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There were many topics and theories discussed so far in Finance class. Research articles on the practical applications of any topic or theory covered. Post the link of one article you found discussing or demonstrating practical application in business along with your analysis of which theories the article covers. In your opinion did the class help you understand the article more clearly? Can you see how you could apply in the real world and how this can help run a business?

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Hubert Koch
Hubert KochLv2
28 Sep 2019

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Discussion 2: Water Cooler Discussion on Leadership Styles

The water cooler has become a symbol in business life. Like any common gathering place in an office slightly removed from the cubicles and desks, the water cooler is a place to share information, both casual and vital, and to build networks with colleagues who you do not necessarily see or interact with every day. The water cooler discussion activity this week will help you get into the practice of looking beyond your metaphorical cubicle to seek out topical news stories and ideas and analyze them with your Instructor and colleagues. Familiarity with current trends, topics, and events is an important element of your participation and success in the business world and your MBA program.

For your Discussion this week, research the Business Source Complete database in the Walden Library for interesting and compelling articles on the topic of leadership styles. For assistance on how to use the Walden Library, consult the document Walden University Library Tips and Tricks, which can be located by clicking on the Learning Support Docs link in the course navigation menu in the online classroom. Then, select an article from the library that resonates with you. You need to access the full text of the article, and it should be more than 2 pages in length. Do not worry if the article you select has a complicated research design (e.g., describes complex quantitative research techniques), as usually the introduction and summary conclusion pages have interesting concepts and findings to discuss.

Most of the articles you find in Business Source Complete will provide a PDF of the article. For the water cooler activity, it is preferable to attach the PDF of the article to your post. If the article you find in Business Source Complete only provides the full text as an HTML file, paste the HTML file in a Word document and attach it to your post.

Post by Day 5 the author(s) and title of the article on leadership style(s) that you found interesting. Provide a paraphrased summary, in your own words, of what the article says about leadership style(s), why you chose it, and what you learned from it, relative to what you have studied this week and throughout the course to date about leadership in business settings. Include the article as attachment to your post.

Over the past few years, the number of start-up companies attracted to either doing business themselves in the cloud, or specifically creating applications for others to use in the cloud, has grown significantly. A few but very promising enterprises have launched applications in “container” technology, which enables companies, programmers, or other enterprises to both launch and run applications solely in the cloud. There is still a lot of room in this emerging marketplace, and you are diving in. The product you’ve developed has a unique angle to tap into the local-grown/local-made/local-paid movement that’s also growing larger every day. Your initial market is your own small city, which operates independently but which is linked economically and via public safety provision to another small city sitting directly across a river separating the two. Once you’ve been able to launch your company in your city, you plan to approach the “sister city” leaders, then the county, state, and eventually go national. It’s too soon now, but your future plans entail an IPO offering to accomplish all this. Eventually, you hope to be able to re-imagine your product to go global. You have big plans, are close to being tapped out financially and you now need to plan for additional investors. Address the following considerations as they apply to your product launch. 1.Describe an agency relationship and how it may/will take shape for your small company. As the sole employee and investor in your startup, what agency conflicts might arise? 2.Six months have transpired, and you’ve been able to add two employees. In this new arrangement, what agency disputes might now develop that need to be addressed, and how might you address them? What resources do you need to use or consider? 3.Another three months have passed. You are now ready to expand to your sister city and you need more capital. You decide the wisest path is to sell some stock to outside investors, but you will maintain control over your company by holding onto the majority of the stock. In this new scenario, what type of agency conflict might occur? How can you address this in advance? 4.The IPO was a success, and you have a robust number of shareholders. With board support, you determine it is time to hire a financial manager to help your firm achieve current goals and set new ones appropriate to the firm’s growth strategy. What professional strengths and skills will an individual seeking this position need to possess? 5.Another consideration you feel you need to address at this point, now that your firm’s stock is publicly traded, is how to sustain the high ethical standards you’ve fostered thus far as you move into the firm’s future. What strategies can your management team implement to conduct your business with both personal and professional integrity? What steps can you take to ensure that ethical considerations for financial and other management decisions are embedded into the firm’s culture? 6.Congratulations - you are now at Year One, and everything is moving along faster than you anticipated. While this is great, you are at the point where you need to raise additional capital from outside lenders. With this decision, what type of agency costs might the company incur? How might a lender mitigate any agency costs? 7.Year Two rolls around. Your company has been able to expand beyond your local communities and into to localities and governments in half the counties of the state. The stakes are getting bigger and you welcome the idea of high-level input to ensure the company keeps growing and expanding. You cash out the majority of your stock and turn the company over to an elected board of directors. Neither you nor any other stockholders own a controlling interest (which is also the situation at most public companies). List six potential managerial behaviors the new board might take that could harm your company’s value, and what steps overall can put into place to avoid or mitigate these. 8.You are also aware from your prior career and from your research, that corporate governance can affect shareholder value. This greatly concerns you, as you still have lofty plans for your company’s growth and eventual global trajectory. Questions you’ve identified that need to be addressed at this stage include: a) What is corporate governance?; b) What five corporate governance provisions are internal to a firm and are under its control?; c) What characteristics of the board of directors usually lead to effective corporate governance?; d) What characteristics of the board of directors signal ineffective or problematic governance practices?; e) How can regulatory agencies and legal systems affect corporate governance? If there are differences in local versus national levels, expand upon these. 9.Lastly, one of your new board members is very concerned with “blockholders.” What is block ownership? How does it affect corporate governance? Explain the pros and cons.

International Research Journal of Applied Finance ISSN 2229 – 6891

Vol. VI Issue – 8 August, 2015 Case Study Series

A Stock Valuation Case: An Application of the “Method of Comparables” for Macy’s Shares

Halil D. Kaya* ,Julia S. Kwok

Abstract

The primary focus of this case is the application of the “Method of Comparables” in the estimation of the value of a security. An investment decision will be made based on the comparison of the selling price and the estimated value. A security will be good for purchase if the estimated value is higher than the market price. This method utilizes basic financial ratios that are commonly provided by financial web sites. First, using Yahoo Finance website, the pricing, sales, book value of equity and shares outstanding data are collected for both the target firm and the competitor firms. Then, the pricing multiples (i.e. price earnings ratio, price to sales ratio and price to book ratio) of the competitors are calculated. After that, those multiples along with the target firm’s earnings, sales, book value and shares outstanding data are used to estimate target firm’s share value. The case also examines the impact of treating “negatives” in the data. Students will learn that replacing negative earnings with zeros tend to induce less bias in target firm’s value estimation than excluding the “negative” data altogether.

Introduction

March 14, 2015 was a sunny day. Mary took advantage of the nice weather to have lunch at the Mall. On her way back to work, she walked by Susan’s investment office. Susan was Mary’s college roommate. They both liked shopping together to find new fashionable clothes. Looking at her watch, Mary realized she had half an hour to spend. She thought she would drop by and say hello to Susan.

The Performance of Macy’s

“Hi, Susan, how are you?” How is your business?” said Mary. Susan was a recent finance graduate. Susan replied, “I am doing fine. Thank you. After so many years, the market is still recovering from the mortgage crisis; many investors have been buying back stocks that they have sold during the crisis. What are you up to?” “I want to start my investment in securities, too. I have a couple thousand dollars, would Macy’s be a good stock to invest in now? That was our favorite store to shop among all of the department stores,” Mary exclaimed. She added, “Also, I read from Motley’s Fool’s article on Macy’s today about its earnings per share growth for the last 16 quarters” (Zahid Waheed, 2014).

In response to Mary’s questions, Susan checked the monthly adjusted returns of Macy’s in Yahoo Finance. She found that, since March 2010, Macy’s stock price had an average annual increase of 23.5% over the last 5 years. The stock rose from $19.98 to $57.38. Susan then told Mary that Macy’s was indeed a growing stock. She added that its success could be attributed to the omni-channel integration, e-commerce and magic selling strategies which allowed merging of sales channels, online shopping and better customer care. Since investment strategy 101 is to buy low, and sell high, given Macy’s stock price had been going up, Susan was not sure whether Macy’s was currently overvalued or undervalued by the market.

The Method of Comparables

Susan remembered her class lecture on the two types of valuation of stocks, namely absolute and relative evaluation. The absolute evaluation focuses on finding the intrinsic value of the security based on fundamentals. That involves more complicated models of discounting cash flows from dividends, operations and residual income.

On the other hand, relative evaluation is quick and easy to use. It assumes two similar securities should sell for one price in an efficient market, i.e. “Law of One Price.” So an analyst can estimate its stock price by multiplying target company’s specific earnings, sales and equity value data by the earning, sales and equity “per share” financial multiples of its competitors.

Since Mary was not familiarized with financial models, Susan decided to use the easy-toperform-and-analyze “Comparables Method” to estimate the relative value of Macy’s stock.

The Financial Data

Dillards, JC Penney and Nordstrom were selected as competitors of Macy’s as they were all in retail department store business. Susan would need some financial data regarding these companies. She went to SEC’s (i.e. Securities and Exchange Commission) website and downloaded these companies’ most recent balance sheet and income statement data. Out of those statements, she knew that she would need the EPS (i.e. earnings per share), the sales number, the number of outstanding shares, and the book value of equity. She also knew that she would need the current share price for each company. After some work, she had found all the necessary information to run the analysis. Below were the data that she had gathered:

All data are in US$ except for the number of outstanding shares. The share price as of March 15, 2014 is shown in the first column. The “Earnings per share” is shown in the second column. The third column reports the book value of equity. The last column shows the number of outstanding shares.

Firm

P ($)

EPS ($)

Sales ($)

BV of equity ($)

# of shares

Macy's

58.58

3.93

27,931 mil.

6,249 mil.

378.3 mil.

Dillard's

90.61

7.10

6,532 mil.

1,992 mil.

45.6 mil.

JC Penney

8.71

-5.57

11,859 mil.

3,087 mil.

249.3 mil.

Nordstrom

61.33

3.77

12,166 mil.

2,080 mil.

194.5 mil.

The Decision

Susan thinks that the following steps would be necessary to perform the analysis:

1.Based on the data above, calculate Sales per share, BV of equity/share values of all firms. Note that EPS is directly given.

2.Calculate P/E, P/Sales, and P/B for all of Macy’s competitors based on the data obtained.

3.Find the average of the P/E, P/Sales, and P/B multiples for the three competitors.

4.Multiply those averages calculated in step 3 with Macy’s EPS, Sales per share, and BV of equity/share values, respectively to get three value estimates for Macy’s shares.

5.The average of the three estimates would then be Susan’s best estimate of Macy’s value per share.

answer # 1-5 please

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