IndexExecutive SummaryIntroductionBillabong Structure and Corporate GovernanceRemunerationCapital StructureFig 1 Monthly View for the ASX and Billabong Market IndexThe formula is: Risk Management and Hedging PolicyConclusionExecutive SummaryBillabong International is facing a challenge on how to expand the company. With an impressive performance in the previous five years, characterized by slow but steady growth. The company's growth has been limited in part due to the small size of the surf apparel industry. The company then decided to move into a much broader class of sportswear. However, it is not limited to this as it can develop its own business brand based on physical expansion in the moderately emerging markets of North America and South Africa. This has been facilitated by the intense competition in the current market in which it operates, as the group operates in the manufacturing lifecycle rather than the service sector. It is therefore highly recommended that Billabong focuses more on geographical expansion. This will result in giving them access, as well as greater growth and new opportunities, but as a result will maintain and improve their presence and market share compared to direct competition from larger companies who are likely to compete on both marketing and price. Overall Billabong International is a profitable company and can expand its influence; brand and market share if it follows the above tips to increase shareholder wealth. I firmly believe that recommendations made in good faith will catapult it to greater heights and become a major brand globally. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay IntroductionThe strengths of Billabong are the very popular brands and the quality of Billabong products, as well as the target market which is mainly young and sporty. This was the company's financial strength and its ability to leverage its brand to add value to smaller acquired brands. The company is an established leader in surf apparel and other activewear accessories, both among surfers and outside of the surfer market. Both target markets are important for Billabong's financial growth and reputation because they represent the majority of the core market and even more so the latter because young people represent the greatest opportunities for the future market. Brand value among retailers depends on commitment to surf culture, so much so that any company not deemed fully committed to the culture of the industry is fired. The company has consistently grown revenues and profits over the past five years. Over that time frame, gross margins improved from 19.5% to 54.7%. Net sales also showed a slight improvement. The company's earnings per share have doubled in that time. Billabong's liquidity is exceptional, with a current ratio of 3.07. Interestingly, it has a roughly 50/50 capital structure and has maintained a 50% range between debt and equity with some consistency over the past few years. Another strategy that has carried it forward has been trying to add value to the smaller brands it acquires. The performance of the brands adds credibility to the company's range, especially considering that the quality of the products in question is typically heavily dependent on surf brands. Billabong maintains brand integrity by retaining staff permanently. Corporate structure and governance ofBillabong In recent times the company has come to realize the importance of good corporate governance which is the backbone of its success in spreading and having influence across the world. To achieve this he must start from the top, as illustrated by his leadership protocol. This is demonstrated by its increase in efficiency and quality in production and innovation processes. This has been established so that you always achieve your set goals and objectives, no matter how ambitious. Billabong in its mission to achieve its objectives has as a board of directors and is classified as follows: The non-executive chairman Three non-executive directors Executive director and CEO, Billabong USA Executive director and CEO Non-executive directors usually Executive directors and other managers independently meet to manage performance issues and other factors impacting the company. Directors are instead allowed to express different and independent judgments to consider when making their decisions. The role of the board of directors includes, among others, setting objectives, goals and strategic direction for all business components, oversight of financial performance, including acceptance of favorable business plans, annual operating and expense budgets in capital account and financial statements, appointment and performance monitoring of the board of directors. CEOs and other senior executives; accept and monitor significant capital and management expenditures, acquisitions, divestitures and identified business developers monitor areas of significant business risk and ensure arrangements are in place to manage such risks; ensure compliance with environmental, social and workplace health and safety regulations announce performance to shareholders. In order to complete all the tasks it set out to undertake, the board created an audit committee, a nominations committee, a human resources committee and a compensation committee. The audit committee ensures the honesty and reliability of the company's financial statements and compliance with all legal requirements, while the nominations committee finds suitable candidates to take up positions on the board of directors, reviews and makes sound suggestions to the board on its composition and appropriate guidelines, among others. The remuneration committee is responsible for providing advice on remuneration and incentive policies and practices and detailed recommendations on remuneration packages and other conditions of employment for executive directors, other senior management and non-executive directors. Non-executive directors receive remuneration based on their responsibilities and also the requests made. Their maximum commission is $1,200,000 with no stock options or pension benefits, but they receive an additional annual commission if they chair a committee. Executive compensation, in contrast, has four divisions: base salary and benefits, short-term performance incentives, long-term performance. incentives (Billabong Executive Incentive Option Plan and Billabong Executive Performance Equity Plan Executives are offered compensation that includes base compensation ideals and benefits in consultation with external compensaters to reflect the market for an appropriate role. Base compensation is usually reviewed annually to maintain competition and also in case of promotion Benefits include health insurance, pension and sometimes travel and accommodation may be usedshort-term performance based on the company's individual and financial performance, and lower-level STI managers are issued based on personal performance, and the benefits paid in September largely depend on the profit target, at the discretion of the human resources committee and remuneration. Long-term performance incentives include the Billabong Executive Incentive Option Plan established on July 4, 2000. Options are approved for a period of one year, exercisable after each of Years 2, 3, and 4. Employee Privileges for options they are not conditional on future employment relationships after they become exercisable even if they do not entail voting rights and dividends but are convertible into ordinary shares. The credits arising from the options are identified as share capital. The other long-term performance-related incentives are Billabong's executive performance share plan, which is divided into performance shares and conditional rights. Under performance benefits, an employee is not legally entitled to them but can vote and receive dividends based on them. For Australian employees, once vested, the dividends remain in their trust, but if the performance shares do not vest, they are forfeited by the employee. For conditional rights. An employee is not legally entitled to shares in the Company prior to the rights granted under. The fair value of the rights granted is documented in the financial statement at the stage in which the rights mature and the employees acquire the unconditional right to the shares. Assignment, acquisition and exercises under the plan are not made for consideration. Billabong's compensation plan is under strong performance guidance that has no unfair loopholes for unfavorable compensation. The entire compensation framework corresponds to the competitive market competition with the compensation strategy of the association. Its alignment with shareholder interests, focusing on the constant growth of shareholder wealth, as well as alignment with the interests of program participants through the ability to reward, contribution recognition, among others, ensures that Billabong's compensation structure is sufficient. Capital Structure Billabong relies heavily on equity financing which has greatly supported the company however in recent years it has looked to other financing avenues such as the Australian Exchange Securities (ASX). The net worth in this case includes treasury shares which in the last three years have grown from 24,896,000 to approximately 27,945,000, options and other reserves, retained earnings, rights issues and dividends paid, bring the total assets in the last three years to approximately 1,176,936. Therefore, the cost of equity capital when leveraged is approximately 33.6%. Part of Billabong's financial structure also involves borrowing from overseas markets in order to take advantage of lower interest rates or to have generally more generous payment terms. According to the 2009-2010 financial report, these loans amounted to approximately 720,478,000 in both current and non-current liabilities. Billabong's debt-to-GDP ratio during this financial period was at a relative low of 16.8%, showing that the company is able to sustain itself quite well. Debts have increased in recent years, as the company takes advantage of attractive credit terms from its suppliers, improving the company's creditworthiness. In addition to this, the company has a diversified leasing portfolio under its debt financing sources, especially the capital equipment leasing portfolio. The financial leasing obligation represents theportion of the lease obligation that is due beyond one year. Properties under this type of lease are capitalized when the lease term of a particular asset is significantly close to the construction life of the asset. When such lease obligations are capitalized, the associated asset is written down as a company asset and subject to depreciation. Over the last three years Billabong has been quite active on the stock market with its current share price trading at A$6.68 on average. With an average of approximately 1,500,000 shares issued and traded over the last 3 years, the dividend yield is approximately 2.71 with an average paid out of approximately 920,196. This shows that the percentage change is increasing by around 0.45%, which means that the company is performing well and maximizing shareholder wealth. Billabong's dividend policy is in line with its business objectives as it pays a fixed payout ratio based on company growth and performance of approximately 62%. Furthermore, the company has approximately share rights and options available to its executive and non-executive directors based on their performance, as per company policy. Fig 1 Monthly view for the ASX market index and BillabongCAPM whose full expression is, the capital asset pricing model is key to determining the most appropriate theoretical rate of return on an asset. This means that an asset must be added to an already highly rated portfolio, after calculating and forecasting non-diversifiable asset possibilities. This is because the model considers and compares the asset's sensitivity to systematic risk, often indicated by the financial sector's Beta () quantity, as well as the expected returns from the market in addition to the expected returns from a hypothetical risk-free asset. The formula is: E(Rj)=Rf+Bj(Rm-Rf) we consider that the beta risk of Billabong company is 2.3, while the risk free rate of return is 9% in addition to that, the significant premium expected risk for the market index in excess of the risk-free investment (Rm-Rf) was 2%. The expected return would be: E(Rj)=Rf+Bj(Rm-Rf)=9+2.3*2=13.6%This simply means that Billabong should get at least a 13.6% return on its investment . If it does not lead to these returns, you will most likely reconsider investing in a different asset or security. Therefore, by referring to the CAPM, the formula above, you can see the significant measure of a security's danger. This is because it is able to determine the comparative volatility of stocks. Thus, Beta to equity, in addition to the risk premium, reveals the amount of reward that equity investors could receive for taking additional risks. We can confidently urge Billabong International to undertake the investment if it meets the desired conditions and is willing to do so. The diagram above shows the relationship between Billabong and perfume and the Australian Stock Exchange. This puts the company in a tremendous position to be able to raise capital suited to its future expansion plans. Furthermore, this shows the confidence that investors have in the company and the company's management. This is reflected in rising but stable share prices, thus demonstrating that management policies and programs work and are capable of increasing shareholder wealth. Billabong WACC estimates. The weighted average cost of capital is shown in the calculations below. Its results show that Billabong's probability of default is 1.6%, so the relative amount of Billabong's debt on its balance sheet is quite small, an indication that its cost of equity covers.