Deutsche Brewery Question and Answer

1. What distinguishs for Deutsche Brauereis (DB) rapid growth in recent years? What strategic choices were made? The Ukraine narration grow rapidly in the recent years. The strategic is just expanding, more focus on the sale/volume, non on how to wring the order to gold. It can be unders aliked that the local distri neverthelessors indispensableness some constitution support from DB, because they just start, still at the offset printing of capitalization period. The current credit policy is applicable for the starting phase, but longsighted shape it affects to be adapted (e. g yearbook bounce on the brook on time accounts).Meanwhile because of fast expansion, more investments on the Assets in Ukraine is needed. The pecuniary plan includes a 7 trillion euro investment in new plant and equipment for the Ukrainian operations in 2001, followed by a 6. 8 million euro investment in 2002 for a new Ukranian warehouse and distribution center. Which is reasonable, but need more decimal point plan/business case before make the decision. I would say, one-half of the follow should be financed by Ukraine team itself, if they are able to turn the account receivable to cash. 2.What is the credit policy for DB for electrical distributors in the Ukraine? why is it different from other sales? Is it appropriate (examine the business models in some(prenominal) instances). The credit policy for Ukranian distributors from 2 percent 10, net 40 to 2 percent 10, net 80 (clients could take a 2% send packing if salary was made within 10 days of the invoice, otherwise payment was due in full within 80 days). The credit policy for Ukranian distributors differed because Ukrainian entrepreneurs, who are ambitious to grow but without support from the hope as in Germany.The credit policy for the Ukranian distributors is applicable, which can support the distributor to expand, buy new equipment, and required more time than usual to pay. in any case is a expert investment for DB to build up the kinship with the distributor and meanwhile invest for the futurn. But on the other hand, long payment turn cost bad cash flow. In Ex1, the account receivable increase a lot, which 3. Why does this profitable firm need increasing amounts of debt? If the company wants to expand, they need cash.It seems that DB is profitable, but because of the big account receivable, which cause actually cash tie-up. In order to still trammel expanding, DB have to increasing amount of debt for investing. 4. approximatelything about dividends The every quarter dividend proposed is 698,000 euro, an amount equal to 25% of the project 2001 dividends (2,793 k). However, this dividend increase is backsided on projected earnings, and several factors affect whether those earnings. Better to reserve a part of money till end of the year. . What should Greta do with respect to the proposed raise for Pinchuk, the quarterly dividend and the financial plan for 2001? Regarding the credit policy for Ukranian distributors, Oleg argues that this process is profitable for the company. Actually, Ex1 in the base case shows accounts receivables in the Ukraine increased 30% from 1999 to 2000, and is projected to increase for the attached 2 years (50% then 30% based on the foregoing year). Having a large amount of money tied up in receivables is happeny.My idea volition be short the payment to 40 days, pay in 10 days lead have even large discount 3-4%, meanwhile, if the account can pay all the bill on time (40 days), can get annul bounce (tbd). For the investment, I will be more careful, Although the data should the growth of sale and assent is not hand in hand. But because of the high debt/equity ratio, I will be more careful on the investment, avoid to have too high debt. We can try to work together with one or two local disctributors (e. g. Kiev, Odessa) to have JV project.About the dividends, I will perhaps go for 60% of earning, which mean 15% of the projected an nual dividends for the quarterly pay. Just in case, if the actual data is not as good as predicted data, we still have enough cash to run the business. 6. Some observation of Ex4. Profitability low return Leverage high risk (high debt) Asset utilization receiveables growth rate high longer payment. disagreement between sale growth and asset growth. Sale Growth is lots higher than assent growth, need to consider investment. Liquidity short term financial commitment. Quick ratio is too high.