Chapter 6 Blog

http://www.financialpost.com/news-sectors/story.html?id=1631822

Summary

This article reports on Chryslers recent drop in sales in the month of May compared to last year. Sales dropped a whopping 55% compared to the same month as last year. Chrysler filed for creditor protection in the United States on April 30. As a result of filing for creditor protection, its North American assembly lines are shut down as the court process continues. Cash is at a shortage for Chrysler and they are desperately finding ways to increase sales. On May 7, Chrysler introduced a new “pay break” program which offers to cover up to $500 of a buyer’s monthly loan payments for three months. This new “pay break” program has not made a significant difference in sales yet.

Connections

I connected this article to the internal control part of the chapter. With assets definitely declining for Chrysler, Management needs to make some key decisions on how to handle this problem, as Management is responsible for safeguarding the organizations assets. Properly handling Chrysler’s assets is very important if Chrysler wants to continue operating. Cash is a major problem for Chrysler as they are in a shortage of it. New policies and procedures are already being implemented by the Chrysler Management to protect their assets. The Chrysler Management needs to efficiently utilize the major assets of Chrysler to succeed these rough times.

Personal Reflection

I think that the next couple of months are very important for Chrysler. If sales do not increase for Chrysler, they could possible lose their assets depending on how much debt they are in. Managing is going to be critical if Chrysler wants to continue operating. Keeping expenses at a minimum and saving cash is what Chrysler will need to do. I feel that in the near future Chrysler financial position will improve slightly. I feel that their financial position will improve because they will have an increase in sales. I think that the consumer confidence in the automobile industry will rise somewhat, which will gain some much needed customers for Chrysler.

Chapter 5 Blog- Canada's airlines struggle to fill their planes

http://www.canada.com/business/fp/Canada+airlines+
struggle+fill+their+planes/1469384/story.html

Summary

The article reports that Canada’s largest airlines are struggling to fill their planes with passengers. Air Canada and WestJet Airlines are seeing a decrease in passengers compared to last year. The declines in demand for air travel have caused the load percentage of Air Canada to drop by a whooping 13.5 percent, and WestJet Airlines to drop by 8.6 percent. The weak economy and the low consumer confidence are definitely the major causes for the decline in passengers. In order to cope with the decline in passengers, Air Canada is reducing capacity in 65 percent of their airplanes. However, WestJet Airlines has not taken any measures to deal with their slump in passengers.

Connection

Chapter five stresses that the cash flow of a company must be healthy in order for the company to continue operating. The decline in passengers has definitely caused the cash flow in Air Canada and WestJet Airlines to decrease. If things continue to run downhill, Air Canada and WestJet Airlines will have trouble covering their everyday expenses. This will ultimately lead to major problems in the future for both companies if they do not find a solution. Air Canada is trying to solve their problem by reducing the capacity in their airplanes to fill them up, but only time will tell if it will work.

Personal Reflection

I feel that Air Canada and WestJet Airlines need to desperately find a way to increase their cash flow. With the weak economy, they cannot depend solely on their ticket sales to keep them operating. They must keep their expense levels at a minimum in order to survive. The future is critical for these companies and every decision they make is very important. Air Canada is reducing capacity in their airplanes, but WestJet Airlines has not decided to do anything yet. In order for WestJet Airlines to continue operating, I feel that they must make a quick and intelligent move.

Chapter 4 Blog- Vehicle warranty scam picks up speed

http://autos.canada.com/news/story.html?id=17fbd1fe-af08-4e73-8c74-f22d8e40ee69

Summary

My blog is about a recent vehicle warranty scam that is rapidly picking up momentum in Canada. A number of Canadian citizens are receiving phone calls from a U.S. firm representing itself as “Warranty Center” which is offering vehicle warranty. An automated message has been dialling up cell phone numbers and land lines, telling people that their warranty will expire in two days and they have to make an immediate credit card payment over the phone. The scam claims that the customer’s vehicle information was provided by the vehicle manufacturer, so the customer believes that the information provided by the scam is official.

Connections

I connected this article to the warranty service part of the chapter. Almost all automotive companies such as Ford, GM, and Honda offer warranty services to their customers to gain revenue. However, with this recent warranty scam customers are going to be hesitant to buy vehicle warranty. With the downturn in the economy as of late, automotive companies cannot afford their customers to pass on buying vehicle warranty from them. At the end of the accounting cycle, automotive companies are going to see less revenue coming in due to this scam. With big automotive companies like GM and Chrysler already going bankrupt in the States, what can we expect to happen to the automotive companies in Canada with all these scams surfacing and hurting our economy?

Personal Reflection

I think that this warranty scam occurred at the worst time possible. Automotive companies currently are seeing a decrease in revenue from previous years, and this certainly does not help to increase revenue. If things do not get better for automotive companies, it seems that Canada’s automotive companies may end up like the States. I think that the government may need to bailout some major automotive companies in the future with all these troubles surfacing for them. Automotive companies may begin to cut employees, reduce salaries, and even decrease research to continue operating. I think that the government needs to crack down on these scams because they are affecting our economy as well as our citizens.

Harman Basra

Financial Accounting

Block B