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Rent-Way, Inc. (A)
by David F. HawkinsThe company uses the units of activity method to account for its rental inventory. A prominent hedge fund advisor recommends the company's stock be sold short.
Wilkerson Co.
by Robert S. KaplanThe president of Wilkerson, faced with declining profits, is struggling to understand why the company is encountering severe price competition on one product line while able to raise prices without competitive response on another product line. The controller proposes that the company develop an activity-based cost model to understand better the different demands that each product line makes on the organization's indirect and support resources. A rewritten version of an earlier case.
Verizon Communications, Inc.: Implementing a Human Resources Balanced Scorecard
by Marc J. Epstein Srikant M. Datar Jeremy CottIn early 2000, Verizon Communications implemented a Human Resources Balanced Scorecard to evaluate the effectiveness of and payoffs from human resource management. This case describes the benefits of the scorecard and the challenges of measurement and implementation. Teaching Purpose: To help students understand: 1) how to implement a Balanced Scorecard, 2) how to measure and improve the effectiveness of support functions, and 3) how to link non-financial measures to financial measures of support functions when financial benefits are difficult to quantify.
Role of Capital Market Intermediaries in the Dot-Com Crash of 2000
by Gillian Elcock Krishna G. PalepuSet in the context of the rise and fall of the Internet stocks in the United States.
Boston Lyric Opera
by Robert S. Kaplan Dennis CampbellThe Boston Lyric Opera was the fastest growing opera company in North America during the 1990s. Having successfully completed a move to a larger facility in 1999, the board and general director recognize the need to develop a formal strategic planning and governance process to guide the company into the future. Board members, senior managers, and artistic leaders use the Balanced Scorecard (BSC) as the focus of a multi-month strategic planning process that develops a strategy map and objectives in the four BSC perspectives for three core strategic themes. This case describes the high-level scorecard development, its cascading down to departments and individuals and the directors' interactions--using the Balanced Scorecard--with the artistic leaders and board of directors.
Home Depot, Inc., in the New Millennium
by Krishna G. Palepu Jeremy CottAfter nearly two decades of spectacular performance, Home Depot reported a disappointing performance in the year 2000. The company began expanding its business scope as a result of saturating its growth in the core business. This case explores whether the disappointing performance is just a temporary slip or if the company is reaching the limits of sustainability of its competitive advantage.
Conceptual Framework for Financial Reporting
by David F. Hawkins Jacob CohenDiscusses the conceptual framework for financial reporting as set by the Financial Accounting Standards Board. Discusses the objectives of financial statements, assumptions of financial accounting, characteristics of accounting information, accounting principles for recognition and reporting, constraints of financial reporting, and elements of financial statements.
Mechanics of Financial Accounting
by David F. Hawkins Jacob CohenExplains in simple terms and numerical examples how the language of accounting is spoken and communicated to financial statement users. Describes terms such as "debits," "credits," "journal entries," "t-accounts," and "financial statements."
Delays at Logan Airport
by George Batta V. G. NarayananLogan Airport is facing mounting delays for flights landings and takeoffs, especially in inclement weather. An additional runway and peak-period pricing are two alternatives being considered.
Dakota Office Products
by Robert S. KaplanThe senior management team of Dakota, an office products distributor, is concerned about the company's first loss in history. Explores the role for activity based costing and customer profitability measurement in a distribution company. Dakota's customers are increasingly demanding more specialized services, such as desktop delivery. Also, whereas some customers have switched to electronic ordering, others continue to place their orders manually. Pricing is based on a fixed markup of the cost of the purchased item. The managers feel that the fixed markup may not be compensating them for the higher costs of manual order processing and desktop delivery. The financial manager initiates an effort to estimate the costs of handling the different types of orders so that she can estimate the profitability of individual customers based on their actual order pattern.
Queueing Theory
by George Batta V. G. NarayananExplains the assumptions behind and the insights from a simple queueing model.
Financial Reporting Environment
by Paul M. Healy Robert S. Kaplan Krishna G. Palepu Amy P. HuttonProvides a framework for understanding the role of financial reporting and various intermediaries as mechanisms for reducing both adverse selection and moral hazard problems in capital markets. Financial reports reduce adverse selection by providing basic information for investors and their agents before they make initial capital resource allocation decisions. Subsequently, after capital is allocated to particular business ventures, financial reports reduce moral hazard between managers and investors by supplying information used in contracting between investors and managers to reduce conflicts of interests. Various institutional mechanisms and information intermediaries monitor and limit the manipulation of reported information by managers and constrain managers' ability to act in their own self-interest, rather than investors' interests. They also improve information production, reduce incentive conflicts, and enable capital markets to function effectively and efficiently, channeling the economy's savings to the most productive opportunities.
Anagene, Inc.
by Robert S. Kaplan Christina DarwallAn entrepreneurial, publicly traded biotech company has begun production and sales of its core product--cartridges that permit DNA samples to be analyzed on a microchip. In the early quarters, sales are difficult to forecast and the company has experienced fluctuating production volumes and unpredictable gross margins, which has upset the board of directors. The finance staff investigates whether to adopt a new costing approach based on capacity. With large amounts of unused capacity, the decision of how to apply capacity costs is critical to the company's management and its reporting strategy with analysts.
eBay, Inc.: Stock Option Plans (A)
by Mark T. BradshawThe footnote disclosure for eBay, Inc. in 2000 indicates that if the company had accounted for employee stock options under the fair value method, its reported profit of $48 million would have been a loss of $91 million. The protagonist is a prospective member of the compensation committee of the board of directors, which provides a corporate governance perspective on the role of compensation in attracting, motivating, and retaining talented employees.
Accounting for Employee Stock Options
by Mark T. BradshawEmployees who have been granted stock options have the right to purchase shares of their company's stock at a specified price within a specified time period. The accounting for such employee stock options has been a controversial and complex topic for decades. The debate has continued to the present time because of the high visibility of company executives who have made fortunes under their stock option programs. This note chronicles the history and debate surrounding the rules for stock options accounting and provides a simple, instructive example of accounting entries for fixed stock option grants.
Customer Profitability and Customer Relationship Management at RBC Financial Group
by V. G. Narayanan Lisa BremThe Royal Bank of Canada uses customer relationship management and customer profitability tools to gain a competitive advantage in Canada's increasingly crowded financial services market. The case presents two pricing and customer management issues: one from the point of view of the vice president of customer relationship marketing and the other from a line manager's perspective.
Metalcraft Supplier Scorecard
by Susan Kulp Ronald L. Verkleeren V. G. NarayananAn automotive components company uses a supplier scorecard to make sourcing decisions and review its supplier performance.
Borealis
by Robert S. Kaplan Bjorn N. JorgensenWhen Borealis, a European producer of plastics, used a traditional, time-consuming budgeting process, the budget was quickly out of date in a competitive environment characterized by continually changing input and output prices and dynamic market conditions. This case describes the process that led Borealis to replace its budgets with four targeted management tools: rolling financial forecasts, Balanced Scorecard, activity based costing, and investment management. It also discusses the process of implementing the new measurement and control systems.
Activity Based Management at W.S. Industries (B)
by Jeremy Cott V. G. NarayananDescribes activity-based budgeting at W.S. Industries. Also describes target costing-led product redesign, and product, customer, and order profitability.
Supply Chain Close-Up: The Video Vault
by V. G. Narayanan Lisa BremThe owners of the Video Vault struggle to determine the optimal stocking levels of home videos in an industry fraught with new technology, new pricing paradigms, and stiff competitive pressure from large national chains. Teaching Purpose: To demonstrate the role of incentive contracts in achieving supply chain coordination.
Customer Profitability and Customer Relationship Management at RBC Financial Group (Abridged)
by V. G. Narayanan Lisa BremThe Royal Bank of Canada uses customer relationship management and customer profitability tools to gain a competitive advantage in Canada's increasingly crowded financial services market. The case presents two pricing and customer management issues: one from the point of view of the vice president of customer relationship marketing and the other from a line manager's perspective.
Management Earnings Disclosure and Pro Forma Reporting
by Jacob Cohen Mark T. BradshawIntroduces a discussion of management earnings disclosure and the growing use of pro forma reporting by corporations. Highlights the background of pro forma reporting, how it has been used in the past couple of years, and what the regulators at the capital markets think about this form of earnings disclosure. Also examines two companies' use of pro forma.
Siebel Systems: Organizing for the Customer
by Robert L. Simons Antonio DavilaSiebel Systems is one of the fastest growing companies in America. Tom Siebel, the company's founder, has organized the business to accommodate growth and focus on the customer. Innovative information technology systems and clear accountability prove to be essential to this new approach to organization design. For example, a new employee must successfully pass an online test to demonstrate her understanding of Siebel's management systems and practices.
United Parcel Service's IPO
by Paul M. Healy Brett Laschinger Ajay ShroffExamines the valuation of United Parcel Service (UPS) at the time of its IPO in mid-1999. Offers students the opportunity to assess UPS's current performance relative to its major competitor, Federal Express (FedEx), and to judge whether that performance is sustainable. Students then make projections of UPS's future earnings performance, estimate on IPO price, and assess the reasonableness of their estimate compared to the valuation of FedEx and best-in-class leaders.
DoubleClick, Inc.
by Thomas D. Fields Jacob CohenExamines DoubleClick's capital structure from IPO. Discusses additional offering of common stock, stock splits, dividends, sale of convertible debt, repurchase of convertible debt, and repurchase of common stock.