Members of the Board of Directors for a certain firm that has 12 seats on the Board for which members are elected for six-year terms. The firm is currently using an election system that puts all members of the Board up for reelection every six years. An alternative is proposed by the CEO that will put only two Board members up for reelection every single year. He justifies this request by saying that reelecting entire board carries the risk that the entire board may be changed, hence the firm would lose valuable experience.
Objective Students are expected to argue in favor of positions they may not necessarily agree with, and in the process, learn to understand where opposing views come from. Such skills are necessary to stay away from "incestuous amplification" that arises from groups of people who think alike. You are required to defend the request made by the CEO to change the election system as if it was made in a court of law in front of a judge.
In: Finance
Gizmo, Inc. is a diversified multinational manufacturer. The CEO
is considering
outsourcing the marketing research function to a global consulting
firm. The
consulting firm would charge a fixed annual fee of $1,100,000. At
present, the
costs of operating the marketing research department are $1,315,000
per year, as
follows:
Director salary $130,000
Staff salaries 800,000
Travel 105,000
Occupancy 75,000
Consultants 80,000
Executive VP 60,000
Overhead 20,000
Miscellaneous 45,000
The outsourcing firm would perform all duties currently performed
by Gizmo
personnel, as well as those of the external consultants.
Miscellaneous expenses (supplies, etc.) would be eliminated. Travel
costs would decline 90%. Occupancy costs reflect internal charge
for office space in corporate headquarters. Cost for Executive VP
reflect a charge for 15% of that individual’s time. Overhead is an
allocation of general corporate overhead.
Required: Discuss the factors that the CEO should consider in
deciding whether to outsource the marketing research function.
In: Accounting
Gizmo, Inc. is a diversified multinational manufacturer. The CEO is considering
outsourcing the marketing research function to a global consulting firm. The
consulting firm would charge a fixed annual fee of $1,100,000. At present, the
costs of operating the marketing research department are $1,315,000 per year, as
follows:
Director salary $130,000
Staff salaries 800,000
Travel 105,000
Occupancy 75,000
Consultants 80,000
Executive VP 60,000
Overhead 20,000
Miscellaneous 45,000
The outsourcing firm would perform all duties currently performed by Gizmo
personnel, as well as those of the external consultants. Miscellaneous expenses
(supplies, etc.) would be eliminated. Travel costs would decline 90%.
Occupancy costs reflect internal charge for office space in corporate headquarters.
Cost for Executive VP reflect a charge for 15% of that individual’s time.
Overhead is an allocation of general corporate overhead.
Required: Discuss the factors that the CEO should consider in deciding whether
to outsource the marketing research function.
In: Accounting
AL Sawaidi Consultants provide business management and marketing services to SME businesses in Riyadh and AlKhobar, with 5 offices in premier locations. The business is expanding rapidly, and high performing analysts are identified for potential promotion.The corporate strategy is focused on growing local talent, while attracting top talent from the region to deliver innovative business processes in a competitive market.
Recently, the CEO noticed the following changes:
Saudi SMEs are moving on-line and embracing technology
Local talent are demanding higher salaries, while local competition increase all the time
Several clients are in very specialized areas, with current staff not having the KSAOs to match
Several high performing analysts are asking for training in non-core areas like "Blockchain", machine learning and AI technologies
The CEO asks you, as a Recruitment Specialist; what can be done to remain competitive.
essay"500 words, in your own words"
In: Economics
In: Operations Management
Wells Fargo: Setting the Stagecoach Thundering Again
In: Operations Management
Larkin Hydraulics. On May 1, Larkin Hydraulics, a wholly owned subsidiary of Caterpillar (U.S.), sold a 12-megawatt compression turbine to RebeckeTerwilleger Company of the Netherlands for €4,000,000, payable as €2,000,000 on August 1 and €2,000,000 on November 1. Larkin derived its price quote of €4,000,000 on April 1 by dividing its normal U.S. dollar sales price of $4.320,000 by the then current spot rate of $1.0800/€.
By the time the order was received and booked on May 1, the euro had strengthened to $1.1000/€, so the sale was in fact worth :4,000,000 * $1.1000/: = $4,400,000. Larkin had already gained an extra $80,000 from favorable exchange rate movements. Nevertheless, Larkin’s director of finance now wondered if the firm should hedge against a reversal of the recent trend of the euro.
Four approaches were possible:
1. Hedge in the forward market: The 3-month forward exchange quote was $1.1060/€ and the 6-month forward quote was $1.1130/€.
2. Hedge in the money market: Larkin could borrow euros from the Frankfurt branch of its U.S. bank at 8.00% per annum
3. Hedge with foreign currency options: August put options were available at strike price of $1.1000/€ for a premium of 2.0% per contract, and November put options were available at $1.1000/€ for a premium of 1.2%. August call options at $1.1000/€ could be purchased for a premium of 3.0%, and November call options at $1.1000/€ were available at a 2.6% premium.
4. Do nothing: Larkin could wait until the sales proceeds were received in August and November, hope the recent strengthening of the euro would continue, and sell the euros received for dollars in the spot market. Larkin estimates the cost of equity capital to be 12% per annum. As a small firm, Larkin Hydraulics is unable to raise funds with long-term debt. U.S. T-bills yield 3.6% per annum.
What should Larkin do and why?
In: Finance
What better way to start the fall semester but with a discussion of the importance of productivity (see Chapter 1, pages 13-18). There we write: “only through increases in productivity can the standard of living improve.” For well over a century, the U.S. has been able to increase productivity at about 2.5% per year, meaning U.S. wealth doubled every 30 years. But in the past decade, the news is not good. As The Wall Street Journal’s (Aug. 10, 2016) front page headline declares: “Productivity Fall Imperils Growth.”
This longest slide in worker productivity since the late 1970s is haunting the U.S. economy’s long-term prospects. Productivity in the 2nd quarter was down 0.4% from a year earlier, the first annual decline in 3 years. That was a further step down from already tepid average annual productivity growth of 1.3% in 2007 through 2015, itself just half the pace seen in 2000 through 2007, and the trend shows little sign of reversing. Productivity has slowed dramatically since the information technology-fueled boom of the late 1990s, when strong productivity gains translated into robust growth for household incomes and the overall economy.
Adds Fed Chair Janet Yellen: “the outlook for productivity growth is a key uncertainty for the U.S. economy and a very difficult question that has divided the economics profession. Some are relatively optimistic, pointing to the continuing pace of innovations that promise revolutionary technologies, from genetically tailored medical therapies to self-driving cars. Others believe that the low-hanging fruit of innovation largely has been picked and that there is simply less scope for further gains.”
Throughout our text we examine how to improve productivity through operations management.
Classroom discussion questions:
In: Operations Management
16. Larkin Hydraulics. On May 1, Larkin Hydraulics, a wholly owned subsidiary of Caterpillar (U.S.), sold a 12-megawatt compression turbine to Rebecke-Terwilleger Company of the Netherlands for €4,000,000, payable as €2,000,000 on August 1 and €2,000,000 on November 1. Larkin derived its price quote of €4,000,000 on April 1 by dividing its normal U.S. dollar sales price of $4.320,000 by the then current spot rate of $1.0800/€. By the time the order was received and booked on May 1, the euro had strengthened to $1.1000/€, so the sale was in fact worth €4,000,000 * $1.1000/€ = $4,400,000. Larkin had already gained an extra $80,000 from favor-able exchange rate movements. Nevertheless, Larkin’s director of finance now wondered if the firm should hedge against a reversal of the recent trend of the euro. Four approaches were possible:
1. Hedge in the forward market: The 3-month forward exchange quote was $1.1060/€ and the 6-month for-ward quote was $1.1130/€.
2. Hedge in the money market: Larkin could borrow euros from the Frankfurt branch of its U.S. bank at 8.00% per annum.
3. Hedge with foreign currency options: August put options were available at strike price of $1.1000/€ for a premium of 2.0% per contract, and Novem-ber put options were available at $1.1000/€ for a premium of 1.2%. August call options at $1.1000/€ could be purchased for a premium of 3.0%, and November call options at $1.1000/€ were available at a 2.6% premium.
4. Do nothing: Larkin could wait until the sales pro-ceeds were received in August and November, hope the recent strengthening of the euro would continue, and sell the euros received for dollars in the spot market.
Larkin estimates the cost of equity capital to be 12% per annum. As a small firm, Larkin Hydrau-lics is unable to raise funds with long-term debt. U.S. T-bills yield 3.6% per annum. What should Larkin do?
In: Finance
Barry Yellen, CPA, is a sole practitioner. The largest audit client in his office is Rooster Sportswear. Rooster is a privately owned company in Chicken Heights, Idaho, with a 12-person board of directors. Barry is in the process of auditing Rooster's financial statements for the year ended December 31, 2019. He just discovered a related-party transaction that has him worried. For one thing, the relationship has existed for the past two years, but Barry did not discover it. What's just as troubling is that the client hid it from him. Rooster bought out Hen Sportswear two years ago but still operates it as a separate entity, and since then has systematically failed to disclose to the private investors related-party transactions involving the CEO of Rooster, Frank Footer. It seems that Footer is borrowing money from Hen and is deeply in debt to the CEO of that company, who is his brother-in-law. Also, Hen has hired relatives of Footer, most of whom are unqualified for their jobs, and pays them an above-market salary. This has been hidden from Barry as well. Barry was informed by an anonymous tipster that Rooster operates a secret off-balance-sheet cash account to pay for cash bonuses to senior officers, travel and entertainment expenses, an apartment rental for Footer, and cash and noncash gifts to local government officials to "grease the wheels" when permits need to be expedited in favor of Rooster. Barry doesn't know what to make of it, because he is too focused right now on the related-party transactions with Hen Sportswear. Barry is in the process of questioning Hans Burger, CPA, who is the CFO of Rooster, about these transactions. Burger explains that he had raised these issues with Footer but was instructed in no uncertain terms to leave them alone. He did just that. Burger told Barry he needed this job and wouldn't jeopardize it out of a sense of "ethics." Barry is in his office back at the firm and reflecting on how best to handle this matter.
Questions
3. Has fraud been committed in this case? Explain. If so, what are Barry's obligations in this regard?
In: Accounting