Using debt to equity ratio,return on capital employed and operating profit margin,analyse the financial position and non-financial positionof both THSR and Village Fusion and the comments on the performance of each of the restaurants.

108 Integrated Case Studies for Accounting Appendix 1 THER Extracted financial information for THSR 2018 RM'000 All figures in 500 Revenue (350) Cost of sales 150 Gross profit (40) Salaries (60) Other expenses (8) Finance costs Profit before tax 42 Income tax expense (13) Profit for the year 29 Number of employees: 12 The company's year-end figures are as follows: RM Non-current assets 140,000 Current assets Receivables Inventory 1,500 Cash in bank 2,500 3,000 Current liabilities 7,000 Non-current liabilities Capital Long-term loans 100,000 40,000Case 19 Business Growth Strategies at SM Holistic Living Academy 107 Village Fusion Village Fusion is a relatively small semi-fine-dining restaurant located in the Klang Valley. The business is doing very well and on average the daily turnover is around RM3,000. This restaurant caters food to a number of offices located around the restaurant. However, this service only operates for 25 working days in a month. The payment for this services is collected from the companies at the end of each month. Hence, 20% of monthly sales is on credit. Nathan, the restaurant owner, is getting old and is looking for a partner who will be able to manage the daily operations of the restaurant. He is keen to go on semi-retirement and wants to sell 50% of his business shares to the right investor. He is very conservative and wants to maintain the natural healthy eating vegetarian concept. Nathan values his current business at RM200,000. Nathan is an experienced accountant and therefore he has operated a very conservative policy in respect of the management of the restaurant's working capital and daily operational costs. He ensures that there is no wastage of food at the end of each working day. He assembles the information about the company's forecast end-of-year financial outcomes. These are provided in Appendix 2. XEJ 91019d lito19 (81) benoqxe xoi smoon!106 Integrated Case Studies for Accounting Klang Valley. The opening of a healthy diet restaurant has been her growing by a desire aspiration. Much of this drive for a healthy diet restaurant is fuelled by a to exploit SMHLA's unique competency in running the Certificate in Diet and Nutrition course. A healthy diet restaurant will complement her academy's holistic wellness activities, particularly with the Diet and Nutrition Programme which is a hit with local school leavers. Currently, the student numbers are growing and SMHLA is finding it a challenge getting appropriate placement for students to complete their practical internship. Sandhya has specifically identified vegetarian restaurants as potential targets because current trends suggest that a new consumer society is emerging for vegan and vegetarian food around the Klang Valley. Although SMHLA has no experience in running a restaurant business, Sandhya is keen to explore the food and beverage industry to cater to the unmet needs of consumers. However, for SMHLA to open a new restaurant will take considerable time and money. Hence, SMHLA is considering acquiring or partnering with an existing restaurant. With a view to expand, SMHLA has identified two restaurants as potential targets for acquisition or strategic partnership, Traditional Home-Style Restaurant (THSR) and Village Fusion. Traditional Home-Style Restaurant (THSR) THSR currently has two restaurants in the Klang Valley catering for the local Chinese and Indian vegetarian population. Besides catering for in-house customers, THSR also does catering services for functions and events. Its catering services caters for both small and large functions, with orders for 50 to 1,000 pax. While the restaurant has become a household name amongst vegetarians, it is becoming challenging for the owner, Ryden, to sustain the quality of the food. This is mainly because of the high turnover of the kitchen staff (chefs) at THSR. Consequently, the quality of the food has not been consistent, resulting in declining sales. THSR has an effective front desk team who are courteous and provide efficient service. Nevertheless, the customer numbers ers have been falling in the past year. The average sales per day has fallen from RM2,000 to RM1,200. All in-house sales are on cash only basis. However, from his event catering services he collects a deposit and the balance is collected within five working days. Ryden is concerned and worried about future commitments and the financial challenges of continuing the restaurant business. He is, however, not ready to close down the restaura is keen to sell 50% of his share interest in THSR. estaurants. Ryden Ryden has valued his current business at RM150,000. However. Sandhya feels that the business is overvalued. Moreover, she is unsure whether to acquire one of Ryden's restaurants or to consider a strategic alliance with THSR.Case 19 Business Growth Strategies at SM Holistic Living Academy 109 Appendix 2 Village Fusion Extracted financial information for Village Fusion 2018 All figures in RM Revenue 850,000 Cost of sales (425,000) Gross profit 425,000 Salaries (55,000) Other expenses (110,000) Profit before tax 260,000 Income tax expense (65,000) Profit for the year 195,000 Number of employees: 12 The company's year-end figures are as follows: RM Current assets 7,200 Receivables 2,000 Inventory 15,000 Cash at bank 95,000 Non-current assets 4,500 Current liabilities