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2013 SAMPLE ROLE PLAYS

BUSINESS FINANCE

AS USED IN DECA’SINDIVIDUAL SERIES EVENTS

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Business Finance

Individual Series Events

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Published 2013 by DECA Images. Copyright © 2013 by DECA Inc.

No part of this publication may be reproduced for resale without written permission from the publisher.

Printed in the United States.

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Business FinanceTABLE OF CONTENTS

Introduction ................................................................................................................................................3

Role-plays

Role-play #1 ....................................................................................................................................5

Role-play #2 ..................................................................................................................................12

Role-play #3 ..................................................................................................................................18

Role-play #4 ..................................................................................................................................24

INTRODUCTIONThis publication is designed to assist DECA members and their local chapter advisors in preparing for the Individual Series Events. This document will be useful in preparing students for local, state and international competition by familiarizing them with the format, structure and evaluation tools used in international competition. This series of events is presented as an example of the types of events in which a student might expect to participate at the International Career Development Conference. The competitive events found herein, however, are not representative of all performance indicators that the student may be expected to demonstrate on the international level. A complete list of performance indicators upon which the events are written can be found at www.deca.org/competitions/2/.

PROCEDUREAn individual series event consists of two major parts: a written comprehensive exam and two preliminary role-playing events. A third role-play activity will be given to finalists.

The comprehensive exam is a 100-question multiple-choice test developed especially for each series based on the knowledge, skills and attributes associated with the particular occupation. Exams from previous years are available for sale through DECA Images at www.deca.org/shop.

In the role-playing portion of the event, participants must accomplish a task by translating what they have learned into effective, efficient and spontaneous action.

The participant is given a situation to review. It may indicate a product or service to sell, a merchandising decision or a problem in communication and interpersonal skills. Participants are allowed 10 minutes to review the situation and to develop a professional approach to solving the problem.

Up to 10 minutes are then allowed for the participant to be examined by a competent judge and asked to explain how (s)he would solve the situation or problem. The judge is a qualified business executive playing the role of second party in the situation. Following the examination, the judge evaluates the participants’ responses and records the results on an evaluation form which has been developed specifically for each competitive event.

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PREPARATIONIn order for DECA members to realize success in competition, DECA advisors are encouraged to carefully plan curriculum which will contribute to student success in the competency based competitive events and to provide real world experiences specifically necessary in the occupational area for which the student has a career interest.

Competency based competitive events are intended to be a motivational tool used by the DECA advisor to encourage student learning. The success of the member’s participation in competency based competitive events directly relates to the experiences (s)he has gained in the classroom and/or at the training station.

As the local, district, state or international competitive event approaches, the advisors are encouraged to further prepare the competitor in tasks such as the following:

Prepare yourself mentally.The competitor should get sufficient sleep the night before competition so that (s)he will be mentally alert and able to concentrate on the activities.

Dress appropriately.Professional dress should be worn to all conference sessions. Please note: Competitors at the ICDC must wear an official DECA blazer during interaction with the judges. Official DECA blazers are sold through DECA Images.

Follow the program agenda.Competitors should carefully follow the program agenda provided at the conference. (S)he should locate the event room beforehand and arrive at the site early enough to be acclimated to the environment, relaxed, etc. Competitors must be on time for each event.

Use preparation time wisely.Competitors should take advantage of the time provided for each activity of the event. During the written tests, the competitor should think through each item completely and carefully while gauging the time appropriately. If time allows, recheck the answers. While preparing for role play events, competitors should use all the time allotted constructively.

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CAREER CLUSTERFinance

CAREER PATHWAYCorporate Finance

INSTRUCTIONAL AREA Economics

BUSINESS FINANCE SERIES EVENT

PARTICIPANT INSTRUCTIONS

PROCEDURES

1. The event will be presented to you through your reading of these instructions, including the Performance Indicators and Event Situation. You will have up to 10 minutes to review this information to determine how you will handle the role-play situation and demonstrate the performance indicators of this event. During the preparation period, you may make notes to use during the role-play situation.

2. You will have up to 10 minutes to role-play your situation with a judge (you may have more than one judge).

3. You will be evaluated on how well you meet the performance indicators of this event.

4. Turn in all your notes and event materials when you have completed the role-play.

PERFORMANCE INDICATORS

1. Describe the nature of business finance.

2. Calculate gross revenue.

3. Describe the functions of prices in markets.

4. Explain how organizations adapt to today’s markets.

5. Identify factors affecting a business’s profit.

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EVENT SITUATION

You are to assume the role of manager of finance and operations for the ROCK COUNTY COUGARS, a minor league baseball team. The team owner (judge) has asked for your recommendation to increase revenue for the upcoming season.

The ROCK COUNTY COUGARS operate as a minor league baseball team playing in a stadium with a seating capacity of 8,200, although attendance over the past three years has averaged only 3,660 per game. Last season the COUGARS performed poorly on the field as well as on “the bottom line,” finishing with a record of 53 – 87 and posting a loss of $136,000.

Budgeted expenses for the upcoming season have been cut dramatically and the team expects they will not increase this season. The owner (judge) would like to see a significant increase in revenue this season to at least wipe out last season’s financial loss, if not also produce a small profit. The most actionable options to boost revenue are increasing ticket prices, concession prices and parking fees. Those options are summarized below:

Ticket Prices For 70 Home GamesThe average price paid per ticket to attend a COUGARS game last season was $7.

Concessions Last season, the average fan attending a COUGARS game spent $6 on food, beverages and souvenirs.

ParkingFans pay $2 to park their cars. Last season the average number of cars in the stadium parking lot was 1,110 per game.

The team projects a similar attendance for the upcoming season and the owner sees four possible solutions to eliminate the deficit:

• Increase ticket prices, which would raise the average price per ticket from $7.• Increase concession prices, which would drive up the average spending on concessions from $6 per

fan per game.• Increase the parking fee from the present $2. • Any combination of the three which produces additional revenue of at least $136,000.

The owner (judge) has requested a meeting with you to obtain your analysis and recommendation on increasing revenue. Specifically, you are to evaluate each of the options listed above from a financial perspective and make a detailed recommendation which would eliminate the deficit.

You will present to the team owner (judge) in a role-play to take place in the owner’s (judge’s) office. The owner (judge) will begin the role-play by greeting you and asking to hear your ideas on reducing the deficit. After you have presented and have answered the owner’s (judge’s) questions, the owner (judge) will conclude the role-play by thanking you for your work.

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JUDGE’S INSTRUCTIONS

DIRECTIONS, PROCEDURES AND JUDGE’S ROLE

In preparation for this event, you should review the following information with your event manager and other judges:

1. Procedures

2. Performance Indicators

3. Event Situation

4. Judge Role-play Characterization Participants may conduct a slightly different type of meeting and/or discussion with you each time;

however, it is important that the information you provide and the questions you ask be uniform for every participant.

5. Judge’s Evaluation Instructions

6. Judge’s Evaluation Form Please use a critical and consistent eye in rating each participant.

JUDGE ROLE-PLAY CHARACTERIZATION

You are to assume the role of team owner of the ROCK COUNTY COUGARS, a minor league baseball team. You have asked the manager of finance and operations (participant) for a recommendation to increase revenue for the upcoming season.

The ROCK COUNTY COUGARS operate as a minor league baseball team playing in a stadium with a seating capacity of 8,200, although attendance over the past three years has averaged only 3,660 per game. Last season the COUGARS performed poorly on the field as well as on “the bottom line,” finishing with a record of 53 – 87 and posting a loss of $136,000.

Budgeted expenses for the upcoming season have been cut dramatically and the team expects they will not increase this season. You would like to see a significant increase in revenue this season to at least wipe out last season’s financial loss, if not also produce a small profit. The most actionable options to boost revenue are increasing ticket prices, concession prices and parking fees . Those options are summarized below:

Ticket Prices For 70 Home GamesThe average price paid per ticket to attend a COUGARS game last season was $7.($7 x 3,660 fans per game x 70 games = $1,793,400 last season)

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Concessions Last season, the average fan attending a COUGARS game spent $6 on food, beverages and souvenirs.($6 x 3,660 fans per game x 70 games = $1,537,200 last season)

ParkingFans pay $2 to park their cars. Last season the average number of cars in the stadium parking lot was 1,110 per game. ($2 x 1,110 cars per game x 70 games = $155,400 last season)

The total revenue last season from tickets, concessions and parking was $3,486,000. To cover last season’s deficit an additional $136,000 needs to be generated which is a 3.9% increase in revenue. While answers will certainly vary, the manager of finance and operations (participant) at least needs to cover last season’s deficit.

The team projects a similar attendance for the upcoming season and you see four possible solutions to eliminate the deficit:

• Increase ticket prices, which would raise the average price per ticket from $7.• Increase concession prices, which would drive up the average spending on concessions from $6 per

fan per game.• Increase the parking fee from the present $2. • Any combination of the three which produces additional revenue of at least $136,000.

You have requested a meeting with the manager of finance and operations (participant) to obtain his/her analysis and recommendation on increasing revenue. Specifically, he/she is to evaluate each of the options listed above from a financial perspective and make a detailed recommendation which would eliminate the deficit.

Sample Solutions:

Increase ticket prices so that the average price per ticket rises to $7.55; produces additional revenue of $140,910. OR

Increase concession prices so that the average spent per fan per game rises to $6.60; produces additional revenue of $153,720. OR

Double the price of parking to $4; produce additional revenue of $155,400.

The manager of finance and operations (participant) will present to you in a role-play to take place in your office. You will begin the role-play by greeting the manager (participant) and asking to hear about his/her ideas.

During the course of the role-play you are to ask the following questions of each participant:

1. Just because we raise our prices on tickets, concessions or parking, are we assured of being able to eliminate our deficit from the previous season? Please explain.

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2. What role can marketing play in reducing the team’s deficit?

Once the manager of finance and operations (participant) has presented and has answered your questions, you will conclude the role-play by thanking the manager (participant) for the work.

You are not to make any comments after the event is over except to thank the participant.

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JUDGE’S EVALUATION INSTRUCTIONS

Evaluation Form Information

The participants are to be evaluated on their ability to perform the specific performance indicators stated on the cover sheet of this event and restated on the Judge’s Evaluation Form. Although you may see other performance indicators being demonstrated by the participants, those listed in the Performance Indicators section are the critical ones you are measuring for this particular event.

Evaluation Form Interpretation

The evaluation levels listed below and the evaluation rating procedures should be discussed thoroughly with your event chairperson and the other judges to ensure complete and common understanding for judging consistency.

Level of Evaluation Interpretation Level

Exceeds Expectations Participant demonstrated the performance indicator in an extremely professional manner; greatly exceeds business standards; would rank in the top 10% of business personnel performing this performance indicator.

Meets Expectations Participant demonstrated the performance indicator in an acceptable and effective manner; meets at least minimal business standards; there would be no need for additional formalized training at this time; would rank in the 70-89th percentile of business personnel performing this performance indicator.

Below Expectations Participant demonstrated the performance indicator with limited effectiveness; performance generally fell below minimal business standards; additional training would be required to improve knowledge, attitude and/or skills; would rank in the 50-69th percentile of business personnel performing this performance indicator.

Little/No Value Participant demonstrated the performance indicator with little or no effectiveness; a great deal of formal training would be needed immediately; perhaps this person should seek other employment; would rank in the 0-49th percentile of business personnel performing this performance indicator.

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JUDGE’S EVALUATION FORMBFS 2013

DID THE PARTICIPANT:

1. Describe the nature of business finance?Little/No Value Below Expectations Meets Expectations Exceeds Expectations0, 1, 2, 3, 4, 5 6, 7, 8, 9, 10, 11 12, 13, 14, 15 16, 17, 18Attempts at describing the nature of business finance were inadequate or weak.

Adequately described the nature of business finance.

Effectively described the nature of business finance.

Very effectively described the nature of business finance.

2. Calculate gross revenue?Little/No Value Below Expectations Meets Expectations Exceeds Expectations0, 1, 2, 3, 4, 5 6, 7, 8, 9, 10, 11 12, 13, 14, 15 16, 17, 18Attempts at calculating gross revenue were inadequate or weak.

Adequately calculated gross revenue.

Effectively calculated gross revenue.

Very effectively calculated gross revenue.

3. Describe the functions of prices in markets?Little/No Value Below Expectations Meets Expectations Exceeds Expectations0, 1, 2, 3, 4, 5 6, 7, 8, 9, 10, 11 12, 13, 14, 15 16, 17, 18Attempts at describing the functions of prices in markets were weak or incorrect.

Adequately described the functions of prices in markets.

Effectively described the functions of prices in markets.

Very effectively described the functions of prices in markets.

4. Explain how organizations adapt to today’s markets?Little/No Value Below Expectations Meets Expectations Exceeds Expectations0, 1, 2, 3, 4, 5 6, 7, 8, 9, 10, 11 12, 13, 14, 15 16, 17, 18Attempts at explaining how organizations adapt to today’s markets were inadequate or unclear.

Adequately explained how organizations adapt to today’s markets.

Effectively explained how organizations adapt to today’s markets.

Very effectively explained how organizations adapt to today’s markets.

5. Identify factors affecting a business’s profit?Little/No Value Below Expectations Meets Expectations Exceeds Expectations0, 1, 2, 3, 4, 5 6, 7, 8, 9, 10, 11 12, 13, 14, 15 16, 17, 18Attempts at identifying factors affecting a business’s profit were inadequate or weak.

Adequately identified factors affecting a business’s profit.

Effectively identified factors affecting a business’s profit.

Very effectively identified factors affecting a business’s profit.

6. Overall impression and response to the judge’s questions.Little/No Value Below Expectations Meets Expectations Exceeds Expectations0, 1, 2 3, 4, 5 6, 7, 8 9, 10Demonstrated few skills; could not answer the judge’s questions.

Demonstrated limited ability to link some skills; answered the judge’s questions adequately.

Demonstrated the specified skills; answered the judge’s questions effectively.

Demonstrated skills confidently and professionally; answered the judge’s questions very effectively and thoroughly.

Judge’s Initials TOTAL SCORE

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INSTRUCTIONAL AREA Financial-Information Management



PROCEDURES






1. Explain laws and regulations pertaining to business finance.

2. Determine the relationship between government and business.

3. Demonstrate financial analysis applications.

4. Explain the use of financial information to identify trends.

5. Identify reasons to analyze financial data.

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EVENT SITUATION

You are to assume the role of a financial consultant temporarily contracted to advise CARTRIDGE PLACE, a retail printer cartridge refiller. The owner of CARTRIDGE PLACE (judge) has asked for your analysis regarding an upcoming increase of a current business expense.

CARTRIDGE PLACE is a small independent business which refills and remanufactures inkjet and toner printer cartridges. Started only three years ago in response to a consumer market upset with the high price of original factory cartridges, CARTRIDGE PLACE refills, restores, and resells used printer cartridges at a savings of 45% below the price of new cartridges. CARTRIDGE PLACE is located in a strip mall and is open from 10:00 AM to 8:00 PM Monday-Saturday and is closed on Sunday.

In addition to the owner (judge) who works a considerable number of hours, CARTRIDGE PLACE has three part-time employees who are paid the legal minimum wage of $7.25 per hour. Last week, local city government passed an ordinance requiring any business operating within the city to pay its employees at least $10.00 per hour beginning January 1st of the coming year. The owner (judge) wants to know how this newly passed ordinance will impact the operation of the business. You have been provided with the most recent 12-month wage and earnings data:

Wages paid to part-time employees: $ 11,462.00Employer payroll taxes (7.8% of wages) $ 894.00Gross Sales before expenses: $ 80,759.00Net Income after expenses: $ 3,069.00

There is significant concern over the impact the new minimum wage legislation could have on CARTRIDGE PLACE. The owner (judge) has requested a meeting with you and has asked for your financial analysis of the situation along with your recommendation(s) to address the upcoming increase in minimum wage. Specifically, your presentation must include the following:

• Explain the purpose or intent of city government passing minimum wage legislation.• Assuming that gross sales are the same in the coming year, detail how employee wages and employer

payroll taxes will affect next year’s net income.• Identify and explain strategies that the owner of CARTRIDGE PLACE may have to implement

because of the impending wage increase.

You will present to the owner (judge) in a role-play to take place in the owner’s (judge’s) office. The owner (judge) will begin the role-play by greeting you and asking to hear your ideas. After you have presented and have answered the owner’s (judge’s) questions, the owner (judge) will conclude the role-play by thanking you for your work.

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1. Procedures


3. Event Situation






You are to assume the role of owner of CARTRIDGE PLACE, a retail printer cartridge refiller. You have temporarily contracted with a financial consultant (participant) and have asked for his/her analysis regarding an upcoming increase of a current business expense.

CARTRIDGE PLACE is a small independent business which refills and remanufactures inkjet and toner printer cartridges. Started only three years ago in response to a consumer market upset with the high price of original factory cartridges, CARTRIDGE PLACE refills, restores, and resells used printer cartridges at a savings of 45% below the price of new cartridges. CARTRIDGE PLACE is located in a strip mall and is open from 10:00 AM to 8:00 PM Monday-Saturday and is closed on Sunday.

As the owner, you work a considerable number of hours. CARTRIDGE PLACE also has three part-time employees who are paid the legal minimum wage of $7.25 per hour. Last week, local city government passed an ordinance requiring any business operating within the city to pay its employees at least $10.00 per hour beginning January 1st of the coming year. You want to know how this newly passed ordinance will impact the operation of the business. You have provided the financial consultant (participant) with the most recent 12-month wage and earnings data:

Wages paid to part-time employees: $ 11,462.00Employer payroll taxes (7.8% of wages) $ 894.00Gross Sales before expenses: $ 80,759.00Net Income after expenses: $ 3,069.00

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There is significant concern over the impact the new minimum wage legislation could have on CARTRIDGE PLACE. You have requested a meeting with your financial consultant (participant) and have asked for his/her financial analysis of the situation along with recommendation(s) to address the upcoming increase in minimum wage. Specifically, the presentation must address the following:

• Explain the purpose or intent of the city government passing minimum wage legislation.• Assuming that gross sales are the same in the upcoming year, detail how employee wages and

employer payroll taxes will affect next year’s net income.• Identify and explain strategies that you may have to implement because of the impending wage

increase.

Calculations:Wages paid to employees will increase by 37.9%, resulting in a dollar increase of $4,344. ($2.75 an hour increase / $7.25 = 37.9%)($11,462 paid to employees last year x 1.379 = $15,806 to be paid to employees next year.)

Payroll taxes will increase by $338 over the previous year.($15,806 next year’s wages x .078 = $1,232)($1,232 taxes next year - $894 taxes last year = $338)

Net income will be turned into a net loss next year if gross sales remain the same.($3,069 net income from last year - $4,682 increase in expenses from wages and payroll taxes = $1,613 net loss)

The financial consultant (participant) will present to you in a role-play to take place in your office. You will begin the role-play by greeting the consultant (participant) and asking to hear about his/her ideas.


1. How does an increase in the minimum wage affect the entire wage structure of a business?

2. Who pays the Social Security tax?

Once the financial consultant (participant) has presented and has answered your questions, you will conclude the role-play by thanking the consultant (participant) for the work.


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1. Explain laws and regulations pertaining to business finance?Little/No Value Below Expectations Meets Expectations Exceeds Expectations0, 1, 2, 3, 4, 5 6, 7, 8, 9, 10, 11 12, 13, 14, 15 16, 17, 18Attempts at explaining laws and regulations pertaining to business finance were inadequate or weak.

Adequately explained laws and regulations pertaining to business finance.

Effectively explained laws and regulations pertaining to business finance.

Very effectively explained laws and regulations pertaining to business finance.

2. Determine the relationship between government and business?Little/No Value Below Expectations Meets Expectations Exceeds Expectations0, 1, 2, 3, 4, 5 6, 7, 8, 9, 10, 11 12, 13, 14, 15 16, 17, 18Attempts at determining the relationship between government and business were inadequate or weak.

Adequately determined the relationship between government and business.

Effectively determined the relationship between government and business.

Very effectively determined the relationship between government and business.

3. Demonstrate financial analysis applications?Little/No Value Below Expectations Meets Expectations Exceeds Expectations0, 1, 2, 3, 4, 5 6, 7, 8, 9, 10, 11 12, 13, 14, 15 16, 17, 18Attempts at demonstrating financial analysis applications were weak or incorrect.

Adequately demonstrated financial analysis applications.

Effectively demonstrated financial analysis applications.

Very effectively demonstrated financial analysis applications.

4. Explain the use of financial information to identify trends?Little/No Value Below Expectations Meets Expectations Exceeds Expectations0, 1, 2, 3, 4, 5 6, 7, 8, 9, 10, 11 12, 13, 14, 15 16, 17, 18Attempts at explaining the use of financial information to identify trends were inadequate or unclear.

Adequately explained the use of financial information to identify trends.

Effectively explained the use of financial information to identify trends.

Very effectively explained the use of financial information to identify trends.

5. Identify reasons to analyze financial data?Little/No Value Below Expectations Meets Expectations Exceeds Expectations0, 1, 2, 3, 4, 5 6, 7, 8, 9, 10, 11 12, 13, 14, 15 16, 17, 18Attempts at identifying reasons to analyze financial data were inadequate or weak.

Adequately identified reasons to analyze financial data.

Effectively identified reasons to analyze financial data.

Very effectively identified reasons to analyze financial data.






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INSTRUCTIONAL AREA Operations



PROCEDURES






1. Describe types of business activities.

2. Discuss the analysis of a company’s financial situation using its financial statements.

3. Explain the nature of overhead/operating costs.

4. Explain the concept of production.

5. Explain the nature of project management.

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EVENT SITUATION

You are to assume the role of a financial consultant hired by VALLEY REMODELING, a new bathroom remodeling business. The owner (judge) has asked for your analysis and recommendation as to whether the business should conduct its operations from a showroom or not.

VALLEY REMODELING is a brand new bathroom remodeling company. However, while the business itself is new, the owner (judge) has sixteen years of home remodeling experience working for other companies in the area. The owner (judge) has witnessed first-hand the inefficiency and inflated pricing of some competitors and is convinced that VALLEY REMODELING will be able to offer lower bids to customers looking to remodel aging bathrooms. For now, the only employee is a salesperson who, in addition to the owner, will estimate projects and submit bids to potential customers. All work will be sub-contracted to electricians, plumbers and carpenters.

The owner (judge) has $150,000 of personal cash to commit to starting up the business. In addition, a loan of up to $100,000 can be obtained from a local bank. While bathroom remodeling projects can vary, the average project runs $8,000. VALLEY REMODELING will have a 25% markup to cover its costs and expenses. The owner (judge) is considering whether to participate in local consumer trade shows complemented with heavy advertising to locate customers or to sell through a permanent showroom. The financial considerations of the two options are as follows:

Trade Shows: The cost of a 10 x 10 ft. booth for the spring and fall home improvement shows is $11,000 per show. Weekly ads in six nearby community newspapers will total $32,500 for the year and Internet ads will cost $5,500 per year.

Showroom: The set-up cost of a 1,700 sq. ft. showroom is $175,000. Monthly rent in a strip mall location will run $36,000 per year. Other expenses to operate the showroom will run $40,000 per year.

The owner (judge) has called your office and requested a meeting with you to obtain your analysis and recommendation on whether to sell VALLEY REMODELING services through trade shows and ads or from a year-round showroom. Specifically, your presentation must address the following:

• Discuss the benefits and limitations of obtaining customer leads through appearances at consumer home improvement shows.

• Explain the benefits of operating the business from a showroom.• Determine the number of remodeling jobs the business needs to complete in order to cover the

annual costs of each option.• State your recommendation regarding which option the owner should select and provide rationale.

You will present to the owner (judge) in a role-play to take place in the owner’s (judge’s) home office. The owner (judge) will begin the role-play by greeting you and asking to hear your ideas. After you have presented and have answered the owner’s (judge’s) questions, the owner (judge) will conclude the role-play by thanking you for your work.

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1. Procedures


3. Event Situation






You are to assume the role of owner of VALLEY REMODELING, a new bathroom remodeling business. You have asked your financial consultant (participant) for his/her analysis and recommendation as to whether the business should conduct its operations from a showroom or not.

VALLEY REMODELING is a brand new bathroom remodeling company. However, while the business itself is new, you have sixteen years of home remodeling experience working for other companies in the area. You have witnessed first-hand the inefficiency and inflated pricing of some competitors and are convinced that VALLEY REMODELING will be able to offer lower bids to customers looking to remodel aging bathrooms. For now, the only employee is a salesperson who, in addition to you, will estimate projects and submit bids to potential customers. All work will be sub-contracted to electricians, plumbers and carpenters.

You have $150,000 of personal cash to commit to starting up the business. In addition, a loan of up to $100,000 can be obtained from a local bank. While bathroom remodeling projects can vary, the average project runs $8,000. VALLEY REMODELING will have a 25% markup to cover its costs and expenses. You are considering whether to participate in local consumer trade shows complemented with heavy advertising to locate customers or to sell through a permanent showroom. The financial considerations of the two options are as follows:

Trade Shows: The cost of a 10 x 10 ft. booth for the spring and fall home improvement shows is $11,000

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per show. Weekly ads in six nearby community newspapers will total $32,500 for the year and Internet ads will cost $5,500 per year.

Showroom: The set-up cost of a 1,700 sq. ft. showroom is $175,000. Monthly rent in a strip mall location will run $36,000 per year. Other expenses to operate the showroom will run $40,000 per year.

You have called your financial consultant (participant) and requested a meeting to obtain his/her analysis and recommendation on whether to sell VALLEY REMODELING services through trade shows and ads or from a year-round showroom. Specifically, the presentation must address the following:

• Discuss the benefits and limitations of obtaining customer leads through appearances at consumer home improvement shows.

• Explain the benefits and limitations of operating the business from a showroom.• Determine the number of remodeling jobs the business needs to complete in order to cover the

annual costs of each option.• State your recommendation regarding which option you should select and provide rationale.

Calculations:$8,000 average remodeling job x 25% markup = $2,000 gross margin generated per job.

Trade Show:$22,000 two trade shows per year + $32,500 community newspaper ads + $5,500 Internet ads = $60,000. $60,000 total costs / $2,000 average gross margin = 30 jobs needed to cover costs.

Showroom:Showroom set-up is a one time cost of $175,000. Since the owner only has cash of $150,000 a loan of some amount at an unknown rate will be needed.

$36,000 annual rent + $40,000 other showroom expenses + unknown interest expense = $76,000.$76,000 / $2,000 average markup = at least 38 jobs needed to cover costs before interest expense.

The financial consultant (participant) will present to you in a role-play to take place in your home office. You will begin the role-play by greeting the consultant (participant) and asking to hear about his/her ideas.


1. Explain how VALLEY REMODELING could utilize a customer referral program.2. What role could the Better Business Bureau play in a customer’s decision to hire a remodeling

company?

Once the financial consultant (participant) has presented and has answered your questions, you will conclude the role-play by thanking the consultant (participant) for the work.


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1. Describe types of business activities?Little/No Value Below Expectations Meets Expectations Exceeds Expectations0, 1, 2, 3, 4, 5 6, 7, 8, 9, 10, 11 12, 13, 14, 15 16, 17, 18Attempts at describing types of business activities were inadequate or weak.

Adequately described types of business activities.

Effectively described types of business activities.

Very effectively described types of business activities.

2. Discuss the analysis of a company’s financial situation using its financial statements?Little/No Value Below Expectations Meets Expectations Exceeds Expectations0, 1, 2, 3, 4, 5 6, 7, 8, 9, 10, 11 12, 13, 14, 15 16, 17, 18Attempts at discussing the analysis of a company’s financial situation using its financial statements were inadequate or weak.

Adequately discussed the analysis of a company’s financial situation using its financial statements.

Effectively discussed the analysis of a company’s financial situation using its financial statements.

Very effectively discussed the analysis of a company’s financial situation using its financial statements.

3. Explain the nature of overhead/operating costs?Little/No Value Below Expectations Meets Expectations Exceeds Expectations0, 1, 2, 3, 4, 5 6, 7, 8, 9, 10, 11 12, 13, 14, 15 16, 17, 18Attempts at explaining the nature of overhead/operating costs were weak or incorrect.

Adequately explained the nature of overhead/operating costs.

Effectively explained the nature of overhead/operating costs.

Very effectively explained the nature of overhead/operating costs.

4. Explain the concept of production?Little/No Value Below Expectations Meets Expectations Exceeds Expectations0, 1, 2, 3, 4, 5 6, 7, 8, 9, 10, 11 12, 13, 14, 15 16, 17, 18Attempts at explaining the concept of production were inadequate or unclear.

Adequately explained the concept of production.

Effectively explained the concept of production.

Very effectively explained the concept of production.

5. Explain the nature of project management?Little/No Value Below Expectations Meets Expectations Exceeds Expectations0, 1, 2, 3, 4, 5 6, 7, 8, 9, 10, 11 12, 13, 14, 15 16, 17, 18Attempts at explaining the nature of project management were inadequate or weak.

Adequately explained the nature of project management.

Effectively explained the nature of project management.

Very effectively explained the nature of project management.






24



INSTRUCTIONAL AREA Financial Analysis



PROCEDURES






1. Explain the role of finance in business.

2. Calculate financial ratios.

3. Demonstrate connections between company actions and results.

4. Discuss business ethics for business finance.

5. Discuss the analysis of a company’s financial situation using its financial statements.

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EVENT SITUATION

You are to assume the role of finance director at GUARDIAN LOCK CORP., a large manufacturer of consumer security products. The chairman of the board of directors (judge) has asked for your analysis and recommendation of a stock buyback plan currently under consideration.

GUARDIAN LOCK CORP is a large manufacturer of padlocks, combination locks and other security products, all targeted to a retail consumer market. Founded nearly eighty years ago, GUARDIAN LOCK today has over 16,000 employees at plants and offices worldwide. Since 1963 the company has been publicly owned with its shares being traded on a major stock exchange.

The past decade has not been good for GUARDIAN LOCK. With intensified competition coming from China and Mexico, GUARDIAN has seen a steady decline in its revenue and net income. The most recent income statement reported net income of $81 million. The effect on shareholders is a stock price that has shown very little movement, flattening out at $28 - $32 per share. In addition, the company has reduced its annual dividend from 96 cents a share to 24 cents. Current shareholders are not happy and are likely to vent a lot of their anger and disappointment at the annual shareholder meeting in two months.

In an attempt to reduce some of that stockholder anger, the board of directors is considering a stock buyback plan where GUARDIAN would purchase 25% of the 34 million outstanding shares, and hold those shares as Treasury Stock (stock which as been bought back by the issuing company). The stock buyback would please current shareholders since it is estimated that GUARDIAN’S stock price could immediately rise by as much as 30%. In addition, new investors would be more likely to consider buying stock in GUARDIAN LOCK CORP because the earnings per share would increase dramatically above the current $2.38, making an investment in the company appear more attractive. Additional investors could potentially drive up the stock price even more.

The chairman of the GUARDIAN board of directors (judge) has requested a meeting with you to obtain your analysis regarding the impact of the buyback plan currently being considered. Specifically, your presentation is to address the following:

• Explain why the buyback plan would immediately increase GUARDIAN’S stock price. Will GUARDIAN have to pay more or less than current market price to obtain the shares?

• Calculate the new earnings per share after the buyback takes place. What will be the percentage of increase in GUARDIAN’S earnings per share?

• Discuss the ethics of the buyback plan as it pertains to current stockholders, potential new investors and the company.

• State your recommendation on the buyback plan and provide rationale.

You will present to the chairman of the board of directors (judge) in a role-play to take place in one of GUARDIAN’S offices. The chairman (judge) will begin the role-play by greeting you and asking to hear your ideas. After you have presented and have answered the chairman’s (judge’s) questions, the chairman (judge) will conclude the role-play by thanking you for your work.

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1. Procedures


3. Event Situation






You are to assume the role of chairman of the board of directors at GUARDIAN LOCK CORP., a large manufacturer of consumer security products. You have asked the finance director (participant) for his/her analysis and recommendation of a stock buyback plan currently under consideration.

GUARDIAN LOCK CORP is a large manufacturer of padlocks, combination locks and other security products, all targeted to a retail consumer market. Founded nearly eighty years ago, GUARDIAN LOCK today has over 16,000 employees at plants and offices worldwide. Since 1963 the company has been publicly owned with its shares being traded on a major stock exchange.

The past decade has not been good for GUARDIAN LOCK. With intensified competition coming from China and Mexico, GUARDIAN has seen a steady decline in its revenue and net income. The most recent income statement reported net income of $81 million. The effect on shareholders is a stock price that has shown very little movement, flattening out at $28 - $32 per share. In addition, the company has reduced its annual dividend from 96 cents a share to 24 cents. Current shareholders are not happy and are likely to vent a lot of their anger and disappointment at the annual shareholder meeting in two months.

In an attempt to reduce some of that stockholder anger, the board of directors is considering a stock buyback plan where GUARDIAN would purchase 25% of the 34 million outstanding shares, and hold those shares as Treasury Stock (stock which as been bought back by the issuing company). The stock buyback would please current shareholders since it is estimated that GUARDIAN’S stock price could

27

immediately rise by as much as 30%. In addition, new investors would be more likely to consider buying stock in GUARDIAN LOCK CORP because the earnings per share would increase dramatically above the current $2.38, making an investment in the company appear more attractive. Additional investors could potentially drive up the stock price even more.

As chairman of the GUARDIAN board of directors (judge) you have requested a meeting with the finance director (participant) to obtain his/her analysis regarding the impact of the buyback plan currently being considered. Specifically, the presentation must address the following:

• Explain why the buyback plan would immediately increase GUARDIAN’S stock price. Will GUARDIAN have to pay more or less than current market price to obtain the shares?

• Calculate the new earnings per share after the buyback takes place. What will be the percentage of increase in GUARDIAN’S earnings per share?

• Discuss the ethics of the buyback plan as it pertains to current stockholders, potential new investors and the company.

• State your recommendation on the buyback plan and provide rationale.

Calculations:

34,000,000 shares outstanding x 25% = 8,500,000 shares purchased under buyback plan.34,000,000 shares – 8,500,000 shares = 25,500,000 shares outstanding after buyback.

Earnings per share after buyback: $81,000,000 net income / 25,500,000 shares = $3.18 EPS$3.18 new EPS - $2.38 old EPS = $0.80$0.80 / $2.38 = 33.6% increase in EPS

The finance director (participant) will present to you in a role-play to take place in one of GUARDIAN’S offices. You will begin the role-play by greeting the finance director (participant) and asking to hear about his/her ideas.


1. What is the difference between publicly and privately held corporations?

2. When people refer to corporate dividends being “double taxed,” what does that mean?

Once the finance director (participant) has presented and has answered your questions, you will conclude the role-play by thanking the finance director (participant) for the work.

28











29



1. Explain the role of finance in business?Little/No Value Below Expectations Meets Expectations Exceeds Expectations0, 1, 2, 3, 4, 5 6, 7, 8, 9, 10, 11 12, 13, 14, 15 16, 17, 18Attempts at explaining the role of finance in business were inadequate or weak.

Adequately explained the role of finance in business.

Effectively explained the role of finance in business.

Very effectively explained the role of finance in business.

2. Calculate financial ratios?Little/No Value Below Expectations Meets Expectations Exceeds Expectations0, 1, 2, 3, 4, 5 6, 7, 8, 9, 10, 11 12, 13, 14, 15 16, 17, 18Attempts at calculating financial ratios were inadequate or weak.

Adequately calculated financial ratios.

Effectively calculated financial ratios.

Very effectively calculated financial ratios.

3. Demonstrate connections between company actions and results?Little/No Value Below Expectations Meets Expectations Exceeds Expectations0, 1, 2, 3, 4, 5 6, 7, 8, 9, 10, 11 12, 13, 14, 15 16, 17, 18Attempts at demonstrating connections between company actions and results were weak or incorrect.

Adequately demonstrated connections between company actions and results.

Effectively demonstrated connections between company actions and results.

Very effectively demonstrated connections between company actions and results.

4. Discuss business ethics for business finance?Little/No Value Below Expectations Meets Expectations Exceeds Expectations0, 1, 2, 3, 4, 5 6, 7, 8, 9, 10, 11 12, 13, 14, 15 16, 17, 18Attempts at discussing business ethics for business finance were inadequate or unclear.

Adequately discussed business ethics for business finance.

Effectively discussed business ethics for business finance.

Very effectively discussed business ethics for business finance.

5. Discuss the analysis of a company’s financial situation using its financial statements?Little/No Value Below Expectations Meets Expectations Exceeds Expectations0, 1, 2, 3, 4, 5 6, 7, 8, 9, 10, 11 12, 13, 14, 15 16, 17, 18Attempts at discussing the analysis of a company’s financial situation using its financial statements were inadequate or weak.

Adequately discussed the analysis of a company’s financial situation using its financial statements.

Effectively discussed the analysis of a company’s financial situation using its financial statements.

Very effectively discussed the analysis of a company’s financial situation using its financial statements.






30

NOTES

31

NOTES

32

NOTES

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