Xenon was considering growth opportunities by analyzing firms that would be financially profitable to the company. The case protagonist James Amphlett was a financial analyst with the job to analyze the company PolyMedica. The company was growing rapidly. It was a provider of diabetes testing apparatus to senior people. The market of the company was niche since the end-receivers of the apparatus were only those whose health was covered by Medicare. The products were marketed by an actor Wilford and were aired late at night. The policy of the company was direct responses to the advertisements. This marketing strategy of direct responses was viewed critically by the analysts.
1. Will the SEC require Poly-Medica to change its method of accounting for direct response advertising?
2. If the company restated its financial statements, what would the impact be on the company’s stock price?