Solution Mannul 7th

CHAPTER 1

OVERVIEW OF FINANCIAL REPORTING, FINANCIAL STATEMENT ANALYSIS, AND VALUATION

Solutions to Questions, Exercises, and Problems, and Teaching Notes to Cases

1. Value Chain Analysis Applied to the Timber and Timber Products Industry. Exhibit 1.A below contains a depiction of the value chain. The links in the value chain are as follows:

1. Timber Tracts: Plant and maintain timber tracts (Weyerhaeuser)

2. Logging: Harvests timber (Weyerhaeuser)

a. Sawmills: Cut timber into various grades of wood (Weyerhaeuser)

b. Pulp and Paper Manufacturing: Grinds timber into pulp and converts the pulp into various grades of paper and cardboard (International Paper)

a. Intermediate Users of Wood: Engage in construction and furniture manufacturing (Masco)

b. Intermediate Users of Paper: Manufacture containers and packaging (Owens-Illinois) and various commodity and specialty papers (Georgia-Pacific)

a. Retailers of Lumber and Wood Products: Sell such products to the final consumer (Home Depot)

b. Retailers of Paper Products: Sell such products to the final consumer (Office Depot).

Exhibit 1.A

Value Chain for the Timber and Timber Products Industry

2. Porter’s Five Forces Applied to the Air Courier Industry.

Buyer Power. Air courier services are a commodity. Firms in the industry offer similar overnight or two-day deliveries. Firms also provide opportunities to track shipments. Business customers can negotiate favorable shipping terms based on the volume of shipments. Thus, buyer power among large corporate customers is high.

Supplier Power. The principal inputs are labor services, equipment, and information systems. Except for pilots and some information processing specialists, the skill required to offer air courier services is relatively low. Therefore, competition for jobs reduces supplier power. The principal items of equipment are...