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Financial analysis Essay The Back Yard Burgers has 183 restaurants – 44 company-operated and 139 franchisees as on June 30, 2007. The sales figures indicate total revenue of $12,610,000 as compared to last year sales figure of $11,695,000. Restaurant sales accounted for $10,688,000 that is a 10. 3% increase from last year figures of $9,686,000. Out of this 10. 3% increase of revenue, 6. 8% is attributed to the addition of two new company-operated restaurants till Jun 30, 2007 since July 1, 2006. The remaining 3. 5% increase in the revenue from restaurant sales is from the existing restaurants. Thirteen Weeks Ended June 30, July 1, 2007 2006 Revenues: Restaurant sales $ 10,688 $ 9,686 Franchise and area development fees 84 204 Royalty fees 1,265 1,245 Advertising fees 318 314 Other 255 246 Total revenues 12,610 11,695 Expenses: Cost of restaurant sales 3,502 3,120 Restaurant operating expenses 5,040 4,646 General and administrative 2,259 1,634 Advertising 814 668 Depreciation 544 543 Other operating (income)/expense — — Total expenses 12,159 10,611 Operating income 451 1,084 Interest income 29 16. Interest expense (193 ) (198 ) Other, net (28 ) (24 ) Income before income taxes 259 878 Income taxes 50 302 Net income $ 209 $ 576 Statement of income for the period July 1, 2006 to June 30, 2007 The statement of income shows a net income of $209,000 only for the current year as compared to $576,000 in the previous year. An increase in the general and administrative expenses and increased advertising expenditure accounts for the lower net income of the company. The annual turnover of the company in the year 2006 was $44,710,000 as compared to $41,000,000 in the year 2005. The company reported a 9% annual growth in sales. Key financial data of Back Yard Burgers (In millions of USD) Income Statement Quarterly (Jun 07) Annual (2006) Annual (2005) Total Revenue 12. 61 44. 71 41. 00 Gross Profit 3. 81 13. 67 12. 29 Operating Income 0. 45 2. 18 0. 42 Net Income 0. 21 0. 88 -0. 04 Balance Sheet Total Current Assets 7. 19 7. 08 5. 32 Total Assets 32. 94 33. 41 31. 64 Total Current Liabilities 5. 24 5. 79 4. 01 Total Liabilities 15. 24 16. 11 16. 34 Total Equity 17. 70 17. 30 15. 30 Cash Flow Net Income/Starting Line 0. 21 0. 88 -0. 04 Cash from Operating 0. 40 4. 05 3. 33 Cash from Investing -0. 16 -1. 85 -7. 83 Cash from Financing -0. 25 -0. 36 5. 78 Net Change in Cash -0. 01 1. 84 1. 28 The above table gives in insight into the company’s current financial position. The operating profit in the year 2006 was $2. 2 million compared to an operating profit of $0. 4 million in the previous year. The net profit was $0. 9 million in the year 2006 as compared to a net loss of $0. 04 million in the year 2005. The company reported a net profit margin of 1. 96% in the year 2006 as compared to 1. 28% in the previous year. The operating margin of the company also increased from 3. 56% to 4. 87%. The financial ratios for the current period is provided in the table below: Key Stats Ratios Quarterly (Jun 07) Annual (2006) Annual (TTM) Net Profit Margin 1. 66% 1. 96% 1. 28% Operating Margin 3. 58% 4. 87% 3. 56% EBITD Margin 9. 77% 8. 34% Return on Average Assets 2. 53% 2. 69% 1. 80% Return on Average Equity 4. 77% 5. 37% 3. 44% The company has seen a decreasing profit over the past few years. The analysis of the various factors that account for success in the fast food industry in this paper has highlighted the reasons responsible for the decreasing profit.