Chapter 6: Cash, Short-Term Investments, and Accounts and Notes Receivable

Rising loonie will drag down economy
http://www.ctvbc.ctv.ca/servlet/an/local/CTVNews/20090529/Canadian_dollar_090529/20090529?hub=BritishColumbiaHome

summary:
This article mainly about how and why Canada’s currency raced higher versus the U.S. dollar affects Canada’s economy. Although the rising value of Canadian dollars is good for people spend holiday in the states, it may insert negative influence on nation’s manufacture and export. If the dollar continues to swell, there may be a massive $50-billion federal deficit in the coming up months. The last rise in Canadian dollars in 2007 is quite different for now because the last surge was caused mostly by the rising prices for oil and commodities, and this reduced the losses in Canada’s manufacture and export industries. However, the rise this time is because of the losing faith in the US dollar, which means the high export prices and low commodity prices can really affect Canada’s economy.

Connection:
This chapter is mainly about what can be done with excess cash on hand, and there is a small section about how the changes in purchasing power, which is the currency, can affect a company’s cash. With the rising value, Canadian manufacture is affected the most because American people may want lower prices commodities from other countries. Amid the economic crisis, most people are losing faith in the US dollar and stop hoarding it, as a result, the purchasing power for the US dollar drops tremendously, the face value for other dollars will not change, but it is affecting most countries economy if the US dollar drops.

Reflection:
Low commodity prices, high export prices and surging manufacturing costs could drive down corporate profits this year and further diminish Ottawa's tax base. This is because investors have started to unload the currency because of continuing signs that the worst of the global recession may have passed. Since it is a hard time for most manufacturing and export industries, government can have short-term investment on these industries to prevent the shortage of cash.

Chapter 5: Cash Flow Statement

DPS gets $169 million loan to aid cash flow

http://www.detnews.com/article/20090501/SCHOOLS/905010428/1006/rss01

Summary:

This article mainly about Detroit Public School in the United States says they need loan to assist with the district’s cash flow so that they can pay their employees and vendors. Financial manager Robert Bobb said they were seeking a four-month, multi-million loans to get through the financial crisis and the loan would be “a major boost to [their] cash-flow issues”. Besides, the Detroit Federation of Teachers union says that if Bobb pushed to restructure teacher compensation, they may strike this fall, even though it is illegal. Both sides of them need to work hard so that students are least affected. Now they are willing to work together to resolve the district’s $306 million budget deficit.

Connection:

This chapter is about cash flow, which could affect a company tremendously because cash flow is important for a company to pay its accounts receivable and meet other needs. Amid the economic crisis, most companies are facing the problems of inconsistent and unstable cash flow. This article reflects the importance of cash flow for a school by showing what will be the consequences if the need of cash flow is not met. Also, when the school is running out of cash, it ask the states for loan in order to get through it, which relating to the financing activities of it. Just like a company, the main cash outflow for a school is teachers’ wages. If employees are not paid, they might not be satisfied and work happily for the company. That is why cash flow is one the most important component of a healthy company.

reflection:

Cash flow reflects the performance of a company with a stable and consistent cash-to-cash cycle and it is related with a company’s policies and management. During the current economic recession, cash flow is particularly important for a company since most of a company’s daily activities involve cash. For DPS, it may have to face many more problems if there is not loan to aid its cash flow. Concerning to the importance of cash flow, a company should have proper policies and management of cash flow and pay attention to the long-term effect of cash-shortage.