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.