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Andrew Ferris, a recent Thunderbird MBA graduate, joined Diversified Equity Investors LLC as an analyst specializing in the telecom, information technology, and cable/satellite industries. He was asked to provide a financial and accounting analysis report on Pantera Communications, Inc., a rapidly growing virtual telecom company. Pantera leased lines from the major long-distance operators, and resold long distance services using a network of independent representatives (IRs) who were paid an upfront commission for each new subscriber who signed up for the company's long distance service. Financial analysts were critical of the company's accounting policy of deferred revenue from the start-up package sold to IRs, and capitalizing and amortizing the commissions paid to IRs for acquiring new customers.

This note explores discounted cash flows as a core technique for valuing a business, allocating scarce resources, and comparing alternative investments. Suitable for MBA and undergraduate business students, this note builds on students' basic understanding of discounting future cash flows with simple examples to which students can easily relate. Whether the discounted cash flow process used to derive a net present value or an internal rate of return metric, it is powerful, rational, and informative.

This case focuses on the use and interpretation of the DuPont model financial ratios, in particular the following four: return on sales, asset turnover, financial leverage, and return on equity . Students consider how these ratios are used to assess a company's financial performance for a single year, over time, and in comparison with other companies within and outside the focal company's industry. They also learn how these ratios provide insight into a company's business model via the margins it is able to earn, the productivity with which it uses its assets, and the company's aggressiveness (or lack thereof) in using borrowed money to finance its operations. The case is rooted in the basic premise that "ROE is the ratio most commonly used to analyze profitability of a business" and it is "important to both current and prospective shareholders." Furthermore, in the context of the DuPont model, the case positions ROE as the product of the other three ratios noted above. Thus, the protagonist in the case, Jill Keyes, has gravitated to the DuPont model. The case ends with a set of questions that Jill Keyes has left for her subsequent follow-up-these provide the basic assignment for students.

In existence since 1868, the non-profit Otago Museum in New Zealand had undergone several changes and expansions during its history and was regarded as curator of a broad-based collection of Maori and South Pacific artifacts. In January 2010, the Otago Museum's chief financial officer (CFO) was instructed by the museum's chief executive officer (CEO) to create a balanced scorecard (BSC) for the museum. The current CEO had brought a sense of customer orientation and financial acumen to the general running of the museum, evidenced through examination of customer satisfaction via surveys and focus groups, and various efforts to diversify income streams. The development of a BSC was seen as a practical way to reinforce and further motivate employee behaviour congruent with the focus on customer service and financial acumen. The resulting BSC needed to clearly articulate the museum's objectives, and the cause-and-effect relationships linking BSC dimensions with the museum's strategic vision and mission.

The ACE Venture Fund case is a 501(c)3 social venture fund that hopes to invest in projects that help the poor around the world. The donors of the fund, 15 Boston-based high-tech entrepreneurs, were interested in backing social entrepreneurs who had innovative and unique approaches to solving social problems. The case provides opportunities for students to: understand how to develop a cohesive strategy for a venture focused on maximizing social value; explore the range of approaches available to evaluate the social impact of investments in the nonprofit sector as well as in the field of corporate social responsibility; appreciate the importance of defining the metrics, especially in the field of social value creation, since there are no standardized definitions for even the commonly used metrics; understand the specific data needs under various approaches; and understand the implications of the data requirements of various approaches on project selection for funding.

This note provides a summary of the guidance available in IAS 21: The effects of changes in foreign exchange rates, including a description of how to determine an entity's functional and presentation currencies, and the impact of this decision on the financial statements. The note also contrasts the IFRS approach to foreign currency transaction to the guidance provided by Accounting Standards for Private Enterprises.

Jimmy Fu is interviewing for a job at Moog, Inc., a worldwide designer, manufacturer, and integrator of precision motion and fluid controls and systems. He learns that a job offer from Moog typically includes stock options and restricted stock in the compensation package. The vesting and termination language for the stock plan leads Jimmy to investigate the Shareholders' Equity section of the Moog balance sheet, where he finds more activity than he expected. The case introduces students to the concepts of employee stock options, stock-splits and buybacks, multiple share classes, and the basics of equity investment and diversification. Students must complete a quantitative analysis of the financial transactions related to Shareholders' Equity.

Normally, serving on a company's board of directors is not a full-time job, but in the summer of 2002, Nick Donatiello (GSB 1986) found himself in exactly that position. As a member of Gemstar-TV Guide International's (Gemstar's or the Company's) board of directors and its Audit Committee, Donatiello was caught up in a storm of accounting issues, shareholder lawsuits and a power struggle between the Company's largest shareholders. Donatiello, one of only three independent directors on the board, wanted to do what was right for shareholders. However, the decisions required to arrive at that outcome were far from clear. This case centers on accounting and governance issues that arose during the 2001 audit of Gemstar TV Guide International. In summary, although management and the company's auditors, KPMG, agreed with the recognition of certain revenues, the company's audit committee believed that those revenues should be restated. The case discusses the specifics of two accounting issues, in particular, and also provides an overview of the company and the various parties involved.

Continental Media Group has a series of business reviews struggling to achieve profitability. This case focuses on the use of management control systems to identify emerging opportunities and the formulation of new strategies. The interactive system used by top managers-the Friday Packet-is described and illustrated in exhibits. Top managers use this system to focus organizational attention on the critical uncertainties of the business. Provides examples of how new strategies emerge from the dialogue that is generated by the interactive control system.

Darlarna is a manufacturer of high-end Swedish-style furniture. It has grown rapidly since its formation in 2005 and is currently attempting to expand into the U.S. market. In early 2009, after releasing the financial statements from the accountants, the owner became very concerned about a dramatic decrease in profits and all the bad news relating to the financial crisis in the United States. A chartered accountant was hired to conduct an analysis of Darlarna's operations and to make recommendations for future actions within the week.

This case presents a series of decision points along with a simple process for ascertaining underlying source(s) of disagreement, which represents an important managerial tool. The president of First Mates' Wholesale Boating Supply Company, is faced with the reality of missing year-end earnings projections and breaking a 30-year streak of successive earnings increases. He has asked all his direct reports to meet with their teams and brainstorm about ways to finish the year in strongly and successfully. The case presents a number of those ideas for students to debate and discuss as they decide which ones the company should pursue.

This case continues the story begun in "Pfizer: A Letter From The Chairman" (HBS No. 9-110-003), revealing the letter Chairman and CEO Jeff Kindler wrote for the 2008 Annual Report.

Cabinet Creations is a woodwork company specializing in the manufacture and distribution to retailers of kitchen cabinet doors. The owner wants to assess the company's second fiscal year of operations. Students are asked to (1) identify and record the cost of raw materials used, cost of work-in-process, cost of finished goods manufactured and cost of goods sold; (2) determine the cost of work in process, calculate partial factory overhead; (3) record the issuance of conversion of preferred shares; (4) record the declaration and payment of dividends; record the purchase and sale of marketable securities - stocks and bonds, and its subsequent interest revenue.

Cabinet Creations is a woodwork company specializing in the manufacture and distribution to retailers of kitchen cabinet doors. The owner wants to assess the company's second fiscal year of operations. Students are asked to (1) identify and record the cost of raw materials used, cost of work-in-process, cost of finished goods manufactured and cost of goods sold; (2) determine the cost of work in process, calculate partial factory overhead; (3) record the issuance of conversion of preferred shares; (4) record the declaration and payment of dividends; record the purchase and sale of marketable securities - stocks and bonds, and its subsequent interest revenue.

The chief financial officer (CFO) of the Richard Ivey School of Business (Ivey) is reflecting on the state of the school. Ivey's MBA program was just beginning its inaugural year in the new 12-month format at the Spencer Leadership Centre (Spencer), and all signs pointed to a successful start. However, it was becoming obvious to the CFO that the Executive Education programs at Ivey would face some serious capacity constraints, given the resulting reduction in available space in the building. The CFO was considering the need for a $7 million expansion to Spencer to ensure that Ivey would be able to continue its number one position in the executive education market in Canada.

Spreadsheet Supplement for case 11063

Owens & Minor (O&M) performed lean inventory services for Virginia Mason (VM) as its alpha vendor, but the outdated industry pricing model created perverse incentives and could not capture O&M's costs. Together, O&M and VM created an activity-based pricing model called the total supply chain costs (TSCC), which incented both companies to be more efficient and to streamline their distribution activities. After beta testing the TSCC for one year, VM's Daniel Borunda and O&M's Michael Stefanic believed that TSCC was a better and more cost-effective pricing model, but could they convince their companies to continue to invest in TSCC?

This case examines the causes and consequences of the credit crisis of 2008 from a national and global perspective and explores the actions taken and proposed by the U.S. and European governments.

This note explains the basic structure of the trading floor in a typical financial institution and how the front, middle and back offices interact to ensure a functioning trading system.

Revenue recognition is a critical issue for companies. Proper revenue accounting can be complex, particularly when vendors provide a mix of products and services, making it difficult to determine the appropriate timing and amount of revenue to be recognized. Financial reporting standards require disentangling multiple revenue streams to ensure that revenue is not recognized before it is earned. Compliance with recognition standards can affect access to capital, firm valuation, and employee bonuses. Errors can have severe consequences, including earning restatements. The case discusses key issues in revenue recognition, with particular focus on transactions with multiple deliverables. It uses Fluidigm Corporation to illustrate revenue recognition principles. This company sells a range of products, including analytical instruments, disposables, software, and services. The case also illustrates the evolving nature of revenue recognition standards, and the consequences of guidance changes on financial reporting and company procedures.