FAC12: Chapter 5 Article

http://www.winnipegfreepress.com/business/breakingnews/shaw-communications-second-quarter-profits-dip-despite-higher-revenue-90348879.html

Summary

Shaw Communications Inc., a Calgary-based cable company has recently announced its plan to start its long awaited wireless business in late 2011. The company has invested 100 million dollars this year and hopes their investment will pay off when they debut their wireless business. By making this large investment the company hopes that they will be able to offer a leading-edge product in two years. The company has no problems waiting two years before they release their wireless service, and believes it might be a good thing. Despite the fact that the company will be having a large cash outflow in the next two years, the company has bumped up its dividend by 5%. Besides the large investment in its wireless business, Shaw Communications Inc. has also announced its plan to buy control of Canwest Global, one of Canada's largest international media companies.

Connection

The connection between the article, "Shaw to launch wireless business in late 2011, invest 100 million this year" and the financing accounting textbook is cash flow, specifically cash outflow and investing activities. Many companies invest in long-term assets to bring in future profit, and Shaw Communications Inc. is no exception. The investing activities that Shaw is currently involved in is their $100 million investment in their wireless business and possibly the purchase of Canwest Global. The large investment causes a large outflow of cash for the company, but will possibly result in a larger inflow of cash after two years, when their wireless business has launched. Besides an outflow of cash caused by investing activities, the company is also having an outflow of cash caused by their financing activities. Even though the company knows that their will be a large outflow of cash caused by their new investments, the company has decided to increase their dividends by 5%.

Reflection

I think Shaw Communications Inc. is heading in the right direction by planning to launch a wireless business. With a rapidly increasing rate of improving technology, I think it is a good idea for almost all companies to spend more on investments and R&D. Although Shaw will have an increase of cash outflow for the next two years, I think they will be able to achieve a higher cash inflow when their wireless business has launch. Besides their investment in their wireless business, I think it would be a good idea for Shaw to buy out Canwest Global since it is one of Canada's largest media company. Even though there will be an increase in cash outflow for Shaw, Shaw has increased their dividends by 5%. I think it was nice of the company to increase their dividends even with their large cash outflow. The increase in dividend not only thanks their investors for their support but gives an aura of confidence that Shaw is financially healthy and will be able to produce a great product in the near future.