Decision case 10-2

Panera and Chipotle annual report 2015

Part A. The Ratio Analysis Model

For each company, determine:

The debt-to-equity ratio

-Is the debt-to-equity ratio of either company too high? Have the companies effectively used leverage? Replicate the five steps in theRatio Analysis Modelto perform the analysis.

1. Formulate the Question

2. Gather the Information from the Financial Statements

3. Calculate the Ratio

4. Compare the Ratio with Other Ratios

5. Interpret the Ratios

Part B. The Business Decision Model

If you were an investor, would you be willing to lend money to either or both companies based on their use of debt?

1. Formulate the Question
2. Gather Information from the Financial Statements and Other Sources
3. Analyze the Information Gathered (compare the company's ratios with industry averages and look at trends)
4. Make the Decision (lend money or find an alternative use for the money)
5. Monitor Your Decision (Monitor your investment periodically)

Links

Panera Annual Report 2015

https://www.sec.gov/Archives/edgar/data/724606/000072460616000042/a2015122910k.htm#s0FAE69FEB080DBA1E32D113EEC614248

Chipotle Annual Report 2015

https://ir.chipotle.com/annual-reports