Pets.com, Inc.: Assessing Financial Performance and Risks in the e-Commerce Industry

2004 ◽  
Vol 19 (4) ◽  
pp. 567-582 ◽  
Author(s):  
John M. Coulter ◽  
Thomas J. Vogel
Keyword(s):  
Initial Public Offering ◽  
Business Models ◽  
Prediction Models ◽  
Bankruptcy Prediction ◽  
Financial Statement ◽  
First Year ◽  
Financial Statement Analysis ◽  
Going Concern ◽  
Public Offering ◽  
Risk Disclosures

Pets.com, Inc. (Pets) was formed as an Internet retailer of pet supplies in 1999. After experiencing rapid sales growth and hemorrhaging cash in it s first year, an initial public offering (IPO) was scheduled for February 2000. In this instructional case, you will evaluate the ability of this real-world company to continue as a going concern by analyzing the financial information and business risk disclosures included in Pets' Prospectus. The case is ideal for an auditing class as it provides a background to examine how going concern and fraud risks impact the audit reporting decision. A focus on corporate governance issues, financial statement analysis techniques, bankruptcy prediction models, and e-commerce company business models would also make this case useful for financial accounting courses (e.g., accounting theory and/or financial statement analysis).

Pengaruh Reputasi Underwriter, Umur Perusahaan, dan Persentase Penawaran Saham 53 kepada Publik terhadap Underpricing

2016 ◽  
Vol 8 (1) ◽  
pp. 53-74
Author(s):  
Maria Jeanne ◽  
Chermian Eforis
Keyword(s):  
Initial Public Offering ◽  
Stock Price ◽  
Stock Exchange ◽  
Secondary Data ◽  
Secondary Market ◽  
Financial Statement ◽  
Data Set ◽  
Multiple Regression Method ◽  
Underwriter Reputation ◽  
Public Offering

The objective of this research is to obtain empirical evidence about the effect of underwriter reputation, company age, and the percentage of share’s offering to public toward underpricing. Underpricing is a phenomenon in which the current stock price initial public offering (IPO) was lower than the closing price of shares in the secondary market during the first day. Sample in this research was selected by using purposive sampling method and the secondary data used in this research was analyzed by using multiple regression method. The samples in this research were 72 companies conducting initial public offering (IPO) at the Indonesian Stock Exchange in the period January 2010 - December 2014; perform initial offering of shares; suffered underpricing; has a complete data set forth in the company's prospectus, IDX monthly statistics, financial statement and stock price site (e-bursa); and use Rupiah currency. Results of this research were (1) underwriter reputation significantly effect on underpricing; (2) company age do not effect on underpricing; and (3) the percentage of share’s offering to public do not effect on undepricing. Keywords: company age, the percentage of share’s offering to public, underpricing, underwriter reputation.

The Effects of the Type and Content of Audit Reports for Financially Stressed Initial Public Offerings on Information Uncertainty

2020 ◽  
Vol 39 (1) ◽  
pp. 125-150 ◽  
Author(s):  
Steven E. Kaplan ◽  
Gary K. Taylor ◽  
David D. Williams
Keyword(s):  
Initial Public Offerings ◽  
Initial Public Offering ◽  
Data Availability ◽  
Information Uncertainty ◽  
Audit Report ◽  
Public Offerings ◽  
Going Concern ◽  
Sufficient Variation ◽  
Public Offering ◽  
Audit Reports

SUMMARY The Public Company Accounting Oversight Board (PCAOB) has expressed concern that audit reports do not contain sufficient variation to provide useful information to the market. Using a sample of financially stressed initial public offering (IPO) firms, we investigate whether information uncertainty is affected by (1) three different types of audit reports—unqualified (clean), hybrid (with explanatory language about financial stress), and going concern (GCAR)—and (2) audit report disclosures. We provide evidence that audit reports (hybrid and GCAR) and audit report disclosures provide useful information to the market by finding a significant reduction in information uncertainty. Just as important, we find that management discretionary going concern disclosures do not complement or substitute for the reduction in information uncertainty associated with hybrid audit reports and GCARs. We provide evidence that current audit report types and disclosures of financially stressed IPO firms provide information to the market. JEL Classifications: M40; M42; G14. Data Availability: The data used in this study are available from public sources indicated in the paper.

The Use Of Altman Equation For Bankruptcy Prediction In An Industrial Firm (Case Study)

2011 ◽  
Vol 7 (7) ◽  
Author(s):  
Khalid Al- Rawi ◽  
Raj Kiani ◽  
Rishma R Vedd
Keyword(s):  
Durable Goods ◽  
Financial Analysis ◽  
Bankruptcy Prediction ◽  
Financial Statement ◽  
Z Score ◽  
Financial Statement Analysis ◽  
Future Performance ◽  
Score Analysis ◽  
Study Results ◽  
The Given

Financial analysis provides the basis for understanding and evaluating the results of business operations and explaining how well a business is doing. In addition, the financial statement analysis can help creditors, investors, and managers answer the following questions: Can the company pay the interest and principal on its debt? Does the company reply too much on non-owner financing? Does the company earn an acceptable return on invested capital? Is the gross profit margin growing or shrinking? Does the company effectively use non-owner financing? Are costs under control? Is the companys market growing or shrinking? Do observed changes reflect opportunities or threats? Is the allocation of investment across different assets too high or too low? Furthermore, financial statement analysis reduces our reliance on hunches, guesses, and intuition. Above all, it reduces risk and/or uncertainty in decision making. Therefore, to reduce risk, uncertainty, and avoid bankruptcy one must appreciate the usefulness of financial statement analysis by using some tools and techniques to evaluate and project the future performance of the firm within a given industry.The researchers used the Altman z-score analysis to predict a firms insolvency. The study results for the period 2002-2004 indicated the weaknesses of Jordan Establishment for Marketing Durable goods. The z-score from the analysis (for the given period) was less than 1.81 (z-score <1.81).Evidence suggests that the firm has increased its debt and will be facing bankruptcy in the near future. In liquidity ratios, the percentage of the working capital is less than 1, indicating an increase in liabilities over assets. Leverage ratios increased from 41.7% to 56.7%, while inventory turnover decreased by 1.2 times through the given period. Net profit to total sales reduced from (1.3) to (1.8) for the same period. Also, the assets return percentage declined from (-9.29%) to (-10.3%), while the stock book value declined from (0.95) JD to (0.67) JD through the given period. The main features provide a gloomy picture and indicate inefficiencies within the firm.

scholarly journals Choice between Acquisition and Joint Venture Based on Financial Statement Comparability

2021 ◽  
Vol 13 (11) ◽  
pp. 6218
Author(s):  
Heein Yi ◽  
Sangsoo Kim ◽  
SeungHun Han
Keyword(s):  
Information Asymmetry ◽  
Initial Public Offering ◽  
Joint Venture ◽  
Investment Strategy ◽  
Financial Statement ◽  
Experimental Setting ◽  
Target Firms ◽  
Public Offering ◽  
Accounting Comparability ◽  
The Impact

This study examined the relationship between target firms’ financial statement comparability and bidder firms’ boundary decisions. The study used initial public offering (IPO) firms as target firms to test the impact of asymmetric information and signaling on investing bidder firms’ boundary decisions, such as joint ventures or acquisitions. In the IPO market, as an experimental setting, bidder firms are unfamiliar with issuing firms because they have little information about them prior to the IPO. This study argues that IPO firms with higher accounting comparability show lower information asymmetry. Consistent with this argument, we found that IPO firms’ accounting comparability has a positive probability of becoming a target for either a joint venture or acquisition, or an acquisition instead of a joint venture. This study contributes to the literature, financial statement comparability, and joint venture and acquisition decisions to measure the degree to which information asymmetry affects corporate investment strategy using a unique experimental setting of IPO firms.

scholarly journals The efficacy of liquidation and bankruptcy prediction models for assessing going concern

2003 ◽  
Vol 18 (6/7) ◽  
pp. 577-590 ◽  
Author(s):  
Nirosh Kuruppu ◽  
Fawzi Laswad ◽  
Peter Oyelere
Keyword(s):  
Prediction Models ◽  
Bankruptcy Prediction ◽  
Going Concern

Does IPO prospectus in Malaysia disclose relevant risk?

2019 ◽  
Vol 11 (4) ◽  
pp. 301-323
Author(s):  
Sin Huei Ng ◽  
Chen Suen Lee
Keyword(s):  
Risk Factor ◽  
Initial Public Offering ◽  
Stock Prices ◽  
Relevant Information ◽  
Annual Reports ◽  
Risk Disclosure ◽  
Content Type ◽  
Public Offering ◽  
The Right ◽  
Risk Disclosures

Purpose The study intends to shed lights on whether the risk factors disclosed in the initial public offering (IPO) prospectus in Malaysia are able to reflect the actual risks of stocks once they are traded on the exchange. In other words, the purpose of this paper is to explore whether prospective investors will be able to benefit, in terms of the more accurate risk information, from the risk disclosures in the IPO-prospectus. Design/methodology/approach Using data obtained from 118 IPO prospectuses of Malaysian companies that issued shares on Bursa Malaysia in the period from 2009 to 2016, the authors investigated whether the “risk factor” section in the IPO prospectuses provides sufficient risk-relevant information to investors. To determine whether companies disclose risk-relevant information, a detailed content analysis of the risk sections was carried out to obtain an aggregate measure of risk disclosure. Findings The findings revealed that the aggregate measures of risk extracted from these texts did not successfully predict the following outcomes: the volatility of companies’ future stock prices, the sensitivity of future stock prices to market-wide fluctuations and the severe declines in future stock prices. Practical implications As indicated by the findings, the authors, therefore, deduce that the IPO prospectuses of Malaysian companies do not provide sufficient risk-relevant information in the risk factor section. The findings imply that overall the management of Malaysian companies would neither be able nor willing to disclose the right and relevant information to the public via IPO prospectus. Originality/value Many corporate risk disclosure studies focus primarily on the disclosures of annual reports of companies. The study intends to fill the gap by focusing on the risk disclosure in the IPO-prospectus. Risk disclosures in IPO-prospectus are farmore extensive than annual reports and, therefore, provide a richness of information that will not be available in the annual reports.

The Genesis of Voluntary Disclosure: An Analysis of Firms’ First Earnings Guidance

2020 ◽  
Author(s):  
Kristian D. Allee ◽  
Theodore E. Christensen ◽  
Bryan S. Graden ◽  
Kenneth J. Merkley
Keyword(s):  
Venture Capital ◽  
Initial Public Offering ◽  
Voluntary Disclosure ◽  
Private Equity ◽  
First Year ◽  
Earnings Guidance ◽  
Public Company ◽  
Guidance Policy ◽  
Public Offering

We investigate a firm’s decision to initiate earnings guidance during its first year as a public company following its initial public offering (IPO), which we label “early guidance.” Using a sample of firms with IPOs between 2001 and 2010, we find that almost 60% provide early guidance and that only one-third of the firms that do not provide guidance during the first year subsequently decide to guide. Consistent with the importance of liquidity incentives following the IPO, we find that firms are significantly more likely to provide early guidance when their IPOs are backed by venture capital or private equity investors. Our results indicate that firms with higher-quality IPO information are more likely to provide early earnings guidance. We also find that early guidance has significant implications for future disclosure choices. Firms that guide soon after the IPO are significantly more likely to guide again and to provide regular future guidance (i.e., they establish a regular guidance policy). Finally, we find evidence suggesting that the credibility of initial guidance is lower than that of subsequent guidance, and subsequent guidance credibility relates to both the length of firms’ guidance history and the accuracy of their initial guidance disclosures. This paper was accepted by Shiva Rajgopal, accounting.

An Analysis of the Usefulness of Debt Defaults and Going Concern Opinions in Bankruptcy Risk Assessment

1998 ◽  
Vol 13 (3) ◽  
pp. 351-371 ◽  
Author(s):  
Benjamin P. Foster ◽  
Terry J. Ward ◽  
Jon Woodroof
Keyword(s):  
Prediction Models ◽  
Bankruptcy Prediction ◽  
Loan Default ◽  
Bankruptcy Risk ◽  
Explanatory Variables ◽  
Going Concern ◽  
Going Concern Opinion ◽  
Loan Defaults ◽  
The Impact ◽  
Covenant Violations

This study extends the research of Hopwood et al. (1994) and Mutchler et al. (1997) by empirically investigating the relationships between loan defaults, violation of loan covenants, going-concern opinions, and bankruptcy in bankruptcy prediction models. One objective of this study is to empirically test the ability of loan defaults/accommodations and loan covenant violations to assess the risk of bankruptcy. Another objective of this study is to investigate the impact of failing to control for these two distress events on results from tests of the usefulness of going-concern opinions in assessing bankruptcy risk. Results suggest that loan default/accommodation and loan covenant violation are both significant explanatory variables of bankruptcy at the time of the last annual report before the event. While a going-concern opinion variable appears to significantly explain bankruptcy, it is not significant when included in a model with loan default/accommodation and covenant violation variables. Consequently, our results suggest that researchers should include both loan default/accommodation and covenant violation as control variables when using bankruptcy to test the usefulness of going-concern opinions.

scholarly journals OPINI AUDIT GOING CONCERN: KAJIAN BERDASARKAN MODEL PREDIKSI KEBANGKRUTAN, PERTUMBUHAN PERUSAHAAN, LEVERAGE DAN REPUTASI KANTOR AKUNTAN PUBLIK

2017 ◽  
Vol 13 (1) ◽  
pp. 79
Author(s):  
Farid Muhamadiyah
Keyword(s):  
Prediction Model ◽  
Prediction Models ◽  
Stock Exchange ◽  
Binary Logistic Regression ◽  
Financial Statements ◽  
Bankruptcy Prediction ◽  
Binary Logistic Regression Analysis ◽  
Manufacturing Companies ◽  
Audit Opinion ◽  
Going Concern

<p>Going-concern audit opinion is the auditor’s opinion regarding the ability of<br />the entity to maintain the viability of their business is one of the important things to<br />consider users of financial statements to make decisions especially berinvestas<br />decisions. This study aimed to examine the effect of bankruptcy prediction models (Altman revised model), growth companies (earnings), leverage and reputation of the public accounting firm of the admission trends going concern audit opinion. The sample used in this study consisted of 32 financial statements of listed manufacturing companies in Indonesia Stock Exchange (IDX) during the period 2007-2010. The sample was selected by using the purposive sampling method. In this research, data analysis using SPSS by binary logistic regression analysis to test the hypothesis. From the analysis in this study suggests that the use of bankruptcy prediction model (Altman revised model) positive effect on revenue trends going concern audit opinion, while the company’s growth, leverage and reputable CPA firm negatively affect revenue trends going concern audit opinion.<br />Keywords : Bankruptcy Prediction Model (Altman revised model), Corporate<br />Growth (income), Leverage, Reputation Public Accountant and Going Concern Audit Opinion.</p>

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