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.

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.

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.