Financial DisciplineQ…There has been a lot of talk of financial discipline. What is financial discipline?
A…There are 3 facets to financial discipline. First is that you maintain a healthy budget. That means you spend less than you make. Not just sometimes. You must do this all the time. If your budget stops meeting this criterion you must correct it by making more income or by cutting costs. If you cannot make more income you must cut costs ASAP. Spend less than you make.
Second facet is that you need to own more than you owe. You need to have more assets than you have liabilities. This allows you freedom to buy things at a discounted price and borrow money at a lower interest rate because you do not really need to borrow it. It also allows you a buffer if there is a break in your streams of income. You can bridge the break until you can cut costs so that you spend less than you make.
Third facet is that you need to plan to stay disciplined. A corporation cannot pursue any other agenda other than to align its budget so that it spends less than it earns. A Government can. A corporation cannot. A corporation that becomes a political football to pursue a Government’s agenda abandons its financial discipline. This is not just bad business it is bad government. It is one of those things that never end well. The latest example is Bombardier.
AC is doing what a corporation should do. Cut costs so that it can survive without government intervention. After all it is a company in the private sector and has been for decades.