Relevant Information for Decision Making (Essay Sample)

Running Head: Financial Management
[Name of the Writer]
[Name of the Institution]
[Name of the Professor]
[Course]
Should Main Line's Maximum and Minimum lost profit amounts be revised downward for the following? Why?
The Domestic Distribution Revenues of $3 million because the deal had not been finalized. The distribution revenues are prepared from the backing of financers together with the film firms past performance in gathering sales and revenue. The maximum profit amount expected was near 9.7 mn from either 144 mn sales by Kim’s advocate and by Mr. Wilde the firm’s advocate would be 12.7 mn sales. In this the revenues of 3 mn were domestic sales. The deal having not been finalized one would gather the domestic experience and performance of firm which is quite good .The firm’s domestic pre sales should have been higher according to Wilde due to higher efficiency of pre sale deals with the financer’s. Once made the foreign financers do provide a higher margin to profit thus possibly making domestic sales little lesser. The Main Line’s downward revision cannot still be made since a look into the Basinger films provides healthy revenue of 19mn average. One cannot make the downward revision based on pre sales when the brand proposition has been assured from Basinger. The Fenn films generate a 1.2 mn so these domestic sales could have been lower. On the other hand she has already verbally negated her acting on the movie. Thus the downward revision must be made.
The $800,000 of foreign Pre-Sales because they were "probable" not actual. The foreign pre sales figures are required since the film’s producers need funding from the bank and local financing bodies. One thing about the total figure is that it is less than expected for foreign pre sales. The foreign pre sales of 800,000$ are still lesser by the expected sales of the firm and movie together. Thus the downward revision here is not only actual but probable. So no downward revisions.
The loss of $2.1 million on the "Without Basinger" film. The movie without Basinger as actress would have had a greater loss. The computation is based on differential between earnings with and without the actress. The computation does not ascribe to the total standards of SFAS no.53.According to actual earnings of movie star which were negligible or not reported one cannot put a figure of 2.1mn$ even if the production firm might have earned higher returns. Thus on both reasons the estimates of loss of 2.1 mn$ must have been downward revised.
2) Are the following relevant to the determination of lost profits to Main Line?
a. Basinger's $3 million salary for "Final Analysis”. Proposal to judge to the inclusion of salary would be based on incumbent actresses latest salary provided she has been guaranteed and received the salary. On the outset, the salary was provided after release in 1992 when the negation to act had been prima facie presented by 1991. Thus the question of an ongoing case does not require further salaries but current ones to calculate losses.AS this has been a contractual type of work, unless contract was fulfilled before 1991 the salary cannot be used.
b. The comparison of revenues for Basinger films with revenues for Fenn films. This is an important aspect where the jury would need to calculate average actual earnings in calculation of damages towards the movie.
3) Is Plaintiff's expert correct in not attempting to estimate revenues for "Boxing Helena" beyond pre-sale amounts? Why? The plaintiff is correct when he expects no revisions to the estimated revenues beyond pre sales amounts as changing the estimated revenues would alter the positioning of the case against the aggrieved actress. The attempt at changing estimated revenues would also make the case weaker again for the firm Main Line without the actress having to prove otherwise whether the case exists or not. If the pre sales amount is the proportionate to actual sales of firm according to the accounting policies then it should be maintained so that the reasonable estimate to estimate loss or damage can be calculated.
4) Should Main Line's lost profits be adjusted downward to include an estimate of domestic revenues for the "Without Basinger" film? Would it have been valid to use the $1.7 million advance against domestic revenues as the estimate? Explain. If the lost profits are adjusted downwards including estimate of domestic revenues for “without basinger” film then the accounts imply revision from the sales data where the actress Basinger having not taken part in movie implies loss of profits due to non approval to make the movie. The loss is adjusted to the probable revenues of 9.7 mn sales which are still more formidable if Basinger would have acted in movie. This implies that Main Line asserts that loss is greater had she left the movie much more than the actual estimates of domestic revenues inclusion could have compensated. The advance against domestic revenues should make the estimate valid only where such an advance is pre determined for production while the advance is purely for post production and inclusion makes the case against the “Without Basinger” film when the advance is altogether not allocated for the said purpose.