Financial Accounting 12 Chapter 1

World shares dive after Lehman Brothers collapse, banks shore up markets
Link: http://afp.google.com/article/ALeqM5hC6o2mty-SrA4ILQ8wMZGjIjLEDw

Summary:
This article I read mainly about world shares price plummeted as Lehman Brother (the giant Wall Street investment bank) filed for bankruptcy. Investors were in near-panic mode because of the collapse at Lehman and the recent purchase of Merrill Lynch by the Bank of America. This effect gave rise to the consequence that shareholders kept selling their shares because they afraid a similar situation may happen in other corporation too. Besides, some people concerned about other banks’ exposure to Lehman Brothers in Europe. Most countries were trying to rescue their markets. After the purchase of Merrill Lynch, Merrill shares rose 0.006 percent while Bank of America fell 21 percent.


Connection:
The connection for me is that in a corporation such as Lehman Brother, the shares of it can be easily transferred to another investor; one investor can sell and another can buy the shares in a given company, usually without affecting the company itself significantly. For this reason, when there is some situation like the one happens to Lehman Brother, shareholders will be getting panicky and busy selling the shares even in a lower price. This causes the share prices drop tremendously. Also, finance is not a personal issue, because it connects the whole world and people from different areas. A financial decision may affect a lot of things around it.


Reflection:
I was shock when I read this news because I didn’t notice that a corporation can affect the world that much. Besides, i realize that before making any decision about buying shares and getting involved in a company, we should not only take the company’s financial statements into account, but also the ability of that company of solving financial problems in emergency. Also, I realize that financial problems concern to a lot of aspects in the world, and it is not a local issue. When making financial decision, we also have to be considering the whole world’s situation.