Krispy Kreme Case

I agree the opinion that Krispy Kreme is significantly more liquid, turn it receivables and inventory more slowly, and has less financial. For liquid, in the ratio analysis, on the exhibit 7, the liquidity ratios are increasing from 2000 to 2004 The current ratio is increasing which means the company has good liquid and can pay money to supplies and so on. Besides, the quick ratio is also increasing from 2000 to 2004. Compared to its peers, on exhibit 8, both quick ratio and current ratio are higher than other companies, so from this, I also can conclude Krispy Kreme has better liquid. But this company should learn how to use money well.

For less financial leverage which means less risk to invest, on exhibit 7 in leverage ratios, I see the debt to equity and debt to capital are decreasing, at the same time, compared to its peers, both data are lower than most peers, so Krispy Kreme has less debt, it has lower risk.

For turning receivables and inventory more slowly, on exhibit 8, under activity ratios, receivables turnover (9.7%) and inventory turnover (17.76%) are both very lower compared to peers, which means the company turn its receivables and inventory very slowly, besides, the company may has the risk of increasing bad debt.

In addition, by the profitability ratios, the operating profit margin is increasing from 2000 to 2004, the EBIT margin is over the average of the industry. The return on assets are over the average, so from the profitability ration, the company did good job.