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Practical and Written Assessment
Finance & Accounting
Pages 14 (3514 words)
Finance and Accounting: Practical and Written Assessment Table of Contents Answer 1 3 Answer 2 5 Answer 3 8 MINI CASE 2: GOVERNANCE FAILURE AT ENRON 10 Answer 1 10 Answer 2 13 Answer 3 15 Reference List 18 Appendix 1 20 MINI CASE 1: PORSCHE CHANGES TRACK Answer 1 Porsche Automobile Holding also known as Porsche is a German company headquartered in Zuffenhausen, Baden-Wurttemberg.
As far as the profitability of the company was concerned, it has been quite impressive in past decade in the automotive industry, as the growth and profit margin of the company in Figure 1 reveals. Figure 1: Growth of Profit and Margin of Porsche Source: (Moffett, 2005) The strategy that Porsche followed for both Cayenne and Boxster was a combination of outsourcing, licensing and in sourcing to influence the investment of the shareholder. Due to this strategy of the company, they enjoyed high return on the invested capital (ROIC), as the increasing sales of the product line shows in Figure 2. Figure 2: Augmenting Sales of Various Product lines of Porsche Source: (Moffett, 2005) During the fall and summer of 2005, two significant announcements were made by Porsche, which changed the directions. The first announcement was that Panamera would be manufactured by the company through company’s own funds and in their own factories. The second decision was that Porsche invested around 3 billion in Volkswagen AG at an interest rate of 20 percent, which was an underperforming automaker of Germany then (Eiteman, Stonehill and Moffett, 2010). In this section of the study, the focus of discussion would be on the strategic decisions that the company has made which augmented its ROIC. ...
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