...[FIN 482: CASE STUDIES IN FINANCIAL MANAGEMENT: CHITRANGNA CHAUDHARY ROOSEVELT ID 900336721] November 06, 2015 Krispy Kreme Doughnuts, INC. 1. What can the historical income statements (case Exhibit 1) and balance sheets (case Exhibit 2) tell you about the financial health and current condition of Krispy Kreme Doughnuts, Inc.? The annual growth of Krispy Kreme donuts from Jan 2000 through Feb 2004 have been quite consistent. The income growth from 1999 2003 has more than 10 folds. However the equity has been increasing in negative numbers from 2001 continuously form the last four years. The reason for this might be the development of business in other aspects is not developing and growing as much as otherwise which of course has impacted the company's income. In the balance sheets of Krispy Kreme donuts of the assets look really good from Jan 2000 to 2004 however there are a few facts that were noted which are as follow: 1. Cash and cash equivalents between defeated off between 2003 and 2004 had dropped considerably; 2. Assets held for sale in February 2004 were almost 37 million and change the company did not amortize their re-acquired franchise rights, goodwill and other intangible assets it was overstated asset in 2000 to 2003 and therefore there was a dramatic increase from 49 to 175 million respectively; 3. Total assets and shareholders were impressive but if you really break down the components they were not so good. In 2004 short-term debt and the...
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...probability of success of the venture depends on whether the manager spends effort to make the business work: - If the manager provides effort, the probability of success is 0.8 and the probability of failure is 0.2 If the manager does not provide effort, the probability of success is 0.5 and the probability of failure is also 0.5 - Unfortunately, investors cannot observe the manager's actions (they can only observe the final outcome) and effort is costly for the manager. As a simplification, assume that the manager's cost of doing effort is equivalent to 3 million Euros. 1. What is the net present value (NPV) of the business if the manager provides effort? What is the NPV of the business if the manager does not provide effort? In this case the NPV is: (Probability of success * Payoff if Success) + (Probability of Failure * Payoff if Failure) - Initial investment If the manager provides effort, the NPV will be: 0.8 * 300 + 0.2 * 50 – 200 = 50 million USD = NPV1 If the manager does not provide effort, the NPV will be: 0.5 * 300 + 0.5 * 50 – 200 = -25 million USD = NPV2 2. If the investors offer a contract to the manager that implies giving him a fixed wage of 4 million, Will he provide effort? [Note: the wage, since it is fixed, must be paid irrespective of the business actual performance] The manager won’t provide any effort, because if he does, he will earn 4-3(cost of effort) = 1 million$,...
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...1st Scenario MINI-CASE ABC CORPORATION The initial cash outlay at Time 0 is simply the cost of the new equipment, $15,000,000 and the ABC’s required return of 12 percent. The marketing study and the research and Development is both sunk costs and should be ignored. (Assuming CCA class is 43, the CCA rate of 30 percent and corporate tax is 35 percent). Sales Sales VC Fixed costs Year 1 $17,500,000 6,020,000 3,000,000 Year 2 $20,000,000 6,880,000 3,000,000 Year 3 $25,000,000 8,600,000 3,000,000 Year 4 $21,250,000 7,310,000 3,000,000 Year 5 $18,750,000 6,450,000 3,000,000 Required: Calculate OCF from the above information. C d Tc S k n $15.000.000,00 .30 .35 -‐ .12 5 Years CCA table Beggining UCC CCA (30%) End UCC Sales VC FC EBIT Year 1 $2.250.000,00 $12.750.000,00 $6.020.000,00 $3.000.000,00 Year 2 $3.825.000,00 $8.925.000,00 $6.880.000,00 $3.000.000,00 Year 3 $8.925.000,00 $2.677.500,00 $6.247.500,00 $8.600.000,00 $3.000.000,00 Year 4 $6.247.500,00 $1.874.250,00 $4.373.250,00 ...
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...holders, compared to the stockholders, have prior claim on cash flow. The residual claim of stockholders increases the risk when the debt holders fixed claim increases, which in turn causes the stock to go up. Debt also increases the risk of bankruptcy to the company. This causes pre-taxed cost of debt to go up as well. Free Cash flow is also affected by additional debt. This can cause increase in the possibility of bankruptcy as well. An indirect cost would be a loss of customer, as a direct cost of distress would be legal fees. The indirect costs cause NOPAT to decrease. This is caused by the loss of customers, in turn causing the net operating working capital to increase. The effect that the managers have (or their behavior in most cases) is also effected by additional debt to the company. Managers will be come less likely to spend or waste their Free Cash Flow on opportunities that might in fact add value, or not add value and even the lack of risk in involving the company in any NPV projects that could indeed become prosperous for the company. B.1. The uncertainty about EBIT is considered to be the business risk. There are many factors that are influential to business risk. Some include: Uncertainty in input costs, and product and other liability types. B.2. The change in EBIT is known as the Operating Leverage which is caused by the change in the quantity that is sold. With the higher proportion of fixed costs that is inside...
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...requirement. Even within the Civil Society Organization (CSO) itself, the different departments compete for resources with maximum approved ceilings and having in place a good financial management system is expected to provide needed tools in order to make timely decisions on fund allocation as well as monitoring performance that adhere to the reporting requirements set by Donors and Government. The financial processes of recording, planning, monitoring and controlling have to be done on an ongoing basis in conjunction with other functions of the organization for maximum impact to achieve the objectives of the organization. With the increase in the number of CSO’s operating in Ethiopia and to address the need for a regulatory body, in 2009 the Ethiopia Government issued Proclamation No. 621/2009. This proclamation provides procedures for the Registration and Regulation of Charities and Societies there by establishing Charities and Societies Agency (ChSA) under the Ministry of Justice. Then Regulation No.168/2009 was issued by the...
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...Zeus Asset Management Inc Executive Summary Zeus Asset Management Inc is an asset management firm with more than $1.7 billion in asset under management. Zeus is well known for relationship-oriented that served both individual and institutional investors with the investment philosophy of believing that they could get a superior return over the long run using a conservative, risk-averse and quality-oriented approach. Zeus have been measuring it’s return in an absolute basis however Abbott demanded for it to be in risk adjusted basis to be better determine if Zeus outperform the relevant indices. The main problem with the current measure is that it did not take risk into consideration. The main aim in this case study is to determine if the current performance evaluation is sufficient or a better risk adjusted measure could be form. Other than that, we would also take into consideration of the difference between Zeus with its main competitors and how different type of investors would have different investment strategy due to their different risk preference. Problem with current measure As the current fund performance measurement consist mainly of holding period and benchmark return, these return have weaknesses that does not allow it to be a sufficient measurement. As a HPR generally calculated based on determining what the total return is earned from holding the investment for a specific period of time. The advantage of it is that it is easy to calculate and understand by...
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...Deficiency Case ACC 410 Auditing August 24 For each of the following independent cases, state the highest level of deficiency that you believe the circumstances represent – a control deficiency, a significant deficiency, or a material weakness. Explain your decision in each case. Case 1 The company processes a significant number of routine intercompany transactions. Individual intercompany transactions are not material and primarily relate to balance sheet activity--- for example, cash transfers between business units to finance normal operations. A formal management policy requires monthly reconciliation of intercompany accounts and confirmation of balances between business units. However there is not a process in place to ensure performance of these procedures. As a result detailed reconciliation of intercompany accounts are not performed on a timely basis. Management does perform monthly procedures to investigate selected large-dollar intercompany account differences. In addition management prepares a detailed monthly variance analysis of operating expenses to assess their reasonableness. I believe that this case represents a significant deficiency due to the fact that reconciliation is not performed on time each month. Any misstatement that might occur from this deficiency is more than likely to be an immaterial amount, however management should...
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...Lesson # 1 Financial Management: Introductory Notes and Words Concepts of Finance and Financial Management Financial Management refers to the proper management of finance functions of an enterprise or organization. In other words, financial management is concerned with the financial decision-making and other financial aspects. Thus, financial management involves financial planning, financial organization, financial coordination and control, financial reporting, financial mergers, combinations and acquisitions, insurance and tax management etc. Financial planning is concerned with the act of deciding in advance the financial activities that are essential if the enterprises are to achieve their financial goals and objectives. These financial activities mainly consist of properly estimating financial needs; selecting the proper sources of finances; procuring the requisite funds; proper utilization of the funds and custody and safekeeping of funds. Financial organization is the grouping of the finance functions into various divisions, departments, sections and sub-sections of the enterprises for their proper and efficient performance. That is, financial organization deals with the proper allocation of the finance functions amongst the various financial executives. Financial coordination and control deal with the proper adjustment of the finance function and evaluation of the same in relation to the predetermined standards. Financial reporting is the proper collection and...
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...Advance Financial Management Graduate Business Administration 645 CRN: 11046 Building 163 – Room 2032 Winter Quarter 2013 Wednesday: 6:00-8:50 Paul Sarmas www.csupomona.edu/~psarmas CATALOG DESCRIPTION: A seminar course in finance utilizing comprehensive cases to simulate the role of the financial manager. 3 seminar-discussion. Prerequisite: GBA 546, all required 500-level courses, and microcomputer proficiency. Concurrent enrollment in GBA 646. Unconditional standing requirement. EXPANDED DESCRIPTION OF THE COURSE AND INSTRUCTIONAL METHODS: A. Expanded Description of the Course: This course reinforces the basic concepts of financial management. The course provides an in-depth discussion of key topics that are critical to financial management: (1) the goals of the firms, (2) financial statement analysis, planning, and forecasting, (3) working capital policy and management, (4) capital budgeting techniques without and with risk, (5) capital structure theory and application, (5) the cost of capital estimation, and (6) long-term financing decisions. In addition, the course examines issues such as lease financing, merger and acquisition, and international financial management. B. Instructional Methods: The delivery system throughout this course will be a combination of class discussion and case analysis. The case analysis will be both in a written format and oral presentation. The amount of lecture will be limited to detailed coverage of concepts...
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...‘’Earnings management, in exchange listed companies, is not fraud but a case of caveat emptor for investors ‘’ UP708386 ‘’Earnings management, in exchange listed companies, is not fraud but a case of caveat emptor for investors ‘’ UP708386 708386 Corporate governance, Financial Crime, Ethics & Controls for Finance Pathways (U234479) 708386 Corporate governance, Financial Crime, Ethics & Controls for Finance Pathways (U234479) ‘’Earnings management, in exchange listed companies, is not fraud but a case of caveat emptor for investors ‘’ This essay is intended to evaluate different views on a case whether the earnings management in exchange listed companies is consider as a fraud or caveat emptor for investors. One of the first mentions of earnings management has been given by Shipper where she described it as ‘’disclosure management, in the sense of purposeful intervention in the external financial reporting process, with the intent of obtaining some private gain.’’ (Shipper, 1989). In other words the managers are adjusting profits or losses on final accounts to mislead the stakeholders and to encourage them from investing. Earnings management become a problem for investors as it generates fake impression about companies success and misguide them into making wrong investment decisions which often leads to a making a loss. Another problem arises with incorrect financial reporting which is insincere for investors and resulting in making a capital market...
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...The University of Illinois Executive MBA Case Summaries Accy 401, EMBA; Fall 2000 Accounting courses are usually separated into five general categories. Two, taxes and auditing, are usually quite technical and often focus on CPA preparation. The other three categories are more general: 1. Financial accounting deals almost strictly with financial statement preparation. It focuses on pronouncements issued by the Financial Accounting Standards Board (FASB) and the SEC, and on accounting concepts such as materiality, matching revenues and expenses, relevance, and consistency. It also considers highly technical details about consolidated financial statements, leases, pensions, income taxes, and inventory valuation methods that are often found on the CPA exam. 2. Financial accounting from a management perspective covers many of the same topics as financial accounting but it does so from the view of a manager using financial accounting information to help make decisions or to report an organization’s performance to others. This is the typical focus of an MBA financial accounting course, or a financial accounting course in a non-degreed program for executives. It is the primary focus of Accy 401, EMBA. 3. Cost and managerial accounting deals almost exclusively with accounting as a tool to help manage and understand a business. These courses focus on areas such as fixed and variable costs, how costs behave over time (e.g., the learning curve), cost...
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...Financial Risk: Key Fundamentals and Case Studies Leonard Chumo, CFA, FRM Strathmore University GARP Chapter Meeting 29th July 2011 Agenda 1. Background 2. Credit Risk and the Case of Washington Mutual 3. Operational Risk and the Case of Rogue Brokers in Kenya and Barings 4. Market Risk and the Case of LTCM 5. Liquidity Risk and the Case of Northern Rock 6. Q&A BACKGROUND Main Types of Financial Risk Risk Type Definition Credit Risk The potential that a bank's borrower or counterparty will fail to meet its obligations in accordance with agreed terms. Market Risk The risk that movements in market prices will adversely affect the value of on- or off-balance sheet positions. The risk is attributable to movements in interest rates, foreign exchange (FX) rates, equity prices or prices of commodities. Operational Risk Risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. The definition includes legal risk, but excludes reputational and strategic risk. Liquidity Risk Liquidity is the ability to fund increases in assets and meet obligations as they become due. It is crucial to the ongoing viability of any organization. Source: Financial Stability Institute CREDIT RISK AND THE CASE OF WASHINGTON MUTUAL Sources of Credit Risk Apart from traditional types of loans, credit risk can also be found in a bank's: Investment portfolio ...
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...Weightings ....................................................................................................................................... 3 Structure of the Examination ................................................................................................................................ 5 Examination Competency Coverage ..................................................................................................................... 6 Scoring Model and Evaluation of Candidate Performance ................................................................................... 6 ©CGA-Canada, 2011 1 CGA-Canada PA2 Examination Blueprint 2011/2012 PA2: Strategic Financial Management Examination Blueprint 2010/2011 About the Examination Blueprint The PA2: Strategic Financial Management examination has been constructed using an examination blueprint — a widely accepted tool used...
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...The University of Lethbridge Calgary Campus Faculty of Management Management 4430Y Financial Management Spring 2011 A.P. Palasvirta Office: Markin 4132, Lethbridge Phone: (403) 332-4582 e-mail: oz.palasvirta@uleth.ca Goal of Course Management 4430 is the capstone course in finance and will incorporate concepts you have learned in through your study of corporate, investments, and international. We will utilize the case methodology to focus our analysis. Cases describe a context in which a particular problem is found. Regardless of the particular characteristics of the problem, problem solving follows a general methodology: identification of the problem, describing the context of the problem, analysis of potential alternative solutions, the identification of the best solution, implementation of the best solution , and the creation of controls and contingency plans, if applicable. Text and Other Sources: E-book based on Case Studies in Finance, 6th ed., 2010, McGraw Hill, Toronto, ISBN Prerequisites Management 3412, Fundamentals of Investments Investments, Analysis & Management, 2nd Canadian Ed., 2005, Cleary & Jones, John Wiley & Sons Canada Ltd., Mississauga ISBN 0-470-83542-7 Management 3460, Corporate Finance Fundamentals of Corporate Finance, 6th Canadian Ed., 2007, Ross, Westerfield, Jordan, & Roberts, McGraw-Hill Ryerson, Toronto ISBN 13: 978-0-07-095910-1 A list of topics for which you should have working knowledge...
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...Class of: 2013 Course Title: Financial Risk Management (FRM) Semester: III Credits: 3 Course Objective & Learning Outcome: This course gives students a working knowledge of derivative instruments and their applications in managing various types of financial risks. While doing so, students would understand the organizational aspects of those risk functions and their roles & responsibilities. The emphasis is on mechanics, properties and valuation of forwards, futures, options and swap instruments. In covering these instruments, cases, examples and notes would be sought from markets so as to provide a holistic view of the financial market structure i.e., currency, fixed income, equity and money markets. Cases discussed in the class would be contemporary in nature drawn from international experience. Pre-requisites: Students are advised to be through with Financial Management I, Financial Management II and Quantitative Methods. Students are expected to go through all the reading prescribed before every class and make a meaningful contribution through active class participation. The course is delivered through a combination of case discussions, problem solving, real life risk reports and simulation. The course would have an analytical and numerical flavor and hence students are required to bring their calculators/laptops to every class. Text Book: 1. Hull, John C. & Basu, S., Options, Futures, and Other Derivatives, 7th Edison, Prentice-Hall...
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