The Global Fin’ Criss and Big Baths

I’m currently studying Decision Analysis at Uni.

All these big big companies around the world (of particular note Japan and of course USA and UK) are making massive losses, and even first reported losses in the history of the Company a-la Toyota. Sure these a re a result in losses taken (in some cases) securitised mortgages and default swaps etc, however, surely not all the company performance can be blamed on the GFC. This got me thinking, how is it that these companys can go from healthy profit to losses in 12 months? I recon, and this is only my opinion, that the management have said “Its a really crap year, lets take a big bath”.

Big bath’s are taken when management recognise that fin budgets are not going to be achieved so they make sure they set up things for next year so they have a good year. This is often done with restructuring charges or some other abnormal charge or expense, lets call it a GFC charge.

There, I have put this in black and white. It will be interesting to see what Toyota’s results are next year – I say modest profit probably helped along by a reversal of some provisional charges made this year.