PolyMedica Corporation (A) Harvard Business Case

Case Questions

  1. Explain the difference between an asset and an expense.
  2. Explain the role of advertising in the company’s customer acquisition strategy.
  3. What are the arguments in favor or capitalizing the direct-response advertising expenditures? What are the arguments in favor of expensing the direct-response advertising expenditures as incurred? As a CEO of PolyMedica, would you favor capitalizing or expensing the direct-response advertising costs?
  4. What would be the impact on the company’s financial statement if PolyMedica had expensed the costs as incurred in 2003 and 2002? Calculate the key balances that highlight any major differences.
  5. As a CEO of PolyMedica, how might you respond to this direct-response advertising accounting issue raised by the SEC and short sellers?