Question
#1. Be sure to review differential analysis and what factors should be considered when a segment of a business is dropped (see Chapter 11). #2.
#1. Be sure to review differential analysis and what factors should be considered when a segment of a business is dropped (see Chapter 11).
#2. Read the following:
The Gale Force Holdings Limited Partnership owns both the Carolina Hurricanes (a professional hockey team) and the PNC Arena where the Hurricanes play. A recent news article stated that the Carolina Hurricanes owner lost $1.3 million in operating the PNC Arena for the fiscal year ending June 2015 (Forbes, Mike Ozanian, Carolina Hurricanes Owner Lost $1.3 Million Operating PNC Arena, November 6, 2015.) Gale Force Holdings LP leases the PNC Arena from the Centennial Authority (a public/private partnership that developed and owns the arena). In 2008, the lease for PNC Arena was extended to 2024.
See the following income statement excerpt from the Gale Force Holdings LP Consolidated Statement of Operations for the year ended June 30, 2015. (See complete statement at http://www.scribd.com/doc/288745589/Gale-Force-HoldingsLinks to an external site..)
Carolina Hurricane's Promo Video:
Revenues | $ 23,055,725 |
Operating expenses | 22,748,229 |
Operating income (loss) | $ 307,496 |
Depreciation & Amortization | (1,707,607) |
Other Income/Non-Arena Related | 105,864 |
NET INCOME (LOSS) | $ (1,294,247) |
#3. Answer the following four Questions:
What is the the difference between cashflow and net income?
Does Depreciation & Amortization expense affect cash (ignoring income taxes)?
The title of the Forbes news article stated Carolina Hurricanes Owner Lost $1.3 Million Operating PNC Arena. Did the owner actually incur out-of-pocket expenses causing the loss? Explain.
If the Carolina Hurricanes Owner were to suddenly shut down the PNC Arena, would he be better or worse off financially? Should they shut down the Arena? Why or Why not? Explain. Assume that there is no alternate use for the PNC Arena.
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