Buenaventura
Growth is more than merely one part of the mission and vision of Buenaventura – the leading mining company in Peru and one of the largest gold and silver producers in the world. It is the company’s daily mantra. Operating in a capital-intensive industry and in a geographic environment not as welcoming to investments as it should be, the company has to be persistent to maintain the degree of success it has achieved over the years. Joint ventures, offerings through the Lima Stock Exchange, and American Depositary Receipts (ADR) issuance on the New York Stock Exchange (NYSE) were all means to achieve the company’s goal of continued growth. But when it came to creating long-term sustainable shareholder value, there was only one way to do it: by enhancing governance practices.
The Roots of the Need for Governance
Buenaventura has focused on exploration and acquisitions, both on its own and through joint ventures, since its founding in 1953. For Buenaventura, conducting business responsibly and effectively is part of its strategy to increase shareholder value. Buenaventura suffered several years of losses that ultimately led to a high level of debt amid Peru’s weak economic environment during the 1980s. In the early 1990s, however, Peru emerged into a period of greater stability, allowing Buenaventura to plan for a more promising future. When the company decided to invest in Yanacocha, now a world class gold deposit, Buenaventura faced high-cost exploration and development investments.
Convinced that the market pays for good corporate governance practices, Buenaventura chose to cancel its debt with the proceeds of an initial public offering (IPO) of ADRs on the NYSE in 1996. The decision reflected Buenaventura’s Board of Directors’ and management’s commitment to comply with United States Securities & Exchange Commission (SEC).regulations. Prior to the IPO, the company took several critical steps toward improving its governance: revamping its Board of Directors, incorporating independent members and establishing Board Committees; implementing an Ethics Code; creating a Disclosure Committee; and finally, eliminating its dual class share structure and converting all its shares into a single class, with equal voting rights.
Corporate Governance Steps
Buenaventura has implemented a comprehensive set of rules to ensure good governance. The reforms were inspired by the recommendations of major international organizations, such as the OECD and the World Bank/IFC. The decision to convert all shares into a single class of common shares served to keep the controlling group together, and was also considered the best way to continue to maximize the value of the company. The stock’s liquidity was bolstered as a result, as investors responded positively to the single voting class of shares. In the event of a tender offer, the Board must review the proposal and make its recommendation all shareholders, who in turn make their own decisions on whether to accept the offer. Buenaventura takes voting rights seriously. To facilitate the participation of all shareholders in General Meetings, the company calls Meetings 25 days in advance and provides shareholders the Meeting’s agenda. ADR holders receive proxies through the depositary bank and special procedures have been put in place to ensure that ADR holders have sufficient time to consider how to vote and that their votes are duly represented at General Meetings.
Results
Buenaventura recognizes that it must continue to improve its governance framework as it strives to maximize shareholder value. Its governance improvements are clearly recognized by the market, as demonstrated by its three-fold increase in market capitalization, from around US$ 400 million to US$ 3.6 billion. The company reported net revenue of US$ 316 million in 2004, generating operating income of US$ 86.6 million in that year. Today, Buenaventura is working on complying with the Sarbanes-Oxley requirements. The company expects to be certified by external auditors as Sarbanes-Oxley compliant in June 2006.
Critically evaluate how Buenaventura achieves success through corporate governance. Provide justifications within the case study.
Imagine that you have been appointed as the CEO of Buenaventura. Discuss how you would strengthen the corporate governance using BRC Model.
In: Finance
Hi [your name],
We are still talking around here about the good job you and the other members of the audit team did on our audit. You all seemed to have a thorough understanding of our business, and we found working with you a pleasure. Based on the good experience we had with the audit, we would like to engage your firm to do additional work for us. Specifically, we’d like your help in designing a new financial information system for our company. We’re also considering investing in stock being offered by one of our suppliers, and we’d like your input into that decision. Hope you can help us here! Looking forward to hearing from you. Regards, Jerome.
Write a letter to Mr. Parker in response to his email. Remember that you want to maintain a good working relationship with Parker and Smith. You also want to maintain proper professional and ethical standards.
In: Accounting
Determine if the below researches are applied or basic
Example 1:
Apple's iPod fueled the company's success in recent years, helping to increase sales from $5 billion in 2001 to $32 billion in the fiscal year 2008 (which ended on September 30). Growth for the music player averaged more than 200% in 2006 and 2007, before falling to 6% in 2008. One reason for this decrease in sales is that iPod owners see little or no reason to upgrade, especially with the crumbling economy. As a result, some analysts believe that the fourth quarter of 2008 will be the first quarter since the iPod was introduced in 2001 that sales will decline from the year-earlier quarter. What's more, they believe that the number of iPods sold will drop 12% in 2009, to about 48 million units. "The reality is there's a limited group of people who want an iPod or any other portable media player," one analyst says. "So the question becomes, what will Apple do about it?"
Example 2:
As Chinese consumers grow wealthier, they are increasingly willing to spend extra money on more expensive, but healthier, drinks. A Chinese company, China Huiyuan Juice Group, has leveraged its early-mover advantage and strong brand name to become the leading 100% juice and nectar beverage company in China. China Huiyuan Juice Group wants to grow bigger but it is lacking the distribution network, financial resources, and management to do so. In an effort to diversify its presence in one of the world's fastest-growing beverage markets, Coca-Cola has announced that it wants to buy China Huiyuan Juice Group. Three major shareholders of Huiyuan, with a collective shareholding of 66% in the Chinese company, have already accepted Coca-Cola's offer. Whether both companies will benefit from this merger is uncertain: mergers can succeed or fail for many reasons. Recent research has shown that cultural differences might be a major cause of post merger difficulties.
Example 3
University professors engage in basic research in an effort to understand and generate more knowledge about various aspects of businesses, such as how to improve the effectiveness of information systems, integrate technology into the overall strategic objectives of an organization.
In: Economics
Following are two income statements for Alexis Co. for the year ended December 31. The left number column is prepared before any adjusting entries are recorded, and the right column includes the effects of adjusting entries. The company records cash receipts and payments related to unearned and prepaid items in balance sheet accounts. The middle column shows a blank space for each income statement effect of the eight adjusting entries a through g (the balance sheet part of the entries is not shown here).
| ALEXIS CO. Income Statements For Year Ended December 31 |
||||||||||
| Unadjusted | Adjustments | Adjusted | ||||||||
| Revenues | ||||||||||
| Fees earned | $ | 24,000 | a. | $ | 30,000 | |||||
| Commissions earned | 42,500 | 42,500 | ||||||||
| Total revenues | $ | 66,500 | 72,500 | |||||||
| Expenses | ||||||||||
| Depreciation expense—Computers | 0 | b. | 1,500 | |||||||
| Depreciation expense—Office furniture | 0 | c. | 1,750 | |||||||
| Salaries expense | 12,500 | d. | 14,950 | |||||||
| Insurance expense | 0 | e. | 1,300 | |||||||
| Rent expense | 4,500 | 4,500 | ||||||||
| Office supplies expense | 0 | f. | 480 | |||||||
| Advertising expense | 3,000 | 3,000 | ||||||||
| Utilities expense | 1,250 | g. | 1,320 | |||||||
| Total expenses | 21,250 | 28,800 | ||||||||
| Net income | $ | 45,250 | $ | 43,700 | ||||||
Analyze the statements and prepare the eight adjusting entries a
through g that likely were recorded. Note: Answer for a
has two entries 30% of (i) the $6,000 adjustment for Fees Earned
has been earned but not billed, and (ii) the other 70% has been
earned by performing services that were paid for in advance.
In: Accounting
Analyze the statements and prepare the eight adjusting entries a through g that likely were recorded. Note: Answer for a has two entries 30% of (i) the $5,400 adjustment for Fees Earned has been earned but not billed, and (ii) the other 70% has been earned by performing services that were paid for in advance.
Following are two income statements for Alexis Co. for the year ended December 31. The left number column is prepared before any adjusting entries are recorded, and the right column includes the effects of adjusting entries. The company records cash receipts and payments related to unearned and prepaid items in balance sheet accounts. The middle column shows a blank space for each income statement effect of the eight adjusting entries a through g (the balance sheet part of the entries is not shown here).
|
ALEXIS CO. Income Statements For Year Ended December 31 |
||||||||||
| Unadjusted | Adjustments | Adjusted | ||||||||
| Revenues | ||||||||||
| Fees earned | $ | 24,000 | a. | $ | 29,400 | |||||
| Commissions earned | 42,500 | 42,500 | ||||||||
| Total revenues | $ | 66,500 | 71,900 | |||||||
| Expenses | ||||||||||
| Depreciation expense—Computers | 0 | b. | 1,350 | |||||||
| Depreciation expense—Office furniture | 0 | c. | 1,575 | |||||||
| Salaries expense | 12,500 | d. | 14,705 | |||||||
| Insurance expense | 0 | e. | 1,170 | |||||||
| Rent expense | 4,500 | 4,500 | ||||||||
| Office supplies expense | 0 | f. | 432 | |||||||
| Advertising expense | 3,000 | 3,000 | ||||||||
| Utilities expense | 1,250 | g. | 1,313 | |||||||
| Total expenses | 21,250 | 28,045 | ||||||||
| Net income | $ | 45,250 | $ | 43,855 | ||||||
In: Accounting
Following are two income statements for Alexis Co. for the year ended December 31. The left number column is prepared before any adjusting entries are recorded, and the right column includes the effects of adjusting entries. The company records cash receipts and payments related to unearned and prepaid items in balance sheet accounts. The middle column shows a blank space for each income statement effect of the eight adjusting entries a through g (the balance sheet part of the entries is not shown here). ALEXIS CO. Income Statements For Year Ended December 31 Unadjusted Adjustments Adjusted Revenues Fees earned $ 18,000 a. $ 25,000 Commissions earned 36,500 36,500 Total revenues $ 54,500 61,500 Expenses Depreciation expense—Computers 0 b. 1,600 Depreciation expense—Office furniture 0 c. 1,850 Salaries expense 13,500 d. 15,750 Insurance expense 0 e. 1,400 Rent expense 3,800 3,800 Office supplies expense 0 f. 580 Advertising expense 2,500 2,500 Utilities expense 1,245 g. 1,335 Total expenses 21,045 28,815 Net income $ 33,455 $ 32,685 Analyze the statements and prepare the eight adjusting entries a through g that likely were recorded. Note: Answer for a has two entries (i) the $7,000 adjustment for Fees Earned, 30% (or $2,100) has been earned but not billed, and (ii) the other 70% (or $4,900) has been earned by performing services that were paid for in advance.
In: Accounting
A large portion of US oil production comes from hydraulic fracturing (fracking). Production from fracked wells quickly declines, requiring constant drilling of new wells and installation of associated pipelines to keep production at current high levels. Assume that the Trump Administration carries out the threat to levy steep tariffs on imported steel. Companies that supply pipe to the oil industry for wells and pipelines see steep price increases for steel and have to raise their prices. Fill in the table below and explain the effects on U.S. and global oil markets.
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shifts to the right |
shifts to the left |
stays the same |
|
U.S. demand curve for oil |
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U.S. supply curve for oil |
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Rest of world demand for oil |
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Rest of world supply of oil |
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Total world demand curve for oil |
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 |
 |
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Total world supply curve for oil |
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rise(s) |
fall(s) |
change(s) little |
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World oil prices |
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U.S. oil prices |
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World oil consumption |
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U.S. oil consumption |
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U.S. oil net exports |
Explain your answers.
In: Economics
Nikita is a government official looking to find evidence on whether the mean taxable income for an individual taxpayer in the region dropped since the previous year. She surveyed 32 individual taxpayers in the region and found the taxable income of each individual as shown in the data set provided. Instead of using the standard deviation from the survey, Nikita decided to use the census data for the region to assume that the population standard deviation of income is $26,744. The mean taxable income in the region was $62,712 for the previous year.
(a) H0:μ=$62,712; Ha:μ<$62,712, which is a left-tailed test.
(b) Taxable income of each individual is given below.
Use Excel to test whether this year's mean taxable income for an individual taxpayer in the region is less than the mean taxable income from the previous year, and then draw a conclusion in the context of the problem, where α=0.10. Calculate the test statistic, z, rounding to two decimal places, and the p-value, rounding to three decimal places.
Taxable income ($)
Taxable income ($)
12193
64586
60363
59639
103402
24127
53641
38963
78596
49328
33983
64023
49771
89073
59433
21930
53789
30236
41639
87935
73396
69640
69371
104896
112354
96396
83921
72539
52186
91483
32069
17296
In: Statistics and Probability
1. Who benefits from rent ceilings? Who suffers? What are the long-term effects of rent ceilings? How can landlords and tenants cheat on rent ceilings? Do you think the rent ceilings might lead to more discrimination against certain groups?
2. Describe the effects on the labor market of a minimum wage that is higher than the equilibrium wage. Who benefits from such a minimum wage? Who suffers? What are the long-term effects of the minimum wage?
3. Have you ever worked for the minimum wage? If so, for how long? Would you favor increasing the minimum wage by a dollar? By two dollars? By five dollars? Explain your reasoning.
4. Of what significance is the elasticity of demand for drugs in the debate about legalization of presently illegal substances?
5.
a) How could taxes be used to regulate legal drug markets?
b) Why are excise taxes on cigarettes and alcohol sometimes referred to as “sin taxes”?
c) Does the government tax them solely because they are “sins”?
In: Economics
Consider two farmers, one who owns land and the other who rents it from someone else. In good times (which happen with probability 0.3), the owner-farmer earns an income of 125. In bad times (which happen with probability 0.7), he earns an income of 75. The tenant works on a farm that is twice as large and earns an income of 250 in good times (prob=0.3) and 150 in bad times (prob=0.7).
However, he must pay a rent of 100. Calculate the expected net income of both farmers.
Assume that their utility function takes the following form: ? = ?1/2, where ?stands for the farmer’s net income. Calculate the expected utility of both.
Compare this result to the calculation on expected income. What do you conclude in terms of the different risks that both farmers face?
In: Economics