Case Study in Finance

1310 Words6 Pages
Hill Country Snack Foods Co. Introduction Hill Country distributed a variety of snacks through successful compliance to the rapid market change and customer preference. The company’s operating strategy includes singular management focus on maximising the shareholder value, efficiency and costs control, and risk-averse expansion and growth. By achieving these, the CEO Howard Keener believed that the company should not use debt to make sure enough cash position and to avoid being involved in financial distress. Business risk Business risk arises when a company have lower profits than expectation or experience a loss rather than a profit. It is influenced by various factors, such as sales volume, price, costs of inputs, competition within the industry, overall economic climate and government regulations. In this case, Hill country has very stable growth in its sales by quickly reacting to the market change and customer preferences. However, the snack food industry is very competitive, there are industry giant like PepsiCo and smaller companies like Snyder’s-Lance. As a result, it is very hard for Hill country to increase its sales revenue by increasing the price, as customers can easily find substitutes and choose another brand. Moreover, controlling costs is crucial in such a rivalry industry. As Howard Keener and its management team did all to keep costs under control, and they are cautious and taking less risky expansion to maintain a steady sales growth, Hill Country is facing moderate business risk Financial risk and debt Financial risk is the possibility that shareholders will lose money when a company has debt if its cash flow is not able to meet the financial obligations. As when a company uses debt financing, creditors is the first priority to get repaid before shareholders. A high proportion of debt indicates a risky investment. In this
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