Essay on 254639970 Pacific Grove Spice Company

1633 Words Jun 1st, 2015 7 Pages
Based on Pacific Grove Spice Company’s forecasted financial statements, are its profitable operations sufficient to quickly bring it into compliance with the bank’s requirements?
By looking at Pacific Grove Spice Company’s forecasted financial statements, we can conclude that its profitable operations are not sufficient enough for it to be able to comply with the bank’s requirements by 30th June 2012. By the end of June-2012 Pacific Grover would only be able to lower its Equity Multiplier to 3.3 and its total debt would still be around 61% of its total assets. However, up on further analysis, we can conclude that Pacific Grove Spice would be able to comply with the bank’s requirements by 30th June 2015. As by then it would be able to
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If Pacific Grove Spice Company decides to acquire High Country Seasonings then it will be able to meet the bank requirements by the end of June-2012. As we can see from the table below Pacific will be able to reduce its equity multiplier to 2.43 and its debt as % of total assets to 51%. In regards to the acquisition, Pacific will be issuing 404908 new shares worth $13.2 Million at the price of $32.6 per share to complete the purchase of High Country Seasonings. This acquisition will result in goodwill worth $3.2 Million on Pacific Grove Spice Company’s balance sheet. The table below gives a breakdown of its equity multiplier and its total debt with respect to total assets and owners equity.

6/30/2012
6/30/2013
6/30/2014
6/30/2015
Equity Multiplier
2.43
2.38
2.29
2.20
Total Debt (Millions)
42.61
46.28
49.02
51.08
Debt as % of Total Assets
51%
49%
48%
46%
Debt as % of Owners Equity
123%
117%
109%
100%

BV Per Share
$5.91
MV Per Share
$32.6
Outstanding Shares
1165327.00
New Shares Issued
404908.00
BV of New Shares
$2,393,006.28
MV of New Shares
$13,200,000.80
Total Shareholders Equity
$9,724,000.00
Goodwill
$3,476,000.80

Pacific Grove Spice Company Balance Sheet after acquiring High Country Seasonings
Assets…