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STRATEGIC MANAGEMENT & BUSINESS POLICY 12TH EDITION

THOMAS L. WHEELEN J. DAVID HUNGER

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Case method- provides the opportunity to move from

a narrow, specialized view that emphasizesfunctional 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 yourresearch 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 individualcategories 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 intopercentages

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 Altman’s Z Value bankruptcy formula- calculate

the likelihood of going bankrupt. Compare historical

statements over timeIndex of sustainable growth- used to determine

whether a company embarking on a growthstrategy will need to take on debt to fund the

growth

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Useful Economic Measures

Constant 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 ofgoods 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 istheir value to case analysis? How are they calculated?

3. When should you gather information outside a case by

going 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 IslandUniversity, NY

•Lecturer- California State PolytechnicUniversity, Pomona, CA

• President- Walter Heimler, Inc.

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