Katka Suvarinova, a financial analyst at Southern Cross LLC, and a recent MBA graduate, was asked to prepare an analysis of the Big 5 Sporting Goods Corporation recent financial performance, as well as an analysis of accounting methods. Big 5 was a West Coast chain of sports equipment and clothing outlets, with 398 stores at the end of 2010. After the German Bank Investment Report get a hold rating and a new target price of $ 13 per share for Big 5, decided to Southern Cross … Read more »

Katka Suvarinova, a financial analyst at Southern Cross LLC, and a recent MBA graduate, was asked to prepare an analysis of the Big 5 Sporting Goods Corporation recent financial performance, as well as an analysis of accounting methods. Big 5 was a West Coast chain of sports equipment and clothing outlets, with 398 stores at the end of 2010. After the German Bank Investment Report get a hold rating and a new target price of $ 13 per share for Big 5, Southern Cross decided on the company as a possible addition to his shorts portfolio. The shorts fund companies held, the Southern Cross were believed significant stock price declines conducted based on fundamental analysis. Southern Cross portfolio manager had Suvarinova asked to pay attention to the company accounting policies, and in particular indicators that the company has significant off-balance sheet debt, which was not uncommon in the retail industry. Commercial companies often leased many of their stores, rather than buying the outlets with borrowed funds. Of their MBA program, Suvarinova reminded that in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP) and International Financial Reporting Standards (IFRS), some leases are not reported as liabilities in the balance sheet of a company.
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Graeme Rankine
Source: Thunderbird School of Global Management
17 pages.
Release Date: 9 October 2012. Prod #: TB0309-PDF-ENG
Off-balance sheet financing at Big 5 Sporting Goods Company HBR case solution

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