Deutsche Brauerei Essay

2694 Words Dec 31st, 2013 11 Pages
The proposals of the meeting with board of directors for Greta Schweitzer consisted of three items of business: (1) approval of the financial plan for 2001, (2) declaration of the quarterly dividend, and (3) adoption of an incentive compensation plan for the marketing manager. She has to evaluate the past financial performance of company and review the strategies about credits and inventories. Deutsche Brauerei produced the quality beers over the years. Its net sales and profit have been incredibly growing in recent years. There are many of factors explained their growth. One factor is that they acquired the equipment in 1994 which are efficiency improvement. These new equipment increased their potential output. However, the firm …show more content…
Increase in Accounts Receivable – Deutsche Brauerei tends to have more accounts receivable. Consequently, management team should estimate allowance for doubtful account higher than ever as the more the firm has account receivables the more risk the firm have to take. (See Exhibit 2)
Increase in Inventories – Firms are likely to stock up more inventory when they are expecting sales to grow. This is understandable since the company wants to cover the demand that rises among customers. Consequently, Firm needs more money as holding cost increases.
Increase in Capital Expenditures – In order to meet expected increase in demand, Deutsche Brauerei surely needs to expand their production capacity. In sufficient production capacity could result in turning down the orders and that costs the firm. The company have to spend more money on capital expenditures like purchasing new technologically improved equipment, new factories, distribution centers and warehouses building etc. and that's why they should put themselves into debt. Production expansion typically results in lower fixed cost per unit as well.
According to these items that increase together with sales due to firm growth. Deutsche Brauerei definitely needs additional fund to cover these items to run the business smoothly. Since this company is not a public company and the all shareholders are the Schweitzer family with half of them have dividends as their income. We think it

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