Groupon and the SEC Essay

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What sources of information are most useful to an investment decision?



There are various sources of information that are most useful to an investment decision. One of the key sources beneficial to making an investment decision is the firm's financial performance. This encompasses the evaluation and scrutiny of the reported financial statements. Some of the items to be analyzed include the revenue generated, profits attained and the cash flow as well. Financial ratio analysis is also an imperative source of information for investment decision making. For instance, ratios such as return on investment (ROI) and return on investment capital (ROIC), are beneficial. The accounting practices used by the company, whether it is the Generally Accepted Accounting Principles (GAAP) or others such as International Financial Reporting Standards (IFRS) are also a beneficial source of information for making decisions on investment. In this case, it can be perceived that Groupon undertook forceful accounting practices, such as Adjusted Consolidated Segmented Operating Income (ACSOI) and Consolidated Segmented Operating Income (CSOI), which are non-GAAP financial measures to mirror positive outcomes.



A second source that is useful for making investment decisions encompasses third party sources. These take into account evaluating SEC filings for investor information, various analysts and also third party audit reports. In this case, this is a useful source with respect to investment as it can show that the SEC rejected the ACSOI accounting practice, necessitating an alteration of how the revenue and expenses were calculated. Another source of information encompasses the organizational data and information. This includes information such as the mission, vision, strategies and management information. The organizational past performance and forthcoming projections together with information and data obtained from media also play a beneficial part. In this case, it would be beneficial as it would show that the press was worried regarding Groupon's violation of the IPO terms. In addition, an assessment of the organizational model and strategies would highlight that Groupon did not have a sustainable financial business model.



What are the future prospects of this business?



The future of Groupon as a business can be analyzed through three different areas.

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The first aspect is the financial prospect of the company. As aforementioned, Groupon utilizes ACSOI and CSOI as their accounting standards of practice. However, it is imperative to note that these non-GAAP accounting practices are deemed to be inefficacious as compared to GAAP. In particular, the approach employed in obtaining the value of the company can be deemed ambiguous and not certain. In contrast, when utilizing GAAP standards, it can be perceived that the numbers obtained do not reveal or paint a positive picture for Groupon.



The second area of analysis is the management body of the organization. It is imperative to note that the executive managers of any entity play a vital role in determining the direction that the entity will take in the future. In the case of Groupon, there are key concerns with respect to its executive management. Greed amongst its executives is noted as they opted to have a payout of $942 million out of the $1.1 billion of cash raised. This indicates that in the near future, any instance of financial trouble or investment opportunity, there is a high likelihood that Groupon will not manage to raise the funds necessitated. Another key concern is the use of financial models so as to mirror maximum value. This is a problem as it does not delineate the actual financial position of the organization. In addition, the management has failed to lay emphasis on coming up with a lucrative and cost-effective strategy and product.



The third area of analysis is the competitive landscape where Groupon operates. Several websites operating with an equivalent model, such as Yelp and Living Social, have come up. This indicates that there is a low barrier to entry and therefore an increase in the level of direct competition. In addition, there is indirect competition through other sites such as Google and Facebook. By analyzing all of these three aspects, it can be seen that the future prospects of Groupon as a business are bleak, which indicates that the company has an uncertain future.



What does Groupon's accounting tell us about accounting?



Groupon accounting does tell….....

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