Accounting Analysis



Accounting Analysis

Company Overview

Bread Life Catering is a famous catering company located in USA. The company has earned a very good reputation of having excellent performance in the industry. The company started its operations many years ago and they operated on a small scale with a focus on very few products. Over the period of time, the company has managed to earn a lot of profit because of their activities. The company has plans for the future and they are looking to expand further in different parts of the country. The company is also planning to start its operations in other countries as well. In this way, they will have an opportunity to earn good amounts of profit in those countries. The company has a good scope in the future because of the nature of their operations. Therefore, all the issues related to the accounting analysis of Bread Life Catering Company will be discussed in detail.

Financial Analysis of Company

There were approximately 970,000 restaurants in the United States with the estimated sales of $ 632 billion in 2012. The restaurant industry is one of the largest private sector employers in the United States with about 12.9 million employees in 2012. As the foundation of U.S. economy, the restaurant industry suffered during the recent recession. The cause-and-effect relationship was straightforward, after watching the deterioration of the housing market, consumer confidence declined; as a result consumers started cutting back on discretionary spending such as eating out. Sales and profits of restaurant industry first began to slide in late 2007, the drop in sales and profits leading to bankruptcy filings of restaurant chains such as Bennigan are and closure of more than 600 Starbucks locations in 2008. The restaurant industry was already suffered from the recent recession, the ever-rising gas price definitely made it more challenging. According to the researcher known as Stensson in 2012, the increase in gas price had negatively effect on restaurant operations either on sales or operation side. In general, restaurants has a relatively large proportion of customers on the lower end of income scale, the rising gas price means less disposable income that could be spent in discretionary areas like restaurants (Aigbedo & Prameswaran, 2004, 896).

Some full service restaurants were negatively affected by the recent recession. For example, the shares of Ruby Tuesday sink 85% due to high remodeling costs and falling sales, the shares of Cheesecake Factory fell 60% in 2008. Even worse, the private owned parent company of the Bennigan's and Steak & Ale chains were forced to file bankruptcy in 2008 due to the drop in sales and profits. Full service restaurants typically require customers to pay a tip, and their sale prices are higher. Customers are frequently encouraged to purchase expensive add-ons such as drinks and desserts. During the recession, people were extra sensitive to the high priced items; this probably was the reason of sluggish sales of full service restaurants. On the contrary, limited service restaurants are reported fared better due to ...