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Ben and Jerry's Financial Audit

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Financial Audit

Liquidity: Ben & Jerry’s seem to have low risk compared to the industry standards; they have no trouble meeting short-term obligations. The CR (B&J = 3.59; I =2.3) and QR (B&J = 2.66. I =1.1) show that they are currently at a lower risk than the overall industry. However, this difference is explained when looking at accounts receivable. It seems as though the A/R collection days are much higher than the industry (B&J =29.2, I =16.4). This may be a result of Ben & Jerry’s having friendly relationships with its local dealers and societal approach. There seems to be significant room for improvement here, if Ben & Jerry’s can start collecting A/R quicker, while still being less demanding than the industry standards. Net working capital has increased every year, with a significant jump from 1992 to 1993. Even though the rest of the industry spends vast amounts of resources on marketing and advertising, the lack of paid marketing doesn’t seem to be affecting Ben & Jerry’s. Their sales have also increased every year and they seem primed for continuing sales with their new lines of lower fat frozen yogurt items. Despite slow returns on A/R, Ben & Jerry’s liquidity seems to be acceptable at this time.

Capital Structure: Ben & Jerry’s has very little capital structure risk compared to the industry; which indicates its cost of capital is relatively low. Both D/E (B&J = .659; I =.903) and D/A (B&J =.40; I =.46) are well below the industry average. There has been some fluctuation over the years, but the company has mostly stayed below the industry averages, with the exception of 1990. This could benefit Ben & Jerry’s if they decide to add manufacturing or distribution capacity in the near future. The low amounts of risk should allow them to have an excess to borrow from, if needed. CD/TD (B&J = .30; I =.61) indicates that Ben and Jerry’s uses...

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