Essays on Pacific Grove Spice Company Assignment

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The paper 'Pacific Grove Spice Company' is a great example of a Business Assignment.   The company had opened up a small grocery business in Monterey peninsula in the late 1980s to sell a collection of food, coffees, teas as well as spices. The founder of the company was Judith find a who was interested in investing in Asian and Indian cuisine. The warehouse expanded so as to support the broad range of international food and within ten years of its operation, the company was known globally. Pacific Grove company intends to invest in a new project that either costs the company $11,000,000 or $13, 200, 00.

This project is the new television program or acquisition of high country respectively. In both investment appraisals, the company considers equity as a source of raising the capital given the capital rationing. The problem the company currently faces is which project to investment and the appropriate method of appraising a project that will give an appropriate conclusion on project viability Acquisition or disposal of an entity entails a detailed understanding of both the internal and external factors affecting the business as well as the liquidity position of the company if it makes a decision to acquire another company.

Where business is going to finance its project using the ordinary shares, factors such as the effect of new equity finance on net income and earnings per share ought to considered as well as whether the project will generate positive net present value from investment or not. The key motive of a manager is shareholders wealth maximization and that is why performing analysis and considering the systematic and unsystematic risk affecting the company should be ascertained before making an intention of buying a company or financing a new project using the unissued ordinary share capital Introduction The company intends to appraise a new project and appreciates investment appraisal tool such as the net present value and the discounting factors in order to precisely estimates the trend in cash flows and whether the cash flow is favorable in that the net present value being positive.

The general trend of the company is favorable and forecasting the return on equity depicts an increasing trend thus the liquidity position is sufficient enough in making an intent to finance a new protect using equity finance. The profitability of Grooves final statement in relation to the bank statement Return on assets= {Net income/total assets} Last three years of analysis   2014 2014 2015 ROA (3.835/76.696) (4.316/85.134) (4.793/92.797)   5% 5.078% 5.16% Current ratio= {current asset/current liability}   2013 2014 2015 Current ratio (45.537/26.061) (48.36/28.826) (52.575/31.282)   1.75 1.7 1.6 The above ration analysis depicts positive trends in terms of the company’ s performance.

The return on asset employed is an increase from 5% in the year 2013 to 5.16% by the end of 2015 implying that investment will yield a return on asset employed. It can as well be depicted that the current ratio of the company beyond 1; 1.

This is a strong indication of the good liquidity position of the company and therefore the company will not be affected by repayment since the business a strong market capitalization that will cater to the debt repayment eminent by the trend of the forecasted current ratio as well as the return on asset employed. Hence, projected sales growth levels bring the relevant ratios into compliance as requested by Pacific’ s bank.

Reference

list

Debarshi, Bhattacharyya. Management Accounting. 2011.

Egner, Thomas. In strategic Analysis of a diversified company. 2010.

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