Wednesday, March 4, 2009

Chapter 15 Blog

http://www.forbes.com/2009/01/30/honda-loss-guidance-markets-equity-0130_markets03.html

Summary
This article is about how Japanese automakers are suffering a $3.7 billion lost. The Detroit Big Three automakers had loss a lot of money after a year, Japanese also followed along. Why? This is because there is a lower demand from the west, and also due to the recession in Asia and Brazil; thus, it is dragging Honda down. However, it claims that Honda will be able to remain safe although there is such a great loss. They're planning to take out 140 billion yen for the full year ending, since the company had a profit of $472.6 billion for the first 9 months of the fiscal year. However, it expects a loss of 332.6 billion at least for the next quarter. On the other hand, there is a bright side of Honda's result. Their sales for motorcycles had gone up by 5.8% ( mainly because of the sales were doing well in Asia - especially Indonesia and Brazil), while their Honda vehicles' sales went down by 5.1% (because of the US , Japan, and Europe recession). In the end, their third quarter revenue went down by 16.8%, and had a net income of 20.2 billion yen (11.16 yen a share).

Relation to the chapter

In this chapter, we learned about analyzing financial statements to check out how a company is doing. While reading the above article, a lot of numbers were shown with regards to their sales and profits. As according to the chapter, these figures can be used to show how much a company had improved and how much a company had done not as well. Specifically, these figures can be plugged into formulas to find ratios (quick ratios, equity percentages, debt ratios..etc) to compare the ups and downs of the progress of a company. These will let outsiders (bankers, creditors, perspective investors, shareholders, or governor agencies) have an idea of how the company is doing, and whether or not they should invest or lend money to the company.

Reflection

I think seeing all those big numbers listed in the article was quite shocking. It would be pleasant if they company was to gain those big digits, but sadly, they are losing that much of an amount. I think that kind of loss is due to the recession we're having right now around the world. Everything is going under inflation. In addition, the economy right now isn't doing well in general. Many businesses are closing down because of that. Just like one of my uncles in Hong Kong, he has his own car business too. However, because there is low in demand for cars because of the recession going on worldwide, he wasn't able to continue on the business(since he has a great loss of profit). I really hope to see the economy jump out of recession soon.

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