Case studies

The learning outcomes of this study are to examine the financial performance of Bangalore Metro Rail Corporation Ltd. (BMRCL) during past five years, to compare the financial performance with the initial projections, to identify the causes of deviations in the performance, to recommend the measures to improve financial performance and to apply the learning from the BMRCL project to other similar upcoming projects in India.

BMRCL has been struggling to perform as per projections made in the initial detailed project report. The situation has further worsened because of the COVID-19 pandemic and its post-impact on the overall economic level of activity. Ramana Rao, the consultant for infrastructure projects, was worried after reading a news article which deemed the project a white elephant. Various articles published in the newspaper also reported that BMRCL was incurring a loss of Rs 45 lakhs every day. The consultant worried about the sustainability of the project. He wanted new ideas and plans which could turn around these losses and convert them into profitable ones. He, however, does not have any immediate plans to execute and is therefore in a dilemma about how a project that was launched with so much fanfare could be made profitable. Because of COVID-19 pandemic, BMRCL’s financial situation, which although improving, had taken a significant hit. It looked like the corporation might need government assistance to cover its losses. The transport utility suffered a loss of Rs 170 crore, as a result of a decline in ridership as well as other revenue sources including parking fees and leasing revenues. This amounted to a daily loss of Rs 1 crore. The pressure on revenues was putting the officials in a tight spot about meeting the company’s debt obligations and market borrowings.

The case study aims to enable participants to understand financial performance and viability of large-scale projects such as metro rail in India.

Teaching notes are available for educators only.

CSS 1: Accounting and Finance

Macro-Economics.

Undergraduate and MBA.

The COVID 19 pandemic-related restrictions devastated South Africa’s economy in 2020 and although the restrictions were generally less damaging than in 2020, the government had to budget for vaccinations and rebuild the economy. Public service unions had just announced that they were demanding an increase of 4% above inflation for their members and that they were preparing for a strike. They were bitter about the fact that the South African Government had withdrawn from the last year of a three-year wage agreement in February 2020 and their members had not received an increase for the two years. These demands and Finance Minister Mboweni’s response to them had to consider the structural and cyclical impact on the fiscus and economy.

The learning outcomes are as follows: understand the general objectives of fiscal policy and stakeholders’ interests; understand the tradeoffs in fiscal policy and the implications of taking a position; and make recommendations based on reasoned judgements about those recommendations.

Undergraduate and MBA level courses on Macro Economics.

Teaching notes are available for educators only.

CSS 10: Public Sector Management.

The case explores Ayesha’s reasoning, who is also a financial expert, regarding how she approaches the question of Riba (interest) so that she can maximize her financial returns and remain true to her religious identity. The discussion in the case revolves around alternate rationalizations as to why Riba (interest) continues to remain important for many Islamic investors.

Historically, the prohibition of Riba (interest) prevented the exploitation of the poor borrower who was charged exorbitant interest rates by wealthy lenders. In the modern day, a banking system which operates in a regulated setup and charges market-based interest rates, the rationale regarding the exploitation of the poor seems less compelling. Furthermore, other economic realities such as inflation and currency fluctuations further lend support to protecting one’s investments through prudent financial decisions. In this case the authors approach this decision regarding the prohibition of Riba (interest) in Islam from the point of view of the protagonist, Ayesha Bhatti, who is religiously conscious and is faced with certain personal investment choices.

The case focuses on one of the core issues of Islamic finance (IF), that of the prohibition of charging Riba (interest) on debt and the reasons behind this ruling. The relevance of this prohibition to modern day financial markets is essential to understand IF.

Teaching notes are available for educators only.

CSS 1: Accounting and Finance.

The case describes the origins of money, touching on the gold standard, the Fed’s 1942 purchase of US debt to fund the “war effort”, Bretton Woods (1944), Nixon’s 1971 pulling the currency peg and descent of money from gold to fiat. It also touches on theories of inflation and deflation, quantitative easing (QE) post the 2008 crisis and the “swamp” of (unorthodox) modern monetary theory (MMT). Aside from providing a brief history of monetary policy and economics, the case study seeks to widen students’ understanding of key economic issues including: fiat money, QE, government funding mechanisms, taxation, economic stimulation, inflation/deflation – and of course, the need for an ombudsman to limit excess.

In May 2020, South Africa’s deputy finance minister David Masondo announced that he would support the South African Reserve Bank’s lending to the government. This statement followed President Ramaposa’s earlier announcement of a R500bn COVID-19 stimulus package. The case explores the economic history of money, from barter to gold to cryptos. The case examines the origins of central banks’ printing of money, initially to support the Second World War effort and more recently the 2008 global financial crisis and now the COVID-19 crisis. In particular, the case raises the question of central bank independence – “democratically elected governments always need money, is it appropriate for central banks provide it? And are there limits?”

MBA and Executive Education

Teaching Notes are available for educators only.

CSS: 1 Accounting and Finance.

Learning outcomes of this paper are to analyse, record and classify financial transactions; prepare unadjusted trial balance; record the adjustment and closing entries and prepare post-closing trial balance; and prepare financial statements.

The case aims to induce users to draw up financial statements from the details provided. The complete accounting process is covered through solving the case. The case follows a start-up company from its first set of financial transactions to preparing the first set of financial statements. The case will help in application of accounting concepts, principles and the processes for recording transactions and preparation of financial statements.

The case is best suited for senior undergraduate- and graduate-level students of management/business schools in the courses of introductory financial accounting, intermediate accounting and financial reporting.

Teaching notes are available for educators only.

CSS 1: accounting and finance.

The purpose of this paper is to understand the situation of Accurate and then to consider possible options for Accurate to face competition in future. Several opportunities are also linked with certain drawbacks and hence by studying the entire mechanism, the decision makers of Accurate may decide on its future direction and how to go about it.

Accurate Weld Arc was established in New Delhi in 1993, his son. The company focused on manufacturing wire drawings and selling to niche customer segment. Due to this, they were operating at a modest turnover. At this juncture, the organization took two critical decisions, first, to enter the welding electrodes market which had a bigger target segment, and second, to hire a Marketing Head who conducted an extensive marketing research to recognize the need of customers and to identify differentiating factors for the organization. Later, the company made further investment in middle-gauge welding electrodes and its turnover climbed in the first year. After that, the company had set up a manufacturing unit in Raipur, Chattisgarh which generated huge profit and is now looking forward to spread its wings in other parts of the country.

This case may be used for postgraduate students, who are doing their specialization in finance and accounting.

Teaching Notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

CSS 1: Accounting and Finance

After a thorough briefing, classroom discussions and de-briefing, the students should be able to appreciate issues of leadership; understand challenges related to managing an organisation; and understand the aspects of organisational politics and power.

This real-life case study is based on a leading management institution of central India. The institute was quite successful in establishing its brand central India during 2011-2017 and is still going strong. The case here captures a change of leadership and the challenges/opportunities it posed to faculty and staff members. The case also intends to address the power struggle that ensued in later years of its functioning. The case is also about how the present leader would finally deal with it all. Students would be able to generate insights in leadership style, power and politics, employee retention, organisational decision-making and concerns in recruiting culturally fit employees.

Graduate level.

Teaching Notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

CSS 1: Accounting and Finance

Steel Corp has a large production capacity but a shrinking steel market in Europe. Reaching growing markets like China and U.A.E will be important to sustaining and growing revenue but is tough due to higher transportation costs. In this case, users must identify and use logistics data; logistics customer segmentation and related cost analysis.

Students act as outside analysts attempting to determine how Alfin will finance its expected growth based on sales of antiwrinkle cream.

The Arbor City Community Foundation (ACCF) was a medium-sized endowment established in Illinois in the late 1970s through the hard work of several local families. The vision of the ACCF was to be a comprehensive center for philanthropy in the greater Arbor City region. ACCF had a fund balance (known collectively as “the fund”) of just under $240 million. The ACCF board of trustees had appointed a committee to oversee investment decisions relating to the foundation assets. The investment committee, under the guidance of the board, pursued an active risk-management policy for the fund. The committee members were primarily concerned with the volatility and distribution of portfolio returns. They relied on the value-at-risk (VaR) methodology as a measurement of the risk of both short- and mid-term investment losses. The questions in Part (A) of the case direct the students to analyze the risk inherent in both one particular asset and the entire ACCF portfolio. For this analysis the students need to calculate daily VaR and monthly VaR values and interpret these figures in the context of ACCF's risk management. In Part (B) the foundation receives a major donation. As a result, the risk inherent in its portfolio changes considerably. The students are asked to evaluate the risk of the fund's new portfolio and to perform a portfolio rebalancing analysis.

Understanding the concept of value at risk (VaR); Calculating daily and monthly VaR by two different methods, the historical and the parametric approach; Interpreting the results of VaR calculations; Understanding the role of diversification for managing risk; Evaluating the impact of portfolio rebalancing on the overall risk of a portfolio.

The Arbor City Community Foundation (ACCF) was a medium-sized endowment established in Illinois in the late 1970s through the hard work of several local families. The vision of the ACCF was to be a comprehensive center for philanthropy in the greater Arbor City region. ACCF had a fund balance (known collectively as “the fund”) of just under $240 million. The ACCF board of trustees had appointed a committee to oversee investment decisions relating to the foundation assets. The investment committee, under the guidance of the board, pursued an active risk-management policy for the fund. The committee members were primarily concerned with the volatility and distribution of portfolio returns. They relied on the value-at-risk (VaR) methodology as a measurement of the risk of both short- and mid-term investment losses. The questions in Part (A) of the case direct the students to analyze the risk inherent in both one particular asset and the entire ACCF portfolio. For this analysis the students need to calculate daily VaR and monthly VaR values and interpret these figures in the context of ACCF's risk management. In Part (B) the foundation receives a major donation. As a result, the risk inherent in its portfolio changes considerably. The students are asked to evaluate the risk of the fund's new portfolio and to perform a portfolio rebalancing analysis.

Understanding the concept of value at risk (VaR); Calculating daily and monthly VaR by two different methods, the historical and the parametric approach; Interpreting the results of VaR calculations; Understanding the role of diversification for managing risk; Evaluating the impact of portfolio rebalancing on the overall risk of a portfolio.

Case (A) starts by reviewing several attempts made by three consecutive Argentine governments between 1973 and 1989 to fight the three-digit inflation rates that had troubled the country since the end of World War II. Next, the implementation of the currency peg under the broad umbrella called the “convertibility plan” is discussed and its rationale is explained in connection with the Central Bank's role in controlling inflation and market expectations. The case then outlines the fiscal reforms introduced in the early 1990s concerning public finance, market regulation, and social security. Finally, the outcomes of these policies are briefly summarized.

Argentina's currency collapse provides a vivid illustration of the perils of government control on exchange rates in an export-dependent economy. Students will learn and understand (1) the role of herding and expectations in currency collapse; (2) the interdependence of fiscal and monetary policies; (3) monetary base management and its effects on inflation; (4) the advantages and drawbacks of currency pegs; (5) the story of the late 1990s financial and currency crises.

A new director of this small brewery must prepare to vote on three issues coming before the board of directors the next day: (1) approval of the financial plan for 1993, (2) quarterly dividend declaration, and (3) incentive-compensation plan for the marketing manager. The tasks for the student are to evaluate the past and prospective financial performance of the company and to assess the extremely liberal credit and inventory terms the company is extending to its distributors. The objective of the case is to introduce and exercise tools and concepts of financial-statement analysis. Perhaps the biggest insight gained by students concerns the link between incentives and financial performance: in this case, the marketing manager is motivated to build sales volume, which he accomplishes by a dramatic buildup in receivables and inventory.

Bed Bath & Beyond (BBBY) had no long-term debt on its balance sheet. Although many analysts considered BBBY's balance sheet a strength that permitted greater flexibility, some commented on the risks of its growing cash balance. These concerns raised questions about BBBY's capital structure. In early 2004, interest rates were at an all-time low, making it an attractive time to consider issuing debt and executing either a share repurchase or a one-time special dividend. Provides a few capital structure proposals for students to analyze.

The director of equipment finance at Burlington Northern Railroad Company must decide if a leveraged-lease proposal is acceptable. The case emphasizes the importance of the lessee's tax status to the value of the lease and how the perception of residual value affects the valuation for both the lessee and lessor. To value the lease properly, the student must identify the relevant cash flows and the appropriate discount rates for those flows.

Acting as chief financial officer (CFO), students try to determine how Coleco can fend off creditors. Coleco is in default on its loans and is in a negative equity position.

This case examines the exchange rate risk of a U.S.-based manufacturer of women's luxury shoes that has recently introduced its product in Japan. Students are asked to evaluate the extent of the firm's exposure to currency risk and whether hedging via forward contract or currency option is advisable.

In January 2012, Ellen Kullman, CEO and chairman of DuPont, must decide whether to retain or sell the company's Performance Coatings (DPC) division. This is an introductory case on valuing a leveraged buyout. The case focuses on a publicly listed corporation's decision to divest a large division and asks students to compare the division's value if it remains under DuPont's control or is sold to an outside party. The transaction size of approximately $4 billion is too large for potential strategic buyers in the industry, making private equity (PE) firms the most likely bidders. The case provides a base-case adjusted present value (APV) model of DPC as a stand-alone company and gives students specific assignments to adjust it to reflect the division's potential value under PE ownership (e.g., EBITDA growth, multiple arbitrage, and increased leverage).

The case is designed to illustrate and discuss the differences between a public company's valuation based on unlevered free cash flows and a PE sponsor's valuation based on residual (levered) cash flows.

This case has been successfully taught in a second-year elective course covering entrepreneurial finance and private equity and in an advanced undergraduate course on corporate finance. It is appropriate for use in classes on private equity, advanced corporate finance, or deal valuation.

This case reviews the financial performance of the Fidelity Magellan Fund up to mid-1995. In essence, the Magellan Fund has managed to “beat the market” over time under three different fund managers despite its enormous size ($51 billion at the date of the case). The tasks for the student are to assess the adequacy of this performance, evaluate its likely sources, and opine on its sustainability. The case affords the opportunity to consider the appropriateness of various possible benchmarks in a risk-return framework and to assess the reasonableness of the efficient-markets hypothesis. The case can be used in an introductory finance course to present general information about equity markets and the behavior of large, sophisticated money managers.

The CFO of a diversified baking company must decide whether to issue convertible debt rather than straight debt or equity. In evaluating the proposed terms of the convertibles offering, the student must value the securities by valuing the call option (using option pricing theory) and the bond component. This case introduces the topic of convertible securities. Student and instructor worksheet files are available for use with the case and teaching note.