If the copresidents of Finagle A Bagel had approached venture capitalists for funding, they probably would have been able to open more new stores in less time. Instead, they opted to use bank financing that has to be repaid.

Do you agree with their decision? Why?

Regina Jerome is Finagle A Bagel’s director of information systems. She and her assistant are responsible for running the computerized accounting system as well as for the pointof-
sale system that stores use to ring up all customer orders.
“Every transaction in every store is recorded and can be retrieved by minute, by day, by store, by cashier, and by terminal,”
notes Jerome. The copresidents use all this financial data to reconcile daily store sales with daily bank deposits.
As a result, copresident Litchman knows by 7:30 each morning how much money was deposited on the previous day and the total amount the company has to cover payroll, food purchases, and other expenses. He also knows if a store’s reported sales match its bank deposit. If not, a senior manager immediately looks into the discrepancy, which usually turns out to be some kind of error. Once in a while, however, the discrepancy is a sign of store-level theft that requires further investigation and—when warranted—legal action.
Although Finagle A Bagel makes about 8 cents in profit from every sales dollar, Litchman is aiming to make a profit of 10 cents per dollar. He needs timely reports showing retailing and wholesaling revenues, the cost of goods sold, and operating expenses to calculate the company’s pretax profit and measure progress toward this profit goal. Food and labor cost constitute more than two-thirds of Finagle A Bagel’s costs—so the faster managers can see these numbers, the faster they can act if expenses are higher than expected.