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Bayern Brauerei Finance Case

1. How would you describe Bayern Brauerei's current financial health with respect to:
a. Growth
b. Profitability
c. Cost structure
d. Working Capital

2. Evaluate the assumptions on which the 1993 and 1994 forecasted financial statements are based.
3. Evaluate the proposed expansion plan.
4. If you were Maria Ober, how would you vote on the proposals regarding the expansion plan, the dividend declaration, and the increased compensation for Max Leiter? Why?

See attached file for full problem description.

Solution Preview

1. How would you describe Bayern Brauerei's current financial health with respect to:
a. Growth

The most impressive part of the company. 47% growth in the foreseeable future is a pretty good mark.

b. Profitability

Such indicators as ROA and ROE show that despite a fall down in 1991 (which is explained by expansion in East Germany), the company is regaining their position year by year with a steady growth of those ratios. A positive sign for investors.

c. Cost structure

The breakeven analysis seems to be pretty solid and given the expected rapid growth in the East Germany, their revenues would quickly surpass the breakeven point.

d. Working Capital

The only point for concern here would be the fact that the company is very dependent on debt financing. That in turn lowers ...

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