Bayern Brauerei.pptVIP

Bayern Brauerei Bayern Brauerei (Group D) What accounts for Bayern Brauerei’s rapid growth in recent years? Specifically, what choices account for this success? What does the financial forecast tell us? The sources-and-uses-of-funds statement? The financial ratios? What does the breakeven chart tell us? Operating Leverage The breakeven point is 543,607HL 1992 volume is 667,000HL Above the breakeven point small increases in unit volume lead to large increases in operating profits But…. Small decreases in unit sales decreases operating profits significantly. Current unit volume provides some safety margin…. But not much. May explain the thirst for growth. Only measures the cost/revenue breakeven for the current cost structure. Sensitivity Analysis Financial Forecasts The Forecast Bayern will need large amounts of short term debt to fund expansion if the proposal above is accurate. Financial Forecasts Sources and Uses of Funds Sources Income Rapid Depreciation In 1993-1994 short term debt is the major source of cash used to finance the expansion Uses Increases in working capital (inv. And accts rec.) Dividend payments Debt Payments 1993 and 1994 major increase in capital expenditures Financial Ratios Profitability What caused the decrease in profitability from 1989 to 1992? What causes the more optimistic forecasts for 1993 and 1997? Are they warranted? If profitability does not improve how will that affect borrowing needs? Leverage Debt ratios raise dramatically over the two forecasted years; what provision is made for repayments? How does the raise in profitability above impact coverage? Is it reasonable? Asset Utilization Overall asset turnover has improved as sales increased more rapidly than assets form 1989-1992 This masks the large build-up in current assets Virtually all due to eastern expansion While the build-up was due in part to increased sales; it was also the result of a dramatic change in terms Liquidity Liquidity improves from 1989-1992 Decline