'Hill Country Snack Foods Co Essay\r'

'pitchers mound province Snack Foods Company manufactures, commercializes, and distributes snack foods and rigid treats throughout the United States. cumulation coarse is overall substantially performed go with. Sales, Net Income, roe and ROA had change magnitude at a looker roll. Company mainly focused on maximizing the shareholder value by the CEO and otherwise management’s managerial philosophy.\r\nCurrently, mound unsophisticated uses a run a risk adverse strategy to deal their business or project. hummock land’s application is high war-ridden but it kept going well with cost efficiency and quick response to customer requirements. From these yards, cumulation rustic has fewer risks. tho, analyst and experts present that Hill democracy’s excess liquidity with goose egg debt is going to lose benefit and go bad to maximize the shareholder value. Risk whitethorn be hided in the steady friendship’s good performance. Pending se clusion of CEO is one of risks. ii) Briefly argue the incumbent corporate culture\r\nHill state of matter was a well-managed company with decisions which nominate make shareholder value. CEO and other management insiders too held a important proportion of company’s cat valium stock. It means that they have responsibility as employee and owner. Company in any case has strong payload to efficiency and controlling costs. These are massive power to survive in exceedingly competitive markets.\r\nAnother important of Hill Country’s culture and managerial philosophy was caution and risk abomination. From that reason they choose zero debt financing and mo bring inary fund internally hold large cash balances. From the discussion of our team members, some of members compute that it is too risk aversion position. only(prenominal) efficiency will be stuck in near forthcoming so they should endow somewhat risky project and boost the debt. The others think that it is unique and fresh and in snack and food industry, it may be good strategy and philosophy handle Coca-Cola’s permanence. iii) How does the stock market valuate Hill Country’s current situation compared to its peers in the same industry (base your discussion on the valuation in the stock market) As shown in queer 2, we can easily check the monetary status of Hill Country with both competitors.\r\nIn comparison to Snyder’s, a company with a bittie larger sales, and Pepsi, a company with 47x more sales, Hill Country performs well given its size. Hill Country has 3.5 ages more NI than Snyder’s. However market capitalization of Hill Country is 1,412 knot USD which is cut back than Snyder’s 1,517 mil USD. Market doesn’t think that Hill Country has lower value which expresses future expectation. This could be a result due to its capital structure and risk aversion strategy. P/E proportionality also shows the same judgment. In the part o f maintain value of asset, Hill Country’s ROA is higher than Pepsi’s ROA. However Hill Country’s ROE is lower than Pepsi’s because of debt.\r\nThis is another indication of market evaluation. iv) Discuss how much pecuniary risk the company would face at all(prenominal) of the three alternative debt-to-capital ratios presented in eggshell Exhibit 4(you may discuss found on the financial risk go about by firms with different credit orders); As the debt-to-capital ratios adds, the possibility of bankruptcy and cost of financial distress increase. In the case of Hill Country Snack Foods, Co., the credit rating will be downgraded1 and interest rate will increase according to the increased level of debt. Interest coverage ratio which measures company’s ability to wonder its debt payments also decrease dramatically as quality of debt increase. Impact on net income from changing in EBIT will increase and financing flexibility will deal worsen wit h the increased level of debt. It also can lose chance to time the market if it has more debts as it has little buffer to issue new debt.\r\n'