Assessing the operational perfomance of produce buying Company Limited (P.B.C.) after its enlistment at the Ghana Stock Exchange
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Date
2003-11-23
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Abstract
The study which set out to find solutions to folding up of LBCs established that, the
government of Ghana in 1993 realized that, the inclusion of private companies in the
internal marketing of cocoa would benefit the nation in general and farmers in particular.
The government’s idea was to increase the total tonnage of Cocoa in Ghana and also correct the situation where farmers’ produce were not completely purchased and was therefore left in the farms to spoil as a result of inefficiencies on the part of PBC. Despite this idea, some of the newly established LBCs started collapsing after just two or three years in operation hence defeating the purpose of their existence. This situation is eventually creeping into PBC (the premier LBC).
The study found out that Ghana had ever been the world’s largest producer of Cocoa for about sixty-six years. This position was lost and now being occupied by Ivory Coast due to certain practices Ghana did not give much attention to which were vital to the sustenance of the production level. Farmers were poorly remunerated and as a result could not maintain their tree stock and or renew them, which resulted in the spread of diseases and others.
The study further found that, despite the fall in market share, there was an increase of 20% in turnover (from ¢499.654 billion to ¢600.699 billion) during 2000/2001 season due to an increase in producer price. The company’s market share started declining after 1997/98 season.
It was also discovered that PBC was more liquid than the Industry. The liquidity levels in PBC rose from a low of 1.16 in 1999 to a high value of 1.98 at the end of 2002.The 1.98 is considered immaterial so far as PBC is concerned because the Industry does not demand keeping huge amounts of money which could be invested elsewhere for profits.
It was also realized that PBC being the oldest company a lot of its fixed assets being old and at, the accumulated depreciation lowers the carrying value of the assets. The study further revealed that, the Industry leveraged more than PBC. This was due to the fact that, the Debt Equity ratios were higher in the case of the Industry.
The study used the ALTMAN’S Z-MODEL in analyzing soundness of the financial position of PBC. It was seen that, the Z values for all the years were higher than the rule of thumb of +2, hence PBC’s financial position came out as the best. This brought to mind that, the fall in market share was due to other things rather than financial.
The study came out with certain recommendations and conclusions it was recommended that, if PBC wants to compete very well in the market, there is a need to adopt vibrant promotional programmes so that they can continuously retain their hard working farmers. The company should adopt a strategy by which seed fund would be send to the field to avoid embezzlement (like the one proposed in this study). The study finally concluded by recommending an area of study for further research.
Description
A thesis submitted to the Department of Economics and Industrial Management in partial fulfilment of the requirements for the degree of Master of Arts, 2003