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Supplements the (A) case.

This case requires students to develop an understanding of (1) the nature of various business events, and (2) how such events affect a company's reported cash flows, net current assets, total assets, and net income. The case does not require the bookkeeping activities of recording and posting journal entries; therefore, it provides an opportunity for a managerially oriented perspective focused on the important question, "How will this event affect my financial profile?"

Delta Air Lines has decided to consolidate its reservations centers in Latin America into one regional office. This new consolidated office will be Delta's Latin America Contact Center, handling reservations for the entire Latin American region. The executives on Delta's site selection team have narrowed down the company's choices of a location for this Center to three options: Mexico City, Mexico; Buenos Aires, Argentina; and Santiago, Chile. Mary Smith will be helping to make the recommendation as to the country where Delta should choose.

Management must extract relevant cost data from the company's cost accounting system for product line decisions. A rewritten version of an earlier case.

Rather than highlight short-term accounting profits, budgets should emphasize future cash. That, as Warren Buffet knows, is where a company's growth potential lies. Changes as simple as replacing the word "budgets" and revising the format of budget reports can put you on a growth footing.

Discusses the advantages and disadvantages of alternative inventory flow assumptions allowed in the United States. A single exhibit shows that in Year 2, a company using LIFO in Year 1 could report higher net income by switching to FIFO at a cost of higher income taxes. Retaining LIFO would save taxes but lead to lower reported income. A rewritten version of an earlier note.

A computer subsidiary appears to be unprofitable. Managers must determine whether it is actually unprofitable and consider whether changes in prices or promotion might improve profitability. Allows clear separation of variable costs from fixed costs. A rewritten version of an earlier case.

By definition, forecasted numbers in a financial statement involve educated guesses. But that's not always clear in the statement itself. To reduce legal liability for off-the-mark predictions, a proposed new model for financial statements clearly distinguishes hard numbers from forecasts.

Intangible assets--patents and know-how, brands, a skilled workforce, strong customer relationships, software, unique processes and organizational designs, and the like--generate most of a company's growth and shareholder value. Yet, extensive research indicates that investors systematically misprice the shares of intangibles-intensive enterprises. Clearly, overpricing wastes capital. But underpricing raises the cost of capital, hamstringing executives in their efforts to take advantage of further growth opportunities. How do you break this vicious cycle? By generating better information about your investments in intangibles and by disclosing at least some of that data to the capital markets. Getting at that information is easier said than done, however. There are no markets generating visible prices for intellectual capital, brands, or human capital to assist investors in correctly valuing intangibles-intensive companies. And current accounting practices lump funds spent on intangibles with general expenses, so that investors and executives don't even know how much is being invested in them, let alone what a return on those investments might be. At the very least, companies should break out the amounts spent on intangibles and disclose them to the markets. More fundamentally, executives should start thinking of intangibles not as costs but as assets, so that they are recognized as investments whose returns are identified and monitored. The proposals laid down in this article are only a beginning, the author stresses. Corporations and accounting bodies should make systematic efforts to develop information that can reliably reflect the unique attributes of intangible assets. The current serious misallocations of resources should be incentive enough for businesses to join--and even lead--such developments.

Spreadsheet Supplement for case 197104

Fluid Analyzers Inc. is a small manufacturer and distributor of hydraulic fittings and has recently developed a new product, the SV pushbutton. The president must decide on a number of issues relating to the product, including target market, manufacturing process, and product features. Using managerial and financial analysis methods he must develop an overall business strategy, incorporating company goals and capabilities with industry trends.

Chip Tec Industries Inc. repairs chips and scuffs on vehicles. A current employee has an opportunity to purchase the business. He must analyse the financial statements to determine the financial status of the company and evaluate the asking price for the business.

University of Chicago's Roman Weil charges that many audit committee members are financially illiterate--and he has the test results to prove it.

A consulting firm to institutional investors recommends selling Enron Corp.'s equity short on May 6, 2001, while many sellside analysts are recommending the stock as a "buy."

Ask senior managers to pare costs by 10%, and they know just what to do. Ask them to boost growth by 10%, and they're stymied, assuming that growth is not really something they can influence. But managers can control their company's growth if they have better information about where their revenues are coming from. Rather than sort sales by geographic market, business unit, or product line, they should break them out in a way that reveals which part of their strategy is responsible for what part of their revenue. This article presents a tool--the sources of revenue statement (SRS)--that does just that. Through straightforward calculations using data taken from a company's balance sheet, along with estimations of customer churn and industry growth rates, the SRS enables managers to classify their revenue according to five sources of growth: continuing sales to established customers (base retention); sales won from the competition (share gain); sales that fell into their laps because the market was expanding (market position); sales from moves into adjacent markets; and sales from entirely new lines of business. Once sorted in this way, revenue can be viewed as the outgrowth of manageable circumstances. Comparing the sources of revenue across divisions can uncover profound insights, which can suggest smart ways to change strategy or set stretch goals.

John Johnson, the owner of the FinePrint Company, is presented with several opportunities to consider: (1) whether to accept a one-time special printing order (the A case), (2) whether to outsource some of his printing to another printing company (the B case, UVA-C-2194), and (3) whether to both accept the one-time special order and outsource it to another printing company (the C case, UVA-C-2195). In making his decision, he must consider the relevance of certain costs, the behavior of those costs, and the extent to which he has capacity constraints.

Supplement to case UV1722. John Johnson, the owner of the FinePrint Company, is presented with several opportunities to consider: (1) whether to accept a one-time special printing order (the A case, UVA-C-2193), (2) whether to outsource some of his printing to another printing company (the B case), and (3) whether to both accept the one-time special order and outsource it to another printing company (the C case, UVA-C-2195). In making his decision, he must consider the relevance of certain costs, the behavior of those costs, and the extent to which he has capacity constraints.

Supplement to case UV1722. John Johnson, the owner of the FinePrint Company, is presented with several opportunities to consider: (1) whether to accept a one-time special printing order (the A case, UVA-C-2193), (2) whether to outsource some of his printing to another printing company (the B case, UVA-C-2194), and (3) whether to both accept the one-time special order and outsource it to another printing company (the C case). In making his decision, he must consider the relevance of certain costs, the behavior of those costs, and the extent to which he has capacity constraints.

Presents an easy introduction to time-driven activity-based costing (ABC) that allows students to build a simple ABC model of order profitability. Midwest's time-driven ABC approach is based on two categories of parameter estimates. The first is the cost per hour of employees performing diverse tasks, such as order-entry operators and delivery personnel performing desktop deliveries. The second is the estimated time required for employees to perform each type of task (manual vs. electronic orders, nearby vs. distant deliveries). Students apply the time-driven ABC model to five representative orders to estimate order profitability based on a far more accurate portrayal of the cost of processing and delivering orders. Stimulates a discussion about the actions, such as pricing and process improvements, to enhance the profitability of orders and also how to report and manage the cost of unused capacity. A rewritten version of an earlier case.

This competitive bidding game consists of four teams, which can be two to four students. (Several games can be played simultaneousely.) Each team runs a printing company that has a capacity of forty press hours a week plus overtime. The case gives budgeted costs, saying which are likely to be variable. Teams bid on lists of jobs and schedule the work they win. Too much work incurs late penalties; two little leaves unused capacity. Four rounds of bidding are scheduled and at the end each team computes its income statement.