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    Group A - Quick Lunch Presentation

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    Nazil Khan
    The Binghams took over the Quick Lunch restaurant located in a department store in mid-2002. Under the lease agreement with the store, the Binghams paid 15% of gross receipts as rent. In its first 4 months of operations, Quick Lunch had $31,790 in net sales and $10,335 in net income. Various financial statements and ratios were analyzed to evaluate the financial performance and health of the new business.

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    Group A - Quick Lunch Presentation

    Uploaded by

    Nazil Khan
    81 views15 pages
    The Binghams took over the Quick Lunch restaurant located in a department store in mid-2002. Under the lease agreement with the store, the Binghams paid 15% of gross receipts as rent. In its first 4 months of operations, Quick Lunch had $31,790 in net sales and $10,335 in net income. Various financial statements and ratios were analyzed to evaluate the financial performance and health of the new business.

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    The Binghams took over the Quick Lunch restaurant located in a department store in mid-2002. Under the lease agreement with the store, the Binghams paid 15% of gross receipts as rent. In its first 4 months of operations, Quick Lunch had $31,790 in net sales and $10,335 in net income. Various financial statements and ratios were analyzed to evaluate the financial performance and health of the new business.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    81 views15 pages

    Group A - Quick Lunch Presentation

    Uploaded by

    Nazil Khan
    The Binghams took over the Quick Lunch restaurant located in a department store in mid-2002. Under the lease agreement with the store, the Binghams paid 15% of gross receipts as rent. In its first 4 months of operations, Quick Lunch had $31,790 in net sales and $10,335 in net income. Various financial statements and ratios were analyzed to evaluate the financial performance and health of the new business.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 15

    Financial Analysis:

    Quick Lunch

    GROUP A
    AKSA ELIZABETH
    JOJI
    MANUEL PAUL
    PHILIP
    NAZIL KHAN A N
    RAHUL S KUMAR
    Summary
    Mr. and Mrs. Richard Bingham decided to open a restaurant in the
    middle of 2002. The Binghams discovered a firm that seemed to be
    exactly what they were looking for in July 2002. This was the
    Quick Lunch, a downtown Fisher's Department Store lunch
    service. A lease with the department store allowed the Quick Lunch
    to operate.

    The pair started talking to the present lunchroom owner and swiftly
    came to an arrangement to take over the lease. Fisher's provided
    space, heat, light, and water under the conditions of the lease, and
    the Binghams paid Fisher 15% of gross receipts as rent.
    Journal entries
    Date Particulars Debit Credit
    Balance Sheet As of December 31, 2002
    Assets Amount Liabilities & Owner’s Equity Amount

    Current Assets Current Liabilities


    Cash $ 12,265 Accounts Payable $ 890
    Food & Supplies Inventory $ 750 Accrued Rent Payable $ 1,515

    Prepaid License $ 150 Deferred Coupon Sales $ 1,375


    Lease Rights $ 3,800
    Total Current Assets $ 16,965 Total Current Liabilities $ 3,780

    Non Current Assets Owner’s Equity


    Fixed Assets Bingham’s Equity $ 15,450
    Equipment $ 8,800 Bingham’s Drawings ($ 3,800)
    Net Income $ 10,335
    $ 21,985
    Total Assets $ 25,765 Total Liabilities & Owner’s Equity $ 25,765
    Treatment of
    Coupon Books
    □ Sale of 140 Coupon books @27.50
    = $ 3,850
    □ Sale of 90 Coupon books @27.50
    = $ 2,475

    □ Deferred coupon sales as of Dec. 31, 2002


    = $ 1,375
    Income Statement Amount
    For the 4 Month period ending December 31, 2002
    Sales
    Cash Sales $ 29,315
    Earned Coupons $ 2,475
    Net Sales $ 31,790
    Less: Cost of Sales ($ 14,415)
    Gross Profit $ 17,375
    Less: Operating Expense
    Rent Expense $ 4,975
    Lease Rights used $ 1,900
    Other Operating Expense $ 90
    City Restaurant License $ 75
    Add: Other Income
    Sale of Cooking Range $ 400
    Less: Other Expense
    Lost on broken Cooking Range ($ 400)
    Net Income $ 10,335
    Treatment of
    Coupon Books
    □ Face value of coupon books @30 = $4,200
    □ Sale of 140 coupon books @27.50 = $3,850
    (92% of 4,200)

    □ Face vale of December 31, 2002 @30 = $ 2,700


    □ Sale of coupon as of December 31, 2002 =
    $2,475 (92% of 2,700)
    Cash Flow Statement for the 4 month period ending December 31, 2002
    Cash Flow from Operating Amount Cash Flow from Investing Amount
    activities activities
    Net Income $ 10,335
    Increase in food & supplies, inventory ($ 750) Increase in Equipment ($ 8,800)

    Increase in prepaid license ($ 150)

    Increase in Lease Rights ($ 3,800) Net cash used in Investing ($ 8,800)


    activities
    Increase in accrued food & supplies $ 890 Cash Flow from Financing
    activities

    Increase in accrued rent payable $ 1,515 Increase in Bingham’s Equity $ 15,450

    Increase in deferred coupon sales $ 1,375 Increase in Bingham’s Drawings ($ 3,800)

    Net cash provided by Operating $ 9,415 Net cash provided by $ 11,650


    activities Financing activities

    Cash at the end of December 31, 2002 $ 12,265


    Financial Ratio
    Analysis

    Gross Profit
    Ratio
    =

    = 0.55
    Financial Ratio
    Analysis

    =
    Operating
    Ratio
    =

    =0.67
    Financial Ratio
    Analysis
    =
    Current Ratio
    =

    =4.49
    Financial Ratio
    Analysis
    =
    Debt/Equity
    Ratio
    =

    =0.17
    Financial Ratio
    Analysis
    =
    Equity Debt
    Ratio =

    =5.82
    Financial Ratio
    Analysis =

    Assets Turnover
    Avg Total Asset =
    Ratio

    =6.16
    Interpretation • The firm's gross profit is just approximately 55 percent, and the
    profit appears to somehow be low.
    • It is beneficial for the company because the operating ratio is only
    two-thirds of its revenue.
    • The current ratio is 4.49, which is higher than 2, indicating that the
    company can cover its short-term obligations.
    • The equity ratio is 0.17, indicating that the company is less risky. If
    the equity/debit ratio is greater than 2, the company is regarded to be
    at greater risk.
    • The assets turnover ratio is 6.16 times, indicating a higher ratio that
    implies successful asset utilization.

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