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For the AutoZone company please answer the following questions.

There are many variables to consider and data to collect. I offer you the following set of questions to organize your thoughts. It is not intended to be inclusive of all possible perspectives you may provide and some of them may not be relevant/possible to address. a. How risky are the firms assets (unlevered/asset beta)? b. What are the types of risk the management choose to hedge? c. How are the risks managed? d. How does the firm report hedging activities? Search company annual filings (10-K) for relevant disclosures may use key words shown on the last page. e. What is the firms degree of operating leverage (DOL)? f. What are the characteristics of firms assets? How would the characteristics affect financial distress costs? g. How much financial leverage does the firm use? h. What is the scale of firms capital expenditures? What are the expectations of management on capital expenditures going forward? i. Is there any evidence that issuing more debt may be problematic? Look for recent debt offerings and see if credit terms have become stricter. Page 2 of 3 j. Does the firm maintain sufficient working capital balances to negate the impact of shocks to sales, costs and industry position? What are the characteristics (restrictive or flexible) of firms short-term financial policy over time? k. Is there any evidence that the degree of asymmetric information between investors and managers are severe? Informational asymmetry is potentially the greatest before earnings announcements and equity offerings. Significant stock price reactions to earnings announcements and stock price declines around equity offering announcements indicate significant asymmetric information. Make sure to review the risk management theory papers to identify effects of asymmetric information on risk management activities. Explain your findings. l. How does the firm manage its working capital? Do working capital management policies of the firm provide sufficient flexibility in case of shocks to sales and costs? m. How much free cash flow does the firm generate? Where does it go; retain/invest, payout, debt repayment etc.? What are the possible effects of firms payout policies on financial flexibility? n. Do managerial compensation contracts and structures appropriately align the interests of shareholders and managers? Explain your findings. o. What are the effects of risk management activities on the enterprise value and Tobins Q? Is there any evidence that the risk management has increased the enterprise value and/or Tobins Q? p. How sensitivity is the firms sales, costs, operating profits and net income to changes in exchange rates, commodity prices, interest rates etc.?

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