BEN & JERRYS HOMEMADE FINANCIAL ANALYSIS

The share price of Ben & Jerry fluctuates quite often especially from October 1998 till
November 1999. Although they are the market leader and holds 45% of market share from the
premium ice cream, the price of the share was still lower than Dreyers Grand ($47.20) and Eskimo
Pie ($30.70). Their share price was $19.80 and increased to $21 after the speculation about the
acquisition took place.
However, based on the profit margin, the net income increases after a slight slump in 1996.
This profit was $5.9million in 1995 compared to $3.9million in 1996. However it increases steadily
and received a record net profit of $8.0million although this is the period of global financial crisis.
The same can be concluded for the net income margin. It shows the effectiveness of the business at
converting sales into profit. Like the profit margin that mentioned before, net income margin also had
a slight slump from 3.8% in 1995 to 2.3% in 1996. However, it increases steadily and in 1999, the net
profit margin was 3.4%, which means that the company is doing quite well financially, but it does not
satisfy the investors who expect more from the market leader in the premium ice cream.
On the return on analysis part, it was a roller coaster ride for Ben & Jerry. Return on Analysis
(ROA) is what the business has earned on its total assets available. The difference between ROA and
Return on Equity (ROE) is that ROA includes both financed by shareholders as well as liabilites,
whereas ROE calculate only the return on shareholders. ROA is not very favourable because the
company is earning less on more investment. ROA improved slightly in 1998 from 2.6% in 1997 to
3.7% in 1998. However, it reduced by 0.02% to 3.5% in 1999. On ROE part, it has actually improved
slightly after a decline in 1996. From 4.5% in 1997, it increases to 6.8% in 1998 and finally 8.9% in
1999. The problem with Ben & Jerry was that the shareholders expect more from a market leader
although the return is quite normal for corporate companies.
Debt to Equity ratio indicates what proportion of equity and debt that the company is using to
finance its assets. This is quite an important analysis since it can determine the solvency of an
organization. This is important for the sustainability test of a business. When analysed Ben & Jerrys
Debt to Equity ratio, the result was very pleasant. The debt of the company reduces every year and the
same goes to the debt equity ratio. From 0.4 in 1995, it has reduced significantly to just 0.18 in 1999.
The result shows that shareholders are more committed in business than the creditors, which is a good
news for the investors. The lesser the debt to equity ratio, the lesser the chances for the company to go
bankrupt and the lesser the commitment the company has to make with financial institutions.
However, in an ideal business world, too little liabilities sometimes can cause share price to drop as
well because it means that too much investment just from shareholders sometimes can be more costly.