Stone Container Corporation

1750 words, 7 pages

Intro Sample...

Stone Container Corporation started out as a small family owned business, J.H. Stone & Sons, founded by a Russian immigrant Joseph Stone in 1926. He started as a jobber of corrugated boxes, and based the business strategy on quality service and a reasonable price. During the Great Depression the company moved from being jobbers to manufactures as a result to stay in business amid economic policy changes. The company grew significantly by acquisition and, through the experiences of the Great Depression, had the policy of not sustaining debt for long periods of time. The company incorporated after World War II and continued to grow by acquisitions. This allowed the company to diversify itself and reduce production by purchasing mills... View More »

Body Sample...

Stone Container was unable to afford their growth strategy and the purchase of CBI was a major push in this negative direction. Stone Container’s interest payments were larger than the income from operations could afford. Stone Container is on the losing end of the heavy financial leveraging, and the losses are magnified as the return of assets have been negative since 1991 and magnified the loss on return of equities, as it has decreased from .32 in 1988 to -.14 in 1992. Given the over payment of CBI at the peak of the pulp & paper cycle, the lack of growth in Europe from the acquisition, the new overhead in operating costs and decreasing profit in the industry has lead Stone Container to take drastic measures to avoid default. However, Stone Container’s balance sheet does show a promising story in the inventory turnover of 5.7 times annually and a standard days sales outstanding of 45.5 days. The turnover and DSOs have shown low percent of change over the last three years. This offers some stability in knowing as long as the company is able to make products, they will be sold and paid off relatively quickly. The accounts receivables are not very high at 12.5%. It could be assumed that given the inventory turnover will stay above 5 as long as Stone Container does not sell off assets that are involved in the manufacturing, milling or distributing of the goods. This is positive as the current liquidity to pay off the current liabilities is 178% in 1992. Unfortunately, given the high interest rates in the recent years the cash ratio is very low at 6%. It is no ...

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