TaxMasters Trouble

A Houston-based tax advisory firm filed for bankruptcy Sunday, a little more than one day before it was scheduled in court to defend itself against fraud accusations. Best known for a national advertising campaign that made company’s bearded, red-haired founder Patrick Cox a recognizable figure, the company spent about $14 million in national advertising in 2009.

Questions:

1. According to the article, what amounts of assets did the company have as compared to debt in the Chapter 11 filing? According to the article, what does the timing of the bankruptcy have to do with the lawsuits filed?
2. What states are suing TaxMasters? What is the company charged with?
3. Instead of speaking to highly qualified tax consultants, who do TaxMasters customers alledgedly speak with?

Source: Video: Oberg, T. (2012). TaxMasters Files Chapter 11 Bankruptcy., ABCNews.com, March 19 (Retrievable online at http://abclocal.go.com/ktrk/story?section=news/local&id=8586594)

Mosk, M. (2012). TaxMasters Files for Bankruptcy, ABCNews.com, March 19 (Retrievable online at http://abcnews.go.com/Blotter/taxmasters-files-bankruptcy/story?id=15932628)

Bathon, M. (2012) TaxMasters Files for Bankruptcy, Dogged by Fraud Suits. Bloomberg.com, March 19 (Retrievable online at http://www.bloomberg.com/news/2012-03-19/taxmasters-files-for-bankruptcy-dogged-by-fraud-suits-1-.html)

Christmas Cheer Backfires

Tyrone Newman decided to celebrate Christmas after he finally got a job and kept it for one year. Unfortunately, the Northeast Washington, D.C. maintenance man ended up spending his $1,500 mortgage payment on Christmas gifts. Not wanting to tell his wife that he had no way to pay the mortgage, he got several loans from a payday lender. Newman made $16.50 per hour at his job and whenever he tried to pay ahead on the loans, the lender discouraged him. His three $500 loans would cost $6,000 each if paid off in one year.

Questions:

1. Based on the amounts in the article, estimate whether it would be possible for him to pay off one $500 loan a year, if his expenses were $2,000 per month (using his salary only).
2. Discuss the legality of these types of loans. How was Newman able to get out from under the loans?
3. Look up the FTC case (www.ftc.gov) against payday loans in South Dakota and summarize the issues.
4. What are the journal entries that the payday lender would make for the 1st 2 months, assuming that Newman did not make a payment until month 3.

Source:

Dvorak, P. (2012). “Payday Loan Disaster: A Holiday Splurge Leads to a 651% interest rate,” The Washington Post, March 8 (Retrievable online at http://www.washingtonpost.com/local/payday-loan-disaster-a-holiday-splurge-leads-to-a-651percent-interest-rate/2012/03/08/gIQA9nMOzR_story.html?hpid=z3

Costs versus Benefits of a Marketing Campaign

Is it April Fool’s Day, yet? No, this really happened! The international marketing agency of BBH Labs recently outfitted 13 volunteer homeless shelter individuals as “human wireless transmitters” at the South by Southwest technology conference in Austin, Texas. The company provided the individuals with the devices, business cards and T-shirts listing their names followed by “a 4G Hotspot.” The homeless volunteers were told to go to the most densely packed areas of the conference to serve the large crowds that typically overwhelm cellular networks in the area. Each participant was paid $20 a day, plus any tips that conference goers donated in exchange for the wireless service. Needless to say, the marketing campaign has been criticized as “a darkly satirical science-fiction dystopia.”

Questions:
1. Do a cost/benefit analysis on this marketing campaign. What are the costs?
2. What are the benefits?
3. What are some of the qualitative issues about this strategy that you would include in a report about this marketing campaign? In your report, conclude with a recommendation.

Source:

Wortham, J. (2012). “Use of Homeless as Internet Hot Spots Backfires on Marketer,” The New York Times, March 12 (Retrievable online at http://www.nytimes.com/2012/03/13/technology/homeless-as-wi-fi-transmitters-creates-a-stir-in-austin.html?_r=1)

Prospects for Pandora

Internet radio’s popularity is growing, through smartphone apps and cars that allow smartphone owners to stream Web-served radio through Bluetooth wireless connections. However, this article indicates that there are bad times ahead for this company and the industry.

Questions:

1. What is Pandora’s share of the total U.S. radio-listening market?
2. What does the article indicate as the problem with the internet radio market?
3. By what percentage did Pandora miss Wall Street revenue projections for Pandora’s most recent quarter?

Source:

Munarriz, R.A. (2012). Why Pandora Will Never Be Great Again. Daily Finance, March 7 (Retrievable online at http://www.dailyfinance.com/2012/03/07/why-pandora-will-never-be-great-again/)

Look into Auto Refinancing

In the past few years, millions of homeowners have realized huge savings by refinancing their mortgages. Now, the refinancing craze is catching on in the car loans industry. According to this article refinancing could same your car might save you big time bucks.

Questions:

1. According to the article, by how much have auto refinancing applications risen?
2. What does the phrase mean if “a loan has turned upside down”?
3. One refinancer offers an interest rate of 2.625% with an APR of 2.795% Explain what this means.

Source:

Caplinger, D. (2012). The Money-Saving Refinancing Move You’ve Never Considered, Daily Finance, March 5 (Retrievable online at http://www.dailyfinance.com/2012/03/05/the-money-saving-refinancing-move-youve-never-considered/)

Embrace Change

Kodak, the 131-year-old film pioneer, filed for bankruptcy protection last month. News got worse this week when the company announced they would stop doing what they were the first to ever do – manufacture digital cameras. Then on Feb. 15, Apple asked a bankruptcy court for permission to sue Kodak for patent infringement, resulting from Kodak’s efforts to import printers and digital camera.

Questions:

1. Why did the video say that this should be a business school case study?
2. What specific signs should Kodak have recognized as roadmarks for change?
3. What is Kodak’s strategy going forward under bankruptcy protection? Discuss what other avenues you believe Kodak could take going forward.
4. If Apple is successful, how should the company account for any proceeds gained from the patent infringement lawsuit?

Source:

The New York Times video.(2012). Kodak Declares Bankruptcy, Jan.19 (Retrievable online at http://video.nytimes.com/video/2012/01/19/business/100000001296658/kodak-declares-banruptcy.html)

Passikoff, R. (2012). No More Kodak Moments. Forbes.com, Feb. 13 (Retrievable online at http://www.forbes.com/sites/marketshare/2012/02/13/no-more-kodak-moments/)

Reuters staff. (2012). Apple Inc. has asked a bankruptcy court for permission to sue Eastman Kodak, accusing it of infringing its patents. Reuters.com, Feb. 15 (Retrievable online at http://www.reuters.com/article/2012/02/16/us-apple-kodak-idUSTRE81F05V20120216)

Coinstar and Self-Service Retailing

Coinstar is a company that was founded just over two decades ago by Jens Molbak, who as a Stanford University graduate student, realized there wasn’t an easy way to spend the spare change piled up in a jar on top of his dresser. Since that time the company has become known for its Redbox kiosks, its movie rental subsidiary. Redbox has largely overshadowed its parent company’s broader ambitions to reinvent vending machines by applying them to new categories of retailing.

Questions:

1. What percentage of Coinstar’s revenue came from Redbox last year?

2. Based on the percentage of Redbox’s investment in Verizon’s online movie services, how should this be accounted for in Redbox’s financial statements?

3. According to the article, Coinstar has about eight or nine kiosk ideas in various stages of development. In general, how should the company account for these?

4. In 2009, Redbox signed Sony to $460 Million distribution agreement, which was a five-year deal that guarantees that the studio would provide DVDs to the kiosk rental company. How do you think Redbox accounted for this agreement? How do you think Sony accounted for this agreement?

Source:
Wingfield, N. (2012) Thinking outside the Redbox. The New York Times, Feb. 17 (Retrievable online at http://www.nytimes.com/2012/02/18/business/coinstar-ventures-beyond-its-redbox-success.html?_r=1&ref=business)

Chose Me

Have you ever wondered how some people get chosen to be profiled on a commercial? You may have seen the American Express Gold Card commercial featuring Sammy’s Fish Box, Sam Chernin’s flagship restaurant on City Island in the Bronx (one of five eateries he currently owns). Most small businesses would like to be featured on this type of very professionally produced commercial for the free publicity (rather than the low-budget commercials they can afford), but it may not be that easy.

As the author of this article explained, maybe Sammy was chosen because he had obtained millions of rewards points through his purchases of supplies for the business. But she later discovered that it requires much more than just using a product. As American Express’ chief marketing officer explained, AMEX looks for business owners who not only use their products to help businesses grow, but do this in an especially unusual way that may influence other business owners.

Questions:
1. Since this commercial began airing, how much have the restaurants’ revenues increased?
2. If Mr. Chernin exchanged his rewards points for cash, how should he account for the cash?
3. How should Mr. Chernin account for the rewards points that he exchanges for trips for his employees?

Source:

Fisher, A. (2011). Entrepreneur gets credit-card star treatment. Crain’s New York Business.com, March 25 (Retrievable online at http://mycrains.crainsnewyork.com/blogs/executive-inbox/2011/03/entrepreneur-gets-credit-card/)

Youtube.com Sammy’s Fish Box (Retrievable online at youtube.com)

Is it Really February?

The warm and sunny weather is raising spirits all over the upper Midwest in January and February, but not for some businesses.

Questions:

1. What businesses did the video profile?
2. Can you think of other types of businesses that would be affected, both favorably and unfavorably? Discuss whether you mean in terms of profits, variable costs, fixed costs, mixed costs, etc.
3. Discuss how you believe the warm weather could either hurt or help our recessionary economy.
4. Contrast and compare by performing a brief cost/benefit analysis for a snow plow company and then a city government under this warm weather scenario.

Source:

You Tube Video. Warm Wisconsin winter hurts area businesses.mp4, Jan 31, 2012 (Retrievable online at http://www.youtube.com/watch?v=3aG6vO40cYs).

 

The Judge Says So

Just days ago, it appeared that a hundred low-wage workers at a Walmart-contracted warehouse in California would lose their jobs after publicly accusing their employer of shorting them on pay and forcing them to work in harsh conditions. But after the workers argued that the layoffs amounted to illegal retaliation, a state judge ordered this week that the contractors keep the mostly immigrant workers employed at the warehouse.

Questions:

1. What was the name of the company that Wal-Mart contracted with?  What is a common name for this arrangement?
2. Why won’t Wal-Mart be included in the litigation regarding this situation?
3. Explain what type of journal entries Wal-Mart would make with respect to this arrangement.

Source:

Jamieson, D. (2012). Wal-Mart-Contracted Warehouse Jobs Saved By Judge, The Huffington Post, Feb. 3 (Retrievable online at http://www.huffingtonpost.com/2012/02/03/walmart-warehouse-workers-california_n_1253267.html?ref=business)

« Previous Page — Next Page »