The problem of many developing businesses has always been
attributed to insufficient or lack
of capital to run these enterprises. But on taking an MBA course at
the University of Ghana
Business School, you have come to realize that most businesses in
Ghana and Africa fail not
because of capital adequacy issues but rather, human resources
management issues. What
significant expectations would you give to all HR managers as
needed competences to be
equipped with if you are the consultant general to businesses in
Ghana?
In: Psychology
Look at the following research questions. What would be an
appropriate audience for each one? Why did you come to that
answer?
1. How does the use of texting affect high school English
grades?
2. What effect do medical budget cuts have on small town
hospitals?
3. Does earning an MBA make you a better job candidate?
4. Why does the American government lend money to foreign
countries?
In: Psychology
1) Explain the primary benefits of a business education?
2) Why is pursuing an MBA immediately after finishing an undergraduate degree generally a bad idea?
3) briefly describe the various alternatives to a formal business education.?
4) Explain the difference between “training” and “education”. Then explain the role of each in higher education (and specifically in business school)?
5) What does a business degree signal to an employer?
6) Briefly describe the various formats for a business degree?
In: Accounting
Garnett Jackson, the founder, and CEO of Tech Tune-Ups, stared out the window as he finished his customary peanut butter and jelly sandwich, contemplating the dilemma currently facing his firm. Tech Tune-Ups is a start-up firm, offering a wide range of computer services to its clients, including online technical assistance, remote maintenance, and backup of client computers through the Internet, and virus prevention and recovery. The firm has been successful in the 2 years since it was founded; its reputation for fair pricing and good service is spreading, and Mr. Jackson believes the firm is in a good position to expand its customer base rapidly. But he is not sure that the firm has the financing in place to support that rapid growth.
Tech Tune-Ups’ main capital investments are its own powerful computers, and its major operating expense is salary for its consultants. To a reasonably good approximation, both of these factors grow in proportion to the number of clients the firm serves.
Currently, the firm is a privately held corporation. Mr. Jackson and his partners, two classmates from his undergraduate days, have contributed $250,000 in equity capital, largely raised from their parents and other family members. The firm has a line of credit with a bank that allows it to borrow up to $400,000 at an interest rate of 8%. So far, the firm has used $200,000 of its credit line. If and when the firm reaches its borrowing limit, it will need to raise equity capital and will probably seek funding from a venture capital firm. The firm is growing rapidly, requiring continual investment in additional computers, and Mr. Jackson is concerned that it is approaching its borrowing limit faster than anticipated.
Mr. Jackson thumbs through past financial statements and estimates that each of the firm’s computers, costing $10,000, can support revenues of $80,000 per year but that the salary and benefits paid to each consultant using one of the computers is $70,000. Sales revenue in 2014 was $1.2 million, and sales are expected to grow at a 20% annual rate in the next few years. The firm pays taxes at a rate of 35%. Its customers pay their bills with an average delay of 3 months, so accounts receivable at any time are usually around 25% of that year’s sales.
Mr. Jackson and his co-owners receive minimal formal salary from the firm, instead taking 70% of profits as a “dividend,” which accounts for a substantial portion of their personal incomes. The remainder of the profits are reinvested in the firm. If reinvested profits are not sufficient to support new purchases of computers, the firm borrows the required additional funds using its line of credit with the bank.
Mr. Jackson doesn’t think Tech Tune-Ups can raise venture funding until after 2016. He decides to develop a financial plan to determine whether the firm can sustain its growth plans using its line of credit and reinvested earnings until then. If not, he and his partners will have to consider scaling back their hoped-for rate of growth, negotiate with their bankers to increase the line of credit, or consider taking a smaller share of profits out of the firm until further financing can be arranged.
Mr. Jackson wiped the last piece of jelly from the keyboard and settled down to work.
Can you help Mr. Jackson develop a financial plan? Do you think his growth plan is feasible?
Please provide balance sheet, income statements, and cash flow statements for 2013-2018. Please explain
In: Accounting
You are the founder of a start-up. You incorporated a C corporation and currently own 1,000,000 shares as the founder. You raised $500,000 from friends and family using a convertible note, which will convert into equity if and when there is a “valuation event”, that is if and when your start-up manages to attract funds from a venture capital fund (at which point a valuation will be assigned to the company). The note provides that when the principal of the note ($500,000) converts into equity, the conversion will be done on the basis of a company valuation that may not exceed a total of $5 million (this is a “valuation cap” clause, meaning, friends and family get shares on the basis of the same valuation as the fund unless it is in excess of $5 million, in which case friends and family get shares on the basis of a $5 million valuation).
Your start-up is doing well. You are finally generating revenue and pitching to potential investors, including a VC fund “VC”. At this point you need VC to invest $10 million in your company in order to grow – if you secure this investment, you do not expect the company to produce any earnings for five years (though the company generates revenue, it still has negative earnings), but at the end of year 5 you anticipate to turn profitable and generate net income of about $16 million. VC knows that a firm comparable to yours with current earnings of $10 million was just sold for $100 million.
1. VC is concerned that you may need more than $10 million to get to the result where the company is generating net income of $16 million at the end of year 5. They introduce language in the investment agreement to be protected against any potential dilution of their interest in the event of subsequent funding rounds. If another funding round is needed at the end of year 3, in the amount of $12 million, what ownership percentage would the new investor insist upon if they wanted to get a 20% annual rate of return on their investment? How many new shares would need to be issued to this new investor? How many additional new shares would need to be issued to VC (to protect VC against dilution)? [hint: you need to first figure out total shares outstanding -- assume the dilution is shared with friends and family, meaning they just keep the shares they had]
2. Assuming that such additional funding round is indeed needed – what would happen to your ownership percentage, as the founder? How would this impact how much money you would make if the company were to eventually be sold for $200 million at the end of year 5?
In: Accounting
Michele Diaz is the founder of Diaz Manufacturing. Michele plans to expand her business. Company’s expansion plans require a significant investment, which she plans to finance with a combination of additional funds from outsiders plus some money borrowed from banks. Company’s financial records are not well maintained. Naturally, the new investors and creditors require organized and detailed financial statements than Michele has previously prepared. Ms. Diaz has assembled the following information:
($ millions)
Michele Diaz is ready to meet with Austin Mark, the loan officer for Wells Fargo. She is asking to borrow $30 million. The meeting is to discuss the mortgage options available to the company to finance the new facility.
Austin begins the meeting by discussing a 30-year mortgage. The loan would be repaid in equal monthly installments. Because of the previous relationship between Diaz Manufacturing and the bank, there would be no closing costs for the loan. Austin states that the APR of the loan would be 6.00 percent. Ms. Diaz asks if a shorter mortgage loan is available. Austin says that the bank does have a 20-year mortgage available at the same APR.
Michele decides to ask Austin about a “smart loan” she discussed with a mortgage broker when she was refinancing her home loan. A smart loan works as follows: every two week a mortgage payment is made that is exactly one-half of the traditional monthly mortgage payment. (Hint: To determine how much is bi-weekly payment >>>calculate PMT as if it is 30-year mortgage and then divide by 2). The APR of the smart loan would be the same as the APR of the traditional loan.
Austin also suggests a bullet loan, or balloon payment, which would result in the greatest interest savings. At Michele’s prompting, he goes on to explain a bullet loan. The monthly payments of a bullet loan would be calculated using a 30-year traditional mortgage. In this case, there would be a 5-year bullet. This would mean that the company would make the mortgage payments for the traditional 30-year mortgage for the first five years, but immediately after the company makes the 60th payment, the bullet payment would be due. The bullet payment is remaining principal of the loan. Ms. Diaz then asks how the bullet payment is calculated. Austin tells her that the remaining principal can be calculated using an amortization table, but it is also the present value of the remaining 25 years of mortgage payments for the 30-year mortgage.
Michele has also heard of an interest-only loan and asks if this loan is available and what the terms would be. Austin says that the bank offers an interest-only loan with a term of 10 years and an APR of 3.9 percent. He goes on to further explain the terms. The company would be responsible for making interest payments each month on the amount borrowed. No principal payments are required. At the end of the 10-year term, the company would repay the $30 million. However, the company can make principal payments at any time. The principal payments would work just like those on a traditional mortgage. Principal payments would reduce the principal of the loan and reduce the interest due on the next payment.
Tony is still unsure of which loan she should choose. She has asked you to answer the following questions to help her choose the correct mortgage.
Why is this shorter than the time needed to pay off the traditional mortgage? How much interest would the company save?
In: Accounting
Garnett Jackson, the founder, and CEO of Tech Tune-Ups, stared out the window as he finished his customary peanut butter and jelly sandwich, contemplating the dilemma currently facing his firm. Tech Tune-Ups is a start-up firm, offering a wide range of computer services to its clients, including online technical assistance, remote maintenance, and backup of client computers through the Internet, and virus prevention and recovery. The firm has been successful in the 2 years since it was founded; its reputation for fair pricing and good service is spreading, and Mr. Jackson believes the firm is in a good position to expand its customer base rapidly. But he is not sure that the firm has the financing in place to support that rapid growth.
Tech Tune-Ups’ main capital investments are its own powerful computers, and its major operating expense is salary for its consultants. To a reasonably good approximation, both of these factors grow in proportion to the number of clients the firm serves.
Currently, the firm is a privately held corporation. Mr. Jackson and his partners, two classmates from his undergraduate days, have contributed $250,000 in equity capital, largely raised from their parents and other family members. The firm has a line of credit with a bank that allows it to borrow up to $400,000 at an interest rate of 8%. So far, the firm has used $200,000 of its credit line. If and when the firm reaches its borrowing limit, it will need to raise equity capital and will probably seek funding from a venture capital firm. The firm is growing rapidly, requiring continual investment in additional computers, and Mr. Jackson is concerned that it is approaching its borrowing limit faster than anticipated.
Mr. Jackson thumbs through past financial statements and estimates that each of the firm’s computers, costing $10,000, can support revenues of $80,000 per year but that the salary and benefits paid to each consultant using one of the computers is $70,000. Sales revenue in 2014 was $1.2 million, and sales are expected to grow at a 20% annual rate in the next few years. The firm pays taxes at a rate of 21%. Its customers pay their bills with an average delay of 3 months, so accounts receivable at any time are usually around 25% of that year’s sales.
Mr. Jackson and his co-owners receive minimal formal salary from the firm, instead taking 70% of profits as a “dividend,” which accounts for a substantial portion of their personal incomes. The remainder of the profits are reinvested in the firm. If reinvested profits are not sufficient to support new purchases of computers, the firm borrows the required additional funds using its line of credit with the bank.
Mr. Jackson doesn’t think Tech Tune-Ups can raise venture funding until after 2016. He decides to develop a financial plan to determine whether the firm can sustain its growth plans using its line of credit and reinvested earnings until then. If not, he and his partners will have to consider scaling back their hoped-for rate of growth, negotiate with their bankers to increase the line of credit, or consider taking a smaller share of profits out of the firm until further financing can be arranged.
Mr. Jackson wiped the last piece of jelly from the keyboard and settled down to work.
Can you help Mr. Jackson develop a financial plan? Do you think his growth plan is feasible?
In: Finance
Digital Designs is a Michigan corporation, owned 100% by its founder Nicole Burke. The average annual gross receipts for the prior three years is $30,000,000. Digital Designs creates cartoon characters that are imprinted on its T-Shirts, magnets, stickers, and various other products. Its revenues largely come from sales of its products to retail stores through independent sales agents who receive a commission. The remainder of its revenues consists of royalties from licensees who pay Digital Designs a fee for the use of its cartoon images.
Digital Designs uses several independent contractors to manufacture its products. In manufacturing its products, Digital Designs creates cartoon characters and sends the original drawing as “flat art” to an independent printer. The printer photographs the cartoon drawing performs color separations and creates a “proof” of a particular product, which is shipped to Digital Designs for approval. The printer provides its own stock of blank T-shirts, paper, and ink, etc. and bears the risk of loss of the supplies and printed goods until they are shipped to Digital Designs. Once Digital Designs approves the proof, it sends a purchase order to the printer. The printer is not permitted to sell the products to anyone and does not have a proprietary interest in the cartoon characters created by Digital Designs. Once the printing is complete, the printer sends the finished products to Digital Designs, whose employees package the products for sale to retailers.
Prepare a memo to Nicole Burke discussing whether Digital Designs is considered a producer for purposes of Section 263A (UNICAP).
In: Accounting
Sam Walton, founder of Walmart, had an early strategy for growing his business related to pricing. The “Opening Price Point” strategy used by Walton involved offering the introductory product in a product line at the lowest point in the market. For example, a minimally equipped microwave oven would sell for less than anyone else in town could sell the same unit. The strategy was that if consumers saw a product, such as the microwave, and saw it as a good value, they would assume that all the microwaves were good values. Walton also noted that most people don’t buy the entry-level product; they want more features and capabilities and often trade up. Choose one side, either defending this strategy or casting this strategy as an unethical act and create a discussion post with your viewpoints as to why you feel this is a valid strategy or is unethical.
In: Accounting
Initial Setup and Series A NewCo has a pre?money valuation of $12 million. Combined, the founder shares and employee options pool total 9 million shares. NewCo seeks a $6 million Series A investment, for which investors receive shares of preferred stock that are convertible to shares of common stock.
Q1: What is the price per share at this time?
Q2: How many shares of preferred stock do the Series A investors receive?
Q3: What is the conversion price? (i.e., when converting a share of preferred stock into common stock, how many shares of common stock does the Series A investor get, and what is its value?)
Q4: What is the total equity stake of the Series A investors?
Q5: What is the total equity stake of the founders & employee options?
Scenario 3: Anti?Dilution Protection Series A investors negotiated broad?based weighted average conversion price protection. The company seeks $8M, and Series B investors demand 8M shares.
Q16: What is the conversion price of Series A investor shares immediately after the B?round?
Q17: What is the total equity stake of the Series B investors?
Q18: What is the total equity stake of the Series A investors?
Q19: What is the total equity stake of the founders & employee options?
In: Finance