BUS 627 W1A
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Ashford University *
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Finance
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Jan 9, 2024
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The company I chose to look into was Dutch Bros Inc (BROS):
Current Ratio = Current Assets / Current Liabilities
2022 Current Ratio = 1.186 / 0.934 (in millions) = 1.26
2021 Current Ratio = 0.554 / 0.34 (in millions) = 1.62
Dutch Bros (BROS) has demonstrated a commendable financial performance, notably evident in its current ratio, which increased from 1.62 in 2021 to 1.26 in 2022. A current ratio surpassing 1 signifies the company's capability to meet short-term obligations with its current assets. This adjustment from 2021 to 2022 suggests a maintained strong liquidity position and an enhanced ability to handle immediate financial responsibilities. Dutch Bros' consistent track record of maintaining a current ratio above 1 underscores prudent financial management, positioning the company favorably for navigating short-term financial challenges and capitalizing on strategic opportunities in the market. (Warren et al., 2022). Profit Margin Ratio = (Net Income / Revenue) * 100
2022 Profit Margin Ratio = (-0.005 / 0.739) (in millions) * 100 = -0.68%
2021 Profit Margin Ratio = (-0.013 / 0.498) (in millions) *100 = -2.61%
These percentages indicate negative profit margins for Dutch Bros in both
2022 and 2021. It's essential to note that Dutch Bros went public with its stock in September 2021, a factor that could significantly influence these results. IPOs often entail one-time costs and adjustments that can impact financial ratios, and the initial stages of transitioning to a publicly traded company may involve increased expenses. Negative profit margins during this period are not uncommon and can be attributed to the adjustments and costs associated with the IPO. While negative values might be a cause for concern in a more established company, for a recently public company like Dutch Bros, further investigation is needed to understand the specific factors driving these losses. Management Discussion and Analysis
Dutch Bros, a high-growth operator and franchisor of drive-thru shops, expanded significantly in 2022, opening 120 new company-operated shops across various regions. As of December 31, 2022, the company had
a total of 671 company-operated and franchised shops in 14 states, marking a 24.7% increase from the previous year. Revenue for the year ended December 31, 2022, reached $739.0 million, despite facing challenges such as global events and inflation. While the net loss was $(19.3) million, the company remains focused on its commitment to quality, speed, and superior service. It's noteworthy that Dutch Bros successfully navigated the complexities of the COVID-19 pandemic due to
its drive-thru shop model, and it's keeping a close eye on potential impacts from the Russia-Ukraine conflict and global economic uncertainties. The company's Management Discussion and Analysis indicates a strategic approach to addressing challenges, including measured menu price increases to counter inflationary pressures and an ongoing commitment to enhancing customer experiences (Dutch Bros, 2023).
Auditor's Report
The audit report for Dutch Bros was conducted by KPMG LLP, they have been the Company’s auditor since 2020. In their opinion, the financial statements present a true and fair view of the company's financial position and conform to accounting principles. The auditor's report notes
Dutch Bros. (2023). Annual Report. https://investors.dutchbros.com/financials/annual-reports/default.aspx
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