Chapter 1

http://webcenters.netscape.compuserve.com/news/story.jsp?floc=FF-APO-1310&idq=/ff/story/0001%2F20080915%2F0026350228.htm&sc=1310

Summary:

The country, in which we all look up upon, United States, was experiencing a major financial crisis in one of their largest investment banks – Lehman Brothers. The Lehman Brothers is the world’s largest investment bank and it was hopeless to rescue for which it couldn’t withstand the large impact of reality - the financial crisis they tried to resolve due to over investments in real estates. The Company had to announce bankruptcy after the U.S Treasury refused to provide a budget of investment into the company as a takeover. Lehman Brothers had to find another way but nobody insisted on helping them. However, Barclays and the Bank of America withdrew their shares in the company and raised their direction into buying the Lehman Brothers investment bank instead.

Connections:

The Lehman Brothers have ties to many connections from our Financial Accounting textbook, A User Perspective. The textbook is mostly referring to how companies manage their business and operates. The company of Lehman Brothers reflects deeply on how businesses function. In other words, the cash flow statement of the company was low on budget and couldn’t continue any longer. The cash flow statement is fairly relevant in a company’s financial position. It calculates all the inflows and outflows of cash between a particular period of time. Also, the internal users of Lehman Brothers, including the Management and Board of Directors, were deeply seeking financial aid and investment towards the company. All their External Users were turning away from them. In other words, all their shareholders, potential investors, creditors, regulators, taxing authorities, their competitors, security analysis, and credit-rating agencies were all turning the Lehman Brothers down.

Reflection:

From reading this article on how the Lehman Brothers had to overcome a financial crisis from misinterpretations of the real estate markets, I cannot say that their direction towards financing it is correct. In my opinion, real estate market prices range from a variety of situations. For example, someone might have overpriced their home in order to gain the most quantity of money they make. However, the Lehman Brothers should not have had such a large investment in real estates. You never know what will happen the next day with real estate prices. It is a hazardous investment to gamble upon. In other words, the bankruptcy of Lehman Brothers wasn’t surprisingly unexpected due to the huge financial crisis it was trying to overcome. AIG, for example, had the help from the Bank of America, because it was the largest insurance company in the world. If it announced bankruptcy, the world would have came to an end and the U.S economy would drop hysterically. Then, other countries would follow into the footsteps of them. After all, U.S is called the “Brother Country” of the world as to helping out other countries. Even if the Lehman Brothers considered bankruptcy, there are still so many different kinds of investment banks in the world, even in U.S, there are the top ten industrial banks.

Article Summarized by
- Jillian Mak

First Blog of the Year

Well, this is my first blog of a new school year and University is just around the corner. Good Luck to me in Grade 12, this year!

Have fun in Financial Accounting everyone! I know there's quite a big chunk of vocabulary and terms to memorize but as long as you're dedicated to doing something, nothing can stop you from reaching success!