Problem:
You and your best friend have decided to quit your jobs, turn in your retirement, and purchase your own restaurant. In your market area there are a lot of restaurants, and you’ve looked at several that were available for sale. You’ll narrowed your choices to either Shadracks or Brighams. From you and your friend’s experience, both restaurants have good food, and generally good service. The owner of Shadracks’ says that he and his wife want to retire and move to Key West. The owner of Brighams indicates that he is tired of the long hours, and has accepted a salaried position with his old employer, IBM. Both restaurants have provided you with a year end balance sheet and income statement (below).
|
Balance Sheet
|
Shadracks
|
Brighams
|
|
Current Assets
|
|
|
|
Cash
|
4500
|
8800
|
|
A/R
|
2000
|
6000
|
|
Inventory
|
20000
|
44000
|
|
Total Current Assets
|
26500
|
58800
|
|
|
|
|
Fixed Assets
|
|
|
|
Land
|
50000
|
100000
|
|
Building
|
250000
|
45000
|
|
Equipment
|
80000
|
120000
|
|
less accumulated depreciation
|
-22000
|
-180000
|
|
Total Fixed Assets
|
358000
|
490000
|
|
|
|
|
Total Assets
|
384500
|
548800
|
|
|
|
|
Current Liabilities
|
|
|
|
A/P
|
22000
|
55000
|
|
Wages Payable
|
8000
|
4000
|
|
Total Current Liabilities
|
30000
|
59000
|
|
|
|
|
Long-term Dept
|
180000
|
320000
|
|
|
|
|
Total Liabilities
|
210000
|
379000
|
|
|
|
|
Owners Equity
|
|
|
|
Capital
|
100000
|
50000
|
|
Retained Earnings
|
48000
|
61000
|
|
Total Owners Equity
|
148000
|
111000
|
|
|
|
|
Total Liabilities & Equity
|
358000
|
490000
|
|
|
|
|
|
|
|
Income Statement
|
Shadracks
|
Brighams
|
|
Revenue
|
460000
|
700000
|
|
Cost of Goods Sold
|
276000
|
413000
|
|
Gross Profit
|
184000
|
287000
|
|
|
|
|
Expenses
|
|
|
|
Payroll
|
92000
|
136400
|
|
Benefits
|
13800
|
20460
|
|
Advertising
|
9200
|
18600
|
|
Utilities
|
23000
|
37200
|
|
Telephone
|
2400
|
3000
|
|
Repairs & Maintenance
|
5520
|
9920
|
|
Supplies
|
3220
|
6200
|
|
Interest
|
16000
|
26500
|
|
Depreciation
|
11000
|
19000
|
|
Total Expense
|
176140
|
277280
|
|
|
|
|
Net Profit
|
7860
|
9720
|
Please prepare a paper on your analysis and recommendations regarding the following questions. (You must choose one or the other of the two restaurants to purchase):
1. Based solely on the financial analysis of the information provided, which restaurant would you buy? (Be sure to share the financial ratios and other pertinent financial analysis you use in making your decision)
2. Explain other financial information that could help you make a better decision if it were available.
3. What other questions that are not specifically financial in nature would you want answered about these two restaurants?
Your work MUST include a reference list. All research should be cited in the body of the speaker notes. Reports without citations are unacceptable. Your report should contain an abstract, a short introduction, and conclusion in addition to the body of the presentation. Please note that if you have a source in your reference section, you need to cite it in the body of the paper per APA guidelines and vice-versa.