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American Hospital Supply, the largest firm in the U.S. hospital supply industry, has achieved success in part through the use of information systems. Changes in the hospital marketplace suggest a shift in strategy would be appropriate. What role should information systems play in future strategies?

Describes the use of common financial ratios to analyze a firm's performance and financial condition. Discusses fundamentals of equity valuation. Based on an earlier note by the same author.

Camelback Communications, Inc. has a poorly designed cost accounting system and is in the process of redesigning it. This case demonstrates how the old cost accounting system operated.

A cost center can take pride in the service it gives to the company, but it's difficult for managers to tell if the center is working at an efficient level. Xerox's answer is to use the yardstick applied in the profit center in the cost center. The Logistics and Distribution (L&D) cost center of the Business System Group has taken steps to emulate the behavior of the profit center.

How can we evaluate if innovative health care ventures can do good-benefit society-and do well-become financially viable? This question is the topic of the first module in the Innovating In Health Care course book. This note and case series enables readers to conduct this kind of evaluation in the context of innovative organizations for Primary Care Physicians (PCPs). They ask the reader to evaluate which, if any, of the different innovations for organizing PCPs could have helped Health Stop avoid its subsequent failure (not revealed in the case). In addition to Health Stop's retail medical center model, the note reviews innovations that differ in location; virtual or bricks and mortar; other retail-based; and differ by payer/patient focus. The pair emphasize that success or failure is shaped by correct identification of the type of organization-is it consumer-facing, technology-commercializing, or cost-controlling?-and the alignment of that type of organization with the Six Factors in the environment that critically affect it-Structure, Financing, Consumers, Public Policy, Accountability, and Technology. Health Stop failed because it tried to become two different types of organizations-consumer-facing and cost-controlling-and thus had poor alignment with many of the Six Factors critical to its success. It is impossible to focus on more than one type. Some sort of partnership with the retail-based (e.g., CVS, Walgreens) or technology-based innovations (e.g., Aledade (see "Aledade." Harvard Business School Case 321-131), Agilon) could have helped to rescue it.

This note discusses the mechanics of preparing a cash budget and the importance of optimizing a company's cash position. A detailed example of a cash budget is provided and examined.

The general manager of a financial services company is examining a request for a loan to finance the completion of a hotel on the ocean shore in Kenya. Projected costs and revenues for the first three years are presented. The manager is trying to assess the validity of these estimates and whether he should recommend the loan.

One month's worth of purchases and sales at a restaurant supply company must be recorded, the ending balance in accounts receivable and accounts payable must be determined, and the revenue and cost of goods sold sections of an income statement must be prepared. This exercise is suitable for an introductory course in financial accounting.

Corey Manufacturing rebuilt its production equipment and thereby extended its useful life. How should Financial Accounting entries reflect extraordinary repair on a fixed asset?

This note discusses the mechanics of preparing a cash budget and the importance of optimizing a company's cash position. A detailed example of a cash budget is provided and examined.

Mayers Tap, Inc. has a poorly designed cost accounting system and is in the process of redesigning it. This case provides background details for the rest of the Mayers Tap, Inc. series.

Mayers Tap, Inc. has decided to redesign its cost system. In this case, the budgeted costs have to be allocated to the machine level. The teaching objective is to demonstrate two-stage allocation and the sensitivity of cost data to allocation base selection.

Mayers Tap, Inc. has decided to redesign its cost system. In this case it uses three different cost center designs to determine how the new system should be designed. Students are asked to drop unprofitable products under the three scenarios and explain the effects on the income statements. The teaching objectives are to demonstrate to students that the selection of cost centers is critical to the generation of accurate standard costs.

Operating cash flow (OCF) is an increasingly popular measure of a company's performance, but a study of nearly 300 businesses raises doubt about its reliability as a financial indicator. The study matches 60 companies that had filed for bankruptcy between 1971 and 1982 with 230 nonbankrupt companies chosen randomly from the Compustat Industrial Tape. The study found that OCF figures (OCF, OCF/current liabilities, and OCF/total liabilities) over five years before filing for bankruptcy were poor predictors of failure.

Budgets have two primary functions: planning and control. Companies must decide which function is most important and then resolve a number of formulation issues. Most companies use budgets to evaluate, to some extent, division managers' performances and tie bonuses to the attainment of targeted goals. But while large companies concerned about operational efficiency may want to focus on the coordination and control aspects of budgeting, small and innovative companies may be more concerned with planning aspects. How well a budget succeeds depends on the management systems in place and on the way senior executives view the budgeting process.

Outdated cost accounting and management control systems are an obstacle to the lasting success of new manufacturing technologies and procedures. They distort the realities of manufacturing performance and fail to give managers the information they need to optimize the benefits of computer-aided manufacturing processes. Measurement systems for today's manufacturing operations must include such nonfinancial indicators as quality, inventory, productivity, innovation, and the morale and skills of the work force. McKinsey Award Winner.

Loss of a major contract has reduced production volume below the level expected when budget and standard costs were determined. Apparently favorable results for monthly operations result from reduced volume rather than operating efficiency. Rewritten version of a case by the same author.

Raising prices to cover rising costs and defend profit margins is a strategy that ceases to work in a recession, for that is when other companies start lowering their prices to increase their competitiveness. To avoid this competitive pricing trap, a company needs a method for seeing the unique way in which inflation is affecting it. Such a method is the value chain, a diagram that shows the value added at each step in the market process, from the raw materials stage to the final prices paid by consumers, exposing shifting cost components.

Crossroads Tavern is a short two part exercise on break-even analysis. In the first part, the owner and manager are attempting to assess the level of sales (measured in units and dollars) required for the firm to: (a) achieve a profit of zero; (b) achieve a target profit of $30,000; and (c) achieve a net cash flow of zero. In the second part, the manager is evaluating the idea of expanding the hours of operation, and is attempting to determine the sales volume necessary to make such an expansion feasible.

Disc Importers is a classical record importer and wholesaler which has just completed its first year of operations. The controller has asked other executives for assistance in choosing an inventory valuation method. The choices revolve around the four standard inventory valuation options (LIFO/FIFO/average cost/specific identification), and the uses which the executives wish to make of the financial statement information. As well, the controller wants to evaluate the impact of the lower-of-cost-or-market rule on ending inventory evaluation. There has been substantial increases in the unit cost of discs throughout the year, and hence the inventory valuation method chosen will impact the financial statements.