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Transcription of this question: 5.ScholasticAlthough more than 325 million copies Of the Harry Potter books have been sold worldwidesince 1997, market analysts claim that the publishing company has failed to take fullfinancial advantage. Some have argued that Scholastic, the privately owned publisher Of theHarry Potter books, has not used the high levels Of working capital held by the company to furtherdevelop their business and boost profitability.One analyst has estimated that with the release Of the final and seventh book in the series,”Harry Potter and the Deathly Hallows”, Scholastic will earn an additional $325 million for thefinancial year 2007-8. The company will also earn an additional SIO-15 million per year for the nextthree years from special editions, two more movies and paperback copies.Some market analysts have argued that Scholastic should not remain a private limited company,and that a change in leadership, away from the Robinson family would benefit Scholasticsignificantly. However, Richard Robinson, Scholastic’S chief executive officer and son Of thefounder disagrees: “we have no need to float the company on the stock market. Our investors haveachieved great results and do not need to sell the company”. Robinson would prefer to retain his levelOf control and maintain the original objectives and vision.[Source adapted from MAW bloombergcom, August 20071(i)(ii)Define the term working capital.Identify two characteristics Of a private limited company.[2 marks][2 marks](b)(c)(d)Explain one advantage and one disadvantage for a firm such as Scholastic Ofholding high levels Of working capital.[6 marks]With reference to the product life cycle, analyse why firms such as Scholasticundertake extension strategiesEvaluate whether the leadership Of Scholastic should be taken away from theRobinson family.[6 marks][9 marks]

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