- What is David Berman’s business model? What are its strengths and weaknesses?
- What is the relationship between retailer’s inventory and their firm valuation?
- Examine the impact of a $20 Million inventory write-off in the spreadsheet “David Berman Simplified Model.xls” on John B. Rivers’ market capitalization. Similarly, examine the impact of a $30 Million write-off on John B. Rivers’ market capitalization.
- How much inventory should Berman expect to write off at John B. Rivers? What data or analysis could he use to refine his estimate?
Note: Please focus on the effects of inventory and inventory write-offs. Obtaining a precise valuation of John B. Rivers is not expected.
*Objective of the case study questions:
- Develop awareness about the subjectivity of inventory valuation
- Understand the relationship between inventory management strategy and earning for retailers
- Understand the relationship between inventory valuation and firm valuation