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represents 20 percent of the right-hand side of the balance sheet, and equity represents 80 percent The second measure of financial leverage is the debt-to-equity ratio, which in this example would be $2 million divided by $8 million, or 025 Financial leverage usually causes average returns to increase and always causes volatility to increase Let s look at Table 92 to see how this happens We begin with rows 5 through 7 Firm A and Firm B both have $10 million of financing Firm A is 100 percent equity financed, while Firm B is only 20 percent equity financed, ie, equity equals $2 million (C6) and debt equals $8 million (C5) We now skip to cells B12 through B15 and C12 through C15 This shows four different possible levels of sales for four assumed scenarios, with their associated probabilities Firms A and B have a 25 percent probability each (C12 through C15) that sales will be $10 million (B12) in the Best Case Scenario, $8 million (B13) in the Second Best Case, $6 million (B14) in the Third Best, and $4 million (B15) in the Worst Case Scenario Next we will construct income statements for both firms in the four scenarios We assume both firms have the same operating income and expenses, and the only difference between their income statements will be in the interest expense (row 23) Sales appears in row 20, according to the scenarios above We assume variable expenses of 75 percent (B32, carried forward to row 21), which leaves net income before interest expense of 25 percent of sales, which is $25 million (B22, C22) in the Best Case Scenario, $2 million (D22, E22) in the Second Best Case Scenario, $15 million in the Third Best, etc Row 23, as noted above, is interest expense We assume interest at 8 percent (B33) of interest-bearing debt of zero (B5) and $8 million (C5) for Firms A and B, respectively Thus, Firm A has zero interest expense, and Firm B has $640,000 regardless of scenario Net income in row 24 equals row 22 minus row 23 In the Best Case Scenario, net income equals $25 million 0 $25 million (B22 B23 B24) for Firm A, and $25 million $640,000 $186 million (C22 C23 C24) for Firm B Return on Equity (ROE), also known as Return on Investment (ROI), equals net income divided by equity For Firm A,.



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Even with the proper credentials in hand, intruders may not be able to log back in to a target system if a login prompt is not presented by some server daemon For example, the root password is of little use if the r-services or telnet have been disabled on the target server Likewise, Administrator on Windows NT grants very few remote-control opportunities by default Thus, the primary goal of attackers will be to leave such mechanisms in place for easy access later In most cases, a remote command prompt is all an attacker really needs We will discuss tools that create remote shells fairly easily With the prevalence of graphical operating systems and the ease of management they offer, a graphical remote control back door is the ultimate in system ownership, and we will also cover some tools that offer this capability We ll save discussion of countermeasures for remote control until the end of this section, since most of the mechanisms for securing against such attacks are similar to each other

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We ve talked extensively in this book about the TCP/IP Swiss Army knife called netcat (see http://wwwl0phtcom/~weld/netcat/indexhtml for both the NT and UNIX versions) and its ability to listen stealthily on a given port, performing a predefined action when remote connections come into the system Netcat can be a powerful tool for remote control if the predefined action is launching a command shell Intruders can then use netcat to connect to this port and return the command prompt to their own machine Commands for launching netcat in a stealth listening mode are usually stashed in some startup file (see the previous section) so that the listener persists across reboots of

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