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Description: Giant retailer Toys “R” Us announced this week that it is seeking to reorganize under the protection of bankruptcy regulations in both the United States and Canada. Like many a bricks and mortar retail establishment, part of the problem is the rise of online vendors, particularly Amazon. The company intends to remain open over the lucrative holiday season as it struggles with $5 billion in debt.

Date: September 19, 2017

Source: cbc.ca

Link: http://www.cbc.ca/news/business/toys-r-us-bankruptcy-protection-1.4296274

Discussion Points:

1) Were you surprised to hear this news? Why or why not?

2)  The CEO says the majority of the individual stores are profitable. How then could the corporation as a whole be in financial trouble?

3)  In chapter two of Wiley’s Financial Accounting: Tools for Business Decision-Making, we read of an important assumption about accounting that can be called into question when a business is threatened with failure. What is that assumption?

2 Responses to “No fun at Toys “R” Us”

  1. riley landry

    I was overally not surprised to hear this news, as online retailers (specifically Amazon) are growing to become increasingly more profitable as technology continues to advance. People are simply becoming, in harsh terms, too “lazy” to simply walk over and browse through a store for childrens toys, when they can easily just browse and purchase the exact same products, in some circumstances for cheaper prices, with just a click of a button. Also, kids now a days would rather play with an iphone, tablet, or ipad than a toy, as the future generations are becoming more and more technologically advanced. Even if the individual stores are profitable, the company most likely has to put all of their profits towards paying their shareholders or investors/creditors into the business, while still attempting to pay off their debt. The liabilities and expenses that the company could incur, could possibly be far too much to have any left over to go back into the business, or break even. An important assumption about accounting that can be called into question when a business is threatened with failure, is the going concern principle, which is the assumption that an entity will remain in business for the foreseeable future. This is the assumption that the business is going to keep operating in order to try and create revenues.

    Reply
  2. Ethan Hume

    1. no I was not surprised to hear this news when it first came out, because with technology innovating everyday it seems like less and less people actually want to physically have a item in front, rather just have a iphone, ipad or computer. less kids want to play with just one toy, when they can play 100 different games on a iphone.
    2. the individual stores might be making money, but as a corporation as a whole they weren’t. They might of borrowed too much money, and i thought they were gonna make more then they did. Individual stores might be making money, but once they make that money, they would have debt to pay off, pay back shareholders, and other expenses.
    3. the going concern principle, which is the assumption that and entity will remain in a business for the foreseeable future. this is the assumption that the business is going to keep operating, to try and create revenues.

    Reply

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