Degree of difficulty of target achievement in the mid-1990s mobile corporation's marketing and refining (M&R) division

8-79 (Compensation tied to balanced scorecard) Degree of difficulty of target achievement in the mid-1990s mobile corporation's marketing and refining (M&R) division underwent a major reorganization and developed new strategic directions. In conjunction with these changes, M&R developed a balance scorecard around four perspectives: financial customer, internal business processes and learning and growth. Subsequently M&R linked compensation to its balanced scorecard metrics. To illustrate, all salaried employees in M&R's Natural Business Units received the following percentages of their competitive market salary:

Poor Performance within industry Average performance within industry Performance best in industry
Base Pay 90% 90% 90%
Award Based on corporate 1-2% 3-6% 10%
performance on financial metrics
Award based on performance on 0% 5-8% 20%
balanced scorecard metrics for the
M&R division and business unit 91-92% 98-104% 120%

The balanced scorecards included numerous metrics. M&R's financial metrics included return on capital employed and profitability and customer metrics included share of targeted segments of consumers and profitability of dealers. Internal business process metrics included safety and quality indices. Finally learning and growth metrics included an index of employees perceptions of the work climate at M&R

a. What are the advantages and concerns in linking compensation to a balanced scorecard generally?
B. Evaluate M&Rs approach to linking compensation to multiple measures including its system of assigning degrees of difficulty to achieving targets. In your response, consider the process that is involved in developing the compensation scheme.


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Profits and Losses from Straddles: Julian Herrara, a sophisticated investor who is both willing and able to take risk, has just noticed that Go-West Airlines has become the target of a hostile takeover

Profits and Losses from Straddles:

Julian Herrara, a sophisticated investor who is both willing and able to take risk, has just noticed that Go-West Airlines has become the target of a hostile takeover. Prior to the announcement of the offer to purchase the stock for $72 a share, the stock had been selling for $59. Immediately after the offer the stock rose to $75, a premium over the offer price.

AND SO ON

Construct Herrara’s profit profiles and answer the following questions.
1. What strategy works best if a bidding war erupts?
2. What strategy works best if the hostile takeover is defeated?
3. Which strategy works best if the original offer price becomes the final price?
4. Which of the three positions produces the worst result and under what condition does it occur?
5. If you were Herrara’s financial advisor, which strategy would you advise he establish? Or would you argue that he not speculate on this takeover?

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Selected financial data of Target and Wal-Mart for a recent year are presented here (in millions)

Problem 18–5A (P18-5A) Selected financial data of Target and Wal-Mart for a recent year are presented here (in millions).

Target Wal-Mart
Corporation Stores, Inc.
Income Statement Data for Year
Net sales $61,471 $374,526
Cost of goods sold 41,895 286,515
Selling and administrative expenses 16,200 70,847
Interest expense 647 1,798
Other income (expense) 1,896 4,273
Income tax expense 1,776 6,908
Net income $ 2,849 $ 12,731

Balance Sheet Data (End of Year)
Current assets $18,906 $ 47,585
Noncurrent assets 25,654 115,929
Total assets $44,560 $163,514

Current liabilities $ 11,782 $ 58,454
Long-term debt 17,471 40,452
Total stockholders' equity 15,307 64,608
Total liabilities and stockholders' equity $44,560 $163,514

Beginning-of-Year Balances
Total assets $37,349 $151,587
Total stockholders' equity 15,633 61,573
Current liabilities 11,117 52,148
Total liabilities 21,716 90,014

Other Data
Average net receivables $7,124 $ 3,247
Average inventory 6,517 34,433
Net cash provided by operating activities 4,125 20,354

Instructions
For each company, compute the following ratios. (Round answers to 1 decimal place, e.g. 10.5.)
Target Walmart
(1) Current
(2) Receivables turnover
(3) Average collection period
(4) Inventory turnover
(5) Days in inventory
(6) Profit margin
(7) Asset turnover
(8) Return on assets
(9) Return on common stockholders' equity
(10) Debt to total assets
(11) Times interest earned

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