Final Article

"OTTAWA TELLS GM: CUT MORE", National Post, Tuesday, March 31, 2009

This article talks about how the car companies, GM and Chrysler, have one last chance to fix the mess that they are in. Otherwise, they will have to face bankruptcy. The two car companies pleaded for as much as US $32 billion in new loans to keep them alive in this auto industry crisis, but the Canadian and U.S. governments refused. Instead, they promised to back them up with temporary aid and demanded that they make more drastic changes or else be pushed into bankruptcy court. U.S. president, Mr. Obama, says the government cannot let the auto industry vanish, but it cannot continue to excuse poor decisions. GM now has 60 days to develop a more aggressive plan. The article further talks about how the governments are coming up with ways to try to save the auto industry.

In the chapters of the textbook, we learned about how a business tries to maximize revenue and minimize expenses to get the maximum profit. We also learned about how cash flow is crucial for a company to do well. Without cash, a business would not be able to run. This article relates to the chapters of the textbook by showing how the two companies are failing without enough cash. Furthermore, we learned about analyzing financial statements to see how well a company is doing. In that chapter, we learned about the debt ratio and leveraging. The two car companies are depending on leveraging to keep their businesses running; therefore their debt ratio is poor.

In my opinion, I think it is correct that the government is adding some pressure to the two car companies. The governments do not want the auto industry to fail, but they must make the car companies understand that they cannot always depend on the government for money. If the car companies kept on making bad decisions and not come up with a good plan, they would just keep coming back to the governments to borrow new loans. Moreover, it is very important that the companies come up with better plans because it involves a lot of people and their jobs. If GM and Chrysler went bankrupt, it would cause many people to lose their jobs and affect their families. It would drag the economy down ever more.

http://www.nationalpost.com/news/story.html?id=1445830

Chapter 16 Media Article

"B.C. records largest increase in EI recipients", Vancouver Sun, February 25, 2009

This article talks about how all of Canada's provinces had increases in Employment Insurance recipients, but British Columbia had the country's largest increase amount. Compared to the same month in 2008, B.C's EI (Employment Insurance) recipients went up by a large amount of 33.2%; Alberta's increased by 30.3%, and Ontario's by increased 29.6%. From December 2007 to December 2008, there was a 79 100 increase in the number of Canadians receiving EI benefits. The number of men receiving benefits increased more than women. Gilles Groleau, an economist, said that B.C's numbers showed a "U-curve", beginning with a high number of EI recipients in 2005, then dropping quite a bit, and then increasing a lot in 2008. Since the economic crisis in 2008, the numbers have been steadily increasing.

Chapter 16 talks about payroll accounting and the different deductions made from payrolls. Chapter 16 relates to this article by showing how employers and employees each pay for portions of Employment Insurance. Deductions are made from the employees’ pay cheques into an Employment Insurance fund. If a worker who sufficiently contributed to the fund becomes unemployed, they are able to receive payments out of the fund. Employers are also required to contribute in paying for portions of the Employment Insurance fund. Employers contribute 1.4 times the amount contributed by employees.

I think that the country’s unemployment rates will continue to increase as the economy continues to fall. In my opinion, the government should try to improve this situation by providing more jobs and opportunities for people so that they do not have to become unemployed. Such a huge number of Employment Insurance recipients will take out a lot of money from the government every month, causing the economy crisis to worsen. I think the best way to help the economy is to try to minimize the unemployment rates so that everyone has money to earn and spend, therefore heating up the economy. Hopefully those unemployed will try their best to look for new jobs, instead of waiting for the government to pay them their monthly amount of EI.

http://www.vancouversun.com/records+largest+increase+recipients/1326494/story.html

Chapter 15 Media Article

"Risky Business", National Post, Tuesday, March 03, 2009

This article talks about the accusation that Canadian banks are not lending enough money. The real problem, however, is actually the collapse of lending from banks outside Canada. Because the foreign banks have been withdrawing from Canada, Canadian banks are having problems with impaired capital. Banks are expected to price loans on cheap credit from governments, not risk. Many people are complaining that the banks are being unfair and denying credit lines, but they do not understand that the big problem is risk. Because of the current economy crisis with increasing unemployment rates, the banks need to be careful to whom they lend their money to. High interest rates are needed to cover for the future, in case people and/or businesses do not repay their loans.

In chapter 15, we learned about the importance of analyzing financial statements. We also learned about how financial statements are used by banks to evaluate borrowers’ abilities to repay loans. This article relates to chapter 15 by showing how Canadian banks are being cautious to whom they lend money out to, because the current economy is not doing very well, which increases the risk that loans will not be paid back. The banks need to look at a company’s ability to make a profit as well as the worth and marketability of the company’s assets in case they need to be sold to repay the loan before they decide to give out credit or not.

In my opinion, I think that the banks are correct to be careful when giving out loans. With increasingly high unemployment rates and businesses closing, there is a huge risk that loans lent out cannot be paid back. That will cause the banks to lose profit and make the economy even worst. I understand that no one likes to pay high interest rates for loans, but I think it is necessary for the bank to do so, just in case they do not get money back in return. Furthermore, I think that foreign banks withdrawing money from Canadian banks is another reason why Canadian banks need to be very cautious, since their capital is limited.

http://www.financialpost.com/story.html?id=1346372&p=1

Chapter 14 Media Article

"Banks freed to offer both MasterCard and Visa credit cards", National Post, Tuesday, November 18, 2008

This article talks about how Canadian banks are now free to offer both MasterCard and Visa credit cards. In the past decades, there were old restrictions that made the banks choose either MasterCard or Visa. However, it still may take some time before the issuers make any changes to their cards. They will have to work it all out first since they've been operating with only one brand or the other for 35 years. This is going to be a fundamental change to businesses in Canada. Credit rating agencies say that Canadian credit card debt levels are lower than in the US and consumers pay off more of their card bills than Americans.

In chapter 14, we learned about cash control and banking. We also learned about bank credit cards. Most small retail stores do not offer their own VISA or MasterCard systems; they use credit cards sponsored by major banks. With bank credit cards, consumers can make purchases on short-term credit at any retail store that accepts credit cards. This article relates to chapter 14 by talking about how the change of the restrictions for issuing MasterCard and Visa will be a fundamental change for the business model of Canada. We learned in chapter 14 that credit cards are used very frequently, and so any changes would make huge changes to many individuals and merchants.

In my opinion, I think it will take a long time before the banks actually start issuing both MasterCard as well as Visas. They'd have to do a lot of work to figure out how to make everything work out. Now that banks can issue both brands of credit cards, there will be more competition, and it'll be harder to keep the customers from moving back and forth between card providers for better deals. In addition, with the current weakening economy, I think that less people will use credit cards to make transactions. This could affect the banks' plans on issuing new credit cards.

http://www.nationalpost.com/story.html?id=969984

Chapter 12 Media Article

“Surviving the credit crisis”, Financial Post, Tuesday, October 28, 2008

This article talks about how companies are trying to survive what is becoming the worst credit crisis in generations. With banks collapsing, the U.S. economy rapidly shrinking and high oil prices, companies are trying hard to stay in business. The article also talks about how liquidity is the key to staying in business since all recent mega-failures in the U.S. was due to the lack of liquidity. Also, the article suggests that businesses should reduce their credit risk without losing customers by offering early discounts to riskier customers. It is very important that money is received since it is not a sale if you don’t get paid.

In chapter 12, we learned about accounting for cash discounts. We learned about the different terms of sales companies have for their customers. For example, some businesses will give a cash discount if the bill issued is paid within a certain amount of days before the invoice date. This article relates to chapter 12 by talking about how offering early discounts is beneficial to businesses. By offering early cash discounts, it can ensure that the company receives the amount due, and make customers happy. As we learned in the chapter, the purpose of a cash discount is to encourage customers to pay promptly.

In my opinion, I think that offering early cash discounts is an efficient way of making sure the company receives money from its customers. I agree where the article talks about how liquidity is the key to running a business. The companies with more cash flow will be able to survive longer. Also, with growing economic problems, I think that it is extremely important for all businesses to try to maximize liquidity. As I said earlier, cash discounts are a great way to receive cash faster, increasing liquidity. With the U.S. economy quickly shrinking, and dropping consumer confidence, businesses will have to work harder to increase liquidity and try to stay in business.

http://www.financialpost.com/story.html?id=914649&p=1

Chapter Eleven Media Article

"Chocolate coins sold in Costco, dollar stores contain melamine: CFIA", Vancouver Sun, October 08, 2008

This article talks about how a type of chocolate coins by the name Sherwood Brands Pirate's Gold Milk Chocolate Coins, sold at Costco and dollar stores, are recalled because it was found to contain melamine, a type of toxic chemical compound. This toxin killed four babies and sickened thousands in China. Garfield Balsom, CFIA spokesman, states that the levels of melamine in the chocolates are actually very low, and no illnesses have been reported, but because the chocolates were widely distributed, they decided to send out an advisory. Also, because Halloween is approaching, everyone should be aware of it so children do not eat it.

In chapter eleven, we learned about the accounting procedures of a merchandising business. We also learned about merchandise returns and allowances. Costco is a wholesaler, which is a merchandising business that buys goods from manufacturers and sells to retailers. Costco also sells to the general public. This article relates to chapter eleven by showing that when products are recalled, the company will have to give out cash refunds. Because the company will have to have many refunds for the toxic chocolate, it will affect the company’s revenue. If the company has sales returns and allowances accounts, the amount would appear on the income statement.

In my opinion, I think big companies like Costco should pay attention to what they are importing and selling. They should have been sure that all the products they sell are safe. This incident will more or less affect the company name as consumers will become cautious to what they buy in the store. Also, the company’s revenue will be affected as the chocolates are returned to the company. Moreover, I think that although the risk of the chocolates of being very toxic are low, I think it is right for the business to recall the products back before something does happen. With Halloween just around the corner, it is very important to make sure children do not become ill because of eating the chocolates.

http://www.canada.com/vancouversun/story.html?id=8a952bd5-01cd-4819-86de-275421f24f3e