Diageo Plc

Bixton Company’s new chief financial officer is evaluating Biston’s capital structure. She is concerned that the firm might be underleveraged, even though the firm has larger-than-average research and development and foreign tax credits when compared to other firms in its industry. Her staff prepared the industry comparison shown here.

2. Describe briefly Intel’s current capital structure. Discuss whether in your view this capital structure is optimal for Intel, with particular emphasis on the pros and cons of Intel’s substantial cash holdings. Articulate and defend a “target” capital structure for Intel. Cee

3. What capital structure would you recommend as appropriate for Bed Bath & Beyond? How much financial risk would Bed Bath & Beyond face at each of the proposed levels of debt?

The statement of cash flows outlines some of the changes to the capital structure. The company added $164.5 million in a consolidated loan facility, and it paid out $138.1 million in dividends. There were no share buybacks during the year. The company states in the annual report (p.4) that it intends to maintain a conservative gearing ratio. The company in this section attributes its increased borrowings to projects and opportunities on which it has embarked. These investments lie within the integrated retail, franchise and property system. One of the

Du Pont's financial policy had always been based on maximization of financial flexibility. Taking to consideration the riskiness of Du Pont's businesses, its competitive position and profitability had declined in the last 20 years. Moreover, the firm is still forced to seek external financing each year for the next five years (1983-1987) due to the continued high level of capital expenditures which are considered non-deferrable to redress the causes of poor performance. In view of the importance and magnitude of the projected financing needs, the firm is concerned about how the cost and availability of debt

Comments from teacher: In question 1, why do we use these equitation’s, explain and show then, i.e. ROE can go up with more leverage. More on comparables. In Q1 assumptions explained, that are then used in DCF. Max for question 1 and 2, two pages. Must power to put in Q3. Deduct tax in table 3. In DCF, show more how calculated and assumption missing about other income and corporate expenses. Table 6 to be fixed (already been done). Skip in DCF advantage and disadvantage. Do table 4 different, use Exhibit 11, value range, use median value and calculate enterprise value with multiples en deduct net debt 318,5 and get equity value. Explain better in main text footnote 12. . Use

4. Based on the results of the model, what recommendation would you make for Diegeo’s future capital structure? How might you adjust the recommendation from the model to adjust for any missing risk factors?

Diageo, a British multinational alcoholic beverage company, established in December 1997, is the world’s leading premium drinks company which manages ‘global priority brands’ such as Johnnie Walker, Smirnoff, Guinness, Captain Morgan, J&B etc. (DEO 20-F (2007)). Initially, the target markets for Diageo were mostly the developed countries where it provided for scale efficiencies in production, selling and marketing. The global branding strategy of Diageo for these target markets has been ‘premiumization’ and dissemination of best practices in business operations in order to serve its customers in the best possible way. The higher-end premium brands range from $35 to $150 for a liter and as the price goes up the product becomes limited edition product which attracts the wealthy consumers. Diageo’s business enjoyed steady growth and high returns on invested capital via business in developed economies but by 2004 many of these markets were saturated and profits started to decline. During this period, Diageo saw an opportunity to expand itself in the emerging markets and targeted African countries like Kenya, Nigeria and Ghana.

Does the team know what it wants to achieve? Does the team understand what the other party is really trying to achieve?

Because Diageo applied a high quality brand which was not affordable by the majority of the customers in Africa “It’s actually more about keeping a brand locally relevant and keeping the costs down. That’s something we’re not used to.” (Evans, (2015, July 30), para.19)

As the Kano fashions are estimating financial implications regarding a corporate bond of £50 million they can determine an optimal capital structure using the following theories:

This report is divided into five parts. First, the company profile is introduced. Second, the performance overview of Diageo will be summarized. Third, the financial ratios analysis is presented. Then, I have analysed industry competitors comparing with Diageo. Final, after considering key relevance factors, the conclusion of the investment will be revealed.

Diageo plc is a British multinational firm that owns some of the most popular alcoholic drinks in the world. The firm boosts a reputation of not only being the largest spirits producer in the world, but also being the world 's leading premium drinks company. The company has an extensive portfolio and their most popular drinks include Smirnoff vodka, Baileys, Pimms, Blossom Hill and Guinness. The company owns 312,120 Breweries, 312,130 Wineries and 312,140 Distilleries in the world and trade in near 180 markets, and employs more than 200,000 people in about 80 countries; of which include Great Britain, Canada, United States, Ireland, Spain, Italy, Africa, Latin America,

The financial analysis of the balance sheet shows that the percentage of equity in the sources of funds is decreasing while the debt is escalating. Short term liability has compounded from 14% to 39% while long term liability had increased from 16% to 24%. The Debit/equity ratio shows an almost double increase in dependence on borrowed funds between 2007-2008, leading to a greater obligation of fixed interest payment, and a lessor safety margin for long term creditors. An increasing Debit-equity ratio can also create difficulties in raising additional loans. This triggered a potential lack of future financing, considering that Gerhard Schroder property developer had indicated that he was unwilling to continue to provide financial support to the organization. Additionally, they

Diageo’s key ambition is to build one of the leading performing, most trusted and respected consumer products companies worldwide, which is currently been met due to mergers and acquisition. Diageo's main strategy is to drive top line growth and margin expansion in a sustainable and responsible way and to bring reliable value creation for its shareholders in the long term. Diageo will use its broad brand range to do this. They are category depth and geographic reach to deliver on consumer needs. Key to achieving its strategy is the expertise of its people who share the same values.