J.L.Lennard Limited is a New Zealand company which distributes the world's leading manufacturers of processing equipment, packaging

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Question:

J.L.Lennard Limited is a New Zealand company which distributes the world's leading manufacturers of processing equipment, packaging machines, beverage handling systems and inspection equipment.

During 2015, the business experienced low sales and worsen as there was an economic downturn in the following two years. It appeared that the company was in danger of closing down. Profits were down, and shareholder confidence was very low.

To reduce costs and increase profits, the Chief Financial Officer and the Chief Operating Officer put in several efficiency and cost-saving measures. These measures include:

Ensuring wasteful processes in the company are overhauled, and efficient methods of working introduced.
The company planned to borrow from the TS Bank to invest in new machinery. The TS Bank was selected because the Managing Director of JL Lennard is a member of the bank’s Board.
Not upgrading their pollution control systems to match the requirements of the new machinery. This cost measure has increased emissions.
Not upgrading their safety systems and providing safety training to workers to match the requirements of the new machinery.
Not paying cash dividends to shareholders for the past three years.
Stopping the company’s support to the local charity.
Laying off older workers who were on a higher pay scale in favour of recruits straight out of college for lower pay.
Implementing a profit-sharing plan where managers are given a percentage of the company’s profits.

As a result of these measures, the company’s profits in the past three years have been consistently rising. However, although profits are up, the company’s stock price has declined by $ 5.00 per share over the past 18 months. The perception in the market is that JL Lennard Limited does not care for its shareholders.

Answer the following questions based on Scenario 1.

Q 1. Briefly explain three different roles of financial managers in financial management. Your answer should include a relevant example from the given scenario. (LO1a)

Q 2.

a. List three stakeholders that have been affected by JL Lennard Limited’s efficiency and cost-saving measures. Explain the reasons based on the given scenario.

b. For each stakeholder listed in Q2a, describe what steps JL Lennard Limited might take to ensure stakeholders' requirements are met. The steps described must appropriate with professional, ethical, and socially and culturally practices. (LO1a, 1e)

Q 3. In Scenario 1, identify the principal and the agent in the agency relationship. Explain the reason for the decline in the share price while the profits are up. (LO1a)