Running head: BOND & STOCK PERFORMANCE ANALYSIS

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BOND & STOCK PERFORMANCE ANALYSIS

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Financial Project #2 : B&GS Foods Company
Student’s Name

Institutional Affiliation

Financial Analysis of Nike Inc. Corporation

Background and industry

B&GS Foods Inc. is a publicly incorporated company which offers high-quality branded frozen and shelf stable food and household products across Canada, Puerto Rico, and the United States (Reuters, 2019). It is headquartered at Parsippany, New Jersey, United States. The company has a successful track record over its operational period of 125 years in the food industry. Its diversified product portfolio encompasses of more than 50 brands. Some of the brands include Nabisco involving Brer Rabbit Molasses, Regina Wine Vinegar, the Cream of Wheat, and Vermont Maid Pancake syrup. Its competitors include Bellisio Foods, Lancaster Colony, Southeast Frozen Foods, Faribault Foods and Conagra Brands. The current market capitalization stands at $1,079.59 million and its P/E ratio is 6.63 (Morningstar, 2019).

Financial Leverage

The financial leverage is the extent to which the fixed income securities and the preferred stocks are used in a firm’s capital structure (Robinson et al 2012). The leverage ratios acts a veritable tools to assess the ability of the firm to fulfill its financial obligations. Some of the financial leverage ratios encompasses of debt to asset, debt to equity, and interest coverage ratio.

Fiscal Year

2018

2017

2016

2015

2014

Debt to Asset Ratio

0.54

0.62

0.57

0.68

0.62

Debt to Equity Ratio

1.82

2.52

2.20

3.78

3.04

Interest Coverage

1.51

2.61

3.47

3.37

3.05

Debt to asset Ratio

A debt to asset ratio is a leverage ratio that shows the percentage of asset that have been financed with debt (Drake, & Fabozzi, 2012). A high debt to asset ratio indicates a high degree of leverage and high financial risk. This ratio is used by creditors to assess the amount of debt in a certain company, the ability to repay debt, and if loans can be extended to the firm (Drake, & Fabozzi, 2012).The debt to asset ratio of the B&Gs Foods company was 0.62, 0.68, 0.57, 0.62, and 0.54 in the years 2014, 2015, 2016, 2017, and 2018, respectively. Over the five accounting years, there is no particular trend as the ratio fluctuates between 0.54, and 068. The ratio increased from 2014 to 2015, then slightly declined from the years 2015 to 2016 and then slightly increased from 2016 to 2017 and decreased again from 2017 to 2018. Over the fiscal years, the B&GS’ debt to asset ratio is more than 50%, which shows that more than 50% of assets are financed with debt. For instance, in the year 2018, 54% of the assets were financed with debt.

Debt to Equity Ratio

A debt to equity ratio measures the degree to which a firm is able to finance its operations using its financing options; debt financing, and equity financing. Also, it is a liquidity and leverage metric which reveals the capital structure of the company (Drake and Fabozzi). A high debt to equity, usually more than one, indicates that a company is financing its operations using more debt than the equity. A ratio of 1.0 means that the debt and equity are equal, which equivalently indicates 50 percent of debt to equity financing. The B&GS’ debt to equity ratios were 3.04, 3.78, 2.20, 2.52, and 1.82 for the fiscal years 2014, 2015, 2016, 2017, and 2018, respectively. Over the five accounting years, there is no consistent pattern as the ratio fluctuates between 1.82, and 3.78, with the highest ratio in 2015, and the lowest in 2018. Worth noting, all the company’s debt to equity ratios are significantly greater than one which reveals that the BGS’ debt is greater than equity. This is a big concern to creditors and the management as B&GS Company seems to be highly leveraged ,less solvent and may have difficult in fulfilling its long-term financial obligations. A high debt to equity ratio indicates a weaker solvency (Drake, & Fabozzi, 2012)