http://www.abc.net.au/news/stories/2010/05/06/2891727.htm?section=justin
Summary
The National Australia Bank's first-half of report show a fell in profit by 21.6% ($2.1 billion), after fee reductions and lower interest rate compared to its competitors. The bank’s chief executive, Cameron Clyne, says cuts in customer fees and NAB’s low variable home loan interest rates will be valuable in the future by building market share and customer retention. New transaction account openings have increased by 32 % and new mortgage flows also increased by 20% but caused a 22 % decline in personal banking earnings. Even though their profit dropped, there is an increase in cash earnings of $2.2 billion and a fall in bad debt charges from $1.8 million to $1.2 billion. This was better than the market expectation.
Connection
First of all, the textbook talked about how bad debts can affect a business’s profit significantly and that is why businesses need to estimate the amount of the expected uncollectible accounts at the end of each period. The fall in bad debt for NAB contributes to the increase of cash earnings when the NAB’s profit is slipping down. The second connection is the financial instruments. In the textbook, it explains 4 types of financial instruments and the one that is related to this article is loans and receivables. NAB is lowering interest rate and fee reduction to attract customers. Even though it contributes to their decrease in profit, their action is an investment. The investment is to make a more sustainable business by improving customer relationships and satisfaction to make NAB reputation broader.
Reflection
The fell in bad debt charges helped NAB to have an increase in cash earnings and I think it also gives a positive sign of the Australian economy recovering from the global financial crisis. People have the money to pay back their debt, which means their economy is not affected by other financial crisis and NAB can have a higher net realizable value. I think NBA’s actions of the fee reductions and lowering interest rates are ways to keep their customers in this recovery period. My opinion is that NAB’s strategy is good for short term because it can provide them with sufficient cash over this period of time, so they can solve their financial crisis that they might have and to balance the fell in their first-half profit.
Wednesday, May 5, 2010
Tuesday, April 13, 2010
Ch. 5 Reports of a deal with lenders are premature, Intrawest claims
http://www.vancouversun.com/Reports+deal+with+lenders+premature+Intrawest+claims/2630965/story.html
Summary
Fortress Investment Group LLC, the New York private-equity and hedge fund, bought Intrawest in 2006 and they agreed to restructure its debt, including the injection of more equity in to the company. Under the terms, Fortress needed to put $150 million into company and divide its $1.2 billion US debt into 2 parts: one part would pay 10% interest and the second part would pay as much as 17%. Intrawest had also been reported that they had signed with a new deal of loans that can be extended to as much as 4 years. Intrawest had already sold 4 properties since November but they say that the sales are of non-core assets and they have no intention of selling properties where Intrawest owns both the ski hill and the accompanying village, like the Whistler-Blackcomb, Mont Tremblant in Quebec and Blue Mountain in Ontario.
Connection
In the textbook, there is an article about Intrawest and their debts problem. A company maybe profitable but they often have cash flow challenges and Intrawest is one of the examples. They have significant lead/lag relationships that affected their cash flows, since the length of time to complete a project and cash flowing back takes a long period of time. Their cash flow had a serious problem that lead to the heavy debt. According to the article, Fortress Investment Group used the increase amount of capitalization to solve the cash flow problem. The $150 million that Fortress put in didn’t help solve the debt problem. They should have concentrated more on the cash flow way earlier because their heavy debt started a long time ago. Intrawest began with a bad start. Their lead/lag relationship had contributed to the serious cash flow problem that can not be solved for years.
Reflection
The textbook wrote the article in 2007 and at that time, they already had debt problems. At the end of the article, it ended with a positive attitude that Intrawest would soon have reliable revenue streams because ski resort businesses mostly generate a steady cash flow. Three years have passed and Intrawest is still struggling to pay back the debt to their lenders. In my opinion, Intrawest have struggled too long with their debt problem, which makes them into a bad situation and harder to return their debt. Their debt keeps continue to enlarge along with interest rates and they would just owe more money to lenders. Intrawest should find a more efficient way of solving their situation, maybe by reducing the lead/lag relationships. I think they should not start investing any more money into new projects because it is one of the reasons why they don’t have enough cash flow causing the heavy debt problem.
Summary
Fortress Investment Group LLC, the New York private-equity and hedge fund, bought Intrawest in 2006 and they agreed to restructure its debt, including the injection of more equity in to the company. Under the terms, Fortress needed to put $150 million into company and divide its $1.2 billion US debt into 2 parts: one part would pay 10% interest and the second part would pay as much as 17%. Intrawest had also been reported that they had signed with a new deal of loans that can be extended to as much as 4 years. Intrawest had already sold 4 properties since November but they say that the sales are of non-core assets and they have no intention of selling properties where Intrawest owns both the ski hill and the accompanying village, like the Whistler-Blackcomb, Mont Tremblant in Quebec and Blue Mountain in Ontario.
Connection
In the textbook, there is an article about Intrawest and their debts problem. A company maybe profitable but they often have cash flow challenges and Intrawest is one of the examples. They have significant lead/lag relationships that affected their cash flows, since the length of time to complete a project and cash flowing back takes a long period of time. Their cash flow had a serious problem that lead to the heavy debt. According to the article, Fortress Investment Group used the increase amount of capitalization to solve the cash flow problem. The $150 million that Fortress put in didn’t help solve the debt problem. They should have concentrated more on the cash flow way earlier because their heavy debt started a long time ago. Intrawest began with a bad start. Their lead/lag relationship had contributed to the serious cash flow problem that can not be solved for years.
Reflection
The textbook wrote the article in 2007 and at that time, they already had debt problems. At the end of the article, it ended with a positive attitude that Intrawest would soon have reliable revenue streams because ski resort businesses mostly generate a steady cash flow. Three years have passed and Intrawest is still struggling to pay back the debt to their lenders. In my opinion, Intrawest have struggled too long with their debt problem, which makes them into a bad situation and harder to return their debt. Their debt keeps continue to enlarge along with interest rates and they would just owe more money to lenders. Intrawest should find a more efficient way of solving their situation, maybe by reducing the lead/lag relationships. I think they should not start investing any more money into new projects because it is one of the reasons why they don’t have enough cash flow causing the heavy debt problem.
Monday, March 1, 2010
Ch.4 Revenues
http://www.ctv.ca/generic/generated/static/business/article1466595.html
Summary
Sears Canada Inc is one of the leaderships in e-commerce and with the pressure from other online sites, they need to continue upgrading their services on the net. They are focusing on updates with their new products and interactive features on their websites. They are also betting heavily on e-commerce to boost their bricks and mortar department sales. In their report, Sears’ overall revenue decreased but online sales have jumped 18% from previous year. Cyber sales make up less than 10% of Sears’ $5.7 billion revenue in 2005. Sears is also expecting a 9% rise, $11.3 billion US in 2010. They are seeing the trend in online behaviour by chasing younger consumers’ desires. Sears is rapidly introducing new products that can attract young consumers, like sports collectibles and eco-clothing. The e-commerce has become one of the important factors in Sears. E-commerce team has doubled to 80 employees from previous year and plans to reach 100 by year’s end.
Connection
The textbook contains an article about on-line shopper survey and it makes the highest revenue from all industries. E-commerce is the buying and selling of goods or services on the internet. In the article, Sears showed that e-commerce is one of the most important factors contributing the company’s revenue. Compared to 2005 Sears’ revenue, the revenue they estimated for 2010 has doubled. The confidence in the rise of the revenue is from the online consumers. Sears don’t need to worry about carry the risk of stocking revenue because suppliers can hold on to the merchandise until it is purchased. This means Sear’s online sales recognize revenue at the time of sale. Once the consumer has paid online, Sears will send the product to customer and recognize the revenue. The textbook also states that returns through Internet are an issue because it may be harder to estimate the probable extent of returns. On the Sears’ website for online shopping, the return policy for purchasing on Sears Outlet website is within 10 days and items purchased on Sears.ca are refunded within 30 days. Sears has made the return policy really clear. The days for allowing returns are similar to going in stores purchases’ return policy. This helps to estimate the probable extent of returns. It may be hard at the beginning to estimate online sales but Sears has been running e-commerce for several years. They have quite an understanding of online behaviour for their sales and return.
Reflection
I think Sears made a good choice of focusing on their e-commerce. As we can see, technology is always in used in our daily lives. Many people now a days prefer to do everything online because it is more convenient. E-commerce helps Sears increase their revenues and reduce the chance of having too much stock inventory. In the future, my prediction is shops would decrease and online businesses would increase. Many people like the idea of doing online sales because it helps them reduce their expense. For example, they don’t need to hire as much workers. The cost of starting a business online is lesser than starting a business in a real store. To me, I think Sears would have the chance of reducing their stores in Canada and focus more on the online market.
Summary
Sears Canada Inc is one of the leaderships in e-commerce and with the pressure from other online sites, they need to continue upgrading their services on the net. They are focusing on updates with their new products and interactive features on their websites. They are also betting heavily on e-commerce to boost their bricks and mortar department sales. In their report, Sears’ overall revenue decreased but online sales have jumped 18% from previous year. Cyber sales make up less than 10% of Sears’ $5.7 billion revenue in 2005. Sears is also expecting a 9% rise, $11.3 billion US in 2010. They are seeing the trend in online behaviour by chasing younger consumers’ desires. Sears is rapidly introducing new products that can attract young consumers, like sports collectibles and eco-clothing. The e-commerce has become one of the important factors in Sears. E-commerce team has doubled to 80 employees from previous year and plans to reach 100 by year’s end.
Connection
The textbook contains an article about on-line shopper survey and it makes the highest revenue from all industries. E-commerce is the buying and selling of goods or services on the internet. In the article, Sears showed that e-commerce is one of the most important factors contributing the company’s revenue. Compared to 2005 Sears’ revenue, the revenue they estimated for 2010 has doubled. The confidence in the rise of the revenue is from the online consumers. Sears don’t need to worry about carry the risk of stocking revenue because suppliers can hold on to the merchandise until it is purchased. This means Sear’s online sales recognize revenue at the time of sale. Once the consumer has paid online, Sears will send the product to customer and recognize the revenue. The textbook also states that returns through Internet are an issue because it may be harder to estimate the probable extent of returns. On the Sears’ website for online shopping, the return policy for purchasing on Sears Outlet website is within 10 days and items purchased on Sears.ca are refunded within 30 days. Sears has made the return policy really clear. The days for allowing returns are similar to going in stores purchases’ return policy. This helps to estimate the probable extent of returns. It may be hard at the beginning to estimate online sales but Sears has been running e-commerce for several years. They have quite an understanding of online behaviour for their sales and return.
Reflection
I think Sears made a good choice of focusing on their e-commerce. As we can see, technology is always in used in our daily lives. Many people now a days prefer to do everything online because it is more convenient. E-commerce helps Sears increase their revenues and reduce the chance of having too much stock inventory. In the future, my prediction is shops would decrease and online businesses would increase. Many people like the idea of doing online sales because it helps them reduce their expense. For example, they don’t need to hire as much workers. The cost of starting a business online is lesser than starting a business in a real store. To me, I think Sears would have the chance of reducing their stores in Canada and focus more on the online market.
Tuesday, January 19, 2010
Ch.3 Analyzing financial statements
http://www.shaw.ca/en-ca/InvestorRelations/FinancialReports/QuarterlyReports/Fiscal2010QuarterlyReports.htm
Summary
Shaw Communications released its quarterly reports of the period, up to November 2009. The format that Shaw used is a multi-step income statement and classified balance sheet. The income statement presented the service revenue, which is $905,934, increased by more than 10% compared to previous accounting period. The operating, general and administrative expenses are total of $430,982, decreased by about 4%. The total net income (after taxes expenses) of the quarter period is $114,229. Current assets, Cash, which is found in the balance sheet increased greatly compare to previous period, totaled to be $451,288. The total of Shareholders’ equity increased to $9,888,349.
Connections
In this chapter, we learned the format of a multi-step income statement and a classified balance sheet. The first section presents income from operations. The most distinguished section of a multi-step income statement is from the first section, which is the calculation of gross profit, or gross margin. Shaw communications have service revenue and operating, general and administrative expenses in its first section. There is no calculation of gross profit because Shaw mainly receives its profit from providing service to its customers. Shaw does not name the total gross profit. This shows that each company has its own format for its financial statements because of the different system of operation. Shaw is traded on the Toronto and New York stock exchanges. The interest expense and income are part of the operating activities. It is under the operating income section. The second section of the income statement is income from non-operating sources. Shaw’s second section shows the income for tax expense. Like the example in the textbook, the net income is calculated after tax expense/income, and comprehensive income is presented at the end.
Reflections
Shaw provides daily needs for people, for example, internet, TV, telephone connections. The financial statements from Shaw show it has a quite stable performance. Comparing a few more financial statements from previous periods, the net income and service operating income are stable. I think Shaw communications is good for long term investments because of the overall stable performance. Shaw provides services that people daily uses, so its market is very steady. Another reason is that Shaw already provides plans that attract people to use its services. For example, cheaper price to have both the internet and TV plans. I believe there are going to be more variety of plans in the future to attract more customers.
Summary
Shaw Communications released its quarterly reports of the period, up to November 2009. The format that Shaw used is a multi-step income statement and classified balance sheet. The income statement presented the service revenue, which is $905,934, increased by more than 10% compared to previous accounting period. The operating, general and administrative expenses are total of $430,982, decreased by about 4%. The total net income (after taxes expenses) of the quarter period is $114,229. Current assets, Cash, which is found in the balance sheet increased greatly compare to previous period, totaled to be $451,288. The total of Shareholders’ equity increased to $9,888,349.
Connections
In this chapter, we learned the format of a multi-step income statement and a classified balance sheet. The first section presents income from operations. The most distinguished section of a multi-step income statement is from the first section, which is the calculation of gross profit, or gross margin. Shaw communications have service revenue and operating, general and administrative expenses in its first section. There is no calculation of gross profit because Shaw mainly receives its profit from providing service to its customers. Shaw does not name the total gross profit. This shows that each company has its own format for its financial statements because of the different system of operation. Shaw is traded on the Toronto and New York stock exchanges. The interest expense and income are part of the operating activities. It is under the operating income section. The second section of the income statement is income from non-operating sources. Shaw’s second section shows the income for tax expense. Like the example in the textbook, the net income is calculated after tax expense/income, and comprehensive income is presented at the end.
Reflections
Shaw provides daily needs for people, for example, internet, TV, telephone connections. The financial statements from Shaw show it has a quite stable performance. Comparing a few more financial statements from previous periods, the net income and service operating income are stable. I think Shaw communications is good for long term investments because of the overall stable performance. Shaw provides services that people daily uses, so its market is very steady. Another reason is that Shaw already provides plans that attract people to use its services. For example, cheaper price to have both the internet and TV plans. I believe there are going to be more variety of plans in the future to attract more customers.
Wednesday, November 18, 2009
Ch. 2 Redo
http://www.bloomberg.com/apps/news?pid=20601085&sid=aAhnL9S2vhss
Connections:
Ch.2 talks about business transaction analysis and profitability ratios. It is necessary for a company to make important decisions from analyzing business transcations. Philips has analysis their transactions and made decisions on how to improve their profits. The sales in the third quarter period was not good because their sales went down by 5.62 billion euros but Philips still made net income. They cut down their expenses, for example, cutting 6,000 jobs and narrowing down the televisin unit's operating cost. Cutting down 6,000 jobs mainly increased their retained earnings which made their income increased to $256 million (174 million euros). In the textbook, it also shows the formula for calculating the profit margin ratio, which is net income/sales revenues. Philips ratio was 174 million euros/ 5.62 billion euros = 3.1% . This indicates that Philips earned 3.1% as profit of its revenues. Philips also planned to use holiday seasons to increase their sales.
Reflection:
Philips did a great job from a business point of view becaue analysts predicted that there would be a net loss but becaues of making the right decisions, cutting down expenses, made their net income increased. From my point of view, I think Philips was too cruel because they cut down 6,000 jobs. It means that 6,000 people lost there jobs and probably most of them are still unemployed because I think right now, the economy is still in recession. Many other electronics businesses would want to cut down expenses, so that means they won't hire new employees. Cutting down 6,000 jobs is a huge amount and this shows that Philips doesnt care about others, especially their employees. Philips' chief executive officer, Gerard Kleisterlee, makes about 1.5 million a year. In the report, he also said that he might even cut down more expenses if necessary. I don't think it is fair because he is earning lots of money while his ex-employees are suffering from losing their jobs. Gerard Kleisterlee is successful in his business but I think his way of operating a business is too cruel.
Connections:
Ch.2 talks about business transaction analysis and profitability ratios. It is necessary for a company to make important decisions from analyzing business transcations. Philips has analysis their transactions and made decisions on how to improve their profits. The sales in the third quarter period was not good because their sales went down by 5.62 billion euros but Philips still made net income. They cut down their expenses, for example, cutting 6,000 jobs and narrowing down the televisin unit's operating cost. Cutting down 6,000 jobs mainly increased their retained earnings which made their income increased to $256 million (174 million euros). In the textbook, it also shows the formula for calculating the profit margin ratio, which is net income/sales revenues. Philips ratio was 174 million euros/ 5.62 billion euros = 3.1% . This indicates that Philips earned 3.1% as profit of its revenues. Philips also planned to use holiday seasons to increase their sales.
Reflection:
Philips did a great job from a business point of view becaue analysts predicted that there would be a net loss but becaues of making the right decisions, cutting down expenses, made their net income increased. From my point of view, I think Philips was too cruel because they cut down 6,000 jobs. It means that 6,000 people lost there jobs and probably most of them are still unemployed because I think right now, the economy is still in recession. Many other electronics businesses would want to cut down expenses, so that means they won't hire new employees. Cutting down 6,000 jobs is a huge amount and this shows that Philips doesnt care about others, especially their employees. Philips' chief executive officer, Gerard Kleisterlee, makes about 1.5 million a year. In the report, he also said that he might even cut down more expenses if necessary. I don't think it is fair because he is earning lots of money while his ex-employees are suffering from losing their jobs. Gerard Kleisterlee is successful in his business but I think his way of operating a business is too cruel.
Monday, October 12, 2009
Ch. 2 Philips Posts Unexpected Profit on Consumer Unit
http://www.bloomberg.com/apps/news?pid=20601085&sid=aAhnL9S2vhss
Summary
Royal Philips Electronics NV posted a profit in the third quarter as operating earnings at the consumer unit more than doubled. Its net income jumped to 174 million euros from 57 million euros in the year-earlier period. Amsterdam-based analyst at Kepler Capital Markets, Peter Olofsen, said that he was surprised because Philips are coming out of the recession more strongly than he thought it would be. In July, Chief Exective Officer Gerard Kleisterlee slash 6,000 jobs and said that he would cut even more expenses if necessary. Philips will focus its restructuring on the lighting and helath-care units next year. Also, the television unit's operating loss narrowed to 26 million euros from 73 million euros last year.
Connections
In Ch.2, the textbook talks about business transaction analysis and profits. It is important to a company to make decisions from business transactions to help improve earnings for the business. Philips has analysis transactions and made decisions on how to improve their profits. They saw that the expenses are a problem, so they cut of 6,000 jobs. They also have a plan on what needs to be narrowed down, for example, the television unit's operating cost. Philiphs have earned more profit in the third quarter period from increasing sale transaction and lowering expenses.
Reflections
I think it is important for businesses to do transaction analysis because it helps owners to understand what is the problem in the company. There are many big corporations that do transaction analysis because they use the analysis to help them make decisions. In the past, I've been to an accounting firm for career prep and I saw that some big companies' owners come to see how their business is doing. Those companies rely on accountants to help them analyze the transactions to decide what accounts are affected and by how much. Those companies are really sucessful because they understand the importance of transaction analysis.
Tuesday, September 15, 2009
Chapter 1 - Auditor: Earthquake funds spent properly
http://www.chinadaily.com.cn/china/2009-09/15/content_8690848.htm
Summary
Auditors hired from the National Audit Office (NAO) for the Sichuan earthquake funds announced that 14 reconstruction projects had been finish and 62 projects are on its way. The reconstructions includes rural houses, schools, transportation, power and power grids, irrigation and telecommunications projects. There were no major legal breaches but NAO did found some reconstruction fund problems. Anxian country in Sichuan enlarged its losses from the earthquake when planning dike construction. At first, the central finance gave an extra 15.5 million yuan but after auditing Anxian refunded the money. Another problem was in Wenchuan where it applied for 2.6 million yuan for the repair and reinforcement of six residential buildings, but the real cost was just more than 900,000 yuan.
Connections
In the first chapter, the textbook gives the definition of an auditor: a professionally trained accountants who add credibility to the financial statements fairly present the company's results.
This article reports about the Sichuan earthquake, where people are not being honest about the funds, so the NAO hired auditors to look at the projects and funds. In the article, it shows that auditors are really important because auditors helped saved lots of money and to give those money back to the people who really needed help.
Reflection
I feel that auditors are really important and professional after reading this article. I believe in China and many other places in the world, lot of people are taking advantage of their power for their own good. Many people exaggerate the amount of money and take the money for themselves. It is not fair to the people who really needed the money. It is a good thing that more auditors are being hired to examine projects and companies because it can help lower the amount of legal breaches and to provide fairness presentation.
Summary
Auditors hired from the National Audit Office (NAO) for the Sichuan earthquake funds announced that 14 reconstruction projects had been finish and 62 projects are on its way. The reconstructions includes rural houses, schools, transportation, power and power grids, irrigation and telecommunications projects. There were no major legal breaches but NAO did found some reconstruction fund problems. Anxian country in Sichuan enlarged its losses from the earthquake when planning dike construction. At first, the central finance gave an extra 15.5 million yuan but after auditing Anxian refunded the money. Another problem was in Wenchuan where it applied for 2.6 million yuan for the repair and reinforcement of six residential buildings, but the real cost was just more than 900,000 yuan.
Connections
In the first chapter, the textbook gives the definition of an auditor: a professionally trained accountants who add credibility to the financial statements fairly present the company's results.
This article reports about the Sichuan earthquake, where people are not being honest about the funds, so the NAO hired auditors to look at the projects and funds. In the article, it shows that auditors are really important because auditors helped saved lots of money and to give those money back to the people who really needed help.
Reflection
I feel that auditors are really important and professional after reading this article. I believe in China and many other places in the world, lot of people are taking advantage of their power for their own good. Many people exaggerate the amount of money and take the money for themselves. It is not fair to the people who really needed the money. It is a good thing that more auditors are being hired to examine projects and companies because it can help lower the amount of legal breaches and to provide fairness presentation.
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