Case 1 is from a firm called Purchase Point Media Corporation, or PPMC. PPMC was a thinly traded over-the-counter stock that issued some detailed financial projections. The data was presented in a very poor form; however, the substance and sequence of the data was organized in such a way that it was possible to compute a break-even point. You’ll study PPMC’s “Projected Statement of Net Income” and additional information provided, then integrate marketing and finance techniques to write a report on your findings.
Case 1: Purchase Point Media Corporation (PPMC)
This case is based on actual financial projections developed and provided by a publicly traded firm, Purchase Point Media Corporation (PPMC). Carefully examine the PPMC projections, which are presented in a sequence and format suitable for break-even calculation and analysis. After you calculate the break-even point, use additional, publicly available information to come to a decision with respect to market potential. The increase in the price per share of PPMC stock suggests that, over time, the market may have reacted to their results and analyses, using a comparable methodology.
When you complete this case, you’ll be able to
• Identify discernable errors, irregularities, and improprieties in style and format within publicly reported data
• Meet financial statement presentation requirements for a specific “real world” example
• Determine whether financial information provided follows generally accepted accounting principles (GAAP) or is presented in “good form”
• Distinguish between the substance and form of financial statements
• Estimate variable and fixed costs for a publicly traded company
• Assess publicly disseminated information from publicly traded companies to determine the feasibility of market potential and market penetration
• Exercise enhanced critical-thinking skills
Purchase Point Media Corporation (Pink Sheets: PPMC) is what some refer to as a thinly traded “corporate shell.” The firm held patents in the United States, Canada, United Kingdom, and Germany for a shopping-cart display device, but was a nonreporting and nonoperating entity.
On March 18, 2002, PPMC reported its intention to sell these patents and related trademarks. The initial estimates suggested a stock price of nearly $2.50 per share, before related per-share deductions for sale-related broker’s commissions and legal fees. At the time of the news release, the firm’s stock was trading at $0.04 per share. In less than 60 days the stock was trading at more than $0.60 per share (Cataldo 2003, 55–60), for a 1,400 percent increase in price per share. (Note that investors and speculators alike would view this as a very risky investment, and the price per share for PPMC stock would be expected to fall short of or sell at a significant discount to the “anticipated” selling price for the firm’s intangible assets. See Arbel and Strebel 1982 and 1983; Arbel, Carvell and Strebel 1983; and Arbel 1985 for guidance on thinly traded or “neglected” firms.)
While this initial news release attracted speculators, causing the stock price to rise, after months without any additional news releases, the stock price drifted down again. On August 20, 2003, PPMC again announced its intention to sell the firm’s intangible assets (Business Wire 2003).
In the second announcement, PPMC management referred interested investors to their corporate Web site. Among the data provided, PPMC included a financial projection and other items they felt might be of interest to potential purchasers of the firm’s intangible assets (see Exhibit 1, Purchase Point Media Corp. statement, which follows).
To begin this case, review and comment on the “form” of the public disclosure circulated by PPMC. Then use the “substance” of this information to develop per-unit, salesbased contribution margins and break-even points for the first year of operations. Last, gather other publicly available information to determine the market feasibility of achieving its break-even point.
Brand Name versus Generic Stocks
|Brand Name Stocks||Generic Stocks|
|Less information risk||More information risk|
|Higher quality of information||Lower quality of information|
|Large sample of consensusestimates||Small or no sample of consensusestimates|
|Monitoring service or fee||No monitoring service or fee|
|Lower return||Higher return|
|Higher price (premium)||Lower price (discount)|
|Lower uncertainty||Higher uncertainty|
|More consistency||Less consistency|
Supplemental information is provided in Figures 1 and 2.
Figure 1 illustrates the price per share for PPMC common
stock for the time period August 20, 2003 through September
27, 2004. The latter date represents the specific event when
PPMC filed their 10QSB. Figure 2 compares the PPMC price
per share with comparable index measures, such as the Dow
Jones Industrial Average, Standard and Poor’s 500, NASDAQ,
and Russell 2000 indices, for the same period of time
FIGURE 1—The price per share for PPMC common stock, August 20, 2003 through September 27,
2004, when PPMC filed their 10QSB
FIGURE 2—Comparison of the PPMC price per share over comparable index measures, such as the Dow
Jones Industrial Average, Standard and Poor’s 500, NASDAQ, and Russell 2000 indices, for the same
Arbel, A. 1985. Generic Stocks: An old product in a new
package. The Journal of Portfolio Management 68: 4–13.
Arbel, A., Carvell, S., and Strebel, P. 1983. Giraffes,
Institutions and Neglected Firms. Financial Analysts
Journal 39: 57–63.
Arbel, A., and Strebel, P. 1982. The Neglected and Small Firm
Effects. The Financial Review: 201–18.
Arbel, A., and Strebel, P. 1983. Pay attention to neglected
firms! The Journal of Portfolio Management 9: 37–42.
Business Wire. 2003. Purchase Point Media Corp.: Corporate
Update (August 20).
Cataldo, A. Information Asymmetry: A Unifying Concept for
Financial and Managerial Accounting Theories (including
illustrative case studies). Studies in Managerial and
Financial Accounting 13, 2003. Oxford, England:
Elsevier Science (JAI). Series Editor: Marc Epstein.
The project requires three steps to be presented.
Step 1 – Identify Form and Substance Errors.
Step 2 – Compute the Purchase Point Media (PPMC)
break-even points in terms of carts and stores.
Step 3 – Determine the number of grocery stores for various
In one Word document, provide individual sections for
each Step. This Word document along with the Excel file
(described below for Step 2) will be uploaded when you click
on the Take Exam button on your Student Portal to submit
your project (described under the “Submitting Your
Assignment” later in the instructions).
This Senior Capstone project highlights your knowledge
and the skills you have developed over the course of your
education. There is nothing “new” to be learned here.
The knowledge and skills required for this project include
English Composition, Financial Accounting, Managerial
Accounting, Information Literacy and the abilities to
think critically, do research and to present your work
in a professional manner.
Substance versus Form and
In the infamous Enron bankruptcy case, the form of the
financial statements prepared by the Enron Corporation
and WorldCom was very professional; however, the substance
was lacking, leading to audit and market failures and the
eventual bankruptcy of both of these big-cap, or largecapitalization
firms. PPMC represents a reverse case, in
which the form of the data contained in the PPMC news
release and corporate Web site was very poor.
To begin, read the PPMC report, focusing on problems with the
form of the report. (“Form” means spelling, punctuation, and
capitalization are correct and that the text is grammatically
correct. Also, form means that the format of the text as far as
font, bold, underlining, indents, and so on are correct.)
Prepare a typed, clearly communicated summary of all errors
or weaknesses you find in the form of this report. This should
be a numbered list. There are well over 30 form errors in the
document. (The ways to go about doing this for this step is to
think of yourself as an English Composition instructor and a
student has turned in a required paper that was written.)
Although the PPMC report isn’t well-written, don’t attempt
rewrite the report. Only present a numbered list of the
To report the numbered list of form errors for this step, each
error should have three components:
1. The location of the error.
2. What the error is.
3. How the text should have been written correctly.
Here is an example of how you’ll present the form errors.
Summary of Errors in the Form of the PPMC Report
The first page of Exhibit 1, the last sentence of the first
paragraph states “You should independently investigate
and fully understand all risk before making investment
The word risk is singular. It should be plural.
It should have been written “You should independently
investigate and fully understand all risks before making
Next, reread the PPMC report, focusing on problems with the
substance of the report. (“Substance” means the figures and
data that are being reported and making sure the math is
correct.) Identify the obvious errors or problems first by
focusing on the addition or math errors. Prepare a typed,
clearly communicated summary of all errors you find in the
substance of this report. These should be presented in a
To report the numbered list of substance errors for this step,
each error should have three components the same as the
presentation of the form errors:
1. The location of the error.
2. What the error is.
3. How the text should have been written correctly.
The heading for the substance errors should be “Summary of
Errors in the Substance of the PPMC Report”.
Do not take this step lightly. The data and figures found in
the report are used to calculate the beak-even analysis for
Step 2. As presented, the data is incorrect and therefore,
the break-even analysis would be incorrect. Therefore, it is
important that you find “all” of the substance errors and
correct them as these corrected figures will be what you
use to make the break-even calculations for Step 2.
The PPMC Notes in the document appear to be organized by
cost behavior. This is similar to the approach you used in
your Managerial Accounting course. You should follow this
approach or framework as you compute the PPMC breakeven
point in terms of carts and stores. Begin with revenues,
follow with variable costs (VCs), develop the contribution
margin (CM; in aggregate), followed by fixed costs (FCs),
and, finally, compute PPMC’s net operating income (NOI)
and break-even point in terms of both carts and stores.
On your Student Portal, under the Supplements section of
the Senior Capstone subject is a downloadable Excel file
titled “Exam 500895- PPMC Excel Spreadsheet”.
Step 2 requires that you calculate the break-even points for
both carts and stores. Download this file and use it to calculate
the breakeven points.
Reference the Excel spreadsheet for Step 2 in the Word document
and include the spreadsheet as a separate file when
submitting the project. The spreadsheet for the calculations
is too large to include in a table in a Word document or be
able to read if an Excel spreadsheet is inserted. Therefore, there
should be two files submitted for the project – this
Word document and the Excel spreadsheet with your work
for Step 2.
The majority of the work has been done for you when using
the spreadsheet. The setup to be able to calculate the CM,
NOI and the break-even points are part of the spreadsheet.
What you need to do to interpret the Notes from the PPMC
document, input the data into the spreadsheet (be sure to
use your “corrected substance” figures/data from Step 1),
and do the calculations required to obtain the break-even
point for the carts and the break-even point for the stores.
(Hint: Some cells in the spreadsheet have comments inserted.
Pay attention to these comments. For example, there is a
comment in a cell that has the formula to be used to calculate
the break-even point.)
Step 3 requires three items:
1. The ticker symbol for the store chain.
2. The number of stores for the store chain.
3. A Works Cited page for the figures found as the number
Table 1 should be reproduced as a table in your Word
document for Step 3 and the ticker symbol and the
number of stores inserted from your own research.
To find the ticker symbol for each of the store chains, it is as
easy as opening up Google Chrome as your web browser and
typing in the store name followed by “ticker symbol” into the
search box. The hits form the search should reveal the ticker
symbol for that store. Alternatively, you could use a financial
website such as Yahoo Finance, E-trade, and so on to do your
searching. All of the stores have a ticker symbol with the
exception of one which is a private company.
Using your own research skills and abilities, determine the
number of grocery stores for each store chain. How you go
about doing this is up to you and your research skills.
Here is what you are looking for as far as the number of stores
• You are looking for the most “current” information.
However, current doesn’t mean today.
For example, if store A (which has 10 stores) took over
store B (which had 3 stores) in a merger, then B is no
longer in business. The number of stores for A will be
13 as of today because it is still in business. The number
of stores for B will be 3 which is how many it had before
the merger. That is the most current for B – not zero.
As another example, if a store declares bankruptcy, it all
depends upon the bankruptcy status. If the store is in
Chapter 11, which is reorganization then the number of
stores will be the current information. If the store is in
Chapter 13, which is a closing of the business, then the
number of stores will be zero.
Be aware that the solution to the number of stores in the
table is kept current, but that doesn’t mean that data will
all be “as of today.” It is possible that the most current
information might be 2015 or 2016. It all depends upon
your research and what is available. Finding the correct
information is the purpose behind doing research.
One other thing to watch out for in doing your research is
a “name change.” If a store changes its name, then list
both the old name and the new name and the current
information available for the number of stores.
• You should rarely use third party sites such as Google
Finance, InvestSnips, Investopedia, Wikipedia, newspaper
articles, and so on as these don’t have the most
current and accurate information. You should use information
from the business web site, SEC filings, Annual
Reports, and so on for the most applicable, relevant and
• Lastly, this step involves research. “Research” is not doing
a quick search and picking a web site or two and going
with what is found. Research is looking at quite a few
sources and thinking critically about what is found as to
relevancy, currency and accuracy. For example, one web
page may say “about 500” stores, but, another page on
the website will say “536 stores” exactly. Or one web site
might have information from March 2016 and another
might have information from December 2016. Which is
more current and relevant? The December 2016 web site.
Not only do you need to do research, but, you also must
think critically about the information you find.
Along with Table 1, a Works Cited page needs to be included
for Step 3. This is Standard English Composition. Work
and/or figures that are not your own need to be cited as
part of a paper.
If no citations are provided or the citations are not properly
formatted, this becomes “Plagiarism”
• There should be a correctly formatted citation for each figure
for the number of stores for the grocery store chain.
This is standard for English Composition and should follow
MLA or APA formatting. If you do not remember how
to make a correct citation, do a search on the Internet
for “Purdue OWL” and when you get there search the
OWL (Online Writing Lab) site for “MLA Works Cited:
Electronic Sources (Web Publications)” as this is the
most likely source you will use and refresh your memory.
Alternatively, you can search Penn Foster’s Library for
the Purdue Owl web site and/or telephone and speak
with an English Instructor
• The web address provided for the citation should take the
reader directly to the web page where the number of
stores can be found. The reader should not have to search
for your information. Do not provide a generic web
address such as the homepage of a web site unless the
actual number of stores is on that web page.
|Stock Ticker||No. of Stores||Firm Name|
|Publix Super Markets|
|Great Atlantic & Pacific|
|Smart & Final|
|Whole Foods Market|
|Wild Oats Markets|
|Eagle Food Centers|
|Village Super Market|
Refer to the “Submitting Your Work” section at the end of
this book for details on submission requirements for the
PPMC Case assignment.
Your assignment will be evaluated according to the following
Content 80 percent
Written Communication 10 percent
Format 10 percent
Content 80 pts
• Identifies Form and Substance errors as instructed (worth 30 points)
• Completes Step 2 – Compute the PPMC break-even point in terms of
carts and stores (worth 40 points)
• Completes Step 3 – Determine the number of grocery stores in the
United States (worth 10 points)
Written Communication 10 pts
• Answers each question in a complete paragraph that includes an
introductory sentence, at least four sentences of explanation, and
a concluding sentence
• Uses correct grammar, spelling, punctuation, and sentence structure
• Provides clear organization by using words like first, however, on the
other hand, and so on, consequently, since, next, and when
• Makes sure the paper contains no typographical errors
• Properly formatted citations – (No Works Cited or incorrectly
formatted citations will result in a final grade of 1 for the project
due to Plagiarism.)
Format 10 pts
The paper is double-spaced, typed in font size 12, and contains properly
formatted Internet research sources. It includes the student’s
• Name and address
• Student number, Course title and number, and project number