This report provides factual quantative information on Lemonade Stand, sourced from financial statements, the business’ General Journal and financial data collected during Seasons One, Two and Three. The following economic summary report will consider how well Lemonade Stand’s business is performing by, among other things, deducting the stand’s capital costs from its profits. Through analysis of the previously stated quantiative information, the company will be able to measure how well the stand is using capital to build economic value, with perhaps deploying company resources in ways that will further enhance its economic value. In short, 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 of review, Lemonade Stand has shown a 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 throughout Season Two – instead of maintaining a steady price of $0.60 during the whole season. 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 excess supplies were purchased in preparation for a predicted rush of customers. This mismanagement lead to a waste of supplies, – especially ice – a low inventory turnover, increased expenses – due to management mistakes instead of business operations -- and excess inventory at the ending of the season. However, despite the downfall in Season Two, inventory turnover did improve during Season Three as well as the stand’s current ratio.
The Lemonade Stand’s...
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