The case features Taste Good Limited (Taste Good), a fictional Hong Kong-based company in the beverage industry. The board of directors has just instructed Alice Chan, the Chief Financial Officer (CFO), to prepare pro forma financial statements for the coming four years, which will be presented to institutional investors. In addition, the pro forma financial statements would help the board assess the company's gearing level for the coming years. Taste Good is required to comply with debt covenants arising from its bank borrowing. One of the covenants states that the firm's gearing ratio shall not exceed 40% for two consecutive years. If such a covenant is breached, there is high risk that the loan will be called for immediate repayment. Using the assumptions in the case, students should assist Alice to draft the pro forma statement of profit or loss and the pro forma statement of financial position. Working on the case will provide students with hands-on experience in performing financial projections and teach them to critically assess the validity of the given assumptions.
This case investigates the downfall of Ocean Park Corporation (Ocean Park or the park) from the perspective of financial statement analysis. Ocean Park's performance significantly declined from a surplus of HKD127.2mn in FY2013 to a severe deficit of HKD557.3mn in FY2019. This was mainly attributable to the shrinking revenue size and mounting difficulties in controlling the operating costs during this period. In 2020, Ocean Park was hard-hit by the coronavirus pandemic, which pushed it further to the verge of liquidation. After rounds of debates, the Hong Kong legislature eventually approved of a relief fund of HKD5.4bn in taxpayers' money. The case seeks to highlight the financial ratios and metrics commonly used in financial statement analysis, and their interpretations. It provides insights on Ocean Park's financial performance in terms of profitability, liquidity, solvency, and operational efficiency. Students will tackle practical questions regarding financial statement analysis of Ocean Park from FY 2013 to FY2019, and the financial impact of the relief fund by means of pro forma financial statements over the next few years.
This case explores how Cathay Pacific, the world's eighth-largest carrier of international passengers, deals with the new accounting standard, namely, HKFRS 16 Leases (which superseded the prior HKAS 17) as mandated, effective 1 January 2019. For lessee accounting, the new standard adopts a singular right-of-use model that applies the same accounting treatment universally to all leases (with few exceptions), while the prior standard used a dual model that required distinct classification of operating and finance leases with different accounting treatments. Companies that enter lease arrangements to access assets are affected by the new lease standard in varying degrees. In particular, the airline industry-with heavy reliance on leases for aircrafts-is one of most affected in terms of financial metrics. The case seeks to highlight the discussion surrounding the implementation of the new standard. Students will tackle practical questions about the differences between HKFRS 16 and HKAS 17, and how the implementation of the new standard affects Cathay Pacific's financial position, performance, and disclosures in the financial statements.
Wang Yung-ching, legendary Taiwanese businessman and philanthropist, passed away in 2008. He left behind an estate worth US $5.5 billion, but did not leave a will. The case discusses the potential motivation for Wang, and uses it to study succession planning for family businesses.