Case Study Rhy's Fries - Part 9 May 15, 20X5 Over three years have passed by since Ronald made the choice to start up Rhy's Fries His humble start on the food convention and carnival scene has now led him to being the operator of three restaurants, a food truck and a catering segment. The success is not without challenges though, and Ronald is facing one of his most difficult to date Approximately a year ago, Ronald's long time employee and director of the food truck and catering segments abruptly left the company. When asked why he was leaving, Peter simply indicated that he felt there were better opportunities elsewhere. What Ronald did not know at the time was the Peter had been planning to open his own restaurant using many of the same techniques and products that he leamed about during his tenure at Rhy's Fries. About two months after his departure Peter opened his restaurant aptly named "Peter's Poutines In less than one year Peter's Poutines has proven itself to be a significant competitor to Rhy's Fries. Although they offered similar menu items Peter's prices were generally slightly higher. Peter did have one advantage however; his location was a high traffic area in an upscale area of the city. On top of that, Peter appears to have started construction on a second restaurant that will be opening soon. Ronald wonders what this extra competition will mean for him. He has already noticed that some days the business is just not as busy as it once was and is starting to seriously contemplate what he should do to counter this growing competitive threat He's tasked Sarah to go work with Uncle Bob to take a serious look at his financial statements and provide him with some insight into his operations. Maybe they can see something in the numbers that he can't. He's tasked Sarah to go work with Uncle Bob to take a serious look at his financial statements and provide him with some insight into his operations. Maybe they can see something in the numbers that he can't. 9.) Analyze the statements in Appendix 3 and 4 for any trends, issues or items of note Prepare a management report for Ronald with your findings and any recommendations you have. Include any calculations or working papers along with the report. Appendix 1 - Sales, Cost of Sales and Expenses related to July 14 - July 29, 20X1 GST on Total Cash Inventory Cost of Travel SalesSalReceipts Purchases Sales Expenses Inventory $ 14,723 736$ 15,4596,000 5,5951,240 $ 405 $ 12,568 628$ 13,196 4,500 4,524$ 805 381 $ 19,523 976$ 20,4997,600 7,8091,920 172 Ending city Date July 14 Springfield July 18 Shelbyville July 23 Capital City July 29 Ogdenville S 6,854 S 343 S 7,197 S 1,953S 2,125 S 365 S Ending inventory referstothe balance of inventory at the end of the event. Note: Assume al 1 inventory purchases and travel expenses were paid in cash. Appendix 2 - Accounts Receivable aging as at January 31, 20X3 Number of Days Accounts Outstanding Receivable 36,500 12,500 $ 9,250 $ 4,200 2,750 S 65,200 0-30 31-60 61-90 91-120 Over 120 TOTAL Estimated % Uncollectible 2% 4% 5% 10% 15% Appendix 3 - Profit and Loss Statement for the years 20X3, 20X4 and 20X5 Rhy's Fries Profit and Loss statement For the Year Ended April 30, 20X5 20X5 20X4 20X3 Income Revenues Food Revenues $688,874 715,488 675,741 452,746 101,410 Restaurant Revenues Less COGS Restaurants Gross Profit Restaurants Food Truck Revenues Less COGS Food Truck 261 427,102 100,166 257,576 457,912 102,547 (34,056) (33,841) 27,381) 66,110 Gross Profit- Food Truck Catering Revenues Less COGs Catering 68,706 74,029 23,347 4,903 18,444 545,220 185,364 35,2 150,145 643,356 83,696 16,739 66,957 Gross Profit Catering Net Food Revenue 593,576 Other Revenues Interest Revenue 3,369 2,365 424 TOTAL REVENUE $646,725 595,941 $ 546,644 Expenses 25,774 230,471 71,255 23,689 12,500 5,214 6,225 1,000 11,477 5,200 21,003 5,000 17,887 2,474 4,200 19,898 210,863 14,256 11,231 10,140 500 5,000 Salary Expenses- Truck Salary Expenses - Restaurant Salary Expenses- Catering Advertising Expense Insurance Expenses Repairs & Maint Exp Food Truck Repairs & Maint Exp Restaurant Repairs & Maint Exp Catering Supplies Expense Hotel Expense Carnival/Trade Show Fee Inventory Spoilage Expense Utilities Expense Propane Expense Fuel Expense 23,641 220,468 40,011 15,000 11,250 3,998 3,336 250 9,669 5,300 19,658 4,000 16,459 2,365 3,500 8,774 5,000 15,896 5,250 15,551 254 2,550 3,500 16,363 51,250 6,233 500 10,050 15,000 4,317 2,000 5,478 493,096 Fuel Expense Depreciation Expense Building Lease Expense Cleaning Ex penses Other Misc Expenses 2,550 16,169 48,540 4,200 16,142 55,145 6,546 3,363 12,410 18,500 3,989 5,500 7,655 572,619 500 13,187 14,510 4,887 200 4,477 442,521 IT Ex penses Interest Expense Bad Debt Expense Uniform & Laundering Expense Total Expenses NETINCOME $74,106 $ 102,845 104,123 Appendix 4 - Rhy's Fries Balance Sheet As At April 30, 20XS Balance Sheet 20X5 20x4 20X3 Assets Cash Investme nts Accounts Receivable - Catering Less: Allowance for Bad Debts Accounts Receivable Other Equipment Food Truck Less: Accum Depreciation Food Truck Equipment - Restaurant Fixtures Less: Accum Depre ciation - Rest. Fixtures Equipment Catering Vans Less: Accum Depre ciation -Van Inventory - Foodstuffs Pre paid Supplies Pre paid Insurance 83,414 $ 94,955 35,082 10,000 20,124 (4,000) 20,000 34,756 (6,000) 503 12,000 10,235 (2,000) 514 12,000 745 12,000 (12,000) 12,000 10,000) 181,572 (23,532) 70,000 (5,000) 38,711 8,762 12,365 175,421 (12,169) 181,572 (32,674) 120,000 (12,000) 42,587 12,472 14,250 33,698 5,126 10,250 Total Assets 458,880 404,702 258,157 Liabilities Bank Loan Short Term Credit line Current portion of long term loan Accounts Payable -Food Suppliers Accounts Payable - Other GST Payable Long Term Loan s 15,000 $12,000 $ 10,000 5,000 14,865 1,627 2,541 52,000 5,000 21,054 1,695 1,867 138,000 5,000 18,654 1,148 1,754 142,000 Total Liabilities 182,616 180,556 86,033 Shareholders Equity Common Shares Retained earnings $1,200 $1,200 1,200 170,924 275,064 222,946 Total Equity 276,264 224,146 172,124 Total Liabilities & Equity 458,880 404,702 258,157