Boston Beer Case

1. What factors determine when a company should go public?

Following factors should be kept in mind before going public.

The size of the company: The Company should be big enough and should have invested reasonable amount of money in either asset or service that they provide. For example with an investment of $50 million, investment banking forms could come up with $10 per share for that company. If the company is small then its difficult to market and the initial price is much lower.

The company’s performance: Company going public should at least be in market for some time and have shows growth and consistent financial performance. They product should be knows to customers and should show the sigh of growth. If the company is not growing then the initial public offering is less attractive.

The company’s future prospectus must be good and growing: The Company’s future prospectus must be good and should show the sigh of growth. The company should reveal about their future plans and investments

Good market conditions: The market should be in favor of the company and should show the sign of growth. Not only the market, but the field where the product belongs to should be growing. For example if the market is growing and the product is related to internet, then internet market should also grow.

2. What are BBC’s financial strengths and weaknesses? (Show calculations)

Financial ratios are given as below. (See the attached excel sheet for detail calculations)

1993

1994

Current ratio

1.619167

1.334075

quick ratio

1.338409

1.019437

NWC-to-asset ratio

0.339777

0.217965

Inventory-to-sales conversion period

38.12435

39.57603

Sale-to-purchase conversion ratio

31.37689

23.46707

Purchase-to-payment period

30.00775

42.08298

39.49349

20.96012

Total-debt-to-Total-Assets Ratio

1.125439

1

Equity Multiplier

2.716738

3.612657

Current-Liabilities-to-Total-Debt Ratio

0.548765

0.652445

Gross...