Question

In: Finance

Whirlybird, Inc. offers helicopter tours and transportation in major cities around the world. The company is...

Whirlybird, Inc. offers helicopter tours and transportation in major cities around the world. The company is considering a stock repurchase in the upcoming quarter. As the Chief Financial Officer (CFO), you understand there are several methods to reduce quarterly earnings, which could reduce stock price prior to the announcement of the proposed stock repurchase.

A. What course of action do you recommend to the Chief Executive Officer (CEO) of Whirlybird?

B. If the CEO approached you recommending a reduction in current quarter earnings, how would you respond?

Solutions

Expert Solution

As CFO of the company i think it is my responsibility to ensure that company's earnings increase on regular basis and nor decrease. However, if situation like the one mentioned in question arises, then its time to play defensive for the greater realization of long term goals. My focus should be to decrease earnings in such manner that overall earnings do not get much affected and stock price also decreases before actual repurchase. Therefore,

A. I would recommend CEO to find out the current market expectation of quarterly growth rate in earnings. If actual growth in next quarter, turns out to be much lower than market expectation then stock price will fall.

B. A reduction in quarterly earnings needs to be backed up by correct market expectation analysis. For the stock price to fall, the earnings should decrease by more than the expected percentage of the market. To decrease earnings, Whirlybird will have to stop its operations in selected areas citing difficulties in operation which will convince the shareholders regarding decreasing profit enabling a fall in share prices.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Whirlybird, Inc. offers helicopter tours and transportation in major cities around the world. The company is...
Whirlybird, Inc. offers helicopter tours and transportation in major cities around the world. The company is considering a stock repurchase in the upcoming quarter. As the Chief Financial Officer (CFO), you understand there are several methods to reduce quarterly earnings, which could reduce stock price prior to the announcement of the proposed stock repurchase. What course of action do you recommend to the Chief Executive Officer (CEO) of Whirlybird? If the CEO approached you recommending a reduction in current quarter...
Consider Whirlybird, Inc. offers helicopter tours and transportation in major cities around the ... Consider Whirlybird,...
Consider Whirlybird, Inc. offers helicopter tours and transportation in major cities around the ... Consider Whirlybird, Inc. offers helicopter tours and transportation in major cities around the world. The company is considering a stock repurchase in the upcoming quarter. As the Chief Financial Officer (CFO), you understand there are several methods to reduce quarterly earnings, which could reduce stock price prior to the announcement of the proposed stock repurchase. Discuss What course of action do you recommend to the Chief...
Larkspur Inc. offers boat tours around the City Reservoir. The company has signed a lease for...
Larkspur Inc. offers boat tours around the City Reservoir. The company has signed a lease for a tour boat with an expected lifespan of six years, no estimated salvage value, and cost the leasing company $207,000. The terms of the lease are as follows: ● The lease term begins on January 1, 2019, and runs for 3 years. ● The lease requires payments of $51,900 each January 1, starting on January 1, 2019, and each payment includes $5,100 for maintenance...
ABC company offers tours of spectacular tourist destinations such as Chicago and New York. The tours...
ABC company offers tours of spectacular tourist destinations such as Chicago and New York. The tours usually have between 5 and 50 people on them.   For each person who goes on the trip, the company incurs $10 per day in food cost, $50 per day in lodging, and $25 per day in entrance admissions and fees. Also, the company incurs a certain total cost per day for transportation, regardless of whether the tour is full or not.    On the last...
Brooklyn Inc. offers boat tours down the Hudson River. The company has signed a lease for...
Brooklyn Inc. offers boat tours down the Hudson River. The company has signed a lease for a tour boat with an expected lifespan of seven years, no estimated salvage value, and a fair market value of $225,000. The terms of the lease are as follows: ·       The lease term begins on January 1, 2018, and runs for 5 years. ·       The lease requires payments of $53,000 at the beginning of each year. ·       The lease payment includes $3,000 for maintenance...
1.In towns and cities around the world,dust is one of the biggest challenges in office and...
1.In towns and cities around the world,dust is one of the biggest challenges in office and residential houses especially in areas where building and people are crowded.Design a system that is safe and can reduce dust particles in rooms. (Hint ; consider electrostatic precipitators ) 2. Soil moisture content is an important aspect in agriculture. Measurements of soil moisture content can be done using capacitors. Design a soil moisture sensor and suggest how to calibrate it. (Hint; soil moisture can...
Adventures in Wild Life conducts tours of wildlife reserves around the world. They have recently purchased...
Adventures in Wild Life conducts tours of wildlife reserves around the world. They have recently purchased a new lodge in Adak, Alaska, utilizing a 4% mortgage from Bank of Alaska. As part of the agreement they must provide an annual report showing they are achieving a current ratio of 1.2 or better. In order to ensure they achieve this ratio, the CEO requested the CFO to reclassify the long-term debt investments into brokerage accounts to allow them to sell them...
Adventures in Wild Life conducts tours of wildlife reserves around the world. They have recently purchased...
Adventures in Wild Life conducts tours of wildlife reserves around the world. They have recently purchased a new lodge in Adak, Alaska, utilizing a 4% mortgage from Bank of Alaska. As part of the agreement they must provide an annual report showing they are achieving a current ratio of 1.2 or better. In order to ensure they achieve this ratio, the CEO requested the CFO to reclassify the long-term debt investments into brokerage accounts to allow them to sell them...
Zagat restaurant guides publish ratings of restaurants for many large cities around the world. The restaurants...
Zagat restaurant guides publish ratings of restaurants for many large cities around the world. The restaurants are rated on a 0 to 30 point scale based on quality of food, decor, service, and cost. Suppose the regression equation that predicts the cost of dinner using the rating of the quality of food for the restaurants in a particular city is (cost of dinner) = 4.089*(food quality) + 2.371. Interpret the slope. 1) We are not given the dataset, so we...
Zagat restaurant guides publish ratings of restaurants for many large cities around the world. The restaurants...
Zagat restaurant guides publish ratings of restaurants for many large cities around the world. The restaurants are rated on a 0 to 30 point scale based on quality of food, decor, service, and cost. Suppose the regression equation that predicts the cost of dinner using the rating of the quality of food for the restaurants in a particular city is (cost of dinner) = 4.201*(food quality) + 2.823. Interpret the slope. Question 3 options: 1) When food quality increases by...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT