Boston Beer Company
The Boston Beer Company provides four major accounting policies that must be considered by auditors. The accounting policies include the reporting methods, measurement processes, systems, and the disclosures to be used in the auditing processes (Gibson 48). The auditors must evaluate the company’s accounting policies clearly in order to avoid any conflicts of interests. The auditors are required to maintain close attention on the disclosures and items in the financial statements. Graham (210) provides that the relevant disclosures include the accounting policies that state the application of the GAAP provisions in the auditing process. The auditors should be keen with the company’s accounting policies in order provide a fair presentation of the financial statements (Graham 210).
The internal controls of the company are efficient and effective in the financial reporting of a company’s financial transactions. This relates to the separate evaluation that comprises internal, external, or quality audits. In addition, the internal controls are crucial in the review of the company’s plans and budgets in order to enhance performance. They also help to assess and execute control programs on various organizational levels. According to Gary and Norton (231), the company uses the internal controls to provide relevant financial information and data to the external auditor. The internal controls assist in risk evaluation and measurements of the financial reporting activities. This involves the maintenance of high standard and ethics in the internal control systems. The management should consider relevant allocation of responsibilities among the various individuals. Therefore, the internal control systems are important in effective monitoring, evaluation, and measurement of risks facing the company over financial reporting (Elder, Mark and Alvin 230).
As observed from table 1 below, the company’s financial condition is favorable. This relates to the financial health and results that indicates better financial performance over the last five years in operation. In addition, the stock analysis determines the improved performance in the company over the last five years.
Table 1: Boston Beer Inc Financial Trends over the last five years
| 2009 | 2010 | 2011 | 2012 | 2013 | |
| Adjusted Stock Price | |||||
| Earnings per share | 2.17 | 3.52 | 4.81 | 4.39 | 5.18 |
| Price earnings ratio | 27.0 | 22.6 | 30.4 | 46.3 | 46.1 |
| Return on equity (%) | 19.87 | 29.60 | 37.71 | 27.67 | 25.73 |
| Return on assets (%) | 12.87 | 19.23 | 24.88 | 18.82 | 17.52 |
| Revenue growth (%) | 12.19 | 11.99 | 16.03 | 16.46 | 15.23 |
| Income from continuing operations | 68.12 | 70.39 | 59.47 | 66.06 | 50.14 |
| Cash flow from continuing operations | 66mil. | 68mil. | 73mil. | 95mil. | 100mil. |
The company’s current and quick ratios are 155% and 118% respectively. This indicates that the company has adequate cash to pay for its short-term obligations. It shows that the company cannot go into bankruptcy. There are certain factors that determine whether the company is going into bankruptcy. These includes the inability of the company to pays its debts, increased external borrowing, and loss of confidence by the investors (Bell and Jeremy 151). The debt-to-equity ratio and times interest earned are 0.23 and 0.24 respectively. This indicates the ratios of the equity financing and debt financing in the organization.
As seen from table 2 below, Boston Beer Company faces stiff competition from the other competitors in the market. The competitors have more operating income and market based compared to Boston Beer.
Table 2: Boston Beer and Its top Competitor Averages
| Boston Beer | Anheuser-Busch | Heinken NV | |
| employees | 1120 | 154,587 | 85,000 |
| Market Cap: | 3.04B | 171.03B | 41.09B |
| Revenue | 739.05M | 43.20B | 24.86B |
| Net Income | 69.88M | 14.39B | 1.77B |
| EPS | 5.18 | 8.72 | 3.07 |
| Operating Margin | 0.16 | 0.32 | 0.13 |
Works Cited
Bell, Timothy B., and Jeremy B. Griffin. “Commentary on auditing high-uncertainty fair value estimates.” Auditing: A Journal of Practice & Theory 31.1 (2012): 147-155.
Elder, Randal J., Mark S. Beasley, and Alvin A. Arens. Auditing and Assurance services. Pearson Higher Ed, 2011.
Gary, Porter., and Norton Curtis. Financial accounting: The impact on decision makers. Boston, MA: Cengage Learning, 2010. Print.
Gibson, Charles. Financial reporting and analysis: Using financial accounting information. Boston, MA: Cengage Learning, 2010. Print.
Graham, Lynford. Accountants’ handbook, financial accounting and general topics, Volume 1. New Jersey: John Wiley & Sons, 2012.Print.