How would you determine whether corporate balance sheets are “too” levered? What benchmarks would you use? What are the risks of too much debt, both for the firm and for the economy?
What are your thoughts about the “pecking order” of capital and how it may have played a role in the bankruptcy?
Tesla seems to be renegotiating with vendors after sales have been booked. What are the accounting implications from Tesla’s perspective? From the vendor’s perspective? What ratios are affected by longer payment terms and by rebates? What other sources of capital are available for Tesla at this point?
If you were a supplier to one of the companies that is taking longer to pay, what course of action would you (could you) take?
In its non-GAAP EPS, Allergan removed “more than half of all operating expenses,” according to the SEC. If the non-GAAP EPS is reconciled to the GAAP EPS, does it matter what or how much they removed? Why or why not?
How can a write-down on oil reserves be beneficial to Exxon’s executives (i.e., “bail them out”)? How would you determine if a probe into accounting practice were “politically motivated”?
Can you tell from this description whether the pro forma (adjusted) results for Marvell Technology are “good”?
EBITDA, a non-GAAP measure, is apparently being tweaked, to make it “more” (?) non-GAAP. Should investors be concerned? Should investors be using cash based measures that are harder for firms to tweak? Should the government oversee non-GAAP metrics?
According to the article, Target’s profitability suffered in part because of the rigid performance metrics that were introduced. Explain how introducing performance metrics can alter employees’ behavior and affect the “creative culture” that Target had. What financial ratios would capture reduced performance?
Why would banks use net debt-to-EBITDA as a constraint on borrowing? What is a common characteristic of those firms that are already highly levered (with a ratio above 5)?
The Effective Tax Rate is measured as Tax Expense / Pre-tax Income. Is it more informative to measure this ratio using “Cash Taxes Paid” in the numerator? Why or why not? Where do firms report the amount of cash taxes paid?
What is the purpose of the P/E ratio? Critique the ratio. When would you use trailing earnings in the ratio? Forecasted earnings? Normalized earnings?
What’s the threshold that banks need their ROE to hit? Why do analysts and investors claim this is “the magic number”? What are ways to hit this magic number? Do banks have incentives to do so?
What financial evidence is used to argue that H.P. is struggling? What advice would you give Whitman? How would your advice manifest itself in improved financial results?
An activist investment fund has increased its ownership of Office Depot to just over 13%. Is this sufficient to exert significant influence? Control? Why would the fund focus on cutting expenses to increase profitability? How might this strategy affect future sales and profitability?
If you were the CEO of Hyundai, what would you do re: worker demands? How would you determine the optimal “days sales in inventory” (DSI)? How is DSI measured?
Why do you suppose that firms in Spain and Italy have significantly “worse” working capital management compared to firms in Germany and Scandinavia? Or, do you think that the working capital practices are not necessarily “worse,” but rather just “different”? Do the differences matter? How?
