Hill Country Snack Foods Co.

This is a CAPITAL STRUCTURE challenge should the company incur debt or not? Why or why not?

If so, how much debt should it incur?

How does one convince the CEO that it is in the companys best interests to take on some debt?

This case was selected to:

1. To create an awareness of alternative capital structures on financial performance, and how to value the benefits created by debt finance.
2. To illustrate capital structure theory and how to select a target debt-to-capital ratio.
3. To consider the effect of corporate culture and managerial philosophy on the capital structure decisions, and how to convince management to change to a more optimal level of debt finance.
4. To question the value of textbook discussions on capital structure, and the benefits of debt finance, when a successful company like Hill Country Snack Foods has consciously chosen to avoid the use of debt finance.