Case Study · November 2014

Case: protests over waste disposal: An environmental group protested against the target company’s waste disposal, while the board said no law was broken. The marking key rewards weighing reputation and compliance against the board’s claim.

Cases: Each case asks for one report to a named reader, with two requirements and appendices. Notice how every pack mixes emails, financial statements and industry data.

Examiner’s report: The report names the missing disclaimer as a pitfall. Compare your cover page with the disclaimer in this topic.

Examiner’s reports: Both ask candidates to practise report writing. Use the five summary headings from the marking key to practise on each case.

Key: rising inventories and debtors: The key rewards professional judgement on figures that disagree with the story. Interpret them with why and so what.

Marking key: performance concerns: The key asks for judgement on areas of concern, such as rising inventories and receivables despite falling performance. Compare it with the income statement questions.

Requirement 1: Mago Pharmaceuticals financial analysis: The key lists rising inventories and receivables despite falling performance. Test your own analysis against the worked case in this topic.

Requirement 1: discontinuing a product line: The solution shows a negative contribution for one line, and the key adds other factors to consider. Rework it using the worked example in this topic.

Requirement 1: multi-stage dividend valuation: The client wanted a value per share using a multi-stage dividend model, at a 10% discount rate. The key also asks for comment on the model and its shortcomings. Rebuild the table using the worked case.

Requirement 1: product line contribution: The case lists sales and costs for three product lines and says no fixed costs go if one is dropped. Practise separating contribution from allocated fixed costs.

Requirement 1: ratios against industry averages: The case supplies industry figures for return on assets, return on equity, net profit margin, debt to equity, receivable days, asset turnover and per-share figures. Calculate each one and compare it.

Requirement 1: valuing Mago Pharmaceuticals: The client asked for a fair value and advice on the price to pay, though the market price was thought unreliable. Compare the asset-based range with the dividend value in the next topic.

The Sadeco case: Each report names the same weak spots: report writing, scepticism, executive summaries and the choice of tool. Read all four and tick off the ten differentiators against them.