Danone, founded in 1919, is a leading French multinational foods and beverage company. Headquartered in French capital of Paris, the company is departmentalized according to its products i.e. medical nutrition, early life nutrition, waters and fresh dairy products. The company operates in more than 120 markets with most of them being in developing countries. Being a multinational corporation, the company is listed on numerous stock exchanges including; the Euronext Paris and the OTCQX market through the American Depository Receipt (ADR) program. Since most stock exchanges have different trading procedures, this may lead to complications in the financial management of the company. This essay therefore provides an analysis of how Danone undertakes its financial management, analyzing how its stock performs in the stock exchange and examining business performance with the aid of financial statements.
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Following a random walk, the stock price of Danone quoted on the ADR as DANOY, is characterized by dips and rises. In the previous year (June 18th 2015 to June 17th 2016), the stock price has performed fairly. It lowest price was recorded on September 14th 2015 where a total of 982,280 shares were traded to close at $53.10. The highest price was recorded on November 30th 2015 with a record of 2.76M shares being traded bring the price to $66.33 at the close of day (Yahoo! Inc. Stock - Yahoo! Finance, 2016).
Given its massive size and myriad of operations, a sound finance division needs to be in place to ensure that Danone meets it objectives. The Finance Division is responsible for overseeing the financial resources management for the organization, ensuring that the company is liquid to meet its current obligation and well financed to achieve its long term goals. Some of the financial resources that are at the disposal of the company are; stock equity and debt facilities (bonds) (Danone Finance, 2016). The department, which is highly centralized, closely monitors the stock price performance in the market to ensure that it remains attractive to new and current investor (Danone Finance, 2016)s. It is also concerned with the internal control and risk management of the company. Working across the borders of many sovereignties, financial contagion risks are bound to happen. The department thus employs hedging techniques to ensure poor performance in one country, does not affect the entire business. The team is also responsible for developing financial models used to evaluate alternative decisions and how these decisions will affect the business and propose the best alternative. The finance department is one of the most important department in the company, ensuring sustainable growth and profitability (Danone Finance, 2016).
Danone is a multinational entity, and as such it uses the International Accounting Standards (IAS) and the International Financial Reporting Standards (IFRS) for uniformity purposes.In order to evaluate the business performance of the firm, it is important to establish the financial ratios drawn from the financial statements. These ratios will aid in analyzing the business performance to pin point the areas where the company is performing poorly and suggest corrective measures. From the ratios, we can also establish the best performing areas of the firm and look for more ways to capitalize on them. Examples of such ratios include; profitability, activity and liquidity ratios (16 Financial Ratios for Analyzing a Company’s Strengths and Weaknesses, 2016).
References
16 Financial Ratios for Analyzing a Company’s Strengths and Weaknesses. (2016). Aaii.com. Retrieved from http://www.aaii.com/journal/article/16-financial-ratios-for-analyzing-a- companys-strengths-and-weaknesses.touch
BN.PA Interactive Stock Chart | Yahoo! Inc. Stock - Yahoo! Finance. (2016). Finance.yahoo.com. Retrieved from http://finance.yahoo.com/echarts?s=BN.PA+Interactive#{"allowChartStacking":true}
Danone Finance. (2016). Danone.com. Retrieved from http://www.danone.com/en/for-you/candidates/danone- teams/detail/juid/finance/#.V2T_irt97IU
