Anna Amphlett, who is affiliated with Fidelity Investments, has bestowed the task of evaluate Fossil Inc. for a potential inclusion to the business’s high growth equity portfolio. In July 2005, Piper Jaffrey initially issued a “market outperform a target cost of $23 per share” and rating. However, in October 2005, the investment firm revised its target price to $20, noting that watches were less important to adolescents than other fashion accessories. During fiscal 2004, 17 new factory outlets started and intended to invest in 27 to 33 new outlets in fiscal 2005. Amphlett must prepare a fiscal analysis of Fossil, evaluate the company’s increase and financing strategies, and make a portfolio recommendation to her firm.
The Fossil case provides the opportunity for pupils to analyze a growth strategy using financial statement data. The case requires students to undertake a cautious company strategy and financial evaluation, including a pro-forma income analysis to ascertain whether Fossil can fund its expansion program with internally generated cash flows. The case provides a leading competitor in the trend watch business, historical financial data for Swatch in addition to Fossil. The case also provides the opportunity for pupils to analyze “quality of gains” problems by investigating accounting method selections and accruals by management that might affect earnings. The case was used in the full time MBA program as well as several Executive MBA programs focused on strategy, fiscal evaluation, and corporate valuation.
Publication Date: 11/15/2011
This is just an excerpt. This case is about Finance
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