Boston Chicken, Inc. Case
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Can one of you help me please with the follwing 6 questions:
1- How is the company reporting on its performance and risks? What are the key assumptions behind these policies? Do you think that its accounting policies reflect the risks?
3. What adjustments, if any, would you make to the firm's accounting policies?
4. What questions would you ask management about the company's performance?I
5. How is Boston Chicken performing?
6. What assumptions is the market making about the company's future performance and risks? Do you agree with those assessments?
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Boston Chicken, Inc. Case is discussed very comprehensively in this explanation.
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Can one of you help me please with the follwing 6 questions:
1- How is the company reporting on its performance and risks? What are the key assumptions behind these policies? Do you think that its accounting policies reflect the risks?
The company reporting on its performance and risks is flawed. The company reported profits but the profits included payments on royalty fees and loan repayment interest from the Franchisee Area Developers. This did not reflect the losses from operations. The Franchisee Area Developers lost $51,3 million in 1994, $148.3 million in 1996 and $156.4 million in 1996. The falling profits of the restaurants were not reflected in the results of the company.
The key assumptions of the company were that the interest earned and the royalty received were also the earning soothe company. However, this does not reflect the operating profits of the company, nor does it reflect the risks of the company.
The accounting polices of Boston Chicken do not reflect the risk, in fact it appears that the policies were designed to hide the tremendous risks of falling earnings from the franchises. The ...
Education
- BSc , University of Calcutta
- MBA, Eastern Institute for Integrated Learning in Management
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