A Study Of Capital Budgeting Essay

1220 Words Oct 6th, 2016 5 Pages
INTRODUCTION Euroland Foods S.A. case is a study of capital budgeting. The case illustrates what problems the senior management committee faces when their proposals exceed the capital budget given by the board of directors. Sales were becoming stagnant, and the committee wanted to try and find ways to increase the sales. Some ideas were expanding the market to more European countries and offering new products. The committee had to agree on how much funds would be allocated to their proposals.
BACKGROUND OF FIRM
Euroland Foods is a European producer in different types of ice cream, yogurt, bottled water, and fruit juices. The company has been in operation since 1924 and went public in 1979. Ice cream is its most profitable line of business accounting for three fifths of revenue. Slow growth in sales have been in effect since 1998, and the company is trying to find opportunities to increase its sales. Euroland Foods has seven senior managers with different proposals such as expanding the truck fleet, building new plants in Europe, introducing new yogurt and ice cream. Not all proposals will be passed because the total amount of all proposals is higher than the budget for 2001. The board of directors consists of twelve members which include family members, management employees, and other directors from northern Europe. The family members own one fifth of the shares outstanding while under half are widely held. The board of directors approves the annual budget for…

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