...Case Solution Outline -Summary -Problem Statement -Company -Market -Product -Projections -Options -Current Capital Structure -Proposed Capital Structure -Review Summary Objective: To find a mutually acceptable debt structure that will minimize lender risk while increasing company value. Constraints: 1) realistic cash flow projections, 2) Bank safety levels Situation for each Business Group Bank: Over extended and is in a bad situation. Lending exceeds reasonable levels and is not collateralized or subject to covenants. An $8 million loan is abnormal for the bank. The company’s management does not appear to understand the unrealistic debt situation, the impact on firm value and impact on the upcoming audit report. Management: Has unrealistic expectations and a lack of understanding of impact of current structure of firm value. Company: The Company has considerable levels of equity and is not maximizing its financial structure. It is capable of taking on considerably more debt, however, the debt needs to be more appropriately structured. Ownership: Closely-held company with owner having little interest in management. Owned for dividend distribution. Problem Statement: Because of inflation and an acquisition, Padgett's financial needs have risen to a permanent level rather than being merely seasonal in nature. Management at the company's bank must revise Padgett's debt structure in a mutually satisfactory manner. The Company Background 1...
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...Table of Contents Overview………………………………………………………………………………………………..……Page 1 Structure………………………………………………………………………………………………..……Page 3 Economic Situation………………………………………………………………………………………Page 4 Political Situation…………………………………………………………………………………………Page 5 Stakeholders…………………………………………………………………………………………..……Page 7 Non-Market Strategies and Analysis……………………………………………………………...Page 9 Market Strategies and Analysis………………………………………………………………...…Page 11 Economic Analysis……………………………………………………………………………………..Page 12 Political Analysis……………………………………………………………………………………..…Page 14 Evaluation of Outcomes………………………………………………………………………...……Page 15 Works Cited………………………………………………………………………………………….……Page 17 Overview The industry of gambling provides a country’s respective government with large amounts of financial support. Furthermore, gambling is a multi-billion dollar industry worldwide. The misfortunes and losses of people are the monumental and overwhelming gains to government or non-government regulated casinos. The establishment of government owned casinos creates much-needed jobs for citizens as well it creates a flow of profit to the country. This inflow of cash assists the government in completing necessary tasks and is beneficial to the public because taxes are not being raised to complete such tasks. Over the last twenty-five years, the regulation of gambling has become prevalent. There are still many situations in which gambling occurs in a deregulated form such as Internet gambling...
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...MAKING Trefor Jones Manchester School of Management UMIST 4 PART I g CORPORATE GOVERNANCE AND BUSINESS OBJECTIVES INTRODUCTION Firms are major economic institutions in market economies. They come in all shapes and sizes, but have the following common characteristics: g g g g g g Owners. Managers. Objectives. A pool of resources (labour, physical capital, ¢nancial capital and learned skills and competences) to be allocated roles by managers. Administrative or organizational structures through which production is organized. Performance assessment by owners, managers and other stakeholders. Whatever its size, a ¢rm is owned by someone or some group of individuals or organizations. These are termed shareholders and they are able to determine the objectives and activities of the ¢rm. They also appoint the senior managers who will make day-to-day decisions. The owners bear the risks associated with operating the ¢rm and have the right to receive the residual income or pro¢ts. Where ownership rights are dispersed, control of the ¢rm may not lie with the shareholders but with senior managers. This divorce between ownership and control and its implication for the operation and performance of the ¢rm is at the centre of many of the issues dealt with in this book. OWNERSHIP STRUCTURES The dominant model of the ¢rm in Western economies is the limited liability company owned by shareholders, but the form varies signi¢cantly between countries. In some countries the...
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...elasticity of demand, market structure as well as profit maximization techniques which would be useful to further this good and also the barriers to entry. Pricing strategies and product differentiation will be the other important topics which will be discussed as well. I am choosing the shampoo company Pantene, founded in 1947, who was inspired by the ingredient panthenol, Pantene and was originally owned by Swiss drug company Hoffman-LaRoche.It made its debut as a premium hair care line across Europe, replete with glass bottles and prestige scents and then crossed over to the US. Pantene has just come up with the latest Custom Hair solutions which I will be focusing on. Elasticity of Demand Simply put, the demand for Pantene shampoo is highly elastic for the main reason that today there are so many substitutes available and so many other companies launching their shampoo products on a daily basis. Market Structure The market structure for the shampoo market is that of Monopolistic Competition. This is when a large number of sellers produce a product or service that is perceived by consumers as being different from that of a competitor but is actually quite similar. This perception of difference is the result of product differentiation, which is the key to success in a monopolistic industry. Products can be differentiated based on price, quality, image, or some other feature, depending on the product. Increasing Revenue/Profit Maximizing Quantity Pantene...
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...Where they operate? – Birch operates 4 production divisions for paper, paperboard, and corrugated boxes as well as a timberland division to supply part of the company’s pulp requirements. How well are they doing? – The company’s profit and competitive position has improved in the last few years since decentralization of profit responsibility. Divisions appear to be doing well in their respective markets: • Southern division runs below capacity at times and has excess inventory, but market price has not noticeably weakened as a result of oversupply. • Thompson Division is in a position to bid full-cost quotations to improve the quality of their business. Key Players • James Brunner, manager of Thompson Division which produces corrugated boxes. • William Kenton, manager of Northern Division (designed specialty display box in conjunction with Thompson Division). • Manager of Southern Division (produces and could potentially supply Thompson with linerboard and corrugating medium for specialty boxes). • Commercial Vice President (analyzing the cost structures of the various divisions). External Environmental Analysis/Industry Analysis Competitors – The rivalry among existing competitors is high because there are a number of competitors who are able to produce the same products. The Northern Division requested bids for their specialty boxes from the Thompson Division and two outside companies who were able to produce it for less than Birch’s own...
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... In this short essay I will discuss the pros and cons of pubic real property zoning regulations as well as the effectiveness of this policy as it relates to Houston, Texas’s overall real estate market. I will then relay my thoughts as to whether this is a model that other municipalities should adopt or not. Before we dive into the pros of public real property zoning regulations, first lets answer the question, what is the purpose of zoning? The main purpose of zoning is to use the land or a property for the common good of society. Zoning is also used to maintain the unique characteristic of the society, to protect and conserve the value of buildings, and to prevent new development from meddling with the existing uses. So what are some pros of these zoning regulations? One of the more important benefits of zoning is that it can give a community some control over its land uses, appearance, and quality of life in the future. This may help with implementing community goals and objectives such as allowing potential nuisance uses to be located away from residential neighborhoods or other sensitive areas as well as preventing the mixing of incompatible land uses (such as erotic dance clubs and schools). Zoning can also protect and enhance property values, recreational spaces and open space as well as help conserve existing neighborhoods, structures, and environmentally sensitive areas. A few other pros of property zoning regulations are that...
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...Comments: The case provides an excellent vehicle for exploring and challenging the notion of optimal capital structure in theory and practice. American Home Products (AHP) is a very successful firm that has not debt in its capital structure. Because of its efficiency in asset management and its high level of profitability, AHP does not need debt to finance its operations. The case focuses on the theory of optimal capital structure and the practical problem of determining an optimal debt ratio. Questions 1. How much business risk does American Home Products face? Some of the pros/cons affecting AHP’s business risk are: PROS: • Sales stability, net sales has grown steadily from 1972-1981 • Strong Marketing expertise • Tight financial control • Stable, consistent financial growth and profitability • Risk aversion can work in favor of the company(no licensing costs, R+D costs) • Threat of new competitors is low because the pharmaceutical industry requires high start-up costs and the companies controlling the industry are very stable and mature. CONS: • Conservative Corporate Culture affect innovations • High cost in marketing to erode competitor’s head start. They are heavily depending on current products and marketing skills. But competitors can also strengthen their marketing strategies. • Hard to expand into new markets due to low R+D • Reticence does not provide confidence to the public • Threat of substitutes is...
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...Market Structure February 6, 2014 Economics are a very important part in the political policy. As a consultant to the mayor it is my job to inform him of the ever changing economy in our area. With that being said it is important that we think of all the aspects of microeconomics when deciding what to do with our economy as a whole. Today, economists classify markets according to conditions that prevail in them. Economists group industries into four different market structures- perfect competition, monopolistic competition, oligopoly, and monopolies. With that being said it is important to emphasize these key points and explain further what they mean. The first market structure, perfect competition, is characterized by a large number of well-informed independent buyers and sellers that exchange identical products. It represents an ideal situation that is used to evaluate other market structures. There are five conditions that perfectly characterize competitive markets. The first condition is that there are a large number of buyers and sellers. No single buyer or seller is large nor powerful enough to affect the price. Condition number two is that sellers and well as buyers deal in identical products. With no difference in quality, there is no need for brand names and no need to advertise. The merchandise of one seller is just as good as that of another. Third is that each buyer and seller must act independently. This ensures that sellers compete against one another for the...
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...Analysis and recommendation on the capital structure of Hill Country Snack Foods Co. EXECUTIVE SUMMARY This report discusses the current operational and financial strategies of Hill Country Snack Foods Co. and analyses the proposed capital structure for it. Part I of the report reviews the company’s strategies and its latest financial performance. Part II illustrates a detailed valuation of the proposed capital structure. Valuation methods involved includes Dividend Discount Model and Discount Cash Flow valuation (the Hamada approach). It is recommended that the company adopt a 40% debt-to-capital structure to fully use its capital and benefit from the external funding. PART I THE OVERVIEW OF HILL COUNTRY SNACK FOODS CO. Background of Hill Country Snack Foods Co. Hill Country Snack Foods Co. is a middle-size snack food company located in Austin, Texas in the U.S.. The snack food industry is very competitive. The main competitors of Hill Country are industry giant PepsiCo and smaller companies like Synder’s-Lance. The current CEO Howard Keener, who is 62 years old and worked in the company for over 15 years, is approaching retirement. He has a very strong personal influence on the company culture and the way it is operated. He is passionate about maximizing shareholder value, believes in keeping tight control over costs, and is very risk adverse in the operation strategy as well as the financing decisions. Considering his near retirement, many investors think there will...
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...Midwest. Then in 2000 they created an equipment manufacturing division for producing telecommunication equipment. That segment then acquired a leading computer workstation manufacturing firm as well. By 2004 the company market value was split with 25% from the product and services segment and 75% from the telecommunications services segment. Though both segment were not doing bad, the company overall was underperforming when compared to the other firms within their industry. So in 2005 a raider named, Victor Yossarian, bought a 10% stake in Teletech and demanded two seats on the board. Yossarian then sent a letter to Teletech’s CEO saying the firm was misusing resources and not maximizing shareholders wealth. Ironically the company’s returns were already under scrutiny internally. Most of the issues had to do with the company’s hurdle rate, which was used for NPV analysis and to evaluate performance. The firm was split between wanting to change to a risk adjusted hurdle rate and keeping the current policy. The current policy was to use a constant hurdle rate of 9.30% for all projects and that rate was based on the WACC for the corporation as a whole. So this lead me to a series of questions. What is the hurdle rate? How did Teletech apply it? What are the pros and cons of risk adjusted hurdle rates? What are the risked adjusted rates? What should Teletech do in response? What is the Hurdle rate? How is Teletech applying it? According to Investopedia, a hurdle rate is the minimum...
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...high rivalry industry, company could not succeed by price increase. And unfavourable cost due to both internal and external factors is not easy to control. In order to control the business risk, the company is actively involved in the budget approval process, and the operating strategy has very important part to keep the costs under control. For the financial risk, the more debt financed the higher financial risk it is. The company's risk avoidance strategy is manifested in its financing decision. The company is managed in preference for equity finance and against debt finance, investments are funded internally. The optimal capital structure for Hill Country The optimal capital structure is the capital structure at which the market value is maximised and the cost of capital is minimised. There are 3 alternative capital structures from pro forma 2011 financial...
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...Should all small businesses have a website? Introduction For this second assignment of the Study and Writing Skills class, we will be focusing on writing an essay. To do so, we had to chose one topic out of 5 give in class by out lecturer. Mine is about the need of small businesses to have a website. To do so, we will be discussing the pros and cons of a website to finally figure out if having one is useful or not for these small businesses. Small Business The term "Small Business" differentiates depending on the location. In fact, it has a range from 15 employees in Australia, 50 employees in the EU and under 500 employees in the US (Wikipedia, 2013). They might also be classified according to other factors such as net profits, sales, etc... Small Businesses are therefore more suitable to internet marketing, because they can niche into the marketplace. A niche market being the subset of the market on which a specific product is focusing (Imhoof, 2013).This is why they are most of the time convenience stores, restaurants, small-scale manufacturing, hairdressers, layers, accountants, and so on. But, they can also be Online businesses such as web-design agency, programming, or Online retailers such as aftermarket car-parts sellers, clothing, etc... Reducing costs Having a website significantly decreases the operating costs. Depending on the type of business, it might lead to no leasing costs concerning the rental of premises, no or low inventory costs and...
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...Objectives 4 MANAGEMENT TEAM 5 COMPANY STRUCTURE, OWNERSHIP & INTELLECTUAL PROPERTY 5 Structure 5 Ownership 6 Personnel Plan 6 Patents 7 INDUSTRY ANALYSIS 7 Competitive Edge 7 Porters Five Force Analysis 8 MARKET ANALYSIS 9 Target Market 9 Market trends and needs 9 Main Competition 9 MARKETING PLAN 9 Product Description 9 Pricing strategies 10 Promotion: 11 Place: 11 Milestones 12 WEB PLAN SUMMARY 12 Website Marketing Strategy 13 Development Requirements and Design 13 OPERATIONS PLAN 13 Operating Hours 13 Daily Operations 13 Distribution Channels 13 FINANCIAL PLANS 14 Pro Forma Profit and Loss 14 Pro Forma Balance Sheet 15 Pro Forma Cash Flow 16 APPENDIX 17 Startup Summary 17 Startup Funding 18 Break Even Analysis 19 Business Ratios 20 EXECUTIVE SUMMARY SpyTech Limited is a Private Limited Company that wants to ensure the safety of all the citizens. Security is a crucial aspect for everyone. Various companies offer this security service, but it still does not stop a large percentage of crime actually taking place. We are still a long way from actually preventing the crime before it happens. SpyTech Ltd provides a software that will be using behavioral analytics instead of normal video analytics. It will raise alerts on the unusual things happening around. The system will be intelligent therefore axing the need for tiresome programming. We noticed a gap in the market whereby customers were not so pleased...
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...Hill Country Snack Foods Co. Hill Country Snack Foods Co. (HCSF) is an American-based company specializing in snack food industry. Its competitive advantages mainly base on conservative management strategies, cost efficiency, high quality products as well as solid regional position. Despite stable growth over years, one big concern raised among company’s shareholders as well as financial analysts are its capital structure. As HCSF is all-equity funding, many perceived that the company has more potential to increase its financial performance but leverage in the means of introducing debts in its capital structure. This report considers impacts of such suggestion on both HCSF’s future operation and financial performance I. Operating and financial strategies Under the management of the current CEO, HCSF adopts one philosophy in all of its decision- making, which is to maximize shareholder value. This is achieved by employing the efficient cost budgeting, and high level of caution as well as risk aversion * Efficiency management and cost controlling: It is easy to observe that well-managed cost is one of the key strategies for the success of HCSF. In the industry where competition is intense and rise in output is nearly impossible, maintaining input costs at the lowest possible numbers is a way to keep the profit growing. The strategy proves its effectiveness by numbers shown in Exhibition 2 when comparing sales and net income between HCSF and Snyder’s Lance Inc. Although...
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...CHAPTER 1 Introduction Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. Overview bro13556_ch01.indd 1 The primary objective of an experiential learning simulation game, such as FinGame Online 5.0 (FG), comes from learning how to plan, formulate strategies, and make sets of sound decisions sequentially through time. FG provides a decisionmaking setting similar in many respects to the financial management requirements of an actual company. The manager of an FG company has the operating control of an entire company. The manager is the chief financial officer (CFO) who also controls major decisions normally managed by the chief executive officer (CEO) and chief operating officer (COO). The FG decision environment is much more complex than the environment found in standard texts and case courses for two primary reasons. First, decisions are entered in many interrelated areas in each period of play. Tools and techniques previously examined, analyzed, and employed in only single-decision problems now must be applied in the presence of interrelationships with many other simultaneously derived decisions. Second, decisions must be entered over several periods of play. The consequences of prior decisions impact the range of decisions available in later periods. To be successful, an adopted strategy must be flexible enough to adjust to a changing environment over time. Avoiding decisions that eliminate a large set of future company options is key...
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