Summary Blog

http://ctv2.theglobeandmail.com/servlet/story/RTGAM.20090403.wusjobs0403/business/Business/businessBN/ctv-business

Summary

This article is a perfect example as to how hard hitting the economy is in the United States. Never has the U.S. experienced such a great amount of job losses in the month of March since the year of 1983 and this particular amount of job losses does not even include now part-time workers and discouraged workers. Ever since December 2007, when the recession first began, more than half of the total job losses occured in the last five months. Out of many struggling industries, only education and health care careers have had job gains. Analysts believe that if the recession ends this year, the economy will remain fragil and vulernable. It would be likely be that any side effects of this recession will last and finally dissolve in 2013, leaving a huge number of people out of work.

Connection

As I read the article, several connections to our accounting textbook was made. Companies cut back on employees to reduce their wages expense and not only so, hours are often reduced or in some cases, frozen. As stated in the article, employees are hoping that their payroll deductions will be less than before, which should be the case since a smaller gross pay does not allow as much room for deductions (such as a smaller amount for taxes to be based upon). While being laid off seems to only have a negative effect on the victim, the employer has to go through a series of steps to lay one off. This includes continuing to contribute to the employee's RPP, CPP, etc. A smart move to reduce the amount taken in from loans is to lower its lending rate. This would allow a company to work under a lesser loan and still manage ok. Since only education and health care are doing fine at the moment, other industries that require inventory to be stocked will be under more debt because if people are not making as much money, they will be reluctant to spend on luxury items. In the end the store will not fare well and individuals will not have the ability to purchase desired items. Debt will be amounted in no time, the credit line of a company will be given a bad rep and make money-lending companies hesitant to lend to you.

Reflection

Since so many industries are laying off workers, it really makes one wonder if they would be able to hold onto their job and pertaining to youth coming out of university, would there be positions that allow them to exercise what they have learnt? Individuals who have had their hours cut or wages frozen may look like they are the only ones on the bad receiving end but that is not true. Employers are going through an equally tough time, often questioning their company's ability to ride out of the recession. Although I do not have a job, family and friends do and at the time being, things look extremely grim. Looking at the number of laid off employees in the U.S., I wonder when Canada will go through the same drastic situation. On the otherhand Jim Flaherty, Minister of Finance in Canada states that Canada's recession is in a mild stage, which I think not. Perhaps it is when compared to other countries (ie. United States) that Canada is not in a tough time but the majority of the news, newspaper and everyday chatter reminds us of what we are going through.

Chpt 16 Payroll Accounting

http://www.cbc.ca/money/story/2009/03/04/chrysler-layoffs.html

Summary

It seems like nowadays all we hear about is the recession, job loses, financial aid, and so on. This unfortunately applies to Chrysler as well. In Windsor, Ontario, Chrysler's minivan assembly plant is about to lay off 1,200 employees and has plans to close down the plant as well. The layoff of employees is set to take place on June 24th, 2009 and the closing of the plant will further depend on the auto market. If all goes well, the plant stays. If not, it will be swiftly removed no later than in July or August. At the moment, this particular minivan assembly plant employs 4450 hourly workers and to remove 1200 of these workers narrows things down to only 3250 employees. To attempt to save the plant, Chrysler has scaled down over 30% of its capacity and has asked the U.S. and Canadian government to bail them out.

Connection

In this article, it talks about individuals getting laid off and it may seem easy to lay off an employee, but it is not. There are several procedures that companys have to abide by. When one is fired, he or she is put under the Unemployment Insurance Act as well as other procedures that all employees have the right to. This particular Unemployment Insurance Act is a fund where small amounts of the worker's paycheck is deducted and put into this fund in order to aid the struggling recipient. While being laid off, the individual will not have to worry about running out of money and hopefully finds the motivation to seek for a new job.

Reflection

Many people's job positions are in danger right now and with the government busy saving themselves, one can only rely on themselves. Fortunately, with the small deductions from each paycheck received, it is comforting to know that there is a small amount of money saved up to, hopefully, last until a new job has been found. Personally I feel that people should save a portion of their paycheck each and every time in case of emergencies, which would allow for a bit of breathing room and less anxiety. As to the workers being laid off from Chrysler's minivan assembly plant, perhaps a job outside of the car industry would be best, seeing that cars are not doing very well at the moment.

Chpt 15 Analyzing Financial Statements

http://www.cbc.ca/money/story/2009/02/27/canwest-deadline.html

Summary

The current economic recession has finally affected several broadcast stations and in this particular article, the media Canwest Global Communications Corp. Canwests' lenders have agreed to, under such circumstances, extend a debt repayment by nearly 2 weeks from this Friday and to discontinue its credit line to $112 million dollars from a previous amount of $300 million. With this surplus of time, Canwest will be able to resume work normally and is currently in the process of negotiating for a longer deadline. Not only will Canwests' bankers negiotiate with its lenders, it will begin to cut back on operating costs (also known as expenses). Although cutting back on operating costs is a step in the right direction of avoiding bankrupcy, debt left due to the purchase of Alliance Entertainment company and former Southam newspaper has begun to take a toll on their ability to meet the minimum repayment figure of $100 million. In order to ease some of the debt that has accumluated, Canwest has put five of its E! television stations for sale but none has been sold yet. The ultimate price? Bankrupcy.

Connection

The content of this article relates to the content of Chapter 15 by allowing us to see what bankers look for when the company they have lent to is in a position of not being able to repay its loans. Bankers, an outsider of companies, may then not lend money to Canwest in the future due to its inability to meet deadlines. With the closest deadline being 12 days after February 27, 2009, the decision to sell its assets to gain some profit is a smart move. Another factor Canwest and businesses in general should have kept in mind when it purchased other companies would to question its profitability and whether or not they are indeed beneficial to yourself. If the answer was 'no', then it would be somewhat a warning that it may be a burden.

Reflection

It is unfortunate to hear that Canwest may go bankrupt, but I believe that before buying other businesses, one should consider if it is worth it or not. Questions should be asked and careful examination of finanacial statements need to be taken into account. On a brighter note, it is great to see companies have the ability to purchase another for it shows that money is not an issue and management decisions made are in the right direction to continue to grow. Hopefully, Canwest will be able to pay off part of its debt and make decisions based upon its comparative financial statements.