An Analysis of Corporate Collapses

4180 WordsApr 18, 201317 Pages
“An Analysis of Corporate Collapses” MPA751 Financial Reporting and Analysis Unit Chair: Dr. Wen Qu. Student Name: Andrew William Giblin Student Number: 211221042 Due Date: Monday 20th August 2012 I certify that the attached work is entirely my own, except where material quoted or paraphrased is acknowledged in the text. I also declare that it has not been submitted for assessment in any other unit or course. Table of Contents Executive Summary 3 Introduction……………………………………………………………………………………………4 Agency Theory and Relevant Hypotheses 5 ABC Learning Centres Limited - Australia 7 Olympus Corporation - Japan ……………………………………………………………………..10 WorldCom Incorporated - United States of America…………………………………………… 13…show more content…
(Setyorini & Ishak 2012). Political Cost Hypothesis Assumes that large firms are more likely to use accounting choices that reduce or defer reported profit so the firms do not attract the attention of politicians or the general public (Bazley & Hancock, 2009). ABC Learning Centres Limited - Australia The company ABC Learning Centres Limited (ABC) was founded by Eddy Groves in 1988; by 1997 it ran 18 centres across Australia. In March 2001 the company commenced trading on the stock exchange at $2.00 per share, from 2001 to 2006 it had enormous success and in December 2006 its share price reached its peak at $8.60 and operated one in five childcare centres in Australia. As stated in the 2006 Annual Report, ABC Learning achieved a growth rate of 41% in its childcare sites for that reported year, a major reason for the success of the company was equity analysts recommended it to potential shareholders due to the subsidised childcare rebate provided by the Australian government. (ABC Learning Centres Annual Reports). By December 2007 just over six years after listing, the business had grown to owning 2323 centres in total including 112 in the United Kingdom, 1000 in the United States of America and 116 in New Zealand (Brennan & Newberry 2010). In November 2008 the company collapsed with debts of more than $1.6 billion dollars with shares last trading at 54 cents. The
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