How did people find the exam? When I went in to the exam I went in with the view that the company was already in crisis. I reasoned, That profits were down 6.5%, the company's debt had been downgraded, it was highly leveraged (144% D/E), it had low liquidity (quick ratio of .41), the company had a small portfolio of four TV programmeswhich were relatively old. When I did my research I learned that in the United States, over the last 30 years, the goal for TV networks was for a programme to last 4 - 5 seasons. All of Evestar's programmes had been running for 6 years or longer with the exception of the Cavern which had been running for three years. However, the Cavern was experiencing a severe drop in viewership. So the risk was high that one or more of the programmes would not be renewed and this could have severe impacts on Evestar's viability.
In addition, cash balances, which stood at $14 million, had fallen 20 - 40% each year for the last five years. If this trend continued the company could be out of money in 3- 4 years.
Evestar also did not have a long term strategy in place.
I thought these were all strong reasons to build a case for the urgency for change.