Boston Beer Company

Topics: Balance sheet, Inventory, Asset Pages: 3 (1128 words) Published: March 19, 2008
The Boston Beer Company

The Boston Beer Company, Inc. produces and sells low alcohol beverages primarily in the domestic market, and in certain selected international markets under the trade mark names "The Boston Beer Company," "Twisted Tea Brewing Company" and "HardCore Cider Company." The Boston Beer Company is mostly known for producing Sam Adams, Sam Adams Light and other various styles of craft beer.

In my research, the ratios from chapters 16 and 17 that I could compute was the working capital, current ratio, acid-test ratio, inventory turnover ratio with the average sales period, and the debt to equity ratio. Starting with the working capital, in 2005 the total was $60,450 and 2006 totaled $79,692. Working capital is the excess of current assets over current liabilities, it measures the company's ability to repay current liabilities using only current assets. Having sufficient working capital provides some sort of guarantee to short-term creditors that they will be paid by the company. Even though Boston Beer Company's working capital is at a decent amount and has increased in the past two years, large amounts are not free for the company. Working capital must be financed with long-term debt and equity, both of which can be expensive. To tell whether or not these figures are in favor of the company and analyzed correctly, you should use it in connection with the current ratio, the acid-test ratio and the inventory turnover.

The current ratio is a test of short-term debt-paying ability. In 2005 the current ratio for the company was 3.1 and in 2006 it was 2.94. I believe that the decline in the ratio could be due to eliminating slow selling products and other stagnant current assets along with an improvement in the financial situation. Generally, a current ratio is suppose to be around 2 on average, but the adequacy of a current ratio depends a lot on the make-up of the assets. It seems like The Boston Beer Co. is on the right track...
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