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Deutsche Brauerei

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Submitted By renmclen89
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Introduction:
Greta Schweitzer requires assistance in determining how the company, Deutsche Brauerei should best proceed in the future, to achieve optimum financial results. Specifically, Schweitzer needs to consider what her position is on adopting the company’s financial projections for the future, the firm’s dividend policy and the compensation package that should be offered to the leader of international expansion, Oleg Pinchuck. There are other areas of Deutsche Brauerei’s operations however, that it appears worthwhile for Schweitzer to assess. These include Deutsche Brauerei’s practise of taking on excessive short-term debt, and the subsequent effect that has on the firm’s working capital. A further impact on Deutsche Brauerei’s working capital could be as a result of the effect of Pinchuck’s extremely relaxed accounts receivable in Ukraine. Finally, Schweitzer should evaluate the benefits and shortfalls of the firm’s aggressive expansion into Ukraine.
Dividends Declaration Policy:
Deutsche Brauerei is currently enjoying a high growth rate in sales, for 2001 the projected growth rate is approximately 48%. It is unusual that a firm that is so successful at generating sales is taking on such a large amount of short-term debt. One of the principle reasons Deutsche Brauerei has such a large amount of short term borrowings is the pressure they are put under to provide such a substantial dividend payment to shareholders.
The largest financial demand’s the firm is currently facing is that they require EUR 7 million for investment in new plant and equipment in 2001 and according to the projections of Pinchuk, are planning to maintain a very high dividend payout ratio for the coming two years of 75%. The biggest driver to the short-term borrowing is the large dividend this company pays. They are paying a 75% dividend at present, and Pinchuk has proposed this…...

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