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Homework answers / question archive / While contracting with celebrities to endorse a company's brand adds to the competitive power of its product offering vis-a-vis the offerings of rivals, one of the big risks in trying to outbid rivals to win celebrity endorsements is is making an accurate forecast of whether the company will have adequate cash flows to pay the contracted amount to the celebrity without having to borrow the money or cut dividend payments to shareholders

While contracting with celebrities to endorse a company's brand adds to the competitive power of its product offering vis-a-vis the offerings of rivals, one of the big risks in trying to outbid rivals to win celebrity endorsements is is making an accurate forecast of whether the company will have adequate cash flows to pay the contracted amount to the celebrity without having to borrow the money or cut dividend payments to shareholders

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While contracting with celebrities to endorse a company's brand adds to the competitive power of its product offering vis-a-vis the offerings of rivals, one of the big risks in trying to outbid rivals to win celebrity endorsements is is making an accurate forecast of whether the company will have adequate cash flows to pay the contracted amount to the celebrity without having to borrow the money or cut dividend payments to shareholders. the inability to know how much to cut spending on advertising in order to help cover some of the contractual payments to the celebrity. that it is so hard to come up with a reliable estimate of the size of the sales volume/revenue/profit payoff associated with signing a celebrity and thus avoid bidding more than the celebrity's endorsement is worth. underestimating how much a company can raise the prices it charges for branded footwear (should it be the winning bidder) to help cover most, if not all, of the costs of paying the contracted amount to the celebrity. is forecasting how much the company will need to increase advertising expenditures in each of the four geographic regions in order to realize a profit on the celebrity contract should it be the winning bidder.

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