Financial Growth in Organization - Term Paper Example

Stamford International Inc. The financial growth in this organization does not reflect the real picture of the management team would wish for the company. With the first quarter already launched, the company has recorded a significant drop in the earning per share value. This has created a negative picture to both the investors and shareholders. The rising concern that shares are becoming less worthy in the exchange market is not good sign at the start of the financial year. As the Chief Financial Officer, the situation of the financial income does seem very promising in this financial year. However, with tightening the belt on the expenditure Stamford International could realize a fruitful financial year as the previous year. With a successful previous financial year, the company has been reluctant to ensure that all expenditure and incomes in the company are appropriately analyzed. The company needs to streamline all the departmental heads. The departmental head should ensure all expenses in the departmental are tightened in order to provide extra cents in value in the earning per share. The effort the staff had displayed did not continue. We had achieved more than the company’s expectations. This made all staff members relax. If this continues, the earning per share may reach a record low value of 3 cents per share. Regardless of the internal conflicts a company has; the investors and stakeholders should not be dragged to the mud. The current situation may result to stakeholders selling their shares at a lower price. In this first quarter, the value per share is at 47 cents. This is a 5 cent deficit from the previous year’s first quarter earnings. If all departments could maximize their efforts, the company would even be able to exceed the value of 52 cents per share. The earning 52 cents per share in one quarter shows the potential of this organization. In the board meeting we had after the first results of this quarter, all the shareholders had recommendations and corrections they would have implemented. These recommendations would enable the organization to add the value of its share. From the meeting, I realized the company was not operating at its full potential and with adjustments department head could increase the output of the company. It was also generated from the board meeting that investors would abandon the company if we do not register I higher share value in the second first quarter. Additionally, if this scenario does not change, shareholders may opt to sell their shares at lower prices in order to avoid getting very low dividends. This meant that the second quarter of this financial year would be the determinant of whether or not the company will retain its shareholders and investors. The move to start streamlining the company from the departments is the fact that some departments played a significant role in the declining in the value of the company’s shares. For instance, the procurement department contributed to a 2 cents loss per share. This loss was generated from bad inventory the department had received. The negligence of this department made the company incur expenses in replacing the bad inventory. This expense could be avoided if the department was under proper management. In my opinion, the public presentation of the earning per share should be increased in figures. However, these adjustments should be made in consideration of what the earning peer share could be if all expenses remained constant in all quarters (6). The company should also use forecasts in planning the adjustment. However, forecasted figures developed should be accurate. The agreement should also be jointly be reached upon by the management and board members. In my opinion, the management should consider increasing the earning per share by 5 cents. In adding 5 cents on the current 47 cents per share, the value will rise to 52 cents per share. Since we are at the first quarter, 52 cents earning per share will portray a good progress among the stakeholders. This will also lead to a prediction of higher earning per share figures as the year progresses. The 5 cent increase is applicable since it is an earning share value that the organization has achieved. Even after having a 52 earning per share it was a general feeling that the company could achieve better results. A similar first quarter earning as the previous financial year is a move that will make the company has more stability in the exchange market. To have stronger earnings per share the organization needs to do some adjustment in its past operations. These operations should include the streamlining of overseas dividends. However, as the company seeks to expand its income, the expenditure of the organization should also be increased in order to maximize its output. In increasing its income, dividends obtained from Brazil are expected in this quarter. If the partners in Brazil pay up all the dividends each share earnings could increase by 4 cents, overseas dividends expected in this financial year add up to 10 cents earnings per share. However, these earnings are minimized by expenditure the organization has to increase. In the last financial year, some maintenance works were deferred to this financial year. The implementation of this fee means each share would lose earnings by 2 cents. The maintenance costs in this quarter also add up to 2 cents share earnings loss. In achieving the 5 cents additional earn per dividend, income and expenditure were calculated as follows. Deferred maintenance: 2 cents Maintenance in this quarter: 2 cents This adds up to a 4 cents loss in each share Overseas dividends in this year: 10 cents per share; this is about additional 2 cents per share in each quarter. Dividends from Brazil add up to an increase of 4 cents per share. The benefits from bad inventory from Grazzini Brothers add up an increase of 4 cents per share. This adds up to an increase of 10 cents per share in each quarter. In subtracting the expenditure from the income per share, the value generated is an increase of 6 cents per share. As the C.F.O, the decision to add extra 5 cents after each share was deducted an extra cent to cater for miscellaneous expenses. The company should file a law suit or ask the Grazzini Brothers for compensation for supplying faulty. In this particular quarter, there was a loss of 6 cents per share from bad inventory (5). The inventory acquired from Grazzini Brothers was faulty and it part of the cause of the losses per share the organization incurred. In tackling this issue, the organization should seek compensation of the spoilt inventory. The organization should also consider legal suits against the supplier. This will ensure a higher probability of compensation. After compensation, the finance should be used to strengthen the earning per share in the company. In my earlier proposition that the earning per share be risen by 5 cents, these funds would a perfect way to ensure this is achieved. Additionally, the issue on purchasing of inventory should be taken very seriously (6). With now an internal auditing department, all inventories should be scrutinized for quality before being put into use. Credible suppliers should be contracted. These adjustments will cushion the organization from incurring losses which may be avoided. The reaction of the shareholders at my recommendations would be positive since I gave a practical layout on how to achieve the extra 5 cents. Additionally, the board members would agree with me on the issue that department need to be streamlined in order to maximize our profits. The move to increase the companies earning per share by 5 cents would be debatable as some stakeholder believe that Stamford International has the capacity to have a higher earnings per share value. I would defend my decision by asking the board members no to base our accurate value on assumptions. If the value added is not achieved then the company could face sanctions from Sarbanes Oxley. Additionally, basing exact value on assumptions may force the company to cut the expenses of some services that may be compulsory in the company. Any adjustment that the board would recommend should not exceed 7 cents for the first quarter (6). In the last financial year, we had a very strong last quarter which may be attributed to the strong first year we had. If in this year, we have a weak earning per share in the first quarter then we could close the year in a bad financial situation. It should be a general conclusion that we should find a way of increasing the earning per share in the first quarter. Another issue that I am confident that the majority of the stakeholders would support is the move of tuning the procurement staff. From this quarter, financial statement, bad inventory caused most of the losses incurred. At the stakeholders meeting, it is obvious that they would all agree with the losses incurred due to bad inventory should not be tolerated in the company. According to Hawkins it is very important that a company create its foundation with reliable inventory (6). The shareholders would also support the move to take legal action against the Grazzini Brothers. For one, we need to send a serious statement to companies we contract with, and the company would need the compensation to comfortably rise its earning per share by 5 cents. To ensure the organization operates in line with the Sarbanes Oxley requirements, the company should ensure that the raise in earning per share is done through an accurate way. This could be achieved if we put into use already existing funds. The company should put off expenses with no urgency and focus on strengthening the cost of shares. With a prediction of compensation from Grazzini Brothers, the company should use existing funds which it would then replace with the predicted funds meant to be received (7). The board may ask as the Chief Financial Officer what my role would be in the implementation of my recommendations. They would also ask what I have done so far to certify that the recommendations have been enacted. As the C.F.O, my main role is to ensure that allocation of funds to all operations in the organization is made appropriately. Additionally, I would ensure the adjustment on the earning per share is done by the right value. Another possible question from the shareholders would be the future quarters of the year benefit from the additionally 5cents (6). In the past financial year, the first quarter shaped the trend of the whole year. If the company can achieve a great balance brought forward in the first quarter, then the subsequent quarters would gain a significant head start. The board may ask me to present the best way in which earning per share could be increased. The constant decrease in the cost per share may result to a worthless company shares by the end of this financial year. As many board members would argue, the last financial year had less expenditure than the current financial year. For this reason, the profits were much higher. As a big and established company we cannot rely on this assumption since expenditures are part of the organization’s budget. Regardless of the expenditure that is used in a quarter, the profits received should match the expenditure (Hawkins, 4). As the chief financial officer, I noticed the decline in earnings per share after we hit the record value per share. The operation carried out after these achievements should be questionable. I greatly believe that the recommendation above would be of very great advantage to the company. 1st quarter 2nd quarter 3rd quarter 4th quarter Value per share (cents) 47 Attributed to Faulty inventory: 4 cents loss per share. Expenses brought forward 2 cents loss per share Heavy maintenance expense: 2 cents loss per share 52 Overseas dividends at 3 cents per share in each quarter. Compensation for faulty inventory at 4 cents per share Dividends from Brazil at 4 cents per share 57 Added: Income generated from overseas dividends and compensation for faulty inventory. 62 Added: income from overseas dividends Work cited Hawkins, David. Stamford International Inc. Boston: Harvard Business School. 2006. Print. Read More