Business Accounting

1. Financing and Management Analysis for
School Corporation Company
Sara Sano Di Fabio
Full Sail University
Business Accounting
(09/18/2018)

2. Financing and Management Analysis
Overview
School Corporation is the largest multi-categorized company in the field of Children’s
Book Publishing, Education, and National e International Distribution. It was founded in 1920 in
order to increase the dedication to study and gain more knowledge. This company has been
doing very well in the United States where counts with more than 6,000 employees and internally
with around 2,600 employees. Although itis a well-developed company in the educative industry,
reports show that it is not in a progressive statue due to its decreases and increases.
Operating risk is defined as the risk of loss resulting from inadequate or failed internal
processes,people and systems or from external events. The company has seen a reduced growth
in sales in all the 3 major segments of the business, which can be initial signs of operating
inefficiencies. Which could, in turn, result in Operating loss to the company. From the data
collected, we can tell that the company is operating at a very low operating margin. Below is a
table with an overview of the operating margin:
Hence for a change in 7% of revenue, the earning per share has dropped by -110%
Companies have constant risks that can either help the company to grow or can take it to the
ruin. For that reason, this research is to identify the key risks and challenges the School
Corporation company faces going forward and find ways to overcome them and succeed.
1- If we fail to adapt to new purchasing patterns or trends, our business and financial
results could be adversely affected.
As the operating margins are very low for the company there are certain things that
management should consider. First of all, the company can either raise the per unit price of the
products or to reduce the inefficient cost and adopt new policies such as purchasing from a
different cost-effective source, etc. As the operating margins are low, the management should
consider discontinuing those operations which require more efforts to be undertaken but
generate lesser revenues. This would particularly result in increasing the operating margins, and
consequently the EPS. Further, performance improvement analysis must be undertaken to
identify potentially inefficientoperations and accordingly, measures such as automatization must
be taken to improvise the same.

3. Financing and Management Analysis
2- Changes in the mix of our major customers in our Trade distribution channel or in their
purchasing patterns may affect the profitability of our trade publishing business and
restrict our growth.
The distribution channel is the major contributor of the revenue to the company. The risk of
altering the Distribution business such as; the company may face volume reductions, and the
overall profitability may get reduced which could hamper the share price of the company. To
overcome these risks, the management must develop the long-term sustainable business model;
use of the technology in the business to make the business efficient. It is quite possiblethat there
may be customers who require greater assistance and services which is not worth the revenue
being generated from them. Such customers should be identified, and efforts must be made to
gain an increase in revenue from those customers particularly or alternatively, such customers
may be discontinued. The focus must be on the customers which provide higher revenue with
lower efforts. The Pareto analysis may be useful in such cases which is a decision-making method
that statistically separates a limited number of input factors as having the greatest impact on an
outcome, either desirable or undesirable.
3- If we are unsuccessful in implementing our corporate strategy we may not be able to
maintain our historical growth.
To answer this, the candidate must develop a backup plan for the new policy. From failures,
the company could lose the growth and goodwill it has built over the years. To overcome this,
the company must develop a backup plan for the new policy in case the new plan fails. The mid-
level management must ensure that the corporate strategies are properly implemented. If any
ground-level difficulties and challenges are faced, the same must be communicated to the top so
that resolutions may be sought. Not just the challenges, also possible remedies or alternative
strategies must be suggested. The top-level management should also be dynamic, proactive and
willing to implement the suggestions.
4- Increases in certain operating costs and expenses, which are beyond our control and
can significantly affect our profitability, could adversely affect our operating
performance.
The costs and expenses which are beyond control should be identified as much as possible.
These risk needs to be categorized as per the expected intensity of risk hampering the business.
After categorizing, the expected risks can now be mitigated using the measures available to the

4. Financing and Management Analysis
company such as insurance, hedging, etc. This process needs continuous monitoring, identifying
new risks, developing the measures to mitigate the risk. Fixed costs have led to the downfall of
businesses multiple time in history. These costs need to be paid irrespective of the fact whether
the business is generating revenue or not. Since the business is seeing a decline in revenue,
efforts must be made to reduce the fixed costs to decrease the burden and pressure from the
business.
5- Failure to meet the demands of regulators, and the associated high cost of compliance
with regulations, as well as failure to enforce compliance with our Code of Ethics and
other policies, could negatively impact us.
First, the company must identify the regulatory requirements within the county and related
to the international business. The company may categorize the requirements it is currently
satisfying and may come new with the new business model. The new requirements will need to
be paid more attention by the company. If possible, the company may consult the professionals
working in such a field. With a new business model, the cost of operations, as well as capital
expenses, may increase. The company should get ahead only when there is a high benefit to cost
for the restructuring of the business. Stakeholders include all the people who affect our business
in some way or the other. May it be our suppliers, customers, government, regulators,
shareholders, money-lenders and all these people, to in some way determine and affect our
policies. Hence, it is imperative that we always keep in mind the needs and requirements of our
stockholders. Analyzing their needs and acting accordingly may lead to better business prospects
leading to increased profitability.
Conclusion
School Corporation is the largest multi-categorized company in the field of Education.
Based on the revenue and EPS figures gives for 2017 and 2018, we can infer that the company
has fixed cost structure which implies that even the small fall in revenues can result in step fall in
EPS because of the huge fixed costs that the company might be incurring irrespective of revenue
scale. This structure exposes the company to multiple risks. Falling to adopt new purchasing
patterns or trends, business, and financial results could be adversely affected. Therefore, the first
thing the management can focus on is its procurement policy. It should try and change the
suppliers for cost-effective purchases. Alternatively, it should try to pass on the increased cost to
customers by increasing per unit cost. This can reduce revenues but increased operating margins
can lead to better profitability and increased EPS. Management can also shut down inefficient
operations which do not generate revenues but have heavy fixed costs. Changes in the mix of
major customers in the trade distribution channel may affect profitability and restrict growth.

5. Financing and Management Analysis
Changing distribution business mat result into volume reductions. A better customer mix would
provide better profitability and that can be achieved through Pareto analysis and by charging
more to customers which take more efforts to serve or to discontinue which them. Failing to
implement corporate strategies can hamper the company’s ability to maintain historical growth.
Corporate level strategies and divisional level strategies should be aligned to achieve desired
results. Mid-level management should ensure that these strategies are implemented on the
ground level. Challenges and possible remedies or alternative strategies should be suggested,
and top-level management should dynamic enough to consider them. Increase in certain
operating costs which are beyond control can significantly affect profitability. Financial control
should be strictly followed according to set policy. Costs and expenses which are beyond control
should be identified early and measures like hedging and insurance should be in placeto mitigate
them. Thesemeasures will againreduce the fixed cost burden on the company resulting in better
operating profitability. Failure to meet the demands of the regulators and associated costs with
compliance could negatively impact. All regulatory requirements at regional as well as
international level should be identified, and a compliance policy should be in place to meet all
the deadlines or requirements arising from the regulatory standpoint. Analyzing the needs of the
stakeholders and acting according to the set policies may lead to better business prospects and
increased profitability.

6. Financing and Management Analysis
References
SEC Filing title Scholastic Corporation. (n.d.). Retrieved from
http://investor.scholastic.com/node/15506/html#s5289335812A05470A4B0388DDE30EB1F
Groupthink - Decision Making Skills Training from MindTools.com title Pareto Analysis Choosing the
Most Important Changes to Make. (2018). Retrieved from
https://www.mindtools.com/pages/article/newTED_01.htm
ECOMAR title Management Considerations. (2018). Retrieved from
http://www.ecomarbelize.org/management-considerations.html
SEC Filing | Scholastic Corporation title Scholastic Reports Q4 And Fiscal 2018 Results and Outlook
| Scholastic Corporation. (2018). Retrieved from http://investor.scholastic.com/news-releases/news-
release-details/scholastic-reports-q4-and-fiscal-2018-results-and-outlook