Buffett’s New Move

Warren Buffett is paying a hefty price for the biggest bet of his career as his Berkshire Hathaway Inc (BRKa.N) has agreed to buy Precision Castparts Corp (PCP.N), valuing the maker of aerospace and other parts at $32.3 billion.

Questions:
1. According to the article, Berkshire’s new deal joins a foray of companies within other unglamourous sectors. Who are these other companies?
2. What is Buffett known for and why is this seen as somewhat of a departure?
3. Assume that you are explaining the specifics of the deal to your roommate, who is an Art major and unfamiliar with financial terminology. Draft your explanation in one paragraph.

Source:
Stempel, J., S. Jaisinghani, S. Singh. Buffett pays high price for Precision Castparts. Reuters, Aug. 10 (Retrievable online at http://www.reuters.com/article/2015/08/10/us-precision-cast-m-a-berkshire-hatha-idUSKCN0QD0LD20150810)



A Model of Innovation or Intimidation?

According to the New York Times, white-collar workers at Amazon are encouraged to tear apart one another’s ideas in meetings, toil long and late (emails arrive past midnight, followed by text messages asking why they were not answered), and held to standards that the company boasts are “unreasonably high.” The internal phone directory instructs colleagues on how to send secret feedback to one another’s bosses. Employees say it is frequently used to sabotage others.

Questions:
1. What are the costs and benefits of this workplace environment?
2. What are the leadership principles or articles of faith that describe the way that Amazonians should act?
3. What financial transaction is used to retain employees at Amazon? Make the journal entry for a person who leaves the company before working there a year.
4. Given some of the stories presented in the article, do you think that Amazon will ever have paid parental leave, like the Netflix model? Discuss.

Source:
Kantor, J. and D. Streitfeld. (2015). Inside Amazon: Wrestling Big Ideas in a Bruising Workplace. The New York Times, Aug. 15 (Retrievable online at http://www.nytimes.com/2015/08/16/technology/inside-amazon-wrestling-big-ideas-in-a-bruising-workplace.html?hp&action=click&pgtype=Homepage&module=photo-spot-region&region=top-news&WT.nav=top-news)
Amazon Kindle Fire



What you are doing and how fast you are doing it?

A new generation of workplace technology is allowing white-collar jobs to be tracked, tweaked and managed in ways that were difficult even a few years ago. While the programs are meant to foster connections and sometimes increase productivity among employees who are geographically dispersed and often working from home, questions are piling up about the tethering of employees to their jobs.

Questions:
1. What are some of the questions you have about the Arias lawsuit?
2. The article quoted a workplace technology analyst who said of the new software,”Done properly, it will increase engagement. Done in the wrong way, employees will feel pressured or micromanaged.” Explain how it could be done right and done wrong.
3. From a managerial accounting standpoint, what would be the benefits and the costs of this software?

Source:
Streitfield, D. (2015). Data-Crunching Is Coming to Help Your Boss Manage Your Time. The New York Times, Aug. 17 (Retrievable online at http://www.nytimes.com/2015/08/18/technology/data-crunching-is-coming-to-help-your-boss-manage-your-time.html?hp&action=click&pgtype=Homepage&module=second-column-region&region=top-news&WT.nav=top-news)
Money-file-2



Hard Times in TeslaLand? A New Type of Company, for Sure!

The Silicon Valley automaker is losing more than $4,000 on every Model S electric sedan it sells, using its reckoning of operating losses, and it burned $359 million in cash last quarter in a bull market for luxury vehicles. The company on Wednesday cut its production targets for this year and next. (As an aside: What did the stockholders think about CEO Elon Musk’s casual Saturday activity – walking on airplane wings – this weekend?)

Questions:
1.Explain CEO Elon Musk’s deadline and the prospects of meeting this, based on the article.
2. Why do automakers consume so much cash?
3. How does Tesla’s cash cushion compare with established automakers? Give percentage comparisons, where possible.
4. Discuss the capitalization of Tesla’s stock over time and currently.
5. Tesla’s financing has resulted in deferred gross profits from Model S leases amounting to $61.9 million. Why is this important to analysts? Include discussion about GAAP.

Source:
White, J. and P. Lienert. (2015) Insight: Tesla burns cash, loses more than $4,000 on every car sold. Reuters, Aug. 9 (Retrievable online at http://www.reuters.com)



Morbid Thought, but Necessary Resolution

When a young person dies unexpectedly, his or her family could end up with the burden of paying off student loans. How can that be avoided?

Questions:
1. According to the article, which loans are forgiven after a student’s death and which ones are not? What is a rough estimate of the total amount of loans that would still require payment after a student’s death?
2. What percentage of private loans are co-signed?
3. According to the article, what is the safety net and why don’t more students take advantage of it?

Source:
White, Gillian (2015). Debt after Death. The Atlantic, July 30 (Retrievable online at http://www.theatlantic.com/business/archive/2015/07/debt-after-death/399983/)

money_ball



On the heels of Pacioli!

Jacob Fugger was a Renaissance-era banker and industrialist from the German city of Augsburg. At the time of his death in 1525, his fortune equaled nearly 2 percent of Europe’s total economy.

Questions:
1. According to the article, there is much to learn about how Fugger built his riches. Why?
2. What were some of the shortcuts to wealth for Fugger?
3. What types of accounting practices did Fugger adopt, that are still part of the profession today?

Source:
Lozada, C. (2015). He remade capitalism, religion and history. You’ve probably never heard of him. The Washington Post, Aug. 6 (Retrievable online at http://www.washingtonpost.com/news/book-party/wp/2015/08/06/he-remade-capitalism-religion-and-history-youve-probably-never-heard-of-him/?hpid=z3)
Fugger



A Good Thing or A Bad Thing? WOW!

Three months ago, Dan Price announced he was setting a new minimum salary of $70,000 at his Seattle credit card processing firm, Gravity Payments, and slashing his own million-dollar pay package to do it. The result has been turmoil, both internally and externally.

Questions:
1. What new costs has Mr. Price faced since his announcement and why?
2. Explain what Mr. Price means about the stakes of income equality expanding since his decision.
3. Discuss the costs and benefits of this new policy. Include both internal and external factors as covered in the article.
4. What qualitative performance factors do you anticipate?

Source:
Cohen, P. (2015). A Company Copes With Backlash Against the Raise That Roared. The New York Times, July 31
(Retrievable online at http://www.nytimes.com/2015/08/02/business/a-company-copes-with-backlash-against-the-raise-that-roared.html?mabReward=A5&moduleDetail=recommendations-0&action=click&contentCollection=Business%20Day&region=Footer&module=WhatsNext&version=WhatsNext&contentID=WhatsNext&src=recg&pgtype=article)



The Journey to Oz

There is severe underfunding for public education by the administration of Republican Gov. Sam Brownback in Kansas. In fact it was so much of a problem that some school districts closed early this past school year because they didn’t have the cash to keep operating.

Questions:
1. According to the article, how does the pay for schoolteachers in Kansas compare to other states?
2. Explain what is going on with the state’s entire funding formula for public education.
3. Discuss Mr. Neff’s statement in light of the changes that are taking place in Kansas. …”“A subject matter specialist is just a subject matter specialist, but a teacher is something different.”
4. How did Kansas get to this point? Discuss the outcome in terms of a cost/benefit analysis.

Source:

Strauss, V. (2015). Why teachers can’t hotfoot it out of Kansas fast enough. The Washington Post, August 2. (Retrievable online at http://www.washingtonpost.com/blogs/answer-sheet/wp/2015/08/02/why-teachers-cant-hotfoot-it-out-of-kansas-fast-enough/?hpid=z4)
Brownback 2



What’s in a NAME?

McDonald’s has not opened in Tehran (only weeks after a nuclear deal was reached). Despite the prospect that the deal will ease international sanctions and possibly portend a change in Iranian revolutionary attitudes toward American companies, Mash Donald’s and other knockoffs of American food culture are a home-grown phenomenon.

Questions:

1. Do you think that McDonald’s will try to pursue trademark infringement? Why or why not?
2. If McDonalds did pursue trademark infringement, how should the costs of this legal battle be accounted for?
3. Why are more knockoffs of American food culture are increasingly dominating the streets of major Iranian cities? What are the examples given in the article?

Source:
Erdbrink, T. (2015). A Burger Joint That’s Iran’s Answer to McDonald’s. The New York Times, Aug. 2 (Retrievable online at http://www.nytimes.com/2015/08/03/world/middleeast/a-burger-joint-thats-irans-answer-to-mcdonalds.html?hp&action=click&pgtype=Homepage&module=second-column-region&region=top-news&WT.nav=top-news)
03MashDonald-web-master675



The “Look Policy” & a Class-Action Lawsuit

Abercrombie & Fitch’s “Look Policy” requires workers on the floor to wear “clothes, accessories and footwear that are similar in style and fit to the brand, and that are consistent with the current fashion season and colors” but that aren’t “clearly that of a competitor.”

Questions:
1. Economic historian Price V. Fishback wrote that, “The company store is one of the most reviled and misunderstood of economic institutions. In song, folktale, and union rhetoric the company store was often cast as a villain, a collector of souls through perpetual debt peonage. …The attitudes carry over into the scholarly literature, which emphasizes that the company store was a monopoly,” [thereby funneling workers’ incomes back to the wealthy owners of the company.] Does this characterize the class action suit at Abercrombie or is it about something different? Discuss.
2. How many Abercrombie & Fitch employees claim that they were illegally required to buy the company’s clothing for work?
3. How has Abercrombie’s strict employee dress code recently gotten it in other legal trouble?
4. What other practices may also get the company in trouble?

Source:
Covert, B. (2015). Class Action Lawsuit Advances, Claiming Abercrombie Employees Were Forced To Buy Abercrombie Clothes. Think Progress, July 17 (Retrievable online at http://thinkprogress.org/economy/2015/07/17/3681739/abercrombie-class-action/)

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