Chapter 5 (Accounting News)

http://www.forbes.com/feeds/afx/2009/04/06/afx6257611.html

Summary:
GM's Saab will seek to write off three quarter of its unpriorited debt inorder to boost its cash flow statement to make a positive amount by the year 2011. The news basically talked about the company had several meetings and tried to find out the solution to boost its cash flow. The company wishes that based on written off the debts, they will have a positve cash flow by the year 2011 and also have a great amount production of cars in return.

Connections:
The Cash Flow Statement theory had provided us that if a company's amount of cash flow is greater than the amount of Income Statement, then we will consider the company's earnings to be of high quality. But if the cash flow is less than the net income, we consider the earnings to be low quality. Based from this theory, we could easyly tell how imporant the cash flow statement is for a company's operating system; even more imporant than the revenues itself sometimes. Maybe from this point you are wondering what a Cash Flow or a Cash Flow Statement is. The definition text book gave us is: the net change in cash that occurs from the beginning of an accounting period to the end of the period. And the cash flow statement must go at the similar rate with the income statement, if not, the company might be losing money or have a low quality earning. The news "GM's Saab seeks debt write-down to boost cash flow" showed us how hard the company had tried to boost its cash flow. The company's operting, financing and investigating rate all goes with the cash flow statement. The court-appointed aministrator of GM's Saab had clearly stated out that the company will seek to write off 3 quarters of unpriorited debt inorder to boost its cash flow, and of course, make the company in a better level.

Reflection:
It is very imporant for a company in Financing Crisis time to get a positive cash flow statement. But it is very hard and risky to make decision that will shift its cash flow. The company had found a solution to boost its cash flow, even though we are not that sure by now if the method is really going to work. I personally think it is a great decision that the company made. Their decision might be wrong, but at least they tried. They already had a negative cash flow and a little more lossing won't change much. But if they are successful of their new method, they could have a high earning quality. They could make better products, make more money from it, and becoming better will be the trend of the company in the future.