In 2001, the turnaround was largely complete. Minoli’s focus shifted to future growth. Minoli announced ambitious growth targets. What should Ducati do next? What strategic directions are available to Minoli in 2001? (financial perspective)

The Turnaround Program
Ducati was founded on July 4, 1926, when Antonio Cavalieri Ducati and his three sons established
one of the first Italian operations of radios and electrical components. In 1935 Ducati started
production at a new factory in Borgo Panigale, just outside Bologna, at the heart of what later became
the most extensive Italian mechanical district. Not until the post-war period did Ducati’s first
motorcycle appear. The bike, “il Cucciolo,” soon became a blockbuster. The 1950s witnessed the
introduction of a series of increasingly sophisticated and powerful bikes, and particularly the
appearance of Ducati’s technical signature: the Desmodromic valve distribution system. This
innovation, developed by the celebrated Ducati engineer Fabio Taglioni, was a sophisticated
mechanical system allowing the engine to achieve more revolutions per minute and greater “usable”
power. The Desmo system could still be found in 2001 on every motorcycle produced, representing
the soul of all Ducatis: the deep intoxicating noise made by the desmo engine was music to the ears of
purists.
Thanks to their technical superiority, Ducati motorcycles rapidly achieved success in the
international racing circuit. This success fueled growth throughout the sixties and the seventies, and
the development of a strong reputation in the performance segment of the motorcycle industry. In
1972, a Ducati 750 Super Sport prototype won a dramatic victory in the Imola 200cc race. This
motorcycle, which was configured with an L-shape desmo engine (two cylinders mounted at a 90-
degree angle) and a Formula Uno-derived tubular trestle frame, inspired the production of a new line
of larger displacement motorcycles that represented the stylistic and technical foundation of modern
Ducatis.

Despite the innovativeness and technical excellence of its product lines, Ducati’s fortunes declined
sharply in the early 1980’s, primarily due to the decision of its major shareholder at that time (IRI, a
State holding company) to refocus the company on products other than motorcycles. In 1985 IRI
decided to sell its motorcycle assets, and Cagiva, an Italian manufacturing conglomerate and
producer of small displacement motorcycles, acquired Ducati. Under Cagiva, Ducati suddenly
recovered its reputation for on and off-track excellence. An impressive series of victories in the
World Superbike Championship where, for the first time, a Ducati two-cylinder engine defeated a
four-cylinder engine produced by Japanese competitors, was paralleled by the introduction of a new
series of stunningly beautiful street performance bikes. However, towards the mid nineties, liquidity
problems at the larger Cagiva group deprived Ducati of the necessary working capital funding,
which, in turn, delayed its payment terms to some key suppliers, resulting in significant production
delays.
Ducati was one step from going bankrupt when, in September 1996, a majority stake in the
company was acquired by the Texas Pacific Group, an American private equity firm. Abel Halpern,
HBS ’93 and TPG partner was the driving force behind the deal. He had a passion for high-end,
“nichey” businesses, and was driven by the firm belief that Ducati had enormous potential that was
largely unexploited due to poor management. For this reason, he needed a first-class, highly
committed management team, and TPG appointed Halpern’s friend and former colleague at Bain &
Co., Federico Minoli, as CEO of Ducati.

Questions #2 Basic and diluted earnings per share

The following data are presented by Quentin Corp. for calendar 2020

Net income                                                                                                                                                                               $ 4,500,000

Common shares outstanding, 1,000,000 shares

10%, cumulative preferred shares, convertible into 120,000 common shares                             $ 1,600,000

8% convertible bonds; convertible into 105,000 common shares                                                        $ 7,500,000

360,000 call options exercisable at $ 25 per share

Additional information

1.       The common and preferred shares and the convertible bonds were outstanding from the beginning of the year.

2.       In 2020, a $ 500,000 dividend was declared and distributed; however, no dividends were declared in 2019.

3.       The average market price of the common shares in 2020 was $ 30. The stock price was $ 27 on January 1, 2020, and $ 35 on December 31, 2020.

4.       The convertible bonds were sold at par.

5.       The income tax rate for 2020 is 30%.

Instructions

a)      Calculate basic EPS.

b)      Calculate diluted EPS.

c)      Briefly discuss the usefulness of the EPS measure in general. What is the additional importance of reporting diluted EPS?

Days Ltd's financial year ended on 30 June 2020. The following events occurred between the end of the reporting period and the date the directors of Edwards Ltd expect to authorise the financial statements for issue:

1. On 3 July 2020, directors proposed a final dividend of $120,000.
2. On 15 July 2020, Days Ltd took delivery of building materials (inventory). Building materials were purchased from a Chinese manufacturer. Building materials were in transit at the end of the reporting period. An inspection of the building materials revealed significant flaws and the materials were returned to the supplier on 25 July 2020. Days Ltd is to receive a full refund of the $125,000 purchase price, which had been paid in advance on 27 June 2020.

REQUIRED

For each of the above material after-reporting-period events, state whether adjustment or disclosure is required in the 30 June 2020 financial statements. Assume the above events would not significantly affect the going-concern assumption for Days Ltd.

(No need for financial statement notes or any journal entries for adjustments.)

Presented here are summarized data from the balance sheets and income statements of Wiper Inc.:

Required:

1. Calculate return on investment, based on net income and average total assets, for 2020 and 2019.
2. Calculate return on equity for 2020 and 2019.
3. Calculate working capital and the current ratio for each of the past three years.
4. Calculate earnings per share for 2020 and 2019.

Rolt Company began 2016 with a $120,000 balance in retained earnings. During the year, the following events occurred:

1. The company earned net income of $80,000.
2. A material error in net income from a previous period was corrected. This error correction increased retained earnings by $9,800 after related income taxes of $4,200.
3. Cash dividends totaling $13,000 and stock dividends totaling $17,000 were declared.
4. One thousand shares of callable preferred stock that originally had been issued at $110 per share were recalled and retired at the beginning of 2016 for the call price of $120 per share.
5. Treasury stock (common) was acquired at a cost of $20,000. State law requires a restriction of retained earnings in an equal amount. The company reports its retained earnings restrictions in a note to the financial statements.

Required:

1. Prepare a statement of retained earnings for the year ended December 31, 2016.

A promises a 20% discount to a customer. The colleague B knows that the customer is compensated with a huge Christmas gift every year. Your boss asks B why the price is so low? B says the truth because B does not lie. Colleague A, a family father, is terminated. Here the consequence of the statements was catastrophic for A. From a sense of fellow humanity or compassion, B would better have said nothing, right? But what if B had said nothing and because of this order the company goes into the insolvency? You don’t lie. Her colleagues claim they have acquired many new customers. Instead, they were mediated by the subsidiary. Colleagues are promoted, you are not.   

Required: (a) Determine the ethical issues and dilemmas faced by the company in this situation.

(b) Using consequentialist approach describe the actions taken by the company.

(c) Elaborate the ethical issue based on Kant’s Theory of Duty.

(d) Describe the potential solutions that the company can take to resolve this situation.

The entire answer should not be more than 1,000 words (+/- 10%) (excluding preliminary pages such as Cover Page, Table of Contents, Reference Page, Declaration and Appendix). o The Assignment should be written with the following formatting:

On January 1, 2019, the Pebbles Company acquired a Bam-Bam Business bond investment with a principal of $ 100,000 for $ 90,000. Pebbles classified the investment as Held to Maturity. The bonds mature in 5 years and pay interest annually at 10%. Pebbles uses the indirect method to prepare the Statement of Cash Flows.
Assuming that, in 2019, Pebbles forgot to amortize the investment discount on Bam-Bam Bonds, what is the impact of this error on net income and on net operating cash flow of 2019 if it is not discovered timely and not taken into account when preparing the financial statements?
 
Net Income
Net Cash Flow from
Operational Activities

Select one:
to. Overrated None
b. Underrated None
c. Underestimated Underestimated
d. Underestimated Underestimated

Bensen Company started business by acquiring $26,300 cash from the issue of common stock on January 1, Year 1. The cash acquired was immediately used to purchase equipment for $26,300 that had a $3,900 salvage value and an expected useful life of four years. The equipment was used to produce the following revenue stream (assume that all revenue transactions are for cash). At the beginning of the fifth year, the equipment was sold for $4,330 cash. Bensen uses straight-line depreciation. Year 1 Year 2 Year 3 Year 4 Year 5 Revenue $ 7,640 $ 8,140 $ 8,340 $ 7,140 $ 0 Required Prepare income statements, statements of changes in stockholders’ equity, balance sheets, and statements of cash flows for each of the five years.

Ross Enterprises has a contract with Big Steel Company Limited in respect of Information Technology (IT) Services. The contract was signed on January 1^st 2020 and will be effected on the 1^st April 2020.

In mid-February 2020 Big Steel’s sales plummeted due to the Covid 19 pandemic. In addition, an already high long term debt, and operating cost, as well as Big Steel’s current negative cash flows situation placed the company in serious financial peril. Indeed if they cannot find a resolution soon to deal with their cash flow problems and debt, they will have to close operations permanently and send all employees home.

Upon hearing this pronouncement, the Trade Union representing workers at Big Steel advised management that they will take strike action. This further affected the operations of Big Steel and resulted in a loss of production, sales and the much-needed cash flows, which is critical to pay off their debt and meet current fixed operating cost. On 3^rd March 2016, Big Steel files for bankruptcy and sent all employees home.

On the 4^th March, Big Steel wrote Ross Enterprises advising of their circumstances and the virtual impossibility of implementing the sign contact for IT Services, which is scheduled to commence on 1^st April 2020.

Ross Enterprises is adamant that they have binding arrangement and wanted to proceed as per signed contract. However Big Steel has advised Ross that certain events, covid 19, global recession and a subsequent strike has culminated for which the company has little or no control of. Thus, it was impossible to implement the contract on the agreed start date due to these circumstances.

Advise Ross Enterprises on this matter using the IRAC method