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Spreadsheet supplement for case 221070.

Using the fictional situation of two brothers facing the challenge of managing a commodity business in central Africa, this note explores different metrics for risk and related considerations for investors. The note considers measures of volatility, including the difference between systematic risk and idiosyncratic risk, and how diversification reduces idiosyncratic risk. The note uses these concepts to motivate the foundations of portfolio risk assessment by rational investors and the theory of the capital asset pricing model.

This case examines Delta Air Lines' response as demand for its services plummeted in the face of the COVID-19 pandemic, with a focus on the company's funding needs and capital structure. Following a series of initial actions, the company's cash "burn" had reduced from $100 million per day at the start of the pandemic to approximately $27 million per day by the summer of 2020; in addition, Delta had amassed significant liquidity and amended its financial covenants. However, the company's shares were trading at roughly half their pre-crisis levels, rating agencies had downgraded Delta's credit rating to "junk" status, and a second wave of coronavirus infections was underway in the United States. Now, management would have to determine if Delta was sufficiently well-positioned to survive and eventually compete in the post-COVID recovery ... or if they needed to take further action to prepare for a prolonged crisis. How should the company manage its capital structure in the face of such industry uncertainty? What actions should be pursued to mitigate the financial and operational risks? Should the company raise additional funding, and if so, of what kind and from whom? How should various stakeholders' concerns be prioritized and reconciled, ranging from shareholders to employees to government?

In March 2020, in response to the global pandemic, the cruise industry ceased operations. Carnival was the largest cruise line operator in the world, and CEO Arnold Donald and his management team worked to position the company to survive. They slashed operating expenses and capital expenditures, raised more than $10 billion in new debt and equity financing, and negotiated with creditors. Planned ship deliveries were cancelled, and less efficient ships were retired or sold. Had the company done enough?

Boond, a last-mile energy access company, was founded to serve the rural base of the pyramid market in India. The company operated in the two states of Rajasthan and Uttar Pradesh(UP). It came face to face with multiple challenges like low purchase capacity, lack of awareness about solar technology and difficulty of reaching out to the remote consumers. Boond innovated its business model to provide customized solution for energy access at an affordable price along with doorstep servicing. It created social capital that facilitated the collectivity of the stakeholders like banks, suppliers, grassroots organizations and community. This led to energy access and had a multi-dimensional impact on human well-being (health, education, employment, etc.), thereby improving lives of many. The challenge for Boond is in scaling up its business model for energy access to the other Indian states, each of which pose unique challenges along with varying environmental factors.

In January 2020, the chief executive officer of the family-run business Scak Textiles LLP (Scak), based in India, was thinking about how the company could achieve a new milestone of ₹500 million in revenue by 2025. He wondered why the company, after coming so far, could not achieve that number with a sustainable margin. What else could he do to help Scak reached this target, and how could he solve the bottleneck of resource constraints?<br><br>The bright next-generation entrepreneurs of the family were taking an active interest in the business and had strategic plans for enhancing the effectiveness of both business and revenue models while navigating the ever-changing business ecosystem. The promoters of Scak wanted an outline of the entrepreneurs’ recommendations with adequate assumptions and a business valuation. The promoters would expect a 15 per cent return on additional capital invested; the corporate tax rate would be 30 per cent. The next-generation family members saw three possible options: add manufacturing operations, establish e-commerce platforms for business-to-business and business-to-consumer businesses, or enter the business of exporting. Could they take up all three options, or should they maintain the status quo? The value and future of Scak would depend on their decision.

Instructor Spreadsheet to accompany product 8B21N003.

Student Spreadsheet to accompany product 9B21N003.

In June 2020, XP and Itaú faced intensified competition and tension in their partnership, with the latter owning a minority stake at XP. Two years earlier, in May 2017, Itaú had announced it would acquire 49.9% of XP for $1.8 billion, followed by three additional stages leading to company control. Yet in August 2018, Brazil's Central Bank, partially barred the deal, stating Itaú could become a minority shareholder. Tensions surfaced as soon as the deal was formalized, with both companies engaging in public attacks across several marketing campaigns, with Itaú estimated to lose around $27 million a day to XP from client migration. Moreover, XP faced increased competition from emerging investment platforms that were gaining ground in Brazil´s market. By mid-2020, XP´s financial results had skyrocketed, taking in $190 million in net income and $743 million in total revenues. As Guilherme Benchimol, XP´s CEO, looks ahead, he must define what strategies they should pursue to achieve further growth, considering competitive forces and market opportunities at hand.

Thorough analysis of various nonprofit business models requires an understanding of each firm's economic characteristics. The relations between various financial statement items provide evidence of many of these economic characteristics. This case presents the "common-size" condensed annual balance sheet, income, and cash flow statements for eight nonprofit firms in the U.S. for the 2018 or 2019 fiscal year (compiled from either audited financial statements or Form 990s).

Thorough analysis of various nonprofit business models requires an understanding of each firm's economic characteristics. The relations between various financial statement items provide evidence of many of these economic characteristics. Providing further practice beyond Nonprofit Business Models and Financial Statement Relationships (A), this case presents the "common-size" condensed annual balance sheet, income, and cash flow statements for eight nonprofit firms in the U.S. for the 2018 or 2019 fiscal year (compiled from either audited financial statements or Form 990s).

In the 1920s, Germany experienced one of the most severe episodes of hyperinflation in history. The episode originated in military defeat and revolution, produced instability that figured prominently in the onset of the Great Depression, and created policy dilemmas that present cautionary lessons for leaders in business and government. This note examines the causes, dynamics, and consequences of Germany's hyperinflation in 1923. Hyperinflation is an episode of very large price increases across a broad range of goods and services that often arises from excessive expansion of the supply of paper money to finance government expenditures. It causes wasteful distortions in the functioning of markets, including hoarding of goods and commodities, currency depreciation, capital flight, price controls, and black markets. In a self-reinforcing cycle, price increases beget greater issuance of currency, which begets more price increases and so on, until a political regime shift reforms the unit of currency and government spending.

In early June 2020, several months into the COVID-19 pandemic, a business analyst was evaluating how COVID-19 had changed business and markets and whether these changes would be permanent. Already, a part of the business world had shifted to a working-from-home mode, while executives were evaluating financial strategies to help cope with the changes caused by the pandemic and assessing supply chains that had been disrupted. This case provides an opportunity to discuss key themes such as risk management, globalization, lessons from previous crises such as the global financial crisis (GFC), and the role of banks during the pandemic, as well as the role of the Federal Reserve in mitigating the economic destruction that COVID-19 had inflicted.

This case explores the use of advanced out-of-court restructuring techniques from the perspective of a company facing looming debt maturities and an overleveraged capital structure. The decade that followed the global financial crisis was characterized by rising corporate leverage with increasingly forgiving debt covenant packages. These looser covenants enabled borrowers to pursue a range of novel transactions to avoid bankruptcy. The 2016 exchange offer conducted by J.Crew paved the way for the use of a particularly aggressive form of restructuring, where valuable assets that had provided collateral and/or value support for loans and bonds are separated from the company and used as a bargaining chip to obtain more favorable terms in a restructuring negotiation. The protagonist in the case is a restructuring advisor, contemplating the proposal of a similar type of transaction for Neiman Marcus Group. These transactions have significant financial, strategic, commercial, legal and ethical implications, which the case explores in depth.

On March 21, 2017, Downer EDI Limited, a leading provider of engineering, construction, and infrastructure management services in the Australasia region, announced an unsolicited offer for Spotless Group Holdings at A$1.15 per share, to be funded largely by a fully underwritten renounceable two-for-five rights issue at A$5.95 per share. Although an offer for Spotless Group Holdings was not unexpected, the market was surprised at the considerable premium of 58 per cent above the previous day's closing price of A$0.725. With the institutional portion of the rights offering due to close the following day, an equity analyst with a large institutional fund that was a major shareholder of Downer EDI Limited, had little time to complete a thorough valuation analysis of Spotless Group Holdings. If the analyst determined that Downer EDI Limited was overpaying for Spotless Group Holdings, she would recommend that the fund turn down the rights offering and sell its stake in Downer EDI Limited.

Student spreadsheet supplement to case W20959

In August 1990, Mikhail Gorbachev, president of the Union of Soviet Socialist Republics (USSR) and general secretary of the Central Committee of the Communist Party, confronted one of the most difficult dilemmas of his career: how to improve the country's economic performance. This case set highlights Gorbachev's reform efforts from 1985 to 1990. Numerous measures of economic performance had declined, and the USSR faced serious crises of economics (declining productivity and financial insufficiency), federalism (challenges to the primacy of the Soviet Union), and separatism (ethnic and nationalist agitation). Three groups of advisers offered competing plans. One plan focused on economic revolution toward a market economy; one on reform of the existing centrally planned economy; and a third on economic retrenchment and reinforcement of socialist discipline that had prevailed over the previous 73 years. Students must evaluate the benefits and risks of each alternative and recommend a course of action.

In August 1990, Mikhail Gorbachev, president of the Union of Soviet Socialist Republics (USSR) and general secretary of the Central Committee of the Communist Party, confronted one of the most difficult dilemmas of his career: how to improve the country's economic performance. This case set highlights Gorbachev's reform efforts from 1985 to 1990. Numerous measures of economic performance had declined, and the USSR faced serious crises of economics (declining productivity and financial insufficiency), federalism (challenges to the primacy of the Soviet Union), and separatism (ethnic and nationalist agitation). Three groups of advisers offered competing plans. One plan focused on economic revolution toward a market economy; one on reform of the existing centrally planned economy; and a third on economic retrenchment and reinforcement of socialist discipline that had prevailed over the previous 73 years. Students must evaluate the benefits and risks of each alternative and recommend a course of action.

Set in January 2020, this case describes the entrepreneurial journey of Hayman Microfinance (Hayman), which provided financial solutions to the low-income strata and rural population of Myanmar who had limited or no access to banking services. Over 2015-2020, Hayman grew to become a 25-branch strong company with a loan portfolio of US$29 million, 129,000 active borrowers, and 155,000 depositors. Besides its product attributes, targeted marketing approach, trained work force and effective delivery, Hayman's success could also be attributed to its corporate social responsibility (CSR) thrust in the areas of health, education, safety, and the environment. Over 2017-2019, many international players had entered Myanmar. While some of these entrants had big spending budgets, they lacked first-hand experience of the country's rural poor, and had limited knowledge of the demanding bureaucratic processes followed by the Myanmar government in the financial sector. Sultan Marenov, the Executive Chairman and Managing Director of Hayman, believed that Hayman would be an ideal partner for such investors; however, he was yet to clinch a satisfactory deal. Would highlighting Hayman's CSR program as a core element of its business model strengthen the company's value proposition to potential investors? How much did the social activities contribute towards building the company's brand equity among its key stakeholders, and a sustainable competitive advantage?