KCQ's

Hi all, these are my questions for LVMH's financial statements.

 

Areas i had difficulty understanding: There are many areas I have difficulty understanding!

• What are equity based financial instruments? The statements says they are used to enhance the dynamic management of investment portfolio.
• The term 'voting rights' is used quite a lot, no idea what this means?
• Organic revenue growth? LVMH has nothing to do with agriculture so what does organic mean in terms of revenue growth?

Areas of business that seem important or critical:

• Marketing I think is a big one, it seems LVMH has spent over 10849 million euros on marketing in 2013!

Key challenges:

• There are various contingent liabilities that concern brand rights, protection of property rights, set up of selective retailing networks, licencing agreements, employee relations, tax audits and more.

• In 2012 and 2013 revenue has dropped (lowest in 2012). Exchange rates and market performance seem to pose a problem in some areas as well because LVMH is worldwide.

Apparent strategy in meeting these issues:

• The financial statements mention the 'value creation strategy' in several places. It involves selling the highest quality products for more money and taking up less space than if they were selling a poorer quality (cheaper) product. The strategy increases revenue and therefore equity and the overall net worth of the firm. This will in turn protect the company from being impacted harshly from bad market performance and currency exchange rates.

Success in meeting challenges:

• LVMH believes that provisions on the balance sheet are enough to avoid its consolidated net worth being materially impacted in the event of a negative outcome.
• The 'value creation strategy' seems to be having a positive effect, with revenue increasing from  over 16 million euros in 2012 to over 18 million euros in 2013. 

Even though many of the financial statements appear very different at first glance they all cover the 5 elements of accounting: assets; expenses; equity; revenue and liabilities. The financial information for some companies is very long, LVMH documents are 72 pages for 2013 whereas for other companies they are very short. I had a look through a few of the different company documents and one of them was only two pages for 2013! Overall they are presented in much the same way regarding the things that they cover, some just go much more in depth than others. I am happy with my company, at first I wished I had one that I was more familiar with such as an Australian based business or an airline as I would be more familiar with what they do. Initially I was very concerned about the length of my firm's financial documents but as I am looking into my company more I am realising that all businesses keep track of their finances in much the same way. As I learn more about reading the financial information I am able to sort through which information is relevant and which is not and this has eased my mind a great deal. The concerns I have right now is my understanding of the content in this course, when I look at what some people are writing about I don’t have a clue and the terminology that is used I am finding very confusing! I am hoping that some people are just ahead of me in the course and I am yet to learn what they write about! Does anyone else feel this way?