Krispy Kreme Final

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Acc/226 Final Project|
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Krispy Kreme, BTN 17-1 BTN 18-1|

Hewlett-Packard Company

March 2, 2013
Authored by:

Refer to Krispy Kreme’s financial statements in Appendix A to answer the following: 1. Using 2001 as the base year, compute trend percent’s for 2001, 2002, and 2003 for revenues, operating expenses (cost of sales), general and administrative expenses, income taxes, and net income.(Round to the nearest whole percent.) 2. Compute common-size percent’s for 2003 and 2002 for the following categories of assets: (a) total current assets, (b) property and equipment, net, (c) intangible assets, and (d) accrued expenses. (Round to the nearest tenth of a percent.) 3. Comment on any significant changes across the years for the income statement trends computed in part 1 and the balance sheet percent’s computed in part 2.

1)| 2001| 2002| 2003|
Revenues| $300,715| $394,354| $49,549|
Operating Expenses| $250,690| $316,946| $381,489|
General & Administrative Expenses| $20,061| $2,7562| $28,897| Income Tax| $9,058| $16,168| $21,295|
Net Income| $14,725| $26,378| $33478|

Trend Analysis| 2001| 2002| 2003|
Revenues| 100%| 131%| 163%|
Operating Expenses| 100%| 126%| 152%|
General & Administrative Expenses| 100%| 137%| 144%| Income Tax| 100%| 178%| 235%|
Net Income| 100%| 179%| 227%|
| | | |

2)| 2002| 2003|
Total Current Assets| $101,769| $41,128|
Property & Equipment Net| $112,577| $202,558|
Intangible Assets| $16,621| $48,703|
Accrued Expenses| $26,729| $20,981|
Total Assets| $255,376| $410,487|
Total Liabilities & Equity| $255,376| $410,487|

Common Size Analysis| 2002| 2003|
Total Current Assets| 39.9%| 34.4%|
Property & equipment Net| 44.1%| 49.3%|
Intangible Assets| 6.5%| 11.9%|
Accrued Expenses| 10.5%| 5.%|

3) For 2002, and 2003 the trend percent for operating expenses are slightly less than that for revenues. The comparisons show the cost of sales is being effectively controlled and growing much faster than the revenues. The trend percent’s for income taxes in 2002, and 2003 were marked higher than revenue growth. Bottom line net income grew faster than top line revenue in both 2002 and 2003. The common size percent figures show a shift away from current assets, and moved toward property and equipment assets, and intangible assets. Krispy Kreme Doughnuts, INC.

Depreciation Analysis:
Krispy Kreme uses intangible assets that are identified with an indefinite life are no longer amortized, but are subject to an impairment test. Depreciation of property and equipment is calculated using the straight-line method of depreciation. which I believe is a fair method because it allocates the cost of assets evenly over the life of the assets. Since the business uses these assets for resources to generate revenue, depreciation method is best it matches expenses with revenue. Some intangible assets will no longer be amortized, but they will still be reviewed at least once annually for impairment. Company Stock Analysis:

Krispy Kreme’s balance sheet shows 10,000 shares of preferred stock has been authorized, however none have been issued. The number of Common Stock Shares Outstanding has increased from 54,271 in 2002 to 56,295 in 2003, and there was no Treasury Stock reported. Krispy Kreme has made no dividend payment since 2001 which means in 2002 and 2003 the Dividend Yield is 0%. This would not be considered a weakness for the company, but rather an indication that Krispy Kreme’s stock is a “Growth Stock”, and there is evidence that shows in the company’s growth of assets. Increase in the earnings per share from $0.49 in 2002 to $0.61 in 2003 is more evidence of the potential the company has for growth. Cash Flow statement Analysis:

When it comes to the reporting of Operating Cash Flows Krispy Kreme uses the Indirect Method. The company did not...
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