Restaurant Analysis

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TABLE OF CONTENT
1.Introduction………………………………………………………..…………………3 2.Company Background………………………………………………..………………3 3.Business Analysis…………………………………………………….………………4 a.Profitability Ratios……………………………………………..……………..4 b.Liquidity Ratios………………………………………………..……………..6 c.Leverage Ratios……………………………………………………………....7 d.Activity Ratios………………………………………………………………..9 e.Shareholders’ Return Ratios………………………………………………….9 f.Contribution Analysis………………………………………………………10 g.DuPont Model of Financial Analysis...……………………….……………10 h.Break-even Analysis……………………………………….……………….11 4.Summary ……………….………………………………………..…………………11 5.Recommendations……………………………………………………..……………13 6.References…………………………………………………………………………..14 7.Appendices

A.Bob’s Restaurants Operating Performance & Selected Balance Sheet Items, Fiscal Years 1997 – 2004…………………15 B.Bob’s Restaurants ratio calculations……………………………………….16

Financial Analysis: Bob’s Restaurants
1. Introduction
In the following analytical report, the financial performance of Bob’s Restaurants is assessed. Operating Performance & Selected Sheet Items for the years of 1997-2004 was provided along with Stock Price Performance for Fiscal Years 1996-2004. The results of the analysis were then compared with the industry standards in order to demonstrate Bob’s Restaurants standing in the restaurant industry. For the purposes of financial statement analysis, ratio analysis was used. After analyzing Bob’s Restaurants a recommendation is made on future actions. 2. Company Background

Bob’s Restaurants owned 223 restaurants by the end of their 1997-1998 fiscal years; however during 1999 the company closed 10 restaurants and 11 more by end of 2001. Bob’s Restaurants continue losing money and had to close 6 more of their restaurants by 2002. The company had a tough time by 2003 where they closed 48 of their restaurants remaining only 148 operable sites. By 2004 Bob’s Restaurants owned 138 restaurants, a total of 85 restaurants closed during the years of 1997-2004. In 1998 Bob’s Restaurants experienced a decline in net income from $28 million in 1997 to $5 million in 1998 to negative $6 million in 2004. The higher Stock Price of the company was $25.25 in 1996 going down to $0.95 in 2003. Bob’s fiscal year ends August 31. No store closing expenditures were incurred in fiscal years 1994-1996 or 1999. Bob’s marketing budget averaged 2% of sales in 1997 and 1998, 2.4% in 1999, 2.1% in 2000, 1.6% in 2001, 0.26% in 2002, 0.34% in 2003 and 1.3% in 2004. Total Operating Expenses excludes depreciation and amortization.Net income is net of income tax provision (benefit). The Provision for Store Closings was reclassified as Discontinued Operations (net of taxes) in 2003.

3. Business Analysis
Numbers provide a way to determine how a business is performing. Measuring financial performance is historical in nature and uses the actual numbers or results from business operations. It tells us what the business has produced, and it compares and evaluates that performance to specific measures. In the business analysis of Bob’s Restaurants the process of Ratio Analysis was chosen as the most suitable for comparison with industry standard indicators which are the most often and in that case solely, available. Several different ratios were used in order to assess Bob’s Restaurants profitability, financial leverage and activity measures. Ratio analysis enables the analyst to compare items on a single financial statement or to examine the relationships between items on two or more statements. After calculating ratios for each year's financial data, trends for the company can be examined across years. a.Profitability Ratios.-

Profitability ratios are gauges of the company's operating success for a given period of time. These financial ratios measure the return earned on a company’s capital and the financial cushion relative to each dollar of sales. A firm that has high gross profit...
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