Describe the industry and the company’s competitive strategy. •
Sold mobile homes in the Southeast US, primarily to low-income individuals who could not afford a traditional single-family home •
Sold most of its installment contracts to financial institutions on a recourse basis
Then identify and explain very briefly what you think are two key success factors, and two major business risks it faces in realizing its strategy? •
Ability to buy in bulk from manufacturers, which allows them to underprice smaller competitors o
Growing industry- southeast is the countries fastest growing market for mobile homes, additionally, as the population ages the number of retirees and travelers is growing •
Low interest rates cause individuals to prepay on their mortgages o
If the economy struggles, low income individuals usually hurt the most, which could cause a high percentage of repossessions
Identify the 2 most important areas of accounting policy.
Accounting for “reserve for credit losses” related to mortgage repayment and repos •
Accounting for finance participation (recourse financing, etc.)- now stated at net present value
Where’s the discretion and judgment?
Reserve for credit losses requires a lot of estimation by management •
Finance participation- should it be stated at net realizable value?
What is the link to competitive business strategy?
Reserve for credit losses- related to business strategy because they focus on low income individuals, and if the economy suffers they may see a significant increase in the number of repossessions •
Finance participation- they make a significant amount of money through recourse financing
How well does accounting measure strategic success and business risks, and what are the earnings quality implications of these policies?
Please join StudyMode to read the full document