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Bayer an Analysis

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Submitted By beckmandal
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BAYER AG
A Financial Analysis

Executive Summary
This paper tries to analyse the financial strength of Bayer AG and the other aspects associated with its capital structure and dividend policy. The organisation has been trying to change its financial structure to a management-driven one. This is evident from the reduction in the share capital of the organisation and the rise of debt capital, which it has been using efficiently to reduce its tax burden and control the overall cost of capital of the firm. The organisation has been paying dividends at a higher rate compared to its rivals which shows the sound financial health of the organisation.
Contents
Introduction 4

Market Risk 4

Bayer’s stock to market risk 4

Capital Structure of Bayer AG 7

Impact of Cost of Capital on Investment Decision 10

Dividend payout policy of Bayer 11

Conclusion 14

References 15

Appendices 17

Introduction

Bayer AG is a pharmaceutical organisation which was founded in Germany in the year 1863 and is famous for its Aspirin brand. The group consists of almost 350 companies on all continents employing a workforce of approximately 120,000. The activities of the Group are segregated into four business segments. It is trying to transform its organisational structure into a management holding firm. By using this technique, the organisation is attempting to achieve a more dynamic and a flexible structure (Bayer, 2002).

Market Risk

Risk can be broadly categorised in two categories, namely market risk and specific risk. Systematic risk or market risk refers to the possibility of incurring losses due to factors that impact the performance of the stock market. Market risk is a risk which cannot be eliminated with the help of diversification though it can be hedged against. Recession, political instability, and

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