Corporate Finance and Investment Advisory Case Studies
Professional5 Case StudiesUpdated Sep 2026
Corporate finance work rarely arrives as a clean problem. A reconciliation will not close, a forecast drifts below plan, or a credit file holds one document that does not fit the rest. The five cases here span distribution, consumer products, wealth management, lending, and audit remediation. Each asks the same underlying questions: what the records show, how much exposure sits behind what cannot be explained, what control evidence exists, and where the decision thresholds fall. The organizations are fictional, and the logic should carry over. Test each recommendation against your own firm's policies.
Case Study 1
Receivables variance hidden in a lockbox change
Corvane Industrial Supply, a regional distributor of pumps and pipe fittings with four warehouses and about 2,300 active trade accounts.
The situation
Corvane closed its quarter with a 412,600 gap between the accounts receivable subledger and the general ledger control account. The difference surfaced in the second week after close, when Priyanka, the senior accountant in shared services, ran the standard tie-out and found the subledger higher. Three warehouses post customer payments through a lockbox that batches receipts, and the batch timing had shifted after the bank updated its portal. Marcus, the treasury analyst, also found two remittances on the bank statement with no matching application in the subledger. The prior reconciliation had been prepared by a contractor who left mid-close, and no one had reviewed the workpapers since.
The challenge
The controller needed a figure she could sign before the board pack went out. The records disagreed in at least three places, the subledger, the ledger, and the bank file, and the gap mixed timing, duplication, and possibly unrecorded cash. The team had to separate those components before proposing any entry. Each item also needed a route, either normal posting or formal write-off approval. Without agreed thresholds, every line would look like an emergency.
Analysis
The first step was to build a bridge instead of a plug. Each reconciling item was classified as timing, error, or unexplained, and each needed its own evidence, such as a bank value date or a posting log. Most of the 412,600 came from lockbox batches posting one business day late, which clears on its own. The rest split into duplicated postings of 38,900, fourteen receipts worth 21,700 that no customer account claimed, and a residual of 33,600 still under review. Exposure sat in the unexplained portion, since unmatched cash can conceal misapplied collections. The net variance on the report understated that risk.
Control evidence mattered as much as the arithmetic. The lockbox change never reached the change log, and the prior reviewer signed after the subledger was locked, so the sign-off showed little. Teams grounded in Corporate Finance and Investment Advisory usually start by asking which control would have caught the error sooner, then set thresholds that force escalation. Corvane adopted three: any unexplained item above 10,000, any item older than two close cycles, and any manual journal without a second approver. The thresholds are blunt, but they turn a write-off made under deadline pressure into a decision with a named approver.
- Match balances Tie subledger, ledger, and bank file to one cutoff before proposing entries.
- Classify variances Tag each item as timing, error, or unexplained, with attached evidence.
- Escalate breaches Breaches over 10,000, two cycles old, or unapproved go to the controller.
- Review and sign Controller signs only after the open list is shorter than the prior cycle.
Actions taken
- Post the timing items only after confirming bank value dates, and record each clearance against its batch identifier so the trail survives audit.
- Hold the fourteen untraced receipts in a suspense account, assign each to a named collector, and release nothing without customer confirmation.
- Route the duplicated postings of 38,900 through a reversing entry approved by the controller, with both source documents attached to the same record.
- Set the three escalation triggers in the close checklist, and report any breach to the audit committee chair in the monthly pack.
Results
Within the next close, the untraced amount fell from 21,700 to under 3,000, and every remaining item had either cleared through posting or been written off with approval on file. The duplicated postings were reversed before the quarterly statements went out. The lockbox timing change now appears in the change log with a standing note for treasury. The preparer hours for the following reconciliation dropped by about half, mostly because the bridge format showed open items on the first day. Two of the three triggers fired the next quarter, and both were resolved inside the window.
Questions for discussion
- Which of the three triggers would have fired earliest in the original quarter, and what would it have cost to catch the error then?
- How should a suspense balance be presented to the board when customer confirmations are still outstanding?
- What evidence would convince you that a staffing gap, rather than the bank portal change, caused the original variance?
Case Study 2
Revenue shortfall and a covenant floor in view
Hallett Ridge Outdoor, a designer and seller of camping equipment with a distribution center, three retail partners, and its own online store.
The situation
Hallett Ridge had planned fourteen percent growth for the year, built on a launch of a new tent line through two retail partners. By the end of the second quarter revenue sat nine percent below plan. Part of the gap traced to a supplier that delivered the tent frames three weeks late, leaving the retail partners short for their peak buying window. The online channel was also weaker than expected, with conversion down and returns up on the lighter models. Available liquidity stood at 2,800,000 against a lender covenant floor of 2,000,000, and the forecast team had been asked to show whether the company could hold its plan or needed to cut.
The challenge
Revenue and cash flow were moving in different directions. Sales were down, but inventory had been bought on terms that still required payment, and the board wanted to know whether the shortfall was timing or structural before approving any hiring or lease commitments. The lender also asked for a revised forecast by the end of the month. Each option had different consequences: cutting too early could damage the retail relationships, while waiting too long could push liquidity toward the floor.
Analysis
The forecast was rebuilt from order-level records, not from the plan's growth rate. Three scenarios were set. The base case assumes delayed frames arrive on the revised date, leaving the year about four percent under plan. The downside keeps online conversion weak and returns high, leaving the year eleven percent short. The severe case adds price concessions that push liquidity toward the covenant floor in the final quarter. Each assumption was tested against the supplier's shipping log, partner reorder emails, and the returns register. The shipping log confirmed the new date for only half the frames, weakening the base case.
Decision thresholds turned the scenarios into actions. Liquidity headroom above the covenant floor was set at 800,000, so any forecast that dropped below that line would trigger an immediate spend review. Discretionary cuts were approved in blocks of 250,000, and commitments longer than a year needed a board vote. Levers were ranked by reversibility before size, since a reversible cut limits the cost of being wrong about the shortfall. The matrix sorts the options that way.
Actions taken
- Pull the hiring freeze and travel limits now, since both can be reversed within a month and keep headroom above the 800,000 trigger.
- Confirm the revised frame delivery with the supplier in writing, and tie the retail restock orders to confirmed ship dates rather than the original schedule.
- Negotiate a return-rights extension on the next inventory buy of 250,000 so that the online weakness does not leave stock stranded.
- Defer the warehouse expansion behind a dated board trigger, returning for a vote only if liquidity holds above the floor for two months.
Results
The revised forecast showed a year-end revenue gap of about four percent in the base case, with liquidity staying above the 800,000 trigger throughout. The hiring freeze and travel limits released 310,000 in the next two months. The supplier confirmed dates for all frames after a formal request, and the partner restock orders moved to those dates. The lender accepted the revised forecast without a covenant waiver, though it asked for monthly reporting. The warehouse expansion stayed on hold, and the board set a review point tied to liquidity.
Questions for discussion
- What evidence would have justified keeping the expansion in the plan, and at what liquidity level would you have reversed that choice?
- How should the severe case be weighted against the base case when the board asks for a single number?
- Which lever would you have pulled first if the supplier had confirmed a later delivery date than the one in the revised forecast?
Case Study 3
Concentrated holdings and unexplained deposits in one account
Pelham Crest Capital, an independent wealth manager running discretionary portfolios for about 180 families, with a compliance team of four.
The situation
Ruth, a portfolio manager, flagged an account during a routine concentration review. A single issuer had grown to 41 percent of market value after a series of purchases over the prior two quarters, well above the house limit of 15 percent. The same account had received 19 incoming transfers over six weeks, each between 4,000 and 9,500, from three different banks, none tied to the client's stated income. Then 600,000 was transferred to a third-party account held by a company the client had not disclosed. The advisory agreement described the client as a retired engineer with modest liquid savings.
The challenge
Each signal alone had a plausible explanation. A concentrated position can come from a founder's stock or an inherited holding, and deposits from several banks can reflect normal banking habits. Together, though, they described a client whose activity did not match the profile on file. The firm had to decide whether to hold trades, what to ask the client, and whether the pattern met the threshold for a suspicious activity review under its anti-money laundering procedures, all without tipping off the client prematurely.
Analysis
The exposure had two parts. The concentration created market risk about 26 percentage points above policy, which rebalancing would have to address regardless of the source of funds. The transfers created a different risk: the outbound 600,000 left the account before the firm had documentation for the receiving party. The file held the account opening form and two statements, but no source-of-funds declaration, no ownership record for the third party, and no note on the deposits. Documentation gaps, not the pattern itself, were the first thing the reviewer could fix.
Escalation turned on thresholds the firm had already written down. Its procedures required review when a transfer to an undisclosed party exceeded 250,000, when unrelated deposits passed 100,000 in ninety days, or when a breach lacked an exception. All three were met, with deposits totaling 128,300 in the window. Dimitri, the compliance officer, referred the case to the reporting committee and instructed the desk to hold discretionary sales pending review. A hold like that works as a control in its own right, since it stops the record from growing while the facts are checked.
Actions taken
- Hold discretionary trading on the account pending compliance review, and document who approved the hold and the reason for it and when.
- File a suspicious activity report if the source-of-funds review does not resolve the deposits within the window set by the firm's procedures, and keep the decision memo with the file.
- Request the client's source-of-funds declaration, the payee's ownership details, and written reasons for the transfer, sent through a channel that is logged and reviewed.
- Require a documented exception or a rebalancing plan for the 41 percent holding, approved by the chief compliance officer, with a date by which the position must fall under the limit.
Results
The desk held discretionary trades for six business days while the source-of-funds file was completed. The client's explanation covered the deposits as proceeds from the sale of a property, but the supporting closing statement arrived only for part of the amount. The reporting committee filed a suspicious activity report on the undocumented portion and approved a rebalancing plan that brought the single issuer below the limit within the following quarter. The firm added a rule to its onboarding checklist that flags stated income against early deposit activity, which compliance had not tested before.
Questions for discussion
- At what point would you have stopped waiting for the client's documents and filed the report, even if the explanation sounded plausible?
- How should the firm weigh a concentration breach that predates the deposits when deciding which signal drives the escalation?
- What would you need to see from the payee before you were comfortable releasing any further funds?
Case Study 4
Acquisition loan request from a family bakery producer
Marrow Creek Foods, a family-owned bakery and frozen dough producer with two plants and about 620 employees.
The situation
Marrow Creek Foods wanted a 3,500,000 term loan to buy a competing frozen dough plant from a retiring owner. The business had grown sales steadily over the last three years, but the purchase would add a second production site with higher fixed costs. The owners offered the existing building and equipment as collateral and proposed interest-only payments for the first year. Lantern Point Capital, a middle-market lender, had asked its analyst, Keisha, to prepare the credit memo and recommend whether to approve, decline, or approve with conditions. The owners also asked the lender to set aside the leverage covenant for the first two quarters after closing.
The challenge
Historical cash flow looked healthy, but it reflected one plant running near capacity. The question was whether the combined business could cover debt service if the new plant took longer to reach volume, or if input costs for flour and shortening rose sharply. The memo also had to test suitability: a family business with limited finance staff, and a structure that front-loaded risk into the second year.
Analysis
The evidence began with audited statements and monthly management accounts, reconciled to bank activity before any ratio was calculated. Pro forma EBITDA for the combined group came to 2,450,000 on a trailing basis, but the seller's plant contributed only 380,000 of that, and its figures were unaudited. The model assumed the plant reached 85 percent utilization in the second year. In a downside case with 65 percent utilization and ingredient costs up 12 percent, coverage fell from 1.9 times to 1.1 times. The severe case removed the plant's contribution entirely for a year.
Suitability and structure decided the recommendation as much as the coverage ratio. The memo recommended approval with conditions, not approval as requested. A waiver of the leverage covenant was declined, since it would have removed the only early warning the lender holds. The owners had no treasury function, so a covenant breach would arrive as a surprise. Lantern Point set approval at 1.3 times downside coverage and leverage at 3.0 times or less at closing. Conditions belong inside the decision itself, since an approval without them is a forecast no one can test later.
- 1Verify historical cashReconcile audited statements and management accounts to bank activity before ratios.
- 2Test seller plantHaircut unaudited earnings and model utilization below the seller's own forecast.
- 3Stress debt serviceRun downside and severe cases against the 1.3 times coverage threshold.
- 4Set conditionsAttach leverage ceiling, reporting dates, and covenant terms to any approval.
- 5Decide and recordApprove, decline, or approve with conditions, with the basis written in the memo.
Actions taken
- Require the seller's plant records, including monthly volumes and input costs, before the lender accepts any pro forma figure for the second site.
- Decline the covenant holiday and instead set the first test date at the end of the first full quarter, with a reporting pack due within fifteen days.
- Cap the acquisition facility at 3,000,000 and require equity from the owners of at least 1,000,000 before the first draw, so they carry part of the risk.
- Revisit the file if the combined business misses the 1.3 times threshold for two consecutive quarters, and require a written plan before any dividend is paid.
Results
Lantern Point approved the loan with conditions: a 3,000,000 facility rather than the requested 3,500,000, owner equity of 1,000,000 before the first draw, and a leverage ceiling of 3.0 times. The covenant holiday was declined. The seller's records arrived in the third week of review and showed utilization near 70 percent, which was above the downside case but below the base. The owners accepted the structure, though they asked for a longer first interest-only period, which the credit committee refused. The plant closed on schedule, and the first covenant test passed.
Questions for discussion
- Which assumption in the seller's forecast would you have tested first, and what evidence would have changed your view of the coverage ratio?
- How would the recommendation change if the owners had refused the equity contribution but accepted a lower facility amount?
- When does a covenant holiday serve the borrower, and when does it remove the lender's ability to act early?
Case Study 5
Control gaps in vendor payments after an internal review
Greystone Harbor Medical Supply, a distributor of clinical consumables with twelve branches and a finance team of 22.
The situation
The internal audit team reviewed vendor master changes, purchase approvals, and payment runs over a six-month period. Its fieldwork found that 14 vendor bank details had been changed without a second verification, that two branches paid invoices above approval limits by splitting them into smaller amounts, and that the monthly reconciliation of the accounts payable control account had not been signed by a reviewer in four consecutive months. The total payments touched by these gaps came to 3,140,000, though most were valid. The audit committee asked for ranked findings, named owners, and closure evidence before the next meeting.
The challenge
Five findings had come out of the review, and the committee wanted them ranked by materiality rather than by how alarming they sounded. Some issues were small in dollar terms but serious in principle, such as a bypassed approval limit. Others were large but mostly reflected timing. Management also needed to avoid assigning every finding to the controller, which would have concentrated the risk in one person and made closure impossible to verify.
Analysis
Materiality was measured on two axes: the value of payments exposed and the likelihood that the gap enabled loss. The vendor bank changes ranked first. Fourteen changes covered vendors who together received 912,000 in the period, and the audit could not confirm that any change was requested by the vendor. The approval bypass ranked second, with split invoices totaling 186,000 above the limit. The reconciliation lapse ranked third. The balance agreed to subledger totals after recount, so the loss exposure was small even though the control had clearly failed.
Each finding received one accountable owner, named by role rather than by team. The bank change control went to Tobias, the head of vendor management, and the approval bypass to Hanna, the regional finance director. Closure tests had to produce evidence that someone outside the owner's line could inspect. Findings above 250,000 in exposure needed committee sign-off to close. For the bank change control, the test was a sample of 40 vendor changes from the following quarter, each with a callback log. Two clean sample results in a row are required before a finding closes, since one clean sample may reflect who was watching.
- First weekFreeze vendor bank changes until each pending request has a callback record.
- Second weekReassign approval authority so no branch manager can approve above limits alone.
- Within six weeksComplete reconciliation sign-off for all open months and rerun the sample test.
- By quarter endTwo clean sample tests on the bank change control, reviewed by internal audit.
- Following quarterAudit committee confirms closure of findings above 250,000 with evidence on file.
Actions taken
- Call back a known number for every vendor bank change, and log the caller, the time, and the approver before the new details are released for payment.
- Route every invoice above the branch limit to the regional finance director, and block the payment run from releasing any amount that appears split across two or more lines.
- Assign a reviewer who did not prepare the reconciliation, and require a signed review within three business days of month end, with the reviewer's query log attached.
- Close each finding only when two consecutive sample tests pass and the evidence sits in the audit file, not in the owner's email.
Results
The bank change control closed after two clean samples, though the first sample found three changes missing a callback, which kept the finding open for one more cycle. The split invoices were traced to two branches, one of which had a manager who had not understood the approval matrix. Both branches were retrained, and the payment run now blocks split amounts automatically. The reconciliation sign-off ran on time for the next four months. The committee closed the first two findings in the following quarter and kept the reconciliation finding open until the sign-off history was complete.
Questions for discussion
- Which of the five findings would you have ranked above the vendor bank changes, and what exposure figure would have changed the order?
- How would you test closure for a finding whose control failure was real but whose loss exposure proved to be small?
- What evidence would convince the audit committee that a branch manager's understanding of the approval matrix had actually improved?
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