Chapter 6 Article

http://globalist.org.ua/eng/1441561-forecast-exchange-rate-of-dollar-and-euro

Summary:

This article is talking about the euro is continuously dropping. According to this article, it said that people are predicting euro will fall to its historic lows. This is due to various reasons, and one of them is because of Greece economic crisis. In addition, not just Greece, but in fact, the Southern Europe’s economy is not in a growth position. Euro exchanging rate is current experiencing a very difficult time, and currency experts believe that the euro is highly unstable and it will not go back up in a short period of time.

Connection:

Chapter 6 has mentioned about the risk in cash. Due to the exchanging rates, our money can be gold one day and a piece of useless paper on the next day. Fortunately, this will rarely happen because unlike stocks and other investments, the exchanging rates are not as fluctuated. However, this article proves the point that holding cash involve a risk. The price of the stocks is determined by the performance of the business; similarly, the exchanging rates depend on the economy of the places that use that currency. Since euro is use throughout Europe, so when one country’s economy goes down, it affects the whole Europe.

Personal Reflection:

Personally I believe that investing in currency is a great idea. Even though we cannot make a huge profit out of this investment; however, it still gives us a reasonable amount of return. More importantly, it will not have sudden growth or drops like stocks. Since the exchanging rates are usually depends on the economy of the country or the place that the currency that is used, it always gives the invest signs that it either will go up or down. Besides, everyone should have certain amount of saving in their bank account. Instead of letting those money sitting on the bank and getting the low interest, it would be way better if people are buying in other currency and make more money in that way.

Chapter 5 Article

The article from the beginning of the chapter

Summary:

In this article, it talks about how successful Frantic Films is. Frantic Films is a company that helps to create the computer-generated visual effects in films, lifestyle programs, and commercials. Frantic Films are created by two guys named Chris Bond and Ken Zorniak. Bond is the expert in computer graphics and animation skill; as Zorniak is good at business management and marketing. The secret of its success is the control it has on its cash flow and debts. When it gets a project, it will first calculate all the expenses, and borrow a loan that is for the life of the project. Frantic will also pay off the loan as soon as possible after the project is done. In this way, the company’s debt will always be minimized.

Connection:

This chapter is teaching us about cash flow statement. Cash flow statement is one of the most important financial statements that people would use to analyze a company. It does not only include the information of the income statement, it also includes the other information of where the company spend its money on. The cash flow statement is always divided into three parts which splits the company’s activity into three major categories which are operating, financing, investing. It is very important for the organization to use the information in this financial statement to make the right decision for the company.

Reflection:

I think it is true that if a company want to be successful, it definitely needs to control its flow and debts. Some companies will often leave off their debts unit the last minute, and they usually ended up failing. Even though they earn a profit from the money they borrowed, as long as the deadline has not arrived, they will not pay back the money. Instead they will use the new profit to invest in projects, but once the date has come, they are short of cash to pay the loan back.

Chapter 4 Article

http://www.reuters.com/article/idUSTRE6205TD20100301?type=globalMarketsNews

Summary:

This article is about McDermott International Inc.’s new quarter report about its financial status. From what they estimate, this company was going to have a 55.7 million of increase in their net income. However, in reality, they did not rise, but fell instead. Stepping in 2010, the shares of this company fell three percent because of the investors have back up and lower their expectations for this company. As the shares of McDermott fell to be around $23 to $28, the explanation of their poor performance is that they believe their businesses are still in a challenging economic environment. It would be a challenge for this company to meet its goals in the mean time.

Connections:

I n Chapter four, we have talked about revenue recognition. In class we have all go over the rules that we need to follow when we are recognizing our earnings. In fact we actually looked at a case where a company has claim to have revenue that they have not earned yet to make their financial statements to look good and attract buyers. In a recession period like now, it would be difficult to maintain a business. If business such as McDermott International Inc. lies to the investors and claim the revenue that has not yet earn, their shares may not go down and earn a profit from another way such as selling it. When all the businesses that are not doing that well lies on their performances, then the economy of the world will crash because people invested in something that are not exist.

Personal Reflection:

Realizing the relationship between the net earnings of the company and the shares of the company, it would be really hard to announce that the company`s performances are not as good as the previous quarter or what they have expected. Since businesses are depending on the investor’s money to cover their daily operation expenses and the amount of investors are determined by the performance of the company. When the results are not that great that also mean there will be lesser investors put money in the company and it would make the corporation in a bad situation. However, even though no one likes to lose in the business world, but it is more important to play fair so that the economy does not crash.

Chapter 3 Article

http://www.camagazine.com/archives/print-edition/2009/oct/upfront/news-and-trends/camagazine30247.aspx

Summary:

The blog I read was about how to prevent corporate fraud. According to the blog, most firms tries to prevent corporate fraud by cutting budget and reorganizations; however, this in fact will increase the risk of fraud. There are a few suggestions that this blog mentioned which helps reduce the chance of fraud. The first one is to conduct criminal checks for the applicants of the financially sensitive positions. Also, develop a strong ethical working environment to encourage workers to work ethically. Lastly, set up an anonymous hotline to report fraud. Once there is a call comes in, the firm should take action as quickly as possible to confirm the truth.

Connections:

Corporate fraud has become a serious business issue in these days. From chapter three, we know that there is many financial information we could find in the financial statements. For example, the performance of the business’s daily operation is reflected by its income statement. Due to that, most investors and bankers use those financial statements to determine whether they should invest in or lend money out those that particular company or not. With corporate fraud, people overstate the performance of business which misleads the decisions of the investors and bankers. Corporate fraud is not only a crime, but it is also a behaviour that cost a huge lost in the world’s economy. Because of the internet today, people can buy stocks in other countries, so a large number of people may be affected by this.

Personal Reflection:

In an economic recession period like now, no one can afford a corporate fraud. In today’s society, people could not just afford a living with just a job, so they must have a “part-time” called investing. Due to the lost of the last crisis, a lot people just want to carefully invest in those companies which have a steady growth. However, the world is not as ideal as people wish; there are still frauds out there. The main reason that I think frauds occur is because of the auditing policy of the financial statements are not tight enough. So in December 15^th, 2009 a new quality control standard has come in effect for all audits of financial statements in Canada.

Chapter 2 Article Re-Do

http://news.smh.com.au/breaking-news-business/norfolk-posts-30-profit-rise-20091125-jpbv.html

Summary:

The building service company, Norfolk Group Ltd has reported on Wednesday that it has a thirty percent rise in half year profit. The reason for such a huge improvement is because of the growth of the revenue during the past six months. The revenue went up from 3.76 billion to 3.88 billion, so the profits before interest and tax rise from 1.04 billion to 1.14 billion which is ten percent growth. In addition, the net debt fell by 24.2 percent. With the increase in revenue and decrease in liabilities, the company said they would be expecting to complete the refinancing the facility by the end of the financial year which is the end of March 2010.

Connection:

This article is pointing out how good the company is doing. Some of the investors will read the financial reports or articles like this to invest into the company. However, to calculate the profitability ratios which mentions in chapter two is one of the best ways to find out is this company worthwhile to invest in. Returning rate can calculate by net income divided by total revenues. For a normal company the returning rate should be around 10 percent, which some company may go a bit higher. Also we are only looking at the returning rate, but also the return on assets rate because the profit that a company make is generated by its assets.

Personal Reflection:

From the two rates I mentioned above, Norfolk Group Ltd. has pretty good figures. For its net revenue is 3.88 billion and its net income is 0.56 billion, so its returning rate is about 14% which is consider as a very good returning rate. Besides, its average total assets is 2.64 billion, so its return on assets rate is 21% which is consider as good too. Not only the profitability of this company is good, but since it has a huge decrease in its debt, so I think this company is definitely worthwhile to invest. One other thing that I like about this company is that the returning rate is good, but not too good like 30 or 40 %, so it will not involve with too much risk in the investment.

Chapter 2 Article

http://www.contractjournal.com/Articles/2009/09/22/71882/plant-growth-some-way-off.html

Summary:
In the downfall of the plant market, most of the plants –owning contractors are facing a difficult situation which they have to make a decision so their business can go on. Due to the economic slowdown, the residual values of the fleets is falling and there will some new regulations implement in the near future, that makes the plant – owning contractors hard to continue their business. So, Most of them have to make a decision of either hire companies to sell their equipment and hold on to what they have, or buy more kit while prices are cheap. Depending on the different circumstances of each company, this decision will determine the business successful or not.

Connection:
In chapter two, residual value is the measure value of the asset in the next two years. Since the plant sales, the contractors’ fleets have fallen in residual values. In a business the non – current assets is extremely important because they are not just used for the operation activities, but also they are to cover the liabilities when it is necessary. Even though it is the residual value is only the estimate value, this value is pretty close to what the actual values of the assets are. So when the values of the long term assets are falling, once the company is in financial trouble, it is hard for them to get out of it.

Personal Reflection:
I believe the fixed assets are just as important as the current assets. When the company is in financial trouble, by selling some of the fixed assets sometimes could pull the company out of the hot water. However, in this news we know that the values contractors’ fixed assets are dropping, so once they don’t have enough current assets to cover up their liabilities, they may not have enough assets to pay off their debt. So except they want to close the business, otherwise, I don’t think they should sell their fleets.

Chapter 1 article

http://www.forbes.com/2009/09/14/ponzi-scheme-barry-markets-equities-prosecution.html

Summary:

A pyramid scheme had run for 30 years and swindled $40 million dollars. Philip Barry was the schemer and he tricked 800 investors, who were mostly his neighbors, with a Ponzi Scheme. Barry has started a company called the Leverage Management Co. which invested for people. The leverage Management Co. stated that the clients’ money would invested in securities and stock with a guaranteed returning from 12.55%-21%. This scam could be stopped if no new investors come in. However, he gave out false financial statements to attract new investors and used some of that money to pay off the guaranteed returning to the old investor.

Connection:

The financial statements are used for owner, bankers, and investors to view the actual performances of the company. It is very important for the investors to look at the financial statements to determine whether or not they should invest in the company. However, with the behavior of Philip Barry, he would make the reliability of the financial statements decrease in general. This could lead to a serious problem to the business world because people will no longer believe in those statements and investing will become a huge gamble. People who blindly invest usually end up losing all the money. It also destroys the opportunity of those companies that has potential to growth from gathering money from the investors, because investors may see that without the financial statements.

Personal Reflection:

I think this scam succeed because of the greed in human. People who invested in the Leverage Management Co were all looking for the guaranteed profits. Unfortunately, all investments involve some risks; people should realize it is a scheme once the company guaranteed for any returning. Even though, Barry used the false statements to lead the investors thought that they made a right decision, it is always the greed that was blocking people’s eyes from seeing the truth. Furthermore, from this article we have to be aware that the financial statements we get may not always telling the truth. Investing should not be just a matter of luck; the broad outcome should be predictable from the financial statements most of the time. A lot of the big corperations could not continue without borrowing money from the bankers or gathering money from the investors. When those statements lost their credibility, bankers and investors cannot predict the outcomes anymore, so they will have less chance to give out their money into this gamble. So it is extremely important for companies to follow the GAAPs and give out the true and accurate financial status to the bankers and the investors to help them make their decisions.

Summary Blog

http://online.wsj.com/article/SB123913125063097913.html

Summary:
In the American’s Federal Reserve report states that the consumer credit has dropped by $7.5 billion n February. The credit grew $8.1 billion in January, and people predict that it will continue rise by $1.8 billion; however, it has dropped instead. This result was way bigger than what the Wall Street expected, and it was the fourth decline in the past six months. After the Wall Street crisis, the standard of qualifying to borrow money has straighten, which makes life harder for both consumers and businesses. In the recession, the situation is getting worst and worst.

Connection:
Through chapter 14-15 we have learned many things about credits in business. Some may about credit cards, or buying on credits. From the textbook we get to see a lot of benefits in using a credit system brings to us; however, in reality many businesses are screwed by those system, or by the other people who use those system improperly. For example, when businesses buying products from other businesses, they will usually buy on credits, which pay off about 30-60 days; however, some people may not pay their bills on time which make the other companies are short of cash and go bankrupt.

Personal Reflection:
In now days, people are depend more and more on the credit systems. Consumers are more likely to use credit card for shopping. As for businesses, they are more likely to purchases stuff on credits. The credit cycle gets bigger and bigger, when one part of this cycle does not pay off its bill, then it may break the whole cycle and make a huge crisis. For instance, if hundreds of consumers who use credit card to shop does not pay off their bills on time. This may cause retail stores short of cash, so they can not pay off their bills. So this makes the manufacture to lose money. In another words, with the credit systems we can easily lose money in the economy.

Chapter 16 article

http://www.forbes.com/feeds/ap/2009/03/11/ap6156175.html
Summary:
Belo Corp, a television company, has planned to do three things to help reduce its operating expenses. First, it will cut a hundred fifty jobs. Secondly, it will reduce some employee salaries by five percent. Lastly it will suspend its 401 matching contributions. By making these decisions, they have helped to reduce ten percent of the operating expenses. However, these decisions are going to affect variety of employees. Those who are Dallas-based are going to be affect by the five percent reduction in salary. Also all the employees in Belo Corp will are going to be affected by the 401 matching program.

Connection:
In Chapter 16, it is talking about the process of a company records the salary and wages expenses in the books. Salary is actually the fixed amount of money that a company pays an employee on a regular basis period of time. Salary is usually paid every two weeks. People who are paid by salaries include teachers, office workers, supervisors and other civil servants. A second type of payment that employers pay their employees is wages. This payment is paid according to hourly, daily, or weekly basis and the quantity of goods the workers produce.

Personal Reflection:
Due to the recession of the economy, many businesses are in some kind of hard time. Since most of the companies are not making as many money as before, the only way they are going to increase their net income by reducing their expenses. One of the expenses that most business are going to reduce first is the salary expenses because they can always cut this expenses and make the workers do more work. In this hard time, workers are hard to find another job, so all they can do is to suffer in this situation. Even though this is understandable, I still think that the businesses should find some other ways to increase their net income instead of letting their employees to suffer.

Chapter 15 article

http://www.dailytimes.com.pk/default.asp?page=2009%5C03%5C08%5Cstory_8-3-2009_pg5_8

Summary:
This article is talking about the bank in the State may determine the level of current ratio for various types of borrowers by the bank itself. As this policy is published, this means the bank will depend on the situation of each individuals and it will set up a particular required minimum current ratio for the borrowers. Before, the bank has a standard level of current ratio of for a specific industry of which the borrower belongs to. In this case, the banker will ensure that their current assets could able to cover their current liabilities. Once the new policy is established, the risk of the borrowers can not pay back the loan will get higher.

Connection:
In chapter fifteen, it introduces us the different ratios in business. Those ratios are used to determined is that particular company’s in a healthy financial state or not. Different ratios have different meanings and different standards of considering a good, fair, or a poor. For current ratio, it is checking is that company able to cover its current liabilities with its current assets. Usually the standard of saying it is good should be somewhere at two. Current ratio is one of the most important factors that a banker will look at when one is looking at the companies’ financial statements. Bankers will use this number to determined lend out money to the business or not.

Personal Reflection:
I think that if the banks are actually going to determine the ratio level on their own, then it is going to easily bring down the economy of US, which also will affect Canada’s economy. I think that if the bankers are not perfect on make decisions, once they have made the wrong judgments, then many people could turn out not able to pay back their loans and the bank will be in a huge debt. That will eventually cause the bank to bankruptcy and the customers of the banks are going to lost money, so the whole economy is going to be corrupt.

Chapter 14 article

http://www.nytimes.com/2008/11/15/business/15citi.html?scp=1&sq=%22credit%20card%22&st=cse

Summary:
This is an article that talks about increasing the credit card rate in the U.S. This is a decision made by the citigroup, and it actually pledged for what they have said in the early 2007. By making such decision, the citigroup said it was due to the difficult market environment, which cut down too much of their profits. Most of the credit card holders’ interest rate will raise when they November statements. As a result, because of the fall of the economy, most of the business are not making as much as before, so one of the ways that most businesses think will help them is by increasing the amount of money that their customers have to pay.

Connection:
In chapter 14.2, we have learned about credit cards. Unlike debit card, people can use credit cards without pay the money in the first place. In another word, when people are using a credit card to purchase something, they are “buy first, pay later”. However, when the cardholder pays the credit card bill, one has to pay an interest on the amount they have used as well. Therefore, the higher the interest rate one’s credit card has, the more one needs to pay; however, the higher the interest rate one’s credit card has, the more money one can use at a time.

Personal Reflection:
In my opinion, I do not think that increasing the interest rate at this moment is a good idea. As everyone knows that we are now in an economy depression, and a lot of people are getting lay off from their jobs. For those people who just became unemployed, they may loss their ability to pay back the bank for the credits sooner or later. Also, some people may think that they don’t want to be in debt, so they would use cash instead use credit cards. As those people keep taking out money from the bank, the bank has less and less money to loan to other people, this may lead to bankruptcy. Therefore, I think that the bank should lower the interest rate which cause more people will use the credit card and save the cash, so that the bank will not run out the money.

Chapter 12 article

http://query.nytimes.com/mem/archive-free/pdf?_r=1&res=9A06E4DB113CE733A25755C1A9619C946796D6CF&oref=slogin
Summary:
This is an article from The New York Times in July 6th, 1916. This is an article that talks about the problem of cash discounts which still exists today. The problem of cash discounts it is talking about in the article is that is cash discounts useful, and should they abolished cash discounts. Cash discounts’ primary purpose is to encourage business to quickly pay their bills. However, because of the growth of the banking system, cash discounts have been largely reduce. Therefore, some people found there are no point to give out discounts, since the discounts are so little which they can’t encourage anyone to pay faster.

Connection:
In chapter 12.3, it introduces cash discount. In order to encourage the customers to pay promptly or early, cash discounts have been offered to the consumer. Although this article is about a century ago, this issue still exists. From the textbook, we can see that most of the discounts are around one to two presents when the customer pays within a certain days. However, one or two presents discounts are not going to make that much difference if the customers purchase a small among of merchandises. In this case, those customers are not going to pay earlier for the discounts. As a result, the cash discount may not achieve its original purpose when it is offer to the small business.

Personal Reflections:
Even though the article is very old, I think it brings out an important issue that most students never think of. After I read this article, I do want to find out more about this topic: “Is cash discount effective on encouraging customer to pay on time?” I am also thinking besides cash discount some there other methods that may be as effective or more effective and are able to apply to both large and small business to get customers pay one time, such as providing some special services.

Chapter 11 article

http://www.mbtmag.com/article/CA6600235.html&
Summary
This article is about the latest version of an IBM System named Info ERP XA. This system is a comprehensive system that can master order processing, inventory management, production reporting and many other functions. Compare to the previous system, info ERP XA 7.8 been improved in a lot of area. It is faster in retrieving data and all other performance. It can also automatically update the accounts such as accounts receivable, accounts payable, and cash. Besides, this version updates the currency decimal point for various foreign monies. Therefore, the newest version of info ERP XA helps the accountants save up a lot of time.

Connection
In chapter 11.5, the book talks about the history of the perpetual inventory system. First, people uses a card file to record all the information, and then made copies of receiving reports every time. All the financial statements were also written out. In now days, people will do the inventory management and financial statements on the computer. Now we also can use only a single system to do all those things, and it has so many extra functions, so the chance of making a mistake has reduced to the lowest.

Personal Reflection
After I read this article I am amaze by the numbers of things that the Info ERP XA can actually do. I realized that I really have a very limited knowledge of the accounting world. Before I thought that the financial statements and inventory management are all done in Microsoft Office. Then later on I knew that there are some specific softwares for doing those kinds of things such as Simple Accounting. However, I never thought of that one single system can manage to do all of the things in accounting.