Dear Tutor... I am sending you ONE question and you reply that you can answer all of the questions for 30 dollars. It is JUST ONE question. What is not clear about it? It is ONE question. If you don't accept the question let me know why and don't deny my request for irrelevant reasons. ONCE AGAIN this is ONE question. I make another effort to submit it before I have to call course hero and ask them to explain why the question is not accepted. Attached is the file that contains ALL of the information to answer the question (one question). Please write a paragraph of a decent size. Please refer to competition, the economy, globalization, etc. to answer the question. The question is the following: 1)Would you invest in this company? Why or why not? "

1 a) The corporate headquarters of Domino's Pizza Inc. are located in Ann Arbor, Michigan. b) The fiscal year end is January 2. c) Domino's sells pizza and other complimentary items. d) The next stockholders' meeting is in May 5th, 2012 at Domino's Pizza World Resource Center 30 Frank Lloyd Wright Drive Ann Arbor, MI. e) The company's website URL is http://www.dominos.com/ f) The company's Ticker Tape name is DPZ. g) The market value for one share of the company's common stock at the conclusion of trading on Friday October 31 was $32.03. 2 a) The company's independent auditor is PricewaterhouseCoopers LLP, which is located in Detroit, MI. b) The auditor believes the financial statements were fairly presented. The conclusion that they are fairly presented is supported by the audits of the financial statements, which included examining evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. c) The auditor believes the company's internal control system is adequate. This belief is supported by the fact that the audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The audits also included performing such other procedures as the auditor considered necessary in the circumstances. 3. The Balance Sheet is presented for the years ended 2010 and 2011, the Income Statement and the Statement of Cash Flows for the years ended 2008, 2010, and 2011. 4. a) The revenues increased over the last year by $166,837 millions. The change was 11.9%. b) The company earns revenues through the domestic owned and franchise stores, dough manufacturing and supply chain centers and international operations. Retail sales from domestic owned stores and royalty revenues resulting from the retail sales from franchise stores are recognized as revenues when the items are delivered to or carried out by customers. Retail sales are generally reported and related royalties paid to the Company on a weekly basis based on a percentage of retail sales, as specified in the related standard franchise agreement (generally 5.5% of domestic franchise retail sales). In the event that retail sales are not reported timely by a franchisee, the Company will record royalty revenues in the period earned based on an estimate of the franchisee's sales. c) The Cost of Goods Sold increased over the last year by $115,224 millions. The percentage change was 11.3%. Some ways to decrease the costs of goods are the following: 1) purchase ingredients of a lower price without affecting the quality of the food, 2) eliminate ingredients that are used not often enough, which their costs eventually outweigh the benefits. 3) Redesign the menu that will include tasty food that requires fewer expenses for preparation. 4) Hire employees who are willing to accept minimum wages and fewer benefits. d) The percentage change in revenues exceeds the change in costs of goods sold by 0.6%. In the section of Management Discussion and Analysis there is no reference that associates revenues and costs. There is a reference for revenues which compares the revenues of prior years to the last year. e) Net income increased $8.2 million or 10.2% in 2010. The company had a profit of $8,173 millions. f) The company uses the straight-line method of depreciation over the estimated useful lives of the related assets. g) Depreciation expense for the current year was approximately $21.5 million. This amount is indicated in the notes to consolidated financial statements. The amortization expense was included in the depreciation expense. There is no reference regarding the cash used to pay depreciation expense. 5. Its total assets increased over the last year by $7,076 million. The percentage change was 1.6%. The largest asset was equipment of the amount of $ 175,125. 6. Two balance sheet accounts that were the most significant in explaining the changes in total assets are equipment and advertising fund assets. The company expanded by opening new stores and consequently equipment was purchased for the new location stores. Also, the company has made changes to its menu which was promoted by advertising the new menu items. 7. a) The company had a cash inflow from operating activities of the amount of $27,051 million. The major items that caused inflows were the increase in insurance reserves and in net income. The major items that caused outflows were the provision for deferred income taxes and the provision for losses on accounts and notes receivable. b) The company had a cash outflow from investing activities which it was lower than the previous year's. The largest item in investing activities was an outflow of $25,421 millions from capital expenditures. c) The company had a cash outflow from financing activities. The largest item in financing activities was an outflow of Repayments of long term debt and capital lease obligations of $116,760 millions. 8 a) The asset turnover ratio is 3.4 (Revenue/Total Assets--1,570,894 / 460837). The asset turnover ratio how well the company is using its assets to produce revenue. b) The profit margin for Domino's is 5.6% and is computed by Net Income / Revenue, 87,917/1,570,894. A profit margin of 5.6% means that for each dollar of sales that Domino's generates it is contributing 5.6 cents to its net income. c) Gross profit is computed by (Revenue - Cogs) / Revenue. The gross profit percentage for the latest three years: 2009: (1,425,114 - 1,061,853) / 1,425,114 = 25.5% 2010: (1,404,057 - 1,017,081) / 1,404,057 = 27.5% 2011: (1,570,894 - 1,132,305) / 1,570,894 = 27.9 There is a slight increasing trend over the last three years. d) Return on Equity (ROE) measures how profitable was Domino's by revealing how much profit it generated with the money stockholders have invested. It is computed by Net Income / Shareholder's Equity. The ROE for the last three years is the following: 2009: 61,354 / -1,278,125 = -4.8% 2010: 79,744 / -1,320,994 = -6% 2011: 87,917 / 1,210,651 = -7.3% There is an increasing negative trend which is bad. It shows that management isn't doing very well because the trend should be positively increasing. e) Profit margin ratio for 2009 was 4.39%, for 2010 5.68% and for 2011 5.6%.Profit margin has been defined as the relation between net income and sales. The profit ratio has increased from 2009 to 2010 but in 2011 it has shown a downward trend which indicates that the operating expenses for the Domino's have increased more than the increase in the revenues which is not a good indicator of working efficiency . On the one hand, Domino's has increased its sales and on the other hand it also has increased its operating expenses. Gross profit ratio has increased from 2009 to 2010 by 25 and from 2010 to 2011 by only .4 %. There has been slight increase in the gross profit margin .In 2010 revenues has decreased and also the cost of goods has also declined but in 2011 revenues have been increased but at the same time cost has also increased and this increase is more than the increase in the revenues that's why the gross profit ratio increased slightly which is not a good sign for Domino's .Very slight increase in ratio indicates there has been decrease in selling price and increase in cost which shows that the business is not running efficiently and the optimum selling price has not been fixed .Managers always try to increase this ratio . There is an increasing negative trend in case of ROE which shows that although there has been increase in the profits but the shareholders funds have not been properly utilized. In comparison to previous year although there has been increase in the profits and revenues but the cost has also increased which will ultimately cut down the profit generating capacity of the Domino's. Management must give an explanation for the changes in the profits like why the cost has increased in relation to the sales. f) The basic EPS changed from $1.39 in 2009 to $1.50 in 2010. This was due to changes in numerator i.e. net income available to common stockholders and also the denominator i.e. weighted average number of common shares. The net income available to common stockholders changed from $79,744 (in thousands) in 2009 to $87,917 (in thousands) in 2010 and also the weighted average number of common shares changed from 57,409,448 shares in 2009 to 58,467,769 shares in 2010; thus, changing the basic EPS in 2010. g) Current ratio = Total Current Assets/ Total Current Liabilities = 305.04/ 186.13 = 1.63 Current ratio tells us about the efficiency of company to meet their short term obligation. It is also an indicator of company's liquidity which tells us about the ability of the company to convert their assets immediately into cash without making much loss. We can see that company is maintaining its current ratio adequately because current ratio more than 2 and less than 1 is not considered as good for company. It is considered as an ideal current ratio. Domino's pizza has quite adequate current ratio in the financial year 2010. It helps the company to meet with the cash requirement in future. h) Account receivable turnover = Turnover / Account receivable 2009 - 1,404,057/76,273 18.41 2010 - 1,570,984/80,410 19.54 Receivable turnover determines the operating efficiency of the management. It determines how fast the collections of credit sales are being made by the company. The turnover of Dominos is excellent at more than 18 times in both the years. This is due to fact that Dominos mostly sells goods over the counter thus not involving credit sales. i) 2009 2010 Inventories 25,890 26,998 The inventory increased by (26,998 - 25,890) = $1108 (in thousands) over the last year. J) Inventory Turnover (Cost of Goods Sold/Inventory) 2009 - 1,017,081/25,890 39.28 2010 - 1,132,305/26,998 41.94 Inventory turnover ratio determines the times inventory has been rolled over by the management. By maintaining lower inventory, if a company achieves higher sales, it is a good sign of efficiency. The inventory turnover ratio of Domino is very good at more than 39 times. It helps Domino to save financing cost by maintaining lower inventory and achieve higher sales. k) The Inventory costing method used by Domino's Pizza is lower of cost or market value (on a first- in, first -out basis). The lower cost or market value approach is the one in which normally the ending inventory is stated at historical cost. But in certain cases the original cost of the closing inventory is more than the cost of replacement thus the inventory has lost value. The FIFO (first in first out method) is an inventory technique in which the oldest inventories are recorded and they are sold first. And it is used with the lower of cost or market value by Domino's. For example if the value of the inventory has decreased in the value below the historical cost then it is reported in the balance sheet with reduced carrying cost. If there is a decline in the value of the inventory it is reduced from cost of goods sold. Domino's Pizza as is a food chain company follows the FIFO method on the cost or market value whichever is less, keeping in account the accounting convention of prudence. 9 a) PARTICULARS Total Assets Total Liabilities YEAR ENDING ON JAN 3, 2010 YEAR ENDING ON JAN 2, 2011 $453,761 $1,774,755 $460,837 $1,671,488 Debt to Asset Ratio = Total Debt / Total 3.91 times 3.63 times Assets The debt-asset ratio shows the proportion of the company's assets which are financed through debt or borrowings. If the ratio is greater than one, it implies that company's assets are financed through debt. If the ratio is greater than one, it means that company's assets are financed through equity. The current liabilities as well as long term debt have decreased in comparison to last year. Increase in additional paid in capital and assets led to decrease in liabilities. Lenders would prefer a company with low debt to asset ratio. Companies with high debt/asset ratios are said to be highly leveraged. They could be in danger if creditors asked for the repayment of debt. b) The times interest earned = According to 10k of Dominos figures: EBIT Interest expense Times Interest earned= Earnings before interest and taxes (EBIT)/ Interest expense 2010 $189,509 $110,945 2011 $227,702 $96,810 1.708 2.352 This ratio measures a company's ability to serve its debt. It helps in knowing whether the company is in any kind of financial trouble. A high ratio shows that Domino's can meet its interest obligation. Earnings are significantly higher in 2011 as compared to 2010. However, a high ratio can also indicate that the company has undesirably low leverage or pays too much of debt. The earnings would have been used for some another opportunity to get higher returns. As seen the ratio is higher in 2011 (2.352) as compared to 2010(1.708)