Ac 465 Parmalat

Unit 4: Assignment 1. According to Tapies and Toninato (2007), Calisto Tanzi created the Parmalat Group in 1961. He was a young businessperson that had inherited the business from his father. Originally, the business was founded by his grandfather, which was called Ditta Tanzi Calisto and Sons. Business began to fail because of health. Therefore, he made his son take charge of the business who at the time was only 22 years of age. According to Tapies and Toninato (2007), there were three intuitions that could change business. Firstly, the companies brand seemed to boring, so it needed more of an appealing look. Secondly, they needed more products because their list of offerings was too narrow. Finally, they need to make the business more profitable, so they needed to expand their area. 2. Financial problems began in the late Eighties because they were under-capitalized and began to suffer liquidity problems. According to Tapies and Toninato (2007), their debt was about €150 million. Therefore, the roots of their problem were that of low operating margins and high levels of debt. The mechanism that was used was the Parmalat issued its own debt to the subsidiaries in order to cover their losses. They had also issued their debt to other companies that transferred funds to the Tanzi family companies. The debt would appear on the balance sheet, but was due to a fake subsidiary in exchange for cash payments. The cash that was paid was put into offshore companies and the documents were then falsified. Parmalat decided to raise bonds and use their subsidiaries false cash deposits as collateral (Tapies and Toninato, 2007). 3. There are three major players and they are Calisto Tanzi, Fausto Tonna, and Gianpaolo Zini. They ended up forming the “Triumvirate”. You had Calisto Tanzi who was the founder of the group and made all major decision about the company. Fausto Tonna was the CFO until 2003. He started out as the company’s accountant, but