For our Accounting assignment we are going to focus on ratios and comparing companies. Your investment company (i.e. your group) is looking to get into the fast casual market and you have narrowed the contenders down to two. The attached spreadsheet has information on QuickBurger (QB) and BigSteak (BS), your two candidates.

Now I know in real life this decision would be much more complex, but go with the story for now.

Part 1:

The first tab in the spreadsheet is a table that you need to fill out (all except the 2019 column). Calculate the given ratios for the two restaurants and compare them to see which is the more favorable.

A couple notes:

a) stock price: QB: $35, BS: $20.

b) Profit margin is Net Income / Sales (Revenue)

c) Assume that Bonds and Property, Plant and Equipment are long term categories.

d) Shares outstanding would be Common Stock / par value. And in this case par value is $1.

Q1) Which restaurant would you invest in and why?

Part 2:

The power of ratios is in comparison. As a stand alone number they don't tell us anything. In part 1 we used them to compare two businesses. In part 2 we are going to use them to make comparison over time.

Assume you are QB. For the four data points given for 2019, compare the ratio you calculated with the information given.

Q2) What does the change in each ratio over time say about the financial stance of the business. That is, what does each change mean to the business and what is the possible cause / impact.

Ratio Analysis
Ratio name	QB		BS		Favorable?	2019
Liquidity Analysis
Current ratio						1.2
Quick ratio
Profitabilty Analysis
Profit Margin						11.50%
Return on Assets						4.96%
Earnings per Share
Price/Earnings ratio
Solvency Analysis
Debt to equity ratio						2.85%

Balance Sheet (in thousands) Quik Burger Big Steak Assets Cash Accounts Receivable Inventory Property, Plant, and Equipment Other Assets Total Assets $2,000 $2,000 $2,000 $20,000 $4,000 $30,000 $4,500 $6,500 $5,000 $35,000 $5,000 $56,000 Liabilities and Stockholder's Equity Accounts Payable Notes Payable Bonds Payable Common stock ($1 par value) Paid-in Capital in Excess of Par Value Retained Earnings Total Liabilities and Stockholder's Equity $2,500 $1,500 $10,000 $1,000 $9,000 $6,000 $30,000 $3,000 $4,000 $30,000 $3,000 $9,000 $7,000 $56,000 Income Statements (in thousands) Quik Burger $54,000 $37,000 $17,000 Big Steak $86,000 $61,000 $25,000 Sales Cost of Goods Sold Gross Margin from Sales General Operating Expenses Selling Expenses Administrative Expenses Interest Expense Income Tax Expense Total Operating Expense Net Income $7,000 $4,000 $1,400 $1,600 $14,000 $3,000 $10,000 $5,000 $3,200 $3,400 $21,600 $3,400 Balance Sheet (in thousands) Quik Burger Big Steak Assets Cash Accounts Receivable Inventory Property, Plant, and Equipment Other Assets Total Assets $2,000 $2,000 $2,000 $20,000 $4,000 $30,000 $4,500 $6,500 $5,000 $35,000 $5,000 $56,000 Liabilities and Stockholder's Equity Accounts Payable Notes Payable Bonds Payable Common stock ($1 par value) Paid-in Capital in Excess of Par Value Retained Earnings Total Liabilities and Stockholder's Equity $2,500 $1,500 $10,000 $1,000 $9,000 $6,000 $30,000 $3,000 $4,000 $30,000 $3,000 $9,000 $7,000 $56,000 Income Statements (in thousands) Quik Burger $54,000 $37,000 $17,000 Big Steak $86,000 $61,000 $25,000 Sales Cost of Goods Sold Gross Margin from Sales General Operating Expenses Selling Expenses Administrative Expenses Interest Expense Income Tax Expense Total Operating Expense Net Income $7,000 $4,000 $1,400 $1,600 $14,000 $3,000 $10,000 $5,000 $3,200 $3,400 $21,600 $3,400