Krispy Kreme’s Financial Health
Looking at the financial reports of a company for the first time can be overwhelming if not intimidating. Analyzing the financial reports to determine the health of a company is much that same but different aspect must be looked at properly in order to predict and assess the health and wellness of a company. The different aspect in assessing the health of a company include the depreciation analysis, stock analysis, cash flow statement analysis, income statement trend analysis, management analysis, significant changes and possible reasons for the changes and implications of change.
To begin the analysis on Krispy Kreme, the first analysis is that of the depreciation analysis. There are three different methods to calculate depreciation and they are straight-line, units-of-production and double-declining-balance (Larson, Wild, & Chiappetta, 2005). The Krispy Kreme Company uses the straight-line method to calculate their depreciation on building, machinery, equipment and leasehold improvements. The breakdown of the depreciation on property and equipment consist of land, buildings, machinery and equipment, leasehold improvements and construction in process (Larson, Wild, & Chiappetta, 2005). Krispy Kreme’s total gross property and equipment in 2002 was a total of $156,484,000 and in 2003, it was a total of $252,770,000. The accumulated depreciation for the year 2002 was a total of $43,907,000 and for the year 2003, the total was $50,212,000. To find the net property and equipment amount, taking the gross property and equipment and subtracting the accumulated depreciation is the equation used. The net property and equipment for the year 2002 would be $112,577,000 and 2003 would be $202,558,000. Once both the gross property and equipment amount and the net property and equipment amounts are calculated, one can determine the percent of original cost. By taking the net amount for 2002, which was a total of $112,577,000, and dividing it by the gross amount ($156,484,000), the percent of original cost would total 80.1%. Using the same equation for 2003, the percent of original cost would total 71.9%.
The next analysis to assess the health of Krispy Kreme would be stock analysis. Stocks are what shareholders (investors) purchase to give them part ownership within a specific company such as Krispy Kreme. Stock analysis is the study of treasury stocks, preferred stocks, common stocks and earnings per shares (EPS) (Larson, Wild, & Chiappetta, 2005). After studying the consolidated balance sheet of Krispy Kreme, the company has not listed any shares of treasury stock and although Krispy Kreme’s shareholders have authorized preferred stocks totaling 10,000,000 for both 2002 and 2003, there were none issued or outstanding for either year.
As for common stocks, Krispy Kreme has common stocks with no par value. In 2002, 100,000,000 common stocks were authorized and in 2003, 300,000,000 common stocks were authorized. Out of all...