David Danjul

BUSI 405

Ceres Gardening Products: Funding Growth in Organic Products

1. How has Ceres grown? What is its basic strategy and how has this evolved?
a. Ceres has grown from being primarily a mail-order company selling organic farming
products (direct business) to a retail-oriented model to accelerate growth.
b. Its basic strategy was to keep its steady growth of the direct business, however Wydown
realized that the retail channel would help accelerate growth in the long run and that it
was important to strengthen sales with dealers. Their strategy has evolved through:
i. Hiring someone with experience in retail (Annette O’Connell)
ii. Adding farms and distribution centers to strengthen its distribution system in
order to adequately stock dealers outside the western US.
iii. Launching the GetCeres Program that gave dealers a 15% discount for a
minimum stock order while extending financing to 120 days. As a result, the
GetCeres program encouraged dealers to stock abundantly rather than
conservatively.
2. Is Ceres financially healthy? To support your answer to this question, compute and report the
following ratios for 2003-2006:
a. Sales Growth

2003-2004 2004-2005 2005-2006

(29289-26797)/26797 (35088-29289)/29289 (42597-35088)/35088
=9.2995% =19.799% =21.4%

b. Gross Margin: (Sales-COGS)/Sales

2003 2004 2005 2006

(26797- (29289- (35088- (42597-
21706)/26797 23841)/29289 28597)/35088 35100)/42597
=18.99% =18.6% =18.499% =17.6%

c. Return on Sales: EBIT/Net Income

2003 2004 2005 2006

2338/1293 2408/1279 2836/1488 3018/1534
=1.808 =1.883 =1.906 =1.967

d. Days in Receivable: 365 x (avg AR / Sales)

2003 2004 2005 2006

365(0.5(4405- 365(0.5(6821- 365(0.5(10286- 365(0.5(14471-
 3485))/26797 4405))/29289 6821))/35088 10286))/42597
=6.27 =15.05 =18.022 =17.93

e. Days in Inventory: 365 x (avg INV / COGS)

2003 2004 2005 2006

365(0.5(2795- 365(0.5(3201- 365(0.5(3291- 365(0.5(3847-
3089))/21706 2795))/23841 3201))/28597 3291))/35100
=-2.47 =3.107 =0.5743 =2.89

f. Days in Accounts Payable: 365 x avg AP / COGS

2003 2004 2005 2006

365(0.5(

g. Current Ratio
h. Total Asset Turnover