Case ID: 4017
Solution ID: 12169
Words: 1553
Price $ 60

Ceres Gardening Company Funding Growth in Organic Products Case Solution

Case Solution

Ceres Company, using its innovative GetCeres program, is striving to improve its outreach by penetrating the retail marketplace for the organic gardening business. Ceres is providing relaxed credit terms to the merchants inside a bid to capture a brand new consumer segment - the causal home gardeners. Their new online marketing strategy, however, is putting additional stress on their capital position. The company is removed of money and can't borrow more money due to its limited debt covenants. The burgeoning sales are, therefore, not sustainable later on. The company remains with two options: they are able to either raise more equity capital to aid their growth or they are able to withdraw using their aggressive growth policy and expand in a sustainable rate.

Excel Calculations

Projected Balance Sheet 

2005, 2006E, 2007F, 2008F

Projected Income Statement

2005, 2006E, 2007F, 2008F

Calculation of Operating Cash Flows

2006E, 2007F, 2008F

Calculation of Dealer's Sell-through in 2006

Analyses of Covenants

EBITDA

Required Debt to EBITDA ratio

Maximum Allowable Debt

Fixed Interest Charges

EBITDA / Fixed Financial Charges

Questions Covered

How has the company grown?  What is its basic strategy, and how has this evolved?

What potential financial risks does Ceres face as it crafts its strategy for 2007?

Prepare a presentation to the bank.  How would you forecast cash flows in 2007-2008?   

How would you evaluate Ceres’s marketing efforts?  Should the GetCeres program be expanded?  Why or why not?