What can the historical income statements (case Exhibit 1) and balance sheets (case Exhibit 2) tell you about the financial health and condition of Krispy Kreme Doughnuts, Inc.?
The income statement and balance sheet provides an overview of the company’s expenditures, future debt constraints, and how the company has done in previous years allowing investors and other relevant parties to make future predictions for investment purposes. Details of the income statement provide insight into Krispy Kreme Doughnut’s current state as well as their future as a company and the balance sheet is more like a snapshot of their assets and liabilities.
Reviewing the income statement, the first thing that became apparent was the rise in total revenue as well as operating expenses. The revenues grew from $220MM to about $666MM and net income skyrocketed from about $6MM to $57MM. The operations expenses also increased significantly, over 100%, from $190MM to $507MM. These increases promote that the organization is in good operating health and is likely attributed due to factors such as acquisitions of a new brand that is already established (Mountain Mills) or their expansion of the Krispy Kreme stores nationwide as well as entering the global market. However it is probable as well that it is a combination of profitable new stores in financially sound sectors and the rebound of the Mountain Mills brand. While income from operations reports as a large increase year over year, which is positive, there are some signs of negative growth for the income from interest is significantly low. This provides evidence that they called in some of their accounts receivable or some franchise stores likely closed. Looking at the company’s interest income from the FY2001 through FY2003, the interest income was reported significantly higher due primarily to their aggressive accounting methods, which made the firm appear much healthier... [continues]
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