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