The Management of Navistar International Corporation - Coursework Example

The Management of Navistar International Corporation The Management Discussion and Analysis for Navistar International Corporation and Oshkosh Corporation differ in the nature of information that these sections of the Annual Financial Reports are giving. The MD&A for Navistar International Corporation carries the justification for the inclusion of the MD&A segment within the annual financial report of the organization, by holding that the segment has been included in order to assist the reader of the financial reports of the organization to understand the information better, since this segment acts as a supplemental information section to clarify different aspects of the financial report (Navistar, 31). On the contrary, the MD&A of the Oshkosh Corporation does not contain the justification for the inclusion of the MD&A section of the organization’s annual financial report, rather going directly into giving the information related to the nature of the company and its operations. On the other hand, the MD&A section of the Oshkosh Corporation has provided a section titled general, under which all the operations and the products that the company is involved in producing and availing to the market, both locally and internationally, are explained (Oshkosh Corporation, 32). This is completely different from the organization of the MD&A for Navistar International Corporation, which goes directly into the executive summary section, which focuses on the previous targets and goals that the organization had set, and the achievements that the organization has made in relation to these goals and targets. The other notable point where the MD&A’s for these two organizations differ is in the presentation of the specific financial information associated with the direct benefit of the shareholders. The MD&A of the Oshkosh Corporation provides the information related to the Earnings per Share (EPS) for the financial year ending 2014, by declaring that the earnings per share for its shareholders in the full year of 2014 was $3.61, which was a notable increase in from the initial estimated range of $3.10 to $3.40 per share (Oshkosh Corporation, 32). This represents an increase in the actual EPS for the shareholders by $0.21 per share. The MD&A of the Oshkosh Corporation has also provided information related to the reinstated dividends to the shareholders, as well as the great milestone made by the company which managed to repurchase 8.3 million shares of Common Stock that served to increase the earning per share for the shareholders of this organization by $0.15 in 2014 (Oshkosh Corporation, 33). On the contrary, the MD&A for Navistar International Corporation chooses to present the milestones that the organization made in reducing the operational and consequently the total costs of operation for the organization. The cost reduction actions of this organization that were implemented for the year 2013 enabled the organization to reduce the operating costs by $330 million in 2013 (Navistar, 31). Additionally, the MD&A for Navistar International Corporation has provided more information related to the key certifications that the organization received during the financial year, such as the EPA certification for using and marketing products manufactured under existing SCR technology (Navistar, 31). The other key certifications that the organization obtained during the year are the EPA certification for Certified MaxxForce 13L engine and the on-board diagnostics ("OBD") certification for all the organization’s equipment and technology applications (Navistar, 31). Conjecture on why those two companies choose to report different information The reporting of different types information under the MD&A’s for these two organizations is a strategic tool that is applied towards appealing and winning the hearts of the potential investors, stakeholders and customers. For example, when the MD&A section of the Oshkosh Corporation has provided information type related to all the products that the company manufactures and sells both locally and internationally, the organization seeks to show the potential investors as well as customers that it is a highly capable company with numerous brands in the local and the international market. This in turn can influence the customers to develop confidence in the products of the company and thus purchase them, while influencing the potential investors to invest in the company as a highly capable organization for wealth creation (Wahlen, et al., 38). Similarly, the reporting of the certification type of information by the MD&A for Navistar International Corporation is a strategy for appealing both to the customers and to the potential investors, by showing them that the company is highly accredited, such that the customers can develop confidence in the products of the company, while the investors can develop interest in investing in the company that has a good reputation (Kimmel, Weygandt and Kieso, 19). The MD&A for Navistar International Corporation has also provided a different type of information that is related to the cost reduction actions of the organization, which seeks to show the potential investors that the organization is capable of running at reduced operational costs, thus being able to maximize the investors returns (Kimmel, Weygandt and Kieso, 21). The tone applied by the MD&A section of the two organizations is also characteristic of emotional appeal and convincing nature, especially for the shareholders of the organization. For example, the MD&A for Navistar International Corporation applies confident tone when reporting the certification achievements by stating “We achieved several milestones” (Navistar, 31). This tone is simply meant to persuade the investors to believe in the company as a highly accredited and reputed company in the industry it serves. The same confident tone has been applied by the MD& A section of the Oshkosh Corporation through stating “The Company returned a significant amount of capital to shareholders in fiscal 2014” (Oshkosh Corporation, 32). This tone is meant to boost the level of confidence both in the potential investors and the shareholders of the organization, by showing them that the company is capable of delivering value for their investment (Wahlen, et al., 39). The optimistic tone is yet another appeal strategy that the two organizations have applied in their MD&A sections, to show the potential investors, customers and the organizations’ shareholders that there is a better hope in the future. For example, the MD& A section of the Oshkosh Corporation states that the “company believes that there is continued opportunity for sales and earnings growth” (Oshkosh Corporation, 33). The same optimistic tone has been applied by the MD&A for Navistar International Corporation, which states that the company believes it is “well-positioned to build upon the 2013 accomplishments and take them to the next level” (Navistar, 32). The limited amount and the level of detail offered by the two organizations under their MD& A sections seek to persuade the customers, shareholders and the potential investors that the organizations are best placed to meet their diverse needs, by offering limited and selective information that is favorable to the organization (Kimmel, Weygandt and Kieso, 22). The MD& A section of the Oshkosh Corporation provides the details of the gains in Earns per Share (EPS) for its shareholders in limited detail, stating that the EPS has increased from the estimated EPS of $3.10 to $3.40 per share to the actual EPS of $ $3.61, which is a gain of $0.21, to persuade the shareholders and the potential investors that the company is indeed performing well and capable of rewarding its investors (Oshkosh Corporation, 32). The same limited amount and level of detail has been provided by the MD&A for Navistar International Corporation, which offers that the organization has implemented its cost-reduction action such that it has managed to reduce the operating costs by $330 million in 2013 (Navistar, 31). The limited and selective amount and level of detail is a strategy applied by organizations to indulge the interested parties of the organization selectively, such that they are persuaded to make a decision in favor of the organization based on the selected favorable information of the organization (Wahlen, et al., 40). Assessment of redundant and valuable information from an investor’s point of view The justification and explanation for the need of including the MD&A section under the annual financial report for Navistar International Corporation is an example of redundant information to a potential investor. This is because, potential investors are simply interested in information related to the financial position of an organization and the future financial prospective of the organization (Kimmel, Weygandt and Kieso, 20). The other example of redundant information to a potential investor is the information related to the listing of the company’s business segment under the MD& A section of the Oshkosh Corporation. This information is redundant to a potential investor, owing to the fact that it does not add any financial information knowledge, which is the core of reading the annual financial reports for any potential investor (Wahlen, et al., 41). Nevertheless, the MD& A section of both the Oshkosh Corporation and the Navistar International Corporation offers very valuable information for a potential investor, which can aid them in decision-making regarding the possibility of investing in such organizations. To start with, the Navistar International Corporation MD& A section provides information related to the reduction action of the operational expense of the company, where the company was able to lower its operational expenses by $330 million in 2013 (Navistar, 31). This type of information is relevant to a potential investor, since it serves to indicate the possibility of creating a higher profit margin for the business, and the consequent increased investor’s returns. The same MD& A section provides information related to the key certifications that the Navistar International Corporation has achieved during the financial year, such as the EPA certification for SCR technology, the EPA certification for Certified MaxxForce 13L engine and the on-board diagnostics ("OBD") certification (Navistar, 31). This type of information is relevant for a potential investor, since it serves to show the rate of accreditation and form of reputation that an organization holds, as the basis of the good will and capacity of the organization to excel (Wahlen, et al., 42). On the other hand, the Oshkosh Corporation MD& A section provides relevant information to a potential investor, in the form of the Earnings per Share information, which indicates that the company was able to increase the earnings per share for its shareholders to $ $3.61 (Oshkosh Corporation, 32). This information offers a potential investor an important tool for decision-making, by showing the investor the range of returns that can be obtained by investing in the company. Additionally, the MD& A section of the Oshkosh Corporation has also provided relevant information for a potential investor in the form of all the products that the organization offers to both the local and international market (Oshkosh Corporation, 31). This information is important for an investor, since it helps the investor to evaluate the company brands and their popularity in the market. This way, the potential investor is able to tell whether the company and its brands have a good reputation and goodwill, thus being able to decide whether to invest in the company or not. Works Cited Kimmel, Paul D, Weygandt, Jerry and Kieso Donald E. Financial Accounting: Tools for Business Decision Making. Hoboken, N.J: John Wiley, 2011. 19-24. Print. Navistar. FORM 10-K: 2013 Annual Report. EDGAR Online, Inc., October 31, 2013. 1-150. Oshkosh Corporation. FORM 10-K: 2014 Annual Report. EDGAR Online, Inc., November 13, 2014. 1-112. Print. Wahlen, James, et al. Financial Reporting, Financial Statement Analysis, and Valuation. Mason, Ohio: South-Western, 2010. 38-43. Print. Read More