controlled their lives. For them, the study of the heavens was not an abstract subject; it was connected directly to the life-and-death necessity of understanding the actions of the gods and currying favor with them. Before the time of our scientific perspectives, everything that happened in nature—from the weather, to diseases and accidents, to celestial surprises such as eclipses or new comets—was thought to be an expression of the whims or displeasure of the gods. Any signs that helped people understand what these gods had in mind were considered extremely important. The movements of the seven objects that had the power to “wander” through the realm of the sky—the Sun, the Moon, and five planets visible to the unaided eye—clearly must have special significance in such a system of thinking. Most ancient cultures associated these seven objects with various supernatural rulers in their pantheon and kept track of them for religious reasons. Even in the comparatively sophisticated Greece of antiquity, the planets had the names of gods and were credited with having the same powers and influences as the gods whose names they bore. From such ideas was born the ancient system called astrology, still practiced by some people today, in which the positions of these bodies among the stars of the zodiac are thought to hold the key to understanding what we can expect from life. ### The Beginnings of Astrology Astrology began in Babylonia about two and half millennia ago. The Babylonians, believing the planets and their motions influenced the fortunes of kings and nations, used their knowledge of astronomy to guide their rulers. When the Babylonian culture was absorbed by the Greeks, astrology gradually came to influence the entire Western world and eventually spread to Asia as well. By the 2nd century BCE the Greeks democratized astrology by developing the idea that the planets influence every individual. In particular, they believed that the configuration of the Sun, Moon, and planets at the moment of birth affected a person’s personality and fortune—a doctrine called natal astrology. Natal astrology reached its peak with Ptolemy 400 years later. As famous for his astrology as for his astronomy, Ptolemy compiled the Tetrabiblos, a treatise on astrology that remains the “bible” of the subject. It is essentially this ancient religion, older than Christianity or Islam, that is still practiced by today’s astrologers. ### The Horoscope The key to natal astrology is the horoscope, a chart showing the positions of the planets in the sky at the moment of an individual’s birth. The word “horoscope” comes from the Greek words hora (meaning “time”) and skopos (meaning a “watcher” or “marker”), so “horoscope” can literally be translated as “marker of the hour.” When a horoscope is charted, the planets (including the Sun and Moon, classed as wanderers by the ancients) must first be located in the zodiac. At the time astrology was set up, the zodiac was divided into 12 sectors called signs (), each 30° long. Each sign was named after a constellation in the sky through which the Sun, Moon, and planets were seen to pass—the sign of Virgo after the constellation of Virgo, for example. When someone today casually asks you your “sign,” they are asking for your “sun sign”—which zodiac sign the Sun was in at the moment you were born. However, more than 2000 years have passed since the signs received their names from the constellations. Because of precession, the constellations of the zodiac slide westward along the ecliptic, going once around the sky in about 26,000 years. Thus, today the real stars have slipped around by about 1/12 of the zodiac—about the width of one sign. In most forms of astrology, however, the signs have remained assigned to the dates of the year they had when astrology was first set up. This means that the astrological signs and the real constellations are out of step; the sign of Aries, for example, now occupies the constellation of Pisces. When you look up your sun sign in a newspaper astrology column, the name of the sign associated with your birthday is no longer the name of the constellation in which the Sun was actually located when you were born. To know that constellation, you must look for the sign before the one that includes your birthday. A complete horoscope shows the location of not only the Sun, but also the Moon and each planet in the sky by indicating its position in the appropriate sign of the zodiac. However, as the celestial sphere turns (owing to the rotation of Earth), the entire zodiac moves across the sky to the west, completing a circuit of the heavens each day. Thus, the position in the sky (or “house” in astrology) must also be calculated. There are more or less standardized rules for the interpretation of the horoscope, most of which (at least in Western schools of astrology) are derived from the Tetrabiblos of Ptolemy. Each sign, each house, and each planet—the last acting as a center of force—is supposed to be associated with particular matters in a person’s life. The detailed interpretation of a horoscope is a very complicated business, and there are many schools of astrological thought on how it should be done. Although some of the rules may be standardized, how each rule is to be weighed and applied is a matter of judgment—and “art.” It also means that it is very difficult to tie down astrology to specific predictions or to get the same predictions from different astrologers. ### Astrology Today Astrologers today use the same basic principles laid down by Ptolemy nearly 2000 years ago. They cast horoscopes (a process much simplified by the development of appropriate computer programs) and suggest interpretations. Sun sign astrology (which you read in the newspapers and many magazines) is a recent, simplified variant of natal astrology. Although even professional astrologers do not place much trust in such a limited scheme, which tries to fit everyone into just 12 groups, sun sign astrology is taken seriously by many people (perhaps because it is discussed so commonly in the media). Today, we know much more about the nature of the planets as physical bodies, as well as about human genetics, than the ancients could. It is hard to imagine how the positions of the Sun, Moon, or planets in the sky at the moment of our birth could have anything to do with our personality or future. There are no known forces, not gravity or anything else, that could cause such effects. (For example, a straightforward calculation shows that the gravitational pull of the obstetrician delivering a newborn baby is greater than that of Mars.) Astrologers thus have to argue there must be unknown forces exerted by the planets that depend on their configurations with respect to one another and that do not vary according to the distance of the planet—forces for which there is no shred of evidence. Another curious aspect of astrology is its emphasis on planet configurations at birth. What about the forces that might influence us at conception? Isn’t our genetic makeup more important for determining our personality than the circumstances of our birth? Would we really be a different person if we had been born a few hours earlier or later, as astrology claims? (Back when astrology was first conceived, birth was thought of as a moment of magic significance, but today we understand a lot more about the long process that precedes it.) Actually, very few well-educated people today buy the claim that our entire lives are predetermined by astrological influences at birth, but many people apparently believe that astrology has validity as an indicator of affinities and personality. A surprising number of Americans make judgments about people—whom they will hire, associate with, and even marry—on the basis of astrological information. To be sure, these are difficult decisions, and you might argue that we should use any relevant information that might help us to make the right choices. But does astrology actually provide any useful information on human personality? This is the kind of question that can be tested using the scientific method (see Testing Astrology). The results of hundreds of tests are all the same: there is no evidence that natal astrology has any predictive power, even in a statistical sense. Why, then, do people often seem to have anecdotes about how well their own astrologer advised them? Effective astrologers today use the language of the zodiac and the horoscope only as the outward trappings of their craft. Mostly they work as amateur therapists, offering simple truths that clients like or need to hear. (Recent studies have shown that just about any sort of short-term therapy makes people feel a little better because the very act of talking about our problems with someone who listens attentively is, in itself, beneficial.) The scheme of astrology has no basis in scientific fact, however; at best, it can be described as a pseudoscience. It is an interesting historical system, left over from prescientific days and best remembered for the impetus it gave people to learn the cycles and patterns of the sky. From it grew the science of astronomy, which is our main subject for discussion. The ancient religion of astrology, with its main contribution to civilization a heightened interest in the heavens, began in Babylonia. It reached its peak in the Greco-Roman world, especially as recorded in the Tetrabiblos of Ptolemy. Natal astrology is based on the assumption that the positions of the planets at the time of our birth, as described by a horoscope, determine our future. However, modern tests clearly show that there is no evidence for this, even in a broad statistical sense, and there is no verifiable theory to explain what might cause such an astrological influence.

# Observing the Sky: The Birth of Astronomy ## The Birth of Modern Astronomy ### Learning Objectives By the end of this section, you will be able to: 1. Explain how Copernicus developed the heliocentric model of the solar system 2. Explain the Copernican model of planetary motion and describe evidence or arguments in favor of it 3. Describe Galileo’s discoveries concerning the study of motion and forces 4. Explain how Galileo’s discoveries tilted the balance of evidence in favor of the Copernican model Astronomy made no major advances in strife-torn medieval Europe. The birth and expansion of Islam after the seventh century led to a flowering of Arabic and Jewish cultures that preserved, translated, and added to many of the astronomical ideas of the Greeks. Many of the names of the brightest stars, for example, are today taken from the Arabic, as are such astronomical terms as “zenith.” As European culture began to emerge from its long, dark age, trading with Arab countries led to a rediscovery of ancient texts such as Almagest and to a reawakening of interest in astronomical questions. This time of rebirth (in French, “renaissance”) in astronomy was embodied in the work of Copernicus (). ### Copernicus One of the most important events of the Renaissance was the displacement of Earth from the center of the universe, an intellectual revolution initiated by a Polish cleric in the sixteenth century. Nicolaus Copernicus was born in Torun, a mercantile town along the Vistula River. His training was in law and medicine, but his main interests were astronomy and mathematics. His great contribution to science was a critical reappraisal of the existing theories of planetary motion and the development of a new Sun-centered, or heliocentric, model of the solar system. Copernicus concluded that Earth is a planet and that all the planets circle the Sun. Only the Moon orbits Earth (). Copernicus described his ideas in detail in his book De Revolutionibus Orbium Coelestium (On the Revolution of Celestial Orbs), published in 1543, the year of his death. By this time, the old Ptolemaic system needed significant adjustments to predict the positions of the planets correctly. Copernicus wanted to develop an improved theory from which to calculate planetary positions, but in doing so, he was himself not free of all traditional prejudices. He began with several assumptions that were common in his time, such as the idea that the motions of the heavenly bodies must be made up of combinations of uniform circular motions. But he did not assume (as most people did) that Earth had to be in the center of the universe, and he presented a defense of the heliocentric system that was elegant and persuasive. His ideas, although not widely accepted until more than a century after his death, were much discussed among scholars and, ultimately, had a profound influence on the course of world history. One of the objections raised to the heliocentric theory was that if Earth were moving, we would all sense or feel this motion. Solid objects would be ripped from the surface, a ball dropped from a great height would not strike the ground directly below it, and so forth. But a moving person is not necessarily aware of that motion. We have all experienced seeing an adjacent train, bus, or ship appear to move, only to discover that it is we who are moving. Copernicus argued that the apparent motion of the Sun about Earth during the course of a year could be represented equally well by a motion of Earth about the Sun. He also reasoned that the apparent rotation of the celestial sphere could be explained by assuming that Earth rotates while the celestial sphere is stationary. To the objection that if Earth rotated about an axis it would fly into pieces, Copernicus answered that if such motion would tear Earth apart, the still faster motion of the much larger celestial sphere required by the geocentric hypothesis would be even more devastating. ### The Heliocentric Model The most important idea in Copernicus’ De Revolutionibus is that Earth is one of six (then-known) planets that revolve about the Sun. Using this concept, he was able to work out the correct general picture of the solar system. He placed the planets, starting nearest the Sun, in the correct order: Mercury, Venus, Earth, Mars, Jupiter, and Saturn. Further, he deduced that the nearer a planet is to the Sun, the greater its orbital speed. With his theory, he was able to explain the complex retrograde motions of the planets without epicycles and to work out a roughly correct scale for the solar system. Copernicus could not prove that Earth revolves about the Sun. In fact, with some adjustments, the old Ptolemaic system could have accounted, as well, for the motions of the planets in the sky. But Copernicus pointed out that the Ptolemaic cosmology was clumsy and lacking the beauty and symmetry of its successor. In Copernicus’ time, in fact, few people thought there were ways to prove whether the heliocentric or the older geocentric system was correct. A long philosophical tradition, going back to the Greeks and defended by the Catholic Church, held that pure human thought combined with divine revelation represented the path to truth. Nature, as revealed by our senses, was suspect. For example, Aristotle had reasoned that heavier objects (having more of the quality that made them heavy) must fall to Earth faster than lighter ones. This is absolutely incorrect, as any simple experiment dropping two balls of different weights shows. However, in Copernicus’ day, experiments did not carry much weight (if you will pardon the expression); Aristotle’s reasoning was more convincing. In this environment, there was little motivation to carry out observations or experiments to distinguish between competing cosmological theories (or anything else). It should not surprise us, therefore, that the heliocentric idea was debated for more than half a century without any tests being applied to determine its validity. (In fact, in the North American colonies, the older geocentric system was still taught at Harvard University in the first years after it was founded in 1636.) Contrast this with the situation today, when scientists rush to test each new hypothesis and do not accept any ideas until the results are in. For example, when two researchers at the University of Utah announced in 1989 that they had discovered a way to achieve nuclear fusion (the process that powers the stars) at room temperature, other scientists at more than 25 laboratories around the United States attempted to duplicate “cold fusion” within a few weeks—without success, as it turned out. The cold fusion theory soon went down in flames. How would we look at Copernicus’ model today? When a new hypothesis or theory is proposed in science, it must first be checked for consistency with what is already known. Copernicus’ heliocentric idea passes this test, for it allows planetary positions to be calculated at least as well as does the geocentric theory. The next step is to determine which predictions the new hypothesis makes that differ from those of competing ideas. In the case of Copernicus, one example is the prediction that, if Venus circles the Sun, the planet should go through the full range of phases just as the Moon does, whereas if it circles Earth, it should not (). Also, we should not be able to see the full phase of Venus from Earth because the Sun would then be between Venus and Earth. But in those days, before the telescope, no one imagined testing these predictions. ### Galileo and the Beginning of Modern Science Many of the modern scientific concepts of observation, experimentation, and the testing of hypotheses through careful quantitative measurements were pioneered by a man who lived nearly a century after Copernicus. Galileo Galilei (), a contemporary of Shakespeare, was born in Pisa. Like Copernicus, he began training for a medical career, but he had little interest in the subject and later switched to mathematics. He held faculty positions at the University of Pisa and the University of Padua, and eventually became mathematician to the Grand Duke of Tuscany in Florence. Galileo’s greatest contributions were in the field of mechanics, the study of motion and the actions of forces on bodies. It was familiar to all persons then, as it is to us now, that if something is at rest, it tends to remain at rest and requires some outside influence to start it in motion. Rest was thus generally regarded as the natural state of matter. Galileo showed, however, that rest is no more natural than motion. If an object is slid along a rough horizontal floor, it soon comes to rest because friction between it and the floor acts as a retarding force. However, if the floor and the object are both highly polished, the object, given the same initial speed, will slide farther before stopping. On a smooth layer of ice, it will slide farther still. Galileo reasoned that if all resisting effects could be removed, the object would continue in a steady state of motion indefinitely. He argued that a force is required not only to start an object moving from rest but also to slow down, stop, speed up, or change the direction of a moving object. You will appreciate this if you have ever tried to stop a rolling car by leaning against it, or a moving boat by tugging on a line. Galileo also studied the way objects accelerate—change their speed or direction of motion. Galileo watched objects as they fell freely or rolled down a ramp. He found that such objects accelerate uniformly; that is, in equal intervals of time they gain equal increments in speed. Galileo formulated these newly found laws in precise mathematical terms that enabled future experimenters to predict how far and how fast objects would move in various lengths of time. Sometime in the 1590s, Galileo adopted the Copernican hypothesis of a heliocentric solar system. In Roman Catholic Italy, this was not a popular philosophy, for Church authorities still upheld the ideas of Aristotle and Ptolemy, and they had powerful political and economic reasons for insisting that Earth was the center of creation. Galileo not only challenged this thinking but also had the audacity to write in Italian rather than scholarly Latin, and to lecture publicly on those topics. For him, there was no contradiction between the authority of the Church in matters of religion and morality, and the authority of nature (revealed by experiments) in matters of science. It was primarily because of Galileo and his “dangerous” opinions that, in 1616, the Church issued a prohibition decree stating that the Copernican doctrine was “false and absurd” and not to be held or defended. ### Galileo’s Astronomical Observations It is not certain who first conceived of the idea of combining two or more pieces of glass to produce an instrument that enlarged images of distant objects, making them appear nearer. The first such “spyglasses” (now called telescopes) that attracted much notice were made in 1608 by the Dutch spectacle maker Hans Lippershey (1570–1619). Galileo heard of the discovery and, without ever having seen an assembled telescope, constructed one of his own with a three-power magnification (3×), which made distant objects appear three times nearer and larger (). On August 25, 1609, Galileo demonstrated a telescope with a magnification of 9× to government officials of the city-state of Venice. By a magnification of 9×, we mean the linear dimensions of the objects being viewed appeared nine times larger or, alternatively, the objects appeared nine times closer than they really were. There were obvious military advantages associated with a device for seeing distant objects. For his invention, Galileo’s salary was nearly doubled, and he was granted lifetime tenure as a professor. (His university colleagues were outraged, particularly because the invention was not even original.) Others had used the telescope before Galileo to observe things on Earth. But in a flash of insight that changed the history of astronomy, Galileo realized that he could turn the power of the telescope toward the heavens. Before using his telescope for astronomical observations, Galileo had to devise a stable mount and improve the optics. He increased the magnification to 30×. Galileo also needed to acquire confidence in the telescope. At that time, human eyes were believed to be the final arbiter of truth about size, shape, and color. Lenses, mirrors, and prisms were known to distort distant images by enlarging, reducing, or inverting them, or spreading the light into a spectrum (rainbow of colors). Galileo undertook repeated experiments to convince himself that what he saw through the telescope was identical to what he saw up close. Only then could he begin to believe that the miraculous phenomena the telescope revealed in the heavens were real. Beginning his astronomical work late in 1609, Galileo found that many stars too faint to be seen with the unaided eye became visible with his telescope. In particular, he found that some nebulous blurs resolved into many stars, and that the Milky Way—the strip of whiteness across the night sky—was also made up of a multitude of individual stars. Examining the planets, Galileo found four moons revolving about Jupiter in times ranging from just under 2 days to about 17 days. This discovery was particularly important because it showed that not everything has to revolve around Earth. Furthermore, it demonstrated that there could be centers of motion that are themselves in motion. Defenders of the geocentric view had argued that if Earth was in motion, then the Moon would be left behind because it could hardly keep up with a rapidly moving planet. Yet, here were Jupiter’s moons doing exactly that. (To recognize this discovery and honor his work, NASA named a spacecraft that explored the Jupiter system Galileo.) With his telescope, Galileo was able to carry out the test of the Copernican theory mentioned earlier, based on the phases of Venus. Within a few months, he had found that Venus goes through phases like the Moon, showing that it must revolve about the Sun, so that we see different parts of its daylight side at different times (see .) These observations could not be reconciled with Ptolemy’s model, in which Venus circled about Earth. In Ptolemy’s model, Venus could also show phases, but they were the wrong phases in the wrong order from what Galileo observed. Galileo also observed the Moon and saw craters, mountain ranges, valleys, and flat, dark areas that he thought might be water. These discoveries showed that the Moon might be not so dissimilar to Earth—suggesting that Earth, too, could belong to the realm of celestial bodies. After Galileo’s work, it became increasingly difficult to deny the Copernican view, and Earth was slowly dethroned from its central position in the universe and given its rightful place as one of the planets attending the Sun. Initially, however, Galileo met with a great deal of opposition. The Roman Catholic Church, still reeling from the Protestant Reformation, was looking to assert its authority and chose to make an example of Galileo. He had to appear before the Inquisition to answer charges that his work was heretical, and he was ultimately condemned to house arrest. His books were on the Church’s forbidden list until 1836, although in countries where the Roman Catholic Church held less sway, they were widely read and discussed. Not until 1992 did the Catholic Church admit publicly that it had erred in the matter of censoring Galileo’s ideas. The new ideas of Copernicus and Galileo began a revolution in our conception of the cosmos. It eventually became evident that the universe is a vast place and that Earth’s role in it is relatively unimportant. The idea that Earth moves around the Sun like the other planets raised the possibility that they might be worlds themselves, perhaps even supporting life. As Earth was demoted from its position at the center of the universe, so, too, was humanity. The universe, despite what we may wish, does not revolve around us. Most of us take these things for granted today, but four centuries ago such concepts were frightening and heretical for some, immensely stimulating for others. The pioneers of the Renaissance started the European world along the path toward science and technology that we still tread today. For them, nature was rational and ultimately knowable, and experiments and observations provided the means to reveal its secrets. Nicolaus Copernicus introduced the heliocentric cosmology to Renaissance Europe in his book De Revolutionibus. Although he retained the Aristotelian idea of uniform circular motion, Copernicus suggested that Earth is a planet and that the planets all circle about the Sun, dethroning Earth from its position at the center of the universe. Galileo was the father of both modern experimental physics and telescopic astronomy. He studied the acceleration of moving objects and, in 1610, began telescopic observations, discovering the nature of the Milky Way, the large-scale features of the Moon, the phases of Venus, and four moons of Jupiter. Although he was accused of heresy for his support of heliocentric cosmology, Galileo is credited with observations and brilliant writings that convinced most of his scientific contemporaries of the reality of the Copernican theory. ### For Further Exploration ### Articles ### Ancient Astronomy Gingerich, O. “From Aristarchus to Copernicus.” Sky & Telescope (November 1983): 410. Gingerich, O. “Islamic Astronomy.” Scientific American (April 1986): 74. ### Astronomy and Astrology Fraknoi, A. “Your Astrology Defense Kit.” Sky & Telescope (August 1989): 146. ### Copernicus and Galileo Gingerich, O. “Galileo and the Phases of Venus.” Sky & Telescope (December 1984): 520. Gingerich, O. “How Galileo Changed the Rules of Science.” Sky & Telescope (March 1993): 32. Maran, S., and Marschall, L. “The Moon, the Telescope, and the Birth of the Modern World.” Sky & Telescope (February 2009): 28. Sobel, D. “The Heretic’s Daughter: A Startling Correspondence Reveals a New Portrait of Galileo.” The New Yorker (September 13, 1999): 52. ### Websites ### Ancient Astronomy Aristarchos of Samos: http://adsabs.harvard.edu//full/seri/JRASC/0075//0000029.000.html. By Dr. Alan Batten. Claudius Ptolemy: http://www-history.mcs.st-and.ac.uk/Biographies/Ptolemy.html. An interesting biography. Hipparchus of Rhodes: http://www-history.mcs.st-andrews.ac.uk/Biographies/Hipparchus.html. An interesting biography. ### Astronomy and Astrology Astrology and Science: http://www.astrology-and-science.com/hpage.htm. The best site for a serious examination of the issues with astrology and the research on whether it works. Real Romance in the Stars: http://www.independent.co.uk/voices/the-real-romance-in-the-stars-1527970.html. 1995 newspaper commentary attacking astrology. ### Copernicus and Galileo Galileo Galilei: http://www-history.mcs.st-andrews.ac.uk/Biographies/Galileo.html. A good biography with additional links. Galileo Project: http://galileo.rice.edu/. Rice University’s repository of information on Galileo. Nicolaus Copernicus: http://www-groups.dcs.st-and.ac.uk/~history/Biographies/Copernicus.html. A biography including links to photos about his life. ### Videos ### Astronomy and Astrology Astrology Debunked: https://www.youtube.com/watch?v=y84HX2pMo5U. A compilation of scientists and magicians commenting skeptically on astrology (9:09). ### Copernicus and Galileo Galileo: http://www.biography.com/people/galileo-9305220. A brief biography (2:51). Galileo’s Battle for the Heavens: https://www.youtube.com/playlist?list=PL28AF597A9C90E18E. A NOVA episode on PBS (1:48:55) Nicolaus Copernicus: http://www.biography.com/people/nicolaus-copernicus-9256984. An overview of his life and work (2:41). ### Collaborative Group Activities 1. With your group, consider the question with which we began this chapter. How many ways can you think of to prove to a member of the “Flat Earth Society” that our planet is, indeed, round? 2. Make a list of ways in which a belief in astrology (the notion that your life path or personality is controlled by the position of the Sun, Moon, and planets at the time of your birth) might be harmful to an individual or to society at large. 3. Have members of the group compare their experiences with the night sky. Did you see the Milky Way? Can you identify any constellations? Make a list of reasons why you think so many fewer people know the night sky today than at the time of the ancient Greeks. Discuss reasons for why a person, today, may want to be acquainted with the night sky. 4. Constellations commemorate great heroes, dangers, or events in the legends of the people who name them. Suppose we had to start from scratch today, naming the patterns of stars in the sky. Whom or what would you choose to commemorate by naming a constellation after it, him, or her and why (begin with people from history; then if you have time, include living people as well)? Can the members of your group agree on any choices? 5. Although astronomical mythology no longer holds a powerful sway over the modern imagination, we still find proof of the power of astronomical images in the number of products in the marketplace that have astronomical names. How many can your group come up with? (Think of things like Milky Way candy bars, Eclipse and Orbit gum, or Comet cleanser.) ### Review Questions ### Thought Questions ### Figuring for Yourself

# Orbits and Gravity ## Thinking Ahead How would you find a new planet at the outskirts of our solar system that is too dim to be seen with the unaided eye and is so far away that it moves very slowly among the stars? This was the problem confronting astronomers during the nineteenth century as they tried to pin down a full inventory of our solar system. If we could look down on the solar system from somewhere out in space, interpreting planetary motions would be much simpler. But the fact is, we must observe the positions of all the other planets from our own moving planet. Scientists of the Renaissance did not know the details of Earth’s motions any better than the motions of the other planets. Their problem, as we saw in Observing the Sky: The Birth of Astronomy, was that they had to deduce the nature of all planetary motion using only their earthbound observations of the other planets’ positions in the sky. To solve this complex problem more fully, better observations and better models of the planetary system were needed.

# Orbits and Gravity ## The Laws of Planetary Motion ### Learning Objectives By the end of this section, you will be able to: 1. Describe how Tycho Brahe and Johannes Kepler contributed to our understanding of how planets move around the Sun 2. Explain Kepler’s three laws of planetary motion At about the time that Galileo was beginning his experiments with falling bodies, the efforts of two other scientists dramatically advanced our understanding of the motions of the planets. These two astronomers were the observer Tycho Brahe and the mathematician Johannes Kepler. Together, they placed the speculations of Copernicus on a sound mathematical basis and paved the way for the work of Isaac Newton in the next century. ### Tycho Brahe’s Observatory Three years after the publication of Copernicus’ De Revolutionibus, Tycho Brahe was born to a family of Danish nobility. He developed an early interest in astronomy and, as a young man, made significant astronomical observations. Among these was a careful study of what we now know was an exploding star that flared up to great brilliance in the night sky. His growing reputation gained him the patronage of the Danish King Frederick II, and at the age of 30, Brahe was able to establish a fine astronomical observatory on the North Sea island of Hven (). Brahe was the last and greatest of the pre-telescopic observers in Europe. At Hven, Brahe made a continuous record of the positions of the Sun, Moon, and planets for almost 20 years. His extensive and precise observations enabled him to note that the positions of the planets varied from those given in published tables, which were based on the work of Ptolemy. These data were extremely valuable, but Brahe didn’t have the ability to analyze them and develop a better model than what Ptolemy had published. He was further inhibited because he was an extravagant and cantankerous fellow, and he accumulated enemies among government officials. When his patron, Frederick II, died in 1597, Brahe lost his political base and decided to leave Denmark. He took up residence in Prague, where he became court astronomer to Emperor Rudolf of Bohemia. There, in the year before his death, Brahe found a most able young mathematician, Johannes Kepler, to assist him in analyzing his extensive planetary data. ### Johannes Kepler Johannes Kepler was born into a poor family in the German province of Württemberg and lived much of his life amid the turmoil of the Thirty Years’ War (see ). He attended university at Tubingen and studied for a theological career. There, he learned the principles of the Copernican system and became converted to the heliocentric hypothesis. Eventually, Kepler went to Prague to serve as an assistant to Brahe, who set him to work trying to find a satisfactory theory of planetary motion—one that was compatible with the long series of observations made at Hven. Brahe was reluctant to provide Kepler with much material at any one time for fear that Kepler would discover the secrets of the universal motion by himself, thereby robbing Brahe of some of the glory. Only after Brahe’s death in 1601 did Kepler get full possession of the priceless records. Their study occupied most of Kepler’s time for more than 20 years. Through his analysis of the motions of the planets, Kepler developed a series of principles, now known as Kepler’s three laws, which described the behavior of planets based on their paths through space. The first two laws of planetary motion were published in 1609 in The New Astronomy. Their discovery was a profound step in the development of modern science. ### The First Two Laws of Planetary Motion The path of an object through space is called its orbit. Kepler initially assumed that the orbits of planets were circles, but doing so did not allow him to find orbits that were consistent with Brahe’s observations. Working with the data for Mars, he eventually discovered that the orbit of that planet had the shape of a somewhat flattened circle, or ellipse. Next to the circle, the ellipse is the simplest kind of closed curve, belonging to a family of curves known as conic sections (). You might recall from math classes that in a circle, the center is a special point. The distance from the center to anywhere on the circle is exactly the same. In an ellipse, the sum of the distance from two special points inside the ellipse to any point on the ellipse is always the same. These two points inside the ellipse are called its foci (singular: focus), a word invented for this purpose by Kepler. This property suggests a simple way to draw an ellipse (). We wrap the ends of a loop of string around two tacks pushed through a sheet of paper into a drawing board, so that the string is slack. If we push a pencil against the string, making the string taut, and then slide the pencil against the string all around the tacks, the curve that results is an ellipse. At any point where the pencil may be, the sum of the distances from the pencil to the two tacks is a constant length—the length of the string. The tacks are at the two foci of the ellipse. The widest diameter of the ellipse is called its major axis. Half this distance—that is, the distance from the center of the ellipse to one end—is the semimajor axis, which is usually used to specify the size of the ellipse. For example, the semimajor axis of the orbit of Mars, which is also the planet’s average distance from the Sun, is 228 million kilometers. The shape (roundness) of an ellipse depends on how close together the two foci are, compared with the major axis. The ratio of the distance between the foci to the length of the major axis is called the eccentricity of the ellipse. If the foci (or tacks) are moved to the same location, then the distance between the foci would be zero. This means that the eccentricity is zero and the ellipse is just a circle; thus, a circle can be called an ellipse of zero eccentricity. In a circle, the semimajor axis would be the radius. Next, we can make ellipses of various elongations (or extended lengths) by varying the spacing of the tacks (as long as they are not farther apart than the length of the string). The greater the eccentricity, the more elongated is the ellipse, up to a maximum eccentricity of , when the ellipse becomes “flat,” the other extreme from a circle. The size and shape of an ellipse are completely specified by its semimajor axis and its eccentricity. Using Brahe’s data, Kepler found that Mars has an elliptical orbit, with the Sun at one focus (the other focus is empty). The eccentricity of the orbit of Mars is only about ; its orbit, drawn to scale, would be practically indistinguishable from a circle, but the difference turned out to be critical for understanding planetary motions. Kepler generalized this result in his first law and said that the orbits of all the planets are ellipses. Here was a decisive moment in the history of human thought: it was not necessary to have only circles in order to have an acceptable cosmos. The universe could be a bit more complex than the Greek philosophers had wanted it to be. Kepler’s second law deals with the speed with which each planet moves along its ellipse, also known as its orbital speed. Working with Brahe’s observations of Mars, Kepler discovered that the planet speeds up as it comes closer to the Sun and slows down as it pulls away from the Sun. He expressed the precise form of this relationship by imagining that the Sun and Mars are connected by a straight, elastic line. When Mars is closer to the Sun (positions 1 and 2 in ), the elastic line is not stretched as much, and the planet moves rapidly. Farther from the Sun, as in positions 3 and 4, the line is stretched a lot, and the planet does not move so fast. As Mars travels in its elliptical orbit around the Sun, the elastic line sweeps out areas of the ellipse as it moves (the colored regions in our figure). Kepler found that in equal intervals of time (t), the areas swept out in space by this imaginary line are always equal; that is, the area of the region B from 1 to 2 is the same as that of region A from 3 to 4. If a planet moves in a circular orbit, the elastic line is always stretched the same amount and the planet moves at a constant speed around its orbit. But, as Kepler discovered, in most orbits that speed of a planet orbiting its star (or moon orbiting its planet) tends to vary because the orbit is elliptical. ### Kepler’s Third Law Kepler’s first two laws of planetary motion describe the shape of a planet’s orbit and allow us to calculate the speed of its motion at any point in the orbit. Kepler was pleased to have discovered such fundamental rules, but they did not satisfy his quest to fully understand planetary motions. He wanted to know why the orbits of the planets were spaced as they are and to find a mathematical pattern in their movements—a “harmony of the spheres” as he called it. For many years he worked to discover mathematical relationships governing planetary spacing and the time each planet took to go around the Sun. In 1619, Kepler discovered a basic relationship to relate the planets’ orbits to their relative distances from the Sun. We define a planet’s orbital period, (), as the time it takes a planet to travel once around the Sun. Also, recall that a planet’s semimajor axis, a, is equal to its average distance from the Sun. The relationship, now known as Kepler’s third law, says that a planet’s orbital period squared is proportional to the semimajor axis of its orbit cubed, or When P (the orbital period) is measured in years, and a is expressed in a quantity known as an astronomical unit (AU), the two sides of the formula are not only proportional but equal. One AU is the average distance between Earth and the Sun and is approximately equal to kilometers. In these units, Kepler’s third law applies to all objects orbiting the Sun, including Earth, and provides a means for calculating their relative distances from the Sun from the time they take to orbit. Let’s look at a specific example to illustrate how useful Kepler’s third law is. For instance, suppose you time how long Mars takes to go around the Sun (in Earth years). Kepler’s third law can then be used to calculate Mars’ average distance from the Sun. Mars’ orbital period (1.88 Earth years) squared, or , is , and according to the equation for Kepler’s third law, this equals the cube of its semimajor axis, or . So what number must be cubed to give 3.53? The answer is . Thus, Mars’ semimajor axis in astronomical units must be 1.52 AU. In other words, to go around the Sun in a little less than two years, Mars must be about 50% (half again) as far from the Sun as Earth is. Kepler’s three laws of planetary motion can be summarized as follows: 1. Kepler’s first law: Each planet moves around the Sun in an orbit that is an ellipse, with the Sun at one focus of the ellipse. 2. Kepler’s second law: The straight line joining a planet and the Sun sweeps out equal areas in space in equal intervals of time. 3. Kepler’s third law: The square of a planet’s orbital period is directly proportional to the cube of the semimajor axis of its orbit. Kepler’s three laws provide a precise geometric description of planetary motion within the framework of the Copernican system. With these tools, it was possible to calculate planetary positions with greatly improved precision. Still, Kepler’s laws are purely descriptive: they do not help us understand what forces of nature constrain the planets to follow this particular set of rules. That step was left to Isaac Newton. ### Key Concepts and Summary Tycho Brahe’s accurate observations of planetary positions provided the data used by Johannes Kepler to derive his three fundamental laws of planetary motion. Kepler’s laws describe the behavior of planets in their orbits as follows: (1) planetary orbits are ellipses with the Sun at one focus; (2) in equal intervals, a planet’s orbit sweeps out equal areas; and (3) the relationship between the orbital period (P) and the semimajor axis (a) of an orbit is given by P2 = a3 (when a is in units of AU and P is in units of Earth years).

# Orbits and Gravity ## Newton’s Great Synthesis ### Learning Objectives By the end of this section, you will be able to: 1. Describe Newton’s three laws of motion 2. Explain how Newton’s three laws of motion relate to momentum 3. Define mass, volume, and density and how they differ 4. Define angular momentum It was the genius of Isaac Newton that found a conceptual framework that completely explained the observations and rules assembled by Galileo, Brahe, Kepler, and others. Newton was born in Lincolnshire, England, in the year after Galileo’s death (). Against the advice of his mother, who wanted him to stay home and help with the family farm, he entered Trinity College at Cambridge in 1661 and eight years later was appointed professor of mathematics. Among Newton’s contemporaries in England were architect Christopher Wren, authors Aphra Behn and Daniel Defoe, and composer G. F. Handel. ### Newton’s Laws of Motion As a young man in college, Newton became interested in natural philosophy, as science was then called. He worked out some of his first ideas on machines and optics during the plague years of 1665 and 1666, when students were sent home from college. Newton, a moody and often difficult man, continued to work on his ideas in private, even inventing new mathematical tools to help him deal with the complexities involved. Eventually, his friend Edmund Halley (profiled in Comets and Asteroids: Debris of the Solar System) prevailed on him to collect and publish the results of his remarkable investigations on motion and gravity. The result was a volume that set out the underlying system of the physical world, Philosophiae Naturalis Principia Mathematica. The Principia, as the book is generally known, was published at Halley’s expense in 1687. At the very beginning of the Principia, Newton proposes three laws that would govern the motions of all objects: 1. Newton’s first law: Every object will continue to be in a state of rest or move at a constant speed in a straight line unless it is compelled to change by an outside force. 2. Newton’s second law: The change of motion of a body is proportional to and in the direction of the force acting on it. 3. Newton’s third law: For every action there is an equal and opposite reaction (or: the mutual actions of two bodies upon each other are always equal and act in opposite directions). In the original Latin, the three laws contain only 59 words, but those few words set the stage for modern science. Let us examine them more carefully. ### Interpretation of Newton’s Laws Newton’s first law is a restatement of one of Galileo’s discoveries, called the conservation of momentum. The law states that in the absence of any outside influence, there is a measure of a body’s motion, called its momentum, that remains unchanged. You may have heard the term momentum used in everyday expressions, such as “This bill in Congress has a lot of momentum; it’s going to be hard to stop.” Newton’s first law is sometimes called the law of inertia, where inertia is the tendency of objects (and legislatures) to keep doing what they are already doing. In other words, a stationary object stays put, and a moving object keeps moving unless some force intervenes. Let’s define the precise meaning of momentum—it depends on three factors: (1) speed—how fast a body moves (zero if it is stationary), (2) the direction of its motion, and (3) its mass—a measure of the amount of matter in a body, which we will discuss later. Scientists use the term velocity to describe the speed and direction of motion. For example, 20 kilometers per hour due south is velocity, whereas 20 kilometers per hour just by itself is speed. Momentum then can be defined as an object’s mass times its velocity. It’s not so easy to see this rule in action in the everyday world because of the many forces acting on a body at any one time. One important force is friction, which generally slows things down. If you roll a ball along the sidewalk, it eventually comes to a stop because the sidewalk exerts a rubbing force on the ball. But in the space between the stars, where there is so little matter that friction is insignificant, objects can in fact continue to move (to coast) indefinitely. The momentum of a body can change only under the action of an outside influence. Newton’s second law expresses force in terms of its ability to change momentum with time. A force (a push or a pull) has both size and direction. When a force is applied to a body, the momentum changes in the direction of the applied force. This means that a force is required to change either the speed or the direction of a body, or both—that is, to start it moving, to speed it up, to slow it down, to stop it, or to change its direction. As you learned in Observing the Sky: The Birth of Astronomy, the rate of change in an object’s velocity is called acceleration. Newton showed that the acceleration of a body was proportional to the force being applied to it. Suppose that after a long period of reading, you push an astronomy book away from you on a long, smooth table. (We use a smooth table so we can ignore friction.) If you push the book steadily, it will continue to speed up as long as you are pushing it. The harder you push the book, the larger its acceleration will be. How much a force will accelerate an object is also determined by the object’s mass. If you kept pushing a pen with the same force with which you pushed the textbook, the pen—having less mass—would be accelerated to a greater speed. Newton’s third law is perhaps the most profound of the rules he discovered. Basically, it is a generalization of the first law, but it also gives us a way to define mass. If we consider a system of two or more objects isolated from outside influences, Newton’s first law says that the total momentum of the objects should remain constant. Therefore, any change of momentum within the system must be balanced by another change that is equal and opposite so that the momentum of the entire system is not changed. This means that forces in nature do not occur alone: we find that in each situation there is always a pair of forces that are equal to and opposite each other. If a force is exerted on an object, it must be exerted by something else, and the object will exert an equal and opposite force back on that something. We can look at a simple example to demonstrate this. Suppose that a daredevil astronomy student—and avid skateboarder—wants to jump from his second-story dorm window onto his board below (we don’t recommend trying this!). The force pulling him down after jumping (as we will see in the next section) is the force of gravity between him and Earth. Both he and Earth must experience the same total change of momentum because of the influence of these mutual forces. So, both the student and Earth are accelerated by each other’s pull. However, the student does much more of the moving. Because Earth has enormously greater mass, it can experience the same change of momentum by accelerating only a very small amount. Things fall toward Earth all the time, but the acceleration of our planet as a result is far too small to be measured. A more obvious example of the mutual nature of forces between objects is familiar to all who have batted a baseball. The recoil you feel as you swing your bat shows that the ball exerts a force on it during the impact, just as the bat does on the ball. Similarly, when a rifle you are bracing on your shoulder is discharged, the force pushing the bullet out of the muzzle is equal to the force pushing backward upon the gun and your shoulder. This is the principle behind jet engines and rockets: the force that discharges the exhaust gases from the rear of the rocket is accompanied by the force that pushes the rocket forward. The exhaust gases need not push against air or Earth; a rocket actually operates best in a vacuum (). ### Mass, Volume, and Density Before we go on to discuss Newton’s other work, we want to take a brief look at some terms that will be important to sort out clearly. We begin with mass, which is a measure of the amount of material within an object. The volume of an object is the measure of the physical space it occupies. Volume is measured in cubic units, such as cubic centimeters or liters. The volume is the “size” of an object. A penny and an inflated balloon may both have the same mass, but they have very different volumes. The reason is that they also have very different densities, which is a measure of how much mass there is per unit volume. Specifically, density is the mass divided by the volume. Note that in everyday language we often use “heavy” and “light” as indications of density (rather than weight) as, for instance, when we say that iron is heavy or that whipped cream is light. The units of density that will be used in this book are grams per cubic centimeter (g/cm3).Generally we use standard metric (or SI) units in this book. The proper metric unit of density in that system is kg/m If a block of some material has a mass of 300 grams and a volume of 100 cm3, its density is 3 g/cm3. Familiar materials span a considerable range in density, from artificial materials such as plastic insulating foam (less than 0.1 g/cm3) to gold (19.3 g/cm3). gives the densities of some familiar materials. In the astronomical universe, much more remarkable densities can be found, all the way from a comet’s tail (10-16 g/cm3) to a collapsed “star corpse” called a neutron star (1015 g/cm3). To sum up, mass is how much, volume is how big, and density is how tightly packed. ### Angular Momentum A concept that is a bit more complex, but important for understanding many astronomical objects, is angular momentum, which is a measure of the rotation of a body as it revolves around some fixed point (an example is a planet orbiting the Sun). The angular momentum of an object is defined as the product of its mass, its velocity, and its distance from the fixed point around which it revolves. If these three quantities remain constant—that is, if the motion of a particular object takes place at a constant velocity at a fixed distance from the spin center—then the angular momentum is also a constant. Kepler’s second law is a consequence of the conservation of angular momentum. As a planet approaches the Sun on its elliptical orbit and the distance to the spin center decreases, the planet speeds up to conserve the angular momentum. Similarly, when the planet is farther from the Sun, it moves more slowly. The conservation of angular momentum is illustrated by figure skaters, who bring their arms and legs in to spin more rapidly, and extend their arms and legs to slow down (). You can duplicate this yourself on a well-oiled swivel stool by starting yourself spinning slowly with your arms extended and then pulling your arms in. Another example of the conservation of angular momentum is a shrinking cloud of dust or a star collapsing on itself (both are situations that you will learn about as you read on). As material moves to a lesser distance from the spin center, the speed of the material increases to conserve angular momentum. ### Key Concepts and Summary In his Principia, Isaac Newton established the three laws that govern the motion of objects: (1) objects continue to be at rest or move with a constant velocity unless acted upon by an outside force; (2) an outside force causes an acceleration (and changes the momentum) for an object; and (3) for every action there is an equal and opposite reaction. Momentum is a measure of the motion of an object and depends on both its mass and its velocity. Angular momentum is a measure of the motion of a spinning or revolving object and depends on its mass, velocity, and distance from the point around which it revolves. The density of an object is its mass divided by its volume.

# Orbits and Gravity ## Newton’s Universal Law of Gravitation ### Learning Objectives By the end of this section, you will be able to: 1. Explain what determines the strength of gravity 2. Describe how Newton’s universal law of gravitation extends our understanding of Kepler’s laws Newton’s laws of motion show that objects at rest will stay at rest and those in motion will continue moving uniformly in a straight line unless acted upon by a force. Thus, it is the straight line that defines the most natural state of motion. But the planets move in ellipses, not straight lines; therefore, some force must be bending their paths. That force, Newton proposed, was gravity. In Newton’s time, gravity was something associated with Earth alone. Everyday experience shows us that Earth exerts a gravitational force upon objects at its surface. If you drop something, it accelerates toward Earth as it falls. Newton’s insight was that Earth’s gravity might extend as far as the Moon and produce the force required to curve the Moon’s path from a straight line and keep it in its orbit. He further hypothesized that gravity is not limited to Earth, but that there is a general force of attraction between all material bodies. If so, the attractive force between the Sun and each of the planets could keep them in their orbits. (This may seem part of our everyday thinking today, but it was a remarkable insight in Newton’s time.) Once Newton boldly hypothesized that there was a universal attraction among all bodies everywhere in space, he had to determine the exact nature of the attraction. The precise mathematical description of that gravitational force had to dictate that the planets move exactly as Kepler had described them to (as expressed in Kepler’s three laws). Also, that gravitational force had to predict the correct behavior of falling bodies on Earth, as observed by Galileo. How must the force of gravity depend on distance in order for these conditions to be met? The answer to this question required mathematical tools that had not yet been developed, but this did not deter Isaac Newton, who invented what we today call calculus to deal with this problem. Eventually he was able to conclude that the magnitude of the force of gravity must decrease with increasing distance between the Sun and a planet (or between any two objects) in proportion to the inverse square of their separation. In other words, if a planet were twice as far from the Sun, the force would be , or as large. Put the planet three times farther away, and the force is , or as large. Newton also concluded that the gravitational attraction between two bodies must be proportional to their masses. The more mass an object has, the stronger the pull of its gravitational force. The gravitational attraction between any two objects is therefore given by one of the most famous equations in all of science: where Fgravity is the gravitational force between two objects, M1 and M2 are the masses of the two objects, and R is their separation. G is a constant number known as the universal gravitational constant, and the equation itself symbolically summarizes Newton’s universal law of gravitation. With such a force and the laws of motion, Newton was able to show mathematically that the only orbits permitted were exactly those described by Kepler’s laws. Newton’s universal law of gravitation works for the planets, but is it really universal? The gravitational theory should also predict the observed acceleration of the Moon toward Earth as it orbits Earth, as well as of any object (say, an apple) dropped near Earth’s surface. The falling of an apple is something we can measure quite easily, but can we use it to predict the motions of the Moon? Recall that according to Newton’s second law, forces cause acceleration. Newton’s universal law of gravitation says that the force acting upon (and therefore the acceleration of) an object toward Earth should be inversely proportional to the square of its distance from the center of Earth. Objects like apples at the surface of Earth, at a distance of one Earth-radius from the center of Earth, are observed to accelerate downward at 9.8 meters per second per second . It is this force of gravity on the surface of Earth that gives us our sense of weight. Unlike your mass, which would remain the same on any planet or moon, your weight depends on the local force of gravity. So you would weigh less on Mars and the Moon than on Earth, even though there is no change in your mass. (Which means you would still have to go easy on the desserts in the college cafeteria when you got back!) The Moon is 60 Earth radii away from the center of Earth. If gravity (and the acceleration it causes) gets weaker with distance squared, the acceleration the Moon experiences should be a lot less than for the apple. The acceleration should be (or 3600 times less—about ). This is precisely the observed acceleration of the Moon in its orbit. (As we shall see, the Moon does not fall to Earth with this acceleration, but falls around Earth.) Imagine the thrill Newton must have felt to realize he had discovered, and verified, a law that holds for Earth, apples, the Moon, and, as far as he knew, everything in the universe. Gravity is a “built-in” property of mass. Whenever there are masses in the universe, they will interact via the force of gravitational attraction. The more mass there is, the greater the force of attraction. Here on Earth, the largest concentration of mass is, of course, the planet we stand on, and its pull dominates the gravitational interactions we experience. But everything with mass attracts everything else with mass anywhere in the universe. Newton’s law also implies that gravity never becomes zero. It quickly gets weaker with distance, but it continues to act to some degree no matter how far away you get. The pull of the Sun is stronger at Mercury than at Pluto, but it can be felt far beyond Pluto, where astronomers have good evidence that it continuously makes enormous numbers of smaller icy bodies move around huge orbits. And the Sun’s gravitational pull joins with the pull of billions of others stars to create the gravitational pull of our Milky Way Galaxy. That force, in turn, can make other smaller galaxies orbit around the Milky Way, and so on. Why is it then, you may ask, that the astronauts aboard the Space Shuttle appear to have no gravitational forces acting on them when we see images on television of the astronauts and objects floating in the spacecraft? After all, the astronauts in the shuttle are only a few hundred kilometers above the surface of Earth, which is not a significant distance compared to the size of Earth, so gravity is certainly not a great deal weaker that much farther away. The astronauts feel “weightless” (meaning that they don’t feel the gravitational force acting on them) for the same reason that passengers in an elevator whose cable has broken or in an airplane whose engines no longer work feel weightless: they are falling ().In the film When falling, they are in free fall and accelerate at the same rate as everything around them, including their spacecraft or a camera with which they are taking photographs of Earth. When doing so, astronauts experience no additional forces and therefore feel “weightless.” Unlike the falling elevator passengers, however, the astronauts are falling around Earth, not to Earth; as a result they will continue to fall and are said to be “in orbit” around Earth (see the next section for more about orbits). ### Orbital Motion and Mass Kepler’s laws describe the orbits of the objects whose motions are described by Newton’s laws of motion and the law of gravity. Knowing that gravity is the force that attracts planets toward the Sun, however, allowed Newton to rethink Kepler’s third law. Recall that Kepler had found a relationship between the orbital period of a planet’s revolution and its distance from the Sun. But Newton’s formulation introduces the additional factor of the masses of the Sun (M1) and the planet (M2), both expressed in units of the Sun’s mass. Newton’s universal law of gravitation can be used to show mathematically that this relationship is actually where a is the semimajor axis and P is the orbital period. How did Kepler miss this factor? In units of the Sun’s mass, the mass of the Sun is 1, and in units of the Sun’s mass, the mass of a typical planet is a negligibly small factor. This means that the sum of the Sun’s mass and a planet’s mass, , is very, very close to 1. This makes Newton’s formula appear almost the same as Kepler’s; the tiny mass of the planets compared to the Sun is the reason that Kepler did not realize that both masses had to be included in the calculation. There are many situations in astronomy, however, in which we do need to include the two mass terms—for example, when two stars or two galaxies orbit each other. Including the mass term allows us to use this formula in a new way. If we can measure the motions (distances and orbital periods) of objects acting under their mutual gravity, then the formula will permit us to deduce their masses. For example, we can calculate the mass of the Sun by using the distances and orbital periods of the planets, or the mass of Jupiter by noting the motions of its moons. Indeed, Newton’s reformulation of Kepler’s third law is one of the most powerful concepts in astronomy. Our ability to deduce the masses of objects from their motions is key to understanding the nature and evolution of many astronomical bodies. We will use this law repeatedly throughout this text in calculations that range from the orbits of comets to the interactions of galaxies. ### Key Concepts and Summary Gravity, the attractive force between all masses, is what keeps the planets in orbit. Newton’s universal law of gravitation relates the gravitational force to mass and distance: The force of gravity is what gives us our sense of weight. Unlike mass, which is constant, weight can vary depending on the force of gravity (or acceleration) you feel. When Kepler’s laws are reexamined in the light of Newton’s gravitational law, it becomes clear that the masses of both objects are important for the third law, which becomes a3 = (M1 + M2) × P2. Mutual gravitational effects permit us to calculate the masses of astronomical objects, from comets to galaxies.

# Orbits and Gravity ## Orbits in the Solar System ### Learning Objectives By the end of this section, you will be able to: 1. Compare the orbital characteristics of the planets in the solar system 2. Compare the orbital characteristics of asteroids and comets in the solar system Recall that the path of an object under the influence of gravity through space is called its orbit, whether that object is a spacecraft, planet, star, or galaxy. An orbit, once determined, allows the future positions of the object to be calculated. Two points in any orbit in our solar system have been given special names. The place where the planet is closest to the Sun (helios in Greek) and moves the fastest is called the perihelion of its orbit, and the place where it is farthest away and moves the most slowly is the aphelion. For the Moon or a satellite orbiting Earth (gee in Greek), the corresponding terms are perigee and apogee. (In this book, we use the word moon for a natural object that goes around a planet and the word satellite to mean a human-made object that revolves around a planet.) ### Orbits of the Planets Today, Newton’s work enables us to calculate and predict the orbits of the planets with marvelous precision. We know eight planets, beginning with Mercury closest to the Sun and extending outward to Neptune. The average orbital data for the planets are summarized in . (Ceres is the largest of the asteroids, now considered a dwarf planet.) According to Kepler’s laws, Mercury must have the shortest orbital period (88 Earth-days); thus, it has the highest orbital speed, averaging 48 kilometers per second. At the opposite extreme, Neptune has a period of 165 years and an average orbital speed of just 5 kilometers per second. All the planets have orbits of rather low eccentricity. The most eccentric orbit is that of Mercury (0.21); the rest have eccentricities smaller than 0.1. It is fortunate that among the rest, Mars has an eccentricity greater than that of many of the other planets. Otherwise the pre-telescopic observations of Brahe would not have been sufficient for Kepler to deduce that its orbit had the shape of an ellipse rather than a circle. The planetary orbits are also confined close to a common plane, which is near the plane of Earth’s orbit (called the ecliptic). The strange orbit of the dwarf planet Pluto is inclined about 17° to the ecliptic, and that of the dwarf planet Eris (orbiting even farther away from the Sun than Pluto) by 44°, but all the major planets lie within 10° of the common plane of the solar system. ### Orbits of Asteroids and Comets In addition to the eight planets, there are many smaller objects in the solar system. Some of these are moons (natural satellites) that orbit all the planets except Mercury and Venus. In addition, there are two classes of smaller objects in heliocentric orbits: asteroids and comets. Both asteroids and comets are believed to be small chunks of material left over from the formation process of the solar system. In general, asteroids have orbits with smaller semimajor axes than do comets (). The majority of them lie between 2.2 and 3.3 AU, in the region known as the asteroid belt (see Comets and Asteroids: Debris of the Solar System). As you can see in , the asteroid belt (represented by its largest member, Ceres) is in the middle of a gap between the orbits of Mars and Jupiter. It is because these two planets are so far apart that stable orbits of small bodies can exist in the region between them. Comets generally have orbits of larger size and greater eccentricity than those of the asteroids. Typically, the eccentricity of their orbits is 0.8 or higher. According to Kepler’s second law, therefore, they spend most of their time far from the Sun, moving very slowly. As they approach perihelion, the comets speed up and whip through the inner parts of their orbits more rapidly. ### Key Concepts and Summary The closest point in a satellite orbit around Earth is its perigee, and the farthest point is its apogee (corresponding to perihelion and aphelion for an orbit around the Sun). The planets follow orbits around the Sun that are nearly circular and in the same plane. Most asteroids are found between Mars and Jupiter in the asteroid belt, whereas comets generally follow orbits of high eccentricity.

# Orbits and Gravity ## Motions of Satellites and Spacecraft ### Learning Objectives By the end of this section, you will be able to: 1. Explain how an object (such as a satellite) can be put into orbit around Earth 2. Explain how an object (such as a planetary probe) can escape from orbit Newton’s universal law of gravitation and Kepler’s laws describe the motions of Earth satellites and interplanetary spacecraft as well as the planets. Sputnik, the first artificial Earth satellite, was launched by what was then called the Soviet Union on October 4, 1957. Since that time, thousands of satellites have been placed into orbit around Earth, and spacecraft have also orbited the Moon, Venus, Mars, Jupiter, Saturn, and a number of asteroids and comets. Once an artificial satellite is in orbit, its behavior is no different from that of a natural satellite, such as our Moon. If the satellite is high enough to be free of atmospheric friction, it will remain in orbit forever. However, although there is no difficulty in maintaining a satellite once it is in orbit, a great deal of energy is required to lift the spacecraft off Earth and accelerate it to orbital speed. To illustrate how a satellite is launched, imagine a gun firing a bullet horizontally from the top of a high mountain, as in , which has been adapted from a similar diagram by Newton. Imagine, further, that the friction of the air could be removed and that nothing gets in the bullet’s way. Then the only force that acts on the bullet after it leaves the muzzle is the gravitational force between the bullet and Earth. If the bullet is fired with a velocity we can call v, the gravitational force acting upon it pulls it downward toward Earth, where it strikes the ground at point a. However, if it is given a higher muzzle velocity, v, its higher speed carries it farther before it hits the ground at point b. If our bullet is given a high enough muzzle velocity, vc, the curved surface of Earth causes the ground to remain the same distance from the bullet so that the bullet falls around Earth in a complete circle. The speed needed to do this—called the circular satellite velocity—is about 8 kilometers per second, or about 17,500 miles per hour in more familiar units. Each year, more than 50 new satellites are launched into orbit by such nations as Russia, the United States, China, Japan, India, and Israel, as well as by the European Space Agency (ESA), a consortium of European nations (). Today, these satellites are used for weather tracking, ecology, global positioning systems, communications, and military purposes, to name a few uses. Most satellites are launched into low Earth orbit, since this requires the minimum launch energy. At the orbital speed of 8 kilometers per second, they circle the planet in about 90 minutes. Some of the very low Earth orbits are not indefinitely stable because, as Earth’s atmosphere swells from time to time, a frictional drag is generated by the atmosphere on these satellites, eventually leading to a loss of energy and “decay” of the orbit. ### Interplanetary Spacecraft The exploration of the solar system has been carried out largely by robot spacecraft sent to the other planets. To escape Earth, these craft must achieve escape speed, the speed needed to move away from Earth forever, which is about 11 kilometers per second (about 25,000 miles per hour). After escaping Earth, these craft coast to their targets, subject only to minor trajectory adjustments provided by small thruster rockets on board. In interplanetary flight, these spacecraft follow orbits around the Sun that are modified only when they pass near one of the planets. As it comes close to its target, a spacecraft is deflected by the planet’s gravitational force into a modified orbit, either gaining or losing energy in the process. Spacecraft controllers have actually been able to use a planet’s gravity to redirect a flyby spacecraft to a second target. For example, Voyager 2 used a series of gravity-assisted encounters to yield successive flybys of Jupiter (1979), Saturn (1980), Uranus (1986), and Neptune (1989). The Galileo spacecraft, launched in 1989, flew past Venus once and Earth twice to gain the energy required to reach its ultimate goal of orbiting Jupiter. If we wish to orbit a planet, we must slow the spacecraft with a rocket when the spacecraft is near its destination, allowing it to be captured into an elliptical orbit. Additional rocket thrust is required to bring a vehicle down from orbit for a landing on the surface. Finally, if a return trip to Earth is planned, the landed payload must include enough propulsive power to repeat the entire process in reverse. ### Key Concepts and Summary The orbit of an artificial satellite depends on the circumstances of its launch. The circular satellite velocity needed to orbit Earth’s surface is 8 kilometers per second, and the escape speed from our planet is 11 kilometers per second. There are many possible interplanetary trajectories, including those that use gravity-assisted flybys of one object to redirect the spacecraft toward its next target.

# Orbits and Gravity ## Gravity with More Than Two Bodies ### Learning Objectives By the end of this section, you will be able to: 1. Explain how the gravitational interactions of many bodies can causes perturbations in their motions 2. Explain how the planet Neptune was discovered Until now, we have considered the Sun and a planet (or a planet and one of its moons) as nothing more than a pair of bodies revolving around each other. In fact, all the planets exert gravitational forces upon one another as well. These interplanetary attractions cause slight variations from the orbits than would be expected if the gravitational forces between planets were neglected. The motion of a body that is under the gravitational influence of two or more other bodies is very complicated and can be calculated properly only with large computers. Fortunately, astronomers have such computers at their disposal in universities and government research institutes. ### The Interactions of Many Bodies As an example, suppose you have a cluster of a thousand stars all orbiting a common center (such clusters are quite common, as we shall see in Star Clusters). If we know the exact position of each star at any given instant, we can calculate the combined gravitational force of the entire group on any one member of the cluster. Knowing the force on the star in question, we can therefore find how it will accelerate. If we know how it was moving to begin with, we can then calculate how it will move in the next instant of time, thus tracking its motion. However, the problem is complicated by the fact that the other stars are also moving and thus changing the effect they will have on our star. Therefore, we must simultaneously calculate the acceleration of each star produced by the combination of the gravitational attractions of all the others in order to track the motions of all of them, and hence of any one. Such complex calculations have been carried out with modern computers to track the evolution of hypothetical clusters of stars with up to a million members (). Within the solar system, the problem of computing the orbits of planets and spacecraft is somewhat simpler. We have seen that Kepler’s laws, which do not take into account the gravitational effects of the other planets on an orbit, really work quite well. This is because these additional influences are very small in comparison with the dominant gravitational attraction of the Sun. Under such circumstances, it is possible to treat the effects of other bodies as small perturbations (or disturbances). During the eighteenth and nineteenth centuries, mathematicians developed many elegant techniques for calculating perturbations, permitting them to predict very precisely the positions of the planets. Such calculations eventually led to the prediction and discovery of a new planet in 1846. ### The Discovery of Neptune The discovery of the eighth planet, Neptune, was one of the high points in the development of gravitational theory. In 1781, William Herschel, a musician and amateur astronomer, accidentally discovered the seventh planet, Uranus. It happens that Uranus had been observed a century before, but in none of those earlier sightings was it recognized as a planet; rather, it was simply recorded as a star. Herschel’s discovery showed that there could be planets in the solar system too dim to be visible to the unaided eye, but ready to be discovered with a telescope if we just knew where to look. By 1790, an orbit had been calculated for Uranus using observations of its motion in the decade following its discovery. Even after allowance was made for the perturbing effects of Jupiter and Saturn, however, it was found that Uranus did not move on an orbit that exactly fit the earlier observations of it made since 1690. By 1840, the discrepancy between the positions observed for Uranus and those predicted from its computed orbit amounted to about 0.03°—an angle barely discernable to the unaided eye but still larger than the probable errors in the orbital calculations. In other words, Uranus just did not seem to move on the orbit predicted from Newtonian theory. In 1843, John Couch Adams, a young Englishman who had just completed his studies at Cambridge, began a detailed mathematical analysis of the irregularities in the motion of Uranus to see whether they might be produced by the pull of an unknown planet. He hypothesized a planet more distant from the Sun than Uranus, and then determined the mass and orbit it had to have to account for the departures in Uranus’ orbit. In October 1845, Adams delivered his results to George Airy, the British Astronomer Royal, informing him where in the sky to find the new planet. We now know that Adams’ predicted position for the new body was correct to within 2°, but for a variety of reasons, Airy did not follow up right away. Meanwhile, French mathematician Urbain Jean Joseph Le Verrier, unaware of Adams or his work, attacked the same problem and published its solution in June 1846. Airy, noting that Le Verrier’s predicted position for the unknown planet agreed to within 1° with that of Adams, suggested to James Challis, Director of the Cambridge Observatory, that he begin a search for the new object. The Cambridge astronomer, having no up-to-date star charts of the Aquarius region of the sky where the planet was predicted to be, proceeded by recording the positions of all the faint stars he could observe with his telescope in that location. It was Challis’ plan to repeat such plots at intervals of several days, in the hope that the planet would distinguish itself from a star by its motion. Unfortunately, he was negligent in examining his observations; although he had actually seen the planet, he did not recognize it. About a month later, Le Verrier suggested to Johann Galle, an astronomer at the Berlin Observatory, that he look for the planet. Galle received Le Verrier’s letter on September 23, 1846, and, possessing new charts of the Aquarius region, found and identified the planet that very night. It was less than a degree from the position Le Verrier predicted. The discovery of the eighth planet, now known as Neptune (the Latin name for the god of the sea), was a major triumph for gravitational theory for it dramatically confirmed the generality of Newton’s laws. The honor for the discovery is properly shared by the two mathematicians, Adams and Le Verrier (). We should note that the discovery of Neptune was not a complete surprise to astronomers, who had long suspected the existence of the planet based on the “disobedient” motion of Uranus. On September 10, 1846, two weeks before Neptune was actually found, John Herschel, son of the discoverer of Uranus, remarked in a speech before the British Association, “We see [the new planet] as Columbus saw America from the shores of Spain. Its movements have been felt trembling along the far-reaching line of our analysis with a certainty hardly inferior to ocular demonstration.” This discovery was a major step forward in combining Newtonian theory with painstaking observations. Such work continues in our own times with the discovery of planets around other stars. ### Key Concepts and Summary Calculating the gravitational interaction of more than two objects is complicated and requires large computers. If one object (like the Sun in our solar system) dominates gravitationally, it is possible to calculate the effects of a second object in terms of small perturbations. This approach was used by John Couch Adams and Urbain Le Verrier to predict the position of Neptune from its perturbations of the orbit of Uranus and thus discover a new planet mathematically. ### For Further Exploration ### Articles ### Brahe and Kepler Christianson, G. “The Celestial Palace of Tycho Brahe.” Scientific American (February 1961): 118. Gingerich, O. “Johannes Kepler and the Rudolphine Tables.” Sky & Telescope (December 1971): 328. Brief article on Kepler’s work. Wilson, C. “How Did Kepler Discover His First Two Laws?” Scientific American (March 1972): 92. ### Newton Christianson, G. “Newton’s Principia: A Retrospective.” Sky & Telescope (July 1987): 18. Cohen, I. “Newton’s Discovery of Gravity.” Scientific American (March 1981): 166. Gingerich, O. “Newton, Halley, and the Comet.” Sky & Telescope (March 1986): 230. Sullivant, R. “When the Apple Falls.” Astronomy (April 1998): 55. Brief overview. ### The Discovery of Neptune Sheehan, W., et al. “The Case of the Pilfered Planet: Did the British Steal Neptune?” Scientific American (December 2004): 92. ### Websites ### Brahe and Kepler Johannes Kepler: http://www.britannica.com/biography/Johannes-Kepler. Encyclopedia Britannica article. Johannes Kepler: http://www-history.mcs.st-andrews.ac.uk/Biographies/Kepler.html. MacTutor article with additional links. Noble Dane: Images of Tycho Brahe: http://www.mhs.ox.ac.uk/tycho/index.htm. A virtual museum exhibit from Oxford. ### Newton Sir Isaac Newton: http://www-groups.dcs.st-and.ac.uk/~history//Biographies/Newton.html. MacTutor article with additional links. Sir Isaac Newton: http://www.luminarium.org/sevenlit/newton/newtonbio.htm. Newton Biography at the Luminarium. ### The Discovery of Neptune Adams, Airy, and the Discovery of Neptune: http://www.mikeoates.org/lassell/adams-airy.htm. A defense of Airy’s role by historian Alan Chapman. Mathematical Discovery of Planets: http://www-groups.dcs.st-and.ac.uk/~history/HistTopics/Neptune_and_Pluto.html. MacTutor article. ### Videos ### Brahe and Kepler “Harmony of the Worlds.” This third episode of Carl Sagan’s TV series Cosmos focuses on Kepler and his life and work. Tycho Brahe, Johannes Kepler, and Planetary Motion: https://www.youtube.com/watch?v=x3ALuycrCwI. German-produced video, in English (14:27). ### Newton Beyond the Big Bang: Sir Isaac Newton’s Law of Gravity: http://www.history.com/topics/enlightenment/videos/beyond-the-big-bang-sir-isaac-newtons-law-of-gravity. From the History Channel (4:35). Sir Isaac Newton versus Bill Nye: Epic Rap Battles of History: https://www.youtube.com/watch?v=8yis7GzlXNM. (2:47). ### The Discovery of Neptune Richard Feynman: On the Discovery of Neptune: https://www.youtube.com/watch?v=FgXQffVgZRs. A brief black-and-white Caltech lecture (4:33). ### Collaborative Group Activities 1. An eccentric, but very rich, alumnus of your college makes a bet with the dean that if you drop a baseball and a bowling ball from the tallest building on campus, the bowling ball would hit the ground first. Have your group discuss whether you would make a side bet that the alumnus is right. How would you decide who is right? 2. Suppose someone in your astronomy class was unhappy about his or her weight. Where could a person go to weigh one-fourth as much as he or she does now? Would changing the unhappy person’s weight have any effect on his or her mass? 3. When the Apollo astronauts landed on the Moon, some commentators commented that it ruined the mystery and “poetry” of the Moon forever (and that lovers could never gaze at the full moon in the same way again). Others felt that knowing more about the Moon could only enhance its interest to us as we see it from Earth. How do the various members of your group feel? Why? 4. shows a swarm of satellites in orbit around Earth. What do you think all these satellites do? How many categories of functions for Earth satellites can your group come up with? 5. The Making Connections feature box Astronomy and the Poets discusses how poets included the most recent astronomical knowledge in their poetry. Is this still happening today? Can your group members come up with any poems or songs that you know that deal with astronomy or outer space? If not, perhaps you could find some online, or by asking friends or roommates who are into poetry or music. ### Review Questions ### Thought Questions ### Figuring for Yourself

# Earth, Moon, and Sky ## Thinking Ahead If Earth’s orbit is nearly a perfect circle (as we saw in earlier chapters), why is it hotter in summer and colder in winter in many places around the globe? And why are the seasons in Australia or Peru the opposite of those in the United States or Europe? The story is told that Galileo, as he left the Hall of the Inquisition following his retraction of the doctrine that Earth rotates and revolves about the Sun, said under his breath, “But nevertheless it moves.” Historians are not sure whether the story is true, but certainly Galileo knew that Earth was in motion, whatever church authorities said. It is the motions of Earth that produce the seasons and give us our measures of time and date. The Moon’s motions around us provide the concept of the month and the cycle of lunar phases. In this chapter we examine some of the basic phenomena of our everyday world in their astronomical context.

# Earth, Moon, and Sky ## Earth and Sky ### Learning Objectives By the end of this section, you will be able to: 1. Describe how latitude and longitude are used to map Earth 2. Explain how right ascension and declination are used to map the sky In order to create an accurate map, a mapmaker needs a way to uniquely and simply identify the location of all the major features on the map, such as cities or natural landmarks. Similarly, astronomical mapmakers need a way to uniquely and simply identify the location of stars, galaxies, and other celestial objects. On Earth maps, we divide the surface of Earth into a grid, and each location on that grid can easily be found using its latitude and longitude coordinate. Astronomers have a similar system for objects on the sky. Learning about these can help us understand the apparent motion of objects in the sky from various places on Earth. ### Locating Places on Earth Let’s begin by fixing our position on the surface of planet Earth. As we discussed in Observing the Sky: The Birth of Astronomy, Earth’s axis of rotation defines the locations of its North and South Poles and of its equator, halfway between. Two other directions are also defined by Earth’s motions: east is the direction toward which Earth rotates, and west is its opposite. At almost any point on Earth, the four directions—north, south, east, and west—are well defined, despite the fact that our planet is round rather than flat. The only exceptions are exactly at the North and South Poles, where the directions east and west are ambiguous (because points exactly at the poles do not turn). We can use these ideas to define a system of coordinates attached to our planet. Such a system, like the layout of streets and avenues in Manhattan or Salt Lake City, helps us find where we are or want to go. Coordinates on a sphere, however, are a little more complicated than those on a flat surface. We must define circles on the sphere that play the same role as the rectangular grid that you see on city maps. A great circle is any circle on the surface of a sphere whose center is at the center of the sphere. For example, Earth’s equator is a great circle on Earth’s surface, halfway between the North and South Poles. We can also imagine a series of great circles that pass through both the North and South Poles. Each of the circles is called a meridian; they are each perpendicular to the equator, crossing it at right angles. Any point on the surface of Earth will have a meridian passing through it (). The meridian specifies the east-west location, or longitude, of the place. By international agreement (and it took many meetings for the world’s countries to agree), longitude is defined as the number of degrees of arc along the equator between your meridian and the one passing through Greenwich, England, which has been designated as the Prime Meridian. The longitude of the Prime Meridian is defined as 0°. Why Greenwich, you might ask? Every country wanted 0° longitude to pass through its own capital. Greenwich, the site of the old Royal Observatory (), was selected because it was between continental Europe and the United States, and because it was the site for much of the development of the method to measure longitude at sea. Longitudes are measured either to the east or to the west of the Greenwich meridian from 0° to 180°. As an example, the longitude of the clock-house benchmark of the U.S. Naval Observatory in Washington, DC, is 77.066° W. Your latitude (or north-south location) is the number of degrees of arc you are away from the equator along your meridian. Latitudes are measured either north or south of the equator from 0° to 90°. (The latitude of the equator is 0°.) As an example, the latitude of the previously mentioned Naval Observatory benchmark is 38.921° N. The latitude of the South Pole is 90° S, and the latitude of the North Pole is 90° N. ### Locating Places in the Sky Positions in the sky are measured in a way that is very similar to the way we measure positions on the surface of Earth. Instead of latitude and longitude, however, astronomers use coordinates called declination and right ascension. To denote positions of objects in the sky, it is often convenient to make use of the fictitious celestial sphere. We saw in Observing the Sky: The Birth of Astronomy that the sky appears to rotate about points above the North and South Poles of Earth—points in the sky called the north celestial pole and the south celestial pole. Halfway between the celestial poles, and thus 90° from each pole, is the celestial equator, a great circle on the celestial sphere that is in the same plane as Earth’s equator. We can use these markers in the sky to set up a system of celestial coordinates. Declination on the celestial sphere is measured the same way that latitude is measured on the sphere of Earth: from the celestial equator toward the north (positive) or south (negative). So Polaris, the star near the north celestial pole, has a declination of almost +90°. Right ascension (RA) is like longitude, except that instead of Greenwich, the arbitrarily chosen point where we start counting is the vernal equinox, a point in the sky where the ecliptic (the Sun’s path) crosses the celestial equator. RA can be expressed either in units of angle (degrees) or in units of time. This is because the celestial sphere appears to turn around Earth once a day as our planet turns on its axis. Thus the 360° of RA that it takes to go once around the celestial sphere can just as well be set equal to 24 hours. Then each 15° of arc is equal to 1 hour of time. For example, the approximate celestial coordinates of the bright star Capella are RA and declination . One way to visualize these circles in the sky is to imagine Earth as a transparent sphere with the terrestrial coordinates (latitude and longitude) painted on it with dark paint. Imagine the celestial sphere around us as a giant ball, painted white on the inside. Then imagine yourself at the center of Earth, with a bright light bulb in the middle, looking out through its transparent surface to the sky. The terrestrial poles, equator, and meridians will be projected as dark shadows on the celestial sphere, giving us the system of coordinates in the sky. ### The Turning Earth Why do many stars rise and set each night? Why, in other words, does the night sky seem to turn? We have seen that the apparent rotation of the celestial sphere could be accounted for either by a daily rotation of the sky around a stationary Earth or by the rotation of Earth itself. Since the seventeenth century, it has been generally accepted that it is Earth that turns, but not until the nineteenth century did the French physicist Jean Foucault provide an unambiguous demonstration of this rotation. In 1851, he suspended a 60-meter pendulum with a mass of about 25 kilograms from the dome of the Pantheon in Paris and started the pendulum swinging evenly. If Earth had not been turning, there would have been no alteration of the pendulum’s plane of oscillation, and so it would have continued tracing the same path. Yet after a few minutes Foucault could see that the pendulum’s plane of motion was turning. Foucault explained that it was not the pendulum that was shifting, but rather Earth that was turning beneath it (). You can now find such pendulums in many science centers and planetariums around the world. Can you think of other pieces of evidence that indicate that it is Earth and not the sky that is turning? (See Collaborative Group Activity A at the end of this chapter.) ### Key Concepts and Summary The terrestrial system of latitude and longitude makes use of the great circles called meridians. Longitude is arbitrarily set to 0° at the Royal Observatory at Greenwich, England. An analogous celestial coordinate system is called right ascension (RA) and declination, with 0° of declination starting at the vernal equinox. These coordinate systems help us locate any object on the celestial sphere. The Foucault pendulum is a way to demonstrate that Earth is turning.

# Earth, Moon, and Sky ## The Seasons ### Learning Objectives By the end of this section, you will be able to: 1. Describe how the tilt of Earth’s axis causes the seasons 2. Explain how seasonal differences on Earth vary with latitude One of the fundamental facts of life at Earth’s midlatitudes, where most of this book’s readers live, is that there are significant variations in the heat we receive from the Sun during the course of the year. We thus divide the year into seasons, each with its different amount of sunlight. The difference between seasons gets more pronounced the farther north or south from the equator we travel, and the seasons in the Southern Hemisphere are the opposite of what we find on the northern half of Earth. With these observed facts in mind, let us ask what causes the seasons. Many people have believed that the seasons were the result of the changing distance between Earth and the Sun. This sounds reasonable at first: it should be colder when Earth is farther from the Sun. But the facts don’t bear out this hypothesis. Although Earth’s orbit around the Sun is an ellipse, its distance from the Sun varies by only about 3%. That’s not enough to cause significant variations in the Sun’s heating. To make matters worse for people in North America who hold this hypothesis, Earth is actually closest to the Sun in January, when the Northern Hemisphere is in the middle of winter. And if distance were the governing factor, why would the two hemispheres have opposite seasons? As we shall show, the seasons are actually caused by the 23.5° tilt of Earth’s axis. ### The Seasons and Sunshine shows Earth’s annual path around the Sun, with Earth’s axis tilted by 23.5°. Note that our axis continues to point the same direction in the sky throughout the year. As Earth travels around the Sun, in June the Northern Hemisphere “leans into” the Sun and is more directly illuminated. In December, the situation is reversed: the Southern Hemisphere leans into the Sun, and the Northern Hemisphere leans away. In September and March, Earth leans “sideways”—neither into the Sun nor away from it—so the two hemispheres are equally favored with sunshine. How does the Sun’s favoring one hemisphere translate into making it warmer for us down on the surface of Earth? There are two effects we need to consider. When we lean into the Sun, sunlight hits us at a more direct angle and is more effective at heating Earth’s surface (). You can get a similar effect by shining a flashlight onto a wall. If you shine the flashlight straight on, you get an intense spot of light on the wall. But if you hold the flashlight at an angle (if the wall “leans out” of the beam), then the spot of light is more spread out. Like the straight-on light, the sunlight in June is more direct and intense in the Northern Hemisphere, and hence more effective at heating. The second effect has to do with the length of time the Sun spends above the horizon (). Even if you’ve never thought about astronomy before, we’re sure you have observed that the hours of daylight increase in summer and decrease in winter. Let’s see why this happens. As we saw in Observing the Sky: The Birth of Astronomy, an equivalent way to look at our path around the Sun each year is to pretend that the Sun moves around Earth (on a circle called the ecliptic). Because Earth’s axis is tilted, the ecliptic is tilted by about 23.5° relative to the celestial equator (review ). As a result, where we see the Sun in the sky changes as the year wears on. In June, the Sun is north of the celestial equator and spends more time with those who live in the Northern Hemisphere. It rises high in the sky and is above the horizon in the United States for as long as 15 hours. Thus, the Sun not only heats us with more direct rays, but it also has more time to do it each day. (Notice in that the Northern Hemisphere’s gain is the Southern Hemisphere’s loss. There the June Sun is low in the sky, meaning fewer daylight hours. In Chile, for example, June is a colder, darker time of year.) In December, when the Sun is south of the celestial equator, the situation is reversed. Let’s look at what the Sun’s illumination on Earth looks like at some specific dates of the year, when these effects are at their maximum. On or about June 21 (the date we who live in the Northern Hemisphere call the summer solstice or sometimes the first day of summer), the Sun shines down most directly upon the Northern Hemisphere of Earth. It appears about 23° north of the equator, and thus, on that date, it passes through the zenith of places on Earth that are at 23° N latitude. The situation is shown in detail in . To a person at 23° N (near Hawaii, for example), the Sun is directly overhead at noon. This latitude, where the Sun can appear at the zenith at noon on the first day of summer, is called the Tropic of Cancer. We also see in that the Sun’s rays shine down all around the North Pole at the solstice. As Earth turns on its axis, the North Pole is continuously illuminated by the Sun; all places within 23° of the pole have sunshine for 24 hours. The Sun is as far north on this date as it can get; thus, 90° – 23° (or 67° N) is the southernmost latitude where the Sun can be seen for a full 24-hour period (sometimes called the “land of the midnight Sun”). That circle of latitude is called the Arctic Circle. Many early cultures scheduled special events around the summer solstice to celebrate the longest days and thank their gods for making the weather warm. This required people to keep track of the lengths of the days and the northward trek of the Sun in order to know the right day for the “party.” (You can do the same thing by watching for several weeks, from the same observation point, where the Sun rises or sets relative to a fixed landmark. In spring, the Sun will rise farther and farther north of east, and set farther and farther north of west, reaching the maximum around the summer solstice.) Now look at the South Pole in . On June 21, all places within 23° of the South Pole—that is, south of what we call the Antarctic Circle—do not see the Sun at all for 24 hours. The situation is reversed 6 months later, about December 21 (the date of the winter solstice, or the first day of winter in the Northern Hemisphere), as shown in . Now it is the Arctic Circle that has the 24-hour night and the Antarctic Circle that has the midnight Sun. At latitude 23° S, called the Tropic of Capricorn, the Sun passes through the zenith at noon. Days are longer in the Southern Hemisphere and shorter in the north. In the United States and Southern Europe, there may be only 9 or 10 hours of sunshine during the day. It is winter in the Northern Hemisphere and summer in the Southern Hemisphere. Many cultures that developed some distance north of the equator have a celebration around December 21 to help people deal with the depressing lack of sunlight and the often dangerously cold temperatures. Originally, this was often a time for huddling with family and friends, for sharing the reserves of food and drink, and for rituals asking the gods to return the light and heat and turn the cycle of the seasons around. Many cultures constructed elaborate devices for anticipating when the shortest day of the year was coming. Stonehenge in England, built long before the invention of writing, is probably one such device. In our own time, we continue the winter solstice tradition with various holiday celebrations around that December date. Halfway between the solstices, on about March 21 and September 21, the Sun is on the celestial equator. From Earth, it appears above our planet’s equator and favors neither hemisphere. Every place on Earth then receives roughly 12 hours of sunshine and 12 hours of night. The points where the Sun crosses the celestial equator are called the vernal (spring) and autumnal (fall) equinoxes. ### The Seasons at Different Latitudes The seasonal effects are different at different latitudes on Earth. Near the equator, for instance, all seasons are much the same. Every day of the year, the Sun is up half the time, so there are approximately 12 hours of sunshine and 12 hours of night. Local residents define the seasons by the amount of rain (wet season and dry season) rather than by the amount of sunlight. As we travel north or south, the seasons become more pronounced, until we reach extreme cases in the Arctic and Antarctic. At the North Pole, all celestial objects that are north of the celestial equator are always above the horizon and, as Earth turns, circle around parallel to it. The Sun is north of the celestial equator from about March 21 to September 21, so at the North Pole, the Sun rises when it reaches the vernal equinox and sets when it reaches the autumnal equinox. Each year there are 6 months of sunshine at each pole, followed by 6 months of darkness. ### Clarifications about the Real World In our discussions so far, we have been describing the rising and setting of the Sun and stars as they would appear if Earth had little or no atmosphere. In reality, however, the atmosphere has the curious effect of allowing us to see a little way “over the horizon.” This effect is a result of refraction, the bending of light passing through air or water, something we will discuss in Astronomical Instruments. Because of this atmospheric refraction (and the fact that the Sun is not a point of light but a disk), the Sun appears to rise earlier and to set later than it would if no atmosphere were present. In addition, the atmosphere scatters light and provides some twilight illumination even when the Sun is below the horizon. Astronomers define morning twilight as beginning when the Sun is 18° below the horizon, and evening twilight extends until the Sun sinks more than 18° below the horizon. These atmospheric effects require small corrections in many of our statements about the seasons. At the equinoxes, for example, the Sun appears to be above the horizon for a few minutes longer than 12 hours, and below the horizon for fewer than 12 hours. These effects are most dramatic at Earth’s poles, where the Sun actually can be seen more than a week before it reaches the celestial equator. You probably know that the summer solstice (June 21) is not the warmest day of the year, even if it is the longest. The hottest months in the Northern Hemisphere are July and August. This is because our weather involves the air and water covering Earth’s surface, and these large reservoirs do not heat up instantaneously. You have probably observed this effect for yourself; for example, a pond does not get warm the moment the Sun rises but is warmest late in the afternoon, after it has had time to absorb the Sun’s heat. In the same way, Earth gets warmer after it has had a chance to absorb the extra sunlight that is the Sun’s summer gift to us. And the coldest times of winter are a month or more after the winter solstice. ### Key Concepts and Summary The familiar cycle of the seasons results from the 23.5° tilt of Earth’s axis of rotation. At the summer solstice, the Sun is higher in the sky and its rays strike Earth more directly. The Sun is in the sky for more than half of the day and can heat Earth longer. At the winter solstice, the Sun is low in the sky and its rays come in at more of an angle; in addition, it is up for fewer than 12 hours, so those rays have less time to heat. At the vernal and autumnal equinoxes, the Sun is on the celestial equator and we get about 12 hours of day and night. The seasons are different at different latitudes.

# Earth, Moon, and Sky ## Keeping Time ### Learning Objectives By the end of this section, you will be able to: 1. Explain the difference between the solar day and the sidereal day 2. Explain mean solar time and the reason for time zones The measurement of time is based on the rotation of Earth. Throughout most of human history, time has been reckoned by positions of the Sun and stars in the sky. Only recently have mechanical and electronic clocks taken over this function in regulating our lives. ### The Length of the Day The most fundamental astronomical unit of time is the day, measured in terms of the rotation of Earth. There is, however, more than one way to define the day. Usually, we think of it as the rotation period of Earth with respect to the Sun, called the solar day. After all, for most people sunrise is more important than the rising time of Arcturus or some other star, so we set our clocks to some version of Sun-time. However, astronomers also use a sidereal day, which is defined in terms of the rotation period of Earth with respect to the stars. A solar day is slightly longer than a sidereal day because (as you can see from ) Earth not only turns but also moves along its path around the Sun in a day. Suppose we start when Earth’s orbital position is at day 1, with both the Sun and some distant star (located in the direction indicated by the long white arrow pointing left), directly in line with the zenith for the observer on Earth. When Earth has completed one rotation with respect to the distant star and is at day 2, the long arrow again points to the same distant star. However, notice that because of the movement of Earth along its orbit from day 1 to 2, the Sun has not yet reached a position above the observer. To complete a solar day, Earth must rotate an additional amount, equal to 1/365 of a full turn. The time required for this extra rotation is 1/365 of a day, or about 4 minutes. So the solar day is about 4 minutes longer than the sidereal day. Because our ordinary clocks are set to solar time, stars rise 4 minutes earlier each day. Astronomers prefer sidereal time for planning their observations because in that system, a star rises at the same time every day. ### Apparent Solar Time We can define apparent solar time as time reckoned by the actual position of the Sun in the sky (or, during the night, its position below the horizon). This is the kind of time indicated by sundials, and it probably represents the earliest measure of time used by ancient civilizations. Today, we adopt the middle of the night as the starting point of the day and measure time in hours elapsed since midnight. During the first half of the day, the Sun has not yet reached the meridian (the great circle in the sky that passes through our zenith). We designate those hours as before midday (ante meridiem, or a.m.), before the Sun reaches the local meridian. We customarily start numbering the hours after noon over again and designate them by p.m. (post meridiem), after the Sun reaches the local meridian. Although apparent solar time seems simple, it is not really very convenient to use. The exact length of an apparent solar day varies slightly during the year. The eastward progress of the Sun in its annual journey around the sky is not uniform because the speed of Earth varies slightly in its elliptical orbit. Another complication is that Earth’s axis of rotation is not perpendicular to the plane of its revolution. Thus, apparent solar time does not advance at a uniform rate. After the invention of mechanical clocks that run at a uniform rate, it became necessary to abandon the apparent solar day as the fundamental unit of time. ### Mean Solar Time and Standard Time Instead, we can consider the mean solar time, which is based on the average value of the solar day over the course of the year. A mean solar day contains exactly 24 hours and is what we use in our everyday timekeeping. Although mean solar time has the advantage of progressing at a uniform rate, it is still inconvenient for practical use because it is determined by the position of the Sun. For example, noon occurs when the Sun is highest in the sky on the meridian (but not necessarily at the zenith). But because we live on a round Earth, the exact time of noon is different as you change your longitude by moving east or west. If mean solar time were strictly observed, people traveling east or west would have to reset their watches continually as the longitude changed, just to read the local mean time correctly. For instance, a commuter traveling from Oyster Bay on Long Island to New York City would have to adjust the time on the trip through the East River tunnel because Oyster Bay time is actually about 1.6 minutes more advanced than that of Manhattan. (Imagine an airplane trip in which an obnoxious flight attendant gets on the intercom every minute, saying, “Please reset your watch for local mean time.”) Until near the end of the nineteenth century, every city and town in the United States kept its own local mean time. With the development of railroads and the telegraph, however, the need for some kind of standardization became evident. In 1883, the United States was divided into four standard time zones (now six, including Hawaii and Alaska), each with one system of time within that zone. By 1900, most of the world was using the system of 24 standardized global time zones. Within each zone, all places keep the same standard time, with the local mean solar time of a standard line of longitude running more or less through the middle of each zone. Now travelers reset their watches only when the time change has amounted to a full hour. Pacific standard time is 3 hours earlier than eastern standard time, a fact that becomes painfully obvious in California when someone on the East Coast forgets and calls you at 5:00 a.m. Globally, almost all countries have adopted one or more standard time zones, although one of the largest nations, India, has settled on a half-zone, being 5.5 hours from Greenwich standard. Also, China officially uses only one time zone, so all the clocks in that country keep the same time. In Tibet, for example, the Sun rises while the clocks (which keep Beijing time) say it is midmorning already. Daylight saving time is simply the local standard time of the place plus 1 hour. It has been adopted for spring and summer use in most states in the United States, as well as in many countries, to prolong the sunlight into evening hours, on the apparent theory that it is easier to change the time by government action than it would be for individuals or businesses to adjust their own schedules to produce the same effect. It does not, of course, “save” any daylight at all—because the amount of sunlight is not determined by what we do with our clocks—and its observance is a point of legislative debate in some states. ### The International Date Line The fact that time is always advancing as you move toward the east presents a problem. Suppose you travel eastward around the world. You pass into a new time zone, on the average, about every 15° of longitude you travel, and each time you dutifully set your watch ahead an hour. By the time you have completed your trip, you have set your watch ahead a full 24 hours and thus gained a day over those who stayed at home. The solution to this dilemma is the International Date Line, set by international agreement to run approximately along the 180° meridian of longitude. The date line runs down the middle of the Pacific Ocean, although it jogs a bit in a few places to avoid cutting through groups of islands and through Alaska (). By convention, at the date line, the date of the calendar is changed by one day. Crossing the date line from west to east, thus advancing your time, you compensate by decreasing the date; crossing from east to west, you increase the date by one day. To maintain our planet on a rational system of timekeeping, we simply must accept that the date will differ in different cities at the same time. A good example is the date when the Imperial Japanese Navy bombed Pearl Harbor in Hawaii, known in the United States as Sunday, December 7, 1941, but taught to Japanese students as Monday, December 8. ### Key Concepts and Summary The basic unit of astronomical time is the day—either the solar day (reckoned by the Sun) or the sidereal day (reckoned by the stars). Apparent solar time is based on the position of the Sun in the sky, and mean solar time is based on the average value of a solar day during the year. By international agreement, we define 24 time zones around the world, each with its own standard time. The convention of the International Date Line is necessary to reconcile times on different parts of Earth.

# Earth, Moon, and Sky ## The Calendar ### Learning Objectives By the end of this section, you will be able to: 1. Understand how calendars varied among different cultures 2. Explain the origins of our modern calendar “What’s today’s date?” is one of the most common questions you can ask (usually when signing a document or worrying about whether you should have started studying for your next astronomy exam). Long before the era of digital watches, smartphones, and fitness bands that tell the date, people used calendars to help measure the passage of time. ### The Challenge of the Calendar There are two traditional functions of any calendar. First, it must keep track of time over the course of long spans, allowing people to anticipate the cycle of the seasons and to honor special religious or personal anniversaries. Second, to be useful to a large number of people, a calendar must use natural time intervals that everyone can agree on—those defined by the motions of Earth, the Moon, and sometimes even the planets. The natural units of our calendar are the day, based on the period of rotation of Earth; the month, based on the cycle of the Moon’s phases (see later in this chapter) about Earth; and the year, based on the period of revolution of Earth about the Sun. Difficulties have resulted from the fact that these three periods are not commensurable; that’s a fancy way of saying that one does not divide evenly into any of the others. The rotation period of Earth is, by definition, 1.0000 day (and here the solar day is used, since that is the basis of human experience). The period required by the Moon to complete its cycle of phases, called the month, is 29.5306 days. The basic period of revolution of Earth, called the tropical year, is 365.2422 days. The ratios of these numbers are not convenient for calculations. This is the historic challenge of the calendar, dealt with in various ways by different cultures. ### Early Calendars Even the earliest cultures were concerned with the keeping of time and the calendar. Some interesting examples include monuments left by Bronze Age people in northwestern Europe, especially the British Isles. The best preserved of the monuments is Stonehenge, about 13 kilometers from Salisbury in southwest England (). It is a complex array of stones, ditches, and holes arranged in concentric circles. Carbon dating and other studies show that Stonehenge was built during three periods ranging from about 2800 to 1500 BCE. Some of the stones are aligned with the directions of the Sun and Moon during their risings and settings at critical times of the year (such as the summer and winter solstices), and it is generally believed that at least one function of the monument was connected with the keeping of a calendar. The Maya in Central America, who thrived more than a thousand years ago, were also concerned with the keeping of time. Their calendar was as sophisticated as, and perhaps more complex than, contemporary calendars in Europe. The Maya did not attempt to correlate their calendar accurately with the length of the year or lunar month. Rather, their calendar was a system for keeping track of the passage of days and for counting time far into the past or future. Among other purposes, it was useful for predicting astronomical events, such as the position of Venus in the sky (). The ancient Chinese developed an especially complex calendar, largely limited to a few privileged hereditary court astronomer-astrologers. In addition to the motions of Earth and the Moon, they were able to fit in the approximately 12-year cycle of Jupiter, which was central to their system of astrology. The Chinese still preserve some aspects of this system in their cycle of 12 “years”—the Year of the Dragon, the Year of the Pig, and so on—that are defined by the position of Jupiter in the zodiac. Our Western calendar derives from a long history of timekeeping beginning with the Sumerians, dating back to at least the second millennium BCE, and continuing with the Egyptians and the Greeks around the eighth century BCE. These calendars led, eventually, to the Julian calendar, introduced by Julius Caesar, which approximated the year at 365.25 days, fairly close to the actual value of 365.2422. The Romans achieved this approximation by declaring years to have 365 days each, with the exception of every fourth year. The leap year was to have one extra day, bringing its length to 366 days, and thus making the average length of the year in the Julian calendar 365.25 days. In this calendar, the Romans had dropped the almost impossible task of trying to base their calendar on the Moon as well as the Sun, although a vestige of older lunar systems can be seen in the fact that our months have an average length of about 30 days. However, lunar calendars remained in use in other cultures, and Islamic calendars, for example, are still primarily lunar rather than solar. ### The Gregorian Calendar Although the Julian calendar (which was adopted by the early Christian Church) represented a great advance, its average year still differed from the true year by about 11 minutes, an amount that accumulates over the centuries to an appreciable error. By 1582, that 11 minutes per year had added up to the point where the first day of spring was occurring on March 11, instead of March 21. If the trend were allowed to continue, eventually the Christian celebration of Easter would be occurring in early winter. Pope Gregory XIII, a contemporary of Galileo, felt it necessary to institute further calendar reform. The Gregorian calendar reform consisted of two steps. First, 10 days had to be dropped out of the calendar to bring the vernal equinox back to March 21; by proclamation, the day following October 4, 1582, became October 15. The second feature of the new Gregorian calendar was a change in the rule for leap year, making the average length of the year more closely approximate the tropical year. Gregory decreed that three of every four century years—all leap years under the Julian calendar—would be common years henceforth. The rule was that only century years divisible by 400 would be leap years. Thus, 1700, 1800, and 1900—all divisible by 4 but not by 400—were not leap years in the Gregorian calendar. On the other hand, the years 1600 and 2000, both divisible by 400, were leap years. The average length of this Gregorian year, 365.2425 mean solar days, is correct to about 1 day in 3300 years. The Catholic countries immediately put the Gregorian reform into effect, but countries of the Eastern Church and most Protestant countries did not adopt it until much later. It was 1752 when England and the American colonies finally made the change. By parliamentary decree, September 2, 1752, was followed by September 14. Although special laws were passed to prevent such abuses as landlords collecting a full month’s rent for September, there were still riots, and people demanded their 12 days back. Russia did not abandon the Julian calendar until the time of the Bolshevik revolution. The Russians then had to omit 13 days to come into step with the rest of the world. The anniversary of the October Revolution (old calendar) of 1917, bringing the communists to power, thus ended up being celebrated in November (new calendar), a difference that is perhaps not so important since the fall of communism. ### Key Concepts and Summary The fundamental problem of the calendar is to reconcile the incommensurable lengths of the day, month, and year. Most modern calendars, beginning with the Roman (Julian) calendar of the first century BCE, neglect the problem of the month and concentrate on achieving the correct number of days in a year by using such conventions as the leap year. Today, most of the world has adopted the Gregorian calendar established in 1582 while finding ways to coexist with the older lunar calendars’ system of months.

# Earth, Moon, and Sky ## Phases and Motions of the Moon ### Learning Objectives By the end of this section, you will be able to: 1. Explain the cause of the lunar phases 2. Understand how the Moon rotates and revolves around Earth After the Sun, the Moon is the brightest and most obvious object in the sky. Unlike the Sun, it does not shine under its own power, but merely glows with reflected sunlight. If you were to follow its progress in the sky for a month, you would observe a cycle of phases (different appearances), with the Moon starting dark and getting more and more illuminated by sunlight over the course of about two weeks. After the Moon’s disk becomes fully bright, it begins to fade, returning to dark about two weeks later. These changes fascinated and mystified many early cultures, which came up with marvelous stories and legends to explain the cycle of the Moon. Even in the modern world, many people don’t understand what causes the phases, thinking that they are somehow related to the shadow of Earth. Let us see how the phases can be explained by the motion of the Moon relative to the bright light source in the solar system, the Sun. ### Lunar Phases Although we know that the Sun moves 1/12 of its path around the sky each month, for purposes of explaining the phases, we can assume that the Sun’s light comes from roughly the same direction during the course of a four-week lunar cycle. The Moon, on the other hand, moves completely around Earth in that time. As we watch the Moon from our vantage point on Earth, how much of its face we see illuminated by sunlight depends on the angle the Sun makes with the Moon. Here is a simple experiment to show you what we mean: stand about 6 feet in front of a bright electric light in a completely dark room (or outdoors at night) and hold in your hand a small round object such as a tennis ball or an orange. Your head can then represent Earth, the light represents the Sun, and the ball the Moon. Move the ball around your head (making sure you don’t cause an eclipse by blocking the light with your head). You will see phases just like those of the Moon on the ball. (Another good way to get acquainted with the phases and motions of the Moon is to follow our satellite in the sky for a month or two, recording its shape, its direction from the Sun, and when it rises and sets.) Let’s examine the Moon’s cycle of phases using , which depicts the Moon’s behavior for the entire month. The trick to this figure is that you must imagine yourself standing on Earth, facing the Moon in each of its phases. So, for the position labeled “New,” you are on the right side of Earth and it’s the middle of the day; for the position “Full,” you are on the left side of Earth in the middle of the night. Note that in every position on , the Moon is half illuminated and half dark (as a ball in sunlight should be). The difference at each position has to do with what part of the Moon faces Earth. The Moon is said to be new when it is in the same general direction in the sky as the Sun (position A). Here, its illuminated (bright) side is turned away from us and its dark side is turned toward us. You might say that the Sun is shining on the “wrong ” side of the Moon from our perspective. In this phase the Moon is invisible to us; its dark, rocky surface does not give off any light of its own. Because the new moon is in the same part of the sky as the Sun, it rises at sunrise and sets at sunset. But the Moon does not remain in this phase long because it moves eastward each day in its monthly path around us. Since it takes about 30 days to orbit Earth and there are 360° in a circle, the Moon will move about 12° in the sky each day (or about 24 times its own diameter). A day or two after the new phase, the thin crescent first appears, as we begin to see a small part of the Moon’s illuminated hemisphere. It has moved into a position where it now reflects a little sunlight toward us along one side. The bright crescent increases in size on successive days as the Moon moves farther and farther around the sky away from the direction of the Sun (position B). Because the Moon is moving eastward away from the Sun, it rises later and later each day (like a student during summer vacation). After about one week, the Moon is one-quarter of the way around its orbit (position C) and so we say it is at the first quarter phase. Half of the Moon’s illuminated side is visible to Earth observers. Because of its eastward motion, the Moon now lags about one-quarter of the day behind the Sun, rising around noon and setting around midnight. During the week after the first quarter phase, we see more and more of the Moon’s illuminated hemisphere (position D), a phase that is called waxing (or growing) gibbous (from the Latin gibbus, meaning hump). Eventually, the Moon arrives at position E in our figure, where it and the Sun are opposite each other in the sky. The side of the Moon turned toward the Sun is also turned toward Earth, and we have the full phase. When the Moon is full, it is opposite the Sun in the sky. The Moon does the opposite of what the Sun does, rising at sunset and setting at sunrise. Note what that means in practice: the completely illuminated (and thus very noticeable) Moon rises just as it gets dark, remains in the sky all night long, and sets as the Sun’s first rays are seen at dawn. Its illumination throughout the night helps lovers on a romantic stroll and students finding their way back to their dorms after a long night in the library or an off-campus party. And when is the full moon highest in the sky and most noticeable? At midnight, a time made famous in generations of horror novels and films. (Note how the behavior of a vampire like Dracula parallels the behavior of the full Moon: Dracula rises at sunset, does his worst mischief at midnight, and must be back down in his coffin by sunrise. The old legends were a way of personifying the behavior of the Moon, which was a much more dramatic part of people’s lives in the days before electric lights and television.) Folklore has it that more crazy behavior is seen during the time of the full moon (the Moon even gives a name to crazy behavior—“lunacy”). But, in fact, statistical tests of this “hypothesis” involving thousands of records from hospital emergency rooms and police files do not reveal any correlation of human behavior with the phases of the Moon. For example, homicides occur at the same rate during the new moon or the crescent moon as during the full moon. Most investigators believe that the real story is not that more crazy behavior happens on nights with a full moon, but rather that we are more likely to notice or remember such behavior with the aid of a bright celestial light that is up all night long. During the two weeks following the full moon, the Moon goes through the same phases again in reverse order (points F, G, and H in ), returning to new phase after about 29.5 days. About a week after the full moon, for example, the Moon is at third quarter, meaning that it is three-quarters of the way around (not that it is three-quarters illuminated—in fact, half of the visible side of the Moon is again dark). At this phase, the Moon is now rising around midnight and setting around noon. Note that there is one thing quite misleading about . If you look at the Moon in position E, although it is full in theory, it appears as if its illumination would in fact be blocked by a big fat Earth, and hence we would not see anything on the Moon except Earth’s shadow. In reality, the Moon is nowhere near as close to Earth (nor is its path so identical with the Sun’s in the sky) as this diagram (and the diagrams in most textbooks) might lead you to believe. The Moon is actually 30 Earth-diameters away from us; Science and the Universe: A Brief Tour contains a diagram that shows the two objects to scale. And, since the Moon’s orbit is tilted relative to the path of the Sun in the sky, Earth’s shadow misses the Moon most months. That’s why we regularly get treated to a full moon. The times when Earth’s shadow does fall on the Moon are called lunar eclipses and are discussed in Eclipses of the Sun and Moon. ### The Moon’s Revolution and Rotation The Moon’s sidereal period—that is, the period of its revolution about Earth measured with respect to the stars—is a little over 27 days: the sidereal month is 27.3217 days to be exact. The time interval in which the phases repeat—say, from full to full—is the solar month, 29.5306 days. The difference results from Earth’s motion around the Sun. The Moon must make more than a complete turn around the moving Earth to get back to the same phase with respect to the Sun. As we saw, the Moon changes its position on the celestial sphere rather rapidly: even during a single evening, the Moon creeps visibly eastward among the stars, traveling its own width in a little less than 1 hour. The delay in moonrise from one day to the next caused by this eastward motion averages about 50 minutes. The Moon rotates on its axis in exactly the same time that it takes to revolve about Earth. As a consequence, the Moon always keeps the same face turned toward Earth (). You can simulate this yourself by “orbiting” your roommate or another volunteer. Start by facing your roommate. If you make one rotation (spin) with your shoulders in the exact same time that you revolve around him or her, you will continue to face your roommate during the whole “orbit.” As we will see in coming chapters, our Moon is not the only world that exhibits this behavior, which scientists call synchronous rotation. The differences in the Moon’s appearance from one night to the next are due to changing illumination by the Sun, not to its own rotation. You sometimes hear the back side of the Moon (the side we never see) called the “dark side.” This is a misunderstanding of the real situation: which side is light and which is dark changes as the Moon moves around Earth. The back side is dark no more frequently than the front side. Since the Moon rotates, the Sun rises and sets on all sides of the Moon. With apologies to Pink Floyd, there is simply no regular “Dark Side of the Moon.” ### Key Concepts and Summary The Moon’s monthly cycle of phases results from the changing angle of its illumination by the Sun. The full moon is visible in the sky only during the night; other phases are visible during the day as well. Because its period of revolution is the same as its period of rotation, the Moon always keeps the same face toward Earth.

# Earth, Moon, and Sky ## Ocean Tides and the Moon ### Learning Objectives By the end of this section, you will be able to: 1. Describe what causes tides on Earth 2. Explain why the amplitude of tides changes during the course of a month Anyone living near the sea is familiar with the twice-daily rising and falling of the tides. Early in history, it was clear that tides must be related to the Moon because the daily delay in high tide is the same as the daily delay in the Moon’s rising. A satisfactory explanation of the tides, however, awaited the theory of gravity, supplied by Newton. ### The Pull of the Moon on Earth The gravitational forces exerted by the Moon at several points on Earth are illustrated in . These forces differ slightly from one another because Earth is not a point, but has a certain size: all parts are not equally distant from the Moon, nor are they all in exactly the same direction from the Moon. Moreover, Earth is not perfectly rigid. As a result, the differences among the forces of the Moon’s attraction on different parts of Earth (called differential forces) cause Earth to distort slightly. The side of Earth nearest the Moon is attracted toward the Moon more strongly than is the center of Earth, which in turn is attracted more strongly than is the side opposite the Moon. Thus, the differential forces tend to stretch Earth slightly into an oblate spheroid (which is something like an American football shape), with its long diameter pointed toward the Moon. If Earth were made of water, it would distort until the Moon’s differential forces over different parts of its surface came into balance with Earth’s own gravitational forces pulling it together. Calculations show that in this case, Earth would distort from a sphere by amounts ranging up to nearly 1 meter. Measurements of the actual deformation of Earth show that the solid Earth does distort, but only about one-third as much as water would, because of the greater rigidity of Earth’s interior. Because the tidal distortion of the solid Earth amounts—at its greatest—to only about 20 centimeters, Earth does not distort enough to balance the Moon’s differential forces with its own gravity. Hence, objects at Earth’s surface experience tiny horizontal tugs, tending to make them slide about. These tide-raising forces are too insignificant to affect solid objects like astronomy students or rocks in Earth’s crust, but they do affect the waters in the oceans. ### The Formation of Tides The tide-raising forces, acting over a number of hours, produce motions of the water that result in measurable tidal bulges in the oceans. Water on the side of Earth facing the Moon flows toward it, with the greatest depths roughly at the point below the Moon. On the side of Earth opposite the Moon, water also flows to produce a tidal bulge (). Note that the tidal bulges in the oceans do not result from the Moon’s compressing or expanding the water, nor from the Moon’s lifting the water “away from Earth.” Rather, they result from an actual flow of water over Earth’s surface toward the two regions below and opposite the Moon, causing the water to pile up to greater depths at those places (). In the idealized (and, as we shall see, oversimplified) model just described, the height of the tides would be only a few feet. The rotation of Earth would carry an observer at any given place alternately into regions of deeper and shallower water. An observer being carried toward the regions under or opposite the Moon, where the water was deepest, would say, “The tide is coming in”; when carried away from those regions, the observer would say, “The tide is going out.” During a day, the observer would be carried through two tidal bulges (one on each side of Earth) and so would experience two high tides and two low tides. The Sun also produces tides on Earth, although it is less than half as effective as the Moon at tide raising. The actual tides we experience are a combination of the larger effect of the Moon and the smaller effect of the Sun. When the Sun and Moon are lined up (at new moon or full moon), the tides produced reinforce each other and so are greater than normal (). These are called spring tides (the name is connected not to the season but to the idea that higher tides “spring up”). Spring tides are approximately the same, whether the Sun and Moon are on the same or opposite sides of Earth, because tidal bulges occur on both sides. When the Moon is at first quarter or last quarter (at right angles to the Sun’s direction), the tides produced by the Sun partially cancel the tides of the Moon, making them lower than usual. These are called neap tides. The “simple” theory of tides, described in the preceding paragraphs, would be sufficient if Earth rotated very slowly and were completely surrounded by very deep oceans. However, the presence of land masses stopping the flow of water, the friction in the oceans and between oceans and the ocean floors, the rotation of Earth, the wind, the variable depth of the ocean, and other factors all complicate the picture. This is why, in the real world, some places have very small tides while in other places huge tides become tourist attractions. If you have been in such places, you may know that “tide tables” need to be computed and published for each location; one set of tide predictions doesn’t work for the whole planet. In this introductory chapter, we won’t delve further into these complexities. ### Key Concepts and Summary The twice-daily ocean tides are primarily the result of the Moon’s differential force on the material of Earth’s crust and ocean. These tidal forces cause ocean water to flow into two tidal bulges on opposite sides of Earth; each day, Earth rotates through these bulges. Actual ocean tides are complicated by the additional effects of the Sun and by the shape of the coasts and ocean basins.

# Earth, Moon, and Sky ## Eclipses of the Sun and Moon ### Learning Objectives By the end of this section, you will be able to: 1. Describe what causes lunar and solar eclipses 2. Differentiate between a total and partial solar eclipse 3. Explain why lunar eclipses are much more common than solar eclipses One of the coincidences of living on Earth at the present time is that the two most prominent astronomical objects, the Sun and the Moon, have nearly the same apparent size in the sky. Although the Sun is about 400 times larger in diameter than the Moon, it is also about 400 times farther away, so both the Sun and the Moon have the same angular size—about 1/2°. As a result, the Moon, as seen from Earth, can appear to cover the Sun, producing one of the most impressive events in nature. Any solid object in the solar system casts a shadow by blocking the light of the Sun from a region behind it. This shadow in space becomes apparent whenever another object moves into it. In general, an eclipse occurs whenever any part of either Earth or the Moon enters the shadow of the other. When the Moon’s shadow strikes Earth, people within that shadow see the Sun at least partially covered by the Moon; that is, they witness a solar eclipse. When the Moon passes into the shadow of Earth, people on the night side of Earth see the Moon darken in what is called a lunar eclipse. Let’s look at how these happen in more detail. The shadows of Earth and the Moon consist of two parts: a cone where the shadow is darkest, called the umbra, and a lighter, more diffuse region of darkness called the penumbra. As you can imagine, the most spectacular eclipses occur when an object enters the umbra. illustrates the appearance of the Moon’s shadow and what the Sun and Moon would look like from different points within the shadow. If the path of the Moon in the sky were identical to the path of the Sun (the ecliptic), we might expect to see an eclipse of the Sun and the Moon each month—whenever the Moon got in front of the Sun or into the shadow of Earth. However, as we mentioned, the Moon’s orbit is tilted relative to the plane of Earth’s orbit about the Sun by about 5° (imagine two hula hoops with a common center, but tilted a bit). As a result, during most months, the Moon is sufficiently above or below the ecliptic plane to avoid an eclipse. But when the two paths cross (twice a year), it is then “eclipse season” and eclipses are possible. ### Eclipses of the Sun The apparent or angular sizes of both the Sun and Moon vary slightly from time to time as their distances from Earth vary. ( shows the distance of the observer varying at points 1–4, but the idea is the same.) Much of the time, the Moon looks slightly smaller than the Sun and cannot cover it completely, even if the two are perfectly aligned. In this type of “annular eclipse,” there is a ring of light around the dark sphere of the Moon. However, if an eclipse of the Sun occurs when the Moon is somewhat nearer than its average distance, the Moon can completely hide the Sun, producing a total solar eclipse. Another way to say it is that a total eclipse of the Sun occurs at those times when the umbra of the Moon’s shadow reaches the surface of Earth. The geometry of a total solar eclipse is illustrated in . If the Sun and Moon are properly aligned, then the Moon’s darkest shadow intersects the ground at a small point on Earth’s surface. Anyone on Earth within the small area covered by the tip of the Moon’s shadow will, for a few minutes, be unable to see the Sun and will witness a total eclipse. At the same time, observers on a larger area of Earth’s surface who are in the penumbra will see only a part of the Sun eclipsed by the Moon: we call this a partial solar eclipse. Between Earth’s rotation and the motion of the Moon in its orbit, the tip of the Moon’s shadow sweeps eastward at about 1500 kilometers per hour along a thin band across the surface of Earth. The thin zone across Earth within which a total solar eclipse is visible (weather permitting) is called the eclipse path. Within a region about 3000 kilometers on either side of the eclipse path, a partial solar eclipse is visible. It does not take long for the Moon’s shadow to sweep past a given point on Earth. The duration of totality may be only a brief instant; it can never exceed about 7 minutes. Because a total eclipse of the Sun is so spectacular, it is well worth trying to see one if you can. There are some people whose hobby is “eclipse chasing” and who brag about how many they have seen in their lifetimes. Because much of Earth’s surface is water, eclipse chasing can involve lengthy boat trips (and often requires air travel as well). As a result, eclipse chasing is rarely within the budget of a typical college student. Nevertheless, a list of future eclipses is given for your reference in Appendix H, just in case you strike it rich early. (As you can see in the Appendix, there will be a total eclipse visible in the United States in 2024, to which even college students may be able to afford travel. For more information, see: http://eclipse.aas.org.) ### Appearance of a Total Eclipse What can you see if you are lucky enough to catch a total eclipse? A solar eclipse starts when the Moon just begins to silhouette itself against the edge of the Sun’s disk. A partial phase follows, during which more and more of the Sun is covered by the Moon. About an hour after the eclipse begins, the Sun becomes completely hidden behind the Moon. In the few minutes immediately before this period of totality begins, the sky noticeably darkens, some flowers close up, and chickens may go to roost. As an eerie twilight suddenly descends during the day, other animals (and people) may get disoriented. During totality, the sky is dark enough that planets become visible in the sky, and usually the brighter stars do as well. As the bright disk of the Sun becomes entirely hidden behind the Moon, the Sun’s remarkable corona flashes into view (). The corona is the Sun’s outer atmosphere, consisting of sparse gases that extend for millions of miles in all directions from the apparent surface of the Sun. It is ordinarily not visible because the light of the corona is feeble compared with the light from the underlying layers of the Sun. Only when the brilliant glare from the Sun’s visible disk is blotted out by the Moon during a total eclipse is the pearly white corona visible. (We’ll talk more about the corona in the chapter on The Sun: A Garden-Variety Star.) The total phase of the eclipse ends, as abruptly as it began, when the Moon begins to uncover the Sun. Gradually, the partial phases of the eclipse repeat themselves, in reverse order, until the Moon has completely uncovered the Sun. We should make one important safety point here: while the few minutes of the total eclipse are safe to look at, if any part of the Sun is uncovered, you must protect your eyes with safe eclipse glassesEclipse glasses are available in many planetarium and observatory gift stores, and also from the two main U.S. manufacturers: American Paper Optics and Rainbow Symphony. or by projecting an image of the Sun (instead of looking at it directly). For more, read the How to Observe Solar Eclipses box in this chapter. ### Eclipses of the Moon A lunar eclipse occurs when the Moon enters the shadow of Earth. The geometry of a lunar eclipse is shown in . Earth’s dark shadow is about 1.4 million kilometers long, so at the Moon’s distance (an average of 384,000 kilometers), it could cover about four full moons. Unlike a solar eclipse, which is visible only in certain local areas on Earth, a lunar eclipse is visible to everyone who can see the Moon. Because a lunar eclipse can be seen (weather permitting) from the entire night side of Earth, lunar eclipses are observed far more frequently from a given place on Earth than are solar eclipses. An eclipse of the Moon is total only if the Moon’s path carries it though Earth’s umbra. If the Moon does not enter the umbra completely, we have a partial eclipse of the Moon. But because Earth is larger than the Moon, its umbra is larger, so that lunar eclipses last longer than solar eclipses, as we will discuss below. A lunar eclipse can take place only when the Sun, Earth, and Moon are in a line. The Moon is opposite the Sun, which means the Moon will be in full phase before the eclipse, making the darkening even more dramatic. About 20 minutes before the Moon reaches the dark shadow, it dims somewhat as Earth partly blocks the sunlight. As the Moon begins to dip into the shadow, the curved shape of Earth’s shadow upon it soon becomes apparent. Even when totally eclipsed, the Moon is still faintly visible, usually appearing a dull coppery red. The illumination on the eclipsed Moon is sunlight that has been bent into Earth’s shadow by passing through Earth’s atmosphere. After totality, the Moon moves out of the shadow and the sequence of events is reversed. The total duration of the eclipse depends on how closely the Moon’s path approaches the axis of the shadow. For an eclipse where the Moon goes through the center of Earth’s shadow, each partial phase consumes at least 1 hour, and totality can last as long as 1 hour and 40 minutes. Eclipses of the Moon are much more “democratic” than solar eclipses. Since the full moon is visible on the entire night side of Earth, the lunar eclipse is visible for all those who live in that hemisphere. (Recall that a total eclipse of the Sun is visible only in a narrow path where the shadow of the umbra falls.) Total eclipses of the Moon occur, on average, about once every two or three years. A list of future total eclipses of the Moon is in Appendix H. In addition, since the lunar eclipse happens to a full moon, and a full moon is not dangerous to look at, everyone can look at the Moon during all the parts of the eclipse without worrying about safety. Thanks to our understanding of gravity and motion (see Orbits and Gravity), eclipses can now be predicted centuries in advance. We’ve come a long way since humanity stood frightened by the darkening of the Sun or the Moon, fearing the displeasure of the gods. Today, we enjoy the sky show with a healthy appreciation of the majestic forces that keep our solar system running. ### Key Concepts and Summary The Sun and Moon have nearly the same angular size (about 1/2°). A solar eclipse occurs when the Moon moves between the Sun and Earth, casting its shadow on a part of Earth’s surface. If the eclipse is total, the light from the bright disk of the Sun is completely blocked, and the solar atmosphere (the corona) comes into view. Solar eclipses take place rarely in any one location, but they are among the most spectacular sights in nature. A lunar eclipse takes place when the Moon moves into Earth’s shadow; it is visible (weather permitting) from the entire night hemisphere of Earth. ### For Further Exploration ### Articles Bakich, M. “Your Twenty-Year Solar Eclipse Planner.” Astronomy (October 2008): 74. Describes the circumstances of upcoming total eclipses of the Sun. Coco, M. “Not Just Another Pretty Phase.” Astronomy (July 1994): 76. Moon phases explained. Espenak, F., & Anderson, J. “Get Ready for America’s Coast to Coast Experience.” Sky & Telescope (February 2016): 22. Gingerich, O. “Notes on the Gregorian Calendar Reform.” Sky & Telescope (December 1982): 530. Kluepfel, C. “How Accurate Is the Gregorian Calendar?” Sky & Telescope (November 1982): 417. Krupp, E. “Calendar Worlds.” Sky & Telescope (January 2001): 103. On how the days of the week got their names. Krupp, E. “Behind the Curve.” Sky & Telescope (September 2002): 68. On the reform of the calendar by Pope Gregory XIII. MacRobert, A., & Sinnott, R. “Young Moon Hunting.” Sky & Telescope (February 2005): 75. Hints for finding the Moon as soon after its new phase as possible. Pasachoff, J. “Solar Eclipse Science: Still Going Strong.” Sky & Telescope (February 2001): 40. On what we have learned and are still learning from eclipses. Regas, D. “The Quest for Totality.” Sky & Telescope (July 2012): 36. On eclipse chasing as a hobby. Schaefer, B. “Lunar Eclipses That Changed the World.” Sky & Telescope (December 1992): 639. Schaefer, B. “Solar Eclipses That Changed the World.” Sky & Telescope (May 1994): 36. ### Websites Ancient Observatories, Timeless Knowledge (Stanford Solar Center): http://solar-center.stanford.edu/AO/. An introduction to ancient sites where the movements of celestial objects were tracked over the years (with a special focus on tracking the Sun). Astronomical Data Services: https://www.usno.navy.mil/USNO/astronomical-applications/data-services. This rich site from the U.S. Naval Observatory has information about Earth, the Moon, and the sky, with tables and online calculators. Calendars through the Ages: http://www.webexhibits.org/calendars/index.html. Like a good museum exhibit on the Web. Calendar Zone: http://www.calendarzone.com/. Everything you wanted to ask or know about calendars and timekeeping, with links from around the world. Eclipse Maps: http://www.eclipse-maps.com/Eclipse-Maps/Welcome.html. Michael Zeiler specializes in presenting helpful and interactive maps of where solar eclipses will be visible Eclipse Predictions: EclipseWise: http://www.eclipsewise.com/intro.html. An introductory site on future eclipses and eclipse observing by NASA’s Fred Espenak. History of the International Date Line: http://www.staff.science.uu.nl/~gent0113/idl/idl.htm. From R. H. van Gent at Utrecht University in the Netherlands. Lunacy and the Full Moon: http://www.scientificamerican.com/article/lunacy-and-the-full-moon/. This Scientific American article explores whether the Moon’s phase is related to strange behavior. Moon Phase Calculator: https://stardate.org/nightsky/moon. Keep track of the phases of the Moon with this calendar. NASA Eclipse Website: http://eclipse.gsfc.nasa.gov/eclipse.html. This site, by NASA’s eclipse expert Fred Espenak, contains a wealth of information on lunar and solar eclipses, past and future, as well as observing and photography links. Phases of the Moon Gallery and Information: http://astropixels.com/moon/phases/phasesgallery.html. Photographs and descriptions presented by NASA’s Fred Espenak. Time and Date Website: http://www.timeanddate.com/. Comprehensive resource about how we keep time on Earth; has time zone converters and many other historical and mathematical tools. Walk through Time: The Evolution of Time Measurement through the Ages (National Institute of Standards and Technology): http://www.nist.gov/pml/general/time/. ### Videos Bill Nye, the Science Guy, Explains the Seasons: https://www.youtube.com/watch?v=KUU7IyfR34o. For kids, but college students can enjoy the bad jokes, too (4:45). Geography Lesson Idea: Time Zones: https://www.youtube.com/watch?v=-j-SWKtWEcU. (3:11). How to View a Solar Eclipse: http://www.exploratorium.edu/eclipse/how-to-view-eclipse. (1:35). Shadow of the Moon: https://www.youtube.com/watch?v=XNcfKUJwnjM. This NASA video explains eclipses of the Sun, with discussion and animation, focusing on a 2015 eclipse, and shows what an eclipse looks like from space (1:54). Strangest Time Zones in the World: https://www.youtube.com/watch?v=uW6QqcmCfm8. (8:38). Understanding Lunar Eclipses: https://www.youtube.com/watch?v=lNi5UFpales. This NASA video explains why there isn’t an eclipse every month, with good animation (1:58). ### Collaborative Group Activities 1. Have your group brainstorm about other ways (besides the Foucault pendulum) you could prove that it is our Earth that is turning once a day, and not the sky turning around us. (Hint: How does the spinning of Earth affect the oceans and the atmosphere?) 2. What would the seasons on Earth be like if Earth’s axis were not tilted? Discuss with your group how many things about life on Earth you think would be different. 3. After college and graduate training, members of your U.S. student group are asked to set up a school in New Zealand. Describe some ways your yearly school schedule in the Southern Hemisphere would differ from what students are used to in the Northern Hemisphere. 4. During the traditional U.S. Christmas vacation weeks, you are sent to the vicinity of the South Pole on a research expedition (depending on how well you did on your astronomy midterm, either as a research assistant or as a short-order cook!). Have your group discuss how the days and nights will be different there and how these differences might affect you during your stay. 5. Discuss with your group all the stories you have heard about the full moon and crazy behavior. Why do members of your group think people associate crazy behavior with the full moon? What other legends besides vampire stories are connected with the phases of the Moon? (Hint: Think Professor Lupin in the Harry Potter stories, for example.) 6. Your college town becomes the founding site for a strange new cult that worships the Moon. These true believers gather regularly around sunset and do a dance in which they must extend their arms in the direction of the Moon. Have your group discuss which way their arms will be pointing at sunset when the Moon is new, first quarter, full, and third quarter. 7. Changes of the seasons play a large part in our yearly plans and concerns. The seasons have inspired music, stories, poetry, art, and much groaning from students during snowstorms. Search online to come up with some examples of the seasons being celebrated or overcome in fields other than science. 8. Use the information in Appendix H and online to figure out when the next eclipse of the Sun or eclipse of the Moon will be visible from where your group is going to college or from where your group members live. What time of day will the eclipse be visible? Will it be a total or partial eclipse? What preparations can you make to have an enjoyable and safe eclipse experience? How do these preparations differ between a solar and lunar eclipse? 9. On Mars, a day (often called a sol) is 24 hours and 40 minutes. Since Mars takes longer to go around the Sun, a year is 668.6 sols. Mars has two tiny moons, Phobos and Deimos. Phobos, the inner moon, rises in the west and sets in the east, taking 11 hours from moonrise to the next moonrise. Using your calculators and imaginations, have your group members come up with a calendar for Mars. (After you do your own, and only after, you can search online for the many suggestions that have been made for a martian calendar over the years.) ### Review Questions ### Thought Questions ### Figuring for Yourself

# Radiation and Spectra ## Thinking Ahead The nearest star is so far away that the fastest spacecraft humans have built would take almost 100,000 years to get there. Yet we very much want to know what material this neighbor star is composed of and how it differs from our own Sun. How can we learn about the chemical makeup of stars that we cannot hope to visit or sample? In astronomy, most of the objects that we study are completely beyond our reach. The temperature of the Sun is so high that a spacecraft would be fried long before it reached it, and the stars are much too far away to visit in our lifetimes with the technology now available. Even light, which travels at a speed of 300,000 kilometers per second (km/s), takes more than 4 years to reach us from the nearest star. If we want to learn about the Sun and stars, we must rely on techniques that allow us to analyze them from a distance.

# Radiation and Spectra ## The Behavior of Light ### Learning Objectives By the end of this section, you will be able to: 1. Explain the evidence for Maxwell’s electromagnetic model of light 2. Describe the relationship between wavelength, frequency, and speed of light 3. Discuss the particle model of light and the definition of photon 4. Explain how and why the amount of light we see from an object depends upon its distance Coded into the light and other kinds of radiation that reach us from objects in the universe is a wide range of information about what those objects are like and how they work. If we can decipher this code and read the messages it contains, we can learn an enormous amount about the cosmos without ever having to leave Earth or its immediate environment. The visible light and other radiation we receive from the stars and planets is generated by processes at the atomic level—by changes in the way the parts of an atom interact and move. Thus, to appreciate how light is generated, we must explore how atoms work. There is a bit of irony in the fact that in order to understand some of the largest structures in the universe, we must become acquainted with some of the smallest. Notice that we have twice used the phrase “light and other radiation.” One of the key ideas explored in this chapter is that visible light is not unique; it is merely the most familiar example of a much larger family of radiation that can carry information to us. The word “radiation” will be used frequently in this book, so it is important to understand what it means. In everyday language, “radiation” is often used to describe certain kinds of energetic subatomic particles released by radioactive materials in our environment. (An example is the kind of radiation used to treat some cancers.) But this is not what we mean when we use the word “radiation” in an astronomy text. Radiation, as used in this book, is a general term for waves (including light waves) that radiate outward from a source. As we saw in Orbits and Gravity, Newton’s theory of gravity accounts for the motions of planets as well as objects on Earth. Application of this theory to a variety of problems dominated the work of scientists for nearly two centuries. In the nineteenth century, many physicists turned to the study of electricity and magnetism, which are intimately connected with the production of light. The scientist who played a role in this field comparable to Newton’s role in the study of gravity was physicist James Clerk Maxwell, born and educated in Scotland (). Inspired by a number of ingenious experiments that showed an intimate relationship between electricity and magnetism, Maxwell developed a theory that describes both electricity and magnetism with only a small number of elegant equations. It is this theory that gives us important insights into the nature and behavior of light. ### Maxwell’s Theory of Electromagnetism We will look at the structure of the atom in more detail later, but we begin by noting that the typical atom consists of several types of particles, a number of which have not only mass but an additional property called electric charge. In the nucleus (central part) of every atom are protons, which are positively charged; outside the nucleus are electrons, which have a negative charge. Maxwell’s theory deals with these electric charges and their effects, especially when they are moving. In the vicinity of an electron charge, another charge feels a force of attraction or repulsion: opposite charges attract; like charges repel. When charges are not in motion, we observe only this electric attraction or repulsion. If charges are in motion, however (as they are inside every atom and in a wire carrying a current), then we measure another force called magnetism. Magnetism was well known for much of recorded human history, but its cause was not understood until the nineteenth century. Experiments with electric charges demonstrated that magnetism was the result of moving charged particles. Sometimes, the motion is clear, as in the coils of heavy wire that make an industrial electromagnet. Other times, it is more subtle, as in the kind of magnet you buy in a hardware store, in which many of the electrons inside the atoms are spinning in roughly the same direction; it is the alignment of their motion that causes the material to become magnetic. Physicists use the word field to describe the action of forces that one object exerts on other distant objects. For example, we say the Sun produces a gravitational field that controls Earth’s orbit, even though the Sun and Earth do not come directly into contact. Using this terminology, we can say that stationary electric charges produce electric fields, and moving electric charges also produce magnetic fields. Actually, the relationship between electric and magnetic phenomena is even more profound. Experiments showed that changing magnetic fields could produce electric currents (and thus changing electric fields), and changing electric currents could in turn produce changing magnetic fields. So once begun, electric and magnetic field changes could continue to trigger each other. Maxwell analyzed what would happen if electric charges were oscillating (moving constantly back and forth) and found that the resulting pattern of electric and magnetic fields would spread out and travel rapidly through space. Something similar happens when a raindrop strikes the surface of water or a frog jumps into a pond. The disturbance moves outward and creates a pattern we call a wave in the water (). You might, at first, think that there must be very few situations in nature where electric charges oscillate, but this is not at all the case. As we shall see, atoms and molecules (which consist of charged particles) oscillate back and forth all the time. The resulting electromagnetic disturbances are among the most common phenomena in the universe. Maxwell was able to calculate the speed at which an electromagnetic disturbance moves through space; he found that it is equal to the speed of light, which had been measured experimentally. On that basis, he speculated that light was one form of a family of possible electromagnetic disturbances called electromagnetic radiation, a conclusion that was again confirmed in laboratory experiments. When light (reflected from the pages of an astronomy textbook, for example) enters a human eye, its changing electric and magnetic fields stimulate nerve endings, which then transmit the information contained in these changing fields to the brain. The science of astronomy is primarily about analyzing radiation from distant objects to understand what they are and how they work. ### The Wave-Like Characteristics of Light The changing electric and magnetic fields in light are similar to the waves that can be set up in a quiet pool of water. In both cases, the disturbance travels rapidly outward from the point of origin and can use its energy to disturb other things farther away. (For example, in water, the expanding ripples moving away from our frog could disturb the peace of a dragonfly resting on a leaf in the same pool.) In the case of electromagnetic waves, the radiation generated by a transmitting antenna full of charged particles and moving electrons at your local radio station can, sometime later, disturb a group of electrons in your car radio antenna and bring you the news and weather while you are driving to class or work in the morning. The waves generated by charged particles differ from water waves in some profound ways, however. Water waves require water to travel in. The sound waves we hear, to give another example, are pressure disturbances that require air to travel though. But electromagnetic waves do not require water or air: the fields generate each other and so can move through a vacuum (such as outer space). This was such a disturbing idea to nineteenth-century scientists that they actually made up a substance to fill all of space—one for which there was not a single shred of evidence—just so light waves could have something to travel through: they called it the aether. Today, we know that there is no aether and that electromagnetic waves have no trouble at all moving through empty space (as all the starlight visible on a clear night must surely be doing). The other difference is that all electromagnetic waves move at the same speed in empty space (the speed of light—approximately 300,000 kilometers per second, or 300,000,000 meters per second, which can also be written as ), which turns out to be the fastest possible speed in the universe. No matter where electromagnetic waves are generated from and no matter what other properties they have, when they are moving (and not interacting with matter), they move at the speed of light. Yet you know from everyday experience that there are different kinds of light. For example, we perceive that light waves differ from one another in a property we call color. Let’s see how we can denote the differences among the whole broad family of electromagnetic waves. The nice thing about a wave is that it is a repeating phenomenon. Whether it is the up-and-down motion of a water wave or the changing electric and magnetic fields in a wave of light, the pattern of disturbance repeats in a cyclical way. Thus, any wave motion can be characterized by a series of crests and troughs (). Moving from one crest through a trough to the next crest completes one cycle. The horizontal length covered by one cycle is called the wavelength. Ocean waves provide an analogy: the wavelength is the distance that separates successive wave crests. For visible light, our eyes perceive different wavelengths as different colors: red, for example, is the longest visible wavelength, and violet is the shortest. The main colors of visible light from longest to shortest wavelength can be remembered using the mnemonic ROY G BIV—for Red, Orange, Yellow, Green, Blue, Indigo, and Violet. Other invisible forms of electromagnetic radiation have different wavelengths, as we will see in the next section. We can also characterize different waves by their frequency, the number of wave cycles that pass by per second. If you count 10 crests moving by each second, for example, then the frequency is 10 cycles per second (cps). In honor of Heinrich Hertz, the physicist who—inspired by Maxwell’s work—discovered radio waves, a cps is also called a hertz (Hz). Take a look at your radio, for example, and you will see the channel assigned to each radio station is characterized by its frequency, usually in units of KHz (kilohertz, or thousands of hertz) or MHz (megahertz, or millions of hertz). Wavelength (λ) and frequency (f) are related because all electromagnetic waves travel at the same speed. To see how this works, imagine a parade in which everyone is forced by prevailing traffic conditions to move at exactly the same speed. You stand on a corner and watch the waves of marchers come by. First you see row after row of miniature ponies. Because they are not very large and, therefore, have a shorter wavelength, a good number of the ponies can move past you each minute; we can say they have a high frequency. Next, however, come several rows of circus elephants. The elephants are large and marching at the same speed as the ponies, so far fewer of them can march past you per minute: Because they have a wider spacing (longer wavelength), they represent a lower frequency. The formula for this relationship can be expressed as follows: for any wave motion, the speed at which a wave moves equals the frequency times the wavelength. Waves with longer wavelengths have lower frequencies. Mathematically, we can express this as where the Greek letter for “l”—lambda, λ—is used to denote wavelength and c is the scientific symbol for the speed of light. Solving for the wavelength, this is expressed as: ### Light as a Photon The electromagnetic wave model of light (as formulated by Maxwell) was one of the great triumphs of nineteenth-century science. In 1887, when Heinrich Hertz actually made invisible electromagnetic waves (what today are called radio waves) on one side of a room and detected them on the other side, it ushered in a new era that led to the modern age of telecommunications. His experiment ultimately led to the technologies of television, cell phones, and today’s wireless networks around the globe. However, by the beginning of the twentieth century, more sophisticated experiments had revealed that light behaves in certain ways that cannot be explained by the wave model. Reluctantly, physicists had to accept that sometimes light behaves more like a “particle”—or at least a self-contained packet of energy—than a wave. We call such a packet of electromagnetic energy a photon. The fact that light behaves like a wave in certain experiments and like a particle in others was a very surprising and unlikely idea. After all, our common sense says that waves and particles are opposite concepts. On one hand, a wave is a repeating disturbance that, by its very nature, is not in only one place, but spreads out. A particle, on the other hand, is something that can be in only one place at any given time. Strange as it sounds, though, countless experiments now confirm that electromagnetic radiation can sometimes behave like a wave and at other times like a particle. Then, again, perhaps we shouldn’t be surprised that something that always travels at the “speed limit” of the universe and doesn’t need a medium to travel through might not obey our everyday common sense ideas. The confusion that this wave-particle duality of light caused in physics was eventually resolved by the introduction of a more complicated theory of waves and particles, now called quantum mechanics. (This is one of the most interesting fields of modern science, but it is mostly beyond the scope of our book. If you are interested in it, see some of the suggested resources at the end of this chapter.) In any case, you should now be prepared when scientists (or the authors of this book) sometimes discuss electromagnetic radiation as if it consisted of waves and at other times refer to it as a stream of photons. A photon (being a packet of energy) carries a specific amount of energy. We can use the idea of energy to connect the photon and wave models. How much energy a photon has depends on its frequency when you think about it as a wave. A low-energy radio wave has a low frequency as a wave, while a high-energy X-ray at your dentist’s office is a high-frequency wave. Among the colors of visible light, violet-light photons have the highest energy and red-light photons have the lowest. Test whether the connection between photons and waves is clear to you. In the above example, which photon would have the longer wavelength as a wave: the radio wave or the X-ray? If you answered the radio wave, you are correct. Radio waves have a lower frequency, so the wave cycles are longer (they are elephants, not miniature ponies). ### Propagation of Light Let’s think for a moment about how light from a lightbulb moves through space. As waves expand, they travel away from the bulb, not just toward your eyes but in all directions. They must therefore cover an ever-widening space. Yet the total amount of light available can’t change once the light has left the bulb. This means that, as the same expanding shell of light covers a larger and larger area, there must be less and less of it in any given place. Light (and all other electromagnetic radiation) gets weaker and weaker as it gets farther from its source. The increase in the area that the light must cover is proportional to the square of the distance that the light has traveled (). If we stand twice as far from the source, our eyes will intercept two-squared (2 × 2), or four times less light. If we stand 10 times farther from the source, we get 10-squared, or 100 times less light. You can see how this weakening means trouble for sources of light at astronomical distances. One of the nearest stars, Alpha Centauri A, emits about the same total energy as the Sun. But it is about 270,000 times farther away, and so it appears about 73 billion times fainter. No wonder the stars, which close-up would look more or less like the Sun, look like faint pinpoints of light from far away. This idea—that the apparent brightness of a source (how bright it looks to us) gets weaker with distance in the way we have described—is known as the inverse square law for light propagation. In this respect, the propagation of light is similar to the effects of gravity. Remember that the force of gravity between two attracting masses is also inversely proportional to the square of their separation. ### Key Concepts and Summary James Clerk Maxwell showed that whenever charged particles change their motion, as they do in every atom and molecule, they give off waves of energy. Light is one form of this electromagnetic radiation. The wavelength of light determines the color of visible radiation. Wavelength (λ) is related to frequency (f) and the speed of light (c) by the equation c = λf. Electromagnetic radiation sometimes behaves like waves, but at other times, it behaves as if it were a particle—a little packet of energy, called a photon. The apparent brightness of a source of electromagnetic energy decreases with increasing distance from that source in proportion to the square of the distance—a relationship known as the inverse square law.

# Radiation and Spectra ## The Electromagnetic Spectrum ### Learning Objectives By the end of this section, you will be able to: 1. Understand the bands of the electromagnetic spectrum and how they differ from one another 2. Understand how each part of the spectrum interacts with Earth’s atmosphere 3. Explain how and why the light emitted by an object depends on its temperature Objects in the universe send out an enormous range of electromagnetic radiation. Scientists call this range the electromagnetic spectrum, which they have divided into a number of categories. The spectrum is shown in , with some information about the waves in each part or band. ### Types of Electromagnetic Radiation Electromagnetic radiation with the shortest wavelengths, no longer than 0.01 nanometer, is categorized as gamma rays (1 nanometer = 10–9 meters; see Appendix D). The name gamma comes from the third letter of the Greek alphabet: gamma rays were the third kind of radiation discovered coming from radioactive atoms when physicists first investigated their behavior. Because gamma rays carry a lot of energy, they can be dangerous for living tissues. Gamma radiation is generated deep in the interior of stars, as well as by some of the most violent phenomena in the universe, such as the deaths of stars and the merging of stellar corpses. Gamma rays coming to Earth are absorbed by our atmosphere before they reach the ground (which is a good thing for our health); thus, they can only be studied using instruments in space. Electromagnetic radiation with wavelengths between 0.01 nanometer and 20 nanometers is referred to as X-rays. Being more energetic than visible light, X-rays are able to penetrate soft tissues but not bones, and so allow us to make images of the shadows of the bones inside us. While X-rays can penetrate a short length of human flesh, they are stopped by the large numbers of atoms in Earth’s atmosphere with which they interact. Thus, X-ray astronomy (like gamma-ray astronomy) could not develop until we invented ways of sending instruments above our atmosphere (). Radiation intermediate between X-rays and visible light is ultraviolet (meaning higher energy than violet). Outside the world of science, ultraviolet light is sometimes called “black light” because our eyes cannot see it. Ultraviolet radiation is mostly blocked by the ozone layer of Earth’s atmosphere, but a small fraction of ultraviolet rays from our Sun do penetrate to cause sunburn or, in extreme cases of overexposure, skin cancer in human beings. Ultraviolet astronomy is also best done from space. Electromagnetic radiation with wavelengths between roughly 400 and 700 nm is called visible light because these are the waves that human vision can perceive. This is also the band of the electromagnetic spectrum that most readily reaches Earth’s surface. These two observations are not coincidental: human eyes evolved to see the kinds of waves that arrive from the Sun most effectively. Visible light penetrates Earth’s atmosphere effectively, except when it is temporarily blocked by clouds. Between visible light and radio waves are the wavelengths of infrared or heat radiation. Astronomer William Herschel first discovered infrared in 1800 while trying to measure the temperatures of different colors of sunlight spread out into a spectrum. He noticed that when he accidently positioned his thermometer beyond the reddest color, it still registered heating due to some invisible energy coming from the Sun. This was the first hint about the existence of the other (invisible) bands of the electromagnetic spectrum, although it would take many decades for our full understanding to develop. A heat lamp radiates mostly infrared radiation, and the nerve endings in our skin are sensitive to this band of the electromagnetic spectrum. Infrared waves are absorbed by water and carbon dioxide molecules, which are more concentrated low in Earth’s atmosphere. For this reason, infrared astronomy is best done from high mountaintops, high-flying airplanes, and spacecraft. After infrared comes the familiar microwave, used in short-wave communication and microwave ovens. (Wavelengths vary from 1 millimeter to 1 meter and are absorbed by water vapor, which makes them effective in heating foods.) The “micro-” prefix refers to the fact that microwaves are small in comparison to radio waves, the next on the spectrum. You may remember that tea—which is full of water—heats up quickly in your microwave oven, while a ceramic cup—from which water has been removed by baking—stays cool in comparison. All electromagnetic waves longer than microwaves are called radio waves, but this is so broad a category that we generally divide it into several subsections. Among the most familiar of these are radar waves, which are used in radar guns by traffic officers to determine vehicle speeds, and AM radio waves, which were the first to be developed for broadcasting. The wavelengths of these different categories range from over a meter to hundreds of meters, and other radio radiation can have wavelengths as long as several kilometers. With such a wide range of wavelengths, not all radio waves interact with Earth’s atmosphere in the same way. FM and TV waves are not absorbed and can travel easily through our atmosphere. AM radio waves are absorbed or reflected by a layer in Earth’s atmosphere called the ionosphere (the ionosphere is a layer of charged particles at the top of our atmosphere, produced by interactions with sunlight and charged particles that are ejected from the Sun). We hope this brief survey has left you with one strong impression: although visible light is what most people associate with astronomy, the light that our eyes can see is only a tiny fraction of the broad range of waves generated in the universe. Today, we understand that judging some astronomical phenomenon by using only the light we can see is like hiding under the table at a big dinner party and judging all the guests by nothing but their shoes. There’s a lot more to each person than meets our eye under the table. It is very important for those who study astronomy today to avoid being “visible light chauvinists”—to respect only the information seen by their eyes while ignoring the information gathered by instruments sensitive to other bands of the electromagnetic spectrum. summarizes the bands of the electromagnetic spectrum and indicates the temperatures and typical astronomical objects that emit each kind of electromagnetic radiation. While at first, some of the types of radiation listed in the table may seem unfamiliar, you will get to know them better as your astronomy course continues. You can return to this table as you learn more about the types of objects astronomers study. ### Radiation and Temperature Some astronomical objects emit mostly infrared radiation, others mostly visible light, and still others mostly ultraviolet radiation. What determines the type of electromagnetic radiation emitted by the Sun, stars, and other dense astronomical objects? The answer often turns out to be their temperature. At the microscopic level, everything in nature is in motion. A solid is composed of molecules and atoms in continuous vibration: they move back and forth in place, but their motion is much too small for our eyes to make out. A gas consists of atoms and/or molecules that are flying about freely at high speed, continually bumping into one another and bombarding the surrounding matter. The hotter the solid or gas, the more rapid the motion of its molecules or atoms. The temperature of something is thus a measure of the average motion energy of the particles that make it up. This motion at the microscopic level is responsible for much of the electromagnetic radiation on Earth and in the universe. As atoms and molecules move about and collide, or vibrate in place, their electrons give off electromagnetic radiation. The characteristics of this radiation are determined by the temperature of those atoms and molecules. In a hot material, for example, the individual particles vibrate in place or move rapidly from collisions, so the emitted waves are, on average, more energetic. And recall that higher energy waves have a higher frequency. In very cool material, the particles have low-energy atomic and molecular motions and thus generate lower-energy waves. ### Radiation Laws To understand, in more quantitative detail, the relationship between temperature and electromagnetic radiation, we imagine an idealized object called a blackbody. Such an object (unlike your sweater or your astronomy instructor’s head) does not reflect or scatter any radiation, but absorbs all the electromagnetic energy that falls onto it. The energy that is absorbed causes the atoms and molecules in it to vibrate or move around at increasing speeds. As it gets hotter, this object will radiate electromagnetic waves until absorption and radiation are in balance. We want to discuss such an idealized object because, as you will see, stars behave in very nearly the same way. The radiation from a blackbody has several characteristics, as illustrated in . The graph shows the power emitted at each wavelength by objects of different temperatures. In science, the word power means the energy coming off per second (and it is typically measured in watts, which you are probably familiar with from buying lightbulbs). First of all, notice that the curves show that, at each temperature, our blackbody object emits radiation (photons) at all wavelengths (all colors). This is because in any solid or denser gas, some molecules or atoms vibrate or move between collisions slower than average and some move faster than average. So when we look at the electromagnetic waves emitted, we find a broad range, or spectrum, of energies and wavelengths. More energy is emitted at the average vibration or motion rate (the highest part of each curve), but if we have a large number of atoms or molecules, some energy will be detected at each wavelength. Second, note that an object at a higher temperature emits more power at all wavelengths than does a cooler one. In a hot gas (the taller curves in ), for example, the atoms have more collisions and give off more energy. In the real world of stars, this means that hotter stars give off more energy at every wavelength than do cooler stars. Third, the graph shows us that the higher the temperature, the shorter the wavelength at which the maximum power is emitted. Remember that a shorter wavelength means a higher frequency and energy. It makes sense, then, that hot objects give off a larger fraction of their energy at shorter wavelengths (higher energies) than do cool objects. You may have observed examples of this rule in everyday life. When a burner on an electric stove is turned on low, it emits only heat, which is infrared radiation, but does not glow with visible light. If the burner is set to a higher temperature, it starts to glow a dull red. At a still-higher setting, it glows a brighter orange-red (shorter wavelength). At even higher temperatures, which cannot be reached with ordinary stoves, metal can appear brilliant yellow or even blue-white. We can use these ideas to come up with a rough sort of “thermometer” for measuring the temperatures of stars. Because many stars give off most of their energy in visible light, the color of light that dominates a star’s appearance is a rough indicator of its temperature. If one star looks red and another looks blue, which one has the higher temperature? Because blue is the shorter-wavelength color, it is the sign of a hotter star. (Note that the temperatures we associate with different colors in science are not the same as the ones artists use. In art, red is often called a “hot” color and blue a “cool” color. Likewise, we commonly see red on faucet or air conditioning controls to indicate hot temperatures and blue to indicate cold temperatures. Although these are common uses to us in daily life, in nature, it’s the other way around.) We can develop a more precise star thermometer by measuring how much energy a star gives off at each wavelength and by constructing diagrams like . The location of the peak (or maximum) in the power curve of each star can tell us its temperature. The average temperature at the surface of the Sun, which is where the radiation that we see is emitted, turns out to be 5800 K. (Throughout this text, we use the kelvin or absolute temperature scale. On this scale, water freezes at 273 K and boils at 373 K. All molecular motion ceases at 0 K. The various temperature scales are described in Appendix D.) There are stars cooler than the Sun and stars hotter than the Sun. The wavelength at which maximum power is emitted can be calculated according to the equation where the wavelength is in nanometers (one billionth of a meter) and the temperature is in K (the constant ). This relationship is called Wien’s law. For the Sun, the wavelength at which the maximum energy is emitted is 520 nanometers, which is near the middle of that portion of the electromagnetic spectrum called visible light. Characteristic temperatures of other astronomical objects, and the wavelengths at which they emit most of their power, are listed in . Since this star has a peak wavelength that is at a shorter wavelength (in the ultraviolet part of the spectrum) than that of our Sun (in the visible part of the spectrum), it should come as no surprise that its surface temperature is much hotter than our Sun’s. We can also describe our observation that hotter objects radiate more power at all wavelengths in a mathematical form. If we sum up the contributions from all parts of the electromagnetic spectrum, we obtain the total energy emitted by a blackbody. What we usually measure from a large object like a star is the energy flux, the power emitted per square meter. The word flux means “flow” here: we are interested in the flow of power into an area (like the area of a telescope mirror). It turns out that the energy flux from a blackbody at temperature T is proportional to the fourth power of its absolute temperature. This relationship is known as the Stefan-Boltzmann law and can be written in the form of an equation as where F stands for the energy flux (in units of watts per square meter), T is given in Kelvins, and σ (Greek letter sigma) is a constant number . Notice how impressive this result is. Increasing the temperature of a star would have a tremendous effect on the power it radiates. If the Sun, for example, were twice as hot—that is, if it had a temperature of 11,600 K—it would radiate 24, or 16 times more power than it does now. Tripling the temperature would raise the power output 81 times. Hot stars really shine away a tremendous amount of energy. ### Key Concepts and Summary The electromagnetic spectrum consists of gamma rays, X-rays, ultraviolet radiation, visible light, infrared, and radio radiation. Many of these wavelengths cannot penetrate the layers of Earth’s atmosphere and must be observed from space, whereas others—such as visible light, FM radio and TV—can penetrate to Earth’s surface. The emission of electromagnetic radiation is intimately connected to the temperature of the source. The higher the temperature of an idealized emitter of electromagnetic radiation, the shorter is the wavelength at which the maximum amount of radiation is emitted. The mathematical equation describing this relationship is known as Wien’s law: . The total power emitted per square meter increases with increasing temperature. The relationship between emitted energy flux and temperature is known as the Stefan-Boltzmann law: .

# Radiation and Spectra ## Spectroscopy in Astronomy ### Learning Objectives By the end of this section, you will be able to: 1. Describe the properties of light 2. Explain how astronomers learn the composition of a gas by examining its spectral lines 3. Discuss the various types of spectra Electromagnetic radiation carries a lot of information about the nature of stars and other astronomical objects. To extract this information, however, astronomers must be able to study the amounts of energy we receive at different wavelengths of light in fine detail. Let’s examine how we can do this and what we can learn. ### Properties of Light Light exhibits certain behaviors that are important to the design of telescopes and other instruments. For example, light can be reflected from a surface. If the surface is smooth and shiny, as with a mirror, the direction of the reflected light beam can be calculated accurately from knowledge of the shape of the reflecting surface. Light is also bent, or refracted, when it passes from one kind of transparent material into another—say, from the air into a glass lens. Reflection and refraction of light are the basic properties that make possible all optical instruments (devices that help us to see things better)—from eyeglasses to giant astronomical telescopes. Such instruments are generally combinations of glass lenses, which bend light according to the principles of refraction, and curved mirrors, which depend on the properties of reflection. Small optical devices, such as eyeglasses or binoculars, generally use lenses, whereas large telescopes depend almost entirely on mirrors for their main optical elements. We will discuss astronomical instruments and their uses more fully in Astronomical Instruments. For now, we turn to another behavior of light, one that is essential for the decoding of light. In 1672, in the first paper that he submitted to the Royal Society, Sir Isaac Newton described an experiment in which he permitted sunlight to pass through a small hole and then through a prism. Newton found that sunlight, which looks white to us, is actually made up of a mixture of all the colors of the rainbow (). shows how light is separated into different colors with a prism—a piece of glass in the shape of a triangle with refracting surfaces. Upon entering one face of the prism, the path of the light is refracted (bent), but not all of the colors are bent by the same amount. The bending of the beam depends on the wavelength of the light as well as the properties of the material, and as a result, different wavelengths (or colors of light) are bent by different amounts and therefore follow slightly different paths through the prism. The violet light is bent more than the red. This phenomenon is called dispersion and explains Newton’s rainbow experiment. Upon leaving the opposite face of the prism, the light is bent again and further dispersed. If the light leaving the prism is focused on a screen, the different wavelengths or colors that make up white light are lined up side by side just like a rainbow (). (In fact, a rainbow is formed by the dispersion of light though raindrops; see The Rainbow feature box.) Because this array of colors is a spectrum of light, the instrument used to disperse the light and form the spectrum is called a spectrometer. ### The Value of Stellar Spectra When Newton described the laws of refraction and dispersion in optics, and observed the solar spectrum, all he could see was a continuous band of colors. If the spectrum of the white light from the Sun and stars were simply a continuous rainbow of colors, astronomers would have little interest in the detailed study of a star’s spectrum once they had learned its average surface temperature. In 1802, however, William Wollaston built an improved spectrometer that included a lens to focus the Sun’s spectrum on a screen. With this device, Wollaston saw that the colors were not spread out uniformly, but instead, some ranges of color were missing, appearing as dark bands in the solar spectrum. He mistakenly attributed these lines to natural boundaries between the colors. In 1815, German physicist Joseph Fraunhofer, upon a more careful examination of the solar spectrum, found about 600 such dark lines (missing colors), which led scientists to rule out the boundary hypothesis (). Later, researchers found that similar dark lines could be produced in the spectra (“spectra” is the plural of “spectrum”) of artificial light sources. They did this by passing their light through various apparently transparent substances—usually containers with just a bit of thin gas in them. These gases turned out not to be transparent at all colors: they were quite opaque at a few sharply defined wavelengths. Something in each gas had to be absorbing just a few colors of light and no others. All gases did this, but each different element absorbed a different set of colors and thus showed different dark lines. If the gas in a container consisted of two elements, then light passing through it was missing the colors (showing dark lines) for both of the elements. So it became clear that certain lines in the spectrum “go with” certain elements. This discovery was one of the most important steps forward in the history of astronomy. What would happen if there were no continuous spectrum for our gases to remove light from? What if, instead, we heated the same thin gases until they were hot enough to glow with their own light? When the gases were heated, a spectrometer revealed no continuous spectrum, but several separate bright lines. That is, these hot gases emitted light only at certain specific wavelengths or colors. When the gas was pure hydrogen, it would emit one pattern of colors; when it was pure sodium, it would emit a different pattern. A mixture of hydrogen and sodium emitted both sets of spectral lines. The colors the gases emitted when they were heated were the very same colors as those they had absorbed when a continuous source of light was behind them. From such experiments, scientists began to see that different substances showed distinctive spectral signatures by which their presence could be detected (). Just as your signature allows the bank to identify you, the unique pattern of colors for each type of atom (its spectrum) can help us identify which element or elements are in a gas. ### Types of Spectra In these experiments, then, there were three different types of spectra. A continuous spectrum (formed when a solid or very dense gas gives off radiation) is an array of all wavelengths or colors of the rainbow. A continuous spectrum can serve as a backdrop from which the atoms of much less dense gas can absorb light. A dark line, or absorption spectrum, consists of a series or pattern of dark lines—missing colors—superimposed upon the continuous spectrum of a source. A bright line, or emission spectrum, appears as a pattern or series of bright lines; it consists of light in which only certain discrete wavelengths are present. ( shows an absorption spectrum, whereas shows the emission spectrum of a number of common elements along with an example of a continuous spectrum.) When we have a hot, thin gas, each particular chemical element or compound produces its own characteristic pattern of spectral lines—its spectral signature. No two types of atoms or molecules give the same patterns. In other words, each particular gas can absorb or emit only certain wavelengths of the light peculiar to that gas. In contrast, absorption spectra occur when passing white light through a cool, thin gas. The temperature and other conditions determine whether the lines are bright or dark (whether light is absorbed or emitted), but the wavelengths of the lines for any element are the same in either case. It is the precise pattern of wavelengths that makes the signature of each element unique. Liquids and solids can also generate spectral lines or bands, but they are broader and less well defined—and hence, more difficult to interpret. Spectral analysis, however, can be quite useful. It can, for example, be applied to light reflected off the surface of a nearby asteroid as well as to light from a distant galaxy. The dark lines in the solar spectrum thus give evidence of certain chemical elements between us and the Sun absorbing those wavelengths of sunlight. Because the space between us and the Sun is pretty empty, astronomers realized that the atoms doing the absorbing must be in a thin atmosphere of cooler gas around the Sun. This outer atmosphere is not all that different from the rest of the Sun, just thinner and cooler. Thus, we can use what we learn about its composition as an indicator of what the whole Sun is made of. Similarly, we can use the presence of absorption and emission lines to analyze the composition of other stars and clouds of gas in space. Such analysis of spectra is the key to modern astronomy. Only in this way can we “sample” the stars, which are too far away for us to visit. Encoded in the electromagnetic radiation from celestial objects is clear information about the chemical makeup of these objects. Only by understanding what the stars were made of could astronomers begin to form theories about what made them shine and how they evolved. In 1860, German physicist Gustav Kirchhoff became the first person to use spectroscopy to identify an element in the Sun when he found the spectral signature of sodium gas. In the years that followed, astronomers found many other chemical elements in the Sun and stars. In fact, the element helium was found first in the Sun from its spectrum and only later identified on Earth. (The word “helium” comes from helios, the Greek name for the Sun.) Why are there specific lines for each element? The answer to that question was not found until the twentieth century; it required the development of a model for the atom. We therefore turn next to a closer examination of the atoms that make up all matter. ### Key Concepts and Summary A spectrometer is a device that forms a spectrum, often utilizing the phenomenon of dispersion. The light from an astronomical source can consist of a continuous spectrum, an emission (bright line) spectrum, or an absorption (dark line) spectrum. Because each element leaves its spectral signature in the pattern of lines we observe, spectral analyses reveal the composition of the Sun and stars.

# Radiation and Spectra ## The Structure of the Atom ### Learning Objectives By the end of this section, you will be able to: 1. Describe the structure of atoms and the components of nuclei 2. Explain the behavior of electrons within atoms and how electrons interact with light to move among energy levels The idea that matter is composed of tiny particles called atoms is at least 25 centuries old. It took until the twentieth century, however, for scientists to invent instruments that permitted them to probe inside an atom and find that it is not, as had been thought, hard and indivisible. Instead, the atom is a complex structure composed of still smaller particles. ### Probing the Atom The first of these smaller particles was discovered by British physicist James (J. J.) Thomson in 1897. Named the electron, this particle is negatively charged. (It is the flow of these particles that produces currents of electricity, whether in lightning bolts or in the wires leading to your lamp.) Because an atom in its normal state is electrically neutral, each electron in an atom must be balanced by the same amount of positive charge. The next step was to determine where in the atom the positive and negative charges are located. In 1911, British physicist Ernest Rutherford devised an experiment that provided part of the answer to this question. He bombarded an extremely thin piece of gold foil, only about 400 atoms thick, with a beam of alpha particles (). Alpha particles (α particles) are helium atoms that have lost their electrons and thus are positively charged. Most of these particles passed though the gold foil just as if it and the atoms in it were nearly empty space. About 1 in 8000 of the alpha particles, however, completely reversed direction and bounced backward from the foil. Rutherford wrote, “It was quite the most incredible event that has ever happened to me in my life. It was almost as incredible as if you fired a 15-inch shell at a piece of tissue paper and it came back and hit you.” The only way to account for the particles that reversed direction when they hit the gold foil was to assume that nearly all of the mass, as well as all of the positive charge in each individual gold atom, is concentrated in a tiny center or nucleus. When a positively charged alpha particle strikes a nucleus, it reverses direction, much as a cue ball reverses direction when it strikes another billiard ball. Rutherford’s model placed the other type of charge—the negative electrons—in orbit around this nucleus. Rutherford’s model required that the electrons be in motion. Positive and negative charges attract each other, so stationary electrons would fall into the positive nucleus. Also, because both the electrons and the nucleus are extremely small, most of the atom is empty, which is why nearly all of Rutherford’s particles were able to pass right through the gold foil without colliding with anything. Rutherford’s model was a very successful explanation of the experiments he conducted, although eventually scientists would discover that even the nucleus itself has structure. ### The Atomic Nucleus The simplest possible atom (and the most common one in the Sun and stars) is hydrogen. The nucleus of ordinary hydrogen contains a single proton. Moving around this proton is a single electron. The mass of an electron is nearly 2000 times smaller than the mass of a proton; the electron carries an amount of charge exactly equal to that of the proton but opposite in sign (). Opposite charges attract each other, so it is an electromagnetic force that holds the proton and electron together, just as gravity is the force that keeps planets in orbit around the Sun. There are many other types of atoms in nature. Helium, for example, is the second-most abundant element in the Sun. Helium has two protons in its nucleus instead of the single proton that characterizes hydrogen. In addition, the helium nucleus contains two neutrons, particles with a mass comparable to that of the proton but with no electric charge. Moving around this nucleus are two electrons, so the total net charge of the helium atom is also zero (). From this description of hydrogen and helium, perhaps you have guessed the pattern for building up all the elements (different types of atoms) that we find in the universe. The type of element is determined by the number of protons in the nucleus of the atom. For example, any atom with six protons is the element carbon, with eight protons is oxygen, with 26 is iron, and with 92 is uranium. On Earth, a typical atom has the same number of electrons as protons, and these electrons follow complex orbital patterns around the nucleus. Deep inside stars, however, it is so hot that the electrons get loose from the nucleus and (as we shall see) lead separate yet productive lives. The ratio of neutrons to protons increases as the number of protons increases, but each element is unique. The number of neutrons is not necessarily the same for all atoms of a given element. For example, most hydrogen atoms contain no neutrons at all. There are, however, hydrogen atoms that contain one proton and one neutron, and others that contain one proton and two neutrons. The various types of hydrogen nuclei with different numbers of neutrons are called isotopes of hydrogen (), and all other elements have isotopes as well. You can think of isotopes as siblings in the same element “family”—closely related but with different characteristics and behaviors. ### The Bohr Atom Rutherford’s model for atoms has one serious problem. Maxwell’s theory of electromagnetic radiation says that when electrons change either speed or the direction of motion, they must emit energy. Orbiting electrons constantly change their direction of motion, so they should emit a constant stream of energy. Applying Maxwell’s theory to Rutherford’s model, all electrons should spiral into the nucleus of the atom as they lose energy, and this collapse should happen very quickly—in about 10–16 seconds. It was Danish physicist Niels Bohr (1885–1962) who solved the mystery of how electrons remain in orbit. He was trying to develop a model of the atom that would also explain certain regularities observed in the spectrum of hydrogen. He suggested that the spectrum of hydrogen can be understood if we assume that orbits of only certain sizes are possible for the electron. Bohr further assumed that as long as the electron moves in only one of these allowed orbits, it radiates no energy: its energy would change only if it moved from one orbit to another. This suggestion, in the words of science historian Abraham Pais, was “one of the most audacious hypotheses ever introduced in physics.” If something equivalent were at work in the everyday world, you might find that, as you went for a walk after astronomy class, nature permitted you to walk two steps per minute, five steps per minute, and 12 steps per minute, but no speeds in between. No matter how you tried to move your legs, only certain walking speeds would be permitted. To make things more bizarre, it would take no effort to walk at any one of the allowed speeds, but it would be difficult to change from one speed to another. Luckily, no such rules apply at the level of human behavior. But at the microscopic level of the atom, experiment after experiment has confirmed the validity of Bohr’s strange idea. Bohr’s suggestions became one of the foundations of the new (and much more sophisticated) model of the subatomic world called quantum mechanics. In Bohr’s model, if the electron moves from one orbit to another closer to the atomic nucleus, it must give up some energy in the form of electromagnetic radiation. If the electron goes from an inner orbit to one farther from the nucleus, however, it requires some additional energy. One way to obtain the necessary energy is to absorb electromagnetic radiation that may be streaming past the atom from an outside source. A key feature of Bohr’s model is that each of the permitted electron orbits around a given atom has a certain energy value; we therefore can think of each orbit as an energy level. To move from one orbit to another (which will have its own specific energy value) requires a change in the electron’s energy—a change determined by the difference between the two energy values. If the electron goes to a lower level, the energy difference will be given off; if the electron goes to a higher level, the energy difference must be obtained from somewhere else. Each jump (or transition) to a different level has a fixed and definite energy change associated with it. A crude analogy for this situation might be life in a tower of luxury apartments where the rent is determined by the quality of the view. Such a building has certain, definite numbered levels or floors on which apartments are located. No one can live on floor 5.37 or 22.5. In addition, the rent gets higher as you go up to higher floors. If you want to exchange an apartment on the twentieth floor for one on the second floor, you will not owe as much rent. However, if you want to move from the third floor to the twenty-fifth floor, your rent will increase. In an atom, too, the “cheapest” place for an electron to live is the lowest possible level, and energy is required to move to a higher level. Here we have one of the situations where it is easier to think of electromagnetic radiation as particles (photons) rather than as waves. As electrons move from one level to another, they give off or absorb little packets of energy. When an electron moves to a higher level, it absorbs a photon of just the right energy (provided one is available). When it moves to a lower level, it emits a photon with the exact amount of energy it no longer needs in its “lower-cost living situation.” The photon and wave perspectives must be equivalent: light is light, no matter how we look at it. Thus, each photon carries a certain amount of energy that is proportional to the frequency (f) of the wave it represents. The value of its energy (E) is given by the formula where the constant of proportionality, h, is called Planck’s constant. The constant is named for Max Planck, the German physicist who was one of the originators of the quantum theory (). If metric units are used (that is, if energy is measured in joules and frequency in hertz), then Planck’s constant has the value h = 6.626 × 10–34 joule-seconds (J-s). Higher-energy photons correspond to higher-frequency waves (which have a shorter wavelength); lower-energy photons are waves of lower frequency. To take a specific example, consider a calcium atom inside the Sun’s atmosphere in which an electron jumps from a lower level to a higher level. To do this, it needs about joules of energy, which it can conveniently obtain by absorbing a passing photon of that energy coming from deeper inside the Sun. This photon is equivalent to a wave of light whose frequency is about hertz and whose wavelength is about meters (393 nanometers), in the deep violet part of the visible light spectrum. Although it may seem strange at first to switch from picturing light as a photon (or energy packet) to picturing it as a wave, such switching has become second nature to astronomers and can be a handy tool for doing calculations about spectra. ### Key Concepts and Summary Atoms consist of a nucleus containing one or more positively charged protons. All atoms except hydrogen can also contain one or more neutrons in the nucleus. Negatively charged electrons orbit the nucleus. The number of protons defines an element (hydrogen has one proton, helium has two, and so on) of the atom. Nuclei with the same number of protons but different numbers of neutrons are different isotopes of the same element. In the Bohr model of the atom, electrons on permitted orbits (or energy levels) don’t give off any electromagnetic radiation. But when electrons go from lower levels to higher ones, they must absorb a photon of just the right energy, and when they go from higher levels to lower ones, they give off a photon of just the right energy. The energy of a photon is connected to the frequency of the electromagnetic wave it represents by Planck’s formula, E = hf.

# Radiation and Spectra ## Formation of Spectral Lines ### Learning Objectives By the end of this section, you will be able to: 1. Explain how emission line spectra and absorption line spectra are formed 2. Describe what ions are and how they are formed 3. Explain how spectral lines and ionization levels in a gas can help us determine its temperature We can use Bohr’s model of the atom to understand how spectral lines are formed. The concept of energy levels for the electron orbits in an atom leads naturally to an explanation of why atoms absorb or emit only specific energies or wavelengths of light. ### The Hydrogen Spectrum Let’s look at the hydrogen atom from the perspective of the Bohr model. Suppose a beam of white light (which consists of photons of all visible wavelengths) shines through a gas of atomic hydrogen. A photon of wavelength 656 nanometers has just the right energy to raise an electron in a hydrogen atom from the second to the third orbit. Thus, as all the photons of different energies (or wavelengths or colors) stream by the hydrogen atoms, photons with this particular wavelength can be absorbed by those atoms whose electrons are orbiting on the second level. When they are absorbed, the electrons on the second level will move to the third level, and a number of the photons of this wavelength and energy will be missing from the general stream of white light. Other photons will have the right energies to raise electrons from the second to the fourth orbit, or from the first to the fifth orbit, and so on. Only photons with these exact energies can be absorbed. All of the other photons will stream past the atoms untouched. Thus, hydrogen atoms absorb light at only certain wavelengths and produce dark lines at those wavelengths in the spectrum we see. Suppose we have a container of hydrogen gas through which a whole series of photons is passing, allowing many electrons to move up to higher levels. When we turn off the light source, these electrons “fall” back down from larger to smaller orbits and emit photons of light—but, again, only light of those energies or wavelengths that correspond to the energy difference between permissible orbits. The orbital changes of hydrogen electrons that give rise to some spectral lines are shown in . Similar pictures can be drawn for atoms other than hydrogen. However, because these other atoms ordinarily have more than one electron each, the orbits of their electrons are much more complicated, and the spectra are more complex as well. For our purposes, the key conclusion is this: each type of atom has its own unique pattern of electron orbits, and no two sets of orbits are exactly alike. This means that each type of atom shows its own unique set of spectral lines, produced by electrons moving between its unique set of orbits. Astronomers and physicists have worked hard to learn the lines that go with each element by studying the way atoms absorb and emit light in laboratories here on Earth. Then they can use this knowledge to identify the elements in celestial bodies. In this way, we now know the chemical makeup of not just any star, but even galaxies of stars so distant that their light started on its way to us long before Earth had even formed. ### Energy Levels and Excitation Bohr’s model of the hydrogen atom was a great step forward in our understanding of the atom. However, we know today that atoms cannot be represented by quite so simple a picture. For example, the concept of sharply defined electron orbits is not really correct; however, at the level of this introductory course, the notion that only certain discrete energies are allowable for an atom is very useful. The energy levels we have been discussing can be thought of as representing certain average distances of the electron’s possible orbits from the atomic nucleus. Ordinarily, an atom is in the state of lowest possible energy, its ground state. In the Bohr model of the hydrogen atom, the ground state corresponds to the electron being in the innermost orbit. An atom can absorb energy, which raises it to a higher energy level (corresponding, in the simple Bohr picture, to an electron’s movement to a larger orbit)—this is referred to as excitation. The atom is then said to be in an excited state. Generally, an atom remains excited for only a very brief time. After a short interval, typically a hundred-millionth of a second or so, it drops back spontaneously to its ground state, with the simultaneous emission of light. The atom may return to its lowest state in one jump, or it may make the transition in steps of two or more jumps, stopping at intermediate levels on the way down. With each jump, it emits a photon of the wavelength that corresponds to the energy difference between the levels at the beginning and end of that jump. An energy-level diagram for a hydrogen atom and several possible atomic transitions are shown in . When we measure the energies involved as the atom jumps between levels, we find that the transitions to or from the ground state, called the Lyman series of lines, result in the emission or absorption of ultraviolet photons. But the transitions to or from the first excited state (labeled n = 2 in part (a) of ), called the Balmer series, produce emission or absorption in visible light. In fact, it was to explain this Balmer series that Bohr first suggested his model of the atom. Atoms that have absorbed specific photons from a passing beam of white light and have thus become excited generally de-excite themselves and emit that light again in a very short time. You might wonder, then, why dark spectral lines are ever produced. In other words, why doesn’t this reemitted light quickly “fill in” the darker absorption lines? Imagine a beam of white light coming toward you through some cooler gas. Some of the reemitted light is actually returned to the beam of white light you see, but this fills in the absorption lines only to a slight extent. The reason is that the atoms in the gas reemit light in all directions, and only a small fraction of the reemitted light is in the direction of the original beam (toward you). In a star, much of the reemitted light actually goes in directions leading back into the star, which does observers outside the star no good whatsoever. summarizes the different kinds of spectra we have discussed. An incandescent lightbulb produces a continuous spectrum. When that continuous spectrum is viewed through a thinner cloud of gas, an absorption line spectrum can be seen superimposed on the continuous spectrum. If we look only at a cloud of excited gas atoms (with no continuous source seen behind it), we see that the excited atoms give off an emission line spectrum. Atoms in a hot gas are moving at high speeds and continually colliding with one another and with any loose electrons. They can be excited (electrons moving to a higher level) and de-excited (electrons moving to a lower level) by these collisions as well as by absorbing and emitting light. The speed of atoms in a gas depends on the temperature. When the temperature is higher, so are the speed and energy of the collisions. The hotter the gas, therefore, the more likely that electrons will occupy the outermost orbits, which correspond to the highest energy levels. This means that the level where electrons start their upward jumps in a gas can serve as an indicator of how hot that gas is. In this way, the absorption lines in a spectrum give astronomers information about the temperature of the regions where the lines originate. ### Ionization We have described how certain discrete amounts of energy can be absorbed by an atom, raising it to an excited state and moving one of its electrons farther from its nucleus. If enough energy is absorbed, the electron can be completely removed from the atom—this is called ionization. The atom is then said to be ionized. The minimum amount of energy required to remove one electron from an atom in its ground state is called its ionization energy. Still-greater amounts of energy must be absorbed by the now-ionized atom (called an ion) to remove an additional electron deeper in the structure of the atom. Successively greater energies are needed to remove the third, fourth, fifth—and so on—electrons from the atom. If enough energy is available, an atom can become completely ionized, losing all of its electrons. A hydrogen atom, having only one electron to lose, can be ionized only once; a helium atom can be ionized twice; and an oxygen atom up to eight times. When we examine regions of the cosmos where there is a great deal of energetic radiation, such as the neighborhoods where hot young stars have recently formed, we see a lot of ionization going on. An atom that has become positively ionized has lost a negative charge—the missing electron—and thus is left with a net positive charge. It therefore exerts a strong attraction on any free electron. Eventually, one or more electrons will be captured and the atom will become neutral (or ionized to one less degree) again. During the electron-capture process, the atom emits one or more photons. Which photons are emitted depends on whether the electron is captured at once to the lowest energy level of the atom or stops at one or more intermediate levels on its way to the lowest available level. Just as the excitation of an atom can result from a collision with another atom, ion, or electron (collisions with electrons are usually most important), so can ionization. The rate at which such collisional ionizations occur depends on the speeds of the atoms and hence on the temperature of the gas—the hotter the gas, the more of its atoms will be ionized. The rate at which ions and electrons recombine also depends on their relative speeds—that is, on the temperature. In addition, it depends on the density of the gas: the higher the density, the greater the chance for recapture, because the different kinds of particles are crowded more closely together. From a knowledge of the temperature and density of a gas, it is possible to calculate the fraction of atoms that have been ionized once, twice, and so on. In the Sun, for example, we find that most of the hydrogen and helium atoms in its atmosphere are neutral, whereas most of the calcium atoms, as well as many other heavier atoms, are ionized once. The energy levels of an ionized atom are entirely different from those of the same atom when it is neutral. Each time an electron is removed from the atom, the energy levels of the ion, and thus the wavelengths of the spectral lines it can produce, change. This helps astronomers differentiate the ions of a given element. Ionized hydrogen, having no electron, can produce no absorption lines. ### Key Concepts and Summary When electrons move from a higher energy level to a lower one, photons are emitted, and an emission line can be seen in the spectrum. Absorption lines are seen when electrons absorb photons and move to higher energy levels. Since each atom has its own characteristic set of energy levels, each is associated with a unique pattern of spectral lines. This allows astronomers to determine what elements are present in the stars and in the clouds of gas and dust among the stars. An atom in its lowest energy level is in the ground state. If an electron is in an orbit other than the least energetic one possible, the atom is said to be excited. If an atom has lost one or more electrons, it is called an ion and is said to be ionized. The spectra of different ions look different and can tell astronomers about the temperatures of the sources they are observing.

# Radiation and Spectra ## The Doppler Effect ### Learning Objectives By the end of this section, you will be able to: 1. Explain why the spectral lines of photons we observe from an object will change as a result of the object’s motion toward or away from us 2. Describe how we can use the Doppler effect to deduce how fast astronomical objects are moving through space The last two sections introduced you to many new concepts, and we hope that through those, you have seen one major idea emerge. Astronomers can learn about the elements in stars and galaxies by decoding the information in their spectral lines. There is a complicating factor in learning how to decode the message of starlight, however. If a star is moving toward or away from us, its lines will be in a slightly different place in the spectrum from where they would be in a star at rest. And most objects in the universe do have some motion relative to the Sun. ### Motion Affects Waves In 1842, Christian Doppler first measured the effect of motion on waves by hiring a group of musicians to play on an open railroad car as it was moving along the track. He then applied what he learned to all waves, including light, and pointed out that if a light source is approaching or receding from the observer, the light waves will be, respectively, crowded more closely together or spread out. The general principle, now known as the Doppler effect, is illustrated in . In part (a) of the figure, the light source (S) is at rest with respect to the observer. The source gives off a series of waves, whose crests we have labeled 1, 2, 3, and 4. The light waves spread out evenly in all directions, like the ripples from a splash in a pond. The crests are separated by a distance, λ, where λ is the wavelength. The observer, who happens to be located in the direction of the bottom of the image, sees the light waves coming nice and evenly, one wavelength apart. Observers located anywhere else would see the same thing. On the other hand, if the source of light is moving with respect to the observer, as seen in part (b), the situation is more complicated. Between the time one crest is emitted and the next one is ready to come out, the source has moved a bit, toward the bottom of the page. From the point of view of observer A, this motion of the source has decreased the distance between crests—it’s squeezing the crests together, this observer might say. In part (b), we show the situation from the perspective of three observers. The source is seen in four positions, S1, S2, S3, and S4, each corresponding to the emission of one wave crest. To observer A, the waves seem to follow one another more closely, at a decreased wavelength and thus increased frequency. (Remember, all light waves travel at the speed of light through empty space, no matter what. This means that motion cannot affect the speed, but only the wavelength and the frequency. As the wavelength decreases, the frequency must increase. If the waves are shorter, more will be able to move by during each second.) The situation is not the same for other observers. Let’s look at the situation from the point of view of observer C, located opposite observer A in the figure. For her, the source is moving away from her location. As a result, the waves are not squeezed together but instead are spread out by the motion of the source. The crests arrive with an increased wavelength and decreased frequency. To observer B, in a direction at right angles to the motion of the source, no effect is observed. The wavelength and frequency remain the same as they were in part (a) of the figure. We can see from this illustration that the Doppler effect is produced only by a motion toward or away from the observer, a motion called radial velocity. Sideways motion does not produce such an effect. Observers between A and B would observe some shortening of the light waves for that part of the motion of the source that is along their line of sight. Observers between B and C would observe lengthening of the light waves that are along their line of sight. You may have heard the Doppler effect with sound waves. When a train whistle or police siren approaches you and then moves away, you will notice a decrease in the pitch (which is how human senses interpret sound wave frequency) of the sound waves. Compared to the waves at rest, they have changed from slightly more frequent when coming toward you, to slightly less frequent when moving away from you. ### Color Shifts When the source of waves moves toward you, the wavelength decreases a bit. If the waves involved are visible light, then the colors of the light change slightly. As wavelength decreases, they shift toward the blue end of the spectrum: astronomers call this a blueshift (since the end of the spectrum is really violet, the term should probably be violetshift, but blue is a more common color). When the source moves away from you and the wavelength gets longer, we call the change in colors a redshift. Because the Doppler effect was first used with visible light in astronomy, the terms “blueshift” and “redshift” became well established. Today, astronomers use these words to describe changes in the wavelengths of radio waves or X-rays as comfortably as they use them to describe changes in visible light. The greater the motion toward or away from us, the greater the Doppler shift. If the relative motion is entirely along the line of sight, the formula for the Doppler shift of light is where λ is the wavelength emitted by the source, Δλ is the difference between λ and the wavelength measured by the observer, c is the speed of light, and v is the relative speed of the observer and the source in the line of sight. The variable v is counted as positive if the velocity is one of recession, and negative if it is one of approach. Solving this equation for the velocity, we find v = c × Δλ/λ. If a star approaches or recedes from us, the wavelengths of light in its continuous spectrum appear shortened or lengthened, respectively, as do those of the dark lines. However, unless its speed is tens of thousands of kilometers per second, the star does not appear noticeably bluer or redder than normal. The Doppler shift is thus not easily detected in a continuous spectrum and cannot be measured accurately in such a spectrum. The wavelengths of the absorption lines can be measured accurately, however, and their Doppler shift is relatively simple to detect. You may now be asking: if all the stars are moving and motion changes the wavelength of each spectral line, won’t this be a disaster for astronomers trying to figure out what elements are present in the stars? After all, it is the precise wavelength (or color) that tells astronomers which lines belong to which element. And we first measure these wavelengths in containers of gas in our laboratories, which are not moving. If every line in a star’s spectrum is now shifted by its motion to a different wavelength (color), how can we be sure which lines and which elements we are looking at in a star whose speed we do not know? Take heart. This situation sounds worse than it really is. Astronomers rarely judge the presence of an element in an astronomical object by a single line. It is the pattern of lines unique to hydrogen or calcium that enables us to determine that those elements are part of the star or galaxy we are observing. The Doppler effect does not change the pattern of lines from a given element—it only shifts the whole pattern slightly toward redder or bluer wavelengths. The shifted pattern is still quite easy to recognize. Best of all, when we do recognize a familiar element’s pattern, we get a bonus: the amount the pattern is shifted can enable us to determine the speed of the objects in our line of sight. The training of astronomers includes much work on learning to decode light (and other electromagnetic radiation). A skillful “decoder” can learn the temperature of a star, what elements are in it, and even its speed in a direction toward us or away from us. That’s really an impressive amount of information for stars that are light-years away. ### Key Concepts and Summary If an atom is moving toward us when an electron changes orbits and produces a spectral line, we see that line shifted slightly toward the blue of its normal wavelength in a spectrum. If the atom is moving away, we see the line shifted toward the red. This shift is known as the Doppler effect and can be used to measure the radial velocities of distant objects. ### For Further Exploration ### Articles Augensen, H. & Woodbury, J. “The Electromagnetic Spectrum.” Astronomy (June 1982): 6. Darling, D. “Spectral Visions: The Long Wavelengths.” Astronomy (August 1984): 16; “The Short Wavelengths.” Astronomy (September 1984): 14. Gingerich, O. “Unlocking the Chemical Secrets of the Cosmos.” Sky & Telescope (July 1981): 13. Stencil, R. et al. “Astronomical Spectroscopy.” Astronomy (June 1978): 6. ### Websites Doppler Effect: http://www.physicsclassroom.com/class/waves/Lesson-3/The-Doppler-Effect. A shaking bug and the Doppler Effect explained. Electromagnetic Spectrum: http://imagine.gsfc.nasa.gov/science/toolbox/emspectrum1.html. An introduction to the electromagnetic spectrum from NASA’s Imagine the Universe; note that you can click the “Advanced” button near the top and get a more detailed discussion. Rainbows: How They Form and How to See Them: http://www.livescience.com/30235-rainbows-formation-explainer.html. By meteorologist and amateur astronomer Joe Rao. ### Videos Doppler Effect: http://www.esa.int/spaceinvideos/Videos/2014/07/Doppler_effect_-_classroom_demonstration_video_VP05. ESA video with Doppler ball demonstration and Doppler effect and satellites (4:48). How a Prism Works to Make Rainbow Colors: https://www.youtube.com/watch?v=JGqsi_LDUn0. Short video on how a prism bends light to make a rainbow of colors (2:44). Tour of the Electromagnetic Spectrum: https://www.youtube.com/watch?v=HPcAWNlVl-8. NASA Mission Science video tour of the bands of the electromagnetic spectrum (eight short videos). ### Introductions to Quantum Mechanics Ford, Kenneth. The Quantum World. 2004. A well-written recent introduction by a physicist/educator. Gribbin, John. In Search of Schroedinger’s Cat. 1984. Clear, very basic introduction to the fundamental ideas of quantum mechanics, by a British physicist and science writer. Rae, Alastair. Quantum Physics: A Beginner’s Guide. 2005. Widely praised introduction by a British physicist. ### Collaborative Group Activities 1. Have your group make a list of all the electromagnetic wave technology you use during a typical day. 2. How many applications of the Doppler effect can your group think of in everyday life? For example, why would the highway patrol find it useful? 3. Have members of your group go home and “read” the face of your radio set and then compare notes. If you do not have a radio, research “broadcast radio frequencies” to find answers to the following questions. What do all the words and symbols mean? What frequencies can your radio tune to? What is the frequency of your favorite radio station? What is its wavelength? 4. If your instructor were to give you a spectrometer, what kind of spectra does your group think you would see from each of the following: (1) a household lightbulb, (2) the Sun, (3) the “neon lights of Broadway,” (4) an ordinary household flashlight, and (5) a streetlight on a busy shopping street? 5. Suppose astronomers want to send a message to an alien civilization that is living on a planet with an atmosphere very similar to that of Earth’s. This message must travel through space, make it through the other planet’s atmosphere, and be noticeable to the residents of that planet. Have your group discuss what band of the electromagnetic spectrum might be best for this message and why. (Some people, including noted physicist Stephen Hawking, have warned scientists not to send such messages and reveal the presence of our civilization to a possible hostile cosmos. Do you agree with this concern?) ### Review Questions ### Thought Questions ### Figuring for Yourself

# Astronomical Instruments ## Thinking Ahead If you look at the sky when you are far away from city lights, there seem to be an overwhelming number of stars up there. In reality, only about 9000 stars are visible to the unaided eye (from both hemispheres of our planet). The light from most stars is so weak that by the time it reaches Earth, it cannot be detected by the human eye. How can we learn about the vast majority of objects in the universe that our unaided eyes simply cannot see? In this chapter, we describe the tools astronomers use to extend their vision into space. We have learned almost everything we know about the universe from studying electromagnetic radiation, as discussed in the chapter on Radiation and Spectra. In the twentieth century, our exploration of space made it possible to detect electromagnetic radiation at all wavelengths, from gamma rays to radio waves. The different wavelengths carry different kinds of information, and the appearance of any given object often depends on the wavelength at which the observations are made.

# Astronomical Instruments ## Telescopes ### Learning Objectives By the end of this section, you will be able to: 1. Describe the three basic components of a modern system for measuring astronomical sources 2. Describe the main functions of a telescope 3. Describe the two basic types of visible-light telescopes and how they form images ### Systems for Measuring Radiation There are three basic components of a modern system for measuring radiation from astronomical sources. First, there is a telescope, which serves as a “bucket” for collecting visible light (or radiation at other wavelengths, as shown in (). Just as you can catch more rain with a garbage can than with a coffee cup, large telescopes gather much more light than your eye can. Second, there is an instrument attached to the telescope that sorts the incoming radiation by wavelength. Sometimes the sorting is fairly crude. For example, we might simply want to separate blue light from red light so that we can determine the temperature of a star. But at other times, we want to see individual spectral lines to determine what an object is made of, or to measure its speed (as explained in the Radiation and Spectra chapter). Third, we need some type of detector, a device that senses the radiation in the wavelength regions we have chosen and permanently records the observations. The history of the development of astronomical telescopes is about how new technologies have been applied to improve the efficiency of these three basic components: the telescopes, the wavelength-sorting device, and the detectors. Let’s first look at the development of the telescope. Many ancient cultures built special sites for observing the sky (). At these ancient observatories, they could measure the positions of celestial objects, mostly to keep track of time and date. Many of these ancient observatories had religious and ritual functions as well. The eye was the only device available to gather light, all of the colors in the light were observed at once, and the only permanent record of the observations was made by human beings writing down or sketching what they saw. While Hans Lippershey, Zaccharias Janssen, and Jacob Metius are all credited with the invention of the telescope around 1608—applying for patents within weeks of each other—it was Galileo who, in 1610, used this simple tube with lenses (which he called a spyglass) to observe the sky and gather more light than his eyes alone could. Even his small telescope—used over many nights—revolutionized ideas about the nature of the planets and the position of Earth. ### How Telescopes Work Telescopes have come a long way since Galileo’s time. Now they tend to be huge devices; the most expensive cost hundreds of millions to billions of dollars. (To provide some reference point, however, keep in mind that just renovating college football stadiums typically costs hundreds of millions of dollars—with the most expensive recent renovation, at Texas A&M University’s Kyle Field, costing $450 million.) The reason astronomers keep building bigger and bigger telescopes is that celestial objects—such as planets, stars, and galaxies—send much more light to Earth than any human eye (with its tiny opening) can catch, and bigger telescopes can detect fainter objects. If you have ever watched the stars with a group of friends, you know that there’s plenty of starlight to go around; each of you can see each of the stars. If a thousand more people were watching, each of them would also catch a bit of each star’s light. Yet, as far as you are concerned, the light not shining into your eye is wasted. It would be great if some of this “wasted” light could also be captured and brought to your eye. This is precisely what a telescope does. The most important functions of a telescope are (1) to collect the faint light from an astronomical source and (2) to focus all the light into a point or an image. Most objects of interest to astronomers are extremely faint: the more light we can collect, the better we can study such objects. (And remember, even though we are focusing on visible light first, there are many telescopes that collect other kinds of electromagnetic radiation.) Telescopes that collect visible radiation use a lens or mirror to gather the light. Other types of telescopes may use collecting devices that look very different from the lenses and mirrors with which we are familiar, but they serve the same function. In all types of telescopes, the light-gathering ability is determined by the area of the device acting as the light-gathering “bucket.” Since most telescopes have mirrors or lenses, we can compare their light-gathering power by comparing the apertures, or diameters, of the opening through which light travels or reflects. The amount of light a telescope can collect increases with the size of the aperture. A telescope with a mirror that is 4 meters in diameter can collect 16 times as much light as a telescope that is 1 meter in diameter. (The diameter is squared because the area of a circle equals , where d is the diameter of the circle.) After the telescope forms an image, we need some way to detect and record it so that we can measure, reproduce, and analyze the image in various ways. Before the nineteenth century, astronomers simply viewed images with their eyes and wrote descriptions of what they saw. This was very inefficient and did not lead to a very reliable long-term record; you know from crime shows on television that eyewitness accounts are often inaccurate. In the nineteenth century, the use of photography became widespread. In those days, photographs were a chemical record of an image on a specially treated glass plate. Today, the image is generally detected with sensors similar to those in digital cameras, recorded electronically, and stored in computers. This permanent record can then be used for detailed and quantitative studies. Professional astronomers rarely look through the large telescopes that they use for their research. ### Formation of an Image by a Lens or a Mirror Whether or not you wear glasses, you see the world through lenses; they are key elements of your eyes. A lens is a transparent piece of material that bends the rays of light passing through it. If the light rays are parallel as they enter, the lens brings them together in one place to form an image (). If the curvatures of the lens surfaces are just right, all parallel rays of light (say, from a star) are bent, or refracted, in such a way that they converge toward a point, called the focus of the lens. At the focus, an image of the light source appears. In the case of parallel light rays, the distance from the lens to the location where the light rays focus, or image, behind the lens is called the focal length of the lens. As you look at , you may ask why two rays of light from the same star would be parallel to each other. After all, if you draw a picture of star shining in all directions, the rays of light coming from the star don’t look parallel at all. But remember that the stars (and other astronomical objects) are all extremely far away. By the time the few rays of light pointed toward us actually arrive at Earth, they are, for all practical purposes, parallel to each other. Put another way, any rays that were not parallel to the ones pointed at Earth are now heading in some very different direction in the universe. To view the image formed by the lens in a telescope, we use an additional lens called an eyepiece. The eyepiece focuses the image at a distance that is either directly viewable by a human or at a convenient place for a detector. Using different eyepieces, we can change the magnification (or size) of the image and also redirect the light to a more accessible location. Stars look like points of light, and magnifying them makes little difference, but the image of a planet or a galaxy, which has structure, can often benefit from being magnified. Many people, when thinking of a telescope, picture a long tube with a large glass lens at one end. This design, which uses a lens as its main optical element to form an image, as we have been discussing, is known as a refractor (), and a telescope based on this design is called a refracting telescope. Galileo’s telescopes were refractors, as are today’s binoculars and field glasses. However, there is a limit to the size of a refracting telescope. The largest one ever built was a 49-inch refractor built for the Paris 1900 Exposition, and it was dismantled after the Exposition. Currently, the largest refracting telescope is the 40-inch refractor at Yerkes Observatory in Wisconsin. One problem with a refracting telescope is that the light must pass through the lens of a refractor. That means the glass must be perfect all the way through, and it has proven very difficult to make large pieces of glass without flaws and bubbles in them. Also, optical properties of transparent materials change a little bit with the wavelengths (or colors) of light, so there is some additional distortion, known as chromatic aberration. Each wavelength focuses at a slightly different spot, causing the image to appear blurry. In addition, since the light must pass through the lens, the lens can only be supported around its edges (just like the frames of our eyeglasses). The force of gravity will cause a large lens to sag and distort the path of the light rays as they pass through it. Finally, because the light passes through it, both sides of the lens must be manufactured to precisely the right shape in order to produce a sharp image. A different type of telescope uses a concave primary mirror as its main optical element. The mirror is curved like the inner surface of a sphere, and it reflects light in order to form an image (). Telescope mirrors are coated with a shiny metal, usually silver, aluminum, or, occasionally, gold, to make them highly reflective. If the mirror has the correct shape, all parallel rays are reflected back to the same point, the focus of the mirror. Thus, images are produced by a mirror exactly as they are by a lens. Telescopes designed with mirrors avoid the problems of refracting telescopes. Because the light is reflected from the front surface only, flaws and bubbles within the glass do not affect the path of the light. In a telescope designed with mirrors, only the front surface has to be manufactured to a precise shape, and the mirror can be supported from the back. For these reasons, most astronomical telescopes today (both amateur and professional) use a mirror rather than a lens to form an image; this type of telescope is called a reflecting telescope. The first successful reflecting telescope was built by Isaac Newton in 1668. In a reflecting telescope, the concave mirror is placed at the bottom of a tube or open framework. The mirror reflects the light back up the tube to form an image near the front end at a location called the prime focus. The image can be observed at the prime focus, or additional mirrors can intercept the light and redirect it to a position where the observer can view it more easily (). Since an astronomer at the prime focus can block much of the light coming to the main mirror, the use of a small secondary mirror allows more light to get through the system. A telescope collects the faint light from astronomical sources and brings it to a focus, where an instrument can sort the light according to wavelength. Light is then directed to a detector, where a permanent record is made. The light-gathering power of a telescope is determined by the diameter of its aperture, or opening—that is, by the area of its largest or primary lens or mirror. The primary optical element in a telescope is either a convex lens (in a refracting telescope) or a concave mirror (in a reflector) that brings the light to a focus. Most large telescopes are reflectors; it is easier to manufacture and support large mirrors because the light does not have to pass through glass.

# Astronomical Instruments ## Telescopes Today ### Learning Objectives By the end of this section, you will be able to: 1. Recognize the largest visible-light and infrared telescopes in operation today 2. Discuss the factors relevant to choosing an appropriate telescope site 3. Define the technique of adaptive optics and describe the effects of the atmosphere on astronomical observations Since Newton’s time, when the sizes of the mirrors in telescopes were measured in inches, reflecting telescopes have grown ever larger. In 1948, US astronomers built a telescope with a 5-meter (200-inch) diameter mirror on Palomar Mountain in Southern California. It remained the largest visible-light telescope in the world for several decades. The giants of today, however, have primary mirrors (the largest mirrors in the telescope) that are 8- to 10-meters in diameter, and larger ones are being built (). ### Modern Visible-Light and Infrared Telescopes The decades starting in 1990 saw telescope building around the globe grow at an unprecedented rate. (See , which also includes websites for each telescope in case you want to visit or learn more about them.) Technological advancements had finally made it possible to build telescopes significantly larger than the 5-meter telescope at Palomar at a reasonable cost. New technologies have also been designed to work well in the infrared, and not just visible, wavelengths. The differences between the Palomar telescope and the modern Gemini North telescope (to take an example) are easily seen in . The Palomar telescope is a massive steel structure designed to hold the 14.5-ton primary mirror with a 5-meter diameter. Glass tends to sag under its own weight; hence, a huge steel structure is needed to hold the mirror. A mirror 8 meters in diameter, the size of the Gemini North telescope, if it were built using the same technology as the Palomar telescope, would have to weigh at least eight times as much and would require an enormous steel structure to support it. The 8-meter Gemini North telescope looks like a featherweight by contrast, and indeed it is. The mirror is only about 8 inches thick and weighs 24.5 tons, less than twice as much as the Palomar mirror. The Gemini North telescope was completed about 50 years after the Palomar telescope. Engineers took advantage of new technologies to build a telescope that is much lighter in weight relative to the size of the primary mirror. The Gemini mirror does sag, but with modern computers, it is possible to measure that sag many times each second and apply forces at 120 different locations to the back of the mirror to correct the sag, a process called active control. Seventeen telescopes with mirrors 6.5 meters in diameter and larger have been constructed since 1990. The twin 10-meter Keck telescopes on Maunakea, which were the first of these new-technology instruments, use precision control in an entirely novel way. Instead of a single primary mirror 10 meters in diameter, each Keck telescope achieves its larger aperture by combining the light from 36 separate hexagonal mirrors, each 1.8 meters wide (). Computer-controlled actuators (motors) constantly adjust these 36 mirrors so that the overall reflecting surface acts like a single mirror with just the right shape to collect and focus the light into a sharp image. In addition to holding the mirror, the steel structure of a telescope is designed so that the entire telescope can be pointed quickly toward any object in the sky. Since Earth is rotating, the telescope must have a motorized drive system that moves it very smoothly from east to west at exactly the same rate that Earth is rotating from west to east, so it can continue to point at the object being observed. All this machinery must be housed in a dome to protect the telescope from the elements. The dome has an opening in it that can be positioned in front of the telescope and moved along with it, so that the light from the objects being observed is not blocked. ### Picking the Best Observing Sites A telescope like the Gemini or Keck telescope costs about $100 million to build. That kind of investment demands that the telescope be placed in the best possible site. Since the end of the nineteenth century, astronomers have realized that the best observatory sites are on mountains, far from the lights and pollution of cities. Although a number of urban observatories remain, especially in the large cities of Europe, they have become administrative centers or museums. The real action takes place far away, often on desert mountains or isolated peaks in the Atlantic and Pacific Oceans, where we find the staff’s living quarters, computers, electronic and machine shops, and of course the telescopes themselves. A large observatory today requires a supporting staff of 20 to 100 people in addition to the astronomers. The performance of a telescope is determined not only by the size of its mirror but also by its location. Earth’s atmosphere, so vital to life, presents challenges for the observational astronomer. In at least four ways, our air imposes limitations on the usefulness of telescopes: 1. The most obvious limitation is weather conditions such as clouds, wind, and rain. At the best sites, the weather is clear as much as 75% of the time. 2. Even on a clear night, the atmosphere filters out a certain amount of starlight, especially in the infrared, where the absorption is due primarily to water vapor. Astronomers therefore prefer dry sites, generally found at high altitudes. 3. The sky above the telescope should be dark. Near cities, the air scatters the glare from lights, producing an illumination that hides the faintest stars and limits the distances that can be probed by telescopes. (Astronomers call this effect light pollution.) Observatories are best located at least 100 miles from the nearest large city. 4. Finally, the air is often unsteady; light passing through this turbulent air is disturbed, resulting in blurred star images. Astronomers call these effects “bad seeing.” When seeing is bad, images of celestial objects are distorted by the constant twisting and bending of light rays by turbulent air. The best observatory sites are therefore high, dark, and dry. The world’s largest telescopes are found in such remote mountain locations as the Andes Mountains of Chile (), the desert peaks of Arizona, the Canary Islands in the Atlantic Ocean, and Maunakea in Hawaii, a dormant volcano with an altitude of 13,700 feet (4200 meters). ### The Resolution of a Telescope In addition to gathering as much light as they can, astronomers also want to have the sharpest images possible. Resolution refers to the precision of detail present in an image: that is, the smallest features that can be distinguished. Astronomers are always eager to make out more detail in the images they study, whether they are following the weather on Jupiter or trying to peer into the violent heart of a “cannibal galaxy” that recently ate its neighbor for lunch. One factor that determines how good the resolution will be is the size of the telescope. Larger apertures produce sharper images. Until very recently, however, visible-light and infrared telescopes on Earth’s surface could not produce images as sharp as the theory of light said they should. The problem—as we saw earlier in this chapter—is our planet’s atmosphere, which is turbulent. It contains many small-scale blobs or cells of gas that range in size from inches to several feet. Each cell has a slightly different temperature from its neighbor, and each cell acts like a lens, bending (refracting) the path of the light by a small amount. This bending slightly changes the position where each light ray finally reaches the detector in a telescope. The cells of air are in motion, constantly being blown through the light path of the telescope by winds, often in different directions at different altitudes. As a result, the path followed by the light is constantly changing. For an analogy, think about watching a parade from a window high up in a skyscraper. You decide to throw some confetti down toward the marchers. Even if you drop a handful all at the same time and in the same direction, air currents will toss the pieces around, and they will reach the ground at different places. As we described earlier, we can think of the light from the stars as a series of parallel beams, each making its way through the atmosphere. Each path will be slightly different, and each will reach the detector of the telescope at a slightly different place. The result is a blurred image, and because the cells are being blown by the wind, the nature of the blur will change many times each second. You have probably noticed this effect as the “twinkling” of stars seen from Earth. The light beams are bent enough that part of the time they reach your eye, and part of the time some of them miss, thereby making the star seem to vary in brightness. In space, however, the light of the stars is steady. Astronomers search the world for locations where the amount of atmospheric blurring, or turbulence, is as small as possible. It turns out that the best sites are in coastal mountain ranges and on isolated volcanic peaks in the middle of an ocean. Air that has flowed long distances over water before it encounters land is especially stable. The resolution of an image is measured in units of angle on the sky, typically in units of arcseconds. One arcsecond is 1/3600 degree, and there are 360 degrees in a full circle. So we are talking about tiny angles on the sky. To give you a sense of just how tiny, we might note that 1 arcsecond is how big a quarter would look when seen from a distance of 5 kilometers. The best images obtained from the ground with traditional techniques reveal details as small as several tenths of an arcsecond across. This image size is remarkably good. One of the main reasons for launching the Hubble Space Telescope was to escape Earth’s atmosphere and obtain even sharper images. But since we can’t put every telescope into space, astronomers have devised a technique called adaptive optics that can beat Earth’s atmosphere at its own game of blurring. This technique (which is most effective in the infrared region of the spectrum with our current technology) makes use of a small flexible mirror placed in the beam of a telescope. A sensor measures how much the atmosphere has distorted the image, and as often as 500 times per second, it sends instructions to the flexible mirror on how to change shape in order to compensate for distortions produced by the atmosphere. The light is thus brought back to an almost perfectly sharp focus at the detector. shows just how effective this technique is. With adaptive optics, ground-based telescopes can achieve resolutions of 0.1 arcsecond or a little better in the infrared region of the spectrum. This impressive figure is the equivalent of the resolution that the Hubble Space Telescope achieves in the visible-light region of the spectrum. New technologies for creating and supporting lightweight mirrors have led to the construction of a number of large telescopes since 1990. The site for an astronomical observatory must be carefully chosen for clear weather, dark skies, low water vapor, and excellent atmospheric seeing (low atmospheric turbulence). The resolution of a visible-light or infrared telescope is degraded by turbulence in Earth’s atmosphere. The technique of adaptive optics, however, can make corrections for this turbulence in real time and produce exquisitely detailed images.

# Astronomical Instruments ## Visible-Light Detectors and Instruments ### Learning Objectives By the end of this section, you will be able to: 1. Describe the difference between photographic plates and charge-coupled devices 2. Describe the unique difficulties associated with infrared observations and their solutions 3. Describe how a spectrometer works After a telescope collects radiation from an astronomical source, the radiation must be detected and measured. The first detector used for astronomical observations was the human eye, but it suffers from being connected to an imperfect recording and retrieving device—the human brain. Photography and modern electronic detectors have eliminated the quirks of human memory by making a permanent record of the information from the cosmos. The eye also suffers from having a very short integration time; it takes only a fraction of a second to add light energy together before sending the image to the brain. One important advantage of modern detectors is that the light from astronomical objects can be collected by the detector over longer periods of time; this technique is called “taking a long exposure.” Exposures of several hours are required to detect very faint objects in the cosmos. Before the light reaches the detector, astronomers today normally use some type of instrument to sort the light according to wavelength. The instrument may be as simple as colored filters, which transmit light within a specified range of wavelengths. A red transparent plastic is an everyday example of a filter that transmits only the red light and blocks the other colors. After the light passes through a filter, it forms an image that astronomers can then use to measure the apparent brightness and color of objects. We will show you many examples of such images in the later chapters of this book, and we will describe what we can learn from them. Alternatively, the instrument between telescope and detector may be one of several devices that spread the light out into its full rainbow of colors so that astronomers can measure individual lines in the spectrum. Such an instrument (which you learned about in the chapter on Radiation and Spectra) is called a spectrometer because it allows astronomers to measure (to meter) the spectrum of a source of radiation. Whether a filter or a spectrometer, both types of wavelength-sorting instruments still have to use detectors to record and measure the properties of light. ### Photographic and Electronic Detectors Throughout most of the twentieth century, photographic film or glass plates served as the prime astronomical detectors, whether for photographing spectra or direct images of celestial objects. In a photographic plate, a light-sensitive chemical coating is applied to a piece of glass that, when developed, provides a lasting record of the image. At observatories around the world, vast collections of photographs preserve what the sky has looked like during the past 100 years. Photography represents a huge improvement over the human eye, but it still has limitations. Photographic films are inefficient: only about 1% of the light that actually falls on the film contributes to the chemical change that makes the image; the rest is wasted. Astronomers today have much more efficient electronic detectors to record astronomical images. Most often, these are charge-coupled devices (CCDs), which are similar to the detectors used in video camcorders or in digital cameras (like the one more and more students have on their cell phones) (see ). In a CCD, photons of radiation hitting any part of the detector generate a stream of charged particles (electrons) that are stored and counted at the end of the exposure. Each place where the radiation is counted is called a pixel (picture element), and modern detectors can count the photons in millions of pixels (megapixels, or MPs). Because CCDs typically record as much as 60–70% of all the photons that strike them, and the best silicon and infrared CCDs exceed 90% sensitivity, we can detect much fainter objects. Among these are many small moons around the outer planets, icy dwarf planets beyond Pluto, and dwarf galaxies of stars. CCDs also provide more accurate measurements of the brightness of astronomical objects than photography, and their output is digital—in the form of numbers that can go directly into a computer for analysis. ### Infrared Observations Observing the universe in the infrared band of the spectrum presents some additional challenges. The infrared region extends from wavelengths near 1 micrometer (µm), which is about the long wavelength sensitivity limit of both CCDs and photography, to 100 micrometers or longer. Recall from the discussion on radiation and spectra that infrared is “heat radiation” (given off at temperatures that we humans are comfortable with). The main challenge to astronomers using infrared is to distinguish between the tiny amount of heat radiation that reaches Earth from stars and galaxies, and the much greater heat radiated by the telescope itself and our planet’s atmosphere. Typical temperatures on Earth’s surface are near 300 K, and the atmosphere through which observations are made is only a little cooler. According to Wien’s law (from the chapter on Radiation and Spectra), the telescope, the observatory, and even the sky are radiating infrared energy with a peak wavelength of about 10 micrometers. To infrared eyes, everything on Earth is brightly aglow—including the telescope and camera (). The challenge is to detect faint cosmic sources against this sea of infrared light. Another way to look at this is that an astronomer using infrared must always contend with the situation that a visible-light observer would face if working in broad daylight with a telescope and optics lined with bright fluorescent lights. To solve this problem, astronomers must protect the infrared detector from nearby radiation, just as you would shield photographic film from bright daylight. Since anything warm radiates infrared energy, the detector must be isolated in very cold surroundings; often, it is held near absolute zero (1 to 3 K) by immersing it in liquid helium. The second step is to reduce the radiation emitted by the telescope structure and optics, and to block this heat from reaching the infrared detector. ### Spectroscopy Spectroscopy is one of the astronomer’s most powerful tools, providing information about the composition, temperature, motion, and other characteristics of celestial objects. More than half of the time spent on most large telescopes is used for spectroscopy. The many different wavelengths present in light can be separated by passing them through a spectrometer to form a spectrum. The design of a simple spectrometer is illustrated in . Light from the source (actually, the image of a source produced by the telescope) enters the instrument through a small hole or narrow slit, and is collimated (made into a beam of parallel rays) by a lens. The light then passes through a prism, producing a spectrum: different wavelengths leave the prism in different directions because each wavelength is bent by a different amount when it enters and leaves the prism. A second lens placed behind the prism focuses the many different images of the slit or entrance hole onto a CCD or other detecting device. This collection of images (spread out by color) is the spectrum that astronomers can then analyze at a later point. As spectroscopy spreads the light out into more and more collecting bins, fewer photons go into each bin, so either a larger telescope is needed or the integration time must be greatly increased—usually both. In practice, astronomers today are more likely to use a different device, called a grating, to disperse the spectrum. A grating is a piece of material with thousands of grooves on its surface. While it functions completely differently, a grating, like a prism, also spreads light out into a spectrum. Visible-light detectors include the human eye, photographic film, and charge-coupled devices (CCDs). Detectors that are sensitive to infrared radiation must be cooled to very low temperatures since everything in and near the telescope gives off infrared waves. A spectrometer disperses the light into a spectrum to be recorded for detailed analysis.

# Astronomical Instruments ## Radio Telescopes ### Learning Objectives By the end of this section, you will be able to: 1. Describe how radio waves from space are detected 2. Identify the world’s largest radio telescopes 3. Define the technique of interferometry and discuss the benefits of interferometers over single-dish telescopes In addition to visible and infrared radiation, radio waves from astronomical objects can also be detected from the surface of Earth. In the early 1930s, Karl G. Jansky, an engineer at Bell Telephone Laboratories, was experimenting with antennas for long-range radio communication when he encountered some mysterious static—radio radiation coming from an unknown source (). He discovered that this radiation came in strongest about four minutes earlier on each successive day and correctly concluded that since Earth’s sidereal rotation period (how long it takes us to rotate relative to the stars) is four minutes shorter than a solar day, the radiation must be originating from some region fixed on the celestial sphere. Subsequent investigation showed that the source of this radiation was part of the Milky Way Galaxy; Jansky had discovered the first source of cosmic radio waves. In 1936, Grote Reber, who was an amateur astronomer interested in radio communications, used galvanized iron and wood to build the first antenna specifically designed to receive cosmic radio waves. Over the years, Reber built several such antennas and used them to carry out pioneering surveys of the sky for celestial radio sources; he remained active in radio astronomy for more than 30 years. During the first decade, he worked practically alone because professional astronomers had not yet recognized the vast potential of radio astronomy. ### Detection of Radio Energy from Space It is important to understand that radio waves cannot be “heard”: they are not the sound waves you hear coming out of the radio receiver in your home or car. Like light, radio waves are a form of electromagnetic radiation, but unlike light, we cannot detect them with our senses—we must rely on electronic equipment to pick them up. In commercial radio broadcasting, we encode sound information (music or a newscaster’s voice) into radio waves. These must be decoded at the other end and then turned back into sound by speakers or headphones. The radio waves we receive from space do not, of course, have music or other program information encoded in them. If cosmic radio signals were translated into sound, they would sound like the static you hear when scanning between stations. Nevertheless, there is information in the radio waves we receive—information that can tell us about the chemistry and physical conditions of the sources of the waves. Just as vibrating charged particles can produce electromagnetic waves (see the Radiation and Spectra chapter), electromagnetic waves can make charged particles move back and forth. Radio waves can produce a current in conductors of electricity such as metals. An antenna is such a conductor: it intercepts radio waves, which create a feeble current in it. The current is then amplified in a radio receiver until it is strong enough to measure or record. Like your television or radio, receivers can be tuned to select a single frequency (channel). In astronomy, however, it is more common to use sophisticated data-processing techniques that allow thousands of separate frequency bands to be detected simultaneously. Thus, the astronomical radio receiver operates much like a spectrometer on a visible-light or infrared telescope, providing information about how much radiation we receive at each wavelength or frequency. After computer processing, the radio signals are recorded on magnetic disks for further analysis. Radio waves are reflected by conducting surfaces, just as light is reflected from a shiny metallic surface, and according to the same laws of optics. A radio-reflecting telescope consists of a concave metal reflector (called a dish), analogous to a telescope mirror. The radio waves collected by the dish are reflected to a focus, where they can then be directed to a receiver and analyzed. Because humans are such visual creatures, radio astronomers often construct a pictorial representation of the radio sources they observe. shows such a radio image of a distant galaxy, where radio telescopes reveal vast jets and complicated regions of radio emissions that are completely invisible in photographs taken with light. Radio astronomy is a young field compared with visible-light astronomy, but it has experienced tremendous growth in recent decades. The world’s largest radio reflectors that can be pointed to any direction in the sky have apertures of 100 meters. One of these has been built at the US National Radio Astronomy Observatory in West Virginia (). lists some of the major radio telescopes of the world. ### Radio Interferometry As we discussed earlier, a telescope’s ability to show us fine detail (its resolution) depends upon its aperture, but it also depends upon the wavelength of the radiation that the telescope is gathering. The longer the waves, the harder it is to resolve fine detail in the images or maps we make. Because radio waves have such long wavelengths, they present tremendous challenges for astronomers who need good resolution. In fact, even the largest radio dishes on Earth, operating alone, cannot make out as much detail as the typical small visible-light telescope used in a college astronomy lab. To overcome this difficulty, radio astronomers have learned to sharpen their images by linking two or more radio telescopes together electronically. Two or more telescopes linked together in this way are called an interferometer. “Interferometer” may seem like a strange term because the telescopes in an interferometer work cooperatively; they don’t “interfere” with each other. Interference, however, is a technical term for the way that multiple waves interact with each other when they arrive in our instruments, and this interaction allows us to coax more detail out of our observations. The resolution of an interferometer depends upon the separation of the telescopes, not upon their individual apertures. Two telescopes separated by 1 kilometer provide the same resolution as would a single dish 1 kilometer across (although they are not, of course, able to collect as much radiation as a radio-wave bucket that is 1 kilometer across). To get even better resolution, astronomers combine a large number of radio dishes into an interferometer array. In effect, such an array works like a large number of two-dish interferometers, all observing the same part of the sky together. Computer processing of the results permits the reconstruction of a high-resolution radio image. The most extensive such instrument in the United States is the National Radio Astronomy Observatory’s Jansky Very Large Array (VLA) near Socorro, New Mexico. It consists of 27 movable radio telescopes (on railroad tracks), each having an aperture of 25 meters, spread over a total span of about 36 kilometers. By electronically combining the signals from all of its individual telescopes, this array permits the radio astronomer to make pictures of the sky at radio wavelengths comparable to those obtained with a visible-light telescope, with a resolution of about 1 arcsecond. The Atacama Large Millimeter/submillimeter array (ALMA) in the Atacama Desert of Northern Chile (), at an altitude of 16,400 feet, consists of 12 7-meter and 54 12-meter telescopes, and can achieve baselines up to 16 kilometers. Since it became operational in 2013, it has made observations at resolutions down to 6 milliarcseconds (0.006 arcseconds), a remarkable achievement for radio astronomy. Initially, the size of interferometer arrays was limited by the requirement that all of the dishes be physically wired together. The maximum dimensions of the array were thus only a few tens of kilometers. However, larger interferometer separations can be achieved if the telescopes do not require a physical connection. Astronomers, with the use of current technology and computing power, have learned to time the arrival of electromagnetic waves coming from space very precisely at each telescope and combine the data later. If the telescopes are as far apart as California and Australia, or as West Virginia and Crimea in Ukraine, the resulting resolution far surpasses that of visible-light telescopes. The United States operates the Very Long Baseline Array (VLBA), made up of 10 individual telescopes stretching from the Virgin Islands to Hawaii (). The VLBA, completed in 1993, can form astronomical images with a resolution of 0.0001 arcseconds, permitting features as small as 10 astronomical units (AU) to be distinguished at the center of our Galaxy. Recent advances in technology have also made it possible to do interferometry at visible-light and infrared wavelengths. At the beginning of the twenty-first century, three observatories with multiple telescopes each began using their dishes as interferometers, combining their light to obtain a much greater resolution. In addition, a dedicated interferometric array was built on Mt. Wilson in California. Just as in radio arrays, these observations allow astronomers to make out more detail than a single telescope could provide. ### Radar Astronomy Radar is the technique of transmitting radio waves to an object in our solar system and then detecting the radio radiation that the object reflects back. The time required for the round trip can be measured electronically with great precision. Because we know the speed at which radio waves travel (the speed of light), we can determine the distance to the object or a particular feature on its surface (such as a mountain). Radar observations have been used to determine the distances to planets and how fast things are moving in the solar system (using the Doppler effect, discussed in the Radiation and Spectra chapter). Radar waves have played important roles in navigating spacecraft throughout the solar system. In addition, as will be discussed in later chapters, radar observations have determined the rotation periods of Venus and Mercury, probed tiny Earth-approaching asteroids, and allowed us to investigate the mountains and valleys on the surfaces of Mercury, Venus, Mars, and the large moons of Jupiter. Any radio dish can be used as a radar telescope if it is equipped with a powerful transmitter as well as a receiver. For many years, the most spectacular facility in the world for radar astronomy was the 1000-foot (305-meter) telescope at Arecibo in Puerto Rico (). The Arecibo telescope was too large to be pointed directly at different parts of the sky. Instead, it was constructed in a huge natural “bowl” (more than a mere dish) formed by several hills, and it was lined with reflecting metal panels. A limited ability to track astronomical sources was achieved by moving the receiver system, which was suspended on cables 100 meters above the surface of the bowl. Unfortunately, the telescope was seriously damaged in the powerful storms of 2020 and had to be decommissioned. An even larger (500-meter) radio telescope has recently gone into operation in China and is called the Five-hundred-meter Aperture Spherical Telescope (FAST). In the 1930s, radio astronomy was pioneered by Karl G. Jansky and Grote Reber. A radio telescope is basically a radio antenna (often a large, curved dish) connected to a receiver. Significantly enhanced resolution can be obtained with interferometers, including interferometer arrays like the 27-element VLA and the 66-element ALMA. Expanding to very long baseline interferometers, radio astronomers can achieve resolutions as precise as 0.0001 arcsecond. Radar astronomy involves transmitting as well as receiving. The largest radar telescope currently in operation is a 305-meter bowl at Arecibo.

# Astronomical Instruments ## Observations outside Earth’s Atmosphere ### Learning Objectives By the end of this section, you will be able to: 1. List the advantages of making astronomical observations from space 2. Explain the importance of the James Webb and Hubble Space Telescopes 3. Describe some of the major space-based observatories astronomers use Earth’s atmosphere blocks most radiation at wavelengths shorter than visible light, so we can only make direct ultraviolet, X-ray, and gamma ray observations from space (though indirect gamma ray observations can be made from Earth). Getting above the distorting effects of the atmosphere is also an advantage at visible and infrared wavelengths. The stars don’t “twinkle” in space, so the amount of detail you can observe is limited only by the size of your instrument. On the other hand, it is expensive to place telescopes into space, and repairs can present a major challenge. This is why astronomers continue to build telescopes for use on the ground as well as for launching into space. ### Airborne and Space Infrared Telescopes Water vapor, the main source of atmospheric interference for making infrared observations, is concentrated in the lower part of Earth’s atmosphere. For this reason, a gain of even a few hundred meters in elevation can make an important difference in the quality of an infrared observatory site. Given the limitations of high mountains, most of which attract clouds and violent storms, and the fact that the ability of humans to perform complex tasks degrades at high altitudes, it was natural for astronomers to investigate the possibility of observing infrared waves from airplanes and ultimately from space. Infrared observations from airplanes have been made since the 1960s, starting with a 15-centimeter telescope on board a Learjet. From 1974 through 1995, NASA operated a 0.9-meter airborne telescope flying regularly out of the Ames Research Center south of San Francisco. Observing from an altitude of 12 kilometers, the telescope was above 99% of the atmospheric water vapor. More recently, NASA (in partnership with the German Aerospace Center) has constructed a much larger 2.5-meter telescope, called the Stratospheric Observatory for Infrared Astronomy (SOFIA), which flies in a modified Boeing 747SP (). Getting even higher and making observations from space itself have important advantages for infrared astronomy. First is the elimination of all interference from the atmosphere. Equally important is the opportunity to cool the entire optical system of the instrument in order to nearly eliminate infrared radiation from the telescope itself. If we tried to cool a telescope within the atmosphere, it would quickly become coated with condensing water vapor and other gases, making it useless. Only in the vacuum of space can optical elements be cooled to hundreds of degrees below freezing and still remain operational. The first orbiting infrared observatory, launched in 1983, was the Infrared Astronomical Satellite (IRAS), built as a joint project by the United States, the Netherlands, and Britain. IRAS was equipped with a 0.6-meter telescope cooled to a temperature of less than 10 K. For the first time, the infrared sky could be seen as if it were night, rather than through a bright foreground of atmospheric and telescope emissions. IRAS carried out a rapid but comprehensive survey of the entire infrared sky over a 10-month period, cataloging about 350,000 sources of infrared radiation. Since then, several other infrared telescopes have operated in space with much better sensitivity and resolution due to improvements in infrared detectors. The most powerful of these early infrared telescopes was the 0.85-meter Spitzer Space Telescope, which launched in 2003 and ended operations in 2020. But, as we shall see later in this chapter, a much larger infrared telescope (the James Webb Space Telescope) has now taken its place. We continue to build larger and more sensitive infrared telescopes in space because they can help us detect the cooler parts of cosmic objects, such as the dust clouds around nurseries of infant stars and the remnants of dying stars, that visible-light images cannot reveal. ### Hubble Space Telescope In April 1990, a great leap forward in astronomy was made with the launch of the Hubble Space Telescope (HST). It has a mirror 2.4 meters in diameter and has earned a reputation as one of the most important telescopes in the history of astronomy. (Its aperture was limited by the size of the payload bay in the Space Shuttle that served as its launch vehicle.) It was named for Edwin Hubble, the astronomer who discovered the expansion of the universe in the 1920s (whose work we will discuss in the chapters on Galaxies). HST is operated jointly by NASA’s Goddard Space Flight Center and the Space Telescope Science Institute in Baltimore. It was the first orbiting observatory designed to be serviced by Shuttle astronauts and, over the years since it was launched, they made several visits to improve or replace its initial instruments and to repair some of the systems that operate the spacecraft—though this repair program has now been discontinued, and no more visits or improvements will be made. With the Hubble, astronomers have obtained some of the most detailed images of astronomical objects from the solar system outward to the most distant galaxies. Among its many great achievements is the Hubble Ultra-Deep Field, an image of a small region of the sky observed for almost 100 hours. It contains views of about 10,000 galaxies, some of which formed when the universe was just a few percent of its current age (). The HST’s mirror was ground and polished to a remarkable degree of accuracy. If we were to scale up its 2.4-meter mirror to the size of the entire continental United States, there would be no hill or valley larger than about 6 centimeters in its smooth surface. Unfortunately, after it was launched, scientists discovered that the primary mirror had a slight error in its shape, equal to roughly 1/50 the width of a human hair. Small as that sounds, it was enough to ensure that much of the light entering the telescope did not come to a clear focus and that all the images were blurry. (In a misplaced effort to save money, a complete test of the optical system had not been carried out before launch, so the error was not discovered until HST was in orbit.) The solution was to do something very similar to what we do for astronomy students with blurry vision: put corrective optics in front of their eyes. In December 1993, in one of the most exciting and difficult space missions ever flown, astronauts captured the orbiting telescope and brought it back into the shuttle payload bay. There they installed a package containing compensating optics as well as a new, improved camera before releasing HST back into orbit. The telescope now works as it was intended to, and further missions to it were able to install even more advanced instruments to take advantage of its capabilities. ### James Webb Space Telescope The largest telescope sent into space so far, and one specifically designed to observe infrared radiation from the universe, is the James Webb Space Telescope. (In a departure from the tradition of naming space telescopes after noted astronomers of the past, it is named after a former administrator at NASA.) Launched on December 25, 2021, the telescope is now in a stable orbit about 1.5 million km from Earth—four times further than the Moon. This is a good, cold location for infrared viewing, but a place where no astronauts can currently travel if the facility needs repair. The Webb’s 18-segment primary mirror is 6.5 meters in diameter (). A multi-layer shield the size of a tennis court protects it from the heat of the Sun and allows its liquid-helium-cooled instruments to gather extremely faint infrared radiation from the universe. NASA estimates that its resolution (ability to make out small details) would be sufficient to distinguish a U.S. penny held up 40 km (24 miles) away. Some of the first images taken with the telescope are shown and explained in . When looking at these and future images from the Webb, bear in mind that its instruments are observing infrared radiation, whose different wavelengths are not visible to the human eye, and thus are not assigned colors by our senses. The colors are added by the science team and represent the different infrared channels (wavelengths) that were observed. With the Webb, astronomers will be able to look into the dusty regions where stars are formed and probe the atmospheres of planets orbiting other stars, just to name two of its primary aims. Its giant mirror will even allow scientists to look back close to the time when galaxies of stars were first being assembled by the pull of gravity. As always with a pioneering telescope, astronomers are looking forward to learning things that they cannot yet predict. ### High-Energy Observatories Ultraviolet, X-ray, and direct gamma-ray (high-energy electromagnetic wave) observations can be made only from space. Such observations first became possible in 1946, with V2 rockets captured from Germany after World War II. The US Naval Research Laboratory put instruments on these rockets for a series of pioneering flights, used initially to detect ultraviolet radiation from the Sun. Since then, many other rockets have been launched to make X-ray and ultraviolet observations of the Sun, and later of other celestial objects. Beginning in the 1960s, a steady stream of high-energy observatories has been launched into orbit to reveal and explore the universe at short wavelengths. Among recent X-ray telescopes is the Chandra X-ray Observatory, which was launched in 1999 (). It is producing X-ray images with unprecedented resolution and sensitivity. Designing instruments that can collect and focus energetic radiation like X-rays and gamma rays is an enormous technological challenge. The 2002 Nobel Prize in physics was awarded to Riccardo Giacconi, a pioneer in the field of building and launching sophisticated X-ray instruments. In 2008, NASA launched the Fermi Gamma-ray Space Telescope, designed to measure cosmic gamma rays at energies greater than any previous telescope, and thus able to collect radiation from some of the most energetic events in the universe. One major challenge is to design “mirrors” to reflect such penetrating radiation as X-rays and gamma rays, which normally pass straight through matter. However, although the technical details of design are more complicated, the three basic components of an observing system, as we explained earlier in this chapter, are the same at all wavelengths: a telescope to gather up the radiation, filters or instruments to sort the radiation according to wavelength, and some method of detecting and making a permanent record of the observations. lists some of the most important active space observatories that humanity has launched. Gamma-ray detections can also be made from Earth’s surface by using the atmosphere as the primary detector. When a gamma ray hits our atmosphere, it accelerates charged particles (mostly electrons) in the atmosphere. Those energetic particles hit other particles in the atmosphere and give off their own radiation. The effect is a cascade of light and energy that can be detected on the ground. The VERITAS array in Arizona and the H.E.S.S. array in Namibia are two such ground-based gamma-ray observatories. Infrared observations are made with telescopes aboard aircraft and in space, as well as from ground-based facilities on dry mountain peaks. Ultraviolet, X-ray, and gamma-ray observations must be made from above the atmosphere. Many orbiting observatories have been flown to observe in these bands of the spectrum in the last few decades. The largest-aperture telescope in space is the Hubble Space telescope (HST), the most significant infrared telescope is Spitzer, and Chandra and Fermi are the premier X-ray and gamma-ray observatories, respectively.

# Astronomical Instruments ## The Future of Large Telescopes ### Learning Objectives By the end of this section, you will be able to: 1. Describe the next generation of ground- and space-based observatories 2. Explain some of the challenges involved in building these observatories If you’ve ever gone on a hike, you have probably been eager to see what lies just around the next bend in the path. Researchers are no different, and astronomers and engineers are working on the technologies that will allow us to explore even more distant parts of the universe and to see them more clearly. As we saw earlier, the premier space facility for the coming decade will be the James Webb Space Telescope (). Its work is just beginning, but its flawless deployment in the first half of 2022 has given astronomers a strong sense of optimism about its ability to probe the infrared universe. The smaller Hubble Space Telescope is still functioning after more than 30 years in space. NASA is also looking at launching (around 2027) the Nancy Grace Roman Space Telescope, an infrared instrument which will have a smaller mirror but a wider field of view than the Webb. On the ground, astronomers have started building the Vera Rubin ObservatoryThe observatory is named after the American astronomer whose work led us to the understanding that much of the universe is made of a mysterious substance that scientists call dark matter (which we explain in , which has an 8.4-meter telescope with a significantly larger field of view than any existing telescopes. It will rapidly scan the sky to find transients, phenomena that change quickly, such as exploding stars and chunks of rock that orbit near Earth. It is expected to see first light in 2022. The international gamma-ray community is planning the Cherenkov Telescope Array (CTA), two arrays of telescopes, one in each hemisphere, which will indirectly measure gamma rays from the ground. The CTA will measure gamma-ray energies a thousand times as great as the Fermi telescope can detect. Several groups of astronomers around the globe interested in studying visible light and the infrared are exploring the feasibility of building ground-based telescopes with mirrors larger than 30 meters across. Stop and think what this means: 30 meters is one-third the length of a football field. It is technically impossible to build and transport a single astronomical mirror that is 30 meters or larger in diameter. The primary mirror of these giant telescopes will consist of smaller mirrors, all aligned so that they act as a very large mirror in combination. The most ambitious of these projects is the European Extremely Large Telescope (ELT) (). (Astronomers try to outdo each other not only with the size of these telescopes, but also their names!) The design of the European ELT calls for a 39.3-meter primary mirror, which will follow the Keck design and be made up of 798 hexagonal mirrors, each 1.4 meters in diameter and all held precisely in position so that they form a continuous surface. Construction on the site in the Atacama Desert in Northern Chile started in 2014, and operations are expected to begin in about 2025. International consortia with major contributions from U.S. astronomers have developed plans for the construction of two large new telescopes. One is a Thirty-Meter Telescope (TMT) for which the preferred site is Maunakea in Hawaii. The design of this telescope is similar to that of the European ELT and will make use of 492 hexagonal elements. Each segment is about 1.44 meters (56.6 inches) across corners. The segments are closely spaced, with gaps between the segments only 2.5 mm (0.1 inch) wide. The Giant Magellan Telescope (GMT) is the second ELT project with major participation by U.S. astronomers. The GMT is also a segmented mirror telescope that employs seven stiff monolith 8.4-meter mirrors as segments. Construction has started at the selected site, which is near the Las Campanas Observatory on the southern edge of the Atacama Desert. These giant telescopes will combine light-gathering power with high-resolution imaging. These powerful new instruments will enable astronomers to tackle many important astronomical problems. As just one example, they provide us images and spectra of planets around other stars and thus, perhaps, give us the first real evidence (from the chemistry of these planets’ atmospheres) that life exists elsewhere. The largest space telescope yet, the 6.5-meter James Webb Space Telescope, was launched in December 2021 and is sending back a flood of useful information about the infrared universe. New and even larger telescopes are on the drawing boards. Gamma-ray astronomers are planning to build the CTA to measure very energetic gamma rays. Astronomers are building the LSST to observe with an unprecedented field of view and a new generation of visible-light/infrared telescopes with apertures of 24.5 to 39 meters in diameter. ### For Further Exploration ### Articles Blades, J. C. “Fixing the Hubble One Last Time.” Sky & Telescope (October 2008): 26. On the last Shuttle service mission and what the Hubble was then capable of doing. Brown, A. “How Gaia will Map a Billion Stars.” Astronomy (December 2014): 32. Nice review of the mission to do photometry and spectroscopy of all stars above a certain brightness. Irion, R. “Prime Time.” Astronomy (February 2001): 46. On how time is allotted on the major research telescopes. Jedicke, Peter & Robert. “The Coming Giant Sky Patrols.” Sky & Telescope (September 2008): 30. About giant telescopes to survey the sky continuously. Lazio, Joseph, et al. “Tuning in to the Universe: 21st Century Radio Astronomy.” Sky & Telescope (July 2008): 21. About ALMA and the Square Kilometer Array. Lowe, Jonathan. “Mirror, Mirror.” Sky & Telescope (December 2007): 22. On the Large Binocular Telescope in Arizona. Lowe, Jonathan. “Next Light: Tomorrow’s Monster Telescopes.” Sky & Telescope (April 2008): 20. About plans for extremely large telescopes on the ground. Mason, Todd & Robin. “Palomar’s Big Eye.” Sky & Telescope (December 2008): 36. On the Hale 200-inch telescope. Subinsky, Raymond. “Who Really Invented the Telescope.” Astronomy (August 2008): 84. Brief historical introduction, focusing on Hans Lippershey. Young, Monica “The New Space Race (and Problem).” Sky & Telescope (March 2020): 14. A good discussion of the danger that huge numbers of new reflective satellites (to provide Wi-Fi) poses to the darkness of the night sky for astronomers. James Webb Space Telescope Geithner, P. “Building the James Webb Space Telescope.” Sky & Telescope (November 2021): 20. The instruments and engineering challenges of building the new space telescope. Mather, J. “The James Webb Space Telescope Lives.” Astronomy (October 2021): 14. The senior project scientist previews the giant infrared telescope NASA is launching. ### Websites Websites for major telescopes are given in , , , and . Information on Swarms of Satellites on Low-Earth Orbit ### Videos Astronomy from the Stratosphere: SOFIA: https://www.youtube.com/watch?v=NV98BcBBA9c. A talk by Dr. Dana Backman (1:15:32) Galaxies Viewed in Full Spectrum of Light: https://www.youtube.com/watch?v=368K0iQv8nE. Scientists with the Spitzer Observatory show how a galaxy looks different at different wavelengths (6:22) Lifting the Cosmic Veil: Highlights from a Decade of the Spitzer Space Telescope: https://www.youtube.com/watch?v=nkrNQcwkY78. A talk by Dr. Michael Bicay (1:42:44) ### Collaborative Group Activities 1. Most large telescopes get many more proposals for observing projects than there is night observing time available in a year. Suppose your group is the telescope time allocation committee reporting to an observatory director. What criteria would you use in deciding how to give out time on the telescope? What steps could you take to make sure all your colleagues thought the process was fair and people would still talk to you at future astronomy meetings? 2. Your group is a committee of nervous astronomers about to make a proposal to the government ministers of your small European country to chip in with other countries to build the world’s largest telescope in the high, dry desert of the Chilean Andes Mountains. You expect the government ministers to be very skeptical about supporting this project. What arguments would you make to convince them to participate? 3. The same government ministers we met in the previous activity ask you to draw up a list of the pros and cons of having the world’s largest telescope in the mountains of Chile (instead of a mountain in Europe). What would your group list in each column? 4. Your group should discuss and make a list of all the ways in which an observing session at a large visible-light telescope and a large radio telescope might differ. (Hint: Bear in mind that because the Sun is not especially bright at many radio wavelengths, observations with radio telescopes can often be done during the day.) 5. Another “environmental threat” to astronomy (besides light pollution) comes from the spilling of terrestrial communications into the “channels”—wavelengths and frequencies—previously reserved for radio astronomy. For example, the demand for cellular phones means that more and more radio channels will be used for this purpose. The faint signals from cosmic radio sources could be drowned in a sea of earthly conversation (translated and sent as radio waves). Assume your group is a congressional committee being lobbied by both radio astronomers, who want to save some clear channels for doing astronomy, and the companies that stand to make a lot of money from expanding cellular phone use. What arguments would sway you to each side? 6. When the site for the new Thirty-Meter Telescope on Hawaii’s Maunakea was dedicated, a group of native Hawaiians announced opposition to the project because astronomers were building too many telescopes on a mountain that native Hawaiians consider a sacred site. You can read more about this controversy at http://www.nytimes.com/2015/12/04/science/space/hawaii-court-rescinds-permit-to-build-thirty-meter-telescope.html?_r=0 and at http://www.nature.com/news/the-mountain-top-battle-over-the-thirty-meter-telescope-1.18446. Once your group has the facts, discuss the claims of each side in the controversy. How do you think it should be resolved? 7. If you could propose to use a large modern telescope, what would you want to find out? What telescope would you use and why? 8. Light pollution (spilled light in the night sky making it difficult to see the planets and stars) used to be an issue that concerned mostly astronomers. Now spilled light at night is also of concern to environmentalists and those worrying about global warming. Can your group come up with some non-astronomical reasons to be opposed to light pollution? ### Review Questions ### Thought Questions ### Figuring for Yourself