COVID-19 Case Questions

Based on the recent global pandemic, the COVID-19, please analyse the following

scenarios. When determining your chosen strategy, please rely on and make reference

to concepts that you have learned in ACCT1002

Financial Decision Making.

Please apply these scenarios to your fictitious business, which you will be using for the

final assessment (The ACCT1002 Business Simulation).

Consider the following three industries and provide a discussion on the different

strategies in place:

1) The restaurant / fast food industry

2) The retail industry

3) The transportation industry

Question 1:

Consider the different financing strategies that may have been adopted by businesses

(Debt v/s Equity financing). Given the financial leverage in place, what strategies may

business owners apply in an effort of maintaining economic sustainability?

a) When discussing this case, please consider businesses that are fully or near fully

owned (near 100% equity) versus a business that has a significant proportion of

debt;

b) Furthermore, please also consider the avoidable and unavoidable costs

implications.(Such as: Is interest payment avoidable, is dividend payment

avoidable)

Question 2:

Compare and contrast the different challenges and strategies that high end (non- essential) businesses versus smaller (essential) businesses are facing due to social

gathering restrictions and lock-down.

In your discussing, please consider the following:

a) Should a business be running low on cash so as to fulfil their imminent cash

commitments, discuss the financing decision that such business may chose

(between debt and equity);

b) For restaurant industry, compare and contrast the cost structure for high-end

restaurant with those of fast food or takeaway restaurants. Within each

industry, which types of businesses are more impacted (i.e. between high-end

restaurants and fast-food outlets or non-essential retail and supermarkets)?

c) Compare the 4 different costs (avoidable fixed, unavoidable fixed, avoidable

variable and unavoidable variable) for high-end restaurant and a fast-food or

takeaway restaurant;

d) Some high-end businesses have had to drastically drop their prices in order to

sustain through COVID. For such businesses, discuss the 3 costs that the

business may be able to minimize and 3 costs that cannot be changed;

e) Within the transportation industry, due to global travel restrictions, the airline

industry is among the most affected. Consider your local (national) airline:

i. Please provide and explain 5 of their fixed costs and 5 of their variable

costs;

ii. From the costs that you have provided above, please explain which of

these can be avoided and which are committed.

Question 3:

Based upon legitimacy theory underpinning corporate social responsibility,

supermarkets across most global economies have been experiencing increased sales

of essential

goods being empty and such essential goods are now being considered as higher

value commodities. Supermarkets are now engaging in

some have even been reported to increase their prices).

a) Provide an argument for how the above practice may deemed to be socially

social acceptance);

b) Provide an argument for how the above practice may in contrast deemed to be

socially responsible (thereby being approved by society in general).

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