The case illustrates the use of the residual income (also known as the abnormal earnings) valuation approach. Students are asked to provide a valuation of Coca-Cola Company using the residual income valuation methodology and understand how it maps into the discounted cash flow method. Students learn how forecasts of sales, performance, dividends, and other valuation inputs feeds into a valuation model. Students also learn the modified Dupont decomposition technique and how to reclassify financial statements to perform the modified Dupont analysis.
In 2010, Foxconn Technology Group, the largest and fastest growing multinational company in the Electronic Manufacturing Services (EMS) industry, came under public scrutiny after a string of employee suicides reached the international press. Although the company was Taiwanese, it operated primarily in mainland China, becoming one of China's biggest exporters. It had 800,000 employees, over 400,000 of whom lived at Longhua Science and Technology Park in the Special Economic Zone of Shenzhen. It was this Science and Technology Park - essentially a company town - which brought Foxconn under international scrutiny in 2010 after 14 employees committed suicide there and three others attempted to do so. The (A) case describes the challenges that Foxconn faced after the suicides took place at its plants. Institutional features of the labor market structure of China are presented. The response of Foxconn's management is described and the associated implications for Foxconn's stock price are discussed.
In 2009, Southwest Airlines produced its first integrated annual report, the Southwest Airlines One Report, combing financial and nonfinancial performance information. This case examines Southwest's environmental and corporate social responsibility (CSR) reports produced in the two years preceding 2009 and follows the company's decision to transition to a new reporting format. Preparing for the 2010 report, the Southwest reporting team contemplates how to improve the One Report. The case also allows for debate on the future of integrated reporting, including its impact on internal management processes, integrated audits, and mandated nonfinancial reporting.
Explores Canadian regulators' decision to adopt International Financial Reporting Standards (IFRS). The Canadian decision in 2005 to adopt IFRS is particularly interesting because Canada had well-developed domestic accounting standards and because a significant fraction of Canadian industry was lobbying for the adoption of U.S. Generally Accepted Accounting Principles (GAAP) and not IFRS. The case positions the student as an advisor to an important local politician. Based on cultural, economic, and political information available in 2005, the case requires the student to choose between: (i) retaining Canadian GAAP; (ii) adopting U.S. GAAP; or (iii) adopting IFRS.