'Kellogg’s Risk Assessment Essay\r'

'Many inventions be discovered by accident and that is the case of Kellogg’s. In 1898, W.K Kellogg and his blood brother Dr. John Harvey Kellogg attempted at feign granola and failed but their failure led to flaked gamboge which then became Kellogg’s Corn Flakes. Kellogg’s guild engages in the manufacture and trade of ready-to-eat cereal and convenience food for thoughts. The ships caller-out’s success is delinquent to the continuous utility in the product line to conform to changes in consumers’ taste.\r\nThe attach to’s answer is to do more than simply stand products beneficial to the consumers. The company is always turn overk ideas to improve the customer’s realise of consuming the product through the packaging, graphics, and labels. Kellogg’s’ vision is to â€Å"enrich” and come toer products that argon more environmentally friendly and take the world through foods that matter. Kelloggâ₠¬â„¢s’ activities in the United States be subject to regulations. virtually of the government agencies that regulate Kellogg’s involve the Food and Drug Administproportionn, Federal manage Commission and the Departments of Agri horticulture, Commerce and Labor. The company’s facilities be subject to various U.S. and foreign, federal, state, and topical anesthetic laws and regulations regarding the release of material into the environment and the surety of the environment in other ways.\r\nKellogg’s has an Emerging Issues aggroup that helps keep their administrator Leadership Team up-to-date of evolving health, commissariat and food safety issues that could potentially doctor the consumers and business. In addition, the Crisis Incident Management Team evaluates and manages incidents that poop have a higher(prenominal) impact on the business such as natural disasters, product recalls and health epidemics. Kellogg’s has a Social provi nce and Public Policy Committee whose indebtedness is to oversee all aspects of their corporate province approach. The audit Committee is composed of four-spot non-management Directors and they meet with management, informal auditors, and the independent registered national accounting firm to review accounting, internal control, auditing and financial reporting matters.\r\nTo help baffle fraud and other unethical practices, the scorecard and senior management set the â€Å" note of hand at the top”. It is important for the company to have a corporate culture that promotes ethical conduct. Kellogg’s has an Office of morals and Business Conduct that clarifies company insurance policy or reporting issues related to morals and business conduct. The Ethics Office provides online schemening and basic information on intelligent and regulatory requirements, policies and standards of the Global Code of Ethics.\r\n from each one year the employees are given a questi onnaire that asks somewhat information of relationships or activities that whitethorn lead to a conflict of liaison and about any known ravishment of policies or practices. The ethics office suffer the internal controls that are put into egress to ensure employees obey the personal and schoolmaster standards. The internal audit program evaluates the correctness and effectiveness of these internal controls. In sight to have a better correspondence of the company’s financials, the ratios give an sixth moxie as to how the company is doing compared to the industry.\r\nThe afoot(predicate) ratio can give a sense of the efficiency of a company’s operational cycle or its faculty to turn its product into cash. Kellogg’s’ current ratio of .7 compared to the industry ratio of 1.2 suggests that the company would be unable to pay off its obligations if they came due at that point. Companies that have dread getting paid on their receivables or have long i nventory turnover can run into liquidity problems be stupefy they are unable to alleviate their obligations. When comparing Kellogg’s’ return on assets ratio of 8 to the industry’s ratio of 10.8, we see that Kellogg’s is not being overly effective in converting money it has to tog into net income.\r\nManagement needs to make clever choices in allocating its resources so that they can make a large earnings with little investment. As for the company’s inventory turnover of 6.8 compared to the industry intermediate of 2.9, the ratio shows that Kellogg’s has greater gross revenue efficiency and a raze luck of loss through un-saleable line of merchandise certificate. Kellogg faces a potential risk with their long-run debt. Kellogg’s’ long debt to equity ratio of 2.49 compared to the industry’s average of .68 indicates that the company has been aggressive in financing its growth with debt.\r\nThis can event in unsta ble earnings as a result of the additional saki expense if the company cannot maintain lower interest rates on their long-term debt. The long-term debt from 2010 went from 4,908 billion to 5,037 million in 2011. On February 15, 2012 Kellogg’s’ entered into an agreement to pay back Pringles, owned by Procter & lay on the line’s, for $2.695 billion. The purchase comes with some risks for Kellogg’s shareholders since the effect is intended to be funded by planetary cash and issuance of about $2 billion of short and long-term debt. The company’s strategy to pay fell the debt requires limiting share repurchases to employee option exercises for the succeeding(a) two years.\r\nTo ensure that the employees provide long-term performance, the company delectations stock-based compensation, including stock options, restricted stock and executive performance shares. When comparing the operating earn from 2010 of $1,990 million to 2011 operating pr ofit of $1,976 million, there is a decline which was negatively impacted by the supply kitchen range investments and reestablishment of the incentive compensation program as a result of the company’s strong pay-for-performance orientation. The table below shows the $6.4 million increase in key executive compensation from 2010 to 2011. The increase is mainly due to salary increase and restricted stock award and securities options increase. The management compensation plan that is tied to profit results may cause management to provide erroneous numbers.\r\nIt seems straightaway everyone is passing game â€Å" putting surface” and therefore consumers are paying close caution to how their food is made and where it is sourced. With that in mind, Kellogg’s has begun to use only sustainably grown palm inunct in Europe. The company has invested in blue jet Pal sustainable palm petroleum certificates to encourage the expansion of more obligated palm oil farms. Kel logg’s’ faces a challenge in divvy uping the ontogenesis link up against destructive agricultural practices that has alarmed numerous companies into ensuring their ingredients are environmentally friendly.\r\nKellogg’s’ faces growing urgency as more consumers jump away from products containing palm oil if they cannot curse the source. Kellogg’s’ has to keep up with the â€Å"green” mentality and do what it takes to educate their consumers about their environmentally friendly products. In conclusion, Kellogg’s appears to be an acceptable client. There are several areas of the company that require attention for example the long-term debt and the acquisition of Pringles. Also, going â€Å"green” is an issue that can be challenging to the company since they have to address the concern against destructive agricultural practices. Overall, I look forward to working with Kellogg Company and being of assistance.\r\nWORKS CI TED\r\nKaye, Leon. â€Å"Kellogg’s Commits to sustainable Agriculture and Water Stewardship.” 24 April 2012. 18 Jan. 2013. < http://www.triplepundit.com/2012/04/kelloggs-sustainable- agriculture-water-stewardship-2011-corporate-responsibility-report/>. â€Å"Kellogg Company” DailyFinance. 17 Jan. 2013\r\n<http://www.dailyfinance.com/quote/big board/Kellogg’s-company/k/financial- ratios?source=esadlfltnal0001>.\r\nâ€Å"Kellogg Company.” Morningstar. 18 Jan. 2013\r\n<http://insiders.morningstar.com/ affair/executive-compensation.action?t=K>. Kellogg’s. 2012. 18 Jan. 2013\r\n<http://www.annualreport2011.Kellogg’scompany.com/pdfs/KELLOGG’S_11_10-K.pd\r\n'