What is social responsibility?

The ethical obligation of a business to act in the best interests of society

The responsibility of individuals to give back to their community

The ethical obligation of a business to act in the best interests of society

The legal obligation of a business to follow government regulations

The sole focus on maximizing profit

What is a social responsibility of a firm?

Minimizing negative environmental impact

What is the purpose of corporate social responsibility?

To contribute to social and environmental well-being

To maximize shareholder profits

To contribute to social and environmental well-being

What is the role of a firm in society?

Generating employment opportunities

Providing goods and services to meet societal needs

Contributing to economic growth

What is the concept of stakeholder theory?

Firms should consider the interests of all stakeholders in their decision-making

Firms should prioritize the interests of shareholders above all

Firms should consider the interests of all stakeholders in their decision-making

Firms should focus on maximizing profit at any cost

Firms should only consider the interests of customers

What is the triple bottom line concept?

Taking into account social, environmental, and economic factors in business decision-making

Focusing solely on economic factors in business decision-making

Maximizing shareholder value through profit-making

Minimizing social and environmental impacts in business operations

Taking into account social, environmental, and economic factors in business decision-making

What is the purpose of a mission statement for a firm?

To define the organization's goals, values, and purpose

To maximize shareholder profits

Objectives of firm and social responsibilities

When it was his turn to speak, Adam Malik, Presidium Minister for Political Affairs and Minister for Foreign Affairs of Indonesia, recalled that about a year before, in Bangkok, at the conclusion of the peace talks between Indonesia and Malaysia, he had explored the idea of an organization such as ASEAN with his Malaysian and Thai counterparts. One of the “angry young men” in his country’s struggle for independence two decades earlier, Adam Malik was then 50 years old and one of a Presidium of five led by then General Soeharto that was steering Indonesia from the verge of economic and political chaos. He was the Presidium’s point man in Indonesia’s efforts to mend fences with its neighbors in the wake of an unfortunate policy of confrontation. During the past year, he said, the Ministers had all worked together toward the realization of the ASEAN idea, “making haste slowly, in order to build a new association for regional cooperation.” Adam Malik went on to describe Indonesia’s vision of a Southeast Asia developing into “a region which can stand on its own feet, strong enough to defend itself against any negative influence from outside the region.” Such a vision, he stressed, was not wishful thinking, if the countries of the region effectively cooperated with each other, considering their combined natural resources and manpower. He referred to differences of outlook among the member countries, but those differences, he said, would be overcome through a maximum of goodwill and understanding, faith and realism. Hard work, patience and perseverance, he added, would also be necessary. The countries of Southeast Asia should also be willing to take responsibility for whatever happens to them, according to Tun Abdul Razak, the Deputy Prime Minister of Malaysia, who spoke next. In his speech, he conjured a vision of an ASEAN that would include all the countries of Southeast Asia. Tun Abdul Razak was then concurrently his country’s Minister of Defence and Minister of National Development. It was a time when national survival was the overriding thrust of Malaysia’s relations with other nations and so as Minister of Defence, he was in charge of his country’s foreign affairs. He stressed that the countries of the region should recognize that unless they assumed their common responsibility to shape their own destiny and to prevent external intervention and interference, Southeast Asia would remain fraught with danger and tension. And unless they took decisive and collective action to prevent the eruption of intra-regional conflicts, the nations of Southeast Asia would remain susceptible to manipulation, one against another. “We the nations and peoples of Southeast Asia,” Tun Abdul Razak said, “must get together and form by ourselves a new perspective and a new framework for our region. It is important that individually and jointly we should create a deep awareness that we cannot survive for long as independent but isolated peoples unless we also think and act together and unless we prove by deeds that we belong to a family of Southeast Asian nations bound together by ties of friendship and goodwill and imbued with our own ideals and aspirations and determined to shape our own destiny”. He added that, “with the establishment of ASEAN, we have taken a firm and a bold step on that road”. For his part, S. Rajaratnam, a former Minister of Culture of multi-cultural Singapore who, at that time, served as its first Foreign Minister, noted that two decades of nationalist fervor had not fulfilled the expectations of the people of Southeast Asia for better living standards. If ASEAN would succeed, he said, then its members would have to marry national thinking with regional thinking. “We must now think at two levels,” Rajaratnam said. “We must think not only of our national interests but posit them against regional interests: that is a new way of thinking about our problems. And these are two different things and sometimes they can conflict. Secondly, we must also accept the fact, if we are really serious about it, that regional existence means painful adjustments to those practices and thinking in our respective countries. We must make these painful and difficult adjustments. If we are not going to do that, then regionalism remains a utopia.” S. Rajaratnam expressed the fear, however, that ASEAN would be misunderstood. “We are not against anything”, he said, “not against anybody”. And here he used a term that would have an ominous ring even today: balkanization. In Southeast Asia, as in Europe and any part of the world, he said, outside powers had a vested interest in the balkanization of the region. “We want to ensure,” he said, “a stable Southeast Asia, not a balkanized Southeast Asia. And those countries who are interested, genuinely interested, in the stability of Southeast Asia, the prosperity of Southeast Asia, and better economic and social conditions, will welcome small countries getting together to pool their collective resources and their collective wisdom to contribute to the peace of the world.” The goal of ASEAN, then, is to create, not to destroy. This, the Foreign Minister of Thailand, Thanat Khoman, stressed when it was his turn to speak. At a time when the Vietnam conflict was raging and American forces seemed forever entrenched in Indochina, he had foreseen their eventual withdrawal from the area and had accordingly applied himself to adjusting Thailand’s foreign policy to a reality that would only become apparent more than half a decade later. He must have had that in mind when, on that occasion, he said that the countries of Southeast Asia had no choice but to adjust to the exigencies of the time, to move toward closer cooperation and even integration. Elaborating on ASEAN objectives, he spoke of “building a new society that will be responsive to the needs of our time and efficiently equipped to bring about, for the enjoyment and the material as well as spiritual advancement of our peoples, conditions of stability and progress. Particularly what millions of men and women in our part of the world want is to erase the old and obsolete concept of domination and subjection of the past and replace it with the new spirit of give and take, of equality and partnership. More than anything else, they want to be master of their own house and to enjoy the inherent right to decide their own destiny …” While the nations of Southeast Asia prevent attempts to deprive them of their freedom and sovereignty, he said, they must first free themselves from the material impediments of ignorance, disease and hunger. Each of these nations cannot accomplish that alone, but by joining together and cooperating with those who have the same aspirations, these objectives become easier to attain. Then Thanat Khoman concluded: “What we have decided today is only a small beginning of what we hope will be a long and continuous sequence of accomplishments of which we ourselves, those who will join us later and the generations to come, can be proud. Let it be for Southeast Asia, a potentially rich region, rich in history, in spiritual as well as material resources and indeed for the whole ancient continent of Asia, the light of happiness and well-being that will shine over the uncounted millions of our struggling peoples.” The Foreign Minister of Thailand closed the inaugural session of the Association of Southeast Asian Nations by presenting each of his colleagues with a memento. Inscribed on the memento presented to the Foreign Minister of Indonesia, was the citation, “In recognition of services rendered by His Excellency Adam Malik to the ASEAN organization, the name of which was suggested by him.” And that was how ASEAN was conceived, given a name, and born. It had been barely 14 months since Thanat Khoman brought up the ASEAN idea in his conversations with his Malaysian and Indonesian colleagues. In about three more weeks, Indonesia would fully restore diplomatic relations with Malaysia, and soon after that with Singapore. That was by no means the end to intra-ASEAN disputes, for soon the Philippines and Malaysia would have a falling out on the issue of sovereignty over Sabah. Many disputes between ASEAN countries persist to this day. But all Member Countries are deeply committed to resolving their differences through peaceful means and in the spirit of mutual accommodation. Every dispute would have its proper season but it would not be allowed to get in the way of the task at hand. And at that time, the essential task was to lay the framework of regional dialogue and cooperation. The two-page Bangkok Declaration not only contains the rationale for the establishment of ASEAN and its specific objectives. It represents the organization’s modus operandi of building on small steps, voluntary, and informal arrangements towards more binding and institutionalized agreements. All the founding member states and the newer members have stood fast to the spirit of the Bangkok Declaration. Over the years, ASEAN has progressively entered into several formal and legally-binding instruments, such as the 1976 Treaty of Amity and Cooperation in Southeast Asia and the 1995 Treaty on the Southeast Asia Nuclear Weapon-Free Zone. Against the backdrop of conflict in the then Indochina, the Founding Fathers had the foresight of building a community of and for all Southeast Asian states. Thus the Bangkok Declaration promulgated that “the Association is open for participation to all States in the Southeast Asian region subscribing to the aforementioned aims, principles and purposes.” ASEAN’s inclusive outlook has paved the way for community-building not only in Southeast Asia, but also in the broader Asia Pacific region where several other inter-governmental organizations now co-exist. The original ASEAN logo presented five brown sheaves of rice stalks, one for each founding member. Beneath the sheaves is the legend “ASEAN” in blue. These are set on a field of yellow encircled by a blue border. Brown stands for strength and stability, yellow for prosperity and blue for the spirit of cordiality in which ASEAN affairs are conducted. When ASEAN celebrated its 30th Anniversary in 1997, the sheaves on the logo had increased to ten – representing all ten countries of Southeast Asia and reflecting the colors of the flags of all of them. In a very real sense, ASEAN and Southeast Asia would then be one and the same, just as the Founding Fathers had envisioned. This article is based on the first chapter of ASEAN at 30, a publication of the Association of Southeast Asian Nations in commemoration of its 30th Anniversary on 8 August 1997, written by Jamil Maidan Flores and Jun Abad.

The plasma membrane (also called the cell membrane) has several functions. For example, it allows only certain molecules to enter or leave the cell. It separates internal metabolic reactions from the external environment. In addition, the plasma membrane allows the cell to excrete wastes and to interact with its environment. Membrane Lipids The plasma membrane, as well as the membranes of cell organelles, is made primarily of phospholipids. Phospholipids have a polar, hydrophilic (“water-loving”) phosphate head and two nonpolar, hydrophobic (“water-fearing”) fatty acid tails. Water molecules sur- round the plasma membrane. The phospholipids line up so that their heads point outward toward the water and their tails point inward, away from water. The result is a double layer called a phospholipid bilayer, as shown in Figure 4-10. The cell membranes of eukaryotes also contain lipids, called sterols, between the tails of the phospho- lipids. The major membrane sterol in animal cells is cholesterol. Sterols in the plasma membrane make the membrane more firm and prevent the membrane from freezing at low temperatures. SECTION 3 OBJECTIVES ● Describe the structure and function of a cell’s plasma membrane. ● Summarize the role of the nucleus. ● List the major organelles found in the cytosol, and describe their roles. ● Identify the characteristics of mitochondria. ● Describe the structure and function of the cytoskeleton. VOCABULARY phospholipid bilayer chromosome nuclear envelope nucleolus ribosome mitochondrion endoplasmic reticulum Golgi apparatus lysosome cytoskeleton microtubule microfilament cilium flagellum centriole Cell membranes are made of a phospholipid bilayer. Each phospholipid molecule has a polar “head” and a two-part nonpolar “tail.” FIGURE 4-10 Copyright © by Holt, Rinehart and Winston. All rights reserved. 78 CHAPTER 4 OUTSIDE OF CELL INSIDE OF CELL 1. Cell-surface marker: Glycoprotein that identifies cell type 3. Enzyme: Assists chemical reactions inside the cell 2. Receptor protein: Recognizes and binds to substances outside the cell 4. Transport protein: Helps substances move across cell membrane Carbohydrate portion Protein portion Phospholipid heads Phospholipid tails Phospholipid Cholesterol bilayer Membrane Proteins Plasma membranes often contain specific proteins embedded within the lipid bilayer. These proteins are called integral proteins. Figure 4-11 shows that some integral proteins, such as cell surface markers, emerge from only one side of the membrane. Others, such as receptor proteins and transport proteins, extend across the plasma membrane and are exposed to both the cell’s interior and exterior environments. Proteins that extend across the plasma membrane are able to detect environmental signals and transmit them to the inside of the cell. Peripheral proteins, such as the enzyme shown in Figure 4-11, lie on only one side of the membrane and are not embedded in it. As Figure 4-11 shows, integral proteins exposed to the cell’s external environment often have carbohydrates attached. These carbohydrates can act as labels on cell surfaces. Some labels help cells recognize each other and stick together. Viruses can use these labels as docks for entering and infecting cells. Integral proteins play important roles in actively transporting molecules into the cell. Some act as channels or pores that allow certain substances to pass. Other integral proteins bind to a mol- ecule on the outside of the cell and then transport it through the membrane. Still others act as sites where chemical messengers such as hormones can attach. Fluid Mosaic Model A cell’s plasma membrane is surprisingly dynamic. Scientists describe the cell membrane as a fluid mosaic. The fluid mosaic model states that the phospholipid bilayer behaves like a fluid more than it behaves like a solid. The membrane’s lipids and pro- teins can move laterally within the bilayer, like a boat on the ocean. As a result of such lateral movement, the pattern, or “mosaic,” of lipids and proteins in the cell membrane constantly changes.

There are 12 core values at BTS, with 4 core values being “non-negotiables”. Each of the 12 core values are categorized into 3 main groups, Permission to Play, Architect of the Future, and Guardian of the Mood, to further encapsulate the broader aspects of BTS's work culture. The 4 non-negotiables: Being Super Hungry: This value underscores an intrinsic motivation and a relentless pursuit of goals. It reflects an individual's aspiration to continually strive for success, always seeking opportunities to grow and excel. Strong Willingness to Learn: This value promotes a continuous desire for personal and professional growth. It represents an open-minded approach to acquiring new skills and knowledge, which is critical in the ever-evolving field of taxation and financial services. Burning Desire for an Abundant Lifestyle: This value aligns well with the firm's vision and mission. It showcases a passionate pursuit of a prosperous life, not just in terms of financial wealth but a comprehensive approach to abundance, involving personal well-being and satisfaction. Burning Desire to be the Best: This embodies the drive to excel and be at the forefront in one’s area of expertise. It encourages individuals to strive for excellence, setting the bar high and aiming to surpass it, fostering a culture of competitiveness and high performance. Permission to Play: This category delineates the foundational qualities BTS seeks in potential team members, reflecting a blend of passion, humility, presence, and aspiration for a prosperous life. Super Hungry: Being "Super Hungry" transcends personal ambition, creating an environment where passion and determination are contagious. It's about fostering an ecosystem of perpetual growth, where individuals are fervently working towards their goals while uplifting others. It represents a spirit of resilience and relentless forward motion, fostering a collective progress where success is a shared journey. Humble and Humility: Embracing humility is the cornerstone of personal and organizational growth at BTS. It encourages individuals to remain open to learning and receptive to constructive criticism, fostering a culture of continuous improvement. Humility embodies a willingness to relinquish ego, embracing the learnings that come through experiences and guidance. It cultivates a space where personal growth is accelerated through mutual respect and collaborative learning, ultimately paving the way for success. Burning Desire for an Abundant Lifestyle: This core value embodies a holistic pursuit of happiness, where individuals strive to find joy and fulfillment in various facets of life, including work, personal relationships, and mental well-being. It encourages a balanced approach to life, where passion for work aligns with personal joy, fostering a workplace where individuals are deeply committed and engaged in their roles, finding contentment and happiness in their professional pursuits. Being Fully Present and Inspiring: Being fully present encourages individuals to immerse themselves wholly in their tasks, minimizing distractions and maximizing productivity. It fosters a workplace where people are engaged, content, and genuinely invested in their roles. Simultaneously, nurturing an inspiring environment is about personal growth and self-motivation, where individuals are the driving forces behind their success, igniting inspiration through their journey and accomplishments, fostering a cycle of mutual motivation and growth. Architect of the Future: This category is about the cultivation of leaders within the team, encouraging qualities such as self-drive, innovation (revolutionist), a strong willingness to learn, and an unyielding desire to be the best in their field. Being Self-Driven: A self-driven individual embodies responsibility and initiative, equipped with a clear vision and a proactive approach to achieving their goals. They are fervent in bridging the gap between their present and envisioned future, fostering a goal-oriented mindset that is aggressive in its pursuit and focused on accomplishing its objectives. Being a Revolutionist: A revolutionist in the BTS context is an innovator, willing to defy conventional norms and embrace new approaches to foster growth and development. They are vocal advocates for change, bringing unique perspectives and solutions to the table, fostering an environment of innovation and progressive thinking. Even amidst resistance, they hold firm to their vision, aligning their actions with the core values and purpose that guide BTS's mission. Strong Willingness to Learn: An individual with a strong willingness to learn is adaptable, constantly evolving to meet the changing demands of the industry. They are voracious learners, continually seeking knowledge to enhance their expertise, thereby adding value to the clients and the organization. Burning Desire to be the Best: This value is about embodying excellence in every endeavor, fostering a culture where individuals are constantly striving to elevate their expertise and services. It encourages a proactive approach to personal and professional growth, where the quest for greatness is a continuous journey, propelled by learning and innovation. Guardian of the Mood: This focuses on maintaining a positive and collaborative work environment, emphasizing values such as gratefulness, patience, excitement, and helpfulness. It suggests that BTS values not only professional excellence but also emotional intelligence and positive interpersonal interactions. Being Grateful: Being grateful at BTS embodies a conscious appreciation of the opportunities and resources at hand. It encourages individuals to not just focus on personal milestones but to recognize and value the collective efforts and accomplishments of the team. It's about harboring a mindset of thankfulness that permeates everyday life, understanding that the privilege to progress and succeed is not to be taken for granted. This attitude fosters a nurturing environment where gratitude amplifies abundance, paving the way for more blessings and opportunities to flourish. Patience: Patience at BTS embodies a multifaceted approach that encompasses trust, readiness to play a role effectively, striving to reach one's potential, a hunger for success, and a helpful disposition. It encourages individuals to cultivate a patient attitude, fostering a work environment where goals are pursued with persistence and determination. Genuine Excitement: Genuine excitement at BTS manifests as a contagious enthusiasm that permeates the organization. It is characterized by a deep-seated passion for one's work, fostering a positive and vibrant work environment where individuals are energized and motivated to make a meaningful impact through their roles. Being Helpful: Being helpful at BTS entails proactively identifying opportunities to assist, be it in aiding clients with their concerns or supporting team members in their roles. It fosters a collaborative and supportive work environment, where individuals are attuned to the needs of others and are ready to step in to provide assistance.

Plant cells have three kinds of structures that are not found in animal cells and that are extremely important to plant survival: plastids, central vacuoles, and cell walls. PLANT CELLS Most of the organelles and other parts of the cell just described are common to all eukaryotic cells. However, plant cells have three additional kinds of structures that are extremely important to plant function: cell walls, large central vacuoles, and plastids. To understand why plant cells have structures not found in ani- mal cells, consider how a plant’s lifestyle differs from an animal’s. Plants make their own carbon-containing molecules directly from carbon taken in from the environment. Plant cells take carbon diox- ide gas from the air, and in a process called photosynthesis, they convert carbon dioxide and water into sugars. The organelles and structures in plant cells are shown in Figure 4-21. SECTION 4 OBJECTIVES ● List three structures that are present in plant cells but not in animal cells. ● Compare the plasma membrane, the primary cell wall, and the secondary cell wall. ● Explain the role of the central vacuole. ● Describe the roles of plastids in the life of a plant. ● Identify features that distinguish prokaryotes, eukaryotes, plant cells, and animal cells. VOCABULARY cell wall central vacuole plastid chloroplast thylakoid chlorophyll Chloroplast Golgi apparatus Mitochondrion Cell membrane Nucleolus Nucleus Cytoskeleton Rough endoplasmic reticulum Pore Smooth endoplasmic reticulum Central vacuole Ribosome Cell wall In addition to containing almost all of the types of organelles that animal cells contain, plant cells contain three unique features. Those features are the cell wall, the central vacuole, and plastids, such as chloroplasts. FIGURE 4-21 Copyright © by Holt, Rinehart and Winston. All rights reserved. 88 CHAPTER 4 CELL WALL The cell wall is a rigid layer that lies outside the cell’s plasma membrane. Plant cell walls contain a carbohydrate called cellulose. Cellulose is embedded in a matrix of proteins and other carbohy- drates that form a stiff box around each cell. Pores in the cell wall allow water, ions, and some molecules to enter and exit the cell. Primary and Secondary Cell Walls The main component of the cell wall, cellulose, is made directly on the surface of the plasma membrane by enzymes that travel along the membrane. These enzymes are guided by microtubules inside the plasma membrane. Growth of the primary cell wall occurs in one direction, based on the orientation of the microtubules. Other components of the cell wall are made in the ER. These materials move in vesicles to the Golgi and then to the cell surface. Some plants also produce a secondary cell wall. When the cell stops growing, it secretes the secondary cell wall between the plasma membrane and the primary cell wall. The secondary cell wall is very strong but can no longer expand. The wood in desks and tabletops is made of billions of secondary cell walls. The cells inside the walls have died and disintegrated. CENTRAL VACUOLE Plant cells may contain a reservoir that stores large amounts of water. The central vacuole is a large, fluid-filled organelle that stores not only water but also enzymes, metabolic wastes, and other materials. The central vacuole, shown in Figure 4-22, forms as other smaller vacuoles fuse together. Central vacuoles can make up 90 percent of the plant cell’s volume and can push all of the other organelles into a thin layer against the plasma membrane. When water is plentiful, it fills a plant’s vacuoles. The cells expand and the plant stands upright. In a dry period, the vacuoles lose water, the cells shrink, and the plant wilts. Other Vacuoles Some vacuoles store toxic materials. The vacuoles of acacia trees, for example, store poisons that provide a defense against plant-eating ani- mals. Tobacco plant cells store the toxin nicotine in a storage vacuole. Other vacuoles store plant pigments, such as the colorful pigments found in rose petals. The central vacuole occupies up to 90 percent of the volume of some plant cells. The central vacuole stores water and helps keep plant tissue firm. FIGURE 4-22 Central vacuole Nucleus Chloroplast Copyright © by Holt, Rinehart and Winston. All rights reserved. CELL STRUCTURE AND FUNCTION 89 PLASTIDS Plastids are another unique feature of plant cells. Plastids are organelles that, like mitochondria, are surrounded by a double mem- brane and contain their own DNA. There are several types of plastids, including chloroplasts, chromoplasts, and leucoplasts. Chloroplasts Chloroplasts use light energy to make carbohydrates from carbon dioxide and water. As Figure 4-23 shows, each chloroplast contains a system of flattened, membranous sacs called thylakoids. Thylakoids contain the green pigment chlorophyll, the main mole- cule that absorbs light and captures light energy for the cell. Chloroplasts can be found not only in plant cells but also in a wide variety of eukaryotic algae, such as seaweed. Chloroplast DNA is very similar to the DNA of certain photosyn- thetic bacteria. Plant cell chloroplasts can arise only by the divi- sion of preexisting chloroplasts. These facts may suggest that chloroplasts are descendants of ancient prokaryotic cells. Like mitochondria, chloroplasts are also thought to be the descendants of ancient prokaryotic cells that were incorporated into plant cells through a process called endosymbiosis. Chromoplasts Chromoplasts are plastids that contain colorful pigments and that may or may not take part in photosynthesis. Carrot root cells, for example, contain chromoplasts filled with the orange pigment carotene. Chromoplasts in flower petal cells contain red, purple, yellow, or white pigments. Other Plastids Several other types of plastids share the general features of chloro- plasts but differ in content. For example, amyloplasts store starch. Chloroplasts, chromoplasts, and amyloplasts arise from a common precursor, called a proplastid. Thylakoid Inner membrane Outer membrane chloroplast from the Greek chloros, meaning “pale green,” and plastos, meaning “formed” Word Roots and Origins A chloroplast captures energy from sunlight and uses that energy to convert carbon dioxide and water into sugar and other carbohydrates. FIGURE 4-23 Copyright © by Holt, Rinehart and Winston. All rights reserved. 90 CHAPTER 4 COMPARING CELLS All cells share common features, such as a cell membrane, cyto- plasm, ribosomes, and genetic material. But there is a high level of diversity among cells, as shown in Figure 4-24. There are signifi- cant differences between prokaryotes and eukaryotes. In addition, plant cells have features that are not found in animal cells. Prokaryotes Versus Eukaryotes Prokaryotes differ from eukaryotes in that prokaryotes lack a nucleus and membrane-bound organelles. Prokaryotes have a region, called a nucleoid, in which their genetic material is concen- trated. However, prokaryotes lack an internal membrane system. Plant Cells Versus Animal Cells Three unique features distinguish plant cells from animal cells. One is the production of a cell wall by plant cells. Plant cells contain a large central vacuole. Third, plant cells contain a variety of plastids, which are not found in animal cells. Cell walls, central vacuoles, and plastids are unique features that are important to plant function. 1. Identify three unique features of plant cells. 2. List the differences between the plasma mem- brane, the primary cell wall, and the secondary cell wall. 3. Identify three functions of plastids. 4. Name three things that may be stored in vacuoles. 5. Describe the features that distinguish prokary- otes from eukaryotes and plant cells from animal cells. CRITICAL THINKING

CARBOHYDRATES Carbohydrates are organic compounds composed of carbon, hydrogen, and oxygen in a ratio of about one carbon atom to two hydrogen atoms to one oxygen atom. The number of carbon atoms in a carbohydrate varies. Some carbohydrates serve as a source of energy. Other carbohydrates are used as structural materials. Carbohydrates can exist as monosaccharides, disaccharides, or polysaccharides. Monosaccharides A monomer of a carbohydrate is called a monosaccharide (MAHN-oh-SAK-uh-RIED). A monosaccharide—or simple sugar— contains carbon, hydrogen, and oxygen in a ratio of 1:2:1. The gen- eral formula for a monosaccharide is written as (CH2O)n, where n is any whole number from 3 to 8. For example, a six-carbon mono- saccharide, (CH2O)6, would have the formula C6H12O6. The most common monosaccharides are glucose, fructose, and galactose, as shown in Figure 3-6. Glucose is a main source of energy for cells. Fructose is found in fruits and is the sweetest of the monosaccharides. Galactose is found in milk. Notice in Figure 3-6 that glucose, fructose, and galactose have the same molecular formula, C6H12O6, but differing structures. The different structures determine the slightly different properties of the three compounds. Compounds like these sugars, with a single chemical formula but different structural forms, are called isomers (IE-soh-muhrz). SECTION 2 OBJECTIVES ● Distinguish between monosaccharides, disaccharides, and polysaccharides. ● Explain the relationship between amino acids and protein structure. ● Describe the induced fit model of enzyme action. ● Compare the structure and function of each of the different types of lipids. ● Compare the nucleic acids DNA and RNA. VOCABULARY carbohydrate monosaccharide disaccharide polysaccharide protein amino acid peptide bond polypeptide enzyme substrate active site lipid fatty acid phospholipid wax steroid nucleic acid deoxyribonucleic acid (DNA) ribonucleic acid (RNA) nucleotide C HO H C H OH C OH H C CH2OH H C H OH O Glucose C OH C O H OH C OH H CH2OH C H CH2OH Fructose C H HO C OH H C OH H C CH2OH H C H OH O Galactose Glucose, fructose, and galactose have the same chemical formula, but their structural differences result in different properties among the three compounds. FIGURE 3-6 Copyright © by Holt, Rinehart and Winston. All rights reserved. 56 CHAPTER 3 Disaccharides and Polysaccharides In living things, two monosaccharides can combine in a condensa- tion reaction to form a double sugar, or disaccharide (die-SAK-e-RIED). For example in Figure 3-4, the monosaccharides fructose and glu- cose can combine to form the disaccharide sucrose. A polysaccharide is a complex molecule composed of three or more monosaccharides. Animals store glucose in the form of the polysaccharide glycogen. Glycogen consists of hundreds of glucose molecules strung together in a highly branched chain. Much of the glucose that comes from food is ultimately stored in your liver and muscles as glycogen and is ready to be used for quick energy. Plants store glucose molecules in the form of the polysaccha- ride starch. Starch molecules have two basic forms—highly branched chains that are similar to glycogen and long, coiled, unbranched chains. Plants also make a large polysaccharide called cellulose. Cellulose, which gives strength and rigidity to plant cells, makes up about 50 percent of wood. In a single cellu- lose molecule, thousands of glucose monomers are linked in long, straight chains. These chains tend to form hydrogen bonds with each other. The resulting structure is strong and can be broken down by hydrolysis only under certain conditions. PROTEINS Proteins are organic compounds composed mainly of carbon, hydrogen, oxygen, and nitrogen. Like most of the other biological macromolecules, proteins are formed from the linkage of monomers called amino acids. Hair and horns, as shown in Figure 3-7a, are made mostly of proteins, as are skin, muscles and many biological catalysts (enzymes). Amino Acids There are 20 different amino acids, and all share a basic structure. As Figure 3-7b shows, each amino acid contains a central carbon atom covalently bonded to four other atoms or functional groups. A single hydrogen atom, highlighted in blue in the illustration, bonds at one site. A carboxyl group, —COOH, highlighted in green, bonds at a second site. An amino group, —NH2, highlighted in yel- low, bonds at a third site. A side chain called the R group, high- lighted in red, bonds at the fourth site. The main difference among the different amino acids is in their R groups. The R group can be complex or it can be simple, such as the CH3 group shown in the amino acid alanine in Figure 3-7b. The differences among the amino acid R groups gives different proteins very different shapes. The different shapes allow pro- teins to carry out many different activities in living things. Amino acids are commonly shown in a simplified way such as balls, as shown in Figure 3-7c. (a) Many structures, such as hair and horns are made of proteins. (b) Proteins are made up of amino acids. Amino acids differ only in the type of R group (shown in red) they carry. Polar R groups can dissolve in water, but nonpolar R groups cannot. (c) Amino acids have complex structures, so, in this and other textbooks, they are often simplified into balls. FIGURE 3-7 (b) Alanine (an amino acid) (c) Simplified version of amino acid CH3 H N OH C C H O H (a) Copyright © by Holt, Rinehart and Winston. All rights reserved. BIOCHEMISTRY 57 H H N C C OH H O H CH3 H2O Glycine Alanine H N OH C C H O H H H N C C H O H CH3 N OH C C H O H (a) (b) (a) The peptide bond (shaded blue) that binds amino acids together to form a polypeptide results from a condensation reaction that produces water. (b) Poly- peptides are commonly shown as a string of balls in this textbook and elsewhere. Each ball represents an amino acid. FIGURE 3-8 Substrate Products Enzyme 1 2 3 In the induced fit model of enzyme action, the enzyme can attach only to a substrate (reactant) with a specific shape. The enzyme then changes and reduces the activation energy of the reaction so reactants can become products. The enzyme is unchanged and is available to be used again. 3 2 1 FIGURE 3-9 Dipeptides and Polypeptides Figure 3-8a shows how two amino acids bond to form a dipeptide (die-PEP-TIED). In this condensation reaction, the two amino acids form a covalent bond, called a peptide bond (shaded in blue in Figure 3-8a) and release a water molecule. Amino acids often form very long chains called polypeptides (PAHL-i-PEP-TIEDZ). Proteins are composed of one or more polypep- tides. Some proteins are very large molecules, containing hun- dreds of amino acids. Often, these long proteins are bent and folded upon themselves as a result of interactions—such as hydrogen bonding—between individual amino acids. Protein shape can also be influenced by conditions such as temperature and the type of solvent in which a protein is dissolved. For exam- ple, cooking an egg changes the shape of proteins in the egg white. The firm, opaque result is very different from the initial clear, runny material. Enzymes Enzymes—RNA or protein molecules that act as biological catalysts—are essential for the functioning of any cell. Many enzymes are proteins. Figure 3-9 shows an induced fit model of enzyme action. Enzyme reactions depend on a physical fit between the enzyme molecule and its specific substrate, the reactant being catalyzed. Notice that the enzyme has folds, or an active site, with a shape that allows the substrate to fit into the active site. An enzyme acts only on a specific substrate because only that substrate fits into its active site. The linkage of the enzyme and substrate causes a slight change in the enzyme’s shape. The change in the enzyme’s shape weakens some chemical bonds in the substrate, which is one way that enzymes reduce activation energy, the energy needed to start the reaction. After the reaction, the enzyme releases the products. Like any catalyst, the enzyme itself is unchanged, so it can be used many times. An enzyme may not work if its environment is changed. For example, change in temperature or pH can cause a change in the shape of the enzyme or the substrate. If such a change happens, the reaction that the enzyme would have catalyzed cannot occur.

Introduction to Hedging Instruments: Forwards, Futures, Options, and Swaps Hedging instruments are financial tools used by businesses and investors to mitigate risk. These instruments help protect against adverse price movements in assets such as commodities, currencies, interest rates, or securities. The four main hedging instruments are forwards, futures, options, and swaps. 1. Forwards A forward contract is a customised agreement between two parties to buy or sell an asset at a predetermined price on a specified future date. Key Characteristics: Over-the-counter (OTC): Traded directly between parties, not on an exchange. Customisation: Can be tailored to suit the needs of the parties involved. Settlement: Occurs at the end of the contract, which may involve physical delivery or cash settlement. Risk: Forwards carry counter-party risk, as there is a possibility one party may default. Example: A company that needs to import raw materials in six months may enter into a forward contract to lock in the current price, avoiding the risk of price increases. 2. Futures A futures contract is similar to a forward, but it is standardised and traded on an exchange. This standardisation eliminates counter-party risk. Key Characteristics: Standardised: Contract size, expiration, and other terms are fixed by the exchange. Mark-to-market: Gains and losses are settled daily. Liquidity: Futures are highly liquid because they are traded on exchanges. Regulation: As they are traded on formal exchanges, they are more regulated than forwards. Example: A wheat farmer may sell futures contracts to hedge against a possible decline in wheat prices before harvest. 3. Options Options provide the right, but not the obligation, to buy or sell an asset at a specified price on or before a certain date. There are two types of options: call options and put options. Call Option: Gives the holder the right to buy an asset at a predetermined price. Put Option: Gives the holder the right to sell an asset at a predetermined price. Key Characteristics: Premium: The buyer pays a premium upfront to obtain the option. Limited Risk: The maximum loss is limited to the premium paid. Flexibility: Options can be used for speculative or hedging purposes. Example: An investor holding stocks may buy a put option to protect against potential declines in the stock's price. 4. Swaps A swap is a contract in which two parties agree to exchange cash flows or liabilities over a specific period. The most common types are interest rate swaps and currency swaps. Key Characteristics: Customizable: Like forwards, swaps are often tailored to meet the needs of the parties involved. Counterparty Risk: Swaps are typically OTC instruments, exposing parties to default risk. Common Uses: Used to manage interest rate risk or currency risk. Example: A company with a variablerate loan may enter into an interest rate swap to exchange its variable payments for fixedrate payments, thus locking in stable costs. Hedging instruments are essential for managing financial risk in volatile markets. Each instrument serves different purposes, with varying levels of complexity, risk, and customization. Whether through forwards, futures, options, or swaps, businesses can better plan for the future by reducing exposure to uncertain price fluctuations. Hedging Strategies for Market Risk, Credit Risk, and Currency Risk 1. Hedging Strategies for Market Risk Market risk (also known as systematic risk) arises from fluctuations in asset prices, such as stocks, bonds, commodities, and interest rates, due to economic factors or market volatility. Key Hedging Instruments for Market Risk: Derivatives (Options, Futures, and Forwards): These instruments allow investors to hedge against unfavorable price movements in stocks, commodities, or interest rates. Example: An investor holding a large stock portfolio might buy a put option to protect against a potential market downturn. If the market declines, the put option increases in value, offsetting losses in the portfolio. Short Selling: Investors can sell borrowed assets with the expectation of buying them back at a lower price, profiting from the decline. Example: A fund manager expecting a market decline may short sell stocks to hedge a portfolio against losses. Common Hedging Strategies: Portfolio Diversification: Reducing market risk by spreading investments across various asset classes (stocks, bonds, commodities) and sectors. Using Index Futures: Large portfolios can be hedged using index futures that track the performance of the overall market. If the market declines, profits from the short position in the futures contract will offset losses in the portfolio. Risk Parity: Allocating assets based on the level of risk rather than the dollar amount invested, balancing risk exposure across asset classes. 2. Hedging Strategies for Credit Risk Credit risk refers to the possibility that a borrower will default on a debt obligation. This is especially important for banks, lenders, and institutions dealing with bonds and loans. Key Hedging Instruments for Credit Risk: Credit Default Swaps (CDS): A financial derivative where the buyer of a CDS pays a premium to the seller in exchange for protection against a default on a loan or bond. Example: A bank holding corporate bonds can buy a CDS to ensure they are compensated if the issuing company defaults. Collateralised Debt Obligations (CDOs): These instruments pool together various debt instruments and allow risk to be distributed among multiple investors. Credit Insurance: Companies may use insurance to protect against the risk of a customer defaulting on payments. Common Hedging Strategies: Diversification of Loan Portfolio: Spreading out credit exposures across various industries, geographies, and borrower profiles reduces the overall risk of default. Tightening Lending Standards: Limiting exposure to highrisk borrowers by implementing stringent credit assessments. AssetBacked Securities: Banks can sell loans or bonds packaged as assetbacked securities to reduce their exposure to credit risk. 3. Hedging Strategies for Currency Risk Currency risk (or exchange rate risk) arises from fluctuations in foreign exchange rates, which can affect companies involved in international trade or with investments in foreign countries. Key Hedging Instruments for Currency Risk: Forward Contracts: A firm agrees to exchange a specified amount of currency at a predetermined exchange rate on a future date. Example: A U.S. exporter expecting payment in euros might enter into a forward contract to sell euros and lock in a favorable exchange rate. Currency Options: These give the right, but not the obligation, to buy or sell currency at a specific price. Example: A U.S.based company buying goods from Japan might buy a call option on the yen to hedge against the risk of yen appreciation. Currency Swaps: Two parties exchange interest payments and principal in different currencies to hedge against exchange rate fluctuations. Common Hedging Strategies: Natural Hedging: Companies can offset currency risk by balancing foreign revenue with costs in the same currency. For example, if a company generates revenue in euros, it can also incur expenses in euros, reducing exposure to exchange rate fluctuations. Multi-Currency Invoicing: Firms can invoice in their home currency, shifting the currency risk to the buyer. Currency Diversification: Holding a diversified basket of currencies can reduce exposure to large fluctuations in any one currency. Effective hedging strategies are crucial for managing various types of risks in financial markets. Market risk can be managed using instruments like futures and options, while credit risk can be mitigated through diversification and credit derivatives. Currency risk, often faced by multinational firms, can be hedged using forward contracts, options, or swaps. Each strategy helps firms and investors protect their portfolios, ensure financial stability, and reduce the impact of adverse movements in the financial markets. Portfolio Risk Management Techniques: Diversification, Asset Allocation, and Risk Budgeting Managing risk is a fundamental aspect of portfolio management. Investors use various techniques to control and reduce the risks inherent in investing. Three key techniques used in portfolio risk management are diversification, asset allocation, and risk budgeting. Each of these techniques helps in mitigating potential losses while aiming to achieve the desired return. 1. Diversification Diversification is a risk management strategy that involves spreading investments across different assets, sectors, or geographic regions to reduce exposure to any single risk. The idea is that different assets perform differently under various market conditions, so losses in one investment can be offset by gains in others. Key Benefits of Diversification: Reduction of Unsystematic Risk: Unsystematic risk, which is unique to a specific company or industry, can be reduced by holding a variety of investments that respond differently to market conditions. Improved Stability: A diversified portfolio is less volatile, as the negative performance of one asset can be balanced by the positive performance of others. Methods of Diversification: Across Asset Classes: Investing in a mix of asset classes such as stocks, bonds, commodities, and real estate. Example: A portfolio with 60% equities, 30% bonds, and 10% commodities is more diversified than one solely consisting of stocks. Within Asset Classes: Diversifying within a single asset class (e.g., holding stocks from different sectors like technology, healthcare, and energy). Geographic Diversification: Investing in assets across various countries or regions to mitigate country-specific risks. Example: Holding U.S. stocks along with emerging market equities can reduce risks related to a downturn in one country's economy. 2. Asset Allocation Asset allocation refers to the process of dividing investments among different asset classes (such as stocks, bonds, and cash) to align with an investor's risk tolerance, time horizon, and financial goals. Asset allocation plays a crucial role in portfolio risk management by determining the overall risk-return profile of the portfolio. Key Elements of Asset Allocation: Strategic Asset Allocation: A longterm approach that involves setting target allocations for different asset classes based on financial goals and risk tolerance. Example: A young investor with a longterm horizon might allocate 70% to stocks, 20% to bonds, and 10% to cash. Tactical Asset Allocation: A more active approach that involves adjusting the asset mix in response to short-term market conditions. Example: If the investor expects an economic downturn, they might temporarily reduce exposure to equities and increase exposure to bonds. Types of Asset Allocation Models: Conservative: Focuses on preserving capital with a larger allocation to bonds and cash (e.g., 20% stocks, 80% bonds). Balanced: A moderate risk approach with an equal focus on growth and income (e.g., 50% stocks, 50% bonds). Aggressive: Targets higher returns by investing predominantly in equities, accepting higher risk (e.g., 80% stocks, 20% bonds). Example of Asset Allocation: A 40 year old investor with moderate risk tolerance may allocate their portfolio as follows: 50% equities, 40% bonds, and 10% in alternative investments such as real estate or commodities. The equities provide growth potential, while the bonds and alternative assets offer stability and income. 3. Risk Budgeting Risk budgeting is a method of allocating risk across different components of a portfolio, rather than focusing solely on returns. The goal is to optimise the portfolio’s risk-return profile by distributing risk in a way that aligns with the investor’s objectives and risk tolerance. Key Concepts of Risk Budgeting: Risk Contribution: Each asset class or investment in the portfolio contributes a certain amount of risk (measured by metrics such as volatility or Value at Risk). Risk budgeting ensures that no single asset class dominates the overall risk of the portfolio. Example: A portfolio may contain 60% stocks and 40% bonds, but if the stocks are highly volatile, they may contribute 90% of the portfolio's risk. Target Risk: Investors set a maximum acceptable level of risk (e.g., a portfolio volatility of 10%) and allocate investments so that the total risk remains within this target. Techniques in Risk Budgeting: Risk Parity: Allocates risk evenly across asset classes, rather than allocating capital based solely on return expectations. Example: In a risk-parity portfolio, both bonds and stocks might be balanced in such a way that they contribute equally to the overall portfolio risk, even though the dollar investment in bonds may be larger due to their lower volatility. Value at Risk (VaR): This technique measures the potential loss in a portfolio over a specific time period, under normal market conditions, at a given confidence level. The risk budget ensures that the potential loss stays within acceptable limits. Example of Risk Budgeting: An investor targets an overall portfolio risk of 8% volatility. After analyzing the risk contribution of each asset class, they determine that equities, which currently make up 60% of the portfolio, contribute 70% of the risk. To adhere to the risk budget, the investor may reduce their equity exposure and increase their allocation to bonds or other less volatile assets. Diversification, asset allocation, and risk budgeting are complementary techniques used in portfolio risk management. Diversification reduces unsystematic risk by spreading investments across various assets. Asset allocation ensures that investments align with an investor's goals and risk tolerance. Risk budgeting focuses on managing the contribution of risk from each asset class to create a balanced and efficient portfolio. Together, these strategies help investors achieve a balance between risk and return, ensuring longterm portfolio stability. Risk Mitigation Through Insurance, Securitisation, and Other Financial Engineering Techniques Risk mitigation is a core objective in financial management, and various strategies can be employed to reduce or manage risks. Three major approaches are insurance, securitisation, and financial engineering techniques. Each of these methods helps firms and individuals transfer, reduce, or eliminate certain financial risks. 1. Insurance as a Risk Mitigation Tool Insurance is a traditional risk transfer method that protects against financial losses by shifting the risk to an insurance company in exchange for premium payments. It is widely used to mitigate various forms of risk, such as operational, liability, and property risks. Key Aspects of Insurance for Risk Mitigation: Risk Transfer: The insurer takes on the risk in exchange for a premium, thus protecting the insured party from unexpected financial losses. Indemnity: In the event of a loss, the insurance policy compensates the insured based on the terms of the contract. Customisable Coverage: Insurance policies can be tailored to address specific risks, such as property damage, business interruption, liability, or cyber risks. Types of Insurance for Businesses: Property and Casualty Insurance: Covers physical assets like buildings, machinery, and inventory from risks like fire, theft, or natural disasters. Liability Insurance: Protects businesses against legal liabilities arising from accidents, negligence, or professional errors. Business Interruption Insurance: Compensates for lost income if a business has to halt operations due to unforeseen events. Credit Insurance: Shields companies from losses due to the nonpayment of trade receivables. 2. Securitisation as a Risk Mitigation Technique Securitisation is a financial engineering process that involves pooling various financial assets (such as loans, mortgages, or receivables) and converting them into marketable securities. This process allows firms to transfer risk to investors, thereby reducing their exposure. Key Elements of Securitisation: Risk Transfer: By securitising assets, companies can transfer the risk of default or nonpayment to investors who purchase the securities. Liquidity Creation: Securitisation converts illiquid assets (like mortgages or loans) into liquid, tradeable securities, improving cash flow for the originating firm. Diversification of Risk: Pooling assets with different risk profiles reduces the impact of individual defaults, spreading the risk across multiple investors. Common Forms of Securitisation: MortgageBacked Securities (MBS): Pools of mortgages are bundled and sold as securities to investors, transferring the risk of mortgage defaults. Example: A bank that issues home loans can bundle those loans into MBS and sell them to investors, transferring the credit risk of potential defaults. Asset-Backed Securities (ABS): Similar to MBS, but backed by other types of assets like credit card receivables, auto loans, or student loans. Collateralised Debt Obligations (CDOs): Structured financial products that pool different types of debt, such as loans and bonds, and sell them as securities with varying risk levels. Example: A bank may issue a portfolio of auto loans and then pool these loans into an assetbacked security (ABS). The ABS is sold to investors, who take on the risk of loan defaults. By securitising the loans, the bank reduces its exposure to credit risk and generates immediate cash flow. 3. Financial Engineering Techniques for Risk Mitigation Financial engineering involves the use of complex financial instruments, derivatives, and structured products to manage or mitigate financial risks. These techniques allow firms to hedge against specific risks, optimize capital structure, and improve financial stability. Common Financial Engineering Techniques: Derivatives: Financial instruments like futures, forwards, options, and swaps are used to hedge against price fluctuations, interest rate changes, or currency movements. Example: A company with significant foreign exchange exposure may use currency forwards or options to hedge against exchange rate fluctuations, ensuring predictable cash flows. Options and Futures: Options: Provides the right (but not the obligation) to buy or sell an asset at a predetermined price, allowing firms to hedge against unfavorable price movements. Example: An airline company can buy options on jet fuel to hedge against rising fuel prices. Futures: Standardized contracts to buy or sell an asset at a set price on a future date, commonly used to hedge commodities or financial assets. Example: A wheat producer may use futures contracts to lock in a favorable price for its crop, hedging against a potential price drop. Swaps: These involve the exchange of cash flows between two parties, often used to manage interest rate risk or currency risk. Interest Rate Swaps: Firms can exchange floatingrate interest payments for fixedrate payments to hedge against rising interest rates. Currency Swaps: Used to hedge exchange rate risk in crossborder transactions by exchanging principal and interest payments in different currencies. Example: A company with a variablerate loan may enter into an interest rate swap to exchange its variable payments for fixedrate payments, locking in stable costs. Structured Products: These are customised financial instruments designed to achieve specific riskreturn objectives. They often combine derivatives with other securities to create tailored risk exposures. Example: A structured note that combines a bond with an embedded option, offering downside protection while allowing for potential upside linked to the performance of an equity index. Credit Derivatives: Tools like credit default swaps (CDS) allow investors to transfer credit risk to other parties. Example: A bondholder worried about a company’s potential default may purchase a CDS, which pays out in case of a default event. Example: A company may issue a bond with an embedded call option, allowing it to repurchase the bond if interest rates decline. This financial engineering tool enables the company to mitigate the risk of rising interest rates, reducing future borrowing costs. Risk mitigation through insurance, securitisation, and financial engineering offers businesses a variety of tools to manage and transfer risks. Insurance allows for the direct transfer of risk to an insurer, while securitisation helps companies offload risk by packaging and selling assets as securities. Financial engineering techniques, including derivatives, swaps, and structured products, provide sophisticated ways to hedge market, interest rate, and currency risks. Each approach helps organizations improve financial stability, enhance liquidity, and manage potential losses in a volatile market environment.

Objectives of Vouching

Related quizzes

Related quizzes