David’s Tea Questions and Answers
1. What are the main issues we can learn from the article about David’s Tea?
List the 3-4 most important facts.
a. They are currently insolvent.
b. They are closing almost half their stores in Canada (82/182) and all their
stores in the US
c. They are changing their business model to mostly e-commerce
d. They lost $23.2 million.
e. They stopped paying their leases.
f. They are going to lay off many of their employees.
2. Who would care about the information mentioned in the article?
a. Their creditors
b. Their landlords
c. Their employees
d. Their customers
e. Their suppliers
f. Their shareholders
g. Their competitors
h. The government (negative economic development)
3. What additional information that is not included in the article would you
like to know?
a. How much liabilities do they have?
b. How much cash do they have?
c. How are their revenues and profit trending?
d. What is the cost of shutting down these stores?
e. Others
4. Should we leave it to companies to release such information? Why? Why
not?
With selective disclosure, we might face many reporting issues:
a. They might choose what information to disclose, focusing on the good
news and avoiding the bad news.
b. They might choose how to measure the amounts reported
c. They might choose to include revenue items and eliminate some of the
expenses.
We can conclude that there is a need for strong rules as to what companies should
report and how to measure the items disclosed.