Case Study

Warren Buffet Investment Club

The Warren Buffet Investment Club’s board is composed of 10 students from a school of
management. The club members also take care of investing the student’s pool of funds. As
part of their annual work, members complete a full qualitative and quantitative analysis of a
chosen industry, and finally, recommend a company each, from 10 different industries.
Finally, these members make a presentation of their investment recommendations.

This year, the selected members for the club includes Aditya, Mitali, Royal, Shalini,, Shuchita
,Charu, Shaniya and Yourself. During the discussion, various ideas were suggested for
identifying the industries, such as industries with successful products; industries with cheap
raw material costs, industries with less competition and industries with high-technology
inputs.

Case Question

Prepare a set of five decisive factors (not measures) that that you would use while selecting
these ten industries (to invest). Give supporting reasons for each of the factors.

Amar, Akbar, Anthony & Amarpreet

Amar, Akbar, Anthony & Amarpreet were four school time friends. After passing from school,
the four met with each other and were discussing about their future plans. All four were sure
that they would take up to doing business after finishing their graduation.

Amar was very ambitious and always thought of growing fast and managing a large business
empire.He was contemplating the setting up of a retail chain of beauty parlors across the
country (replicating the McDonald model). Akbar never believed in such large dreams and
had always believed in being self-reliant. Akbar was planning to start a sponge iron unit.
Anthony always believed in being a team member. He was planning to start an event
management firm. Amarpreet being a doctor by profession believed in serving the people
and hence, planned to run his own hospital with help of his professional group of friends.

Case Questions

(a) Suggest the type of business entity that would fit the profile of each individual. Give
your reasons.

(b) In the above case, should the type of business being taken up, influence the type of
business entity. Discuss.

(c) What other factors do you think are essential while deciding on the type of business
entity?
 Case Study-Balance Sheet
‘Rajat Jain and IIM Premier League’
The modem day Jhola-wala laptop carrying and tobacco-chewing Wharton-returned Professor Rajat Jain was
teaching financial accounting course in one of the IIMs. The class was hazaar (means, thousand times)
impressed with his smart looks and pony tail-especially the Dance India Dance members including Gita and
Shruti. The Bigg Boss Gang smelt completion and did not like him one bit, especially Salman Khan. Unlike the
aggressive actresses in bollywood, the Sambar brigade decided to adopt a wait and watch approach, it included
Shriti and Kajal.
In a recent session, Professor Rajat surprised the class with a quiz. The class was of course not surprised. The
The Bigg Boss Gang tigers took it as an opportunity to prove themselves while the Dance India Dance folks
worked vigorously to impress the charismatic Rajat by repeated visits to beauty parlour-varlor, gym-vym, and
doing some yoga shoga. The sambar brigade was also not let behind and had Ayurvedic preparation. Finally,
the day came when the quiz paper was there on the table. It included ten companies listed on the Bombay
Stock Exchange from different sectors and varying ownership and having different sizes and being at different
stages of growth:
•Aditya Birla Nuvo: Large business group affiliate and a conglomerate with presence across Financial
Services, Telecom, Fashion and Lifestyle and Manufacturing Businesses.
• Chowgule Steamships: Small business group affiliate is principally engaged in the carriage of goods
by sea.
• Educomp Solutions: Private owned entity with main products as Books, CD ROMs, Toys, Software
Education, Computers and other components.
• Hindustan Unilever: A multinational subsidiary with focused presence in fast moving consumer
consumables space.
• MMTC: State owned entity with main activities as Wholesale Trade of Commodities such as Iron
Ore, Gold, and Coal.
• Noida Toll Bridge Co.: Private owned entity with main activities as Infrastructure based Construction and
managing of a Toll Bridge.
• NTPC: State owned entity with main activities as Utilities especially generating thermal power.
• SKS Microfinance: Private owned entity and operating in microfinance domain as a non-banking
finance company.
• Tech Mahindra: Large business group affiliate providing IT solutions and, Business Process Out-
sourcing to telecommunications industry.
• Zee Entertainment Enterprises; A large business group affiliate in media and entertainment space.

The quiz involved identifying the two biggest items in both sides of the balance sheet for the, latest
financial year (i.e., 'assets' side and 'equities & liabilities' side) from the list of items prescribed in the
Schedule III of the Companies Act, 2013 (for example, the categories would include items in the Current
 Assets as "Cash & Cash Equivalents', 'Trade Receivables', and 'Short-term Loans and Advances'; and
items in the Non-current Assets as 'Long-term Loans and Advances', 'Non-current Investments', and'
'Intangible assets under development').

Case Question
(a) What are the possible reasons behind differing choices in the (two biggest) balance sheet items (on
(either side) of these 10 companies? Discuss.
(b) Are there any similarities emerging in the list above? Discuss.

Case Study-Profit &Loss Account

‘Rajat Jain and IIM Premier League’ Part II
This case is in continuation of the Mini Case 2.2 of Chapter 2. It included 10 companies listed on the
Bombay Stock Exchange from different sectors - Aditya Birla Nuvo; Chowgule Steamships; Educomp
Solutions; Hindustan Unilever; MMTC; Noida Toll Bridge Co.; NTPC; SKS Microfinance; Tech Mahindra
and Zee Entertainment Enterprises. These firms had different sizes and came from different stage of growth.

This part of the quiz involves identifying two main items in the income statement from their latest
financial year other than 'revenue from operations/sales' from the list of items prescribed in the Schedule
III of the Companies Act 2013 (for example, the categories would include- items as "Cost of material
consumed', 'Deferred tax expense', 'Employee benefits expense', and 'Finance costs’)
(a)
Company Major items

Aditya Birla Nuvo Reserves and surplus, non-current investments, trade

receivables, unsecured loans

Chowgule Steamships Reserves and surplus, non-current investments, tangible

fixed assets

Educomp solutions Unsecured loans, Tangible fixed assets

Hindustan Unilever Trade payables, inventory, cash and bank balances

MMTC Cash and bank balances, Trade payables

Noida Toll bridge Share capital, Secured loans

company

NTPC Unsecured loan, Tangible fixed assets

SKS Microfinance Secured loans, loans and advances

Tech Mahindra Trade payables, trade receivables, cash and bank balance

Zee Entertainment Share capital, inventory, trade receivables

Enterprises

From the above table the similarities may be found out.

1. This case helps in identifying the students the types of expense that forms a major part of the
company’s total expense. Since the companies named above have different business activities and
in different levels of growth, this case would enable them to think what could be the major areas
the company would be spending their money.
Company Major items

Aditya Birla Nuvo Cost of materials consumed, Purchases of stock in trade

Chowgule Steamships Operating expenses, Depreciation and Amortization expense

Educomp solutions Finance cost, Employee benefit expense

Hindustan Unilever Cost of materials consumed, Advertising expense

MMTC Purchases of stock in trade, Freight

Noida Toll bridge company Operating expense, Finance costs

NTPC Fuel, Depreciation

SKS Microfinance Finance costs, Employee benefit expense

Tech Mahindra Employee benefit expense, Subcontracting expense

Zee Entertainment Enterprises Operating expense, Advertisement and publicity expense