Essay about Deutsche Brauerei Case
Although it appears that Oleg Pinchuk has done a great job at aggressively …show more content…
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 be understanding when given reports of the likely global economic recession. Since Pinchuk has dramatically helped the company grow and seems to be doing a good job at it, I do believe he deserves some kind of raise. His knowledge is