Ben and Jerry\'s Financial Statement Analysis Through

Ben and Jerry's Financial Statement Analysis

Through a ratio analysis of Ben and Jerry's comparative balance sheet and comparative income statement for 2004 and 2005 it was determined that Ben and Jerry's appears to be financially stable. Three different types of ratios were used to assess the company's health including liquid rations, profitability ratios, and solvency ratios.

Liquid ratios that were analyzed included working capital, current ratio, and acid test ratio. "Liquidity ratios measure a firm's ability to meet its current obligations" (Credit Research Foundation, 1999). Based upon the working capital, it was determined that in 2004, Ben and Jerry's had $8,200 on hand to satisfy contingencies and the number rose to $11,100 in 2005, which appears to indicate that Ben and Jerry's was more financially prepared the following year. Furthermore, an analysis of the current ratio, which measures Ben and Jerry's ability to pay off their debts determined that Ben and Jerry's had $2 in assets for every $1 in debt, however, the ratio dropped in 2005 to $1.87 in assets to every $1 in debt. Although the slight decrease in monies could indicate that Ben and Jerry's had less money to pay off debts in 2005, an acid test found that, if needed, Ben and Jerry's could easily acquire $1.07 in cash for every $1 in debt, up from $0.71 in cash for every $1 in debt in 2004. Given these figures, it can be determined that Ben and Jerry's is financially stable and ready to pay off any and all debts at one time without going broke.

An analysis of profitability ratios also determined that Ben and Jerry's appears to be gaining profits from year to year, or at least from 2004 to 2005. Profitability ratios "measure management's ability to control expenses and to earn a return on the resources committed to the business" (Credit Research Foundation, 1999). An analysis of Ben and Jerry's net income to net sales helped to determine the company's profit margins for the years 2004 and 2005. It was determined that Ben and Jerry's profit margin rose from 3.38% in 2004 to 3.87% in 2005. Given the information, it was also determined that for every dollar's worth of assets, Ben and Jerry's made $2.51 in 2005. Moreover, it was determined that Ben and Jerry's had a return on investment of 9.71% in 2005. Lastly, an analysis on the return on common stockholders' equity was undertaken. Given the information, it was determined that in 2005, Ben and Jerry's made $1.77 for every $1 that had been invested into the company by stockholders. Once again, because Ben and Jerry's is earning more money than has been invested by private stockholders, it can be determined that the company is, at the present, financially stable and growing.