Strategic Management

Krispy Kreme Doughnuts case (pp. 378-384) in Strategic Management and respond to the questions in the Case Analysis Template. Instructions: Fill in the cells with $ (yellow highlighted) and the ratios will automatically calculate Financial Ratios Analysis Current Year Previous Year Previous Year Liquidity Ratios Current Ratio: Current Assets/Current Liabilities - - - extent to which a firm can meet short-term obligations - generally one wants an upward trend Quick Ratios: Current assets minus inventory/current liabilities - - - extent to which a firm can meet short-term obligations w/o selling inventory - generally one wants an upward trend $ Current Assets $ Current Liabilities $ Inventory Leverage Ratios Debt-to-Total Assets Ratio: Total Debt/Total Assets - - - % of total funds provided by creditors - generally one wants a downward trend Debt-to-Equity Ratios: Total Debt/Total Stockholders' Equity - - - % of total funds provided by creditors vs.. by owners - generally one wants a downward trend Times-Interest-Earned Ratio: Profits before interest & taxes/Total Interest Charges - - - extent to which earnings can decline w/o firm being unable to pay interest - generally one wants and upward trend $ Total Debt $ Total Assets $ Total Stockholders' Equity $ Profits before Interest and taxes $ Total Interest Expense Activity Ratios Inventory Turnover: Sales/Inventory of Finished Goods - - - whether firm holds extensive inventory and is selling it slower than industry - generally one wants and upward trend Fixed Assets Turnover: Sales/Fixed Assets - - - Sales productivity and plan and equipment utilization - generally one want to see an upward trend Total Assets Turnover: Sales/Total Assets - - - whether firm is generating sufficient vol. of business. for size of asset investment - generally one wants an upward trend Average Collection Period: Accounts Receivable/(Total credit sales/365 days) - - - average time it takes for firm to collect on credit sales - generally one wants a downward trend $ Sales $ Inventory of Finished Goods $ Fixed Assets $ Total Assets $ Accounts Receivable $ Total Credit Sales (unless otherwise indicated, same as sales) Profitability Ratios Gross Profit Margin: Sales minus cost of good sold/Sales - - - total margin available to cover operating expenses and yield a profit - generally one wants an upward trend Operating Profit Margin: Earnings before interest and taxes (EBIT)/Sales - - - profitability w/o concern for taxes and interest - generally one wants and upward trend Net Profit Margin: Net Income/Sales - - - after-tax profits per dollar of sales - generally one wants an upward trend Return on Total Assets (ROA): Net income/Total Assets - - - after-tax profits per dollar of assets (ROI) - generally one wants and upward trend Return on Stockholders' Equity (ROE): Net Income/ Total Stockholders' Equity - - - after-tax profits per dollar of stockholders' investment in the firm - generally one wants and upward trend Sales Revenue (already entered above - no need to re-enter data) - - - $ Cost of goods sold or cost of sales $ EBIT (Earnings Before Interest and Taxes) $ Net Income (Earnings After Interest and Taxes) Total Assets (already entered above - no need to re-enter data) - - - Total Stockholders' Equity (already entered above - no need to re-enter) - - - $ Other Operating Expenses Revenue/Expense Sales Revenue (percentage change) - - - annual percentage growth rate in sales - generally one wants an upward trend Cost of Sales (percentage change) - - - annual percentage growth rate in cost of sales - generally one wants a downward trend Operating Profit (percentage change) - - - annual percentage growth rate in operating profit - generally one wants an upward trend Net Income (percentage change) - - - annual percentage growth rate in net income - generally one wants an upward trend