JESTIONS Building Shareholder Value. Describe at least three ways that corporate managers can build shareholder value increase their firm's share price). Rank-order the various managerial actions you identified according to their effectiveness in building shareholder value. Be prepared to justify your rank-ordering. Litigation Disclosure. Mylan NV, the maker of EpiPens (an allergy treatment), was the subject of a probe in 2017 by the Department of Justice because they classified EpiPens as generic. By using the generic clas- sification, it was alleged that Mylan was able to overcharge Medicaid by over $1 billion. Later, the SEC filed a lawsuit against Mylan for not informing investors about the probe from the Department of Justice. How should Mylan have disclosed the EpiPen-related lawsuits in its 2017 annual report? Basic Versus Diluted Earnings per Share. In its 2019 annual report, Apple, Inc., reported that its basic earnings per share were $11.97 per share while its diluted earnings per share were $11.89 per share. Discuss the factors that might cause the number of shares used in the calculation of earnings per share to increase and thus, cause diluted earnings per share (EPS) to be less than basic carnings per share. Which measure do you feel is more important to shareholders--basic EPS or diluted EPS? Why? Assessing the Quality of Reported Earnings Using Cash Flow Data. Below, you will find a graph of Enron's operating cash flows versus its net income in the years leading up to the company's downfall. You will notice that Enron's income differs quite a bit from its operating cash flows for every year in the chart What could account for the differences? Some users of financial statements use differences between net income and cash flows (particularly operating cash flows) as a rough indicator of how reliable net income is What is your opinion of the reliability of Enron's income based on the chart below? derlying data from Enron's financial statements as originally reported. The ratio of cash to net income is at the bottom of the table. Does it seem plausible that the company can 12/31/1996 1231 2000 12/31/1999 12/31/1998 12/31/1997 Net income Net cash flows from operating activities crease in the ratio in 2000? 12/31/1998 12/31/1997 12/31/19 12/31/1999 12/31/2000 Flow $ 584 1.040 S 979 4.779 4.88 S 893 1.228 1.38 $ 703 1,640 2.33 $ 105 211 2.01 perating activities ouncements and Share Prices. It is common to see share prices of a company increas ent of good news from the company, such as positive earnings. However, stock pri with earnings announcements. For example, in October of 2019, McDonald's Com percent following its quarterly earnings announcement even though the comme iss why an earnings announcement may lead to a share price increase but line as experienced by McDonald's nings. Some members of the financial community allege that pany's reported accounting results. Discuss the possible moins on a situation where a manager might manage any sses. In October of 2019, Schlumberger was related to goodwill. Goodwill is the will is impaired if the carrying value dollar impairment loss (and a Sil was announced. Why might this s. On September 11, 2001 on The World Trade Cente JESTIONS Building Shareholder Value. Describe at least three ways that corporate managers can build shareholder value increase their firm's share price). Rank-order the various managerial actions you identified according to their effectiveness in building shareholder value. Be prepared to justify your rank-ordering. Litigation Disclosure. Mylan NV, the maker of EpiPens (an allergy treatment), was the subject of a probe in 2017 by the Department of Justice because they classified EpiPens as generic. By using the generic clas- sification, it was alleged that Mylan was able to overcharge Medicaid by over $1 billion. Later, the SEC filed a lawsuit against Mylan for not informing investors about the probe from the Department of Justice. How should Mylan have disclosed the EpiPen-related lawsuits in its 2017 annual report? Basic Versus Diluted Earnings per Share. In its 2019 annual report, Apple, Inc., reported that its basic earnings per share were $11.97 per share while its diluted earnings per share were $11.89 per share. Discuss the factors that might cause the number of shares used in the calculation of earnings per share to increase and thus, cause diluted earnings per share (EPS) to be less than basic carnings per share. Which measure do you feel is more important to shareholders--basic EPS or diluted EPS? Why? Assessing the Quality of Reported Earnings Using Cash Flow Data. Below, you will find a graph of Enron's operating cash flows versus its net income in the years leading up to the company's downfall. You will notice that Enron's income differs quite a bit from its operating cash flows for every year in the chart What could account for the differences? Some users of financial statements use differences between net income and cash flows (particularly operating cash flows) as a rough indicator of how reliable net income is What is your opinion of the reliability of Enron's income based on the chart below? derlying data from Enron's financial statements as originally reported. The ratio of cash to net income is at the bottom of the table. Does it seem plausible that the company can 12/31/1996 1231 2000 12/31/1999 12/31/1998 12/31/1997 Net income Net cash flows from operating activities crease in the ratio in 2000? 12/31/1998 12/31/1997 12/31/19 12/31/1999 12/31/2000 Flow $ 584 1.040 S 979 4.779 4.88 S 893 1.228 1.38 $ 703 1,640 2.33 $ 105 211 2.01 perating activities ouncements and Share Prices. It is common to see share prices of a company increas ent of good news from the company, such as positive earnings. However, stock pri with earnings announcements. For example, in October of 2019, McDonald's Com percent following its quarterly earnings announcement even though the comme iss why an earnings announcement may lead to a share price increase but line as experienced by McDonald's nings. Some members of the financial community allege that pany's reported accounting results. Discuss the possible moins on a situation where a manager might manage any sses. In October of 2019, Schlumberger was related to goodwill. Goodwill is the will is impaired if the carrying value dollar impairment loss (and a Sil was announced. Why might this s. On September 11, 2001 on The World Trade Cente