Financial Cases Essay

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UVA-F-1027 Version 2.2 BAYERN BRAUEREI In early January 1993, Maria Ober arrived at Bayern Brauerei1 to participate in her first meeting of the board of directors. She had recently joined the board at the behest of her uncle, the managing director of the company. August Ober had told her that the board could use her financial expertise in addressing some questions that would come up in the near future, but he would not be specific as to the nature of those questions. The company was owned entirely by 16 uncles, aunts, and cousins in the Ober family. Maria had received an MBA degree from a well-known business school and had worked for the past six years as a commercial loan officer for a leading bank in Frankfurt, Germany. With the permission of the bank, she agreed to join the Bayern Brauerei board. The agenda for the January meeting of the directors consisted of three items of business: (1) approval of the 1993 financial budget, (2) declaration of the quarterly dividend, and (3) adoption of a compensation scheme for Max Leiter, the company’s sales and marketing manager. Because she knew little about the company, Maria decided to visit it for a day before the first board meeting. The Company Bayern Brauerei produced two varieties of beer, dark and light, for which it had won quality awards consistently over the years. Its sales and profits in 1992 were DM102.3 million and DM2.6 million, respectively.2 (See Exhibit 1 for historical and projected financial statements.) Founded in 1737, the Bayern Brauerei had been in the Ober family for 12 generations. An etching of Gustav Ober, the founder, graced the label of each bottle of beer. The company was located in a village just outside Munich, Germany. Its modern equipment was capable of producing 700,000 hectoliters of beer per year. In 1992 the company sold 667,000 hectoliters. This equipment was

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