Wind turbine maker Leone Energy posted a net loss of Rs. 250 crore for the fourth quarter ended March 31, 2010 as against a net profit of Rs.350 crore in the same quarter a year - ago. In the financial year 2009 - 10, the company clocked a gross income of Rs.6,517 crore, as against Rs.9,778 crore in the previous year. Leone Energy clocked a loss of Rs.1,100 crore in 2009 - 10, as against a net profit of Rs.320 crore in 2008 - 09. The sales revenues stood at Rs.22,400 crore fo the year, approximately 21 per cent less against Rs. 28,350 crore last year. For the financial year ending March 31, 2010, Leone Energy’s sales volume (in terms of capacity of projects executed) was 4,560 MW from 2,935 MW a year ago. The CEO of Leone Energy in his message to shareholders suggested that the poor performance of the company was the result of adverse economic conditions during the year ended March 31, 2010 . You are a shareholder owning 5% of the shares of Leone Energy, have seen the stock price decline by more than 50% during the year 2009 - 10, and are quite upset with the way the management has been handling the business. You have decided to confront the management at the next shareholders’ meeting and have chosen the following 5 point to argue against the CEO’s version of the story. In light of the above paragraph, select the most appropriate order of these 5 statements that you, as a disappointed shareholder, should adopt as a stringing and robust preface in your case against the management in front of the management and other shareholders.
a. The management is not doing its best to maintain the profitability of the company.
b. The company has actually increased its sales volume during the year under consideration.
c. The adverse economic conditions have led to a worldwide increase in the adoption of alternative energy sources, reflecting in all - time highest profits for wind turbine makers in both developed and developing countries.
d. The management has been lax with its employees as the management enjoys a large set of benefits from the company that they would have to forgo if they became strict with employees.
e. The company is trying to increase sales by charging lower, unprofitable prices.

Solution

As there has been remarkable growth for Wind turbine makers in both developing and developed countries, the CEOs argument of adverse economic conditions will not be sustainable.

(c) will be the first statement as it gives the current global situation of the sector. It should be followed by (b) which mentions the fact that the sales has actually increased. (e) states the reason why the profits have decreased despite increased sales volume. Hence this should be the final statement.

Option D is the correct answer.

Instructions

Answer questions 30-32 on the basis of information given in the following situation.

Lal & Sons, a family business, comprises three different companies in three different industries. Sudarshan Lal was heading this entire business from the inception. Two years ago, he hired three managers, one for each company and Chhaganlal Jha as Chief Executive Officer (CEO) to look after the entire business. These three managers are reporting to the CEO. However, Sudarshan Lal and his family still own the entire business, though they are not involved in day to day operations.

Question 2

Two years after the handing over, Sudarshan was concerned that none of the companies, except one, is profitable.

Which of the following information, if true, will most likely reduce Sudarshan's concerns?

Solution

A per the information provided in the question we need to look for a case that provides the required assurance of how the current and the future prospects may turn out.

Since a financial institution that acts as an independent researcher has a very positive outlook towards the loss-making company's prospects in the future. This provides the required assurance for not just Sudarshan but for all the key stakeholders. Hence is very crucial to understand how things stand currently for the company.

It will be appropriate that it was handed over to professionals but unless any results are provided from the professional advice this might not be significant enough to assure Sudarshan.

The huge success in one industry cannot be translated or expected to compensate for the loss in the other two industries.

We are not aware if the replaced employees are incompetent or poorly performing employees. Hence this does not hold significance in assuring the required confidence.

If people are leaving at a much higher rate compared to the industry average then this becomes a matter of concern and hence is not correct.

Question 3

Some of the senior employees who left Lal & Sons in recent past have complained to Sudarshan that the long cherished values of the organization such as respect for elders, job security etc. are being compromised.

Which of the following options, if true, will indicate to Sudarshan that the employees are misleading him?

Solution

We need to find the option where we can say that the senior employees are misguiding Sudarshan, which is best explained in option B. The senior employees were given respected positions that means they were being valued which contradicts the senior person's claims. The other options can be eliminated.

Question 4

Chhaganlal Jha, the CEO, was certain that someone in his leadership team was leaking information to Sudarshan Lal, well before Chhaganlal communicated.

Given the following options, how best should Chagganlal Jha respond to this situation?

Solution

The leakage of information should be prevented. Sudharsan Lal is supposed to know the proceedings of the company but it should be through a formal communication channel.

We can eliminate option B since it proposes an immature course of action.
Option C can be eliminated as well since it proposes no step to curb the leak of information.
We can eliminate option D since it does not propose any course of action.
Option E can be eliminated as well since it spoils the relationship between him and the business heads. Also, it fails to find out the person responsible for leaking the information and even if someone is fired, there is no way to know whether Chhaganlal has fired the right person.

Chaganlal should request Sudharsan to be patient till he gives out the information. This will ensure that Sudharsan will not have the need to depend on second-hand information and hence, will address the root cause of the issue. Therefore, option A is the right answer.

Two years after the handing over, Sudarshan was concerned that none of the companies, except one, is profitable. Which of the following information, if true, will most likely reduce Sudarshan's concerns?

Chhaganlal Jha, the CEO, was certain that someone in his leadership team was leaking information to Sudarshan Lal, well before Chhaganlal communicated. Given the following options, how best should Chagganlal Jha respond to this situation?

Two years after the handing over, Sudarshan was concerned that none of the companies, except one, is profitable.

Which of the following information, if true, will most likely reduce Sudarshan's concerns?

Chhaganlal Jha, the CEO, was certain that someone in his leadership team was leaking information to Sudarshan Lal, well before Chhaganlal communicated.

Given the following options, how best should Chagganlal Jha respond to this situation?