Reading and Understanding Financial Statements

Reading and Understanding Financial Statements

The purpose of this paper is to apply and illustrate what you have learned this semester, by submitting a full financial synopsis based on a hypothetical fast food restaurant. Below is a mock financial report indicating actual sales and expenses versus budgeted sales and expenses for a one year period of time. Review the report and write a 5 to 7 page financial review of this business incorporating the following areas:

Part I: Analysis (Sections 1 – 3)

·         Sub-divide your analysis into three distinct sections: 1) Revenue, 2) Expenses, and 3) Profitability

·         For each section, review the financial statement below and comment on:

· Current status, apply vertical analysis to both Actual Results and Budgeted Results.

· Determine and comment on the variance as it applies to each section. Ask yourself things like:

· How did management perform against what was budgeted?

· What are the strengths and weaknesses of this operation per section based on your variance analysis?

· Create graphs or charts to illustrate and help clarify your synopsis

Part II: Recommendations & Budgeting (Sections 4 and 5)

·         After your financial analysis in sections 1 – 3, add two more sections; 4) Recommendations and 5) Budgeting. 

· Section 4: Based on your synopsis in sections 1 – 3, what recommendations would you make to upper management that would reduce expenses and increase revenues. For example:

· Talk about your thoughts on product mix. Where should they focus their marketing dollars next year in order to increase profit margin?

· How will your recommendation affect food cost?

· What other recommendations would you make based on this year’s performance?

· Consider doing some outside research of current fast food chains, compare how they perform versus this operation to support your recommendations 

· Section 5: Prepare next year’s budget

· Create next year’s budget based on what it would look like if upper management accepted your recommendations

· Consider doing some outside research of current fast food chains, compare how they perform versus this operation to support your recommendations 

Paper:

·         Must have a title page that includes date and your name

·         Use Arial or New Times Roman 12 font, single space

·         Must have a Reference page at the end siting any outside resources for your analysis, have at minimum two sources