Bally Investment: Ways to Improve Business Performance - Book Report/Review Example

Bally should keep Mr. Trump out of the Bally picture to successfully pursue Bally’s expansion plans. 

Mr. Donald Trump’s investment in Bally manufacturing is unfavorable to Bally’s stockholders and officers. Bally manufacturing, now Bally Technologies, is correct in preventing Mr. Trump from owning 9.9 percent of Bally manufacturing’s outstanding shares. The New Jersey law prohibits ownership of more than three casinos. With Bally’s January 19, 1987 purchase of Golden Nuggets Inc’s Atlantic City Casino, Bally will own two casinos. With Mr. Trump’s current ownership of two casinos in Atlantic City, the Bally purchase of Golden Nuggets Inc. Casino would increase Mr. Trump’s casino ownership to four. Since the ownership of 4 casinos is prohibited in New Jersey, Bally is right in forcing Mr. Trump to sell all his current Bally shares.  In response, Donald Trump was right in getting the Atlantic Court to restrain Bally from temporarily purchasing the Golden Nuggets property.   Bally’s management’s decision to oust Mr. Trump adheres to standard management principles of planning, organizing, directing, motivating, monitoring, controlling, and conforming (Waters, 1999, p. 3). As of November 21, 1986, Mr. Trump originally owned   9.6 percent of Bally’s outstanding shares of stocks. Mr. Trump plans to increase his ownership of Bally’s outstanding shares of stocks to 25 percent. As of February 2, 1987, Donald Trump increased his outstanding Bally shares to 9.9 percent.
Bally management was right in entering into an amicable settlement with Mr. Trump. Bally’s officers would rather pay an additional $24 million profit to Mr. Trump, which includes amounts for Mr. Trump’s “certain expenses” amount compared to Mr. Trump’s illegal ownership of four Atlantic City casinos (Black, 2009, p. 244). The amount will be paid for the 9.9 percent Bally shares purchased from Mr. Trump. In turn, Mr. Trump agreed to stop his current plans to buy additional shares of Bally manufacturing stocks.   With the amicable settlement, Bally can now proceed with the purchase of Atlantic City’s Golden Nuggets Casino. The Bally officers feel that the payment to Mr. Trump is more than enough to stop Mr. Trump’s negative comments about the Bally officers’ exorbitant salaries, at the expense of the stockholders. 
Bally’s disposal of Mr. Trump stopped Mr. Trump’s complaints about the Bally mismanagement by its current officers. For example, the Bally takeover of Golden Nuggets translated to Golden Nuggets’ reduced revenues.  Prior to the economic depression, the boardwalk property performed in a mediocre fashion, resulting in generating enough revenues to pay its debts. The Golden Nuggets business did not fare profitably well. The approaching economic recession will literally reduce the Golden Nuggets’ casino sales as well as the Boardwalk property revenues. In addition, the unrealistic high salaries of the Bally officers, including Richard Gillman’s $4,000,000 salary, was an unnecessary drain on the Bally coffers. The company could have saved scarce cash resources by canceling the annual European fetes held in villa D Esta, Italy.

         Bally’s decision to remove Mr. Trump is a correct business decision (Bally Financials, 2012). As proof, Bally was generated favorable financial statement analysis results, without Mr. Trump included in the Bally investor equation. Bally generated a favorable 25.29 percent return on equity ratio. Bally generated favorable a 21.60 percent price-to-earnings ratio.  Bally generated a favorable 19.70 percent revenue growth ratio. Bally generated a favorable 5.80 percent earnings per share growth ratio. Lastly, Bally generated a favorable five-year 19.40 percent long-term growth rate ratio. Further, Bally’s $46.84 stock market price dropped by 0.21 percent as of June 19, 2012, which is not a significant decline.