Reference no: EM13197410
Mark Golledge, 65 years old, is the major shareholder of News Review Ltd a 5 year old family run rapidly expanding publishing house with a turnover of £25m and profit before taxation of £1.5m for the year ended 31 March 2013. Due to the growth of the internet as a major source of advertising revenue, the company is planning to launch an e-paper and a newspaper. This will require a major injection of cash and so the company is planning a listing on the stock exchange in the near future. The finance function currently consists of a Financial Accountant, a Management Accountant and a Financial Manager.
Due to his age Mark is considering retiring and appointing Raymond Cash as Managing Director. Raymond has come as a recommendation from friends that Mark has in the industry as a "safe pair of hands with traditional values".
Raymond was interviewed and asked about his proposals given the company's plans and finance structure. He made the following recommendations:
1. That with a possible stock exchange listing the company's sole objective should be to maximise profit before taxation. He felt that this was the sole relevant measure of a company's performance.
2. The rapid expansion of the company meant that new offices and a new printing machine would need to be purchased. (25 marks)
3. That his remuneration should be linked to profit before taxation to ensure goal congruence with the company's objectives and that he appoints all the board members.
4. The removal the Management Accountant & Financial Manager. The financial accountant was felt to be most competent and who had been a friend for many years. This would save cash and rationalise the Finance function as all the jobs were too similar.
Mark Golledge is concerned with these proposals and feels that not all the issues and implications have been addressed. He has arranged a meeting with you, a well known Financial Consultant to discuss these proposals.
Requirement
Discuss and analyse all the issues in order, and any other implications arising from this scenario for presentation to Mark Golledge.
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