1. Scenario About the business You are the CEO of a multi-national financial services business. Founded...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
1. Scenario About the business You are the CEO of a multi-national financial services business. Founded in the UK in the 1980s, the business concentrates on providing specialist insurance, trade finance, and associated services, including consulting, for companies involved in international commodities trading. The business does not have retail customers. Its expertise and focus are business-to-business. Shareholders and company control The company is listed on the main London Stock Exchange with a roster of institutional shareholders, the largest of which is an insurance company with an 8% stake. You and the other directors collectively own around 2.5% of the company. The value of the shares is £440 million. Trading performance The business's clients are UK based in the main with 85% of the turnover and 90% of the profits after tax coming from UK commodity traders and brokers. There are a few European-based companies that provide the rest of the business. Group turnover is £ 500 million per annum with net profits at £ 60 million, and profits, after tax, are £45 million. There is no debt. Cash in the bank totals £ 89 million at the time of the report. ROCE is 35%. Despite this healthy financial position, over the past few years, business growth has stagnated somewhat. Opportunity knocks However, because of your positive reputation, you have been asked on many occasions, to provide services for Australian commodity businesses that export to China. Similarly, Chinese commodities buyers based in London have asked you to provide services for them in their local markets. You feel that you should expand to exploit the Chinese market and believe that, in order to do the job properly, you need to commit to opening a business where commodity buyers and sellers are therefore in China. Over the years, several of your predecessors as CEO have proposed similar actions. Indeed, once the company did expand into the US market, only to close the operation when commodity prices slumped resulting in client collapses with your company being owed significant fees. Other issues included cultural differences. You view this as a valuable learning experience for the company, rather than a reason not to try and expand again. Board approval You have had the long phone calls and lunches discussing ideas and options. You have gathered the information and have a plan in your mind. You conclude that China is a long-term, super-scale market. You also feel that, in order to compete and be taken seriously, you need to be there physically and culturally. To get the project up and running, you need the full Board of Director's approval in order to propose the expansion to shareholders at the Annual General Meeting. You need to develop a single Board Paper as a business report, covering all the essential information. The report will be reviewed and commented on by two Board committees. These are the Audit Committee (who are interested in the financial impact and the risks of doing business in China and Australia) and the Corporate Social Responsibility (who may focus on wider social and environmental issues). You estimate that, by the third full year, the new business will turnover £150 million per annum with net profits at £48 million, and profits, after tax, will be £31 million. You think the capital requirement for the expansion is in the region of £60 million. The directors have indicated that you can borrow some, or all, of the funding required if you think it is appropriate. They have indicated that they would not support issuing new shares. The Board have agreed that you need to present financial information for the proposal as if it is in the third year only, (you will not need to provide information about years one and two). The board is expecting to see some financial analysis to cover my business, at least the operating profit, return on capital employed, capital, and debt and interest if there is any. 2. Requirement You need to present a proposal to the board of directors of the company to gain their approval for the expansion. They are, generally, a bit risk-averse and medium to long-term thinkers. An expansion of this size requires special shareholder approval, only obtainable at an annual general meeting. Therefore, you only have one opportunity to pitch your proposal. a) short introduction / purpose of the report b) executive summary of the key findings, conclusions, and recommendations c) The main body to cover analysis and arguments including, if appropriate: . • Markets, Products, and Channels - this content area may contain adapted content from the Marketing, International Business and Strategy modules. . Operational Impacts - this content area may contain adapted content from the Operations Management and Strategy modules . • Financial Impacts - this content area may contain adapted content from the Accounting and Finance and Strategy modules. . • Organisational Impacts - this content area may contain adapted content from the Organisational Behaviour and Human Resource Management and Strategy modules d) Limitations - how and where is the data weak? Are there gaps in the scope of your report? e) Conclusions g) Recommendations - remember, you are asking for clear permission to act 1. Scenario About the business You are the CEO of a multi-national financial services business. Founded in the UK in the 1980s, the business concentrates on providing specialist insurance, trade finance, and associated services, including consulting, for companies involved in international commodities trading. The business does not have retail customers. Its expertise and focus are business-to-business. Shareholders and company control The company is listed on the main London Stock Exchange with a roster of institutional shareholders, the largest of which is an insurance company with an 8% stake. You and the other directors collectively own around 2.5% of the company. The value of the shares is £440 million. Trading performance The business's clients are UK based in the main with 85% of the turnover and 90% of the profits after tax coming from UK commodity traders and brokers. There are a few European-based companies that provide the rest of the business. Group turnover is £ 500 million per annum with net profits at £ 60 million, and profits, after tax, are £45 million. There is no debt. Cash in the bank totals £ 89 million at the time of the report. ROCE is 35%. Despite this healthy financial position, over the past few years, business growth has stagnated somewhat. Opportunity knocks However, because of your positive reputation, you have been asked on many occasions, to provide services for Australian commodity businesses that export to China. Similarly, Chinese commodities buyers based in London have asked you to provide services for them in their local markets. You feel that you should expand to exploit the Chinese market and believe that, in order to do the job properly, you need to commit to opening a business where commodity buyers and sellers are therefore in China. Over the years, several of your predecessors as CEO have proposed similar actions. Indeed, once the company did expand into the US market, only to close the operation when commodity prices slumped resulting in client collapses with your company being owed significant fees. Other issues included cultural differences. You view this as a valuable learning experience for the company, rather than a reason not to try and expand again. Board approval You have had the long phone calls and lunches discussing ideas and options. You have gathered the information and have a plan in your mind. You conclude that China is a long-term, super-scale market. You also feel that, in order to compete and be taken seriously, you need to be there physically and culturally. To get the project up and running, you need the full Board of Director's approval in order to propose the expansion to shareholders at the Annual General Meeting. You need to develop a single Board Paper as a business report, covering all the essential information. The report will be reviewed and commented on by two Board committees. These are the Audit Committee (who are interested in the financial impact and the risks of doing business in China and Australia) and the Corporate Social Responsibility (who may focus on wider social and environmental issues). You estimate that, by the third full year, the new business will turnover £150 million per annum with net profits at £48 million, and profits, after tax, will be £31 million. You think the capital requirement for the expansion is in the region of £60 million. The directors have indicated that you can borrow some, or all, of the funding required if you think it is appropriate. They have indicated that they would not support issuing new shares. The Board have agreed that you need to present financial information for the proposal as if it is in the third year only, (you will not need to provide information about years one and two). The board is expecting to see some financial analysis to cover my business, at least the operating profit, return on capital employed, capital, and debt and interest if there is any. 2. Requirement You need to present a proposal to the board of directors of the company to gain their approval for the expansion. They are, generally, a bit risk-averse and medium to long-term thinkers. An expansion of this size requires special shareholder approval, only obtainable at an annual general meeting. Therefore, you only have one opportunity to pitch your proposal. a) short introduction / purpose of the report b) executive summary of the key findings, conclusions, and recommendations c) The main body to cover analysis and arguments including, if appropriate: . • Markets, Products, and Channels - this content area may contain adapted content from the Marketing, International Business and Strategy modules. . Operational Impacts - this content area may contain adapted content from the Operations Management and Strategy modules . • Financial Impacts - this content area may contain adapted content from the Accounting and Finance and Strategy modules. . • Organisational Impacts - this content area may contain adapted content from the Organisational Behaviour and Human Resource Management and Strategy modules d) Limitations - how and where is the data weak? Are there gaps in the scope of your report? e) Conclusions g) Recommendations - remember, you are asking for clear permission to act
Expert Answer:
Answer rating: 100% (QA)
PROPOSAL Proposal for Expansion into the Chinese Market a Short IntroductionPurpose of the Report The purpose of this report is to present a proposal to the Board of Directors for the expansion of our ... View the full answer
Related Book For
Discovering Advanced Algebra An Investigative Approach
ISBN: 978-1559539845
1st edition
Authors: Jerald Murdock, Ellen Kamischke, Eric Kamischke
Posted Date:
Students also viewed these finance questions
-
For 7a-c, use u1= 4. Round your answers to the nearest thousandth. a. For a geometric series with r = 0.7, find S10 and S40. b. For r = 1.3, find S10 and S40. c. For r = 1, find S10 and S40. d. Graph...
-
Liquidity Ratios Mike Sanders is considering the purchase of Kepler Company, a firm specializing in the manufacture of office supplies. To be able to assess the financial capabilities of the company,...
-
Suppose that 75% of the workers have indexed labour contracts. The Phillips curve is given by = + 0.10- 2u. Expected inflation is given by n = (1-0) + 0-1 where is assumed to be one. Suppose that...
-
Let (x) = x - 3, g(x) = x, h(x) = x 3 , and j(x) = 2x. Express each of the functions as a composite involving one or more of , g, h, and j. a. y = x - 3 b. y = 2x c. y = x 1/4 d. y = 4x e. y = (x -...
-
Mill Creek Golf Club purchased equipment on January 1, 2016, for $31,500. Suppose Mill Creek Golf Club sold the equipment for $22,000 on December 31, 2018. Accumulated Depreciation as of December 31,...
-
Identify and explain the objectives of performance appraisal?
-
Income statement information for Sim Corporation in 20x6 is as follows: a. Administrative expenses, $220,000 b. Cost of goods sold, $880,000 c. Extraordinary loss from a storm (net of taxes,...
-
Ratio Computations and Discussion Costner Company has been operating for several years, and on December 31, 2010, presented the following balance sheet. The net income for 2010 was $25,000. Assume...
-
answer urgently basis 9 5 0 .
-
You serve as the trustee for the Josephine Frederick testamentary income trust. The trust was created by the will of her late husband, John. Under the terms of John's will, all assets are transferred...
-
Let f:x->Y and g:Y->Z be two functions (mapping ) (i) If f and g are both injective, then show that the composition of gof is also injective.
-
The US Postal Services uses bar codes to represent zip codes in order to sort them quickly using machines. The machine will read the bar code and direct the letter to the right location. Write a C++...
-
Focus areas for improvement include How do you reduce waste? How do you do a job better? How do you improve the process? AREA 1 Identify and establish strategies to monitor and evaluate the...
-
SCENARIO: You have been hired as a Restaurant Manager for a new exciting upcoming restaurant in downtown Toronto. The owner, Mr. Wandel, has come to you with the question of whether the organization...
-
Cordell Incorporated experienced the following events in Year 1, its first year of operation: 1. Received $52,000 cash from the issue of common stock. 2. Performed services on account for $80,000. 3....
-
For the analysis and procedure (Step 5 and 6) this needs to be calculated using figure 5. Results for Step 2 (procedure and analysis): Results for Step 3/4: Question 1: Deflection of a beam due to...
-
Ron and Robin Reid wish to borrow $540,000 to buy a home. The loan from Biggles Bank requires equal monthly repayments over 20 years, and carries.an interest rate of 7.8% per annum, compounded...
-
Critical reading SAT scores are distributed as N(500, 100). a. Find the SAT score at the 75th percentile. b. Find the SAT score at the 25th percentile. c. Find the interquartile range for SAT scores....
-
Solve. a. 6x + x2 + 5 = -4 + 4(x + 3) b. 7 = x(x + 3) c. 2x2 - 3x + 1 = x2 - x - 4
-
Use these three functions to find each value: f (x) = -2x + 7 g(x) = x2 - 2 h(x) = (x + 1)2 a. f(4) b. g(-3) c. h(x + 2) - 3 d. f (g(3)) e. g(h(-2)) f. h( f (-1)) g. f (g(a)) h. g( f (a)) i. h( f (a))
-
For each data set given in 10a and b, draw a scatter plot and find the correlation coefficient, r. State what this value of r implies about the data. a. {(0.3, 0.9), (0.4, 0.6), (0.6, 0.4), (1, 0.3),...
-
Transaction Analysis and Business Activities OBJECTIVE 3 The accountant for Huron Corporation has collected the following information: a. Huron purchased a tract of land from Jacobsen Real Estate for...
-
Transaction Analysis} During December, Cynthiana Refrigeration Service engaged in the following transactions: a. On December 3, Cynthiana sold a one-year service contract to Cub Foods for \(\$ 12 ;...
-
Inferring Transactions from Statement of Financial Position Changes Each of the following statement of financial position changes is associated with a particular transaction: YOUDECIDE a. Cash...
Study smarter with the SolutionInn App