D'Leon Case
Section I
Introduction
D’Leon Incorporated is a regional snack foods production company that operates in North Florida. D’Leon specializes in high quality pecan and other nut products sold in the snack food market. In 2007, D’Leon Incorporated took on an expansion program to make their products available to customers nationwide. This expansion program put the small-scale local producer into competition with industry leaders like Frito Lays. D’Leon planned on gaining market share by offering a higher quality product than the competition. The expansion program required significant increases in plant capacity, additional sales offices, and implementing a costly customer awareness marketing campaign. By 2008, D’Leon’s financial status was suffering due to the expansion program’s higher than expected costs and lower than anticipated increase in sales.
This financial analysis report contains sections examining D’Leon’s financial statements, evaluating the expansion’s effects, projections for 2009, and recommendations for improvement. Financial statements and ratio analysis can be found in Tables 1-11 pages 16-20 in the appendix.
Section II
Financial Ratios
Section II of this report is a financial analysis on D’Leon’s expansion program. The report includes comparing D’Leon’s performance to that of other firms in the same industry and evaluating trends in the firm’s financial position over time. Managers, creditors, and investors, use ratio analysis for evaluating a certain company or investment’s performance. The comparison identifies the investment’s strengths, weaknesses, solvency, and growth potential.
The five major categories of ratios are: liquidity, asset management, debt management, profitability, and market value. These five ratios can be found in Tables 6-10 (pages 21-25) in the appendix.
A. Liquidity Ratios
Liquidity ratios measure the ability to pay current and long-term debt when due. Companies must maintain acceptable
Introduction
D’Leon Incorporated is a regional snack foods production company that operates in North Florida. D’Leon specializes in high quality pecan and other nut products sold in the snack food market. In 2007, D’Leon Incorporated took on an expansion program to make their products available to customers nationwide. This expansion program put the small-scale local producer into competition with industry leaders like Frito Lays. D’Leon planned on gaining market share by offering a higher quality product than the competition. The expansion program required significant increases in plant capacity, additional sales offices, and implementing a costly customer awareness marketing campaign. By 2008, D’Leon’s financial status was suffering due to the expansion program’s higher than expected costs and lower than anticipated increase in sales.
This financial analysis report contains sections examining D’Leon’s financial statements, evaluating the expansion’s effects, projections for 2009, and recommendations for improvement. Financial statements and ratio analysis can be found in Tables 1-11 pages 16-20 in the appendix.
Section II
Financial Ratios
Section II of this report is a financial analysis on D’Leon’s expansion program. The report includes comparing D’Leon’s performance to that of other firms in the same industry and evaluating trends in the firm’s financial position over time. Managers, creditors, and investors, use ratio analysis for evaluating a certain company or investment’s performance. The comparison identifies the investment’s strengths, weaknesses, solvency, and growth potential.
The five major categories of ratios are: liquidity, asset management, debt management, profitability, and market value. These five ratios can be found in Tables 6-10 (pages 21-25) in the appendix.
A. Liquidity Ratios
Liquidity ratios measure the ability to pay current and long-term debt when due. Companies must maintain acceptable
Bibliography: Strunk, William. Elements of Style. Ithaca, N.Y.: Priv. print. [Geneva, N.Y.: Press of W.P. Humphrey], 1918; Bartleby.com, 1999. www.bartleby.com/141/. 02/04/2013. Dr. Joel F. Houston, , and Eugene F. Brigham. Fundamentals of Financial Management, Concise Edition, 7th Edition. 7th Concise. South-Western Cengage Learning, 2012. Print. Dr. Joel F. Houston, , and Eugene F. Brigham. Fundamentals of Financial Management, Concise Edition, 7th Edition. 7th Concise. South-Western Cengage Learning, 2012. Chapter 3 spreadsheet. Dr. Joel F. Houston, , and Eugene F. Brigham. Fundamentals of Financial Management, Concise Edition, 7th Edition. 7th Concise. South-Western Cengage Learning, 2012. Chapter 4 spreadsheet. Dr. Joel F. Houston, , and Eugene F. Brigham. Fundamentals of Financial Management, Concise Edition, 7th Edition. 7th Concise. South-Western Cengage Learning, 2012. Chapter 3. Web. <http://websites.swlearning.com/cgi-wadsworth/course_products_wp.pl?fid=M20b&flag=student&product_isbn_issn=9780324597707&disciplinenumber=414>. Dr. Joel F. Houston, , and Eugene F. Brigham. Fundamentals of Financial Management, Concise Edition, 7th Edition. 7th Concise. South-Western Cengage Learning, 2012. Chapter 4. Web. <http://websites.swlearning.com/cgi-wadsworth/course_products_wp.pl?fid=M20b&flag=student&product_isbn_issn=9780324597707&disciplinenumber=414>.