The return on equity measures how efficient management is using its resources and giving back to their investors. The higher the percentage the more return Hill Country provides for its investors. A favorable return on equity is between 15% and 20%. For return on assets Hill Country was at 10.0% in 2011. This ratio is found by dividing net income and total assets, $97.6 / $979.9, respectively. Return on assets shows how efficiently a company is converting its money to invest into net income. The higher the return on assets the better. When Hill Country’s return on assets is compared to its competitors, PepsiCo and Snyder- Lance, Hill Country comes out with the highest percentage. Even though it is only 10.0% Hill Country still handles their investments more efficiently. This is caused by the thoroughness and strict budget that CEO, Kanner puts on the company. Kanner’s main concern is the amount the shareholders are …show more content…
Hill Country CEO will be retiring soon and a new outlook on the company will be welcomed. By making small reductions to cash, increasing debt, and reductions to owners’ equity the return on equity will significantly increase. This increase will be more favorable to investors and allow Hill Country to increase net income. This is important because the higher the return on equity shows the more efficiently a company is running. With a return on equity of only 10.0% in 2011 the company can double that percentage by increasing debt-to-capital to 40%. The optimal capital structure for Hill Country is between 30-40%