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Describe and illustrate the use of horizontal analysis in evaluating a company's performance and financial condition. Chipotle Mexican Grill, Inc. (CMG) is a quick-service restaurant
Describe and illustrate the use of horizontal analysis in evaluating a company's performance and financial condition.Chipotle Mexican Grill, Inc. (CMG)is a quick-service restaurant providing a focused menu of burritos, tacos, and salads. Chipotle's income statements for the end of two recent years are as follows:
https://college.cengage.com/nextbook/shared/finance/warren_9781337902663/images/9781337902663_ch2-056-t2.png
- A horizontal analysis of the two income statements. (Horizontal Analysis is taking the difference between year 2 and year 1 and dividing by the "base" year, so year 1).Example Year 1 Revenue to Year 2 Revenue, displays a decrease: ($3,904,385 - $4, 501, 223)/$4,501,223) = (13.25%) decrease in revenue.The (parenthesis) for the expenses, merely means subtractions from revenue.
- Interpret the horizontal analysis.
- Why Chipotle's revenues and operating income may have decreased so significantly in Year 2?
- Any recent marketing that Chipotle has taken on that may be an attempt to increase their revenue?
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