Fiducial Extreme Report For

Auntie Em’s Restaurant

(The following is a sample of what Fiducial can prepare for your small business to help
you improve your business performance. Once you’ve had a chance to compare this to
what you are currently getting from your accountant, give us a call toll free at 1(866)
FIDUCIAL [1 (866) 343-8242.] We’ll be glad to discuss how we can help your business
grow and be profitable.)

Report prepared for: Auntie Em’s Restaurant

Industry: 722211 - Limited-Service Restaurants

Periods: 12 months against the same 12 months from the previous year

LIQUIDITY BORROWING
PROFITS & PROFIT MARGIN ASSETS
SALES EMPLOYEES

LIQUIDITY
Generally, what is the company's ability to meet obligations as they come due?

At this point, the company really needs to improve its liquidity position because it has declined from last
period and it is generally very weak.

In fact, the weakness in this area is pretty thorough. The company doesn't have much strength in either
its cash account or its non-cash current asset accounts. The company must quickly retain some cash
flow generated from higher sales and profits or get more cash invested in the company.

The company's average work with accounts payable days is brightened by its good work with inventory
days and accounts receivable days. Both of these statistics (AR days and inventory days) are currently
better than the industry standards. Keeping these metrics low will greatly help the cash account, which is
especially important when overall liquidity has some softness.

Management might explore some aggressive ways to improve cash flow: 1) Prepare frequent cash flow
forecasts. If the company is having chronic cash flow problems, it may be advisable to prepare forecasts
as often as once or even twice per month. 2) If prudent to do so, sell off unproductive assets that are not
generating cash flow or income for the company. 3) Get tougher generally in the collection area. 4) See if
prices can be moved higher on some selected goods or services. 5) Re-think some credit issues
generally. It is rarely appropriate to give all customers the same credit terms. 6) Use COD for marginal
customers. 7) "Term out" some short-term debt by refinancing. Basically, management can move some
short-term debt to long-term debt.

Fiducial Tel: (410) 910-5885

10480 Little Patuxent Parkway, Third Floor Fax: (410) 910-5903
Columbia, MD 21044 www.fiducial.com
 Fiducial Extreme Report For
Auntie Em’s Restaurant

Fiducial Tel: (410) 910-5885

10480 Little Patuxent Parkway, Third Floor Fax: (410) 910-5903
Columbia, MD 21044 www.fiducial.com
 Fiducial Extreme Report For
Auntie Em’s Restaurant

PROFITS & PROFIT MARGIN

Are profitability trends favorable in the company?

The company's sales and net profit margin have stayed approximately the same since the prior period.
Companies generally prefer to increase sales over time, so it is a little bit unfavorable that sales have
been flat this period. However, there are two important favorable points to note about this company's
profitability performance this period. First of all, it is positive that the net profit margin is strong this period,
as it was last period. The net profit margin measures the cents of net profit that the company earns on
every dollar it gains in sales. This company's net profit margin is strong both generally and relative to the
net margins being earned by other firms in this industry. No Income Statement ratio is more important to
manage than the net profit margin, so the firm is doing some positive work here.

Secondly, the company was able to pull more net profits (in dollars) from sales, even though sales stayed
about the same since the prior period. The company's net profits rose by 9.00% this period, which is
clearly positive. This suggests that the firm is no managing each sales dollar a little more effectively,
which is good. If the company can maintain these types of profit results in the long term, it may be able to
expand the business significantly, because the company will have the extra profit that it needs to do so.

Here are some items for managers of the company to consider, to further improve profitability: 1) Is the

Fiducial Tel: (410) 910-5885

10480 Little Patuxent Parkway, Third Floor Fax: (410) 910-5903
Columbia, MD 21044 www.fiducial.com
 Fiducial Extreme Report For
Auntie Em’s Restaurant

company using enough suppliers/vendors for each type of expenditure? Generally, the more suppliers a
company has, the less it will pay for resources. 2) Are managers receiving financial reports on a timely
basis -- within 40 days of when the financial period is over? If not, the reports will be less valuable.
Managers need financial information that is accurate and timely.

Industry Observation: Attracting and retaining qualified employees remains a key challenge in the food
service industry. Therefore, employers have to use creative methods to keep qualified workers in order to
remain competitive. Forward-thinking employers are using some of the following methods:
• Encouraging employees to share problems and concerns
• Asking employees to teach skills to other employees
• Allowing employees to run orientation programs for new employees
• Inviting speakers to discuss important issues
• Teaching employees how to brainstorm

SALES
Are sales growing and satisfactory?

This company's sales have stayed approximately the same as last period, which is fairly obvious. What is
more interesting to point out is that the company purchased a significant amount of fixed assets, and

Fiducial Tel: (410) 910-5885

10480 Little Patuxent Parkway, Third Floor Fax: (410) 910-5903
Columbia, MD 21044 www.fiducial.com
 Fiducial Extreme Report For
Auntie Em’s Restaurant

these assets have yet to lever higher sales. Is it possible that the assets purchased are more of a long-
term investment that will drive future sales? It could also be that the purchases will drive profitability, not
sales. Companies generally want to see sales or profitability increasing substantially over the long run as
fixed assets are purchased. Otherwise, asset turns (which are a measure of how efficiently the company
is managing its assets) will fall over time.

BORROWING
Is the company borrowing profitably?

Net profitability improved by 9.00% from last period without significant additions to the debt level.
Basically, this means that profitability was improved without additional borrowed funds. It also means that
a better level of profitability is moving through about the same debt level.

There are a few other thoughts to consider. Right now, it seems that the company may be able to borrow
effectively to sustain its operations, at least based upon this set of data. It has generated good cash flow
from operations relative to interest or cost of debt expenses. Although it is difficult to project future
conditions, the company is producing sufficient cash flow from operations to support interest payments
for the time periods being compared. Finally, please note that, relative to its industry, the company has a
moderate amount of debt as compared to equity.

Whenever profitability can continue to improve without the use of additional debt, this is positive. If the
company can continue this situation, it may be best to avoid borrowing for the present time. Managers
also might want to be a little more cautious before accepting any borrowing opportunities, since
profitability is improving without added debt at this time, and additional debt means additional risk. The
company may have room to grow within its present structure without having to add any further debt right
now.

Although there does not seem to be a correlation at this time between debt and profitability, it might be
interesting to determine if there were any prior period changes (increases or decreases) that might have
helped profitability this period. If not, the company has improved Income Statement performance without
adding significant debt, which is positive.

Fiducial Tel: (410) 910-5885

10480 Little Patuxent Parkway, Third Floor Fax: (410) 910-5903
Columbia, MD 21044 www.fiducial.com
 Fiducial Extreme Report For
Auntie Em’s Restaurant

ASSETS
Is the company using gross fixed assets effectively?

It is true that profitability improved by 9.00% from last period, which is a positive result. However, asset
growth exceeded profitability improvements. Not only is it important to improve profitability as fixed assets
are added, it is also important to improve profitability at a higher rate than the rate by which assets are
increased.

There are several components in this area which are quite positive, however. For example, the company
has generated above average returns on equity and assets and is "turning" its fixed asset base quite well.
Therefore, this would be an example where looking at the overall trends in the area could be less
important than looking at the positive returns generated for owners in the company.

Fiducial Tel: (410) 910-5885

10480 Little Patuxent Parkway, Third Floor Fax: (410) 910-5903
Columbia, MD 21044 www.fiducial.com
 Fiducial Extreme Report For
Auntie Em’s Restaurant

Fiducial Tel: (410) 910-5885

10480 Little Patuxent Parkway, Third Floor Fax: (410) 910-5903
Columbia, MD 21044 www.fiducial.com
 Fiducial Extreme Report For
Auntie Em’s Restaurant

EMPLOYEES
Is the company hiring effectively?

This company has some rather interesting results with regards to employee management. Net profitability
has improved from last period while the employee base has remained relatively flat. This means that the
company is improving its net profitability per employee statistic, which is a key performance indicator in
this particular industry. It also indicates that the company's management of its existing employee base is
better than it was last period.

There is no indication from these specific results that hiring more people is necessary at this time. If the
company can generate improved net profitability with about the same employee base, there may be no
compelling reason to add more employees. One exception to this would be if the company has reached a
sort of "employee ceiling" -- the point after which the efficiency of existing employees is exhausted, and
thus the company will need more employees to improve profitability. This can only be determined
internally, so careful planning is needed here.

"Management is doing things right; leadership is doing the right things." -- Peter F. Drucker

A NOTE ON SCORING: Each section of this report (Liquidity, Profits & Profit Margin, etc.) contains a star
rating which measures the company's overall performance in the area at the time of the report's
generation. One star indicates that the company is below average or may possibly need improvement in
the area. Three stars indicate that the company is about average for the area. Five stars indicate that the
company is above average or performing quite well in the area.

Fiducial Tel: (410) 910-5885

10480 Little Patuxent Parkway, Third Floor Fax: (410) 910-5903
Columbia, MD 21044 www.fiducial.com
 Fiducial Extreme Report For
Auntie Em’s Restaurant

RAW DATA

12/31/2004 12/31/2003 12/31/2002 12/31/2001

Income Statement Data
Sales (Income) $4,464,194 $4,312,406 $4,448,756 $3,549,398
Cost of Sales (COGS) $1,381,232 $1,382,433 $1,329,922 $1,110,870
Gross Profit $3,082,962 $2,929,973 $3,118,834 $2,438,528
Gross Profit Margin 69.06% 67.94% 70.11% 68.70%
Depreciation and Amortization $22,152 $16,561 $22,132 $33,016
Interest Expense $438 $7,476 $11,091 $1,097
Net Profit before Taxes $683,773 $627,294 $772,140 $409,320
Adjusted Net Profit before Taxes $683,773 $627,294 $772,140 $409,320
Net Profit Margin 15.32% 14.55% 17.36% 11.53%
Adjusted EBITDA $706,363 $651,331 $805,363 $443,433
Net Income $683,773 $627,294 $772,140 $409,320

Balance Sheet Data

Cash (Bank Funds) $4,100 $4,100 $3,150 $3,150
Accounts Receivable $5,580 $43,175 $27,137 $20,270
Inventory $11,565 $20,778 $11,648 $17,814
Total Current Assets $158,487 $191,262 $174,281 $223,872
Gross Fixed Assets $138,358 $102,571 $124,393 $89,346
Total Assets $326,407 $325,661 $298,674 $313,218
Accounts Payable $94,375 $85,456 $126,164 $100,651
Total Current Liabilities $169,392 $163,188 $222,569 $187,042
Total Liabilities $187,577 $179,825 $263,734 $187,042
Total Equity $138,830 $145,836 $34,940 $126,176

Number of Employees (FTE) 40 39 38 33

Fiducial Tel: (410) 910-5885

10480 Little Patuxent Parkway, Third Floor Fax: (410) 910-5903
Columbia, MD 21044 www.fiducial.com
 INDUSTRY SCORECARD

Distance from
Financial Indicator Current Period Industry Range Industry

Current Ratio 0.94 1.60 to 3.00 -41.25%

= Total Current Assets / Total Current Liabilities

Explanation: Generally, this metric measures the overall liquidity position of a company. It is
certainly not a perfect barometer, but it is a good one. Watch for big decreases in
this number over time. Make sure the accounts listed in "current assets"
(numerator) are collectible.

Quick Ratio 0.06 1.00 to 2.00 -94.00%

= (Cash + Accounts Receivable) / Total Current Liabilities

Explanation: This is another good indicator of liquidity, although by itself, it is not a perfect one.
If there are receivable accounts included in the numerator, they should be
collectible. Look at the length of time the company has to pay the amount listed in
the denominator (current liabilities).

Inventory Days* 3.06 Days 5.00 to 20.00 Days +38.80%

= (Inventory / COGS) * 365

Explanation: This metric shows how much inventory (in days) is on hand. It indicates how
quickly a company can respond to market and/or product changes. Not all
companies have inventory for this metric.

Accounts Receivable
0.46 Days 1.00 to 10.00 Days +54.00%
Days*

= (Accounts Receivable / Sales) * 365

Explanation: This number reflects the average length of time between credit sales and
payment receipts. It is crucial to maintaining positive liquidity.

Accounts Payable Days* 24.94 Days 20.00 to 50.00 Days 0.00%

= (Accounts Payable / COGS) * 365

Explanation: This ratio shows the average number of days that lapse between the purchase of
material and labor, and payment for them. It is a rough measure of how timely a
company is in meeting payment obligations.

Gross Profit Margin 69.06% 55.00% to 70.00% 0.00%

= Gross Profit / Sales

Explanation: This number indicates the percentage of sales revenue that is paid out in direct
costs (costs of sales). It is an important statistic that can be used in business
planning because it indicates how many cents of gross profit can be generated by
future sales.

Net Profit Margin 15.32% 2.00% to 8.00% +91.50%

Fiducial Tel: (410) 910-5885

10480 Little Patuxent Parkway, Third Floor Fax: (410) 910-5903
Columbia, MD 21044 www.fiducial.com
 = Adjusted Net Profit before Taxes / Sales

Explanation: This is an important metric. In fact, over time, it is one of the more important
barometers that we look at. It measures how many cents of profit the company is
generating for every dollar it sells. Track it carefully against industry competitors.
This is a very important number in preparing forecasts.

Interest Coverage Ratio 1,612.70 2.00 to 11.00 +14,560.91%

= EBITDA / Interest Expense

Explanation: This ratio measures a company's ability to service debt payments from operating
cash flow (EBITDA). An increasing ratio is a good indicator of improving credit
quality.

Debt-to-Equity Ratio 1.35 1.00 to 3.00 0.00%

= Total Liabilities / Total Equity

Explanation: This Balance Sheet leverage ratio indicates the composition of a company’s total
capitalization -- the balance between money or assets owed versus the money or
assets owned. Generally, creditors prefer a lower ratio to decrease financial risk
while investors prefer a higher ratio to realize the return benefits of financial
leverage.

Debt Leverage Ratio* 0.27 N/A N/A

= Total Liabilities / EBITDA

Explanation: This ratio measures a company's ability to repay debt obligations from annualized
operating cash flow (EBITDA).

Return on Equity* 492.53% 8.00% to 20.00% +2,362.65%

= Net Income / Total Equity

Explanation: This measure shows how much profit is being returned on the shareholders'
equity each year. It is a vital statistic from the perspective of equity holders in a
company.

Return on Assets* 209.48% 6.00% to 12.00% +1,645.67%

= Net Income / Total Assets

Explanation: This calculation measures the company's ability to use its assets to create profits.
Basically, ROA indicates how many cents of profit each dollar of asset is
producing per year. It is quite important since managers can only be evaluated by
looking at how they use the assets available to them.

Fixed Asset Turnover* 32.27 2.00 to 12.00 +168.92%

= Sales / Gross Fixed Assets

Explanation: This asset management ratio shows the multiple of annualized sales that each
dollar of gross fixed assets is producing. This indicator measures how well fixed
assets are "throwing off" sales and is very important to businesses that require
significant investments in such assets. Readers should not emphasize this metric
when looking at companies that do not possess or require significant gross fixed
assets.

* These formulas have been scaled to approximate annual statistics.

Fiducial Tel: (410) 910-5885

10480 Little Patuxent Parkway, Third Floor Fax: (410) 910-5903
Columbia, MD 21044 www.fiducial.com
 NOTE: Exceptions are sometimes applied when calculating the Financial Indicators. Generally, this
occurs when the inputs used to calculate the ratios are zero and/or negative.
READER: Financial analysis is not a science; it is about interpretation and evaluation of financial events.
Therefore, some judgment will always be part of our reports and analyses. Before making any financial
decision, always consult an experienced and knowledgeable professional (accountant, banker, financial
planner, attorney, etc.).

ABOUT FIDUCIAL

Fiducial is an international provider of professional business and financial services to small businesses
and individuals. Established in Europe in 1970, the company remains privately held with revenues
exceeding $1.2 billion. With over 15,000 employees worldwide serving 185,000 clients, the company is
currently the 13th largest accounting firm in the world.

Fiducial entered the U.S. market in 1999 through a series of strategic acquisitions, and now serves clients
nationwide through a network of about 375 company-owned and franchise offices. The company’s
mission in the U.S. is to provide outsourcing services to small businesses, enabling them to grow and be
profitable. In providing a one-stop shopping experience to clients through its unique business model that
combines the warm, strong contact of neighborhood professionals with the efficiency of today's
technology, Fiducial offers an array of services along eight business lines: Accounting and Financial
Reporting, Payroll, Tax, Business Counseling, Financial Management, Legal Support, HR, and IT.

Small Business Support

Instead of running their business, most small business owners today say the business is running them.
For those finding themselves drowning in a sea of back-end office functions, Fiducial offers a life-line of
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CALL US TOLL FREE AT 1 (866) FIDUCIAL or email us at [email protected] .

Fiducial Tel: (410) 910-5885
10480 Little Patuxent Parkway, Third Floor Fax: (410) 910-5903
Columbia, MD 21044 www.fiducial.com