Business Analysis and Valuation企业分析和估价-boston_ch.docVIP

Boston Chicken, Inc. Teaching Note Overview Boston Chicken developed a new segment of the fast food restaurant business, home-cooked food. To take advantage of this innovation the company sought to grow rapidly by signing franchise agreements with large area developers. However, it also provided sizable loans to the developers to help them finance new restaurants. These loans have, in turn, been financed through public stock and convertible debt issues made by Boston Chicken. The case can be used for several purposes. It can be used to illustrate analysis of assets, where the key question for students to consider is how to value the loans to area developers. At the time of the case, Boston Chicken reported the loans at face value, with no allowance for bad debts. Students learn to appreciate that the loans are only as valuable as the concept itself. However, there is little information to help investors understand whether the concept is financially viable. The case therefore helps students to consider what information they would want to have to be confident in the valuation of the receivables. The case also raises the question as to whether Boston Chicken should be consolidating the franchisees given the control that it effectively has over them through the financing arrangements. Finally, the case can be used as a comprehensive security analysis case, covering strategy analysis, accounting analysis, financial analysis and valuation. Questions Assess Boston Chicken’s business strategy. What are its critical success factors and risks? 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? What adjustments, if any, would you make to the firm’s accounting policies? What questions would you ask management about the company’s performance? How is Boston Chicken performing? What assumptions is the market making about the company’s future performance and