Your best-friends have decided to open a cozy coffee shop in a busy commercial center in...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Your best-friends have decided to open a cozy coffee shop in a busy commercial center in Kuwait in 2018. They have done extensive market research and feasibility studies before and they decided to make the investment. They (will refer to them as Owners ) called their business Yum Tumz and they have been working very hard to get their business off the ground over the past 3 years. YumTumz serves a wide variety of specialty coffees, tea, protein shakes, fresh juices, smoothies, and an assortment of light snacks and finger foods. Their food bar was created and tasted by the owners) and is stocked using ready-made items from a supplier. Their entire drinks and food menu items was carefully selected and tasted by the Owners as well as their close friends and family before agreeing on it. However, business has been slow and they are losing morale. They have called you to give their financial statements a look and provide much needed advice/guidance. First, perform the Horizontal Analysis (as a %) using 2018 as the base year. 1) What can you conclude about the company s overall health/performance compared to the Industry average with regards to the following (fill the table): 2020 % Ind. Avg. Conclusions Line Item Cash Total Inventory Total Liabilities Cost of Goods Sold Gross Profit Net Income 2019 % Pane I 2) On the excel sheet provided, calculate all of the ratios included in the equation sheet provided on the next page. 3) You were not able to find the industry averages for Kuwait for the above ratios. However, what conclusions can you make from the ratios? NOTE: ALL YOU WORKINGS MUST BE DONE ON THE EXCEL SHEET USING EQUATIONS Ratio Liquidity Current Quick, or Acid Test Asset Management Inventory Tumover Debt Management Debt ratio Interest coverage Profitability Net profit margin Formula Total current assets Total current liabilities. Current assets-inventories Current liabilities Cost of goods sold Inventories (average) Total debt Total assets EBIT Interest charges Net income Total operating revenue Ratio Gross profit margin Net return on assets Gross return on assets Formula EBIT Total operating revenue Net income Total average assets EBIT Total average assets 4) Based on all your calculations and conclusions above, your friends want you to answer the following questions honestly: 1. How well are they doing? List as many strengths/pros and weaknesses/cons on his performance as you can below: Areas of Strength Areas of Weakness 2. Lastly, and based on what you have found, they want you recommendation on whether they should continue, or cut their losses and close down? Provide a clear justification for your recommendation. Yumtumz Co. Assets Cash Short Term Investments Accounts Receivable 3 Total Inventory 9 Prepaid Expenses LO Total Current Assets 11 Property/Plant/Equipment- Total-Gross 12 Accumulated Depreciation - Total 13 Property/Plant/Equipment- 34 Long Term Investments 15 Total Assets 16 17 Liabilities 18 Accounts Payable 19 Accrued Expenses 20 Notes Payable/Short Term Debt 21 Other Current liabilities-Total 22 Total Current Liabilities 23 Long Term Debt 24 Total Long Term Debt 25 Total Debt 26 Minority Interest 27 Other Liabilities-Total 28 Total Liabilities Total - Net 29 30 Shareholders Equity 31 Common Stock-Total- 32 Additional Paid-in Capital 33 Retained Earnings (Accumulated Deficit) 34 Treasury Stock-Common 35 Unrealized Gain (Loss) 36 Other Equity- Total 37 Total Equity 30 Balance Sheet 2018 All Amounts in KWD 6,000 1 350 3,250 455 10,056 21,000 (500) 20,500 1 30,557 1,900 450 150 175 2,675 17,000 17,000 17,000 1 1 19,675 7,500 2,000 1 1 (20) 1.380 10,862 2019 4,310 - 490 3,000 575 8,375 21,000 (1,000) 20,000 28,375 2,650 620 150 175 3,595 14,000 14,000 14,000 17,595 7,500 2,500 * 780 10,780 D 2020 2,000 1,040 3,100 500 6,640 21,000 (1,500) 19,500 26,140 3,100 750 150 230 4,230 12,000 12,000 12,000 16,230 7,500 2,000 C 410 9,910 E Horizontal Analysis Industry Average G 200% 100% 117% 116% 120% 113% 110% 200% 88% 112% 105% 150% 220% 100% 100% 100% 107% 107% 107% 103% 109 % 130% 100% 100% 125% 101% 2% -1% 108 % 39 40 41 42 Revenue 43 Total Revenue 44 Cost of Goods Sold 45 Gross Profit 46 47 Selling/General/Admin. Expenses, Total 48 Interest Expense 49 Unusual Expense 50 Other Operating Expenses, Total 51 Total Operating Expense 52 Operating Income 53 Interest Income 54 Gain (Loss) on Sale of Assets 55 EBIT 56 57 Provision for Income Taxes 58 Net Income After Taxes 59 Minority Interest 60 Net Income 61 Income Statement 2018 1,200 1,200 1,500 (300) (2,500) (700) (150) (250) (3,600) (3,900) 1 1 (3,900) 1 (3,900) 1 (3,900) 2019 1,500 1,500 1,500 (2,500) (700) (190) (3,390) (3,390) (3,390) (3,390) (3,390) 2020 2,150 2,150 1,750 400 (1,500) (500) H (2,000) (1,600) (1,600) (1,600) (1,600) 150% 150% 123% 136% 117% 94% 109% 115% 39% 170% 0% 142% 120 % 0% 114% 0% 110% Your best-friends have decided to open a cozy coffee shop in a busy commercial center in Kuwait in 2018. They have done extensive market research and feasibility studies before and they decided to make the investment. They (will refer to them as Owners ) called their business Yum Tumz and they have been working very hard to get their business off the ground over the past 3 years. YumTumz serves a wide variety of specialty coffees, tea, protein shakes, fresh juices, smoothies, and an assortment of light snacks and finger foods. Their food bar was created and tasted by the owners) and is stocked using ready-made items from a supplier. Their entire drinks and food menu items was carefully selected and tasted by the Owners as well as their close friends and family before agreeing on it. However, business has been slow and they are losing morale. They have called you to give their financial statements a look and provide much needed advice/guidance. First, perform the Horizontal Analysis (as a %) using 2018 as the base year. 1) What can you conclude about the company s overall health/performance compared to the Industry average with regards to the following (fill the table): 2020 % Ind. Avg. Conclusions Line Item Cash Total Inventory Total Liabilities Cost of Goods Sold Gross Profit Net Income 2019 % Pane I 2) On the excel sheet provided, calculate all of the ratios included in the equation sheet provided on the next page. 3) You were not able to find the industry averages for Kuwait for the above ratios. However, what conclusions can you make from the ratios? NOTE: ALL YOU WORKINGS MUST BE DONE ON THE EXCEL SHEET USING EQUATIONS Ratio Liquidity Current Quick, or Acid Test Asset Management Inventory Tumover Debt Management Debt ratio Interest coverage Profitability Net profit margin Formula Total current assets Total current liabilities. Current assets-inventories Current liabilities Cost of goods sold Inventories (average) Total debt Total assets EBIT Interest charges Net income Total operating revenue Ratio Gross profit margin Net return on assets Gross return on assets Formula EBIT Total operating revenue Net income Total average assets EBIT Total average assets 4) Based on all your calculations and conclusions above, your friends want you to answer the following questions honestly: 1. How well are they doing? List as many strengths/pros and weaknesses/cons on his performance as you can below: Areas of Strength Areas of Weakness 2. Lastly, and based on what you have found, they want you recommendation on whether they should continue, or cut their losses and close down? Provide a clear justification for your recommendation. Yumtumz Co. Assets Cash Short Term Investments Accounts Receivable 3 Total Inventory 9 Prepaid Expenses LO Total Current Assets 11 Property/Plant/Equipment- Total-Gross 12 Accumulated Depreciation - Total 13 Property/Plant/Equipment- 34 Long Term Investments 15 Total Assets 16 17 Liabilities 18 Accounts Payable 19 Accrued Expenses 20 Notes Payable/Short Term Debt 21 Other Current liabilities-Total 22 Total Current Liabilities 23 Long Term Debt 24 Total Long Term Debt 25 Total Debt 26 Minority Interest 27 Other Liabilities-Total 28 Total Liabilities Total - Net 29 30 Shareholders Equity 31 Common Stock-Total- 32 Additional Paid-in Capital 33 Retained Earnings (Accumulated Deficit) 34 Treasury Stock-Common 35 Unrealized Gain (Loss) 36 Other Equity- Total 37 Total Equity 30 Balance Sheet 2018 All Amounts in KWD 6,000 1 350 3,250 455 10,056 21,000 (500) 20,500 1 30,557 1,900 450 150 175 2,675 17,000 17,000 17,000 1 1 19,675 7,500 2,000 1 1 (20) 1.380 10,862 2019 4,310 - 490 3,000 575 8,375 21,000 (1,000) 20,000 28,375 2,650 620 150 175 3,595 14,000 14,000 14,000 17,595 7,500 2,500 * 780 10,780 D 2020 2,000 1,040 3,100 500 6,640 21,000 (1,500) 19,500 26,140 3,100 750 150 230 4,230 12,000 12,000 12,000 16,230 7,500 2,000 C 410 9,910 E Horizontal Analysis Industry Average G 200% 100% 117% 116% 120% 113% 110% 200% 88% 112% 105% 150% 220% 100% 100% 100% 107% 107% 107% 103% 109 % 130% 100% 100% 125% 101% 2% -1% 108 % 39 40 41 42 Revenue 43 Total Revenue 44 Cost of Goods Sold 45 Gross Profit 46 47 Selling/General/Admin. Expenses, Total 48 Interest Expense 49 Unusual Expense 50 Other Operating Expenses, Total 51 Total Operating Expense 52 Operating Income 53 Interest Income 54 Gain (Loss) on Sale of Assets 55 EBIT 56 57 Provision for Income Taxes 58 Net Income After Taxes 59 Minority Interest 60 Net Income 61 Income Statement 2018 1,200 1,200 1,500 (300) (2,500) (700) (150) (250) (3,600) (3,900) 1 1 (3,900) 1 (3,900) 1 (3,900) 2019 1,500 1,500 1,500 (2,500) (700) (190) (3,390) (3,390) (3,390) (3,390) (3,390) 2020 2,150 2,150 1,750 400 (1,500) (500) H (2,000) (1,600) (1,600) (1,600) (1,600) 150% 150% 123% 136% 117% 94% 109% 115% 39% 170% 0% 142% 120 % 0% 114% 0% 110%
Expert Answer:
Related Book For
Service Management Operations Strategy Information Technology
ISBN: 978-0077841201
8th edition
Authors: James Fitzsimmons, Mona Fitzsimmons, Sanjeev Bordoloi
Posted Date:
Students also viewed these accounting questions
-
You and four of your closest friends have decided to start a business that will purchase from banks and other financial institutions high-risk, subprime mortgage loans that are in default. You...
-
You and two of your friends have decided to apply some of the knowledge that you are learning in your business classes. You plan to start a wholesale business, buying goods in the Czech Republic and...
-
You and three college friends have decided to launchan online business selling clothes college students wear T-shirts, shorts, sweats, and so on. You plan to use Facebookads. What likes or interests...
-
The following data represent the prices in dollars of general admission tickets for the last 18 concerts at one venue. Use the given data to determine the stems for this stem-and-leaf plot. $50 $61...
-
Explain why the backward-bending labor supply curve has this shape.
-
From Concept Check 4, record the March 31 semiannual payment and amortization of Premium on Bonds Payable.
-
Prove that, for fixed \(t\), \[A_{t}^{(u)} \stackrel{\text { law }}{=} \int_{0}^{t} e^{2\left(u(t-s)+W_{t}-W_{s} ight.} d s:=Y_{t}^{(u)}\] and that, as a process \[d Y_{t}^{(u)}=\left(2(u+1)...
-
According to the Bottled Water Trends for 2014 report (bit.ly/1gx5ub8), the U. S. per capita consumption of bottled water in 2013 was 31.8 gallons. Assume that the per capita consumption of bottled...
-
CWRU Biosciences has just completed their most recent year with the following results (in thousands): Sales 1,000 Net income 20 Dividends 0 Net assets 250 Equity 200 The company forecasts that it...
-
Tucker, Inc., produces high-quality suits and sport coats for men. Each suit requires 1.2 hours of cutting time and 0.7 hours of sewing time, uses 6 yards of material, and provides a profit...
-
i) Draw sample response plots for overdamped and underdamped single degree of freedom system in the same figure ii) Draw response of a harmonically excited single degree of freedom underdamped system...
-
A stock has had returns of 17 percent, 9 percent, -20 percent over the last three years, respectively. What is the geometric mean return for this stock? (Enter your answers as a percentage rounded to...
-
Question: A borrower takes out a 15-year mortgage loan for $100,000 with an interest rate of 7% plus 3 points. What is the effective annual interest rate on the loan if the loan is camed for all 15...
-
discuss the fundamental differences in tax characteristics for these different business types. Also, what is a flow - through entity? Please also discuss the Qualified Business Income deduction.
-
A taxpayer with a Federal AGI of $100,000 makes $60,000 in cash contributions to charity. What is the size of the adjustment to add back taxable income on the State return? $0; The State conforms to...
-
Question 2: Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company usuallyproduces all of the necessary parts for its engines, including all of the carburetors....
-
Economic capital is used to protect the bank from losses: A. That occur when an unusual and extremely unlikely event occurs. B. That are above the average level but below the relevant confidence...
-
Uniform electric field in Figure a uniform electric field is directed out of the page within a circular region of radius R = 3.00 cm. The magnitude of the electric field is given by E = (4.50 x 10-3...
-
What possible dangers are associated with developing complementary services?
-
Revisit the copying service Huff analysis in Example 8.2. Recalculate the monthly customer expenditures and the market share for the proposed copying center at location B if the new store will be...
-
Passengers arriving at an airport departure gate must first wait for their row to be called before proceeding to the gate to have their boarding pass authenticated. If the boarding pass does not...
-
Let us consider a call option with maturity \(T=1\) year and strike price \(\$ 11\). The current price of the stock share is \(\$ 10\), and the riskfree interest rate is \(10 \%\). The two possible...
-
Let us consider the PDE with terminal condition In order to apply the representation theorem, we observe that \(r=0\), \((x t)=\), and , so that the underlying stochastic process boils down to a...
-
Let us consider the same setting as Example 13.4: \(S_{0}=K=50\), \(r=01, \quad=04\), and time-to-maturity is \(T=5/12\) (here we take \(t=0)\). The calculation is as follows: This exact result may...
Study smarter with the SolutionInn App