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Bank of Baroda was the second-largest commercial bank in India, but it was struggling with a decline in profits and an increase in non-performing assets. Only a week before the new chief executive officer's term commenced, Bank of Baroda was in the news due to reports of fraud occurring at the bank’s Ahmedabad and New Delhi operations. The frauds involved bill discounting schemes and money laundering. The bank’s violations of its know your client and anti-money laundering standards raised concerns about its risk management practices—or lack of such practices. The new chief executive officer was only the second executive from the private sector to head a public sector bank. He needed to prove his value in the world of public sector banking by managing the crisis, implementing a strategy to stabilize the bank’s financial health, and preventing a recurrence of the problems.

Lending Club follows the path of founder and CEO Renaud Laplanche as he scales his successful P2P lending company both pre- and post-IPO. From debating with bankers on the proper valuation metrics for the company, to managing customer acquisition costs as the competitive landscape rapidly changes, the Lending Club case explores several key challenges that come with operating a fin-tech company at scale.

In January 2007, Metro do Porto, a light rail network, entered into an interest rate swap agreement with Banco Santander Totta on a notional principal of €89 million. The intent was to reduce the interest costs that Metro do Porto was incurring. This was a complex swap agreement that brought immediate benefits to Metro do Porto but proved catastrophic in the long run. Two years after the swap commenced, a "snowball clause" in the swap agreement took effect, increasing Metro do Porto's liability beyond 60 per cent per annum at a time when market interest rates were low and expected to drop even lower. It was unclear whether the company entered into this agreement out of ignorance, political pressure, or both, but the end result was a lawsuit. Students are expected to analyze the terms of this swap and decide whether the swap constituted good practice from a risk management perspective and whether Metro do Porto should have been able to anticipate the possible losses.

The case examines interest rate risk management at a U.S. utility company, Dominion Gas Holdings. In November 2012, as part of its new financing plan, it wanted to hedge the interest rate risk involved with the company's 2013 planned issuance of $1 billion in debt. While the coupon rates for the planned debt were unknown as of November 2012, the company wanted to lock in its financing costs one year ahead since interest rates were at historically low levels. The company was considering entering into a number of forward-starting interest rate swaps. The use of forward-starting interest rate swaps as a pre-issuance hedging tool could cause some accounting and regulatory risks, and some other utility companies chose not to hedge at all. A bank had approached Dominion Gas with an indicative quote for the forward-starting swap, and the Treasurer had to decide whether it was a fair rate. This case has been used in a first-year MBA class that focused on valuation of financial markets, and a more advanced second-year elective that focused on derivative securities.

In 2014, a newcomer to Canada has the opportunity to start a Chinese restaurant in a small Canadian city. The entrepreneur needs to decide whether to invest in the project, and if so, how to finance it: using debt or equity financing. She has to evaluate the impact of the financing options on the viability of the business, her investment returns, and the financial and business risks. The case provides an opportunity for a comprehensive FRICTO analysis of capital structure, and creates tension by putting the students in a small business owner’s shoes.

This case raises a number of issues related to the relationship between financial metrics and a company's business model and strategy. Specifically, the case requires students to match a company with a financial profile that consists of a common-size balance sheet and additional selected ratios. Students are forced to consider the many different ways a company's business model and strategy impact the financial statements, including effects on gross margin, net margin, inventories, R & D expenditures, and working capital ratios. The case is excellent when used as a capstone exercise after a discussion of financial statement ratios and their use in financial statement analysis. The case has been used in both the first year Financial Reporting course and the Financial Statement Analysis elective in the Babson MBA program. In addition, the case has been used in many different executive education programs that include sessions on financial analysis.

This is an MIT Sloan Management Review article. The Bank of England, one of the world's oldest and most influential central banks, has made analytics excellence a key pillar of its mission to promote economic stability within the United Kingdom. Like other central banks, the Bank has relied on data and analytics to formulate policy recommendations. But, since 2008 when it regained its status as a regulator, the Bank has begun using its access to new forms of data to increase its insights and forecasting abilities about the British economy.

Spreadsheet supplement for case 216123. In December 2015, Canadian Pacific Railroad (CPR) has just made its third bid to acquire Norfolk Southern Corporation (NSC), one of the largest railroads in the United States. Having rejected the prior offers, NSC's CEO James Squires and the NSC board must now value the current offer including the projected merger synergies as well as a recently-added contingent value right (CVR) designed to "sweeten" the offer, and decide how to respond.

Student spreadsheet for case UV7138.

It is possible to follow rules and commit fraud, a lesson that former Enron CFO Andrew Fastow learned the hard way. In this Ivey Business Journal Q&A, the world’s most infamous finance executive explains how a good kid from a good home, who received a good education from good schools, ended up a willing participant in one of the largest corporate frauds in U.S. history. Today, he accepts full accountability for the damage caused by flaws in his character that enabled him to justify questionable interpretations of accounting laws. He says that the media portrayed Enron as “a bunch of sinister guys sitting in a dimly lit room trying to think of ways to rip people off. It wasn’t that way. When we did these creative deals, they weren’t hidden. We had parties to celebrate them. We got awards for them…. I like to think that I wouldn’t have done what I did if it had dawned on me that my actions were potentially criminal. It just never did.” Fastow believes that many unethical business behaviours happen in a grey area, where we rationalize fraudulent behaviour because we’ve technically followed the rules. Although he still sees questionable behaviour in politics, tax avoidance, and business, he’s optimistic that improvement is possible — less through legislation than cultural change. After all, business schools did not even offer comprehensive courses on ethics when Fastow did his MBA.

Despite the existence of large social networks, such as Facebook and LinkedIn, co-founders Jeff Tangney and Dr. Nate Gross believed there was a unique opportunity to create a social network specifically targeted at physicians. The two envisioned a social network that would enable doctors to find any doctor in the United States, regardless of whether they had signed up for Doximity. By combining hundreds of medical databases and journals onto a single platform, Doximity would immediately contain information on nearly every U.S. physician, including their medical school, specialty, location, phone number, fax number, and associated journal articles. In addition to locating doctors, Doximity would allow for HIPAA secure messaging between any doctors in the United States. Finally, Doximity would provide custom-curated news and research, personalized to the clinical interests on their Doximity profiles. Doctors within any geography or specialty would receive the most up-to-date and relevant information without having to read through dozens of journal articles. Tangney and Gross's vision proved wildly successful; in just two years, Doximity became one of the largest networks for U.S. healthcare professionals, with approximately 10 percent of U.S. doctors as members. By the beginning of 2014, 40 percent of U.S. physicians had signed onto Doximity's platform. "Doximity: Financing a Social Network for Physicians" examines how Tangney and Gross raised capital for their rapidly growing healthcare start-up.

Magic Timber and Steel (Magic) was formed in Caloundra, a community on Queensland, Australia's Sunshine Coast. Magic's business peaked in terms of sales revenue in about 2011 and went on to experience a steady decrease in turnover that was attributed to a number of causes, including infrastructure issues on the coast and a drop in tourism. Hoping to reinvigorate the business in early 2015, Magic's owner believed his company required an investment in fixed assets - specifically, a large finisher that would increase capacity and reduce maintenance. Because the new machine required a significant financial investment, the owner had to use the net present value method to determine whether the purchase would add value to the firm.

Magic Timber and Steel (Magic) was formed in Caloundra, a community on Queensland, Australia’s Sunshine Coast. Magic’s business peaked in terms of sales revenue in about 2011 and went on to experience a steady decrease in turnover that was attributed to a number of causes, including infrastructure issues on the coast and a drop in tourism. Hoping to reinvigorate the business in early 2015, Magic’s owner believed his company required an investment in fixed assets — specifically, a large finisher that would increase capacity and reduce maintenance. Because the new machine required a significant financial investment, the owner had to use the net present value method to determine whether the purchase would add value to the firm.

Instructor spreadsheet to accompany product 8B16N010.

In October 2010, the recently appointed CEO of the Singapore Exchange (SGX) wanted the SGX to grow faster than organic growth alone would allow. The most logical acquisition target was the Australian Securities Exchange (ASX). Executives from the SGX and the ASX announced an agreement to merge. The two exchanges would remain separate legal entities for regulatory purposes but both would be owned by ASX?SGX Limited, a new holding company that the deal would establish. But why did the merger fail? This left executives at the SGX and other foreign securities exchanges pondering whether the conditions the Australian Treasurer specified for a merger could ever be met and, if so, would a foreign securities exchange really be allowed to acquire the ASX?

When Margaret A. Cargill passed away in 2006, her 17.5 per cent stake in Cargill went to Margaret A. Cargill Philanthropies (MAC). MAC lobbied for her stake to be liquidated. Cargill proceeded to shed its 64 per cent stake in Mosaic, North America’s second-largest fertilizer company, in exchange for Margaret Cargill’s stake in the company, in order to maintain control over the company. Like many second- and third-generation family businesses, Cargill’s current family owners were not actively involved in the day-to-day running of the company. Was spinning off Mosaic in the best long-term interests of Cargill? Were there other feasible ways in which Cargill could have better facilitated the liquidation of Margaret Cargill’s stake?

Spreadsheet supplement for case 216055.

This case is used in a Darden second-year elective in corporate finance, "Corporate Financial Policies." It asks students to analyze the cash flows estimated for a production sharing agreement (PSA) between BP and the Azerbaijan government targeted for signing by year-end 2014. The primary relationship is a joint venture (JV) between BP and the State Oil Company of the Azerbaijan Republic (SOCAR). The JV is entitled to recover operating costs and capital costs from the proceeds of sales of the early production of the project and share profits earned from production, called the profit petroleum (PP), with Azerbaijan after the cost recoveries. Students are provided a detailed cash flow model for the project and for BP's equity investment and are asked to explain how the value estimates correlate with the risks assumed by the respective parties. This case is appropriate for students who have studied the principles of discounted cash flow and cost of capital. It is best positioned as part of a first-year MBA finance course as the last case in a module related to cash flow analysis. The case can also be taught in an MBA elective containing advanced corporate finance topics. It would be of special interest to students planning for a career related to energy, banking, or consulting, and also relevant for students interested in international business.

Spreadsheet supplement for case UV7135.