Describe Long Term Liabilities For Eastman Kodak Co.vs Canon Inc Using the infor

Question

Describe Long Term Liabilities For Eastman Kodak Co.vs Canon Inc Using the information from the financial statements for each company, discuss whether the company obtains any of its financing from long term liabilities such as bonds payable or long term notes payable. If they have issued bonds, what interest rate were they issued at? Can you determine from the financial statements whether they were issued at a premium or discount? Does the company have any other long term liabilities that an investor would be interested in knowing about? Using the information from the financial statements for each company, calculate the debt to equity ratio and discuss how the ratios compare and what this may mean for each company.

Explanation / Answer

Kodak?s low-cost ink strategy for its EasyShare multifunction printer line seems to have ruffled a few features at Canon USA, which recently filed a complaint with the National Advertising Division of the Council of Better Business Bureaus. At issue: Kodak?s advertising claim that buyers can ?Save up to 50% on everything you print? with its EasyShare line. Among other things, Canon claimed that Kodak didn?t make it clear that the savings claim was based on ink costs only. This week Canon it lost its challenge when the NAD ruled that Kodak ?provided reasonable support for the advertising claim.? All of this would seem to be a tempest in a teapot. Why would Canon USA bother pursuing such a claim against upstart Kodak, which has less than 1% of the market for consumer-grade multifunction printers? The answer is that there's a lot more at stake. First of all, printer manufacturers "give away" the hardware with little or no profit margin, but make a fat profit on the ink, which carries a very large margin. Secondly, Kodak's ink is indeed cheaper - a lot cheaper, as my comparison test against an HP model demonstrated. It's doubtful that Canon, which follows HP's "give away the razor to sell the blades" model, would far any better. Now consider this trend: The amount of printing consumers do is already on the decline, according to IDC, particularly with photos, which use a lot of ink. Enter Kodak, with its printer line that breaks the business model for consumer printers by offering low-cost ink. Kodak is going after a select group of Canon?s most profitable customers: Those who do a lot of printing of photographs at home. These are also the people who are the most influential with other buyers. It's a long shot, but grass roots adoption of EasyShare printers and word of mouth buzz about the advantages of using low-cost ink could - if it caught on - upend the established business model in the market. That's a big if. One year after the EasyShare launch, Kodak faces some challenges. If Kodak is able to gain market share, that would put pressure on ink prices, depress margins and cause printer manufacturers to rethink their business model. But with sales of just 520,000 units in a market of 61 million, Kodak?s strategy isn't even a blip on the radar screen. And beyond its own online store and a few high profile retailers such as Best Buy and Wal Mart, Kodak doesn?t have broad distribution. Furthermore, while ink prices are a top complaint among consumers who have printers, so far they seem to pay more attention to purchase price when shopping for a new unit. So why should Canon care? Because Kodak doesn?t need to get a large overall market share to cause trouble. If 10% of consumers are responsible for 80% of printing, all it needs to do is capture a substantial portion of that elite group to put pressure on its competitors. Perhaps that?s what has Canon worried. Canon is appealing the NAD's decision.

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