Wednesday, September 20, 2017

business 101

 I saw on the news that Toys R Us filed for chapter eleven bankruptcy. I'm no financial man, big business surely isn't anything I have any experience with,  but it was reported they are 5 billion dollars in debt ! Will someone please explain to me just how you wind up 5 billion dollars in the hole and yet continue to operate a business ! I fail to understand how that can happen. Surely there is some board of directors, or some such thing, that is overlooking the whole business. I would think after a few million dollars I would start closing the door. Just who is investing their money in this apparently losing proposition ? It appears that is the American taxpayer that will eventually foot the bill for this negligence. They have filed for Chapter 11 protection under the Bankruptcy laws. It protects them while they reorganize.
 The president, Ceo, and all the other big shots that control Toys R Us will continue to receive their huge salaries of that you can be certain. It is the working man that will bear the burden in lost jobs. Their wages will be lost, not protected by any law. The ones that got the corporation into 5 billion dollars worth of debt will retain their position ! Am I alone in scratching my head and wondering why ? If I build a racing car that is faster than everyone else, but the driver crashes it, whose fault is that ? Hint : it is not the one who built the car. But, as I say, I'm not a big business kinda guy. I still operate under the model you need to show a profit to stay in business. Not the case it appears. And then we wonder why things cost so much. When you have to pay for the product, along with the debt, the cost will increase.
 One of the most popular degree programs out there is an MBA. You hear it all the time being advertised as the path to success. An MBA is a " Master of Business Administration. " Didn't Toys R Us hire any of those folks ? Surely these educated business people wouldn't have run a corporation into the ground that way. Now that statement isn't meant to disparage anyone that holds such a degree but is a valid question to ask don't you think ? I'm certain Toys R Us has an entire team of people holding framed diplomas certifying their credentials. Those diplomas stating the fact they have completed the prescribed course of instruction and been awarded a Masters in Business Administration. So, once again I ask a simple question, Just how did Toys R Us wind up 5 billion dollars in debt ? How was this allowed to happen ? I don't know, something just doesn't seem right.
 Oh, I know this isn't the first corporation to have done this. Thousands of businesses and even private citizens use these bankruptcy protection laws to full advantage. Big business, as it turns out, isn't really about profits. Nope, big business is about filling the coffers of the " corporation " until the debt can no longer be carried. Toys R us was making a 400 million dollar a year payment on the interest of their debts ! Think about that, 400 million a year just in interest before the corporation figures they have a problem. That is thirty three million, three hundred thirty three thousand, thirty three hundred and thirty three dollars a month ! Oh and thirty three cents.
 Here's my thought. Maybe we should have less MBA's and more accountants. The former may be masters but the later will hold you to account. I'm thinking that is what is required. Of course, I'm no businessman. I did take business math in high school. Never really caught on to that compounding of interest stuff though. 400 million a year in interest payments does seem a bit excessive , that's quite a compound.  

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