© 2000 John Petroff
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© 2000 John Petroff |
Assignments, Cases & Exercises
Research assignments:
R-9B.1 Choose a company with sales history extending over the last 30 years. Select the index most appropriate for adjusting sales data, and explain your selection. Obtain the series and explanation on how it is compiled. Conduct the adjustment. Argue why the use of the index can distort as well as correct the sales data.
R-9B.2 Pick twelve firms from different industries. Read and report the revenue recognition methods presented in the note explaining accounting policies. Comment on similarities and differences (if any).
R-9B.3 Select six firms that have at least three different product lines. Describe in details the information present in the note showing data on segments of business. Correlate the information to materials in other parts of the annual report and articles in the press (if any). Discuss whether the data in the note on segments of business is sufficient to conduct a fruitful financial analysis.
R-9B.4 Choose a company that is known to have a seriously seasonal sales pattern (such as in an industry related to the outdoors). Study the annual report and indicate if sales and performance data reflecting the seasonality is sufficiently thoroughly presented. Corroborate your arguments with citations from management's comments on seasonal factors. Suggest what accounting numbers would be useful to a financial analyst.
R-9C.1 Return to the twelve companies used in assignment R-9B.2. Read and report the note pertaining to inventories. Drawn conclusions for each firm whether potential distortions of the cost of goods sold amount is likely. Indicate whether the inventory methods are sufficient uniform to allow comparison between the companies chosen.
R-9C.2 Find a company for which annual reports go back to the early 1970's. Read the notes to financial statements and build a history of the accounting methods used for inventories. Justify the switching from one method to another. Comment of comparability of data over the years.
R-9C.3 Take an annual report of a company in a country with high inflation. Report on the accounting method used for inventories and conclude how distorted (or not) the cost of goods sold are. Discuss the consequences of the accounting method for the ability to make comparisons of financial data with similar companies in countries without inflation.
R-9C.4 Study the evolution of an industry which went through rapid expansion in the recent past (such as PC or chip manufacturing). Report on the evolution of production techniques, costs of production and prices. Indicate whether the pattern illustrates the theory of the learning curve.
R-9C.5 Choose six (relatively small) firms in the same industry which has a high level of competition. Investigate their pricing policy by studying the relationship between revenues and cost of goods sold and management's comments. Determine whether pricing is similar in all the firms. Then, choose six (relatively large) firms (or less) in an industry that is highly concentrated. Investigate their pricing policies. Draw conclusions about differences that may exist between the two groups.
R-9C.6 Using the same firms as in the previous question (or firms in wholesale trade industries), investigate the marketing strategies for the firms involved. Pay particular attention to the use of discounts, rebates and allowances. Draw conclusions about differences that may exist between firms in competitive markets, as opposed to firms in concentrated markets.
R-9D.1 Read books or articles focusing on productive capacity utilization in industries such as automobile, chemicals or other manufacturing. Note and report on the justification of the minimum size of plant for breaking even. Gather data that can be used to construct a break-even graph for such plant.
R-9E.1 Choose six firms of different size in the same industry, that all have sufficient sales data to conduct a sales growth analysis. Use different techniques to calculate sales growth (i.e. arithmetic mean, geometric mean, time-series). Discuss whether any adjustments (e.g. for inflation or seasonality) would be warranted to the sales data.
R-9E.2 Choose the same firms as before, or another group, to study how cyclical the sales of the various firms are. That means that there should enough observations to cover at least one full business cycle. Use a regression analysis to determine whether sales are cyclical for each firm. Test for lag and anticipation.
R-9E.3 For the previous set of firms, test for the presence of instability not explained by the business cycle. Look for explanation such as action of competitors, changes in tastes, introduction of new products, or unique company strategy. Test your hypothesis with sensitivity analysis on appropriately selected trend series.
R-9G.1 Conduct a top-down sales projection for an industry of your choice. Establish past growth trend of industry. Determine impact of current economic conditions and related markets. Identify leading firms and their marketing strategy. Conclude with prediction of next year market share and sales of the company you choose.
R-9G.2 Conduct a bottom-up sales projection of a company of your choice. Calculate sales growth with a time-series analysis. Outline the stated strategy, and translate that into sales volume. Conduct an audit of expenses to ascertain that resources are put to use to achieve the desired goals.
R-9G.3 Continue with the firm used in the previous assignment to determine the strategy feasibility in light of strengths and weaknesses of the company vis a vis its competitors, and adjust company expectations accordingly. Verify that economic conditions and changes in socio-economic trends will not undermine projections.
R-9G.3 Choose the dominant companies of a concentrated industry. Determine their market share and their respective marketing strategies (from their annual reports). Check that each strategy is not likely to be derailed by economic, social or political changes. Assess the strengths of each firm and the prospects for its strategy to succeed over others. Conclude with a projection of future changes in market share and sales volume.
R-9G.4 Choose a company that derives the bulk of its revenues from sales in countries outside the United States. Conduct a top-down analysis for sales projections in each of the countries.
Cases for Chapter 9 Sales
Bell Canada Enterprises
Read the outline of Case
- BCE. Study the market in which Bell Canada competes. Is
Bell Canada ready for the new competition? Identify the reasons
why Bell Canada went through a major divestiture in 1998, and
is undertaking a major acquisition in 2000. What strengths and
opportunities will the merger bring?
Paint a brief history of Versar's sales growth strategy in
the late 1990's from case outline in Case
- VSR. Discuss the Versar's expansion strategy. Point out
the major direction(s). Explain the reasons for the failed merger.
Did the fail merger give the company a clearer vision of its best
opportunity and worst weakeness?
Study the 1998 merger of Teleglobe and Excel in Case
- TGO. Explain why the merger was a crucial tactical move
in the context of the rapidly evolving long distance telecommunication
market in Canada, North America and world-wide. Did Teleglobe
have the experience to enter new markets and compete in them?
What was required of Teleglobe to do that? What difficulties do
your foresee for the Teleglobe operation resulting from the merger
with Excel? Are the other Teleglobe investments as important as
that in Excel? (Note: please focus your analysis on Teleglobe
strategy prior to the merger with BCE.)
Study the results of operation of Jenny Craig in 1999 presented in Case - JC. Are ratios revealing a major difficulty? Should Jenny Craig be concerned with its ability to control is costs? Explain. How has the weight control market changed in the 1990's to justify a completely different commercial strategy from the past? Should Jenny Craig change its pricing?
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