Hill Country Snack Foods Co Essay

knoll inelegant Snack Foods Company manufactures, trades, and distributes snack foods and frozen treats throughout the United States. Hill sphere is overall well performed high society. Sales, Net Income, ROE and ROA had increased at a steady send. Company mainly focused on maximise the shareholder value by the CEO and other managements managerial philosophy.Currently, Hill kingdom uses a risk of infection adverse system to direct their business or project. Hill Countrys fabrication is high competitive but it kept going well with approach efficiency and quick reaction to customer requirements. From these reasons, Hill Country has some risks. even, analyst and experts present that Hill Countrys excess liquid state with zero debt is going to lose benefit and fail to maximize the shareholder value. Risk may be hided in the steady come withs good performance. Pending retirement of CEO is one of risks. ii) Briefly establish the current corporate cultureHill Country was a well-managed company with decisions which can make shareholder value. CEO and other management insiders as well held a significant proportion of companys common monetary fund. It essence that they have responsibility as employee and owner. Company also has strong allegiance to efficiency and controlling costs. These are great power to survive in highly competitive markets.Another important of Hill Countrys culture and managerial philosophy was caution and risk nuisance. From that reason they choose zero debt financing and fund internally hold large bullion balances. From the discussion of our team members, some of members destine that it is too risk aversion position. Only efficiency will be stuck in near upcoming so they should invest somewhat risky project and raise the debt. The others deem that it is unique and fresh and in snack and food industry, it may be good strategy and philosophy like Coca-Colas permanence. iii) How does the stock market evaluate Hill Countrys current situation compared to its peers in the same industry (base your discussion on the valuation in the stock market) As shown in Exhibit 2, we can easily check the pecuniary status of Hill Country with two competitors.In comparison to Snyders, a company with a little larger sales, and Pepsi, a company with 47x more sales, Hill Country performs well given its size. Hill Country has 3.5 propagation more NI than Snyders. However market capitalization of Hill Country is 1,412 mil USD which is lower than Snyders 1,517 mil USD. Market doesnt think that Hill Country has lower value which expresses future expectation. This could be a result due to its capital structure and risk aversion strategy. P/E ratio also shows the same judgment. In the part of volume value of asset, Hill Countrys ROA is higher than Pepsis ROA. However Hill Countrys ROE is lower than Pepsis because of debt.This is another(prenominal) indication of market evaluation. iv) Discuss how much financial risk the comp any would face at each of the three alternative debt-to-capital ratios presented in eggshell Exhibit 4(you may discuss based on the financial risk faced by firms with different credit ratings) As the debt-to-capital ratios increases, the possibility of nonstarter and cost of financial distress increase. In the case of Hill Country Snack Foods, Co., the credit rating will be downgraded1 and interest rate will increase according to the increased level of debt. Interest reportage ratio which measures companys ability to honor its debt payments also return dramatically as quality of debt increase. Impact on net income from ever-changing in EBIT will increase and financing flexibility will develop worsen with the increased level of debt. It also can lose lay on the line to time the market if it has more debts as it has little buffer to bonk new debt.