Case Study 1:- Krispy Kreme Doughnuts inc
Maytham Hussein Saeed
Is Krispy Kreme financially “healthy”? What do the statement show, what do the ratio show?
Based on the Common Sized Financial Statement of Limited Service Restaurant Averages and Krispy Kreme (KKD) the value of KKD’s cash and equivalents is 3.1 and its lower that the 3 years industry average’s value of 12.8 in 2001, 12.4 in 2002 and 13.7 in which is not a good sign because it show company has low cash in their hand compared to industry benchmark. This is due to the low in sale especially cash sale that will lead to low cash collected from their sale. Although their cash turnover (CTO) that increase back to…show more content… Compared to their major competitor, current ratio and quick ratio of KKD is the highest among all of them which show that their ability to meet their short term liabilities is the highest among all of them even though KKD too much depend on their trade receivable and other current assets. This will give a good sign to their supplier to give them more short term debt facilities in the future because KKD have high ability to meet it and financially in healthy position in managing their current assets,
Based on non current assets of KKD stated in common sized financial statement, it show that intangible assets in 2003 (26.6) is higher that 3 years industry average ( 2001:13.3, 2002:14.2, 2003:12.6) but fixed assets (42.5) and other non current assets (4.5) in 2003 is lower that the industry average (fixed assets (2001:54.7, 2002:57, 2003:55) and other non current assets (2001:11.0, 2002:9.6, 2003:10.0) ). This leads to lower value of total non current assets of KKD for 2003 (73.6) compared to the 3 years industry average (79.0 in 2001, 81.8 in 2002 and 77.6 in 2003). This also lead to the continuity of downward movement in certain ratio that related to total assets which is total assets turnover (TATO) that decrease from 2.1 in FY Jan 2000 till 1.2 in FY Feb 2003 then continue to drop to 1.01 and compared to their competitor KKD is the third lowest among them all. This show that KKD is losing their