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Ryanair Holdings plc
by Mark T. BradshawExamines the valuation of an Irish airline that reported its first decline in net income in 2004 and saw a 30% stock price drop on the news. Ryanair is a low-cost, low-fare airline headquartered in Dublin, Ireland, operating over 200 routes in 20 countries. The company has directly challenged the largest airlines in Europe and has built a 20+ year track record of incredibly strong passenger growth while progressively reducing fares. It is not unusual for one-way tickets (exclusive of taxes) to sell on Ryanair's Web site for less than one euro. Having created profitable operations in the difficult airline industry, industry analysts and Ryanair itself have likened the airline to its U.S. counterpart, Southwest Airlines, and the common stock has attracted the attention of investors in Europe and abroad. Valuing Ryanair is problematic because of the general levels of uncertainty in the industry (i.e., fuel costs, labor, macroeconomic factors, etc.) and is exacerbated by the company's stated goal of actually decreasing fares each year.
Kansai Digital Phone: Zutto, Gaining Japanese Loyalty
by James R. Dillon F. Asis Martinez-JerezTed Katagi, marketing strategy manager of Kansai Digital Phone (KDP), utilizes customer lifetime value as a key metric to prioritize initiatives in an emergency plan to turn around the company. KDP is a regional phone company in Japan with less than stellar performance. Katagi is sent from the U.S. partner, Airtouch (later Vodafone), to assemble a team to design and implement a plan that improves company to performance. Katagi must quickly prioritize actions and then assess the expected economic impact.
Restating Revenues and Earnings at INVESTools, Inc. (A)
by F. Warren Mcfarlan Michael D. KimbroughRelates the events leading up to the announcement in February 2005 that INVESTools, a Utah-based provider of investor education services, would be restating prior-year financial statements due to inappropriate revenue recognition.
Restating Revenues and Earnings at INVESTools, Inc. (C)
by F. Warren Mcfarlan Michael D. KimbroughAn abstract is not available for this product.
DICOM Group plc and Captiva Software Corp.
by Paul M. HealyCompares two companies in the information capture software industry. Asks students to analyze and compare the performance of two companies (one in the United Kingdom and the other in the United States) from the perspective of a buy-side analyst reporting to the manager of the firm's Global Technology Fund. The analyst must decide whether to recommend one or both stocks to the fund manager. Provides an opportunity to compare the differences in terminology, presentation of financial reports, and accounting methods for the U.S. and U.K. firms.
Accounting for Pensions and Employee Benefits at Ford and Toyota
by Douglas J. Skinner Laura E. Donohue Gregory S. MillerUses Ford's and Toyota's financial statements to familiarize students with the information provided in pension footnotes. Allows students to combine that information with other financial statement information to create a greater understanding of the costs of each company's business. Includes directive questions.
Investor Relations at TOTAL
by Vincent Dessain Gregory S. Miller Anders SjomanExamines investor relations and financial communications in a large company with a diverse group of financial stakeholders. Total is an "energy major" based in Paris, France. The importance of its product and its impact on economies and environments combine with the size of the company to make Total highly visible to investors, governments, environmental groups, and other shareholders. The highly technical nature of Total's many internal activities and the breadth of its complex operations further impacts communication efforts. In addition, as a Continental European firm (in particular, French), Total has strong societal expectations regarding its interactions with employees/citizens vs. shareholders. Examines how Total creates a consistent and clear financial communication that provides information to these diverse stakeholder bases and their different desires for the company. Also asks students to consider how this communication strategy will need adjustment due to a period of high oil prices and a resulting windfall profit during 2005.
Accounting for Marketable Securities and the "Recycling" of Income
by Gregory S. MillerGives an overview of accounting for equity investments less than 20%. Uses this accounting to introduce the issue of amounts included in the statement of comprehensive income during a different time period from its inclusion in net income (sometimes called "recycled earnings").
Slots, Tables, and All that Jazz: Managing Customer Profitability at the MGM Grand Hotel
by Marc J. Epstein F. Asis Martinez-Jerez Joshua Bellin Dennis CampbellThe MGM Grand Hotel in Las Vegas had detailed information on loyal gaming customers, but could its information systems also be tailored to nongaming customers? As the nongaming business sectors became increasingly profitable both at the MGM Grand and in Las Vegas generally, understanding the nongaming customers appeared to be of critical importance to the continuing growth of the resort.
Sarbanes-Oxley Act: Details and Evaluation
by Susan Kulp David LanePresents details related to Sarbanes-Oxley, with special emphasis on Section 404.
Kevin McCarthy and Westlake Chemical Corp (A)
by Edward J. RiedlExamines forecasting earnings/performance for a commodity chemical firm during a period of high uncertainty, highlighting the combined effects of input process (natural gas), industry capacity/utilization, and cyclicality. Assuming the role of Kevin McCarthy (the top chemical industry analyst in 2004), students must analyze macro, industry, and firm-level data to determine the future performance of this firm.
Sippican Corporation (A)
by Robert S. KaplanPresents a time-driven version of the Wilkerson Co. activity-based costing case (101092). Faced with declining profits, Sippican Corp. is struggling to understand why it is encountering severe price competition on one product line. The controller collects data that will enable development of a time-driven, activity-based cost model to explain better the different demands of each product line on Sippican's indirect and support resources. Illustrates a powerful connection between strategic planning and operational budgeting.
CEMEX: Rewarding the Egyptian Retailers
by F. Asis Martinez-Jerez Joshua Bellin Carole A. WinklerCEMEX has pursued an aggressive decommoditization strategy focused on its relationship with small Egyptian retailers. In particular, the strategic role and effectiveness of the Rewards Program, a tournament that rewarded the sales performance of the retailers, was called into question by Assiut Cement's management based on the results of its first two rounds.
Revenue-Recognition Problems in the Communications Equipment Industry
by Paul M. Healy Arjuna CostaDesigned to explore recognition issues in the context of a potential market downturn. In late 2000, Lucent Technologies reports multiple revisions to its recent financial results due to revenue recognition problems, leading to a dramatic decline in its stock price. This disclosure comes in the wake of a period of spectacular growth for the communications equipment industry during the 1990s. From the perspective of a securities analyst covering the industry, are the troubles at Lucent indicitive of larger revenue recognition issues throughout the industry? Facilitates a discussion of potential early warning signs of the risks faced by Lucent's competitors.
Deferred Taxes at Obadiah Vineyard
by Romana L. AutreyObadiah Vineyard's owners create financial statements in accordance with generally accepted accounting principles (GAAP) to help them obtain funding to plant more acreage. The owners grapple with deferred taxes and the differences between tax and financial reporting books.
Amanco: Developing the Sustainability Scorecard
by Ricardo Reisen de Pinho Robert S. KaplanDescribes the challenges of using the Balanced Scorecard to implement a triple-bottom-line strategy for delivering excellent economic, environmental, and social performance. The owners and senior executive team of Amanco, a producer of plastic pipe and complete water treatment systems, want strong financial returns but are also deeply committed to improving the environment and making a difference in people's lives. Robert Salas, CEO, wants a management system that communicates and motivates Amanco's three high-level goals. Initially, he creates a simple scorecard of measures, but he soon migrates to developing a strategy map and Balanced Scorecard that places economic, environmental, and social objectives as the highest-level objectives. He faces the challenges of cascading the corporate Balanced Scorecard to operating units throughout Latin America and how to develop better measures of social and environmental impact. Salas must also address whether he can sustain Amanco's balanced strategy while entering the Brazilian market, where he faces an entrenched and much larger competitor.
Brief Note on Deferred Taxes: An Analysis Perspective
by Mark T. BradshawProvides an overview of accounting for deferred taxes. The primary objective is to provide external users with a basic understanding of deferred taxes. A simple illustrative example is provided, which is followed by a discussion of several important issues likely to be encountered in the analysis of deferred taxes (e.g., deferred tax assets vs. liabilities, balance sheet classification, permanent differences, statutory vs. effective tax rate, net operating loss carry forwards, and valuation allowances). The discussion of these issues is brief and non-technical. Provides actual deferred tax information from AOL's Form 10-K, where net operating loss carry forwards result in a large deferred tax asset and the accounting for software and deferred subscriber acquisition costs generate a large differed tax liability.
Bancaja: Developing Customer Intelligence (A)
by F. Asis Martinez-Jerez Katherine MillerIn 1996, CEO Fernando Garcia Checa wanted to make customer analytics a part of Bancaja's new strategy. Bancaja, a savings bank based in Valencia, Spain, was expanding and wanted to exploit customer information to increase commercial effectiveness. At the same time, it was pushing for innovation in the nascent Spanish credit card market. To avoid the considerable investments of time and money that a large-scale customer relationship management (CRM) project would require, the bank decided to explore its benefits with a smaller pilot project. It appointed a CRM project team to design and implement a project focused on credit cards. Describes the challenges of the Spanish credit card market at the time, the methods for profiling credit card customers, and the variables involved in designing an optimal credit card. Concludes with a consideration of the decisions the CRM team had to make in designing the project, including whether to use conjoint analysis or implement a mini campaign.
Hallstead Jewelers
by William J. Bruns Jr.A retail jeweler has relocated to a larger store and is experiencing losses for the first time. Sales and costs have increased along with the breakeven point. Changes in pricing and promotion must be explored. Alternative actions to return to profitability can be considered.
Survey Masters LLC (A)
by William J. Bruns Jr.Partners in a service firm are reviewing results for 2006, wondering whether large or small projects are more profitable. Present reports make small projects look more profitable. However, activity-based accounting reveals that large projects are more profitable and that concentrating sales efforts on large projects offers potential for greater profit in a service firm.
Corrections Corp. of America
by Edward J. RiedlThis case illustrates a comprehensive valuation of a publicly-traded firm specializing in building and managing prisons. Students must assess the firm's strategy and risks, evaluate key financial reports, derive forecasts of future performance, and use these forecasts to value the firm.