Economics

The article that I chose was written by Steven Levy, a Newsweek Senior editor, called Mulling the Merger: Microsoft, Yahoo! And Google” Who do you antitrust? I felt that this article highlighted the roles of market structure for monopolies and that is why I chose this article. I felt that the article did a good job of pointing out the facts, while giving limited statistical information. In a way the article could also be considered an opinion piece on how Steven feels about the situation that Microsoft, Yahoo, and Google are in.

A monopoly is a firm that is the only seller of goods or services that do not have a close substitute. As we have talked about it throughout the semester we have yet to find anywhere where a monopoly exists. As we have discussed in class, one way that a monopoly is found is by measures of concentration. The main measure used is the Herfindahl-Hirschman Index. As Steven stated in his article, “if Microsoft combined its Internet assets with Yahoo’s, the combined companies would have an 85 percent share of portal front pages, an 80 percent share of Web mail, almost a 90 percent share of Web-based instant messaging, and by far the largest sites in business, music, sports and many other areas.” (Levi, 1) The Department of Justice and the FTC will more than likely challenge this because the post-merger HHI would be above 1,800.

I think that this could pose major problems for the smaller firms within this market, although I imagine there aren’t very many firms in this market. If Microsoft were to merge with Yahoo it would give them a clear advantage over their competitors. With the vast technological knowledge had within these two companies Microsoft would have a large shift to the right on the demand curve, whereas Google would probably have a shift to the left on the demand curve. Microsoft could also have a large shift to the right on its supply curve, while again Google would probably have a shift to the left on their supply curve.

Levy, Steven. "Mulling the Merger: Microsoft, Yahoo! and Google: Who do you antitrust?" Mulling the Merger 13 FEB 2009 Web. 20 Apr 2009. .

Ratio's

For this assignment I chose to do a financial analysis of Nike. I really enjoy Nike products and thought it would be a good chance to look more into the company and their finances.
The first ratio that I did was the gross margin percentage which was 44.6%. Since Nike is a retail company this shows that they have a stable gross margin so it would be good for their company.
The current ratio is found by taking current assets divided by current liabilities. Nike had current assets of $9.73 billion and current liabilities of $3.28 billion which led to a current ratio of 2.97. Since the general rule of thumb is to shoot for a ratio of at least 2 Nike is in good shape with a current ratio of 2.97. This is good because Nike is able to pay short-term debt.
The Acid-Test ratio at Nike is 2.81. This can be looked at as a good thing because this is a more in-depth measure of the company’s ability to pay debt.
The debt-to-equity ratio is 0.46. This is good because it shows that for every dollar that is provided by Nike’s stockholders, their creditors were providing 46 cents.
The average sales period was 85.68 days. This was found by taking 365 and dividing by the inventory turnover which was found by taking the cost of goods sold and dividing it by the average inventory balance. The inventory turnover was 4.26. For the industry that Nike is in an average sales period of 86 days is reasonable. This is good for the company.
The times interest earned ratio was 4.98. This is good because a times interest earned ratio of 2 or more is generally sufficient to protect long-term creditors.
I was unable to find adequate information to calculate the book value per share but the website where I found the balance sheet and income statement had the book value per share listed at 16.96. The market price was $57.92 so the stock may be overpriced. This could also be good because it often reflects expectations about future earnings.
The earnings per share are $3.73. This is a good indication that investors will have the chance to realize a return and possible make a profit.
I struggled to find the dividends per share information but I was able to find that the dividend yield ratio was 1.71 % and that the dividend payout ratio is of 33. The yield ratio is neither bad nor good because it is low. It is the same for the payout ratio since there is no “right” ratio.
The price earnings ratio is 15.53. The stock is selling for about 15.53 times its current earnings per share.
The return on common stockholders’ equity is 18 %. The return on total assets is 11.94 %. These can both be considered good or bad ratios as they are determined by financial leverage.
In conclusion, if I had money that I could invest I would not be afraid to invest in Nike. They control a large portion of a small market. They compete with two main companies in Adidas and Reebok. There are several brands that are starting to come into the mix but Nike controls the majority of the market. They are a great company with a history of manufacturing the best products. Many of today’s top athletes perform in Nike apparel. Nike is a good company and after computing the financial ratios I am more confident that it is a good investment.

Blog for week of February 8

I emailed Marianna the Monday following this blog due date because I had accidently posted it on my wife's blog. I talked with Janet and she said to just let you know that I had it done before the deadline. Here is a the website for that post:

http://rileyandaubree.blogspot.com/2010/02/professionalism-in-classroom.html

Economics

This is the first time that I have had the opportunity to be in an Economics class so coming into the semester I wasn’t really sure that I knew what Economics was. From the course material that we have covered thus far, and the material that we will continue to study the remainder of this semester, I have come to understand that Economics is part of our day to day lives. The book that we were assigned to read, The Undercover Economist, helped me to better understand the whole of Economics.

While reading this book it helped me to really think about where the money that my wife and I make really goes and to what extend we are being overcharged for certain items that we purchase. One of the main examples that Tim Harford used in The Undercover Economist is the one of coffee. He takes the reader through the entire process of what happens when we purchase a coffee. I liked the fact that he made you think about what it really would cost to make the coffee. He puts it into a perspective that is simple to understand and really makes you wonder what other things could be the same. He really went into detail of the whole process of making coffee and not only just the producing of the coffee itself, but the buildings that coffee shops are put into and the rents that are charged. It really gives you a perspective that isn’t always thought of in our daily lives. It made me understand why places like Starbucks are able to have buildings in such centralized locations. From the readings it all boils down to who is willing to pay the highest price because they know that the location is going to allow them to make profit. The examples used in the book are of big cities with metro’s and large squares.

Each day we make decisions. We decide whether or not to wake up, whether or not to go to school, whether or not to do our homework, etc. Each of these decisions is an economical decision. When we make these choices we are saying that the alternative is not of the same importance to us. For instance, where I work we are extremely slow at the moment. When my coworkers and I arrived at work on Monday we were given a choice. Since that we are so slow at this time we were given the opportunity to take any day this week off. Each year each employee is allotted a certain number of days off with pay and we were told that we could have any day this week off without pay and we would not be punished for doing so. It was very tempting to me to just say okay I don’t have to work the rest of this week. Yet, as I thought more about it I decided that working would be the best idea so that when my next paycheck came I would still be receiving some money. This was an economical decision.

Where are we willing to spend our money? Why are we willing to spend our money where we spend it? These are some of the questions that were addressed in this book. One of the major decisions we as humans make is where we spend our money. We spend our money on certain items because that money is worth whatever it is that we are purchasing for the price that it is at. I love Zero bars. I just love the white nougat chocolate and caramel. Theses candy bars are difficult to find. They aren’t as popular as snickers or Kit-Kat’s, but when I see one in the store I am willing to pay whatever the price is to enjoy it. If a Zero bar was 2 dollars I would still buy just one. If snickers were 2 dollars I would not be willing to pay that same price because it isn’t worth it to me.

One of the examples that are presented in the book was that of a line in a supermarket. “You can see the phenomenon at work at the supermarket checkout. Which line is the quickest? The simple answer is that it’s just not worth worrying about.” I like this idea, the idea that “it’s just not worth worrying about.” This is something that could happen each day because we are often at stores and I know that I have always looked to find the “fastest” line. The readings make you think about whether or not it is really worth your time to find this fast line because if everyone knew which line was fastest they would join it and it wouldn’t be the fastest line anymore. It really is as simple as that, if everyone knew which line would be fastest, it wouldn’t be the fastest line anymore because everyone would join it. It really doesn’t matter what line we choose to go to because you’ll get checked out in the slower lines and the time difference, if there is any, will be marginal.

Five skills desired in a prospective employee

In today's business world employers look for employees with qualities they feel will be most beneficial to their company. With that in mind I would like to talk about five qualities that many companies desire as they go through the interview process.

In any area of today's business world communication skills are extremely desirable. Companies want individuals who are able to communicate through writing, public speaking and conversation. They also seem to like individuals who can speak foreign languages.

Another desirable skill is the ability to work in teams. Working in teams is a large part of business today and companies look for individuals who have success in working with others.

Leadership skills are essential for future employees seeking upper level positions. The ability to help others understand their roles and perform those roles at a higher level than before. The ability to lead groups effectively is regarded very highly by employers.

Many companies desire employees who are able to solve problems. These are known as analytical skills. The ability to reason through difficult situations can bring success to the company and individual who can solve problems using reasoning.

Strong ethics are very desirable. Making the right decisions in difficult places comes back to an individuals ethics. According to dictionary.com, ethics is "a system of moral principles." It also says that it is "that branch of philosophy dealing with values related to human conduct, with respect to the rightness and wrongness of certain actions and to the goodness and badness of the motives and ends of such actions."

There are many other skills that employers look for in employees and these are a few that I thought stand out above others.