ASSIGNMENT 1 CHIEF EXECUTIVE OFFICER

CEO is considered to be the highest level of hierarchy in an organization. The general hierarchy of an organization is:

As you can see from the level of hierarchy of management, CEO reports directly to the Managing Director of the company. CEO is the one who is responsible for all ups and downs in an organization. Also he is the highest paid employee of the organization. So metimes CEO

title can also relates to president. As president title means the democracy level, the title is generally not used in many organizations.

Roles & Responsibilities

1. CEO is responsible for creating & managing the companies mission & vision 2. He must implement all the strategies required to reach the targets 3. CEO must motivates the employees in order to maintain a high efficacy in the organization 4. A CEO must have good decision making skills who can plan for the future opportunities 5. CEO also have to manage the Human Resources for the company 6. CEO generally assist the Managing Director of the organization to achieve the governance function. 7. CEO acts as a leader in the organization as he is the one who gives advice to higher level of hierarchy, look after the organization products & operations.

CHIEF FINANCIAL OFFICER

As you have seen the level of hierarchy of management, CFO comes just under CEO as a Top Level managers. CFO is also abridged as Critical Few Objectives. He is responsible for supervising accounting managers and also for financial controlling in the organization in order to enhance the shareholder value.

MAJOR RESPONSIBILITIES

Financial Plans

Create Financial Plans for the organization.

Financial Plans
Performance

Accounting & Tax Process

CFO must also look forward to accounting & taxes to minimize financial risks.

Accounting & Taxes

Measure Performance

Financial Reports shows how the firm is performing.

Enhancing Shareholder Value

Shareholder Money

CFO must protect the company owners financially.

FINANCE DEPARTMENT: FOR TRAINING FORTHCOMING CEO

Corporate World is on the rise and the companies are in a dilemma whom to opt for a CEO. They want a person who has the abilities to manage any perplexing situation. From 1990s there has been a propensity of employing former CFO as a CEO. But the question arises whether he is a right person for the CEO position or not.

In general CEO must have certain individualities like leadership, strategic abilities, better communication skills etc. which hadnt been seen in CFO.

PROs & CONs OF SIGNING CFO AS A CEO

ASSIGNMENT 2 AUDI AG (AKTIENGESELLSCHAFT)

AUDI AG is a well known automobile brand headquartered at Germany, Bavaria & Ingolstadt. AUDI AG instigated in Germany in 1909 by August Horch (Founder). Company name came from Horch means to listen and AUDI when translated into Latin. AUDI plans, innovate, manufactures & delivers best exquisite cars.

AUDI AG VALUES

Most of the time people acquaintances AUDI with its LOGO i.e. 4 Rings. In general, these rings represent the merger of four leading motor manufacturers (AUDI, WANDERER, HORCH & DKW) at the time of depression. AUDI AG is a subsidiary of Volkswagen AG ever since 1966. AUDI is

ranked no. 1 in terms of Total Quality Management (TQM) in 2012. Audi is the worlds best selling luxury automobile brand.

WHY AUDI?

These parameters fascinated most to choose AUDI. They go hand in hand with the technology. Audi had get through their targeted goals a lot of times which ensures it would sustain in future run.

FINANCIAL HIGHLIGHTS
AUDI AG stocks are traded in various stock exchange: 1. Stuttgart 2. Frankfurt A.M. 3. Dusseldorf 4. Hamburg 5. Berlin And till 31 December 2012 around 43,000,000 number of shares had been issued.

AUDI AG STOCK PRICE (PAST 12 MONTHS)

MONTHS APRIL'12 MAY'12 JUNE'12 JULY'12 AUG'12 SEPT'12 OCT'12 NOV'12 DEC'12 JAN'13 FEB'13 MAR'13

STOCK PRICE (IN EUROS) 585 560.5 530.55 540 524 521 522 515 525.1 575 565 580

% GAIN/ LOSS 0% -4.19% -5.34% 1.78% -2.96% -0.57% 0.19% -1.34% 1.96% 9.50% -1.74% 2.65%

THE PERSON WHO BOUGHT THE SHARE ON APRIL'12 AND WOULD HAVE SOLD THE SHARE YESTERDAY THEN % GAIN/ LOSS -0.85%

HE'LL BE IN A LOSS OF 0.85% EURO PER SHARE FOR EXAMPLE: HE HAD PURCHASED 15000 SHARES ON APRIL'12 TOTAL COST 8775000

NO. OF SHARES

SHARE PRICE

15000

585

AND IF HE WOULD HAVE SOLD SOLD IT YESTERDAY THEN 15000 THUS IS IN A LOSS OF EURO The most recent price of AUDI AG Share as of 17th March 2013 is 581. 580 8700000 75000

ABOUT TOP LEVEL MANAGEMENT

Mr. Rupert Stadler is the Chairman of Audi AG. He joined the firm in 1990 as a head of sales and marketing team. In 1994, he switched to Volkswagen Audi Espana as a director where he had to perform tasks like Accounts, & managing organization. In 1997, he got promoted to Head of the Board of the Management & Head of Product Planning of the organization. He became the Chairman on 1st January 2007 & also serves as Chief Financial Officer of Audi AG. Under his expertise, the firm has always outstrips the targets and come up with a new benchmark. By 2012, the firm achieved the major target (Volkswagen group has added the most attractive brand Ducati in their portfolio).

ASSIGNMENT 3 MARKET CAPITALIZATION

The market capitalization of the public stock in various economies as of early 1980s is as shown:

COUNTRY

FINANCIAL INSTITUTIONS

INDIVIDUAL

GOVERNMENT FIRMS

MISC.

US UK Japan Germany Australia France Canada South Korea New Zealand Singapore Switzerland Hong Kong Belgium Greece

0% 40% 80% 35% 30% 40% 55% 35% 30% 5% 45% 0% 0% 0%

100% 20% 10% 25% 10% 20% 35% 25% 15% 65% 55% 80% 70% 50%

0% 15% 10% 30% 20% 25% 0% 20% 25% 25% 0% 5% 5% 20%

0% 20% 0% 10% 35% 10% 10% 20% 30% 5% 0% 5% 25% 20%

0% 5% 0% 0% 5% 5% 0% 0% 0% 0% 0% 10% 0% 10%

According to the data, in US whole of the market shares are captured by individuals while in Japan & Germany the shares are equally distributed among the economy.

10

AGENCY PROBLEMS SEVERITY IN GERMANY/JAPAN THAN IN US

Agency problem increases when the individual ownership is greater. Thus, if we consider Germany or Japan where the majority of stocks are owned by financial institution like banks etc., thus the agency may incur less problems in such economies as compared to US economies where majority of shares are earned by the individuals.

HOW FINANCIAL INSTITUTIONS IN US WILL HELP AGENCY PROBLEMS?

Recent trends have shifted in US where Financial Institutions are leading the individual market of public shares. These can be seen from the recent data of market capitalization as shown below:

COUNTRY

FINANCIAL INSTITUTIONS

INDIVIDUAL

GOVERNMENT FIRMS

MISC.

US UK Japan Germany Australia France

80% 100% 90% 50% 65% 60%

20% 0% 5% 10% 5% 20%

0% 0% 5% 25% 5% 15%

0% 0% 0% 15% 25% 5%

0% 0% 0% 0% 0%

11

0%

Canada South Korea New Zealand Singapore Switzerland Hong Kong Belgium Greece

60% 55% 30% 15% 60% 10% 5% 10%

25% 20% 25% 30% 30% 70% 50% 50%

0% 15% 25% 45% 0% 5% 5% 30%

15% 5% 20% 10% 5% 5% 30% 10%

0% 5% 0% 0% 5% 10% 10% 0%

The financial institutions high % of ownership may lead to greater agreement degree among owners. Also Financial Institutions may be more efficient in controlling the managers than individual owners. Thus increasing Financial Institutions stock ownership in US had led to reduce the agency problem and thus enhancing the market control.

12

ASSIGNMENT 4 EXECUTIVE COMPENSATION

Executive compensation is the pay that an employee receives with regards to his tasks he performs in the company. This includes salary, bonus, extrinsic rewards, and other personal allowances.

COMPENSATION BASIC PARAMETERS

13

CEOs ARE OVERPAID

As per analyzed data, In the year 1980, average CEO pay was 42 times the average hourly pay of a worker. This pay got doubled to 84 times by 1990. By 2000, this pay got an unbelievable high to around 531 times to that of an average hourly worker pay.

What the firm feels that giving executive compensation helps to enhance the financials of the company. But according to the market shareholders compensation survey, it showed that returns to the shareholders was more for the companies whose CEOs salaries were under $500,000 than for those who provides their CEOs a whopping compensation.

WHY ATHLETES AND TOP ENTERTAINERS EARNS MORE COMPENSATION

Athletes like Tiger Woods, Beckham etc. and Entertainers like Oprah Winfrey, Tom Hanks etc. generally earns at least the same compensation as of a CEO if not more than that. They are getting paid because they are ones whom people want see and also for whom the people can pay to see the show or game. This is the reason for which they are getting a higher compensation.

14

ASSIGNMENT 5 AUDI AG STOCKS

FIVE YEAR CHART

According to this 5 year basic chart analysis of AUDI AG, it had seen that price was fluctuating within a specified band of price limits (Between 500 to 650 Euros). The current stock price is around 580 Euros. From the chart we can see that the stock price in early 2013 had started from the trough of the limit. We can consider that the price of the stock might increase in the next year as the return on equity of the firm 31.16% which is considered to be a good in stock trading.

15

YEARLY STOCK PRICES

YEARS JAN'13 JAN'12 JAN'11 JAN'10 JAN'09

STOCK PRICE (IN EUROS) 575.0 548.95 642.5 562.0 485.0 AVERAGE OF 5 YEARS

% GAIN/ LOSS 4.75% -14.56% 14.32% 15.88% 14.17% 6.91%

ROE of AUDI AG is 31.16% and the Average %Gain or Loss of 5 years of the stock shows a positive 6.91% value which means the stock is not a risky investment to be made. The price of stock (if we compare the previous 5 years data) had a gain of approximately 14% every year (2009, 2010 & 2011) but it fell down drastically by the same percentage i.e. 14% in the year 2012. Again stock prices went up though not as much but was a great start.

If we take an average of all these data, we can predict that in the next year we can see a hike of 6.91% of the current stock price (575.0). So we can expect around 614.73 Euro to be the stock price of AUDI AG by the year 2014.

16

ASSIGNMENT 6 MARKET VALUE AND BOOK VALUE OF BAJAJ CORP

YEAR 2011 2012 2013

MARKET VALUE (INR) 107.46 99.6 236.85

BOOK VALUE(INR) 29.01 29.01 29.01

17

MARKET VALUE AND BOOK VALUE OF HERO MOTOCORP

YEAR 2011 2012 2013

MARKET VALUE (INR) 1985.25 1838.55 1904.15

BOOK VALUE(INR) 214.83 214.83 214.83

18

HERO MOTOCORP VS BAJAJ CORP

MARKET VALUE
BAJAJ CORP 1985.25 1838.55 HERO MOTOCORP

1904.15

236.85 107.46 99.6 2012 2013

2011

BOOK VALUE
BAJAJ CORP HERO MOTOCORP

214.83

214.83

214.83

29.01

29.01

29.01

2011

2012

2013

19

The book value and the market value of Hero Motocorp is far more than Bajaj Corp. These both companies deals with the motorbikes production. If we compared the difference in the price of market value and book value of both these companies than Hero Motocorp had been observed to have comparably huge market value of the shares around 9 times more than book value while compared to a 7 times of Bajaj Corps.

20

ASSIGNMENT 7 COMPANY RISKS PART A

RISK
EXAMPLE TEXT Go ahead and replace DIVERSIFIED it with your own text.

RISK
EXAMPLE TEXT Go ahead and replace AGGREGATE it with your own text.

RISK

RISK

RISK
1. Diversified Risk

RISK

Diversified Risk may be defined as the risk associated with few assets of the firm. Risk is generally due to the change in the price which may occur due to certain change in the market. This risk can be alleviated through diversification. Diversified Risk can also can termed as Non Systematic Risk. Diversified risk can be explained by using certain examples: Strikes between the employees of the company Suppose an Oil Firm is having a risk of drilling less or no oil

2. Un Diversified Risk Un Diversified Risk can also be termed as systematic, market or aggregate risk. This risk generally relates to the entire economy but may differ by the buying decision of the investments or purchasing the securities from different firms.

21

Systematic Risk can be explained using certain examples: Earthquakes, Floods, and other weather related calamities may induce such risks

SOLUTIONS TO ISSUES OF INVESTORS

a. United States suffered from large fire in three major cities. This might have affected the whole of the market and thus any configuration of stock would alter the entire economy. This can be considered as aggregate risk as explained above for any natural calamities it will be considered as non diversified risk. b. An unexpected rise in the oil prices may affect the whole of the market and thus can be seen as systematic risk c. The lawsuit filed against a particular firm and thus it will impact the same firm. This risk can be avoided by adjusting the firm portfolio. So, it is considered as Diversified Risk.

22

PART B
a. Beta () for AUDI AG is 0.60. generally measures the systematic risk of the firm compared to the market. of less than 1 means that the securitys price is less volatile when compared to the market. Though it will possess less return rate, the securities would be less risky.

b. As we know Rf = 4.5% Rm - Rf = 6.5%

Thus using SML Method, RE = Rf + *(Rm Rf) = 4.5% + 0.6*(6.5%) = 8.4%

Thus Cost of Equity of Audi AG is 8.4%

c. We can find the portfolio of the companies using weightage average, p = w11 + w22 + w33

Choosing two other companies, for BMW = 1.18 for Volkswagen = 1.52

23

p = w11 + w22 + w33 p = 0.33*0.6 + 0.33*1.18 + 0.33*1.52 p = 1.089

Now again using SML Method for this portfolio,

REb = Rfb + *(Rmb Rfb) = 4.5% + 1.089*(6.5%) = 11.57%

So, I would conclude as the portfolio still depicts less risk and as we know low risk, low return, we might get low returns from this stock.

24

ASSIGNMENT 8 LONG TERM PROJECT OF AUDI AG

Audi is planning to bring their concept of Audi A6 L electric hybrid into the market by 2014. Due to the great success of Audi A6 in the market, the board of director came up with the decision of introducing the same model with an option of electronic hybrid engine. This enhances the efficiency of the vehicle. The company has predicted the efficiency of the electric hybrid would be 100 km/ 6.2 liters. In order to keep the weight of the car under control, the might reinforce materials like carbon fiber and aluminum which might reduce the weight by approximately 15% as compared to steel. The owner of this car wont be feeling any performance l ag as the car would have a 2.0 liter gasoline engine that induces around 211 horsepower plus 95 horsepower from the motor. They are planning to bring this concept to market by 2014 into order to become market leader of a new market segment. They must go for equity funding. They can sell a portion of assets of the company in order to start working on the concept. They must avoid debt funding as it can introduce more liabilities in the company.

SHORT TERM PROJECT OF AUDI

AUDI AG is helping Relief fund in helping them to nurture excellence in the near future. AUDI AG employees raised around 135000 Euro dollars to help Dazhou Childrens Welfare Center. This is one of the top 10 relief projects. Apart from funding them, they organize ceremonies of project completion with these children so that they dont feel disconnect among the society.

25

The employees at Audi AG contribute their 1 day salary to these relief fund occasionally.

ASSIGNMENT 9 CORPORATE EVENTS AND THEIR EFFECT ON THE STOCK

Audi AG had an event for the top business leaders of India in Davos. There Audi had created a unique driving experience on ice for the corporates. This event happed on January 31, 2013 and thus the impact on the market shares can be seen from the below chart:

This chart shows the market price of the stock of Audi AG. As we can see the cursor at 31 Jan 2013, the stock price was Euro 575.00 per share. After the event had happened the stock as we

26

can see had took a hike to Euro 593.00 per share. This event had helped the company to enhance the market capitalization.

27