24 September 2014
Costco Wholesale Corporation Write-Up
I. Situational Analysis & Questions
Margarita Torres is an investor who has stock in Costco and is concerned over Costcos
performance in the future. Costc
5 November 2014
Case Write-Up: Endeca Technologies
I. Situational Analysis & Questions:
Steve Papa is CEO of Endeca Technologies and is facing a difficult business environment for the
Series C funding of his company. Papa has two offe
Depreciation: Tangible assets
-When depreciation is finished Leave at Salvage Value
Amortization: Intangible assets
Government specifies how long you can depreciate assets
EBIT kind of Substitute for looking at cash flow. Strips out acco
More and sooner is better
Cash is king
Cash Production Cycle
DSO + I AP = Cash Gap
Profit not equal to cash
Common size statements vertical, horizontal (Look for abnormal changes and flag anomalies.
3 statements are all conne
Most concerned with:
Cash Conversion cycle: Sources and Uses
Why does depreciation go into inventory?
Or fixed assets into inventory?
Assets deplete Recorded as depreciation (non-cash expense),
Assets used to produce inventory!
1) International stores will grow at the same rate as us stores.
3) Growth? (Cannibalization, How many of these stores can we put near each other)
4) Sales not accounting for sales online, and
1st( Free cash flow)
Time Horizon (5 years)
Cost of Capital
High risk, high cost of capital
12.35 post money valuation
11.65 post money, so founder loses percentage, and half a million shares get issued to them and they pay
zero for the additional shares
Participation: dont like it
3x for alpha try to get it to 1 x
Totally focused on value creation higher score
Revenue and Ebit optimization 4.2
External working capital 4
For Midterm Can use computer
Create cash flow
Sources and uses
Do not memorize formulas
Read green book
Read Higgins Chapters 1,2,3,4,6
Ch 1,2,3,4,6 Higgins for midterm
Assumptions: Have to be based on objective data.
Always write down assumptions and the sources and the data.
TOP DOWN Comps: how have other company in similar industry (Free edgar 10Ks S1s (IPO)
Rule 1: Dont run out of money (know how much you need: ProForma Income Statement )
Interconnectivity: How financial statements affect one another.
Two open book Midterm and Final (multiple choice/shortanswer)
Get points fo