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Deutsche Brauerei Case Essay

801 words - 4 pages

Deutche Brauerei is a family run German Beer Company. It is owned entirely by 16 uncles, aunts, and cousins from the Schweitzer family. The Schweitzers are brewers, not marketers or finance people, so they have hired Oleg Pinchuk to help with the marketing aspects and Greta Schweitzer, Lukas Schweitzer’s niece, to give financial expertise. The company’s agenda includes: approval of the 2001 financial budget, declaration of the quarterly dividend, and adoption of a compensation scheme for Oleg Pinchuk. Greta also wants to study the company’s reliance on debt financing and whether or not Deutsche’s aggressive penetration of the Ukraine helped the company.
Although it appears that Oleg ...view middle of the document...

It is best to work on making these distributors more reliable before expanding and adding even more risk.
Even though the company is operating at breakeven, it still relies on debt financing due to all of the expanding it wishes to do. If the company wishes to continue aggressively expanding in Ukraine, its liquidity via the current ratio will substantially decrease from 1.34 to 1.27 in 2001 and continue to decrease in 2002. Its quick ratio will also decrease by .04 points. The company’s leverage will also suffer. The debt to equity ratio will rise to 77% and continue rising in 2002 to 82.7%. Its debt to total capital ratio will rise to 43.5% and continue rising in 2002 to 45.3%. This is a lot of risk to take on especially since a global economic recession is likely to occur. It is better to play it safe and not expand during this time so that the company does not suffer.
I think the projections for future sales may be a little too optimistic. Especially if the company does not expand as I have suggested. It would be best to decrease the amount of dividends proposed just to play it safe. Instead of the original 75% dividend payout, I think it is a better idea to only do a 70% dividend payout. The family stockholders will...

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