FRANCHISING

Finance

Which one of the following is not necessarily a post-combination characteristic of

a legal acquisition?
A. The combining firms remain separate legal entities.

B. A parent-subsidiary relationship exists.

C. The acquiring firm owns 100% of the voting stock of the acquired firm.

D. The combining firms are under common economic control.

Correct!

The acquiring firm in a legal acquisition does not have to own 100% of the voting stock of the
acquired firm. In a legal acquisition, the acquiring firm need only acquire greater than 50% (50%
+ 1 share) of the acquired firm to obtaining a controlling interest. Both firms continue to exist and
operate as separate legal entities, the acquiring firm as the parent and the acquired firm as a
subsidiary.

Under GAAP, which of the following can be issued as the primary form of public
financial statement disclosure for a parent and its subsidiaries?
Parent only Separate Parent and Subsidiary Consolidated
Statement Statements Statements

Yes Yes Yes

Yes No No

No Yes Yes

No No Yes

Correct!

Under GAAP, only consolidated financial statements may be issued as the primary form of public
disclosure for a parent and its subsidiaries. Parent only statements and separate parent and
 subsidiary statements may not be issued in lieu of consolidated financial statements.

Penn, Inc., a manufacturing company, owns 75% of the common stock of Sell, Inc.,
an investment company. Sell owns 60% of the common stock of Vane, Inc., an
insurance company.

In Penn's consolidated financial statements, should consolidation accounting or

equity method accounting be used for Sell and Vane?

A. Consolidation used for Sell and equity method used for Vane.

B. Consolidation used for both Sell and Vane.

C. Equity method used for Sell and consolidation used for Vane.

D. Equity method used for both Sell and Vane.

Correct!

If one looked just at Penn's interest in Vane's result of 45% (75% x 60%), one might say that the
equity method would be appropriate.

However, because Sell owns 60% of Vane, it controls Vane and would need to consolidate Vane.
Because Penn owns 75% of Sell, it controls Vane and would need to consolidate Sell, which
consolidated Vane. Thus, all three would be consolidated, making this response correct.

Aceco has significant investments in three separate entities. These investments

are:
1. 40% ownership of the voting stock of Kapco.

2. 60% ownership of the voting stock of Placo.

3. 100% ownership of the voting stock of Simco

Introduction

The 7 eleven brand can be found at every nook and cranny in the philippines. It is a brand that is
known and loved around the world. It is a convenience store system in the philippines that
started its operations in the year 1927 as tote’m stores until it was renamed in the year 1946 to
what we now know as 7 eleven. With over 68,236 branches around the country, there is bound to
he a 7/11 store anywhere you go in the philippines

SWOT ANALYSIS

STRENGTH

As one of the leading organizations in its industry, 7-Eleven has numerous strengths that enable it to
thrive in the market place. These strengths not only help it to protect the market share in existing markets
but also help in penetrating new markets.

 Successful track record of developing new products – product innovation.

 Highly skilled workforce through successful training and learning programs. 7-Eleven is
investing huge resources in training and development of its employees resulting in a workforce that is not
only highly skilled but also motivated to achieve more.
7-Eleven is generally perceived as the market leader by consumers in the convenience
store sector. This brand equity translates into customer loyalty and reduced price
sensitivity and, therefore, continued stability of revenue streams across its outlets.

WEAKNESSES
Due to the need to locate the 7-Eleven outlets in very convenient locations, they are
likely to incur higher rental costs as a result. This higher operating cost structure will
mean that they will need to adopt a price premium approach. There are some consumers
who are happy to pay a little bit more for convenience and speed of purchase, however
other budget-conscious consumers a more price sensitive

Similar to the high rental costs above, because the store operates on a 24/7 basis in
some locations, this type of retailing operation is likely to have a higher ongoing
operating cost structure. As a consequence of these higher costs, 7-Eleven will be
required to have higher price offerings in order to protect their margins.

OPPORTUNITIES
In many of the 7-Eleven stores, there would be physical capacity to increase the product
range and offering. This provides the opportunity of being able to offer a greater
selection of both physical products, as well as services, such as ATMs, cellphone cards,
and perhaps even car insurance. Certainly in some countries, 7-Eleven has expanded
into offerings of wine, beer, fuel, ATMs, coffee, donuts, pizza, sandwiches and so on.

7-Eleven has managed to form some strong relationships with key manufacturers that
have strong brands. An example here is Gatorade, where certain flavors are only
offered through 7-Eleven stores. This has advantages to both of the strategic partners,
and is something that will broaden the range of benefits that 7-Eleven delivers to its
consumers.

7-Eleven could expand their geographic coverage through co-branded outlets with
other significant retail offerings. For example, they could partner with a coffee chain or
a sandwich chain and set up a co-branded store – where both stores operate
independently but out of the same location. This has the advantage of attracting more
consumers, who are possibly less reliant on the convenience aspect, and are likely to
buy from both businesses over time.

Threat

Because 7-Eleven is a convenience store that handles cash and may be open on a 24/7
basis, it is always likely to be a target for theft and armed hold-up. Obviously the chain
has put in various security measures in different parts of the world, including video
cameras, safes, and window barriers and so on.

Some consumers are adopting the system of ordering their groceries online and then
having them delivered. Although this requires some pre-planning, it does also offer
significant levels of convenience to organized consumers, which does represent a threat
to 7-Eleven’s convenience-based competitive advantage.

SWOT ANALYSIS

selection of both physical products, as well as services, such as ATMs, cellphone cards,
and perhaps even car insurance. Certainly in some countries, 7-Eleven has expanded
into offerings of wine, beer, fuel, ATMs, coffee, donuts, pizza, sandwiches and so on.
7-Eleven has managed to form some strong relationships with key manufacturers that
have strong brands. An example here is Gatorade, where certain flavors are only
offered through 7-Eleven stores. This has advantages to both of the strategic partners,
and is something that will broaden the range of benefits that 7-Eleven delivers to its
consumers.

7-Eleven could expand their geographic coverage through co-branded outlets with
other significant retail offerings. For example, they could partner with a coffee chain or
a sandwich chain and set up a co-branded store – where both stores operate
independently but out of the same location. This has the advantage of attracting more
consumers, who are possibly less reliant on the convenience aspect, and are likely to
buy from both businesses over time.

Threat

Because 7-Eleven is a convenience store that handles cash and may be open on a 24/7
basis, it is always likely to be a target for theft and armed hold-up. Obviously the chain
has put in various security measures in different parts of the world, including video
cameras, safes, and window barriers and so on.

Some consumers are adopting the system of ordering their groceries online and then
having them delivered. Although this requires some pre-planning, it does also offer
significant levels of convenience to organized consumers, which does represent a threat
to 7-Eleven’s convenience-based competitive advantage.

SWOT ANALYSIS

STRENGTH

As one of the leading organizations in its industry, 7-Eleven has numerous strengths that enable it to
thrive in the market place. These strengths not only help it to protect the market share in existing markets
but also help in penetrating new markets.

 Successful track record of developing new products – product innovation.

 Highly skilled workforce through successful training and learning programs. 7-Eleven is
investing huge resources in training and development of its employees resulting in a workforce that is not
only highly skilled but also motivated to achieve more.
7-Eleven is generally perceived as the market lea

STRENGTH

As one of the leading organizations in its industry, 7-Eleven has numerous strengths that enable it to
thrive in the market place. These strengths not only help it to protect the market share in existing markets
but also help in penetrating new markets.

 Successful track record of developing new products – product innovation.

 Highly skilled workforce through successful training and learning programs. 7-Eleven is
investing huge resources in training and development of its employees resulting in a workforce that is not
only highly skilled but also motivated to achieve more.
7-Eleven is generally perceived as the market leader by consumers in the convenience
store sector. This brand equity translates into customer loyalty and reduced price
sensitivity and, therefore, continued stability of revenue streams across its outlets.

WEAKNESSES
Due to the need to locate the 7-Eleven outlets in very convenient locations, they are
likely to incur higher rental costs as a result. This higher operating cost structure will
mean that they will need to adopt a price premium approach. There are some consumers
who are happy to pay a little bit more for convenience and speed of purchase, however
other budget-conscious consumers a more price sensitive

Similar to the high rental costs above, because the store operates on a 24/7 basis in
some locations, this type of retailing operation is likely to have a higher ongoing
operating cost structure. As a consequence of these higher costs, 7-Eleven will be
required to have higher price offerings in order to protect their margins.

OPPORTUNITIES

In many of the 7-Eleven stores, there would be physical capacity to increase the product
range and offering. This provides the opportunity of being able to offer a greater
selection of both physical products, as well as services, such as ATMs, cellphone cards,
and perhaps even car insurance. Certainly in some countries, 7-Eleven has expanded
into offerings of wine, beer, fuel, ATMs, coffee, donuts, pizza, sandwiches and so on.

7-Eleven has managed to form some strong relationships with key manufacturers that
have strong brands. An example here is Gatorade, where certain flavors are only
offered through 7-Eleven stores. This has advantages to both of the strategic partners,
and is sSWOT ANALYSIS

STRENGTH

As one of the leading organizations in its industry, 7-Eleven has numerous strengths that enable it to
thrive in the market place. These strengths not only help it to protect the market share in existing markets
but also help in penetrating new markets.

 Successful track record of developing new products – product innovation.

 Highly skilled workforce through successful training and learning programs. 7-Eleven is
investing huge resources in training and development of its employees resulting in a workforce that is not
only highly skilled but also motivated to achieve more.
7-Eleven is generally perceived as the market leader by consumers in the convenience
store sector. This brand equity translates into customer loyalty and reduced price
sensitivity and, therefore, continued stability of revenue streams across its outlets.

WEAKNESSES
Due to the need to locate the 7-Eleven outlets in very convenient locations, they are
likely to incur higher rental costs as a result. This higher operating cost structure will
mean that they will need to adopt a price premium approach. There are some consumers
who are happy to pay a little bit more for convenience and speed of purchase, however
other budget-conscious consumers a more price sensitive

Similar to the high rental costs above, because the store operates on a 24/7 basis in
some locations, this type of retailing operation is likely to have a higher ongoing
operating cost structure. As a consequence of these higher costs, 7-Eleven will be
required to have higher price offerings in order to protect their margins.

OPPORTUNITIES
In many of the 7-Eleven stores, there would be physical capacity to increase the product
range and offering. This provides the opportunity of being able to offer a greater
selection of both physical products, as well as services, such as ATMs, cellphone cards,
and perhaps even car insurance. Certainly in some countries, 7-Eleven has expanded
into offerings of wine, beer, fuel, ATMs, coffee, donuts, pizza, sandwiches and so on.

7-Eleven has managed to form some strong relationships with key manufacturers that
have strong brands. An example here is Gatorade, where certain flavors are only
offered through 7-Eleven stores. This has advantages to both of the strategic partners,
and is s