5-2 Final Project (3)

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Southern New Hampshire University *

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320

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Finance

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Apr 3, 2024

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5-2 Final Project Allan Salazar Southern New Hampshire University Fin 320 Raul Rios February 7 ,2024 The company's working capital, current ratios, and debt ratios have all improved since the last fiscal year which indicates better profitability. The company's current ratios are both within the range that is considered good. We have a current ratio of 1.5 which is great since “A good current ratio depends on the industry, but it's usually between 1.2 and 2.0. A current ratio of 1.5 to 3 is often considered good”(Fernado ,J.). We also have a debt ratio of .62 a, .03 decrease from 2022, which means we don't have a good chance of getting the banks and other investors to lend us money. The ideal number would be anything equal to or lower than .4. . The earnings per share has also increased which indicates better profitability. The price/earnings ratio has lowered which benefits the investors and businesses since it means that there is a high chance of growth meaning they have a high chance of profiting from our business. The total asset turnover ratio has not improved; the low ratio of .31 indicates poor asset utilization. The ideal number is anything equal to or above 1 like in 2022 when they had a high ratio of 1.3. The net profit margin has increased by .6 since the last fiscal quarter which indicates we are controlling our costs and selling at a high cost. The ROA has improved which indicates a small investment can yield more money. Finally the return on equity increasing means we are doing well in terms of growth through equity financing. Overall, Chipotle's performance has improved over the year.

Chipotle is a financially healthy company with a higher debt ratio and fluctuating total asset turnover ratio. However, the stockholder's earnings per share and return on assets are increasing. While not in the best financial health, Chipotle's overall health is not poor. Out of all the 10 financial calculations we did 7/10 have good numbers.The COVID-19 pandemic may have contributed to their success or failure, as they were still recovering from closures and borrowing. We have to take into account that interest and loans have increased each year.” The Fed has raised interest rates 11 times since March 2022 — the fastest pace of tightening since the early 1980s. The spike in interest rates caused consumer borrowing costs to skyrocket while inflation remained elevated, putting many households under pressure” (Jdickler). Those types of situations may have affected our debt ratio and made it harder for us to lower it compared to 2022 when those interests were much lower.The company's success can be attributed to the introduction of new breakfast menu options and cleaner ingredients. Technology has also increased our profits. As a Mcdonald’s employee I can say that there are some days where we receive more uber and doordash orders than customers coming in and sitting down. Overall, these factors contribute to Chipotle's financial health. Short-term financing means “taking out a loan to make a purchase, usually with a loan term of less than one year.”(Smith,K). Short-term financing sources such as lines of credit or commercial loans can improve cash flow, provide emergency funding, facilitate opportunity exploration, and aid in building a business's credit profile. These loans can typically be used for day-to-day business expenses, staff wages, inventory, and emergency funding. There are a couple of short term financing sources such as Trade credit and factoring. Trade credit is where we buy goods or services on account and pay for them later. Factoring is where you sell

receivables to a third party at a discount. Based on the calculations I would say we shouldn’t do any short term financing. We are already having trouble with our debts and accepting STF would cause us to have a higher debt ratio. I would suggest factoring since we are making enough revenue to make up for the lost receivable. We would use the money from factors to pay off our debts so that we wouldn’t keep getting billed each month for loans we are struggling to pay off. ● Mergent. (n.d.). Chipotle Mexican Grill Inc. Retrieved February 8, 2024 from https://www.mergentonline.com/login.php ● Chipotle Mexican grill share holder equity 2010-2023: CMG. Macrotrends. (n.d.). https://www.macrotrends.net/stocks/charts/CMG/chipotle-mexican-grill/total-share- holder-equity#:~:text=Chipotle%20Mexican%20Grill%20share%20holder%20equity %20for,was%20$2.02B%2C%20a%2020.03%%20increase%20from%202019 . ● Fernado ,J. (n.d.). Current ratio explained. Investopedia. h/ https://www.investopedia.com/terms/c/currentratio.asp ● Jdickler. (2023, December 13). The Federal Reserve’s period of rate hikes may be over. here’s why consumers are still reeling. CNBC. https://www.cnbc.com/2023/12/13/the- federal-reserve-held-rates-steady-heres-what-that-means-for-you.html ● Smith, K. (2020, August 6). Short term financing. PersonalFinanceLab. https://www.personalfinancelab.com/finance-knowledge/personal-finance/short-term-

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