Chapter 3

http://www.marketwatch.com/news/story/Qiao-Xing-Universal-Telephone-Inc/story.aspx?guid=%7B88C6EC20-1D23-4A82-8347-2B88F34DAF82%7D

Summery:

This is news basically about how the net profit of Xiao Qing Universal Telephone, Inc in China had dropped dramatically from the year 2007 to 2008. The net non-operating income for the company n 2007 was 11.9 million, compared to 524.0 million in the same period of 2007, represents a decrease of 512.1 million. Xiao Qing Universal Telephone Inc is the largest manufacturers and distributor company of telecommunication in China. It had a strong net comprised of more than 5000 retail stores throughout China, and the company also has a strong partnership with many major retailers in Europe, North America and Latin America.



Connections:

This news is one of the significant examples for Extraordinary item. Extraordinary item could be defined as a gain or loss that is unusual, infrequent and not caused primarily by a decision made by someone inside the company. No one ever thought that the Net Profit of the company would drop for more than 90% in just one year. It is unusual for this company is moving from a well processed organization to a company that is nearly bankrupted. The pace of dropping of the company is so fast that no one could believe it is happening. This is one of the reasons that it is infrequent. It could not be a decision made by someone inside the company because I don’t believe that the CEO or someone that hold professional financial managing skills could make a decision that made the company lost 90% of net profit in only one year. That is unbelievable.



Reflection:

I think the reason for the significant loss of net profit of Qiao Xing Universal Telephone Inc probably relates to the Economic Depression in America. As I mentioned before, Qiao Xing Universal Telephone Inc had a strong partnership with many retailers through out North America and Latin America. As the economy of America goes down, companies in foreign countries such as China also could go through a downfall period.

Chapter 2

Asia, Europe close ranks to ease financial crisis

http://www.guardian.co.uk/business/feedarticle/7925372

Summery:

This is news about how the Chinese government was trying to get any resources and means to help to ease its domestic financial crisis. The Chinese government already pledged about $4 trillion to help the banks and restart money markets in order to prevent deeper financing crisis in the future. The Prime Minister Hu, Jing Tao said:” We must use every means to prevent the financial crisis impacting growth of the real economy." He also said that countries need to strike a balance between innovation and regulation and between savings and consumption.



Connection:

Ruling a country’s finance is just like managing a big company. No one would know what would happen next. But still, some basic accounting rules and formulas are very important and necessary to use. The Balance Sheet format could be used by an organization as small as a company or as big as a country. Like the Prime Minister said, that the Chinese Government must strike a balance between innovation and regulation and between savings and consumption. He is right and that’s the way any managers or board of directors should rule the company, to make as many profits and use as less consumption as they could. Make the “asset” increase, the “liability” decrease in order to increase the “shareholder’s equity”. And in this case make the whole country’s equity increase.


Reflection:

Well, I believe that the Chinese economy will rise in a fast pace for the Prime Minister Hu used the right method the manage it. He is trying his best to save money for the country. He established money markets for security and also to make more profits in the future. He reduced the expenses and consumption of the country as much as possible. I think that China is in a huge financial crisis right now probably has the Olympic as part of its reason. China spent a lot of money and also manpower in building the “Bird Nest”. The biggest and the most comfort stadium in China and also the world. I hope that Prime Minister Hu would realize after this event that save more money for the country’s own use is much more important than have a huge and fantastic Olympic Opening Ceremony.

Chapter 1 (news)

AIG Falls on Prospect of Federal Takeover, Curbs on Dividends
By Hugh Son and Erik Holm

Sept. 17 (Bloomberg) -- American International Group Inc. lost 44 percent of its remaining value in early trading after investors learned that the U.S. rescue will curb the insurer's dividends and wipe out most of their stake.
AIG fell $1.66 to $2.09 as of 9:17 a.m. in New York. The U.S. plan to save the New York-based company, the nation's largest insurer by assets, may give the government an 80 percent stake in return for an $85 billion loan, and dividends may be halted to common and preferred stockholders. They're already reeling from a 94 percent drop in the common shares this year.
The ``punitive'' interest rate on the two-year loan ``makes it extremely clear that this is not a subsidy extended to keep the company afloat but rather a stranglehold that makes AIG unviable while ensuring that its obligations will be met,'' said Marco Annunziata, an analyst at UniCredit SpA, in a note to clients. ``This is to all extents and purposes a controlled bankruptcy.''
AIG unraveled as the worst housing crisis since the Great Depression led to more than $18 billion of losses in the past year. A meltdown could have cost the financial industry $180 billion, according to RBC Capital Markets, because AIG provided insurance on more than $441 billion of fixed-income investments held by the world's biggest institutions, including $57.8 billion in securities tied to subprime mortgages.
The U.S. reversed its opposition to a bailout of AIG, after private efforts collapsed and the Federal Reserve concluded that ``a disorderly failure of AIG could add to already significant levels of financial market fragility,'' according to a Fed statement late yesterday.
``It's an enormous relief,'' said David Havens, credit analyst for UBS AG in Stamford, Connecticut. ``Nobody really knows what it would have meant if they would have been allowed to fail, but there was an enormous amount of systemic risk. The problem was, nobody really knew how bad it could have been.''
To contact the reporters on this story: Hugh Son in New York at hson1@bloomberg.net; Erik Holm in New York at eholm2@bloomberg.net.
Last Updated: September 17, 2008 09:25 EDT

Summary:

AIG is at the downfall part of it’s business. The company couldn’t keep operating and its stock value dropped from $3.75 to $2.09 in September 17. This company created another depression period for the US citizens other than the one in 1920s. The US government is trying to save this New-York based company by lending them $85 billion loan. And in return they wanted 80% of the government’s profits. They also halted the dividends to the shareholders.

Comment of this news:

The sad thing with business is that almost everybody is saving themselves when they meet troubles, even the government. AIG is in a low condition right now that they couldn’t get enough money to keep operation. The government lend them $85 billion for rescue. But in return they wanted an 80% stake. The business also halted the dividends that were supposed to be given to the shareholders. In my personal opinion that is extremely unfair. They are the one who invested in the business and operates it. In other word, without them the business couldn’t even get started. But at the end they can not get what they were supposed to be getting. The government didn’t finance, operate or invest in the business, but at the end they get most of its profits.

Reflection:

Business is all about risks and smart brains. Doing a great business depends on decision making, and it is the most important issue in managing and running a business. For example the Management and Board of Directors have to decide how many shares does the company want to have? How much dollars per share? And for an insuring organization, what amount of money should they give to different levels of accidents? How much money should they collect from the selling of insurances in order to make the business profitable? These decisions could lead the business into a huge success, a non-profitable company, or such a disaster. I think AIG didn’t have a great effort today is because the wrong decision making which started by it’s biggest shareholder "Hank" Greenberg. It is said in newspaper that “he built AIG into a global behemoth during his four-decade tenure, in part by expanding into complex lines of business and insuring risk that few would dare to touch.” This wrong decision made the company went down-hill.

First time ever......

eh.....Hi!~~~