YOUR Company Case Study
Question 1. (10 points)
Look at the latest issues and/or repurchases of equity and/or debt of YOUR Company.
a. Explain how owner’s equity could be affected by the choice of equity or liabilities. Use some ratios to illustrate.
1. The dividend payout ratio is 23.7 %( 159/671). Dividend payment can vary from different companies. For growing companies, they tend to reinvest using their equities so the dividend payment may be very low or even zero, but Beiersdorf is a mature company, so it has a high dividend payout ratio. Nevertheless, this also implies that the share price of Beiersdorf is unlikely to appreciate much in a short time.
2. The opening balance of equity in year 2015 is 3640 while the closing balance is 4201. This is due to the …show more content…
(15 points)
a. Given the activity and the compensation schemes for the top management of YOUR Company, which elements would raise your concern regarding possible earnings management practices? Illustrate with examples.
The presiding committee discuss the remuneration of executive board and the supervisory board. The compensation scheme comprise the flowing four component:
1. A fixed basic remuneration component
2. A variable bonus liked to the achievement of annual targets, consisiting of a short-term bonus and a multi-year spanning a period of three years,
3. A long-term bonus based on enterprise value performance( enterprise value component/ LTP)
4. Customary ancillary benefits
(page13)
The compensation liked with enterprise value raised my attention. As stated in the report(page 13) , enterprise value is calculated by adding together sales and EBIT as reported in the consolidated financial statements and applying a multilplier. Nevertheless, this multiplier varies from company to company. In other words, each company choose its own multiplier for enterprise value, and earnings management may intervene at this stage.
b. Provide two mechanisms already implemented at YOUR Company to minimize the risk of earnings management? Explain their …show more content…
For former members of the executive board and their dependents, the payments and provisions for pension obligations are disclosed.
All the balance and amounts are compared with previous year.
There is no material transactions between the members of beiersdorf AG’s executive board or supervisory board and the companies of the beiersdorf group in the fiscal year.
In my opinion, the information of related parties disclosed here is sufficient. We can know exactly how much money the key managerial personnel get from the company and how this amount is decided.
Why it is needed:
According to IAS24, the related party disclosures are to ensure that an entity's financial statements contain the disclosures necessary to draw attention to the possibility that its financial position and profit or loss may have been affected by the existence of related parties and by transactions and outstanding balances with such parties. to ensure that an entity's financial statements contain the disclosures necessary to draw attention to the possibility that its financial position and profit or loss may have been affected by the existence of related
Look at the latest issues and/or repurchases of equity and/or debt of YOUR Company.
a. Explain how owner’s equity could be affected by the choice of equity or liabilities. Use some ratios to illustrate.
1. The dividend payout ratio is 23.7 %( 159/671). Dividend payment can vary from different companies. For growing companies, they tend to reinvest using their equities so the dividend payment may be very low or even zero, but Beiersdorf is a mature company, so it has a high dividend payout ratio. Nevertheless, this also implies that the share price of Beiersdorf is unlikely to appreciate much in a short time.
2. The opening balance of equity in year 2015 is 3640 while the closing balance is 4201. This is due to the …show more content…
(15 points)
a. Given the activity and the compensation schemes for the top management of YOUR Company, which elements would raise your concern regarding possible earnings management practices? Illustrate with examples.
The presiding committee discuss the remuneration of executive board and the supervisory board. The compensation scheme comprise the flowing four component:
1. A fixed basic remuneration component
2. A variable bonus liked to the achievement of annual targets, consisiting of a short-term bonus and a multi-year spanning a period of three years,
3. A long-term bonus based on enterprise value performance( enterprise value component/ LTP)
4. Customary ancillary benefits
(page13)
The compensation liked with enterprise value raised my attention. As stated in the report(page 13) , enterprise value is calculated by adding together sales and EBIT as reported in the consolidated financial statements and applying a multilplier. Nevertheless, this multiplier varies from company to company. In other words, each company choose its own multiplier for enterprise value, and earnings management may intervene at this stage.
b. Provide two mechanisms already implemented at YOUR Company to minimize the risk of earnings management? Explain their …show more content…
For former members of the executive board and their dependents, the payments and provisions for pension obligations are disclosed.
All the balance and amounts are compared with previous year.
There is no material transactions between the members of beiersdorf AG’s executive board or supervisory board and the companies of the beiersdorf group in the fiscal year.
In my opinion, the information of related parties disclosed here is sufficient. We can know exactly how much money the key managerial personnel get from the company and how this amount is decided.
Why it is needed:
According to IAS24, the related party disclosures are to ensure that an entity's financial statements contain the disclosures necessary to draw attention to the possibility that its financial position and profit or loss may have been affected by the existence of related parties and by transactions and outstanding balances with such parties. to ensure that an entity's financial statements contain the disclosures necessary to draw attention to the possibility that its financial position and profit or loss may have been affected by the existence of related