International Research Journal of Applied Finance (IRJAF)

(ISSN 2229-6891)Since 2010

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Understanding Bonus Debentures- A Case of Blue Dart Express Limited
Dr. Poonam Gupta

Learning Managerial Accounting in Lower Division: a Three Phase Project Approach
Ching-Lih Jan, Diane Satin, and Robert Lin
This case presents a project for use in a lower division introductory managerial accounting class to engage students in active learning. We designed this project to be presented to the students over the course of study in three phases with the following objectives: to relate cost concepts to one another in a meaningful way and to relate these cost concepts to a realistic scenario to exemplify how these concepts affect real world business decisions. The project itself asks students to consider starting a printed T-shirt shop in a local mall and then introduces concepts such as variable and fixed costs, unit product costs, breakeven analysis, variable and absorption costing and reporting, and the cash budget. This paper describes each phase of the project and the corresponding learning objectives, discusses how the project was used most recently in Fall, 2013, and provides complete instructions and documentation for each phase for instructors who wish to use or adapt our project for their classes. Anecdotal evidence from student feedback indicates that the project meets its objectives.

CLS Corporation: An Accounting Information Systems Case on Fundamental Concepts and Business Processes
Dr. Bob Hurt and Dr. Cheryl Wyrick                                                                                                                                 

Accounting information systems courses fall into two general categories:  traditional and database-oriented.  In traditional courses, students may learn about flowchart development, business processes, transaction processing and internal controls; database-oriented courses often deal with REA models, database design and related internal controls.  This two-part case is suitable for use in either type of course.  The first part presents a short narrative of a fictitious consulting firm, including a description of its business processes and current clients.  Students are asked to prepare a systems flowchart, create a relational database and suggest internal controls based on perceived risks.  In the second part, students are asked to consider accounting-related issues associated with a merger and the human resources business process.

How effective are the financial processes at higher educational institutions in the Persian Gulf countries? Evidence from a large university at one of the GCC (Gulf Cooperation Council) countries
Osama M. Fetyan, Eyad M. Fetyan, and Shahriar M. Saadullah

The purpose of this case study is to observe the financial process at a higher educational institution located in one of the Gulf Cooperation Council countries, perform a SWOT (strengths, weaknesses, opportunities, and threats) analysis, and identify areas for improvement. Moreover, the paper highlights the impact of the enterprise resource planning system on the institution’s accounting information system - particularly the general ledger module and the financial process. The study begins with a detailed description of the financial process and all its functions illustrated through flowcharts. The detailed description is followed by a SWOT analysis and recommendations for improvement where the system seems to be deficient. 

Barksdale’s Brewery Company – A Commercial Lending Case
Patrick Terry and Edward C. Lawrence

On March 23, 2014 Sam Smith, VP of Commercial Lending at Riverboat Bancshares (RB), visited Patrick Barksdale, President & CEO of Barksdale's Brewing Company. The company currently banks with RB’s chief competitor, Chemical Bank, but is not happy with them and is open to a move. He toured the brewery and went over the company’s financials with Mr. Barksdale.  The company is in need of a $900,000 first mortgage loan, a $200,000 term loan and $200,000 line of credit to open a new microbrewery in Columbia, Missouri.  The mortgage loan will cover 80% of the cost for the real estate including land and building improvements. The term loan will be used to cover initial costs of the brewery such as purchasing and installing machinery/equipment. The line of credit will be used to cover some of the inventory, working capital and start-up expenses that the brewery requires. Mr. Barksdale has sent out bid requests to key vendors for the procurement of equipment, inventory, building renovation and labor. These cost figures have been identified and figured into the business plan.  A tentative contract has been written up for the purchase of real estate but not yet signed. This information is detailed in the report below.

Commercial Bank Risk Management and Financial Performance: Case Study
Patricia R. Robertson
The case is ideal for an upper-level finance course with an emphasis on financial institution risk management and financial performance.  It is unique in that it sources data from the Federal Financial Institutions Examination Council (FFIEC) website through a series of reports called the Uniform Bank Performance Report (UBPR).  The UBPR is a report set created for bank supervisory, examination, and management purposes. It presents data and ratios for each bank in a concise and consistent format.  This allows the course instructor to assign multiple banks confident that the data is available and consistently presented.  The case can be used to supplement course curriculum or as a stand-alone assignment.  It can be offered as an individual or as a team-based assignment.

Motomart: Mixed Up Over Mixed Costs 
A.J. Cataldo II and John S. DeJoy

The Motomart case is based on real data and designed to supplement managerial/cost accounting textbook coverage of cost behavior and variable costing.  Unlike textbook problems, this data is real.  It will not produce a clear solution when attempts are made to analyze cost behavior and apply the basic techniques of scatter plot, high-low, and regression methods to separate mixed costs into their fixed and variable components and develop cost equations.  Therefore, this case illustrates the impact and consequences of a failure to properly apply accrual-based financial accounting.  The financial information generated by Motomart was not useful.  Motomart was not using accrual accounting.  Without the properly applied “matching principle” and “periodicity assumptions,” consistent with accrual accounting, financial data cannot be used to separately develop fixed and variable cost measures, break even points, forecasts, or any managerial accounting techniques extended from the development of these basic, cost behavioral measures.

Hedging fuel price risk in the Canadian Department of National Defence: An application of risk management in the public sector
Naceur Essaddam and Derek Miller

This case is designed for use in a finance course that includes risk management as a topic at the undergraduate or graduate levels. The case is designed to examine the application of a private sector risk management strategy in the public sector to educate the user about the commodity markets and the use of derivative instruments in risk management.

Purchase point Media Corporation: Using variable costing and break-even analysis to examine market share feasibility
A.J. Cataldo II and John S. DeJoy

Variable costing is typically taught as a measure for internal use and decision-making purposes. This case illustrates how skills associated with variable costing may take the form of and be used for an external application, including market share feasibility and a related stock purchase decision. The case is based on actual financial projections developed and provided by a publicly traded firm, Purchase Point Media Corporation (PPMC).  You are to examine PPMC’s projections, which are in poor form, but substantively provide a format suitable for break-even calculation, contribution margin analysis and forecasting within the relevant range of the cost equation.  After calculating the break-even point, use additional information, easily developed from public sources, to come to a decision with respect to market potential or feasibility. The increase in the price per share of PPMC stock suggests that, over time, the market may have reacted to these results and analyses, favoring the PPMC information disclosed on its website, using a comparable methodology.

Golden Supply Company (An Auditing Case)
Paul C. Schauer

When performing an audit, the auditor must be aware of the impact of the final presentation of the financial statements will have on the auditee’s stakeholders.  This case provides a situation where an adjustment to inventory can be potentially dealt with in three different manners, each of which has very distinct different impact on various stakeholders.  Following the steps in the requirements allows the student to recognize those differences which in turn, provides a basis for the selection of the best alternative treatment.

BankThai: Death by Synthetic CDOs
Narumon Saardchom
Among other three banks—Krung Thai Bank, Bank of Ayudhaya and Bangkok Bank—in Thailand, BankThai had the largest exposure to and suffered the largest losses from synthetic CDO investment.  Before investing in synthetic CDO, BankThai had persistently high level of loan losses and high cost of funds which led to several capital injections from the Financial Institutions Development Fund (FIDF), the major shareholder at that time. Given the bank’s inability to secure good quality loan portfolio, the bank’s management decided, in 2006 and 2007, to generate easy high return by investing in synthetic CDOs.  The management perceived such investment as low risk because of such CDOs’ high credit ratings, which later proved to misrepresent the true risk of the investment.  BankThai’s CDO portfolio was valued at THB 10.462 billion by the end of 2007, and was all disposed for only THB 2.6 billion in 2008.  Because such huge losses totally wiped out the bank’s capital base, the government had to relax foreign majority-ownership restrictions to seek for foreign buyer. In January 2009, CIMB Thai group completed its acquisition and compulsory tender offer, and emerged as the largest shareholder with 92.04% of the total issued and paid-up shares of BankThai, which is the end of BankThai by its own adventurous investment policy. 

Curves Don’t Lie: The Cost Curve Analysis of a Belly Dance Studio
Karla Borja, Tien Q. Nguyen, James Osborne, and Francisco Bonilla
In a highly competitive environment with slight product differentiation, managers should focus their business resources in two areas: marketing strategy and cost structure. Dance studios and academies fall into this category. They provide a service under a highly competitive setting in which minor errors in estimations might take the business from profits to losses. The case-study of Hip Expression Belly Dance studio offers insights of the managerial process on how to develop a profitability outlook and cost analysis at different output levels and market assumptions. The revenue-cost analysis forecasts profit-maximizing prices and the monthly number of classes to be offered in a new location.

Inventory Management: A Case for Cost Accounting
Diane Satin

This case is on inventory management for use in cost accounting class.  The case ties together many of the concepts of inventory management including economic order quantity (EOQ), just-in-time (JIT) manufacturing, the relationship between production and job cost sheets, and backflush costing.  It also relates management of materials inventory with management of finished goods inventory.  

A Case Study of Portfolio Optimization: Efficient Frontier
Maggie Foley, Barry Thornton, Biqing Huang, and Xiaowei Liu 

In this study, we provide a template in Excel based on Matrix for the efficient frontier. Since the optimal portfolios usually have heavy concentrated stocks, we offer a solution on how to deal with heavy concentrated stocks.

Nelson Guitars, Inc.:  The Risk-Reward Trade-Off from Operating Leverage
Gia Chevis and John T. Rose

This fictional case illustrates the risk-reward trade-off implicit in an operating leverage decision by incorporating sales-level probabilities into the discussion.  After performing standard degree of operating leverage (DOL) calculations, students must use basic statistical analysis to explain to the company’s management the risk-reward implications of a change in the production process to one of relatively greater fixed costs and lower variable costs.  By incorporating these additional skills into the decision-making process, students should achieve a better understanding of the risk-reward implications of operating leverage.

Capital Adequacy Management in Financial Service Industry: The Case of Taiwan’s Futures Commission Merchants
Matthew C. Chang

The regulators in Taiwan apply Adjusted Net Capital (ANC) ratios to supervise the capital adequacy of Future Commission Merchants (FCMs). Such restrictions make firms’ capital structure in financial service industries in divergence. In this case, collect data of two years, i.e., the year of 2008 and the year of 2013, which represent the crisis and recovery periods, respectively. Students may discuss different strategies FCMs adopted during crisis and recovery periods, and further discuss the influence of capital adequacy request from regulators on capital structure.