Posted by: | 20th Oct, 2010

Common Sense in Action

While it may be difficult to find an article on the difference between managerial accounting and financial accounting (since that belongs in a textbook rather than a newspaper) I did manage to very quickly find an article that gives a good example of managerial accounting in action.

Take a look at it here:

To summarize, this is the story of a web design company that made the switch to a software-selling company. Once selling software became more profitable than doing web design for clients, management made the decision to focus on that area.

This is a prime example of managerial accounting, where we make the best decisions with what we have. This company had the accounting data that showed that software was making more money and that this area was growing. Based on this, they made the decision to focus on software only. This may seem like a very basic example that is just common sense, but as Mr. Kroeker told us, that’s what managerial accounting is all about.

When Murray Carlson spoke to our class last week, he asked us to remember one of three things about finance. One of them was this: financial markets allow you to move value through time. He had a great example that had to do with receiving guaranteed money in the future, and transferring that value to the present.

When I think of this aspect of finance, I think of saving for retirement. Saving is giving up a portion of your current wealth so that you may use it in the future. I’ve always thought of most types of investments as a type of savings. But the more I think about the way many people invest their money, the less I think of it as savings and the more I think of it as gambling.

When I see article after article detailing how you should still buy gold or that copper is the next metal to skyrocket, I realize that many people aren’t looking to transfer value through time in financial markets. They’re looking to multiply value quickly. That’s why business articles talk about dramatic short-term changes in financial markets, because people are interested in the short-term.

I don’t have any specific article to link to; this was just a thought of mine.

Are financial markets the wrong tool for the job of quickly multiplying wealth? Maybe lotteries are more suitable.

Posted by: | 5th Oct, 2010

MIS in Action

After today’s lecture on MIS (Management Information Systems) I went home and tried to find an article relevant to the topic. It didn’t take long, and in fact the article I found shows the dramatic effect that MIS has on decision making and our lives.

I encourage you to read it here:

What essentially happened is this: a single program used by an investment firm to carry out trades got an automated order to trade $4.1 billion worth of stocks, which it did within 20 minutes. This triggered a huge wave of selling that made major index stock prices drop by 5%.

I thought this was an excellent example of how much MIS is used and how relevant it is for everyone. In this case, MIS was not only used to help managers make decisions, it made those decisions itself. It’s interesting that MIS can be so sophisticated that it can be made to automatically take certain complicated actions in complicated situations. For the most part those actions are the right ones, but here it obviously led to a disaster. I suggest that we shouldn’t rely on technology to replace our own brains in most cases.

It only took a single computer.

I found an article recently on The Globe and Mail’s website that completely slammed Canadian universities, and the way that most universities manage themselves. The main point that it made was that universities place almost no importance on the teaching ability of professors, which can dramatically affect the quality of education that students receive.

For the full article, follow this link:

I thought this article was very relevant to both myself and the people who might read this blog, so I thought I’d share my opinions on some of the points in the article. Although I’m in my first year and I have only experienced four different courses, I have seen the professor who puts little effort into his lectures, as well as the one who is engaging from start to finish and provides valuable insight into the material (like the ones in COMM 101).

A few weeks ago I told my father that I might as well not attend the lecture of a certain course, because my time would be better spend reading the textbook. He told me that that was what university was all about; you teach yourself. I accepted that this was just the way it is, but after reading this article I am starting to question whether or not to accept this. Why can’t all my classes be as stimulating as COMM 101? To me that is the ideal course. Even though it has 150 students, we all participate in a variety of ways, and each class gives us valuable lessons not just in certain areas, but in how they all fit together. If more and more courses were formatted like this one, learning would be much more engaging, interactive and enjoyable.

Posted by: | 26th Sep, 2010

Revisiting the Enbridge Case

This blog post is a follow up to the last one I wrote about Enbridge’s oil line bursting and spilling a huge quantity of oil into a Michigan river. After further investigation it turns out that Enbridge may actually not be at fault for the incident, or at the very least not completely at fault.

For the full article, follow this link:

There were a number of breaches of protocol in the construction surrounding this oil pipeline, and it seems that the municipal government where the spill occurred is to blame for these. The offenses include large rocks surrounding the pipeline, a municipal water line too close to the pipeline, and heavy traffic on the road above the pipeline.

I thought it was important to follow up on this story, especially since I was very critical of Enbridge in my earlier post. I was talking about business ethics, and I don’t believe that showing the incomplete story is the very ethical.

Enbridge Inc. recently spilled 19 500 barrels of oil into a Michigan river, and this incident could certainly have been avoided. The company was aware of hundreds of potential problem-spots in the particular oil line that burst, but it only took proactive action to maintain the line on a few of these spots.

For the full article, follow this link:

I also encourage you to check out Enbridge’s corporate overview off of their site:

I’d like to talk a bit about the ethics of Enbridge and maybe why they allowed this to happen. This company is based in Calgary, and let’s assume that the company executives would feel some sort of responsibility not to contaminate Albertan rivers with oil. It is their home province, after all. But I doubt they would feel as strongly with regards to the US. I would suggest that this lack of a sense of responsibility might be one factor why they did not repair the pipeline. If it’s cheaper to let it rot and just patch it up every time there’s a leak, and it’s far from your back yard, why not? Maybe ethics is dependant on location.

Posted by: | 9th Sep, 2010

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