Analyzing a Company's Financial Health: Krispy Kreme
Lorelie R Vicente
Axia College of University of Phoenix
ACC 226 Managerial Accounting
Instructor: Leonard Block
February 2, 2013
Analyzing a Company's Financial Health: Krispy Kreme
In 1933, the creator of Krispy Kreme Vernon Rudolph bought a recipe together with a doughnut shop in Paducah, Kentucky from a French cook, from New Orleans. In the summer of 1937, Vernon shifted to Winston-Salem, North Carolina; he started a company to meet the needs of grocery stores. Soon after that, people began requesting hot doughnuts; the requirement was so outstanding that it motivated Rudolph to sell doughnuts straight to customers. This marked the start of Krispy Kreme’s retail companies (Krispy Kreme, 2004). The research document will discuss the fiscal health of Krispy Kreme Doughnuts Incorporation; more particularly, five components analysis will be incorporated: 1) wear and tear 2) organization stock 3) cash flow document, 4) income statement trend, and 5) administration.
Depreciation Analysis
Appendix A-12 #5 furnished useful information concerning Krispy Crème’s property and equipment. The sum of property and equipment by February 3, 2002 was $156,484; the accumulated wear and tear in those days was $43,907. The percent of the initial price of Krispy Kreme’s other property, plants, and equipment which remained to be depreciated was 71.9% (112,577/156,484). By February 3, 2003 the sum of property and equipment was $252,770; the accumulated wear and tear in those days was $50,212. The percent of the initial cost of Krispy Kreme’s property, plants, and equipment which remained to be depreciated in 2003 was 80.1% (202,558/252,770).
Appendix A-10 furnished useful information concerning Krispy Crème’s intangible possessions. “The company has evaluated its intangible assets….and determined that all such assets have indefinite lives, and, as a result, are not subject to amortization provisions” (Larson, Wild, & Chiappetta, 2004, A-10). In concordance with SFAS No.142, intangible possessions are analyzed at least one time a year for impairment. Larson, Wild, and Chiappetta said that “an intangible asset that is not amortized is tested annually for impairment - if necessary, an impairment loss is recorded” (Larson, Wild, & Chiappetta, 2004, p. 399).
In Appendix A-12 No. 5 the complete property and equipment (prior to accumulated wear and tear) for the years finished February 2, 2002 and February 2, 2003. A growth of $96,286 (252,700 - 156,484) can be observed by examining the two year-end numbers. Appendix A-8 (consolidated documents of cash flows) indicated that by February 2, 2003, the amount of $82,495 (83,196-701) was utilized in investment activities; mainly, in buying property and equipment. Examining Appendix A-12, it also seemed that long-term debts enhanced from $4,643 (2002) to $44,234 (2003). The consolidated balance sheet (appendix A-5) demonstrated that the overall long-term debts enhanced from $12,685 (2002) to $72,255 (2003). A realistic judgment might be that Krispy Kreme’s administration restored its equipment and thus boosting its long-term debts.
Appendix A-3 (chosen fiscal data) demonstrated that Krispy Kreme’s overall income at year-end February 2002 was $491,549; the same table also furnishes its overall possessions of $410,487. Using the formula, Net Sales/Average overall possessions, it's possible to figure out Krispy Kreme’ overall asset turnover; the end result is 1.48 (491,549/(410,487 255,376)/2). It means that every $1 of asset generates $1.48 of net sales. Establishing in case $1.48 isn't good negative or positive turnover, Krispy Kreme’s administration must look at its earlier years and at their rivals. A few operations are capital intensive, and therefore a comparatively big amount is dedicated to assets to create sales; “this suggests a relatively lower total asset turnover” (Larson, Wild,
