Ben & Jerry’s analysis.
Translating from the ratios, Ben & Jerry was struggling to generate enough sales to cover their costs. In other words, their profitability had fallen sharply from 1992 to 1993 and in 1994, the firm had experience a loss for the first time. Even though the EBITDA was still positive in 1994, it fell from $10,000 level to 2,000 level, an 80% decrease from 1993. This clearly indicated that Ben & Jerry’s performance had deteriorated at a striking rate, regardless of its increase in sales by 6%. Moreover, their return on assets and equity had kept on decreasing contributing to the fact that the firm is less profitable. Their decreasing net working capital turnover ratio and assets turnover ratio indicated that Ben & Jerry was not utilizing its assets well enough, despite the increase in total assets and net working capital over the 5 years period. Ben & Jerry turnover ratio showed that they used more resources to generate the same level of sales. Their short term liquidity ratio had improved a bit comparing only 1993 and 1994. However, their spike increase in long term debt to equity ratio in 1994 to 40% meant that the firm had to borrow money from outside to fund their projects. Overall, looking from their financial performance, Ben & Jerry had an unsuccessful year in 1994. Looking deeper, their disappointing profitability in 1994 may be attributed to some external factors such as the change in lifestyle. The rise of health concern in 1990’s and higher education had led many people to seek for healthy food. Ben & Jerry’s ice cream with its rich flavor and high calorie and fat, thus became less preferable. Consumers had switched to different alternative within snack and candy industry. Secondly, the technological change had made their competitor more efficient in producing ice cream. Meanwhile Ben & Jerry had insisted on keeping their inefficient labor force in their production process. As a result, their main...
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