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Competition in the mobile phone industry
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Competition in the mobile phone industry
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1. a) General Environment and investment needs
The general environment that faced MCI at the time of this case surrounds the telecommunication industry. MCIs major competitor was AT&T who had basically a monopoly on the industry at the time. MCI was a young upstart company that was always in search of money. The first few years MCI sold millions of dollars of stock, exhausted the lines of credit they were able to get, and tapped private investors. They also went up against the giant, AT&T to gain full access to the interconnective services. While all this was going on, MCI stock price went below $1, had a negative net worth of $27.5 million, and an operating deficit of $87.3 million. MCI sold more common stock that enabled them to continue to do business.
MCI experienced a significant turn in 1976 when Execunet began producing considerable revenues. It was the first time MCI was able to start paying the interest on their loans and made their first $100,000 in profit. Even during this small success, the FCC was able to restrict who MCI could sell Execunet service to, but the move did not deter MCI in their growth efforts.
By 1983, MCI was on, what appeared to be, the road to success. The only thing that still stood in the way was the lack of steady investment capital, even though revenue was up to $1,073 million and net income from operation was $170.8 million. Here are a few other pieces of interesting information about MCI at this point. When compared to like companies, except for GTE, MCI is still relying heavily on debt to finance its assets with a debt ratio of 55%. In addition, MCIs revenue, net income, and assets where also significantly lower than the rest of the telecommunication industry which demonstrates the risk MCI was willing to take by investing in debt. In addition, MCI stock and bonds have always been in the "Not Rated" category. Their return on equity (32.4) shows that MCI was generating a profit with shareholders money. The return on sales and assets also show that MCI was becoming more efficient and earning more money on less of an investment. Of course the stockholders did not benefit from MCIs growing efficiency because no dividends have ever been paid out.
a. Total raw sugar shipped from each supplier to each refinery must be less than or equal to the amount available to ship
The investors saw the stock price go from an all-time high of $90 per share down to nothing in a blink of an eye. Even with the uncertainty surrounding Enron in the late part of 2001, stock analysts were still rating the stock very well. Unfortunately, investors listened to their advice and kept their stock in place. After all was said and done, the investors ended up losing $40 billion and were only able to recover about $7.27 billion from settlements with the banks and auditors. The creditors didn 't fare any better. All in all, they lost around $16 billion. After an initial loss of $21 billion, $5 billion was
MCI is at a critical point in their company history. After going public in 1972 they experienced several years of operating losses. Then in 1974 the FCC ordered MCI's largest competitor AT&T to supply interconnection to MCI and the rest of the long distance market. With a more even playing field the opportunities to increase market share and revenue were significant. In order to maximize this opportunity MCI required capital. Their poor financial performance required them to use less traditional instruments to obtain financing. The capital acquired supported their growth until they reached a level of profitability in 1978. Subsequently they continued to increase their net income and the quality of their balance sheet. With continued prospects for growth tempered with some regulatory uncertainty they need to determine their optimal financial structure for the future.
Looking at the individual ratios seen in exhibit 1 and comparing it to the industry average shown in exhibit 2 gives a sense of where this company stands. Current ratio and quick ratio are really low and have been decreasing. For 1995, the current ratio is 1.15:1, which is less than the industry average of 1.60:1, however to give a better sense of where this stands in the industry, as seen in exhibit 3, it is actually less than the average of the bottom 25% of the industry. The quick ratio is 0.61 is less than the industry is 0.90. Both these ratios serve to point out the lack of cash in this company. The cash flow has been decreasing because, it takes longer to get the money from customers, but the company still needs to pay for its purchases. Also, the company couldn’t go over the $400,000 loan limit, so they were forced to stretch their cash.
In assessing Du Pont’s capital structure after the Conoco merger that significantly increased the company’s debt to equity ratio, an analyst must look at all benefits and drawbacks of a high debt ratio. The main reason why Du Pont ended up with a high debt to equity ratio after acquiring Conoco was due to the timing and price at which they bought Conoco. Du Pont ended up buying the firm at its peak, just before coal and oil prices started to fall and at a time when economic recession hurt the chemical industry of Du Pont. The additional response from analysts and Du Pont stockholders also forced Du Pont to think twice about their new expansion. The thought of bringing the debt ratio back to 25% was brought on by the fact that the company saw that high levels of capital spending were vital to the success of the firm and that high debt levels may put them at higher risk for defaulting.
far behind and seems like a firm with economic success and great debt management, but with the money in my pocket I would use it on McDonalds.
Spokane Industries has contracted Franklin Electronics for an 18 month product development contract. Franklin Electronics is new to using project management methodologies and has not been exposed to earned value management methodologies. Even though Franklin and Spokane have worked together in the past, they have mainly used fixed-price contracts with little to no stipulations. For this project, Spokane Industries is requiring Franklin Electronics to use formalized project management methodologies, earned value cost schedules, and schedules for reports and meetings. Since Franklin Electronics had no experience with earned value management, the cost accounting group was trained in the methodology in order to bid for the project.
The major groups that were directly affected are investors, employees, and suppliers. Here we should make the distinction between different types of investors. There are two major types of investors: insiders and outside investors. Insiders are the investors who know the information that is not known publicly and may benefit them in some way. Outside investors are the investors who only know publicly known information. In our case, outside investors was the group that lost the most. On the other hand, insiders, notably Mickey Monus and David Shapiro, were the one that gains millions on IPO. The group who suffered was employees of Phar-Mor. After the scandal was revealed, most of the stores were closed to cover up losses. As a result, thousands of employees got fired. Another party that was damaged by the scandal was Coopers&Lybrant, the firm that did the audit for Phar-Mor, lost its reputation as a firm who does an audit with integrity. The secondary effect of the scandal was the overall mistrust among investors. They thought that if a giant retailer can forge its accounting books, why smaller companies wouldn’t do the same. As a result, investors became reluctant in investing into businesses that caused harm to the economy as a whole. The last but not least group that was affected by the scandal is Phar-Mor’s suppliers. Mickey Monus was fiercely fighting with them to make the chipset deals to cover up his losses, sometimes using inappropriate pressure and causing suppliers making unprofitable deals. In additions, Monus forced them to pay fees and sponsor his basketball League using buyer power of his company. In addition, a lot of bills for supplies were unpaid for months by Phar-Mor. Some suppliers said that they hated doing business with Phar-Mor, but had no choice since it had an access to vast amount of customers.
Kodak’s debt ratio has been improving since 2012 when it was considerably above 1. Their 2014 debt ratio is 0.89, which is very close to Hewlett-Packard and Sony. The debt-to-equity ratio of Kodak is the first signal within the ratios that the company is not performing well. Generally, this ratio should be below 1 and for Kodak in 2014 it was 8.83. Their equity is almost non-existent and this is signaling very weak balance sheet strength. Compared to Kodak, Hewlett-Packard and Sony are doing okay, but their ratios are both well above 1. In terms of ability to pay interest, Kodak’s only strong year was 2013. Their ratio has dipped in 2014, showing that they aren’t able to pay their interest or are struggling to pay it. Hewlett-Packard had no interest expense in their latest fiscal year and Sony’s ratio is very strong. In 2012, Kodak’s free cash flow was in the negatives (-$1,176,000). Surprisingly, it reached over two million in 2013, but then dropped to only $33,000 in 2014. Without sufficient cash flow, Kodak is going to have a difficult time increasing their shareholder value. Hewlett-Packard has free cash flow over five million dollars which is huge compared to Kodak. Kodak does not seem to have sufficient cash to handle their business obligations. The cash flow adequacy ratio should be above 1, but Kodak’s are negative. The competitors are around 0.5 for their cash flow adequacy ratio, which
...rs, setting a good trend for the corporation. They also have a very low debt-to-equity ratio, indicating that they have enough equity to easily pay off any funds acquired from creditors. As a creditor I would feel safe in lending them funds for any future projects or endeavors.
Background One. Tel was launched by Jodee Rich and Brad Keeling in 1995 (Cook, 2001). At first, it looked to get the advantages from deregulation of the telecommunication industry by reselling other network’s capacity and making money through stock market speculation. Rich and Keeling tried to increase the company’s shares rather than profit the company (Cook, 2001). Initially, One.
The first analysis will be on Verizon. The current ratio and the debt to equity ratio both improved in 2006 when compared to 2005. However, the net profit margin dropped from 9.8% to 7.0%. What does this tell us as investors...
money as the value of the shares was not worth a lot now. So they
The McDonald's Corporation is the largest chain of fast food restaurants in the world. It is franchised in over 119 countries and serves an average of 68 million customers daily. The company started in 1940 as a barbecue restaurant operated by Richard and Maurice McDonald in the United States. They reorganized their business as a hamburger stand in 1948. In 1955, Businessman Ray Kroc joined the company as a franchise agent. He purchased the chain from the McDonald brothers and oversaw its global-wide growth (McDonald’s 2014).
Strategic management is the way of implementing different business strategies and plans to attain certain specific aims and objectives. It involves collection of decisions and different rules and policies that tend to define the results that are generated in the form of better business performance. For undertaking these activities, management should possess an in depth understanding and be able to assess the general and competitive external and internal business environment to take proper business decisions (Cornelis, 2010). McDonalds is an organization that offers a range of products and services in a very effective manner that makes it a market leader in providing fast food services all over the world. By enforcing suitable strategies, McDonalds can increase its level of sales and will also help in upgrading as well as sustaining the market by acquiring competitive advantage (Schoenberg, Collier and Bowman, 2013).