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Boston Beer Company Case Study

540 Words3 Pages

Liquidity denotes how fast a firm can turn their assets into cash. As shown in the graph above, The Boston Beer Company Inc. experienced a very slight increase in their liquidity ratios over the two-year period evaluated. The liquidity figures have an effect on the short-term performance of a business because these are used to determine a company’s ability to pay off its short-term debt obligations. Profit Margin is part of a category of profitability ratios calculated as net income divided by revenue, or net profits dived by sales. These are expressed as percentage and measure how much out of every dollar of sales a company actually keeps in their earnings. The profit margin for the Boston Beer Company had a profit margin at 10.0%, indicating …show more content…

The Debt to Equity ratio can be described as the total liabilities divided by the stockholder’s equity. This type of ratio is used to measure a company’s financial leverage and it indicates how much debt a company is using to finance its assets relative to the amount of value represented in the shareholder’s equity. The company experienced a significant change in its leverage ratio over the past two consecutive years. The leverage ratio for the Boston Beer Company Inc. decreased from 34.6% to 25.3%. This ratio is servers as a measure of a company’s ability to repay its obligations. These Debt to Equity figures have a negative and a positive impact on the company’s overall long and short-term performance. On one hand, it is an improvement for the financial statement of the company since the debt decreased, meanwhile, it can be rather negative for the company to still carry a high percentage of debt. As stated earlier, when investors are examining the health of a business, they take a long, hard look at the Debt-to-Equity ratio, since this ratio represents the compromise a company has to pay back its debt to their owners. Lenders will be less inclined to invest in the Boston Beer Company if they keep up a high percentage of leverage. In reference to the long-term performance, if the percentage is high, it will take a longer period of time to pay off that

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