Zita tells you that she is thinking of expanding her business and has the opportunity to purchase
Question:
Zita tells you that she is thinking of expanding her business and has the opportunity to purchase four small mobile carts similar to the one that was rented for the Hernandez wedding. The costs of purchasing these four carts will be $16,000 and the carts have a useful life of five years. Normally, these carts would cost $48,000 to buy, but the original owner passed away two years ago and the carts have been locked in storage all this time. The family has a list of original clients, including festival organizers, so, although it is not guaranteed that she would get that business back, there appears to be an opportunity to get some immediate business. The only other potential buyer is her direct competition, and she fears that if he buys the carts, that he might take some of the new clientele that she has generated in the shop this month. She asks your advice as to whether this IS a potentially profitable move. Using the financial statements you have prepared, outline to Zita whether or not you think she should buy the mobile carts and provide reasons for your recommendations.
(Your answer should specifically reference at least two items from each statement).
2. Do you think ZZ Pops is in a good financial position at the end of April? Explain your answer using at least two ratios that you have studied this semester.
Some ratios you can write about are Current Ratio, Gross Profit Margin, and Debt to Asset.