Xerox Case Study Analysis

 

To steal ideas from one person is plagiarism; to steal from many is research.–Steven Wright

We discussed the Xerox (XRX) here: http://wp.me/p1PgpH-zH.

Is the company over-leveraged?

You can download my comments here: http://www.yousendit.com/download/M3BsUXVpeFUwMEdLRmNUQw

Our goal is to have you practice skimming through the 10-K to find the critical information for making a particular judgment. There is no clear black or white answer since most investing requires judgment honed by practice and experience.

When determining the appropriate leverage, we have to understand the terms and conditions of the debt as well as the quality/cash flows of the assets being financed by that debt. Segment the different types of financing to gain a clearer understanding of the business and credit risks.

This wasn’t the best example, but the more you practice reading a 10-K the faster you will be able to organize your time.

 

2 responses to “Xerox Case Study Analysis

  1. What is the meaning of capped pension obligations?

    • Good Question: No more defined benefit plan after 2011.
      Declining interest rates resulted in a lower pension discount rate and forced Xerox to contribute $200 million to pension assets. But pensions will turn from a headwind into a tailwind in the future: First, Xerox closed its defined benefit plan in 2011; second, though interest rates may decline further, in the long run they’ll likely rise, boosting Xerox’s cash flows.

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