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Scheller College of Business

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https://hdl.handle.net/1853/70690

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Office of the Provost and Executive Vice President for Academic Affairs

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Institute for Leadership and Social Impact

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https://finding-aids.library.gatech.edu/agents/corporate_entities/255

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Publication Search Results

Now showing 1 - 10 of 40

Commitment Decisions with Partial Information Updating (ed.2)

(Georgia Institute of Technology, 2004-12-21) DeCroix, Gregory A. ; Zipkin, Paul Herbert

In this paper, we extend the results of Ferguson [10] on an end-product manufacturer's choice of when to commit to an order quantity from its parts supplier. During the supplier's lead-time, information arrives about end-product demand. This information reduces some of the forecast uncertainty. While the supplier must choose its production quantity of parts based on the original forecast, the manufacturer can wait to place its order from the supplier after observing the information update. We find that a manufacturer is sometimes better off with a contract requiring an early commitment to its order quantity, before the supplier commits resources. On the other hand, the supplier sometimes prefers a delayed commitment. The preferences depend upon the amount of demand uncertainty resolved by the information as well as which member of the supply chain sets the exchange price. We also show conditions where demand information updating is detrimental to both the manufacturer and the supplier.
A Look at Cash Flow and Earnings Growth for the S&P 100

(Georgia Institute of Technology, 2004-12) Mulford, Charles W. ; Ely, Michael L. ; Martins, Mario ; Patel, Amit

Excess Cash Margin, ECM, calculated by dividing by revenue the difference between adjusted operating cash flow and adjusted operating earnings, provides useful insight into the relationship between cash flow and earnings. When ECM declines in a consistent manner it indicates that earnings are growing faster or declining more slowly than cash flow. As a result, relative to the scale of operations, increasing levels of non-cash accounts are accumulating on the balance sheet. Earnings generated in this manner, that is, with declining cash flow confirmation, are not sustainable and are at risk for decline. When ECM increases consistently it indicates that operating cash flow is either growing faster or falling more slowly than earnings. As a result, relative to the scale of operations, the balance sheet is being liquidated. Operating cash flow generated in this manner, that is, without consistent earnings support, is not sustainable and is at risk for decline. The better, more sustainable relationship between operating cash flow and earnings is when the two measures grow at consistent rates, resulting in a constant ECM through time. This study calculates ECM for the non-financial firms of the S&P 100 for the years 2000, 2001, 2002, and 2003 and provides commentary on the results. Insights are provided into firms with a declining ECM, an increasing ECM and a stable ECM.
Non-Cash Investing and Financing Activities and Free Cash Flow

(Georgia Institute of Technology, 2004-12) Mulford, Charles W. ; Ely, Michael L. ; Patel, Amit ; Martins, Mario

Items of property, plant and equipment are often acquired through non-cash investing and financing activities. In these transactions, equipment-purchase financing is provided at the time of purchase. While such transactions increase a company's productive capacity, they are not reported as capital expenditures in the statement of cash flows. Accordingly, free cash flow calculated based on capital expenditures reported in the statement of cash flows will often be overstated when assets are acquired through such non-cash transactions. In this report we look at a series of non-cash investing and financing transactions and assess their effects on calculated free cash flow.
Seeking Guidance for the Dow? Try GDP

(Georgia Institute of Technology, 2004-12) Mulford, Charles W. ; Ely, Michael L. ; Maloney, Kerianne ; Martins, Mario ; Quiroz, Raul ; Jayaraman, Narayanan

With the Dow Jones Industrial Average once again trading above 10,000, investors understandably are wondering where the blue chips are headed next. An interesting long-term perspective on the subject can be gained by examining the extent to which Nominal Gross Domestic Product has explained the movement of share prices over time.
Cash-Flow Reporting Practices for Sale and Leaseback Transactions

(Georgia Institute of Technology, 2004-11) Mulford, Charles W. ; Ely, Michael L. ; Patel, Amit ; Martins, Mario

In a sale and leaseback transaction an asset is sold and simultaneously leased back. As a result, the seller/lessee relinquishes ownership but not possession of the asset in question, which can be most any long-lived asset, including real estate or equipment. Some firms have even sold and leased back rights to motion picture films. While there is general agreement on the reporting treatment for sales entailing leasebacks that are capital leases, reporting practices differ for sales proceeds when the underlying leasebacks are accounted for as operating leases. Some companies include sale proceeds in the investing section of the statement of cash flows, while others report them as financing cash flow. As a result, calculations of free cash flow that use net capital expenditures, or gross capital expenditures net of the proceeds from asset dispositions, may not be comparable across firms. In this study, we examine and highlight cashflow reporting practices for proceeds from sale and leasebacks for a broad cross-section of firms from various industries.
Calculating Sustainable Cash Flow: A Study of the S&P 100 Using 2003 Data

(Georgia Institute of Technology, 2004-10-26) Mulford, Charles W. ; Ely, Michael L. ; Martins, Mario ; Patel, Amit

Operating cash flow in 2000, 2001, 2002 and 2003 for the S&P 100 was adjusted to remove items that may provide misleading signals of operating performance. Ten adjustments were made, separated into three categories - (1) where flexibility in GAAP for cash flow reporting was used to alter cash flow, (2) where the requirements of GAAP result in misleading operating cash flow amounts, and (3) where nonrecurring operating cash receipts and payments lead to operating cash flow that is non-sustainable. Adjustments resulted in an average company change in operating cash flow in 2001 of 1.5%, in 2002 of 4.2%, and in 2003 of 0.7%. Certain individual company adjustments were quite significant, resulting in some cases, in much more operating cash flow than actually reported, and in other cases, much less. Many companies had an increase or decrease in operating cash flow of greater than 10% including 35 in 2001, 26 in 2002, and 22 in 2003.
Hiding in the Patent's Shadow: Firms' Uses of Secrecy to Capture Value from New Discoveries

(Georgia Institute of Technology, 2004-10) Graham, Stuart J. H.

This paper examines firms’ uses of secrecy and patenting in order to explore three elementary questions of firm intellectual property strategy: First, are there complementarities between patenting and secrecy that firms exploit when crafting their technology market strategies? Second, what drives the firm’s choice of a patent-secret mix when developing a strategy to sustain to itself competitive advantage? And third, what are the consequences for the firm of one or another choice or mix? I argue that the use of the U.S. "continuation" procedure affords patent applicants a strategic opportunity. Because continuation practice allows pre-issue application delay, pursuing a continuation patenting strategy may allow the firm to better control the technology development and appropriation process, in terms of the timing of disclosures and managing technological change, preserving an early patent priority date for the invention while protecting an extended period of secrecy against competitors’ discovery. A strategic opportunity arises from the added term of secrecy that the continuation procedure affords to patent applicants. I argue that this period of secrecy may be a complement to the act of patenting itself. This paper employs data on the use by firms of continuation applications in the United States from 1975-1995 in order to empirically test the uses by firms of these secrecy strategies, and to compare these uses against other proposed motivations for patentees’ uses of the continuation application. Results support complementary uses byfirms of patents and secrecy in their appropriability strategies.
Behind the Patent's Veil: Innovators’ Uses of Patent Continuation Practice, 1975-2002

(Georgia Institute of Technology, 2004-10) Graham, Stuart J. H.

This paper employs new data on the use by patentees of continuation applications in the United States from 1975-2002 to shed light on patentees' motivations for and actual uses of the continuation application procedure, a procedure available only in the U.S. which allows a patent applicant to voluntarily delay issue of a patent. The paper investigates the affect that continuation use has had upon patent grant lags, evaluating whether routinely used research methods that ignore continuation delays may be improved by accounting for continuations in patents' application lineage. This paper demonstrates conclusively that a sizeable share of patent applicants employs the continuation, that continuation use by patent applicants results in substantial additional delay in the time-to-grant statistics for associated issued patents, and that significant changes in the pattern of continuation use have occurred since Congress enacted legislative amendments intended to curb the procedure’s use. Evidence provided in this paper supports a contention that the continuation has been economically important in shaping the environment for innovation, influencing industrial organization, and social welfare. The paper also demonstrates that continuation practice is common in overall US patenting, and that in some important sectors, including electronics, computing, pharmaceuticals, chemicals, and biotechnology, a substantial minority, and in some instances a majority of patents in recent years have issued with continuation in their application lineage. Furthermore, substantial intersectoral differences are shown in innovators’ use of the continuation, as well as significant changes in the patterns of usage over time.
Sharing Information to Manage Perishables (ed.1)

(Georgia Institute of Technology, 2004-09-14) Ferguson, Mark E. ; Ketzenberg, Michael E.

We address the value of information (VOI) sharing in the context of a two-echelon,serial supply chain with one retailer and one supplier that provides a single perishable product to consumers. We evaluate information sharing under two supply chain structures where both supply chain members share their inventory levels and replenishment policies with the other. In the first structure, referred to as Decentralized Information Sharing, the retailer and the supplier make their own profit-maximizing replenishment decisions. In the second structure, referred to as Centralized Information Sharing, the replenishment decisions are coordinated. The latter supply chain structure corresponds to the industry practice of vendor-managed inventory. We measure the VOI as the marginal improvement in expected profits that a supply chain achieves relative to the case when no information is shared. Key assumptions of our model include stochastic demand, lost sales, and order quantity restrictions. We establish the importance of information sharing in the supply chain and identify conditions under which relatively substantial benefits are realized. As opposed to previous work on the VOI, the major benefit of information sharing in our setting is driven by the supplier's ability to provide the retailer with fresher product. By isolating the benefit by firm, we show that sharing information is not always Pareto improving for both supply chain partners.
How Should a Firm Manage Deteriorating Inventory? (ed.1)

(Georgia Institute of Technology, 2004-09-14) Ferguson, Mark E. ; Koenigsberg, Oded

Firms selling goods whose quality level deteriorates over time often face difficult decisions when unsold inventory remains. Since the leftover product is often perceived to be of lower quality than the new product, carrying it over to the next period offers the firm a second selling opportunity, but at a reduced price. By doing so, however, the firm subjects sales of its new product to competition from the leftover product. We present a dynamic model that captures the effect of this competition on the firm's production and pricing decisions. We characterize the firm's optimal strategy and find conditions under which the firm is better of carrying all, some, or none of its leftover inventory to the next period. We also show that the price of the new product is independent of the quality level of the leftover product. Finally, we relax the model assumption and assume that there is demand uncertainty in both periods. We run a simulation and find that the firm finds it optimal to introduce the old units only if the level of uncertainty is low and does not exceed a certain threshold.