UVA-F-1355

Version 1.2
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DEUTSCHE BRAUEREI

In early January 2001, Greta Schweitzer arrived at Deutsche Brauerei 1 to participate in her
first meeting of the board of directors. She had recently joined the board at the behest of her uncle,
the managing director of the company. Lukas Schweitzer had told her that the board could use her
financial expertise in addressing some questions that would come up in the near future, but he would
not be specific as to the nature of those questions. The company was owned entirely by 16 uncles,
aunts, and cousins from the Schweitzer family. Greta had received an MBA degree from a well-
known business school and had worked for the past six years as a commercial loan officer for a
leading bank in Frankfurt, Germany. With the permission of the bank, she agreed to join Deutsche
Brauerei’s board.

The agenda for the January meeting of the directors consisted of three items of business: (1)
approval of the 2001 financial budget, (2) declaration of the quarterly dividend, and (3) adoption of a
compensation scheme for Oleg Pinchuk, the company’s sales and marketing manager. Because she
knew little about the company, Greta decided to visit it for a day before the first board meeting.

The Company

Deutsche Brauerei produced two varieties of beer, dark and light, for which it had won
quality awards consistently over the years. Its sales and profits in 2000 were (euros) EUR92.1
million and EUR2.9 million, respectively.2 (See Exhibit 1 for historical and projected financial
statements.) Founded in 1737, the Deutsche Brauerei had been in the Schweitzer family for 12
generations. An etching of Gustav Schweitzer, the founder, graced the label of each bottle of beer.

The company was located in a village just outside Munich, Germany. Its modern equipment
was capable of producing 1.2 million hectoliters of beer a year. In 2000, the company sold 1.173

1
In English, “Deutsche Brauerei” (DOI-cha BROI-reye) means “German brewery.”
2
In January 2001, the euro could be exchanged for about (U.S. dollars) $0.94.

This case was written by Robert F. Bruner, Dean and Charles C. Abbott Professor of Business Administration. It was
written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative
situation. Deutsche Brauerei is a fictional company reflecting the issues facing actual organizations. Copyright  2001
by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send
an e-mail to sales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval
system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying,
recording, or otherwise—without the permission of the Darden School Foundation.
 -2- UVA-F-1355

million hectoliters. This equipment was acquired in 1994, following a fire that destroyed the old
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equipment.
Because of its efficiency improvements and slightly larger size, the new equipment increased
the brewery’s potential output. This additional capacity remained unused, however, until late 1998.
In that year, Deutsche Brauerei expanded into the Ukraine. Following the dissolution of the
U.S.S.R., Lukas Schweitzer had envisioned a significant new market for high-quality beer in Eastern
Europe, particularly in the former Soviet states, and resolved to penetrate that market. The Ukraine
was particularly attractive given its relatively larger population of 52 million and its strategic
location within Central and Eastern Europe.

In 1995 and 1996, the Ukrainian government embarked on a wave of privatizations and
market reforms. The Ukrainian government’s posture convinced the Schweitzer family that it was a
favorable time to enter the Ukrainian market. After analyzing various entry options, the Schweitzers
decided to enter the Ukraine through a network of independent distributors. Launched in 1998,
Deutsche’s beer was an overnight success. Accordingly, Lukas Schweitzer hired Oleg Pinchuk away
from a major Ukrainian beer producer to market Deutsche’s beer even more aggressively.

The beer won popularity for its full-bodied, malty taste. A factor extrinsic to the product—
the fragmented nature of the Ukrainian beer industry—also provided easy entry opportunities for
Deutsche Brauerei.

When the Russian debt crisis hit in 1998, the Ukrainian hryvna depreciated by 125% within
three months (see Exhibit 2). The depreciation of the hryvna resulted in lower revenue, profit, and
asset values when translated into deutsche marks (Germany’s currency in 1998). Because of the
popularity of Deutsche’s beer, however, the increase in Deutsche Brauerei’s volume sales more than
offset the negative currency effects.3 By early 2001, Ukrainian consumers accounted for 28% of
Deutsche’s sales. Further, the Ukraine had accounted for most of the unit growth in Deutsche’s sales
over the past three years.

In Germany, Deutsche Brauerei served its markets through a network of independent

distributors. Those distributors purchased Deutsche’s beer, stored it temporarily in their own
refrigerated warehouses, and ultimately sold it to their customers at the retail end of the distribution
chain (for example: stores, restaurants, and hotels). Oleg Pinchuk had adopted a different
distribution strategy with regard to the Ukraine.

Lunch with Uncle Lukas

After driving down from Frankfurt, Greta’s visit began with a luncheon meeting with Lukas
Schweitzer. Now 57, Lukas had worked at the brewery for his entire career. His experience had been

3
For 2001 and 2002, the hryvna was not expected to depreciate materially against the euro. As Exhibit 2 shows, the
hryvna had held steady since the Russian default. In January 2001, (Ukrainian hryvna) UAG1 was equivalent to EUR20.
 -3- UVA-F-1355

largely on the production side of the brewery, where he had risen to the position of brewmaster
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before assuming general management of the company upon the retirement of his father. He said:

Over the long history of this company, the Schweitzers have had to be brewers, not
marketers or finance people. As long as we made an excellent product, we always
sold our output at the price we asked. Then, in the 1990s, I realized that we needed
more than just production know-how. The collapse of the Berlin Wall, and then the
dissolution of the Soviet Union, convinced me that tremendous opportunities existed
in Eastern Europe. I hired Oleg Pinchuk to lead this initiative.

I’m quite pleased with what Pinchuk has been able to accomplish. He has organized
five distributorships, taken us from 0 to 211 customer accounts, and set up
warehousing arrangements—in 30 months, and on a small budget! He really
produces results. I am afraid I will have to pay him a lot more money next year, if I
am to keep him. As it is, I paid him EUR82,344 in 2000, consisting of a base salary
of EUR40,000 and an incentive payment of EUR41,440, which is calculated as 0.5%
of the annual sales increase in Ukraine. As you know from my letter to the board of
directors, I am proposing increases in both his base salary (to EUR48,500) and
incentive payment (to 0.6% of the annual sales increase).

Pinchuk was very helpful in pulling together the financial plan for 2001 [see Exhibit
1]. It shows handsomely rising sales and profits! Also, he prepared various analytical
presentations, including a sources and uses of funds statement [Exhibit 3] and a
detailed ratio analysis [Exhibit 4]. One very helpful analysis was the break-even
chart4 Pinchuk prepared [Exhibit 5]. It shows that, as we increased our volume above
the break-even volume, our profits rise disproportionately faster.

If we keep on this growth course, we’ll exhaust our existing unused productive
capacity by late 2001. The budget for 2001 calls for investment of EUR7 million in
new plant and equipment. For 2002, Pinchuk has proposed that we invest EUR6.8
million in a state-of-the-art warehouse and distribution center in Ukraine. He argues
that we won’t be able to sustain our growth in Ukraine without those major
investments. I haven’t even begun thinking about how we will finance all this
growth. In recent years, we have depended more on short-term bank loans than we
used to. I don’t know whether we should continue to rely on them to the extent that
we have. Right now, we can borrow from our long-standing Hausbank at a 6.5% rate

4
This chart shows the relationship between revenues, costs, and volume of output. For instance, revenues are
calculated as the volume of hectoliters of beer sold times the unit price of EUR78.5 per hectoliter. Fixed costs (EUR24.6
million) remain constant as the unit output varies, and are the sum of administration and selling expenses plus
depreciation. Variable costs are the sum of production costs, excise duties, and allowance for doubtful accounts, or
EUR52.3 per hectoliter. At any given level of output, total costs are the sum of variable and fixed costs. Profits or losses
are illustrated as the difference between the revenue and the total-cost lines, but note carefully that profit here is
implicitly defined as earnings before interest and taxes (EBIT). This analysis identifies the break-even volume, where
revenues just equal total costs. Deutsche Brauerei’s break-even volume was 938,799 hectoliters.
 -4- UVA-F-1355

of interest.5 Our banker asked me to meet with him next week to discuss our
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expansion plans; I’m guessing that he can’t wait to get more of our business!

With the improved profits, I am proposing an increase in dividends for this quarter to
a total of EUR698,000, one-fourth of the dividends projected to be paid in 2001. This
should keep the Schweitzer family happy. As you know, half of our family
stockholders are retirees and rely on the dividend to help make ends meet. We have
traditionally aimed for a 75% dividend payout from earnings each year, to serve our
older relatives.

Lukas Schweitzer had been quite talkative during the meal, allowing Greta little opportunity
to ask questions or to offer her own opinions. She was disquieted by some of the statements she
heard, however, and resolved to study the historical and forecast financials in detail. Then, quite
abruptly, Uncle Lukas announced that lunch was done and he would take her to meet Pinchuk.

Meeting with Pinchuk

After the introductory pleasantries, Greta asked Pinchuk to describe his marketing strategy
and achievements in Ukraine. He said:

Our beer almost sells itself; discount pricing and heavy advertising are unwarranted.
The challenge is getting people to try it and getting it into a distribution pipeline, so
that when the consumer wants to buy more, he or she can do so. But in 1998, the
beer-distribution pipeline in Ukraine was nonexistent. I had to go there and set up
distributorships from nothing; there were willing entrepreneurs, but they had no
capital. I provided the best financing I knew how, in the form of trade-credit
concessions. First, I extended credit to distributors in Ukraine who could not bear the
terms we customarily gave our distributors in western Germany. I relaxed the terms
for those new distributors from 2% 10, net 40, to 2% 10, net 80.6 Even on these
terms, our distributors are asking for more time to pay; I plan to relax the payment
deadline to 90 days. I am confident that we will collect on all of those receivables;
my forecast assumes that bad debts as a percentage of accounts receivable will
amount to only 2%.

These distributors are real entrepreneurs. They started with nothing, but their brains.
They have great ambitions and learn quickly. Some of them have gotten past due on
their payments to us, but I suspect that they will catch up in due course. Virtually all
the retailers and restaurateurs we supply are expanding and enhancing their shops,
buying modern equipment, and restocking their own inventories—all without the

5
In January 2001, the yield on short-term euro government debt was 4.58%.
6
“2% 10, net 40” means that Deutsche’s customer can take a 2% discount if payment is made within 10 days of the
invoice and that, otherwise, the full payment is due within 40 days.
 -5- UVA-F-1355

support of big banks like yours in Frankfurt! Most of those retailers can’t get bank
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credit; their “bootstrap” financing is ingenious and admirable. A little delay in

payment is understandable. Where we see great opportunity in these distributors, the
banks see no collateral, low profits, negative cash flow, and high risk. I know these
distributors better than the banks know them. I think we’ll make a profit on our
investment there. My analysis [Exhibit 6] suggests that we are earning a very high
return on our investment in receivables in Ukraine. We borrow at 6.5% from our
bank in the West, and use those funds to finance receivables in Ukraine that give us a
return of about 130%!

I should add that the other parts of my marketing strategy involve field warehousing,
to permit rapid response to market demand, and quite a lot of missionary activity, to
see that our beer receives the proper placement in stores and restaurants. My policy
on field inventories has been to support the fragile distributor network by carrying a
substantial part of the inventory on behalf of the distributor. This resulted in a sizable
increase in inventory for the company in 1999 and 2000.

These new marketing policies have paid off handsomely in terms of our unit growth
in the new federal states. Sales in Ukraine grew 47% in 2000—a rate of increase that
I aim to sustain for the foreseeable future. Without my changes in credit and
inventory policy, we would have realized only a small fraction of our current level of
sales there. In 2001, I hope to establish five more distributors and place our beer in
100 more stores and restaurants.

Greta inquired about the signs of global economic recession. Pinchuk seemed relatively
unconcerned. He said, “I don’t think Ukraine will be affected. Last year the economy grew 7%, and
this year it is predicted to grow 10%. I expect unit sales in Ukraine to rise significantly in 2001.” At
the close of their meeting, Greta asked for information on Deutsche’s credit customers. Pinchuk
supplied several files from which Greta extracted the summary information in Exhibit 7.

Conclusion

After a lengthy dinner that evening, at which she met the other directors, Greta returned to
the information she had gathered that day. She would need to form an opinion on the three matters
coming before the board the next day (the financial plan, the dividend declaration, and the
compensation plan for Pinchuk). She also wanted to study the company’s reliance on debt financing.
The other directors would be interested to know why, if the company was operating so profitably
above its break-even volume, it needed to borrow so aggressively. Greta also wondered about the
wisdom of Deutsche’s aggressive penetration of the Ukraine: Did rapid sales growth necessarily pay
off in terms of more profits or dividends? All this would take more study. She yawned and then
poured herself a cup of coffee before returning to scrutinize the numbers.
 -6- UVA-F-1355

Exhibit 1
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DEUTSCHE BRAUEREI
Historical and Projected Income Statements and Balance Sheets
(fiscal year ended December 31; all figures in thousands of euros)

Income Statements

1997 1998 1999 2000 2001 2002

(Actual) (Actual) (Actual) (Actual) (Proj'd.) (Proj'd.)

1 Sales: Germany 62,032 62,653 64,219 66,216 68,203 70,249

2 Sales: Ukraine 0 4,262 17,559 25,847 37,479 48,722
3 Net sales 62,032 66,915 81,779 92,064 105,682 118,971
Operating expenses:
4 Production costs and expenses 32,258 35,366 44,271 49,827 61,393 71,609
5 Administrative and selling expenses 12,481 13,014 16,274 18,505 18,500 18,500
6 Depreciation 3,609 4,314 5,844 6,068 6,766 7,448
7 Excise duties 9,143 9,108 10,486 11,557 11,625 13,087
8 Total operating expenses (57,491) (61,802) (76,874) (85,957) (98,284) (110,644)
9 Operating profit 4,541 5,113 4,904 6,106 7,398 8,327
10 Allowance for doubtful accounts (5) (7) (38) (24) (201) (60)
11 Interest expense (1,185) (1,064) (1,046) (1,304) (1,468) (1,634)
12 Earnings before taxes 3,351 4,042 3,821 4,779 5,729 6,633
13 Income taxes (1,132) (1,396) (1,510) (1,864) (2,005) (2,322)
14 Net earnings 2,219 2,646 2,311 2,915 3,724 4,311

Dividends on:
15 Dividends to all common shares 1,669 1,988 1,734 2,186 2,793 3,234
16 Retentions of earnings 550 658 577 729 931 1,078

Balance Sheets

1997 1998 1999 2000 2001 2002

(Actual) (Actual) (Actual) (Actual) (Proj'd.) (Proj'd.)
Assets
1 Cash 5,366 8,183 9,813 11,048 12,682 14,277
2 Accounts receivable:
Germany 6,933 7,142 7,222 7,517 7,661 7,891
Ukraine 0 424 4,090 6,168 9,241 12,014
Allowance for Doubtful Accounts (69) (76) (113) (137) (338) (398)
3 Inventories 6,133 6,401 7,817 12,889 14,795 16,656
4 Total current assets 18,363 22,075 28,829 37,485 44,042 50,439
5 Investments and other assets 3,102 3,189 3,416 3,520 3,500 3,500
6 Gross property, plant, and equipment 58,435 58,435 60,682 60,682 67,663 74,485
7 Accumulated depreciation (23,404) (27,719) (33,562) (39,631) (46,397) (53,845)
8 Net property, plant, and equipment 35,031 30,716 27,120 21,052 21,266 20,639
9 Total assets 56,496 55,981 59,365 62,057 68,808 74,579

Liabilities and Stockholders' Equity

10 Bank borrowings (short-term) 2,987 10,236 12,004 13,089 17,862 21,372
11 Accounts payable 3,578 3,755 4,103 4,792 5,284 5,949
12 Other current liabilities 7,397 7,361 8,996 10,127 11,625 13,087
13 Total current liabilities 13,962 21,352 25,103 28,009 34,771 40,407
14 Long-term debt: bank borrowings 16,107 7,544 6,601 5,658 4,715 3,772
15 Shareholders' equity 26,427 27,085 27,661 28,390 29,321 30,399
16 Total liabs. and stockholders' equity 56,496 55,981 59,365 62,057 68,808 74,579
Source: Case writer’s analysis.
 -7- UVA-F-1355

Exhibit 2
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DEUTSCHE BRAUEREI
Historical Exchange Rates: Ukrainian Hryvna to Deutsche Mark/Euro

DEM Deutsche marks per 1 Ukrainian hryvna

1.20

1.00
Russian crisis

0.80

0.60

0.40

0.20

0.00
4/

7/ 97

1/ 997

4/ 98

7/ 98

1/ 998

4/ 99

7/ 99

1/ 999

4/ 00

7/ 00
10 97

10 98

10 99

10 00
3/

3/

3/

3/

3/

3/

3/

3/

3/

3/

3/
/3

/3

/3

/3
19

19

19

19

19

19

19

19

20

20

20
/1

/1

/1

/2
00
0
EUR Euros per 1 Ukrainian hryvna
0.30

0.25

0.20

0.15

0.10

0.05

0.00
12

2/

4/ 999

6/

8/

10

12

2/

4/

6/

8/

10

12
15 98

15

15 9

15 9

15 99

15 0

15 0

15 0
/1

/1

/1

/1

/1
5/

/1

/1

/1

/1

5/

5/

/2

/2

/2

/2

5/

5/
19

99

99

99

19

19

00

00

00

00

20

20
9

99

00

00

Source: http://www.oanda.com/convert/fxhistory.
 -8- UVA-F-1355

Exhibit 3
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DEUTSCHE BRAUEREI
Sources and Uses of Funds Statements
(fiscal year ending December 31; all figures in thousands of euros)

1997 1998 1999 2000 2001 2002

(Actual) (Actual) (Actual) (Actual) (Proj'd.) (Proj'd.)
Sources of Funds
1 Net income 2,646 2,311 2,915 3,724 4,311
2 Increases in allowance for doubtful accounts 7 38 24 201 60
3 Depreciation 4,314 5,844 6,068 6,766 7,448
4 Increases in short-term debt 7,249 1,768 1,085 4,773 3,510
5 Increases in accounts payable 177 348 690 492 664
6 Increases in other current liabilities (36) 1,635 1,131 1,498 1,462
7 Total Sources of Cash 14,357 11,943 11,913 17,454 17,456

Uses of Funds
8 Dividend payments 1,988 1,734 2,186 2,793 3,234
9 Increases in cash balance 2,817 1,630 1,234 1,634 1,595
10 Increases in accts. receivable (Germany) 209 79 296 144 230
11 Increases in accts receivable (Ukraine) 424 3,665 2,078 3,074 2,772
12 Increases in inventories 267 1,417 5,072 1,906 1,861
13 Increases in other assets 87 227 104 (20) 0
14 Reductions in long-term debt 8,563 943 943 943 943
15 Capital expenditures 0 2,247 0 6,980 6,822
16 Total Uses of Cash 14,357 11,943 11,913 17,454 17,456

Source: Case writer’s analysis.

 -9- UVA-F-1355

Exhibit 4
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DEUTSCHE BRAUEREI
Ratio Analyses of Historical and Projected Financial Statements
(fiscal year ended December 31)

1997 1998 1999 2000 2001 2002

(Actual) (Actual) (Actual) (Actual) (Proj'd.) (Proj'd.)
Profitability
1 Operating profit margin (%) 7.3% 7.6% 6.0% 6.6% 7.0% 7.0%
2 Average tax rate (%) 33.8% 34.5% 39.5% 39.0% 35.0% 35.0%
3 Return on sales (%) 3.6% 4.0% 2.8% 3.2% 3.5% 3.6%
4 Return on equity (%) 8.4% 9.8% 8.4% 10.3% 12.7% 14.2%
5 Return on net assets (%) 6.5% 7.4% 6.9% 8.4% 9.3% 9.7%
6 Return on assets (%) 3.9% 4.7% 3.9% 4.7% 5.4% 5.8%

Leverage
7 Debt/equity ratio (%) 72.3% 65.6% 67.3% 66.0% 77.0% 82.7%
8 Debt/total capital (%) 41.9% 39.6% 40.2% 39.8% 43.5% 45.3%
9 EBIT/interest (x) 3.8 4.8 4.7 4.7 5.0 5.1

Asset Utilization
10 Sales/assets 1.10 1.20 1.38 1.48 1.54 1.60
11 Sales growth rate (%) 4.0% 7.9% 22.2% 12.6% 14.8% 12.6%
12 Assets growth rate (%) 6.0% -0.9% 6.0% 4.5% 10.9% 8.4%
13 Receivables growth rate (%) 4.0% 9.1% 49.5% 21.0% 23.5% 17.8%
14 Receivables growth rate: Germany 4.0% 3.0% 1.1% 4.1% 1.9% 3.0%
15 Receivables growth rate: Ukraine 0.0% nmf 863.5% 50.8% 49.8% 30.0%
16 Days in receivables 40.8 41.3 50.5 54.3 58.4 61.1
17 Days in receivables: Germany 40.8 41.6 41.0 41.4 41.0 41.0
18 Days in receivables: Ukraine nmf 36.3 85.0 87.1 90.0 90.0
19 Payables to sales 5.8% 5.6% 5.0% 5.2% 5.0% 5.0%
20 Inventories to sales 9.9% 9.6% 9.6% 14.0% 14.0% 14.0%

Liquidity
21 Current ratio 1.32 1.03 1.15 1.34 1.27 1.25
22 Quick ratio 0.88 0.73 0.84 0.88 0.84 0.84

Note: nmf = not a meaningful figure.

These financial ratios show the performance of the firm in four important areas.
Profitability is measured both in terms of profit or expense margins (lines 1–3) and as investment returns (lines 4–6).
Investors will focus on the latter measures of profitability.
Leverage ratios measure the use of short-term and long-term debt financing by the firm. In general, higher usage of debt
increases the firm’s risk. Higher ratios of debt to equity and debt to capital (lines 7 and 8) suggest higher financial risk.
The ratio of EBIT to interest expense measures the ability of the firm to “cover” its interest payments; lower levels of this
ratio suggest higher risk (line 9).
Asset-utilization ratios measure the efficiency of asset use. For instance, the sales to assets ratio (line 10) shows how
many euros of sales are generated per euro of assets. A higher figure suggests more efficiency, while a lower figure
suggests less efficiency. Over the long term, differences in the growth rates of sales (line 11) and assets (line 12) can lead
to production problems of over- or undercapacity. Days in receivables (lines 16–18) shows how many days it takes to
collect the average credit sale; the longer it takes, the greater the investment in receivables.
Liquidity ratios measure the resources available to meet short-term financial commitments. The current ratio (line 21) is
the ratio of all current assets to all current liabilities. The quick ratio (line 22) is the ratio of only cash and receivables
(i.e., those assets that can be liquidated quickly) to all current liabilities.
Exhibit 5
 -10- UVA-F-1355

DEUTSCHE BRAUEREI
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2000for
Breakeven Chart Breakeven ChartBrauerei, 2000
Deutsche

90
80
Millions of Euros

70
60 Revenues
50 Var. Cost
40 Fixed Cost
30
Tot. Cost
20
10
0

00
0

0
0
10

20

30

40

50

60

70

80

90

10
Thousands of Hectolitres of Beer Sold

Source: Case writer’s analysis.

 -11- UVA-F-1355

Exhibit 6
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DEUTSCHE BRAUEREI
Pinchuk’s Analysis of the Return on Investment from
Investment in Accounts Receivable in Ukraine

To: Lukas Schweitzer

From: Oleg Pinchuk

The following table illustrates the high profitability we have achieved on our investment in
receivables in Ukraine. We can look forward to a return of about 120%−130% on our receivables
from the East.

The return on investment is calculated as follows:

Return on investment = Marginal after-tax profit contribution

Required marginal investment

The numerator is simply the profits we earn on new sales each year in Ukraine. It excludes the fixed
costs because we assume those costs have been covered: we want to focus only on the marginal
events. Also, it assumes that, without the extension of credit, no sales growth would occur in
Ukraine. The denominator is Deutsche’s investment in the receivables. This is not the face amount
of the receivables; it is only the cash outlay for the product underlying the receivable. Accordingly,
for 2001, the calculation is:

Investment in accounts receivable (AR) = (Variable costs  Sales) × Change in AR

= (EUR52.31  EUR78.49) × EUR3,073,536
= EUR2,048,512

Assumptions
Revenue per HL (EUR) 78.49
Variable costs per HL (EUR) 52.31
Contribution percentage 33%
Tax rate 35%

1997 1998 1999 2000 2001 2002

(Actual) (Actual) (Actual) (Actual) (Proj'd.) (Proj'd.)
Sales in Ukraine (EUR, thousands) 4,262 17,559 25,847 37,479 48,722
Change in sales (EUR, thousands) 4,262 13,297 8,288 11,631 11,244
Variable costs on the marginal sales (2,841) (8,863) (5,524) (7,752) (7,494)
Contribution on the marginal sales 1,421 4,435 2,764 3,879 3,750
Taxes on the marginal contribution (497) (1,552) (967) (1,358) (1,312)
Marginal After-tax Profits (EUR, thousands) 924 2,883 1,797 2,521 2,437

Variable costs/sales 1 1 1 1 1
Change in accounts receivable, Ukraine (EUR, thousands) 424 3,665 2,078 3,074 2,772
Investment in Accounts Receivable (EUR, thousands) 283 2,443 1,385 2,049 1,848

Return on Marginal Investment in Receivables 327% 118% 130% 123% 132%

 Este documento está autorizado para utilizarse en el Programa de Dirección Estratégica - PDE, MINTIC - 2018

-12- UVA-F-1355

Exhibit 7
DEUTSCHE BRAUEREI
Selected Information on Deutsche Brauerei’s Distributors in Ukraine

Composite Ratios,
German Beer-
Deutsche Distributors Distribution
by City: Kharkiv Dnipropetrovsk Odessa Donetsk Kiev Industry
Income Data
Net sales, 2000 EUR2,530,935 EUR2,024,748 EUR2,812,150 EUR843,645 EUR3,475,255 NA
Operating profit/sales 1.8% 2.2% 3.0% 1.1% 3.5% 3.7%
Pretax profit/sales 1.7% 1.9% 2.3% 0.7% 3.1% 3.5%
Assets (as % of total)
Trade receivables 12.9% 13.5% 16.5% 19.5% 13.0% 12.0%
Inventory 15.1% 19.0% 30.0% 25.0% 22.0% 31.0%
Fixed assets 33.1% 29.1% 25.0% 21.0% 28.0% 24.0%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Liabilities
Short-term bank 0.1% 2.1% 1.5% 2.5% 4.0% 15.0%
borrowings 29.2% 32.2% 28.7% 37.5% 19.0% 16.3%
Trade payables 35.0% 41.0% 33.2% 43.2% 27.0% 39.4%
Total current liabs. 2.5% 0.0% 3.0% 0.0% 5.0% 16.0%
Long-term debt 32.5% 59.0% 63.8% 56.2% 68.0% 44.6%
Net worth 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Total
Ratios
Current ratio 1.1 1.2 1.1 0.9 1.6 1.4
Days’ sales outstanding 27.7 25.9 27.4 39.5 19.8 19.4
Sales/assets 2.0 1.9 2.2 1.8 2.4 2.3
Pretax profit/assets 2.9% 3.6% 5.1% 1.3% 7.4% 8.0%
Debt/equity 8.0% 3.6% 7.1% 4.4% 13.2% 69.5%
Source: Case writer’s analysis.