Economic Summary of the Lemonade Stand
BUS 599 Introduction to Quantitative Principles
Dr. Harrison Green
September 23, 2011
This report provides quantative information on the lemonade stand, sourced from financial statements, the business journal, and financial data collected during all three seasons. The following economic summary report will tell how well the lemonade stand’s business is performing by deducting the stand’s capital costs from its profits. Through analysis of the previously stated quantative information, the company will be able to measure how well the stand is using capital to build economic value. The economic summary report’s fundamental objective is to maximize the stand’s return for its owners, as well as to focus on very precise value-related targets, be they cost reductions, new investments, or other resource allocation.
Over the three season period, the lemonade stand has shown a non-steady revenue growth. Although this growth is positive, there are aspects of the business that, if managed more efficiently, could have brought the stand a significant increase in overall profits. First, the price per cup could have been increased before the end of Season Two. This simple increase in price would increase revenues and profits for the season. Second, there was a lack of wise management towards the purchase of supplies during season two. It was difficult to forecast the turnout for each day and not enough supplies were purchased in preparation for a predicted rush of customers. This mismanagement leads to having not enough supplies; a high inventory turnover, decreased expenses due to management mistakes instead of business operations. However, despite the downfall in Season Two, inventory turnover did improve in Season Three.
The lemonade stand’s current ratio was higher in Season Two than any other season. The higher current ratio indicates...