Engine Block Heaters and Battery Heaters

Posted by PITHOCRATES - February 19th, 2014

Technology 101

As Matter loses Heat it shrinks from a Gas to a Liquid to a Solid

There is no such thing as cold.  Cold is simply the absence of heat.  Which is a real thing.  Heat.  It’s a form of energy.  Warm things have a lot of energy.  Cold things have less energy.  The Kelvin scale is a measurement of temperature.  Like degrees used when measuring temperature in Celsius or Fahrenheit.  Where 32 degrees Fahrenheit equals 0 degrees Celsius.  And 0 degrees Celsius equals 273.15 kelvin.  Not ‘degrees’ kelvin.  Just kelvin.

When something cools it loses heat energy.  The molecular activity slows down.  Steam has a lot of molecular activity.  At 212 degrees Fahrenheit (100 degrees Celsius or 373.15 kelvin) the molecular activity decreases enough (i.e., loses energy) that steam changes to water.  At 32 degrees Fahrenheit (0 degrees Celsius or 273.15 kelvin) the molecular activity decreases enough (i.e., loses energy) that water turns into ice.

The more heat matter loses the less molecules move around.  At absolute zero (0 kelvin) there is no heat at all.  And no molecular movement.  Making 0 kelvin the ‘coldest’ anything can be.  For 0 kelvin represents the absence of all heat.  As matter loses heat it shrinks.  Gases become liquid.  And liquids becomes solid.  (Water, however, is an exception to that rule.  When water turns into ice it expands.  And cracks our roadways.)  They become less fluid.  Or more viscous.  Cold butter is harder to spread on a roll than warm butter.  Because warm butter has more heat energy than cold butter.  So warm butter is less viscous than cold butter.

Vehicles in Sub-Freezing Temperatures can Start Easily if Equipped with an Engine Block Heater

In a car’s internal combustion engine an air-fuel mixture enters the cylinder.  As the piston comes up it compresses this mixture.  And raises its temperature.  When the piston reaches the top the air-fuel mixture is at its maximum pressure and temperature.  The spark plug then provides an ignition source to cause combustion.  (A diesel engine operates at such a high compression that the temperature rise is so great the air-fuel mixture will combust without an ignition source).  Driving the piston down and creating rotational energy via the crank shaft.

For this to happen a lot of things have to work together.  You need energy to spin the engine before the combustion process.  You need lubrication to allow the engine components to move without causing wear and tear.  And you need the air-fuel mixture to reach a temperature to burn cleanly and to extract as much energy from combustion as possible.  None of which works well in very cold temperatures.

Vehicles operating in sub-freezing temperatures need a little help.  Manufacturers equip many vehicles sold for these regions with engine block heaters.  These are heating elements in the engine core.  You’ll know a vehicle has one when you see an electrical cord coming out of the engine compartment.  When these engines aren’t running they ‘plug in’ to an electrical outlet.  A timer will cycle these heaters on and off.  Keeping the engine block warmer than the subfreezing temperatures.

The Internal Combustion Engine is Ideal for use in Cold Temperatures

At subfreezing temperatures engine oil because more viscous.  And more like tar.  This does not flow well through the engine.  So until it warms up the engine operates basically without any lubrication.  In ‘normal’ temperatures the oil heats up quickly and flows through the engine before there’s any damage.  At subfreezing temperatures oil needs a little help when starting.  So the oil sump is heated.  Like an engine block heater.  So when someone tries to start the engine the oil is more like oil and less like tar.

Of course, for any of this to help start an engine you have to be able to turn the engine over first.  And to do that you need a charged battery.  But even a charged battery needs help in sub-freezing temperatures.  For in these temperatures there is little molecular action in the battery.  And without molecular activity there will be little current available to power the engine’s starter.  So there are heaters for batteries, too.  Electric blankets or pads that sit under or wrap around a battery.  To warm the battery to let the chemicals inside move around more freely.  So they can produce the electric power it needs to turn an engine over on a cold day.

Once an engine block, the engine oil and battery are sufficiently warmed by external electric power the engine can start.  Once it warms up it can operate like it can at less frigid temperatures.  The engine alternator powers the electrical systems on the vehicle.  And recharges the battery.  The engine coolant heats up and provides heat for the passenger compartment.  And defrosts the windows.  Once the engine is warm it can shut down and start again an hour or so later with ease.  Making it ideal for use in cold temperatures.  Unlike an electric car.  For the colder it gets the less energy its batteries will have.  Making it a risky endeavor to drive to the store in the Midwest or the Northeast during a winter such as this.  Something people should think about before buying an all-electric car.

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Melting Snow and Ice

Posted by PITHOCRATES - February 5th, 2014

Technology 101

When Temperatures fall below Freezing Liquid Water turns into Solid Water

You know what the best thing about water is?  You don’t have to shovel it.  Well, that, and its life-giving properties.  Let’s face it.  We couldn’t survive without the stuff.  We couldn’t grow food.  We even couldn’t live without drinking water.  So perhaps its life-giving properties is the best thing about water.  But a close second would be that thing about not having to shovel it.

When it rains water soaks into our green areas.  It runs off driveways and sidewalks into green areas.  And into streets.  Where it runs off into a storm drainage system.  Which takes it to a river or lake.  The rain lets our gardens grow.  And any excess water conveniently just goes away.  We may have a puddle or two to slosh through.  But even those go away without us having to do anything.  Water is nice that way.  As long as the temperature is above its freezing point.

When the temperature falls below the freezing point of water bad things start to happen.  Liquid water turns into solid water.  And hangs around for awhile.  Accumulating.  On our driveways, sidewalks, porches and roads.  It’s pretty much everywhere we don’t want it to be.  Making it difficult to walk.  And drive.  We slip and fall a lot in it.  The sun may melt it a little during the day.  Creating puddles of water where the snow once was. But when the sun sets those puddles freeze.  And become even more slippery.  Making solid water more dangerous than liquid water.  So a big part of making it through winters in northern climes, then, is transforming solid water back into the liquid form.

Even though Bourbon melts Ice Cubes Bourbon would be a Poor Choice to melt Snow and Ice

All material can be in three different stages.  It can be a solid.  A liquid.  Or a gas.  What determines the phase of this material depends on a couple of things.  Mostly temperature and pressure.  And the chemical properties of the material.  At ambient temperature and pressure material typically exists stably in one phase.  Water, for example, is stable in the liquid phase on an 80-degree summer day.  Allowing us to swim in it.  While on a freezing February day it is stable in the solid phase.  Which is why we hold the Winter Olympics in February.  The cold temperatures give us the best solid water conditions.

If we raise the temperature of water we can turn it from a liquid to a gas.  We could also do this by lowering the ambient air pressure.  Such as putting it into a vacuum.  For a liquid remains a liquid as long as the vapor pressure (the tendency for particles to escape from the liquid they’re in) of the liquid is less than the ambient air pressure.  If we lower the ambient air pressure below the vapor pressure of the liquid we can lower the boiling point of that liquid.  This is why different liquids have different boiling points.  They have different vapor pressures.  Oxygen has a very high vapor pressure and requires a high pressure and cold temperature to keep oxygen in a liquid phase.

When we take ice cubes out of the freezer and add them to a glass of bourbon they melt.  Because the ambient temperature outside of the freezer is above the freezing point of water.  So the solid water changes its phase from solid to liquid.  It would follow, then, that pouring bourbon on snow and ice would help melt it.  Of course we don’t do that.  For wasting bourbon like that would be criminal.  Not to mention costly.  Even if you used the cheap stuff.  Making bourbon a poor choice for melting snow and ice.

Salt dissolves into a Brine Solution that lowers the Melting Point of Snow and Ice

We see that a material will change its phase at different temperatures and pressures.  Which is good to know.  But it doesn’t help us to melt snow and ice during winter.  For we can’t lower the atmospheric air pressure to lower the boiling and melting points of water.  And we can’t raise the ambient temperature above the melting point of water.  If we could our winters would probably be a lot more comfortable than they are now.  So because when we can’t change the air pressure or temperature of the ambient environment the snow and ice is in we do something else.  We use chemistry to lower the melting point of snow and ice.  And the most common chemical we use is salt.

To melt snow and ice salt needs heat and moisture.  The moisture comes from the snow and ice.  Or from the humidity in the air.  The heat comes from the warmth of the earth or air.  Heated by the sun.  It also comes from the friction between tires and the road.  When salt comes into contract with water and heat it dissolves into a brine solution.  And this brine solution has a much lower melting point than water.  Which in turn lowers the melting point of the snow and ice it comes into contact with.  Allowing it to be in the liquid phase at temperatures below freezing temperatures.  Melting that snow and ice so it can run off like rain water.

The warmer it is when it snows the quicker salt will melt that snow.  While the colder it is the longer it takes to melt.  If it gets too cold (around 15 degrees Fahrenheit) salt proves to be ineffective.  In temperatures below 15 degrees Fahrenheit other chemicals work better.  Such as calcium chloride.  But calcium chloride is more costly than sodium chloride (salt).  Ambient temperatures, time of day, sunny or cloudy, wind, etc., all determine the chemical to use.  And the amount of chemical to use.  They consider all of these factors (and more) before sending those ‘salt’ trucks out on the roads.  Allowing us to drive in the worst of winters just as we drive in the best of summers.  It may take more time.  And there may be a little more cussing.  But we still go to work, take our kids to school, go shopping, etc., when it snows.  Thanks to chemicals.  Chemistry.  And the people that put those chemicals and that chemistry to work.

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Phase Transition, Expansion Valve, Evaporator, Compressor, Condenser and Air Conditioning

Posted by PITHOCRATES - April 3rd, 2013

Technology 101

We can use Volume, Pressure and Temperature to change Water from a Liquid to a Gas and back Again

Liquids and gasses can do a lot of work for us.  If we can control three variables.  Volume.  Pressure.  And temperature.  For example, internal combustion engines work best when hot.  But excessive heat levels can damage the engine.  So we use a special anti-freeze/anti-boil liquid in the cooling system.  A pump circulates this liquid through the engine where it absorbs some of the excess heat of combustion that isn’t used in pushing the piston.  After leaving the engine it flows through a radiator.  Air blows across tubes in the radiator cooling this liquid.  Ejecting some of the heat of combustion into the atmosphere.  Lowering the temperature of the cooling liquid so it can flow through the engine again and absorb more heat.

Our first cars used alcohol in the winter for a lower freezing point.  So this liquid didn’t freeze in the engine and crack the block.  Letting the coolant flow out.  And with no cooling available the excessive heat levels would damage the engine.  In the summer time we used plain water in the cooling system.  And kept the cooling system sealed and under high pressure to prevent the water from boiling into steam.  But the high pressure often caused a hose or a radiator cap to fail.  Releasing the pressure.  And letting the cooling water boil out leaving the engine unsafe to operate.

If this happened on a hot summer’s day and you got a tow to a gas station you may have sat there waiting for them to complete the repairs.  Sipping on a cool bottle of soda from a refrigerated soda machine.  Soon drops of water would condense onto your cold bottle.  The cold bottle cooled the water in gas form (the humidity in the air) and turned it back into a liquid.  So in these examples we see how we were able to use pressure to keep water a liquid.  And how removing heat from water as a gas changed it back into a liquid.  This phase transition of a material has some very useful applications.

The High-Pressure Refrigerant Liquid from the Condenser loses Pressure going through the Expansion Valve

The phase transition between a liquid and a gas are particularly useful.  Because we can move liquids and gases in pipes and tubing.  Which allows us to take advantage of evaporation (going from a liquid to a gas) in one area.  While taking advantage of condensation (going from a gas to a liquid) in another area.  By changing pressure and volume we can absorb heat during evaporation.  And release heat during condensation.  Allowing us to absorb heat inside a building with evaporation.  And release that heat outdoors with condensation.  All we need are a few additional components and we have air conditioning.  An expansion valve.  An evaporator.  A compressor.  A condenser.  A couple of fans.  And some miscellaneous control components.

We install the expansion valve and the evaporator inside our house.  Often installed inside the furnace.  And the compressor and the condenser outside of the house.  We interconnect the indoor and the outdoor units with tubing.  Inside this tubing is a refrigerant.  Which is a substance that transitions from liquid to a gas and back again at relatively low temperatures.  As the refrigerant moves from the evaporator to the condenser it is a gas.  As it moves from the condenser to the evaporator it is a liquid.  The transition between these stages occurs at the evaporator and the condenser.

The refrigerant leaves the condenser as a liquid under high pressure.  As it passes through the expansion valve the pressure drops.  By restricting the flow of the liquid refrigerant.  Think of a faucet at a kitchen sink.  If you open it all the way the water flowing in and the water flowing out are almost equal.  But if we just open the faucet a little we get only a small trickle of water out of the faucet.  And a pressure drop across the valve.  With the full force of city water pressure pushing to get out of the faucet.  And a low pressure trickle coming out of the faucet.

As the Warm Air blows across the Evaporator Coil any Humidity in the Air will condense on the Coil

As the liquid leaves the expansion valve at a lower pressure it enters the evaporator coil.  A fan blows the warm air inside of the house through the evaporator coil.  The heat in this air raises the temperature of the refrigerant.  And because of the lower pressure this heat readily boils the liquid into a gas.  That is, it evaporates.  Absorbing heat from the warm air as it does.  Cooling the air.  Which the fan blows throughout the ductwork of the house.

As the gas leaves the evaporator it travels through a tube to the condenser unit outside.  And enters a compressor.  Where an electric motor spins a crankshaft.  Attached to the crankshaft are two pistons.  As a piston moves down it pulls low pressure gas into the cylinder.  As the piston moves up it compresses this gas into a higher pressure.  As the pressure rises it applies more pressure on the spring holding the discharge valve closed.  When the pressure is great enough it forces open the valve.  And sends the high-pressure gas to the condenser coil.  Where a fan blows air through it lowering the temperature of the high pressure gas enough to return it to a liquid.  As it does it releases heat from the refrigerant into the atmosphere.  Cooling the refrigerant.  As the liquid leaves the condenser it flows to the expansion valve to repeat the cycle.  Over and over again until the temperature inside the house falls below the setting on the thermostat.  Shutting the system down.  Until the temperature rises high enough to turn it back on.  A window air conditioner works the same way.  Only they package all of the components together into one unit.

There is one other liquid in an air conditioning system.  Water.  As the warm air blows across the evaporator coil any humidity in the air will condense on the coil.  Like on a cold bottle of soda on a hot summer day.  As this water condenses on the evaporator coil is eventually drips off into a pan with a drain line.  If the evaporator is in the furnace this line will likely run to a sewer.  If the evaporator is in the attic this line will run to the exterior of the house.  Perhaps draining into a gutter.  If it’s a window unit this line runs to the exterior side of the unit.  These simple components working together give us a cool and dehumidified house to live in.  No matter how hot and humid it gets outside.

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Fire, Oil Lamp, Candle, Wicks, Gas Lights, Incandescence, Incandescent Light Bulb, Fluorescence and Compact Fluorescent Lamp

Posted by PITHOCRATES - February 20th, 2013

Technology 101

(Originally published March 28th, 2012)

A Lit Match heats the Fuel Absorbed into a Wick, Vaporizes it, Mixes it with Oxygen and Ignites It

Fire changed the world.  From when Homo erectus first captured it.  Around 600,000 BC.  In China.  They saw it.  Maybe following a lightning strike.  Seeing it around volcanic activity.  Perhaps a burning natural gas vent.  Whatever.  They saw fire.  Approached it.  And learned not to fear it.  How to add fuel to it.  To transfer it to another fuel source.  To carry it.  They couldn’t create fire.  But they could manage it.  And use it.  It was warm.  And bright.  So they brought it indoors.  To light up their caves.  Scare the predators out.  To use it to heat.  And to cook.  Taking a giant leap forward for mankind.

When man moved into man-made dwellings they brought fire with them.  At first a one-room structure with a fire in the center of it.  And a hole in the roof above it.  Where everyone gathered around to eat.  Stay warm.  Sleep.  Even to make babies.  As there wasn’t a lot of modesty back then.  Not that anyone complained much.  What was a little romance next to you when you were living in a room full of smoke, soot and ash?  Fireplaces and chimneys changed all that.  Back to back fireplaces could share a chimney.  Providing more heat and light.  Less smoke and ash.  And a little privacy.  Where the family could be in one room eating, staying warm, reading, playing games and sleeping.  While the grownups could make babies in the other room.

As we advanced so did our literacy.  After a hard day’s work we went inside.  After the sun set.  To read.  Write letters.  Do some paperwork for the business.  Write an opera.  Whatever.  Even during the summer time.  When it was warm.  And we didn’t have a large fire burning in the fireplace.  But we could still see to read and write.  Thanks to candles.  And oil lamps.  One using a liquid fuel.  One using a solid fuel.  But they both operate basically the same.  The wick draws liquid (or liquefied) fuel via capillary action.  Where a porous substance placed into contact with a liquid will absorb that liquid.  Like a paper towel or a sponge.  When you place a lit match into contact with the wick it heats the fuel absorbed into the wick and vaporizes it.  Mixing it with the oxygen in the air.  And ignites it.  Creating a flame.  The candle works the same way only starting with a solid fuel.  The match melts the top of this fuel and liquefies it.  Then it works the same way as an oil lamp.  With the heat of the flame melting the solid fuel to continue the process.

Placing a Mantle over a Flame created Light through Incandescence (when a Heated Object emits Visible Light)

Two popular oils were olive oil and whale oil.  Beeswax and tallow were common solid fuels.  Candles set the standard for noting lighting intensity.  One candle flame produced one candlepower.  Or ‘candela’ as we refer to it now.   (Which equals about 13 lumens – the amount of light emitted by a source).  If you placed multiple candles into a candelabrum you could increase the lighting intensity.  Three candles gave you 3 candela of light to read or write by.  A chandelier with numerous candles suspended from the ceiling could illuminate a room.  This artificial light shortened the nights.  And increased the working day.  In the 19th century John D. Rockefeller gave the world a new fuel for their oil lamps.  Kerosene.  Refined from petroleum oil.  And saved the whales.  By providing a more plentiful fuel.  At cheaper prices.

By shortening the nights we also made our streets safer.  Some cities passed laws for people living on streets to hang a lamp or two outside.  To light up the street.  Which did indeed help make the streets brighter.  And safer.  To improve on this street lighting idea required a new fuel.  Something in a gas form.  Something that you could pump into a piping system and route to the new street lamps.  A gas kept under a slight pressure so that it would flow up the lamp post.  Where you opened the gas spigot at night.  And lit the gas.  And the lamp glowed until you turned off the gas spigot in the morning.  Another advantage of gas lighting was it didn’t need wicks.  Just a nozzle for the gas to come out of where you could light it.  So there was no need to refuel or to replace the wicks.  Thus allowing them to stay lit for long periods with minimum maintenance.  We later put a mantle over the flame.  And used the flame to heat the mantle which then glowed bright white.  A mantle is like a little bag that fits over the flame made out of a heat resistant fabric.  Infused into the fabric are things that glow white when heated.  Rare-earth metallic salts.  Which change into solid oxides when heated to incandescence (when a heated object emits visible light).

One of the first gases we used was coal-gas.  Discovered in coal mines.  And then produced outside of a coal mine from mined coal.  It worked great.  But when it burned it emitted carbon.  Like all these open flames did.  Which is a bit of a drawback for indoor use.  Filling your house up with smoke.  And soot.  Not to mention that other thing.  Filling up your house with open flames.  Which can be very dangerous indoors.  So we enclosed some of these flames.  Placing them in a glass chimney.  Or glass boxes.  As in street lighting.  Enclosing the flame completely (but with enough venting to sustain the flame) to prevent the rain form putting it out.  This glass, though, blackened from all that carbon and soot.  Adding additional maintenance.  But at least they were safer.   And less of a fire hazard.  Well, at least less of one type of fire hazard.  From the flame.  But there was another hazard.  We were piping gas everywhere.  Outside.  Into buildings.  Even into our homes.  Where it wasn’t uncommon for this gas to go boom.  Particularly dangerous were theatres.  Where they turned on the gas.  And then went to each gas nozzle with an open fire on a stick to light them.  And if they didn’t move quickly enough the theatre filled with a lot of gas.  An enclosed space filled with a lot of gas with someone walking around with an open fire on a stick.  Never a good thing.

Fluorescent Lighting is the Lighting of Choice in Commercial, Professional and Institutional Buildings

Thomas Edison fixed all of these problems.  By finding another way to produce incandescence. By running an electrical current through a filament inside a sealed bulb.  The current heated the filament to incandescence.  Creating a lot of heat.  And some visible light.  First filaments were carbon based.  Then tungsten became the filament of choice.  Because they lasted longer.  At first the bulbs contained a vacuum.  But they found later that a noble gas prevented the blackening of the bulb.  The incandescent light bulb ended the era of gas lighting.  For it was safer.  Required less maintenance.  And was much easier to operate.  All you had to do was flick a switch.  As amazing as the incandescent light bulb was it had one big drawback.  Especially when we use a lot of them indoors.  That heat.  As the filament produced far more heat than light.  Which made hot buildings hotter.  And made air conditioners work harder getting that heat out of the building.  Enter the fluorescent lamp.

If phosphor absorbs invisible short-wave ultraviolet radiation it will fluoresce.  And emit long-wave visible light.  But not through incandescence.  But by luminescence.  Instead of using heat to produce light this process uses cooler electromagnetic radiation.  Which forms the basis of the fluorescent lamp.  A gas-discharge lamp.  The most common being the 4-foot tube you see in office buildings.  This tube has an electrode at each end.  Contains a noble gas (outer shell of valence electrons are full and not chemically reactive or electrically conductive) at a low pressure.  And a little bit of mercury.  When we turn on the lamp we create an electric field between the electrodes.  As it grows in intensity it eventually pulls electrons out of their valence shell ionizing the gas into an electrically conductive plasma.  This creates an arc between the electrodes.  This charged plasma field excites the mercury.  Which produces the invisible short-wave ultraviolet radiation that the phosphor absorbs.  Causing fluorescence.

One candle produces about 13 lumens of light.  Barely enough to read and write by.  Whereas a 100W incandescent light bulb produces about 1,600 lumens.  The equivalent of 123 candles.  In other words, one incandescent lamp produces the same amount of light as a 123-candle chandelier.  Without the smoke, soot or fire hazard.  And the compact fluorescent lamp improves on this.  For a 26W compact fluorescent lamp can produce the lumen output of a 100W incandescent light bulb.  A one-to-one tradeoff on lighting output.  At a quarter of the power consumption.  And producing less heat due to creating light from fluorescence instead of incandescence.  Making fluorescent lighting the lighting of choice in commercial, professional and institutional buildings.  And any other air conditioned space with large lighting loads.

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Trend Analysis—Long-Term Debt-Paying Ability

Posted by PITHOCRATES - January 28th, 2013

Economics 101

To Help with the Decision Making Process Small Business Owners look at Past Results and Trends

A small business owner has a lot on his or her mind.  Most of which have something to do with cash.  If they will have enough for their short-term needs.  And their long-term needs.  Because if they don’t there’s a good chance he or she will be a small business owner no more.  So with every decision a small business owner makes he or she asks this question.  What will be the cash-impact of this decision?  Both short-term.  And long-term.

To help with this decision making process small business owners look at past results.  And the trend between accounting periods.  Either quarterly.  Or monthly.  For there is a lot more to a business’ health than net profit.  Or cash in the bank.  You can have neither and still be a healthy business.  And you can have both and be in a lot of danger.  Because these are only parts of the bigger picture.  It’s how they fit together with the other pieces that give small business owners useful information.  So let’s take a look at 4 quarters of fictitious data.  And what the data trends tell us.

Trend Analysis Long-Term Debt

Looking at these numbers you can arrive at different conclusions.  Sales were 1.7 million or higher for all 4 quarters.  That seems good.  But sales fell the last two quarters.  That seems bad.  But it’s hard to get a full grasp of what these numbers can tell us on their own.  But if we look at some ratios we can glean a lot more information.  And can graph these ratios and look at trends.

If the Debt Ratio is less than 1 it means the Business is Insolvent

If you divide current assets (Cash through Inventory) by current liabilities (Accounts Payable through Current Portion of L/T Debt) you get the current ratio.  A liquidity ratio.  Telling a small business owner his or her short-term (in the next 12 months) cash health.  If this ratio is greater than one than you have more current assets than current liabilities.  Meaning you should be able to meet your cash needs in the next 12 months.  Which is good.  If it’s less than 1 it means you may not be able to meet your cash needs in the next 12 months.  Which is bad.  But is there a ‘correct’ number for a small business?  No.  It could vary greatly depending on the nature of your business.  But the trend of the current ratio can provide valuable information.

Trend Analysis Long-Term Debt Current Ratio

This business became more liquid from Q1 to Q2.  Meaning they should have been able to meet their short-term cash needs even easier in Q2 than Q1.  A good thing.  But they became less liquid from Q2 to Q3.  With their current ratio falling below 1.  Meaning they may not have had enough cash to meet their short-term cash needs.  Their short-term cash position improved in Q4.  But it was still below one.  So the current ratio trend for these 4 quarters shows a cause for concern.  Is it a problem?  It depends on the big picture.  So let’s look at more parts that make up the big picture.

Plotted on the same graph is a long-term debt-paying ability ratio.  The debt ratio.  Which we get by dividing Total Assets by Total Liabilities.  If this number is less than 1 it means Total Assets are greater than Total Liabilities.  Which is good.  If it’s greater than 1 it means the business is insolvent.  Which is bad.  As insolvency leads to bankruptcy.  The trend from Q1 to Q2 was good.  Their debt ratio fell.  But it rose between Q2 and Q3.  Rising above 1.  Which is a great cause for concern.  It fell between Q3 and Q4 but it was still below one.  Is this a problem?  It’s starting to look like it is.

There is no such thing as a Sure Thing for a Small Business Owner

Are they going to have trouble servicing their debt?  There are ratios for this, too.  Such as the Times Interest Earned (TIE).  Which shows how many times your recurring earnings can pay your interest costs.  In this example we have normal interest expense such as that paid on the business line of credit.  And the capitalized interest such as the interest portion on a car payment.  We calculate TIE by dividing recurring earnings by total interest expenses.

Trend Analysis Long-Term Debt Times Interest Earned

In Q1 their recurring earnings had no trouble covering their interest expenses.  In Q2 recurring earnings grew as did their ability to pay their interest expenses.  But the trend following Q2 has been downward.  Either indicating a surge in debt.  And interest due on that debt.  Or a fall in recurring earnings.  In this case it was a fall in earnings.  Which plummeted following Q2.  Looking at another ratio we can see the extent of these poor earnings on their long-term debt-paying ability.  If we divide Total Liabilities by Owner’s Equity we get the debt to equity ratio.  If this number is 1 then the business is financed equally by debt and equity.  If it’s less than 1 more equity (typically produced by recurring earnings) than debt financed the business.  Which is preferable as equity financing doesn’t incur any costs or risk.  If it’s greater than 1 it means more debt than equity financed the business.  Which is not as preferable.  Because debt-financing incurs costs.  As in interest expense.  And risk.  The greater the debt the greater the interest.  And the greater risk that they may not be able to repay their debt.  Which could lead to bankruptcy.

Trend Analysis Long-Term Debt Debt to Equity Ratio

This business was highly leveraged in Q1.  With virtually all financing coming from debt.  Probably because the owner drew a lot of money out during some profitable years.  Something banks don’t like seeing.  They like to see the owner sharing the risk with the bank.  If they don’t it can be a problem if the business owner wants to borrow money.  Which this one did in Q3.  Because business was doing so well this owner wanted to expand the business by adding another piece of production equipment.  But being so highly leveraged the owner had to put up a sizeable down-payment to get a loan for this new piece of production equipment.  As can be seen by the $20,000 owner contribution in Q3.  There was also a large decline in Owner’s Equity in Q3.  Indicating a one-time charge or correction.  With the loan the owner increased production.  And was looking forward to making a lot of money.  Which was not to happen.  For the economy fell into recession in Q3.

Sales fell just as they increased production.  Which led to a swelling inventory of unsold goods.  Worse, the recession was hurting everyone.  As can be seen by the growth in accounts receivable.  Because people were paying them slower they were paying their suppliers slower.  As is evident by the growth in their accounts payable.  Then a piece of equipment broke down.  They had no choice but to replace it.  Requiring another equity infusion of $10,000.  While some write-downs of bad debt reduced Owner’s Equity further.  (Or something similar.  With such low recurring profits by the time you add in other one-time and non-recurring costs this can lead to a net loss.  And a decline in Owner’s Equity.)  Despite this $30,000 equity infusion into the business the debt to equity ratio soared between Q3 and Q4.  Showing how poorly recurring operations were able to generate cash after that expansion in Q3.  Which explains their insolvency.  And as leveraged as they are it is very unlikely that they are going to be able to borrow money to help with their pressing cash needs.  Meaning that the decision to expand in Q3 may very well lead to bankruptcy.

This is just an example of the myriad concerns a small business owner has to consider before making a decision.  And a successful small business owner always has to factor in the possibility of a recession.  It’s not for the faint of heart.  Being a small business owner.  For it’s a lot like gambling.  There is just no such thing as a sure thing.

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Fire, Oil Lamp, Candle, Wicks, Gas Lights, Incandescence, Incandescent Light Bulb, Fluorescence and Compact Fluorescent Lamp

Posted by PITHOCRATES - March 28th, 2012

Technology 101

A Lit Match heats the Fuel Absorbed into a Wick, Vaporizes it, Mixes it with Oxygen and Ignites It 

Fire changed the world.  From when Homo erectus first captured it.  Around 600,000 BC.  In China.  They saw it.  Maybe following a lightning strike.  Seeing it around volcanic activity.  Perhaps a burning natural gas vent.  Whatever.  They saw fire.  Approached it.  And learned not to fear it.  How to add fuel to it.  To transfer it to another fuel source.  To carry it.  They couldn’t create fire.  But they could manage it.  And use it.  It was warm.  And bright.  So they brought it indoors.  To light up their caves.  Scare the predators out.  To use it to heat.  And to cook.  Taking a giant leap forward for mankind.

When man moved into man-made dwellings they brought fire with them.  At first a one-room structure with a fire in the center of it.  And a hole in the roof above it.  Where everyone gathered around to eat.  Stay warm.  Sleep.  Even to make babies.  As there wasn’t a lot of modesty back then.  Not that anyone complained much.  What was a little romance next to you when you were living in a room full of smoke, soot and ash?  Fireplaces and chimneys changed all that.  Back to back fireplaces could share a chimney.  Providing more heat and light.  Less smoke and ash.  And a little privacy.  Where the family could be in one room eating, staying warm, reading, playing games and sleeping.  While the grownups could make babies in the other room.

As we advanced so did our literacy.  After a hard day’s work we went inside.  After the sun set.  To read.  Write letters.  Do some paperwork for the business.  Write an opera.  Whatever.  Even during the summer time.  When it was warm.  And we didn’t have a large fire burning in the fireplace.  But we could still see to read and write.  Thanks to candles.  And oil lamps.  One using a liquid fuel.  One using a solid fuel.  But they both operate basically the same.  The wick draws liquid (or liquefied) fuel via capillary action.  Where a porous substance placed into contact with a liquid will absorb that liquid.  Like a paper towel or a sponge.  When you place a lit match into contact with the wick it heats the fuel absorbed into the wick and vaporizes it.  Mixing it with the oxygen in the air.  And ignites it.  Creating a flame.  The candle works the same way only starting with a solid fuel.  The match melts the top of this fuel and liquefies it.  Then it works the same way as an oil lamp.  With the heat of the flame melting the solid fuel to continue the process. 

Placing a Mantle over a Flame created Light through Incandescence (when a Heated Object emits Visible Light)

Two popular oils were olive oil and whale oil.  Beeswax and tallow were common solid fuels.  Candles set the standard for noting lighting intensity.  One candle flame produced one candlepower.  Or ‘candela’ as we refer to it now.   (Which equals about 13 lumens – the amount of light emitted by a source).  If you placed multiple candles into a candelabrum you could increase the lighting intensity.  Three candles gave you 3 candela of light to read or write by.  A chandelier with numerous candles suspended from the ceiling could illuminate a room.  This artificial light shortened the nights.  And increased the working day.  In the 19th century John D. Rockefeller gave the world a new fuel for their oil lamps.  Kerosene.  Refined from petroleum oil.  And saved the whales.  By providing a more plentiful fuel.  At cheaper prices.

By shortening the nights we also made our streets safer.  Some cities passed laws for people living on streets to hang a lamp or two outside.  To light up the street.  Which did indeed help make the streets brighter.  And safer.  To improve on this street lighting idea required a new fuel.  Something in a gas form.  Something that you could pump into a piping system and route to the new street lamps.  A gas kept under a slight pressure so that it would flow up the lamp post.  Where you opened the gas spigot at night.  And lit the gas.  And the lamp glowed until you turned off the gas spigot in the morning.  Another advantage of gas lighting was it didn’t need wicks.  Just a nozzle for the gas to come out of where you could light it.  So there was no need to refuel or to replace the wicks.  Thus allowing them to stay lit for long periods with minimum maintenance.  We later put a mantle over the flame.  And used the flame to heat the mantle which then glowed bright white.  A mantle is like a little bag that fits over the flame made out of a heat resistant fabric.  Infused into the fabric are things that glow white when heated.  Rare-earth metallic salts.  Which change into solid oxides when heated to incandescence (when a heated object emits visible light).

One of the first gases we used was coal-gas.  Discovered in coal mines.  And then produced outside of a coal mine from mined coal.  It worked great.  But when it burned it emitted carbon.  Like all these open flames did.  Which is a bit of a drawback for indoor use.  Filling your house up with smoke.  And soot.  Not to mention that other thing.  Filling up your house with open flames.  Which can be very dangerous indoors.  So we enclosed some of these flames.  Placing them in a glass chimney.  Or glass boxes.  As in street lighting.  Enclosing the flame completely (but with enough venting to sustain the flame) to prevent the rain form putting it out.  This glass, though, blackened from all that carbon and soot.  Adding additional maintenance.  But at least they were safer.   And less of a fire hazard.  Well, at least less of one type of fire hazard.  From the flame.  But there was another hazard.  We were piping gas everywhere.  Outside.  Into buildings.  Even into our homes.  Where it wasn’t uncommon for this gas to go boom.  Particularly dangerous were theatres.  Where they turned on the gas.  And then went to each gas nozzle with an open fire on a stick to light them.  And if they didn’t move quickly enough the theatre filled with a lot of gas.  An enclosed space filled with a lot of gas with someone walking around with an open fire on a stick.  Never a good thing.

Fluorescent Lighting is the Lighting of Choice in Commercial, Professional and Institutional Buildings 

Thomas Edison fixed all of these problems.  By finding another way to produce incandescence. By running an electrical current through a filament inside a sealed bulb.  The current heated the filament to incandescence.  Creating a lot of heat.  And some visible light.  First filaments were carbon based.  Then tungsten became the filament of choice.  Because they lasted longer.  At first the bulbs contained a vacuum.  But they found later that a noble gas prevented the blackening of the bulb.  The incandescent light bulb ended the era of gas lighting.  For it was safer.  Required less maintenance.  And was much easier to operate.  All you had to do was flick a switch.  As amazing as the incandescent light bulb was it had one big drawback.  Especially when we use a lot of them indoors.  That heat.  As the filament produced far more heat than light.  Which made hot buildings hotter.  And made air conditioners work harder getting that heat out of the building.  Enter the fluorescent lamp.

If phosphor absorbs invisible short-wave ultraviolet radiation it will fluoresce.  And emit long-wave visible light.  But not through incandescence.  But by luminescence.  Instead of using heat to produce light this process uses cooler electromagnetic radiation.  Which forms the basis of the fluorescent lamp.  A gas-discharge lamp.  The most common being the 4-foot tube you see in office buildings.  This tube has an electrode at each end.  Contains a noble gas (outer shell of valence electrons are full and not chemically reactive or electrically conductive) at a low pressure.  And a little bit of mercury.  When we turn on the lamp we create an electric field between the electrodes.  As it grows in intensity it eventually pulls electrons out of their valence shell ionizing the gas into an electrically conductive plasma.  This creates an arc between the electrodes.  This charged plasma field excites the mercury.  Which produces the invisible short-wave ultraviolet radiation that the phosphor absorbs.  Causing fluorescence.

One candle produces about 13 lumens of light.  Barely enough to read and write by.  Whereas a 100W incandescent light bulb produces about 1,600 lumens.  The equivalent of 123 candles.  In other words, one incandescent lamp produces the same amount of light as a 123-candle chandelier.  Without the smoke, soot or fire hazard.  And the compact fluorescent lamp improves on this.  For a 26W compact fluorescent lamp can produce the lumen output of a 100W incandescent light bulb.  A one-to-one tradeoff on lighting output.  At a quarter of the power consumption.  And producing less heat due to creating light from fluorescence instead of incandescence.  Making fluorescent lighting the lighting of choice in commercial, professional and institutional buildings.  And any other air conditioned space with large lighting loads. 

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FUNDAMENTAL TRUTH #27: “Yes, it’s the economy, but the economy is not JUST monetary policy, stupid.” -Old Pithy

Posted by PITHOCRATES - August 17th, 2010

DURING UNCERTAIN ECONOMIC times, people act differently.  If business is down where you work, your company may start laying off people.  Your friends and co-workers.  Even you.  If there is a round of layoffs and you survive, you should feel good but don’t.  Because it could have been you.  And very well can be you.  Next time.  Within a year.  In the next few months.  Any time.  You just don’t know.  And it isn’t a good feeling.

So, should this be you, what do you do?  Run up those credit cards?  By a new car?  Go on a vacation?  Take out a home equity loan to pay for new windows?  To remodel the kitchen?  Buy a hot tub?  Or do you cut back on your spending and start hoarding cash?  Just in case.  Because those unemployment payments may not be enough to pay for your house payment, your property taxes, your car payment, your insurances, your utilities, your groceries, your cable bill, etc.  And another loan payment won’t help.  So, no.  You don’t run up those credit cards.  Buy that car.  You don’t go on vacation.  And you don’t take that home equity loan.  Instead, you hunker down.  Sacrifice.  Ride it out.  Prepare for the worse.  Hoard your cash.  Enough to carry you through a few months of unemployment.  And shred those pre-approved credit card offers.  Even at those ridiculously low, introductory interest rates.

To help hammer home this point, you think of your friends who lost their jobs.  Who are behind on their mortgages.  Who are in foreclosure.  Whose financial hardships are stressing them out to no ends.  Suffering depression.  Harassed by collection agencies.  Feeling helpless.  Not knowing what to do because their financial problems are just so great.  About to lose everything they’ve worked for.  No.  You will not be in their position.  If you can help it.  If it’s not already too late.

AND SO IT is with businesses.  People who run businesses are, after all, people.  Just like you.  During uncertain economic times, they, too, hunker down.  When sales go down, they have less cash to pay for the cost of those sales.  As well as the overhead.  And their customers are having the same problems.  So they pay their bills slower.  Trying to hoard cash.  Receivables grow from 30 to 45 to 90 days.  So you delay paying as many of your bills as possible.  Trying to hoard cash.  But try as you might, your working capital is rapidly disappearing.  Manufacturers see their inventories swell.  And storing and protecting these inventories costs money.  Soon they must cut back on production.  Lay off people.  Idle machinery.  Most of which was financed by debt.  Which you still have to service.  Or you sell some of those now nonproductive assets.  So you can retire some of that debt.  But cost cutting can only take you so far.  And if you cut too much, what are you going to do when the economy turns around?  If it turns around?

You can borrow money.  But what good is that going to do?  Add debt, for one.  Which won’t help much.  You might be able to pay some bills, but you still have to pay back that borrowed money.  And you need sales revenue for that.  If you think this is only a momentary downturn and sales will return, you could borrow and feel somewhat confidant that you’ll be able to repay your loan.  But you don’t have the sales now.  And the future doesn’t look bright.  Your customers are all going through what you’re going through.  Not a confidence builder.  So you’re reluctant to borrow.  Unless you really, really have to.  And if you really, really have to, it’s probably because you’re in some really, really bad financial trouble.  Just what a banker wants to see in a prospective borrower.

Well, not really.  In fact, it’s the exact opposite.  A banker will want to avoid you as if you had the plague.  Besides, the banks are in the same economy as you are.  They have their finger on the pulse of the economy.  They know how bad things really are.  Some of their customers are paying slowly.  A bad omen of things to come.  Which is making them really, really nervous.  And really, really reluctant to make new loans.  They, too, want to hoard cash.  Because in bad economic times, people default on loans.  Enough of them default and the bank will have to scramble to sell securities, recall loans and/or borrow money themselves to meet the demands of their depositors.  And if their timing is off, if the depositors demand more of their money then they have on hand, the bank will fail.  And all the money they created via fractional reserve banking will disappear.  Making money even scarcer and harder to borrow.  You see, banking people are, after all, just people.  And like you, and the business people they serve, they, too, hunker down during bad economic times.  Hoping to ride out the bad times.  And to survive.  With a minimum of carnage. 

For these reasons, businesses and bankers hoard cash during uncertain economic times.  For if there is one thing that spooks businesses and banks more than too much debt it’s uncertainty.  Uncertainty about when a recession will end.  Uncertainty about the cost of healthcare.  Uncertainty about changes to the tax code.  Uncertainty about new government regulations.  Uncertainty about new government mandates.  Uncertainty about retroactive tax changes.  Uncertainty about previous tax cuts that they may repeal.  Uncertainty about monetary policy.  Uncertainty about fiscal policy.  All these uncertainties can result with large, unexpected cash expenditures at some time in the not so distant future.  Or severely reduce the purchasing power of their customers.  When this uncertainty is high during bad economic times, businesses typically circle the wagons.  Hoard more cash.  Go into survival mode.  Hold the line.  And one thing they do NOT do is add additional debt.

DEBT IS A funny thing.  You can lay off people.  You can cut benefits.  You can sell assets for cash.  You can sell assets and lease them back (to get rid of the debt while keeping the use of the asset).  You can factor your receivables (sell your receivables at a discount to a 3rd party to collect).  You can do a lot of things with your assets and costs.  But that debt is still there.  As are those interest payments.  Until you pay it off.  Or file bankruptcy.  And if you default on that debt, good luck.  Because you’ll need it.  You may be dependent on profitable operations for the indefinite future as few will want to loan to a debt defaulter.

Profitable operations.  Yes, that’s the key to success.  So how do you get it?  Profitable operations?  From sales revenue.  Sales are everything.  Have enough of them and there’s no problem you can’t solve.  Cash may be king, but sales are the life blood pumping through the king’s body.  Sales give business life.  Cash is important but it is finite.  You spend it and it’s gone.  If you don’t replenish it, you can’t spend anymore.  And that’s what sales do.  It gets you profitable operations.  Which replenishes your cash.  Which lets you pay your bills.  And service your debt.

And this is what government doesn’t understand.  When it comes to business and the economy, they think it’s all about the cash.  That it doesn’t have anything to do with the horrible things they’re doing with fiscal policy.  The tax and spend stuff.  When they kill an economy with their oppressive tax and regulatory policies, they think “Hmmm.  Interest rates must be too high.”  Because their tax and spending sure couldn’t have crashed the economy.  That stuff is stimulative.  Because their god said so.  And that god is, of course, John Maynard Keynes.  And his demand-side Keynesian economic policies.  If it were possible, those in government would have sex with these economic policies.  Why?   Because they empower government.  It gives government control over the economy.  And us.

And that control extends to monetary policy.  Control of the money supply and interest rates.  The theory goes that you stimulate economic activity by making money easier to borrow.  So businesses borrow more.  Create more jobs.  Which creates more tax receipts.  Which the government can spend.  It’s like a magical elixir.  Interest rates.  Cheap money.  Just keep interest rates low and money cheap and plentiful and business will do what it is that they do.  They don’t understand that part.  And they don’t care.  They just know that it brings in more tax money for them to spend.  And they really like that part.  The spending.  Sure, it can be inflationary, but what’s a little inflation in the quest for ‘full employment’?  Especially when it gives you money and power?  And a permanent underclass who is now dependent on your spending.  Whose vote you can always count on.  And when the economy tanks a little, all you need is a little more of that magical elixir.  And it will make everything all better.  So you can spend some more.

But it doesn’t work in practice.  At least, it hasn’t yet.  Because the economy is more than monetary policy.  Yes, cash is important.  But making money cheaper to borrow doesn’t mean people will borrow money.  Homeowners may borrow ‘cheap’ money to refinance higher-interest mortgages, but they aren’t going to take on additional debt to spend more.  Not until they feel secure in their jobs.  Likewise, businesses may borrow ‘cheap’ money to refinance higher-interest debt.  But they are not going to add additional debt to expand production.  Not until they see some stability in the market and stronger sales.  A more favorable tax and regulatory environment.  That is, a favorable business climate.  And until they do, they won’t create new jobs.  No matter how cheap money is to borrow.  They’ll dig in.  Hold the line.  And try to survive until better times.

NOT ONLY WILL people and businesses be reluctant to borrow, so will banks be reluctant to lend.  Especially with a lot of businesses out there looking a little ‘iffy’ who may still default on their loans.  Instead, they’ll beef up their reserves.  Instead of lending, they’ll buy liquid financial assets.  Sit on cash.  Earn less.  Just in case.  Dig in.  Hold the line.  And try to survive until better times.

Of course, the Keynesians don’t factor these things into their little formulae and models.  They just stamp their feet and pout.  They’ve done their part.  Now it’s up to the greedy bankers and businessmen to do theirs.  To engage in lending.  To create jobs.  To build things.  That no one is buying.  Because no one is confident in keeping their job.  Because the business climate is still poor.  Despite there being cheap money to borrow.

The problem with Keynesians, of course, is that they don’t understand business.  They’re macroeconomists.  They trade in theory.  Not reality.  When their theory fails, it’s not the theory.  It’s the application of the theory.  Or a greedy businessman.  Or banker.  It’s never their own stupidity.  No matter how many times they get it wrong.

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