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business
financial statement analysis
Strategic Management A Competitive Advantage Approach 17th Edition Fred David - Solutions
b. Discuss whether the nonrecurring events disclosed in Exhib 2P-1 should be included in management performance mea sures such as ROF.
c. Using the information presented and Exhibit 2P.1. discus the expected level of Monsanto's future income and ROE
14. [Recurring and nonrecurring income, courtesy of Profes sor M Schiff; revised] Many analysts focus on recurring in come and ignore nonrecurring charges. Exhibit 2P-2, adapte from AT&T's 1997 and 2000 Annual Reports, reports sale and operating income (earnings before interest and taxes) fo the
15. [Cost of sales and treatment of fulfillment costs; pro form operating results] Amazon.com [AMZN] sells books, videos music, and many other products online For the years ended De EXHIBIT 2P-2. AT&T Revenues and Operating Income 1991-2000 (in Smillions) Total Operating Special Year Revenue Income
16. [Pro forma reporting] In its April 24, 2001 press release announcing its first quarter 2001 results, Amazon.com [AMZN] reported a "pro forma operating loss" of $49 million or 7% of net sales, compared with $99 million, or 17% of net sales in 2000. The pro forma operating loss excludes stock-
17. [Deferred revenue] Microsoft defers a portion of the sales price of some products and services over the product life cycle. Deferred revenue includes technical support, unspecified enhancements (such as service packs and Internet browser up- dates), maintenance, and other subscription
18. [Revenue recognition for nonrefundable and refundable fee payments; adapted from Frequently Asked Questions and An- swers: Staff Accounting Bullean 101] Gigondas.com provides customers with nonexclusive access to proprietary databases on its website for a nonrefundable annual fee. The company
b. Answer part a assuming that the unused portion of the mem- bership fee is refundable.
19. [Revenue recognition for refundable fee payments and lay- away transactions] Wal-Mart Stores [WMT] operates member- ship-only, cash-and-carry Sam's Clubs. The Company states that its analysis of historical membership fee refunds shows de minimis refunds. In fiscal 2000, the Company changed its
20. [Revenue recognition] Until the first quarter of 2001, Wal- Mart Stores [WMT] recognized revenues from layaway transac- tions [putting merchandise aside for customers who make partial payment] when the merchandise was placed on layaway. During the first quarter of 2001, the Company changed its
b. Discuss whether the new method better reflects the com- pletion of the earnings process associated with layaway transactions.
21. [Provision for bad debts] Nucor [NUE], a large U.S. steel producer, reported the following (amounts in $millions): Years Ended December 31 1997 1998 1999 2000 Allowance for Doubtful Accounts Opening balance $14.6 $18.0 $16.3 $21.1 Charged to earnings 4.2 (1.4) 5.3 Write-offs (net of recoveries)
List reasons why many mergers or acquisitions historically have failed.
List major benefits of acquiring another firm to achieve desired objectives.
List major benefits of forming a joint venture to achieve desired objectives.
What conditions, externally and internally, would be desired or necessary for a firm to diversify?
In order of importance, list the benefits of objectives.
In order of importance, list the characteristics of objectives.
If the CEO of a beverage company such as Dr Pepper Snapple asked you whether backward or forward integration would be better for the firm, how would you respond?
Give reasons why so many companies are divesting(spinning off) key segments or divisions of the firm.
What are the two key differences between for-profit and not-for-profit organizations, besides one type seeks to make a profit and the other does not.
What are the advantages of being a first mover in a particular industry?
Define and discuss vertical integration.
Explain the AQCD Test for determining the quality of an external factor. Why should the AQCD Test be met to the extent possible in performing an external assessment?
List the 10 external forces that give rise to opportunities and threats.
What is the different between factors listed in an EFE Matrix versus critical success factors listed in a CPM?In which matrix is it particularly important to include specific, actionable factors? Why?
Explain how to conduct an external strategicmanagement audit in a business versus as a student performing case analysis.
Could or should critical success factors in a CPM include external factors? Explain.
In developing an EFE Matrix, explain why is it advantageous to arrange your opportunities according to the highest weight, and your threats likewise?
Let’s say you work for McDonald’s and you applied Porter’s Five-Forces Model to study the fast-food industry. Rank the five forces as to relative importance for strategic planning at McDonald’s.
What external factors impact the ability of state to attract business? Visit the website: https://www.cnbc.com/2017/06/12/heres-how-your-state-can-become-a-cnbc-top-state-forbusiness.html and summarize how the selection criteria used to determine the best states for business compares to the
If your CPM has three firms and they all end up with the same total weighted score, would the analysis still be useful? Why?
As the value of the dollar rises, U.S. firms doing business abroad see their profits fall, so some firms raise prices of their products to offset the decrease in profits.What are some risks of raising prices?
List some legal or ethical ways to gather competitive intelligence. List some illegal or unethical ways.
Provide a synopsis of IBISWorld, Mergent Online, and PrivCo.
Weyerhaeuser Company grows, harvests, and processes timber and develops residential real estate. Incorporated in Washington State, the company has four business segments: timberlands; wood products; pulp, paper, and packaging; and real estate. The company manages 5.3 million acres of commercial
In the early 1970s a widely publicized list of the "Nifty Fifty" stocks was drawn up. This list, which included Avon Products, Polaroid, Coca-Cola, McDonald's, Walt Disney, Amer- ican Express, and Xerox, was touted as a set of "good buys." Most of the firms traded at high multiples. Their P/E
Cordant Technologies, based in Salt Lake City, manufactures rocket motors, "fasteners" (bolts), and turbine engine components for the aecospace industry. For the first half of 1999, its sales were $1.28 billion, up 7 percent on the same period for the previous year. Net income was $85.7 million, or
E3.17. Implying the Market Risk Premium: Procter & Gamble (Easy) Analysts give Procter & Gamble, the consumer products firm, an equity beta of 0.65. The risk-free rate is 4.0 percent. An analyst calculates an equity cost of capital for the firm of 7.9 percent using the capital asset pricing model
E3.16. Betas, the Market Risk Premium, and the Equity Cost of Capital: Sun Microsystems (Medium) A risk analyst gives Sun Microsystems, the networking computer firm, a CAPM equity beta of 1.38. The risk-free rate is 4.0 percent.a. Prepare a table with the cost of capital that you would calculate
3.15. Dividends, Stock Returns, and Expected Payoffs: Weyerhaeuser Company (Medium) Weyerhaeuser, the forest products producer, traded at $42 at the beginning of 1996. Its cost of equity capital, calculated with the CAPM, is 11.5 percent. It is expected to pay dividends of $1.60 per share in 1996
E3.14. Stock Repurchases and Value: Dell, Inc. (Easy) During fiscal year 2008, Dell repurchased 179 million shares on the market for $4,004 million. There were 2,239 million shares outstanding prior to the repurchase. What was the effect of the repurchases on the per-share price of Dell's stock?
E3.13. Share Issues and Market Prices: Is Value Generated or Lost by Share Issues? (Medium)a. XYZ Corporation had 158 million shares outstanding on January 1, 2009. On February 2, 2009, it issued an additional 30 million shares to the market at the market price of $55 per share. What was the effect
E3.12. Valuation of Bonds and the Accounting for Bonds, Borrowing Costs, and Bond Revaluations (Hard) On January 1, 2008, Debtor Corporation issued 10,000 five-year bonds with a face value of $1,000 and an annual coupon of 4 percent. Bonds of similar risk were yielding 8 percent p.a. in the market
E3.11. Forecasting Prices in an Efficient Market: Weyerhaeuser Company (Medium) Weyerhaeuser, the forest products producer, traded at $42 at the beginning of 1996. Beta services typically place its beta at 1.0 with a market risk premium of 6 percent. The risk- free rate at the end of 1995 was 5.5
E3.10. Measuring Value Added (Medium)a. Buying a stock. A firm is expected to pay an annual dividend of $2 per share forever. Investors require a return of 12 percent per year to compensate for the risk of not receiving the expected dividends. The firm's shares trade for $19 each. What is the value
E3.9. Pricing Multiples: General Mills, Inc. (Medium) General Mills, the consumer foods company, traded at 1.6 times sales in 2008. It was reporting a net profit margin on its sales of 9.5 percent. What was its P/E ratio?
E3.8. A Stab at Valuation Using Multiples: Biotech Firms (Easy) The following table gives accounting data from the 1994 annual reports of six biotechnol- ogy firms. The market value of the equity of five of the firms is also given. All numbers are in millions of dollars. From these numbers,
E3.7. The Method of comparables: Dell, Inc. (Easy) Here are some accounting numbers and market values (in millions) for Hewlett-Packard and Gateway for 2002. These two computer manufactures are considered to be compara bles for Dell, Inc. Book Hewlett-Packard Co. Sales $45,225 Earnings Value Market
E3.6. Applying Present Value Calculations to Value a Building (Easy) In the year 2008, a real estate analyst forecasts that a rental apartinent building will gener- ate $5.3 million each year in rents over the five years 2009-2013. Cash expenses are expected to be $4.2 million a year. At the end of
E3.5. Valuing Bonds (Easy) 8. A firm issues a zero-coupon bond with a face value of $1,000, maturing in five years. Bonds with similar risk are currently yielding 5 percent per year. What is the value of the bond?b. A firm issues a bond with a face value of $1,000 and a coupon rate of 5 percent per
E3.4. Identifying Firms with Similar Multiples (Easy) Find a screening engine on the Web, enter a multiple you are interested in, and get a list of firms that have that multiple of a particular size. Choose a particular industry and see how the various multiples-P/E, price-to-book,
E3.3. Unlevered (Enterprise) Multiples (Easy) A firm reported $250 million in total assets and $140 in debt. It had no interest-bearing securities among its assets. In the income statement it reported $560 million in sales. The firm's 80 million shares traded at $7 each. Calculatea. The
E3.2. Stock Prices and Share Repurchases (Easy) A firm with 100 million shares outstanding repurchased 10 million shares at the market price of $20 per share. What is the total market value of the equity after the repurchase? What is the per-share value after the repurchase?
E3.1. Calculating a Price from Comparables (Easy) A firm trading with a total equity market value of $100 million reported earnings of $5 mil- lion and book value of $50 million. This firm is used as a comparable to price an IPO firm with earnings per share of $2.50 and book value per share of $30
C3.12. Shoulda finn thatpayshigherdividends have a highersharevalue?
C3.11. Your answer to concept question C3.10 shouldhavebeen:Yes. Ifshare repurchases increase epsmorethandividends, dosharerepurchases alsocreatemorevaluethan dividends?
C3.10. It issometimes saidthatfirms prefertomakestockrepurchases ratherthanpaydividends because stockrepurchases yielda highereps.Do they?
C3.9. Theyieldon a bondis independent of thecoupon rate.Is this true?
C3.8. Why would youexpectasset-based valuation to bemoredifficult to apply to a technologyfirm, likeDen, Inc.,thanto a forest products company, likeWeyerhaeuser?
C17. What do traders mean when they refer to stocksas "glamourstocks"and "value stocks?"
C3.6. If a firm is expected to havea profit margin of 8 percent but trades at a price-tosalesratio of 25,whatinferences would youmake?
C15. Ifa firm has a PIEratio of 12anda profit margin on sales of 6 percent, what is its price-to-sales (PIS) ratiolikelyto be?
C3.4. Whydo trailing PIE ratios vary withdividend payout?
C3.3. It isalsocommon tocompare firms ontheirprice-to-ebitda ratios. What arethemer.its of usingthismeasure? Whatare thedangers? Hint: ebitdaleaves something out.
C3.2. It is common to compare firmson theirprice-to-ebit ratios. Whatare the merits of usingthismeasure? Whatare the problems withit?Hint: ebitleaves something out.
C3.1. Whatexplains differences between firms'price-to-sales ratios?
The number of people in millions that visited various finance-focused information websites in September 2017 are as follows: Yahoo! Finance
If a firm has the leading market share in its industry, where on the BCG Matrix would the circle lie?Diagram and explain.
Consider developing a before and after BCG or IE Matrix to reveal the expected results of your proposed strategies. What limitation of the analysis would this procedure overcome somewhat?
What procedures could be necessary if the SPACE vector falls right on the axis between the competitive and defensive quadrants? Diagram and explain.
Make up an example to show clearly and completely that you can develop an IE Matrix for a three-division company, where each division has $10, $20, and $40 in revenues and $2, $4, and $1 in profits. State other assumptions needed. Label axes and quadrants.
List four limitations of a BCG Matrix. Diagram and explain.
Develop a SPACE Matrix for a company that is financially weak and is a weak competitor. The industry for this company is pretty stable, but the industry’s projected growth in revenues and profits is not good.Label all axes and quadrants.
How would for-profit and nonprofit organizations differ in their applications of the strategy-formulation analytical framework?
Explain how to estimate the cost of building one new manufacturing plant for a company.
Given the information in the following table, develop a BCG Matrix and an IE Matrix:Divisions 1 2 3 Profits $10 $15 $25 Sales $100 $50 $100 Relative Market Share 0.2 0.5 0.8 Industry Growth Rate +.20 +.10 −.10 IFE Total Weighted Scores 1.6 3.1 2.2 EFE Total Weighted Scores 2.5 1.8 3.3
How would application of the strategy-formulation analytical framework differ from a small to a large organization?
Develop a 2 • 2 • 2 • 2 • 2 QSPM for an organization of your choice (i.e., two strengths, two weaknesses, two opportunities, two threats, and two strategies). Follow all the QSPM guidelines presented in the chapter.
In a BCG Matrix, would the question mark quadrant or the cash cow quadrant be more desirable? Diagram and explain.
If a firm has weak financial position and competes in an unstable industry, in which quadrant will the SPACE vector lie? Diagram and explain.
On the competitive position (CP) axis of a SPACE Matrix, what level of capacity utilization would be necessary for you to give the firm a negative 1?Negative 7? Why? Diagram and explain.
Would the angle or degrees of the vector in a SPACE Matrix be important in generating alternative strategies?Diagram and explain.
For the following three firms using the given factors, calculate a reasonable stability position (SP) coordinate to go on their SPACE Matrix axis, given what you know about the nature of those industries.Factors Winnebago Apple u.S. Postal Service Barriers to entry into market Seasonal nature of
For a firm that you know well, give an example of SO strategy showing how an internal strength can be matched with an external opportunity to formulate a strategy.
Overlay a BCG Matrix with a Grand Strategy Matrix and discuss similarities in terms of format and implications.Diagram and explain.
In developing a SPACE Matrix, what would you expect the SP average to be for Apple, Heinz, Verizon, Amazon, and Kroger? Diagram and explain.
In developing a BCG Matrix or an IE Matrix, what would be a good surrogate for revenues for Target Corp., Burger King, Bank of America, and Spirit Airlines?
A Wall Street Journal article (July 12, 2014, p. B3)said Apple’s smartphone market share in China is 6.0 percent, behind the two leaders Samsung (17.8%) and Lenovo (11.4%). With regard to a BCG Matrix, what are the three firms’ relative market share position?
Under the marketing mix factor of price, what are four considerations or decisions many firms face?
Develop a perceptual map for five colleges and universities in your state. Explain the potential value of your map for the president of your institution.
To conflict problems, how would you resolve a disagreement between a human resource manager and a sales manager over the firing of a particular salesperson?Why?
Identify and discuss pros and cons of keeping the COO position in a corporate design.
Think of a company that would operate best, in your opinion, by a division-by-services organizational structure.Explain your reasoning.
Explain why Alfred Chandler’s strategy–structure relationship commonly exists among firms.
Businessweek says firms should “base executive compensation on actual company performance, rather than on the company’s stock price.” For example, Target Corp. bases executive pay on same-store sales growth rather than stock price. Discuss.
Women comprise less than 20 percent of boards of directors. Why is this a problem globally for many companies and countries?
List the different types of organizational structure.Diagram what you think is the most complex of these structures and label your chart clearly.
List four reasons why companies are phasing out the COO position.
Discuss recent trends and facts regarding corporate well-being programs in the United States.
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