firm level analysis Flashcards
What does Regulation S-K require from registrants?
A description of the general development of the business during the past five years.
Requires a narrative description of the business done and intended
to be done by the registrant and its subsidiaries, focusing upon the
registrant’s dominant segment or each reportable segment about which
financial information is presented in its financial statements.
It also requires a narrative description of the business done and intended by the registrant and its subsidiaries.
How does the company described in the text engage in ‘rent arbitrage’?
By signing long-term leases at one rate and subleasing the space to SMEs and Enterprise members at shorter durations.
This allows the company to receive a higher aggregate rent due to increased density.
What is McDonald’s primary business focus according to the text?
Real estate.
This is a shift from the common perception of its focus on food products.
What are the three primary customer sets for Amazon as of 2010?
Consumers, sellers, and enterprises.
Additionally, Amazon generates revenue through marketing and promotional services.
True or False: Using longer historical data is always better for forecasting future profitability.
False. because business changes and the past becomes
less relevant or even totally irrelevant / misleading
Business changes over time, making past data potentially less relevant.
List the three strategies to create and sustain a competitive advantage.
- Cost leadership
- Product differentiation
- Focus (supply one segment with exactly what they want)
What are the financial consequences of a cost leadership strategy?
- Lower margin
- Higher volume
- Lower investment
the financial consequences of the product differentiation
unique attribute
higher margin
lower volume
higher investment
the financial consequences of the focus
Higher margin,
lower volume,
higher investment
What factors contribute to the sustainability of profitability?
- Scale economies
- Network effects
- Switching costs
- Proprietary assets
- Superior processing
What does the relation between growth and profitability suggest?
Growth could lead to either declining or improving profitability.
This is due to factors like the demand curve and scalability.
What should be included in an executive background check?
- Professional background
- Track record
- Illegal/unethical behavior
- Personality traits
What governance issues should be monitored in a company?
- Checks and balances among management
- Competence and independence of the board
- Pressure from executives to win at all costs
Fill in the blank: The success of corporate strategy relies on the sustainability of _______ and sustainability of _______.
[profitability], [growth]
What should you understand about how a company makes money?
Explain it using plain English. Identify the type of economic frictions the company addresses
in the economic system
what is the relation between growth and profitability
Growth could lead to declining profitability
* Demand curve slopes down
* Growth could lead to improving profitability
* Scalability or network effects
