Financial Management – MGMT134 CASE QUESTIONS



Financial Management – MGMT134 CASE QUESTIONS Pletcher

REMEMBER TO WORK TOWARD A "REALISTIC" SOLUTION!

INTRODUCTORY CASE #1 SOUTHEAST TRAILER COMPANY

(This case is available in the Library Reserve Book Room.)

Part 1

Based on your analysis of the information provided for 1987, 1988, and 1989, do you feel that the bank should grant the additional loan? Support your answer. You should analyze trends via ratio analysis, common size analysis, and funds flow analysis.

If the bank fails to grant the loan, what alternatives exist for Southeast?

Part 2

What is your specific recommended solution to the problem facing Southeast and the bank? Be sure to concentrate on implementations and implications.

 

 

Case #1 Apple Computer

1. How about them apples? Evaluate the financial performance for recent time periods and comment on Apple’s progress – or lack thereof.

2. Discuss the cash reserves held by Apple. What reasons might be given for such large cash reserves? What possible uses might be made of those reserves?

3. Is the capital structure adequate to support competition in this industry?

4. What options do you see for Apple at this time?

5. What do you recommend for Apple? Be sure to demonstrate via pro forma statements what you expect your recommendations to achieve for Apple.

6. Discuss the stock price fluctuations.

Case #2 Brown-Forman

1. Evaluate the capital structure of Brown-Forman. Will the capital structure of

Brown-Forman allow the company to compete effectively with its competitors?

2. What factors contribute to the value of Brown-Forman components?

3. Is the Brown-Forman diversification effective diversification?

4. About a year ago Brown-Forman lost out on an attempt to significantly expand the liquor portion of the business. Do you feel that Brown-Forman had the capital to complete the acquisition? Did Brown-Forman do the right thing by dropping out of the bidding?

5. Comment on the price performance of Brown-Forman stock. How would you rate the stock?

6. Where do you feel the company should go from here? Be sure to support your recommendations.

Case #3 Wal-Mart

1. Evaluate Wal-Mart’s expansion activities (recent and future).

2. Discuss the ramifications of using debt rather than equity to finance the expected expansion. Show via pro-forma statements the impact of the alternatives. What expansion plan financing do you favor for Wal-Mart? Why?

3. Discuss the Wal-Mart dividend policy. Do you feel it is consistent with company performance and plans? Be sure to consider existing and proposed stock repurchase activities.

4. Describe a five-year plan for maximizing shareholder wealth for Wal-Mart shareholders. Describe and develop key elements in the plan.

5. Discuss domestic versus foreign growth opportunities.

Case #4 Sears

1. Evaluate the capital structure of Sears.

2. What changes in the capital structure would you recommend for Sears?

3. Trace some of the attempts by Sears to "remake" itself. Evaluate the effectiveness of those efforts.

4. What opportunities/risks do you see for Sears? Can Sears learn and benefit from the Wards failure?

5. Can Sears prosper in the current market segment? Where should Sears be?

Case 5 The Home Depot

1. Describe Home Depot's financing strategy over the past several years? Include an analysis of the financial statements. Has the policy been appropriate for Home Depot?

2. Describe and evaluate Home Depot's business and competitive strategy.

3. Does the financial policy/strategy complement or conflict with management's competitive strategy?

4. What risks and uncertainties do company managers face to fulfill growth

goals? How will competitors respond to Home Depot's growth?

5. Do you feel that the current share price is a fair price? Discuss any reservations

or qualifications you may have relating to your answer.

Case #6 Walgreens

1. Do you feel that the capital structure for Walgreens puts the company in a favorable position compared with competitors?

2. Evaluate the performance of Walgreens compared with competition.

3. What changes would you recommend for near-term corporate strategy for Walgreens.

4. What threats/risks/opportunities lie ahead for Walgreens? Be sure to evaluate the projected expansion plans.

5. Discuss the reasonableness of the stock price.

Case #7 Boeing

It seems that Boeing has frequently been in the news - the huge surge in new plane orders, the acquisition of McDonnell Douglas, the acquisition of the Rockwell Defense unit and an ongoing fierce international competition with AirBus and September 11.

1. What do you see as the biggest challenge facing Boeing?

2. Evaluate the existing capital structure for Boeing.

3. How do you feel that these huge changes will impact the capital structure/financial strength of Boeing?

4. Evaluate the attempts by Boeing to diversify.

5. What measures, if any, should Boeing take to remain a strong competitor in the commercial aircraft industry? (aside from moving the company headquarters)

6. Do you consider Boeing stock to be a good buy?

Case #8 American Airlines

1. Do you feel that the capital structure for American Airlines puts the company in a favorable position compared with competitors?

2. Evaluate the performance of American Airlines compared with competition.

3. What threats/risks lie ahead for American Airlines?

4. Discuss the reasonableness of the stock price.

5. Are proposed mergers a good thing or a bad thing? Why?

Case #9 Pepsi

1. Discuss recent strategy on the part of Pepsi to compete more effectively.

2. Does the capital structure allow Pepsi to compete effectively?

3. What challenges/risks face Pepsi?

4. Discuss the reasonableness of the current stock price.

5. Should Pepsi concentrate more on domestic or foreign growth opportunities?

 

Case 10 Amazon

1. Discuss the recent growth activities relating to Amazon.

2. How does Amazon compare with other eBusiness companies?

3. Evaluate the capital structure of Amazon.

4. What opportunities/risks do you see for Amazon?

Comment on the reasonableness of the company’s stock

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