Question

Chapter 3 - The Research Process (#1,5,6,7,8,10,13 in your text)

You have just been assigned to provide client services to the following entities. For each, identify three resources you could consult in order to better understand the company's business model and industry.

a. Pfizer

b. Southwest Airlines

c. Caesars Entertainment

You are once again in the first step of the research process (understanding the facts). Now, your company is looking to repurchase some of its outstanding stock. You are about to attend a meeting between representatives of your company's Treasury department and a bank at a fixed price on a certain date. Identify three resources you could consult or questions you might ask of others on your team or in the organization, to gather additional background/ precedent for this issue before you attend the meeting.

Identify at least one researchable question for each of the following issues.

A cable network has just entered into an agreement granting it the right to show reruns of a hit TV series. In exchange for this right, the network must pay the TV show's creators a fee each time the show airs.

An online restaurant booking site sells a $100 meal voucher, good for $100 towards a meal at Randall's Steakhouse, to a customer for $60. When the customer presents the voucher to Randall's Steakhouse, the restaurant booking site must remit $50 to Randall's, retaining $10.

A company's auditor is questioning the appropriateness of the company's discount rate assumption, which it uses to measure its defined benefit pension obligation.

Automotive, Inc. has announced the sale of it's Truck Division's three plants, along with planned layoffs of the Truck Division's employees. Automotive, Inc. is hoping to segregate the results of the Truck Division's operations in its financial statements. Identify at least two possible research questions.

Answer 1

Three resources I could consult in all the 3 cases, in order to better understand the company's business model and industry are as follows :

1. PFIZER

• Being a pharmaceutical company, the products of the company is to be looked upon.
• Mission or Vision statements of the company
• Business verticals, it is into.

2. SOUTHWEST AIRLINES

• Target customers, demographic factors of the airlines (Location or cities)
• How the company generates revenue
• Its value proposition statement and competitive strategy

3. CAESARS ENTERTAINMENT

• Marketing or competitive strategy
• How it engages its customers and how value is delivered
• Products and services provided

Identify three resources you could consult or questions you might ask of others on your team or in the organization, to gather additional background/ precedent for this issue before you attend the meeting.

SOLUTION : Repurchase of task involves company reinvesting in itself. I would keep in mind the following questions to be asked or discussed, during the meeting :

1. What is the current market price at which the stock was repurchased?
2. Number of shares involved in case of pre and post repurchase?
3. In case of negotiation being made or market purchase, necessary agreements or documents are to be checked. So, I would ask for related agreements.

Identify at least one researchable question for each of the following issues.

1. A cable network has just entered into an agreement granting it the right to show reruns of a hit TV series. In exchange for this right, the network must pay the TV show's creators a fee each time the show airs.

ANS : Several questions can be raised about the Licensing deal or agreement between the cable network and TV show creators, the Business model of the network, the source of money that it uses to pay the TV show creators and the method of pricing it uses.

2. An online restaurant booking site sells a $100 meal voucher, good for $100 towards a meal at Randall's Steakhouse, to a customer for $60. When the customer presents the voucher to Randall's Steakhouse, the restaurant booking site must remit $50 to Randall's, retaining $10.

ANS : In order to secure reservations, some restaurants follow such policies. In the end, they return a specific amount to the customers who used their services in a timely manner.

In the above case, question related to the offeror's offer agreement- terms and conditions of the policies, duration of the voucher validity, return or cancellation policy can be asked.

3. A company's auditor is questioning the appropriateness of the company's discount rate assumption, which it uses to measure its defined benefit pension obligation.

ANS : As per the related rules or code of the Financial Accounts Standard Board (FASB), proper disclosure of discount rate must be made. Questions regarding the rate fixed for a single portfolio or category, the related provisions mentioned in written form in document would be raised.

4. Automotive, Inc. has announced the sale of it's Truck Division's three plants, along with planned layoffs of the Truck Division's employees. Automotive, Inc. is hoping to segregate the results of the Truck Division's operations in its financial statements. Identify at least two possible research questions.

ANS : A) Which is the key essential production plant, that adds value to the company's activities and enhances its productivity?

B) When employees are laid off, settlements are to be made. So, accordingly, how much is the company planning to provide its employee as final payment along with additional benefits, if any ?

These can have an effect on the company's financial statements too.