CASE ANALYSIS: MGM MIRAGE Harvard Case Solution & Analysis

Case Analysis: MGM Mirage Case Solution

Horizontal Balance Sheet

            The balance sheet which has been made on the horizontal common size i.e. calculating percentages for all the items as of 2001, in other words calculating the variances as a percentage of 2001 while assuming 2001 as a base year. In addition, the balance sheet suggests that the current assets have been decreased by almost 11% in 2002 while they increased in 2003 by 14%. However, the major change was seen in prepaid expense in both of the years as in 2002 prepaid expense were increased by 24% and they again grew in 2002 by almost 29%. Furthermore, this major change ledthe overall current assets’ position to increase in 2003.

            Moreover, the non-current assets showed a growth of almost 22% in 2002 while they again grew by 34% in 2003. Additionally, the total assets grew by less than 1% and by 2% in 2002 and 2003 respectively. However, the long term debt was reduced by almost 2% in 2002 but later on it again increased by 4% in 2003. On the other hand, the company made efforts to reduce its current liabilities in both of the years to increase its liquidity as the current liabilities were reduced by 15% in 2002 and later on, by 13% in 2003. Finally, tremendous efforts were seen in the shareholders’ equity as the shareholder’s equity was increased by 6% and then it was again inflated by almost 1%.

            Conclusively, it can be seen and concluded that the company was putting efforts to increase its overall assets by any means as, the company reduced its short term liabilities while increasing its long term debt. However, this is a good sign since, this indicates that creditors has a trust on the company and therefore, they are still giving debt to the company. Nonetheless, the company is also working to increase its liquidity and making efforts to reduce short term obligations.

Horizontal Income Statement

            From this table it can be seen that the overall revenue has been increased by 2% in 2002 and afterwards, it was also increased by 5%. However, the major change happened due to food and beverages segment since, this segment increase its revenue by almost 5% and 12% in 2002 and 2003 respectively. Furthermore, the expense were reduced by almost 3% and then increased by almost the same amount in 2002 and 2003 respectively. Finally, the most substantial growth was seen in the net profit as it was increased by 72% in 2002 and afterwards, it again inclined by almost 44%. Overall, the horizontal analysis suggests that the company is trying to increase its revenue and ultimately its profitability by working on different aspects of the revenue drivers.

Vertical Balance Sheet

            Vertical Balance sheet (common size) has been made by calculating all the items as a percentage of total assets. The analysis suggests that the total current assets were almost 6% of the total assets in 2001 which were further reduced to 5.61% in 2002 and later on they increased to 7.07%. Moreover, the non-current assets were 9% in 2001, 11% in 2002 and 12% in 2003.  The current liabilities were almost 8.5% of total assets and then turned into 7% for the last two years. Furthermore, the long term debt retained almost 50% of the total assets in all the years, which shows a high debt rate. Finally, it can be concluded that the long term debt has a crucial role in the formation of the company’s assets,whereas the company is taking initiatives to reduce its short term debts in pursuit of higher liquidity.

Vertical Income Statement

            Vertical Income Statement (common size) also indicates the similar factors as horizontal income statement as it shows that the most prominent revenue was generated by the company’s Casino and food and beverage SBU (Strategic Business Unit)................

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