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Del Monte Foods Case Study

In: Business and Management

Submitted By tjhanek
Words 1865
Pages 8
Unless otherwise stated, I am comparing values from 2006 to 2007 in order to cut down on writing. Monetary values are in millions of dollars unless otherwise stated. Common-size balance sheet is attached.

Cash, Cash Equivalents, and Restricted Cash
Del Monte Foods exhibit a dramatic change in cash and cash equivalents going from 12% of total assets to 0.3% of total assets. In monetary terms, cash and equivalents fall from $459.9 to a mere $13. Del Monte Foods acquired two companies (Meow-Mix and Milk-Bone), choosing to invest using cash over other financing sources. Restricted cash (not available for immediate use) has also exhibited a similar trend as cash and equivalents. It goes from 1.2% of total assets to nonexistent.

Inventories
I would first classify Del Monte Foods as a manufacturing company. They produce food products (for humans and pets) but they do not sell direct to the consumer. Del Monte Foods is within the typical range of inventory as a percentage of total assets in 2006 (21.1% of total assets) but falls out of this range in 2007 (17.8% of total assets). This might be a cause for concern in that if their inventory gets too low, they might miss sale opportunities. Looking at the monetary value, however, we see that inventories have increased; just at a lower rate than total assets. Note that the $45.7 increase in inventories is due almost entirely to the costs allocated to Meow-Mix’s and Milk-Bones’ inventories ($43.9 total) during the acquisition by Del Monte Foods.

Accounts Receivable
Accounts receivable as a percentage of total assets decrease from 6.6% to 5.7%. The monetary value of accounts receivable increased slightly ($237.8 to $261.1) but that increase is less than the increase in total assets.

Prepaid Expenses
Prepaid expenses represent a less than 5% of total assets in each year so I will follow the text’s...

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