STRATEGIC MANAGEMENT & BUSINESS POLICY12TH EDITION

THOMAS L. WHEELEN J. DAVID HUNGER

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Case method- provides the opportunity to move from a narrow, specialized view that emphasizes functional techniques to a broader, less precise analysis of the overall corporation

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Researching the Case Situation

Don’t go beyond the decision date of the case in your research unless instructed to do so

Sources of information:• Hoover’s• Company annual and 10-K reports

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Researching the Case Situation

Ratio analysis- the calculation of ratios from data on financial statements

• Liquidity ratios• Profitability ratios• Activity ratios• Leverage ratios

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Analyzing Financial Statements

• Review historical income statements and balance sheets

• Compare historical statements over time• Calculate changes that occur in individual

categories form year to year• Determine the change as a percentage• Adjust for inflation

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Common size statements- financial statements in which the dollar figures have been converted into percentages

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Altman’s Z Value bankruptcy formula- calculate the likelihood of going bankrupt. Compare historical statements over time

Index of sustainable growth- used to determine whether a company embarking on a growth strategy will need to take on debt to fund the growth

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Useful Economic MeasuresConstant dollars- dollars adjusted for inflation

Prime interest rate- the rate of interest banks charge on their lowest risk loans

Gross domestic product- measures total output of goods and services within a country’s borders

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1. Why should you begin a case analysis with a financialanalysis? When are other approaches appropriate?

2. What are common-size financial statements? What is their value to case analysis? How are they calculated?

3. When should you gather information outside a case bygoing to the library or using the Internet? What shouldyou look for?

4. When is inflation an important issue in conducting caseanalysis? Why bother?

5. How can you learn what date a case took place?

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PowerPoint created by:

Ronald Heimler

• Dowling College- MBA• Georgetown University- BS Business

Administration• Adjunct Professor- LIM College, NY• Adjunct Professor- Long Island

University, NY• Lecturer- California State Polytechnic

University, Pomona, CA• President- Walter Heimler, Inc.

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