Horniman Horticulture
(Horniman Horticulture)
(a) Horniman Horticulture (Horniman) revenue growth is increasing since 2003 it showing a rapid growth then the industry benchmark, which is decreasing by 1.8% per year. In 2004 and 2005 Horniman is constantly growing with increase in the revenue from 2.4% in 2003 to 12.5% in 2005 and 15.5% in 2005 as well as increase in total asset net profit and return on equity respectively, which indicate that it’s doing well within the industry. As we can see in exhibit 1 They have stabilized depreciation as its only rose 20% from 2003 to 2005 (38.4 to 40.9) . The same goes for tax expanse it hasn’t change much by staying around 34 to 34%. One of the Key strength of Bob Brown in regard to management is that he has a good relationship with the employee and customer.
On the other hand, as we can see in exhibit 1 during this time cash balance has decreased from $120.1 in 2002 to $9.4 in 2005, it’s a decline of 92% over the four year due an increased in total asset by 14.4% and inventory by 8.7% in the last four year from 2002 to 2005. If nothing is done to solve cash problem and continue to burn a lot of cash, debt requirement will become larger and larger and will become a major hazard to the business. Horniman is not collecting payment as the industry benchmark indicates which is 21.8 days it takes Horniman twice as long that is 51 days to collect receivable. As a result account receivable went from $90.6 in 2002 to $146.4 in 2005, an increase of 62.2%. Horniman takes longer to pay its supplier then the industry benchmark that is 26.9 days. In 2003 it’s payable days was 13.3 that is continue with 10.2 days in 2004, which is less than half of the industry benchmark days.
(b)
We use the formula (FCFE= NI – Cap Exp – Change WC + Net Borrowing) to get the free cash flow to the firm for 2005.
Operating Profit Taxes Add Depreciation Operating Cash Flow CAPEX Change in NWC
(a) Horniman Horticulture (Horniman) revenue growth is increasing since 2003 it showing a rapid growth then the industry benchmark, which is decreasing by 1.8% per year. In 2004 and 2005 Horniman is constantly growing with increase in the revenue from 2.4% in 2003 to 12.5% in 2005 and 15.5% in 2005 as well as increase in total asset net profit and return on equity respectively, which indicate that it’s doing well within the industry. As we can see in exhibit 1 They have stabilized depreciation as its only rose 20% from 2003 to 2005 (38.4 to 40.9) . The same goes for tax expanse it hasn’t change much by staying around 34 to 34%. One of the Key strength of Bob Brown in regard to management is that he has a good relationship with the employee and customer.
On the other hand, as we can see in exhibit 1 during this time cash balance has decreased from $120.1 in 2002 to $9.4 in 2005, it’s a decline of 92% over the four year due an increased in total asset by 14.4% and inventory by 8.7% in the last four year from 2002 to 2005. If nothing is done to solve cash problem and continue to burn a lot of cash, debt requirement will become larger and larger and will become a major hazard to the business. Horniman is not collecting payment as the industry benchmark indicates which is 21.8 days it takes Horniman twice as long that is 51 days to collect receivable. As a result account receivable went from $90.6 in 2002 to $146.4 in 2005, an increase of 62.2%. Horniman takes longer to pay its supplier then the industry benchmark that is 26.9 days. In 2003 it’s payable days was 13.3 that is continue with 10.2 days in 2004, which is less than half of the industry benchmark days.
(b)
We use the formula (FCFE= NI – Cap Exp – Change WC + Net Borrowing) to get the free cash flow to the firm for 2005.
Operating Profit Taxes Add Depreciation Operating Cash Flow CAPEX Change in NWC