This is a series of four case studies illustrating a number of key financial issues facing many small to medium sized companies.

Great Eastern Toys (B) As part of its growth strategy, a new product has been designed and a study carried out by a consultant to estimate the market potential and the investment required to put it into production.

Great Eastern Toys (C) A major concern of the family owners was whether to try to sell their company. The “C” case gives students the opportunity to consider many approaches to valuing a firm: comparative valuation (P/E ratios, price-to-book ratios, price to cash flow ratios, and price to sales ratios) or a DCF valuation. Both approaches present considerable analytical problems.

Great Eastern Toys (D) The company faced currency risk on its sales to European markets, and on some Yen loans it had taken. Because the HK$ was pegged to the US$, currency risk on its American sales was seen as practically nil.