Ceres Gardening Case Study

Introduction

Continuous growth and development are some of the major aspects that associated with an organisation. The organisations which are able to grow continuously and without any hassle are comparatively more efficient and secure than the organisations which don’t have such inclinations (Barry et al. 2000). It is not an easy ask for the companies to grow continuously. There are certain factors that associated with the financial and strategic growth of a company. The main objective of this assignment is to answer some of the questions related to “Ceres Gardening Company”. There is a case study which has been given along with this assignment that needed to be read out completely in order to answer the questions comprehensively. Apparently, the assignment is divided into three different sections, which are introduction, Analysis & discussion and Conclusion. All the relevant questions will be answered under the Analysis & Discussion section of the report.

Analysis & Discussion

1. Key Factors in the Company Growth

The main objective of every organization is to attain economic perfection and effectiveness in their long run. Companies which are able to achieve the same are the one that can sustain their operations in the market for a certain time period. There are numerous factors that underlie in the growth of a company, and the same is applicable with Ceres Garden Company as well (Bartram et al. 2009).

The foremost factor that associated with the growth of the company was their inclination towards the Organic Growth of the Gardens. The company has used the Organic Products for the growth of their gardens, which were never used by any other company. In other words, Ceres Gardening Company was the first one which used the organic product idea for their development and betterment (Brigham & Ehrhardt 2013). The next important factor that associated with the remarkable growth of the company was its growing operational assets. Operational assets always deem favorable and highly efficient for the organizations as far as increasing their potential. They have the tendency to maximize the sales of the company in a professional manner. The operational assets that include both, current and non-current assets have increased by 23% in the year 2006 as compared to 2005, showing that the assets of the company have grown rapidly. Property Plant and Equipment (PPE) and Inventory are some of the major types of assets which have grown substantially in the fiscal year 2006 as compared to the year 2005. Growing operational asserts is an indemnity that the position of the company is strengthening, and growing as well. Due to the remarkable growth of the company from the year 2003 till 2005, shareholders started to bring utter confidence towards the positioning of the company. They started to increase their investment level towards the company in a positive way. The shareholder’s equity was amounted to $ 8.33 Million in the year 2005 which moved to $ 9.56 Million in the year 2006. This particular 14% increment in the equity is clearly showing that the level of the confidence of the shareholders have increased tremendously on the company.

2. Stock Market Response

The main mantra of every organization is to attain economic growth and maximize the shareholder’s equity in a professional and ethical manner(Brigham & Ehrhardt 2013). The growth of the company, particularly in their sales and net income had a direct impact over the share price of the company(Brigham & Ehrhardt 2012). The share price of Ceres Garden has been increasing regularly year on year, as can be found in the below mentioned graph

An increment of more than 50% has been envisaged in the share price of the company in the year 2003. Consecutive increase in the share price have also been envisaged in the same aspect, as the stock price increased by 3.22%, 24.96% and 18.48% for the years 2004, 2005 and 2006 respectively, showing that the company is achieving growth potential. The company neither increased the share outstanding nor the dividend per share factor. Earnings per share of the company which was $0.50 in the year 2005 moved to a level of $ 0.51 in the financial year 2006. This particular analysis is clearly showing that the exceptional financial growth of the company enables them to materialist their growth with perfection in reaching on a final destination. The incremental share price of the company is giving a strong message to the existing as well as new investors of the company that they have invested in a blue chip company that will remain highly efficient in the long run, from the standpoint of investment. It is recommended to the company to increase the amount of dividend yield or divided per share for their shareholders, in order to give more confidence to them.

3. Increment of Sales, Inventory and Account Receivables and their Relevance

This particular part of the assignment is likely to examine the relationship among sales, inventory and the account receivable of the company, and what is the relationship is letting the investors about their operations and growth (Chen & Shimerda 1981). The graph mentioned below is showing the relationship among the variables

The blue line is showing the sales of the company, which has a growing trend from the year 2002 till 2006, as can be found in the aforementioned graph. Apart from Sales, the account receivable factor of the company has also increased positively that can be found in the red line. However, the inventory of the company decreased marginally in the 2003. In order to analyse the relationship and intensity of relationship, it is important to apply a sophisticated technique such as Correlation. The Correlation result is as follows

From the aforementioned table of correlation, it is clearly found that the relationship among the sales, account receivables and inventories is positive. The relationship among the sales and account receivable is showing a value of 0.99, which is positive and very. It is showing that with any increase in the sales, the account receivables of Ceres increased consequently. Moreover, with the incremental sales, the inventory of the company is also like to increase positively, which is showing a value of 0.90. In short, it can be said that the incremental rates of sales, account receivables and inventory are similar, because of their close and positive relationship with each other.

4. Evaluation of the Marketing Efforts

Marketing department and marketing functions are more than significant for the sake of an organization as far as retaining their position in the market for a certain time period (Hilgert, et al. 2003). Most of the organizations throughout the world are now focusing over strengthening their position in the market through perfect marketing techniques and efforts, and the same is applicable to Ceres Gardening.

The marketing efforts that undertake by Ceres Gardening Company were exceptional and tremendous. Expansion of the marketing program, adding new products or the organic products like seeding and pursuance of Pilot programs are some of them (Jensen 2005). The marketing factor was remarkable; as it helped the company to get recognized their products in the market with mere efficacy and efficiency. This particular factor was very efficient for them in the long run. Moreover, the marketing head of the company revealed that they need higher amount of spending on their Research and Development (R&D) to attract more things, along with attracting good sales talent. In the year 2006, the cost of goods sold for the dealer was nearly $ 2.54 Million, which was reasonable, as it accounts for around 80% of the overall cost of the company. The company still in the positive node, and able to maximize their net income in a perfect manner

The idea of extending the Get Ceres program should be extended, as the program is bringing positivist and effectiveness in the productivity of the company, which certainly helps them to maximize their potential in the market with zeal. Such types of marketing effort are efficient as it will help them to determine exceptional financial growth at the end of the day, which will be helpful for them, especially in the long run.

5. Sales Growth

Incremental Sales is an important aspect from the viewpoint of a company, and it is one of the most important elements that affect over the positioning of an organization in a perfect manner (Wipplinger 2007). The higher the sales the higher will be the objective and effectiveness associated with the company. In the year 2006, the company managed to generated sales amounted to $ 42.59 Million, which was extremely high. According to the question, the sales of the company is likely to increase by 15% each year, and this particular part is likely to determine the incremental sales of the company year on year (YOY). Mentioned below table and chart is showing the same info

From the aforementioned table, it is clearly found that the sales of the company have been increasing positively in the year 2007 and 2008 as well. In the year 2007, the sales of the company increased to a level of $ 48.98 Million with an increment of 15%. Same 15% increment is found in the scenario of the year 2008, in which the sales of the company has reached to a level of 56.33$ Million. This particular factor is quite helpful and highly attractive for the company, as incremental sales is an indemnity that the company has been growing with positivist, and they have a bright chance to maintain their economic attentiveness in the long run. The shareholders will certainly get appreciation in the market with proper effectiveness and zeal. Ceres has the chance to retain their sales growth in the same manner, as it is the type of economic assistance for them in the long run.

6. Presentation for Bank

This particular part of the assignment is interlinking with the last part of the assignment, as it is likely to examine the forecaster income statement and balance sheet. The same assumption of 15% increment is likely to use in this particular factor as well for the years 2007 and 2008 in particular

From the aforementioned income statement, it is clearly found that the net income would be in the positive node. It is $1.76 Million in the year 2007, which is likely to move to a level of $ 2.46 Million by the end of the year 2008.

The aforementioned balance sheet is showing that the financial position of the company is efficient, and it has the tendency to maximize their core potential in the market with proper effectiveness and zeal. The company can achieve the objectives of retaining their position in the market for their proper effectiveness and zeal. The bankers will certainly attracts with the incremental financial performance and position of the company year on year.

7.Prospects and Risk

From the aforementioned analysis and discussion, it is clearly found that the prospect and position of the company in terms of maximizing their economic well-being and potential in the year 2007 and 2008 is extremely high, which is highly efficient for them in the long run. The sales, gross profit as well as the net income after tax of the company is high, and it is likely to increase by 15% each year, which is showing that the capability of the company in terms of managing their potential is high from which they can easily maximize their potential in the market. The potential prospect of the company is to maintain their attentiveness in the long run from their viewpoint. The risk of increasing competition in the Organic Food industry will be higher for the company that may endanger the position of the company in the long run. It is significant for the company to overcome on the said risk completely, if they really want to strengthen their position in the market with proper effectiveness and zeal.

Conclusion

The main objective of this assignment is to answer some of the questions related to “Ceres Gardening Company”. There are numerous questions which have been discussed in this particular analysis related to the sales, net income and incremental growth of the company that may increase their core potential in the market. Moreover, the company has a great chance to maximise their income potential further in the year 2007 and 2008 and retain their competitive position in the market for a long span of time.

References

Barry, P. J., Ellinger, P. N., Hopkin, J. A., & Baker, C. B. (2000). Financial management in agriculture.

Bartram, S. M., Brown, G. W., & Fehle, F. R. (2009). International evidence on financial derivatives usage. Financial management38(1), 185-206.

Brigham, E. F., & Ehrhardt, M. C. (2013). Financial management: Theory & practice. Cengage Learning.

Brigham, E. F., & Houston, J. F. (2012). Fundamentals of financial management. Cengage Learning.

Chen, K. H., & Shimerda, T. A. (1981). An empirical analysis of useful financial ratios. Financial Management, 51-60.

Hilgert, M. A., Hogarth, J. M., & Beverly, S. G. (2003). Household financial management: The connection between knowledge and behavior. Fed. Res. Bull.89, 309.

Jensen, M. C. (2005). Agency costs of overvalued equity. Financial management34(1), 5-19.

Wipplinger, E. (2007). Philippe Jorion: Value at Risk–The New Benchmark for Managing Financial Risk. Financial Markets and Portfolio Management21(3), 397-398.

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