QUESTION Analyse the financial and non-financial position of both THSR and Village Fusion and comment on the performance of each of the restaurants. Points to consider • Calculate appropriate ratios for the two restaurants • Interpret the performance • Non-financial factors consist of qualitative factors
QUESTION Analyse the financial and non-financial position of both THSR and Village Fusion and comment on the performance of each of the restaurants. Points to consider • Calculate appropriate ratios for the two restaurants • Interpret the performance • Non-financial factors consist of qualitative factors
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
QUESTION
Analyse the financial and non-financial position of both THSR and Village Fusion and comment on the performance of each of the restaurants.
Points to consider
• Calculate appropriate ratios for the two restaurants
• Interpret the performance
• Non-financial factors consist of qualitative factors
![Traditional Home-Style Restaurant (THSR)
THSR currently has two restaurants in the Klang Valley catering for the local
Chinese and Indian vegetarian population. Besides catering for in-house
customers, THSR also does catering services for functions and events. Its
catering services caters for both small and large functions, with orders
for 50 to 1,000 pax. While the restaurant has become a household name
amongst vegetarians, it is becoming challenging for the owner, Ryden, to
sustain the quality of the food. This is mainly because of the high turnover
of the kitchen staff (chefs) at THSR. Consequently, the quality of the food
has not been consistent, resulting in declining sales.
THSR has an effective front desk team who are courteous and provide
efficient service. Nevertheless, the customer numbers have been falling
in the past year. The average sales per day has fallen from RM2,000 to
RM1,200. All in-house sales are on cash only basis. However, from his
event catering services he collects a deposit and the balance is collected
within five working days. Ryden is concerned and worried about future
commitments and the financial challenges of continuing the restaurant
business. He is, however, not ready to close down the restaurants. Ryden
is keen to sell 50% of his share interest in THSR.
Ryden has valued his current business at RM150,000. However,
Sandhya feels that the business is overvalued. Moreover, she is unsure
whether to acquire one of Ryden's restaurants or to consider a strategic
alliance with THSR.
Scanned with CamScanner
Case 19 Business Growth Strategies at SM Holistic Living Academy
Village Fusion
Village Fusion is a relatively small semi-fine-dining restaurant located in
the Klang Valley. The business is doing very well and on average the daily
turnover is around RM3,000. This restaurant caters food to a number of otfices
located around the restaurant. However, this service only operates for 25
working days in a month. The payment for this services is collected from the
companies at the end of each month. Hence, 20% of monthly sales is on credit.
Nathan, the restaurant owner, is getting old and is looking for a partner who
will be able to manage the daily operations of the restaurant. He is keen to go
on semi-retirement and wants to sell 50% of his business shares to the right
investor. He is very conservative and wants to maintain the natural healthy
eating vegetarian concept. Nathan values his current business at RM200,000.
Nathan is an experienced accountant and therefore he has operated a
very conservative policy in respect of the management of the restaurant's
working capital and daily operational costs. He ensures that - there is
no wastage of food at the end of each working day. He assembles the
information about the company's forecast end-of-year financial outcomes.
These are provided in Appendix 2.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9fb3ea92-df28-4f33-a39c-d6b624e5c63e%2Fc039c335-e7e9-4ede-b330-71353edd6887%2Fdn5tvhb_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Traditional Home-Style Restaurant (THSR)
THSR currently has two restaurants in the Klang Valley catering for the local
Chinese and Indian vegetarian population. Besides catering for in-house
customers, THSR also does catering services for functions and events. Its
catering services caters for both small and large functions, with orders
for 50 to 1,000 pax. While the restaurant has become a household name
amongst vegetarians, it is becoming challenging for the owner, Ryden, to
sustain the quality of the food. This is mainly because of the high turnover
of the kitchen staff (chefs) at THSR. Consequently, the quality of the food
has not been consistent, resulting in declining sales.
THSR has an effective front desk team who are courteous and provide
efficient service. Nevertheless, the customer numbers have been falling
in the past year. The average sales per day has fallen from RM2,000 to
RM1,200. All in-house sales are on cash only basis. However, from his
event catering services he collects a deposit and the balance is collected
within five working days. Ryden is concerned and worried about future
commitments and the financial challenges of continuing the restaurant
business. He is, however, not ready to close down the restaurants. Ryden
is keen to sell 50% of his share interest in THSR.
Ryden has valued his current business at RM150,000. However,
Sandhya feels that the business is overvalued. Moreover, she is unsure
whether to acquire one of Ryden's restaurants or to consider a strategic
alliance with THSR.
Scanned with CamScanner
Case 19 Business Growth Strategies at SM Holistic Living Academy
Village Fusion
Village Fusion is a relatively small semi-fine-dining restaurant located in
the Klang Valley. The business is doing very well and on average the daily
turnover is around RM3,000. This restaurant caters food to a number of otfices
located around the restaurant. However, this service only operates for 25
working days in a month. The payment for this services is collected from the
companies at the end of each month. Hence, 20% of monthly sales is on credit.
Nathan, the restaurant owner, is getting old and is looking for a partner who
will be able to manage the daily operations of the restaurant. He is keen to go
on semi-retirement and wants to sell 50% of his business shares to the right
investor. He is very conservative and wants to maintain the natural healthy
eating vegetarian concept. Nathan values his current business at RM200,000.
Nathan is an experienced accountant and therefore he has operated a
very conservative policy in respect of the management of the restaurant's
working capital and daily operational costs. He ensures that - there is
no wastage of food at the end of each working day. He assembles the
information about the company's forecast end-of-year financial outcomes.
These are provided in Appendix 2.
![Extracted financial information for Village Fusion
Appendix 1
THSR
Extracted financial information for THSR
nd All figures in na RM 000 s
Revenue
500
Cost of sales
(350)
Gross profit
150
Salaries
(40)
(60)
(8)
Other expenses
Finance costs
Profit before tax
42
Income tax expense
(13)
Profit for the year
29
Number of employees: 12
The company's year-end figures are as follows:
Non-current assets
140,000
Current assets
Receivables
1,500
Inventory
2,500
Cash in bank
3,000
Current liabilities
7,000
Non-current liabilities
Capital
100,000
Long-term loans
40,000
Case 19 Business Growth Strategies at SM Holstic Lving Academy 109
Appendix 2
Village Fusion
2018
All figures in
RM
850,000
Revenue
Cost of sales
Gross profit
(425,000)
425,000
Salaries
(55,000)
(110,000)
Other expenses
Profit before tax
260,000
Income tax expense
(65,000)
Profit for the year
195,000
Number of employees: 12
The company's year-end figures are as follows:
RM
Current assets
7,200
Receivables
2,000
Inventory
15,000
Cash at bank
95,000
Non-current assets
4,500
Current liabilities](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9fb3ea92-df28-4f33-a39c-d6b624e5c63e%2Fc039c335-e7e9-4ede-b330-71353edd6887%2Fg6mjfti_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Extracted financial information for Village Fusion
Appendix 1
THSR
Extracted financial information for THSR
nd All figures in na RM 000 s
Revenue
500
Cost of sales
(350)
Gross profit
150
Salaries
(40)
(60)
(8)
Other expenses
Finance costs
Profit before tax
42
Income tax expense
(13)
Profit for the year
29
Number of employees: 12
The company's year-end figures are as follows:
Non-current assets
140,000
Current assets
Receivables
1,500
Inventory
2,500
Cash in bank
3,000
Current liabilities
7,000
Non-current liabilities
Capital
100,000
Long-term loans
40,000
Case 19 Business Growth Strategies at SM Holstic Lving Academy 109
Appendix 2
Village Fusion
2018
All figures in
RM
850,000
Revenue
Cost of sales
Gross profit
(425,000)
425,000
Salaries
(55,000)
(110,000)
Other expenses
Profit before tax
260,000
Income tax expense
(65,000)
Profit for the year
195,000
Number of employees: 12
The company's year-end figures are as follows:
RM
Current assets
7,200
Receivables
2,000
Inventory
15,000
Cash at bank
95,000
Non-current assets
4,500
Current liabilities
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