Chapter 2

http://www.bloomberg.com/apps/news?pid=20601087&sid=aDhVXr9oTkJE

Summary:
With the recession drawing to an end, the economy and many businesses are slowly starting to get back on its feet. Unfortunately this is not the case for McGraw Hill. McGraw is known for its education text books and financial services. However, the company also owns BusinessWeekly magazine. The company has been in a slump ever since the recession. The company's revenue fell more than 30% from $164.4million to $112.6million until September 2009. Now Bloomberg is seeking to buy the small section of BusinessWeekly from McGraw Hill, promising to rebuild the magazine and to transform it into best global business newsweekly.

Connection:

This relates to chapter 2 in two ways. Firstly is the profit margin ratio, a ratio that compares the net profit during an accounting period with the related revenues. However, according to Publishers Information Bureau, McGraw is clearly suffering from net loss for more than a fiscal period. Then why would a big company like Bloomberg want to buy a tiny section. I believe Bloomberg hopes that under their company name, BusinessWeekly will gain more popularity. Also the soon to be chairman of new BusinessWeekly, Norman Pearstine claims Bloomberg will transform the new division into best global business newsweekly, which hopefully will turn that net loss into a net income. Secondly, the buy out can be considered as a investing activity, it will ultimately affect the cash flow statement.

Reflection:
Personally, i believe BusinessWeekly will continue to be a liability. Unless Bloomberg is trying to be like Warren Buffett, magically renovate and improve the performance of the company, then selling it making millions. The downside to this buyout, is that there will be employees who will be fired or lay-offed, and at times like these, people cannot afford to lose their jobs. However, it is not up for me to decide what is best for both companies, and the negotiation of the two companies is scheduled to close on December first. which gives both companies plenty of time to rethink the deal.