Case Study: "American Home Products Corporation" (Capital Structure Decision)

American Home Products Corporation1. CASE SUMMARYAHP Chief Executive?I hardly don?t like to owe currency?, verbalize William F. Laporte, AHP chief executive, when asked about his company?s closely debt-free symmetry sheet and growing cash reserves. Mr. Laporte had taken burn out ensemble over as chief executive of American Home Products in 1964. passim 17 subsequent years of his tenure Mr. Laporte has not changed his imprint of debt financing and AHP?s self-denial from debt continued, while the growth in its cash balance outpaced grandiose growth in two sales and earnings. At the cease of 1980, AHP had almost no debt and a cash balance enough to 40% of its net worth. explanation of the CompanyAHP? 1981 sales of more than $4 billion were produced by over 1,500 marketed brands in four lines of parentage: prescription drugs, packaged drugs (i.e. copyrighted or over-the-counter), food harvest-tides, and housewares and class products. Consumer products included a mo tley of well-known brand names, such(prenominal) as Anacin, Preparation H, Sani-Flush, Chef Boy-Ar-dee, florin?s Mustard, Woolite, and the Ekco line of housewares. AHP?s success in these lines of business was built on trade expertise. Whether the product was an oral hitch or a gage bowl cleaner, ?they sell the funny house out of everything they?ve got?, give tongue to one competitor.

AHP?s Distinctive in collective CultureAHP had a distinctive corporate culture that, in the pull in of many observers, emanated from its chief executive. This culture had several components:Reticence. A detonating device crown of Wall Street analysts ranked AHP last in corporate communicability among 2 1 drug companies. Frugality and tight fiscal! control. Reportedly, all expenditures greater than $500 had to be personally O.K. by Mr. Laporte even if authorized in the corporate budget. conservativism and insecurity aversion. AHP consistently avoided much of the risk of new product victimization and introduction in the volatile drug industry. just about of its... If you pauperism to get a full essay, order it on our website: OrderEssay.net

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