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.) (HG 4026 B668) (1990)
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?
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. Several years ago Brown-Forman lost out on an attempt to significantly expand the liquor portion of the business. Do you feel that Brown-Forman has the capital to complete a major acquisition? Do you feel that Brown-Forman should make additional liquor acquisitions?
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 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 #4 General Motors
Evaluate the capital structure of GM.
Does GM have a capital structure to be able to continue to compete in the world market?
Evaluate proposed capital spending plans for GM.
Discuss GM’s dividend policy.
Do you feel that the dividend policy is appropriate.
Discuss your perception of shareholder satisfaction.
Case #5 The Home Depot
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?
Describe and evaluate Home Depot's business and competitive strategy.
Does the financial policy/strategy complement or conflict with management's competitive strategy?
What risks and uncertainties do company managers face to fulfill growth goals?
How will competitors respond to Home Depot's growth?
In early January 2003 HD stock fell about 15% in one day when the company announced that it expected to miss earnings estimates by between 2 cents and 5 cents per share. Comment on that market adjustment. Comment on HD recent and expected future share price performance.
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 General Electric
We do not hear a lot about GE; yet the company continues to perform and operate as a worldwide conglomerate.
1. What do you see as the biggest challenge facing GE?
2. Evaluate the existing capital structure for GE.
3. Discuss the impact of current economic conditions upon GE.
4. Evaluate GE diversification. Would you consider GE diversification as efficient?
5. What measures, if any, should GE take to remain a strong competitor in the world market?
6. Do you consider GE 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 Hewlett Packard
1. Discuss the merger with Compaq.
2. Do you feel that HP can continue to be a player in the computer industry?
3. What changes have taken place in the capital structure?
4. Discuss those changes.
5. What opportunities/risks do you see for HP?
6. Comment on the reasonableness of the company’s stock price.
Discussion Case – Boeing
From the article provided, and from your research, discuss your perspective relating to Boeing. Do you feel that the worst is over for Boeing? Do you feel that Boeing is still hiding from the truth? Discuss the capital structure of Boeing and comment on the strength or weakness of the capital structure. What opportunities and threats exist for Boeing?