'NYSE:KKD, A Case Study of Krispy Kreme Doughnuts Inc. Financial Statements\r'

'Krispy Kreme Doughnuts was formed in 1933 when Vernon Carver Rudolph bought a doughnut shop in Kentucky. By 1937 the personal line of credit had branched into a wholesale ope symmetryn, supplying topical anesthetic grocery stores. Today, the business is owned by Krispy Kreme franchises and at that place are approximately 449 factory stores throughout the world.Krispy Kreme first-year floated on the NASDAQ in 2000 and, with a share bell of $40.64, immediately gained a market hoodization of $ euchre million.  A year later they switched to the NYSE where they flat trade under the ticker symbol KKD.In put up to perform a financial analysis of Krispy Kreme we set aside for utilize 3 main financial program lines; the income report, the statement of cash flow and the balance statement.The Income Statement, or clear and loss statement, pass on allow us to key how much profit has been generated by KKD and will allow us to cite how profitable the business is.  Whereas the income statement reports the results from operating the business over a precondition period of time, the balance saddlery provides a get word of the unwavering’s value at a snapshot period in time by presenting details of its assets, liability and owner beauteousness.Whilst an income statement reports a bon ton’s profits this is not rattling the same as their cash flows.  It is therefore grave that we in like manner look at this when analyzing the financial advantageouslyness and wellbeing of a company.  By looking at the free cash flows we are able to observe how much cash is available to the company by and by they lead paid for their investments in operating capital and fixed assets.  The free cash will be the amount that is available to redistribute to the owners and creditors.The financial reports for Krispy Kreme amongst the years 2005 and 2007 fuck be found in Appendix A.  At first glance it is perspicuous that a has been made over the last three years since their 2005 filing.  This could be potentially attributed to their rapid emergence and extension that has necessitated large investments in home, plant, equipment and investments in equity method franchises.  The losses, however, have reduced from $7.2 million in 3rd ninny 2006 to $798 in the 3rd quarter of 2007 that could indicate an improvement.The operating income, excluding the $21.05 million in depreciation, of Krispy Kreme at the end of the 3rd quarter 2007 was $22.11. The company has describe an investment of 12.63 that their annual report (www.krisykreme.com) attributed to the sale of property and the reacquisition of some of the franchises.  In addition to this KKD retired some of their capacious debt leading to a net loss of $15.48 in financing activities.The statement of cash flows reveal a net credit to impairment and lease stopping point of $268,000 in the 3rd quarter of 2007, a broad shift from the charge of $5.4million of 3rd quarter 2006.  understandably in the latter stages of 2006 a number of stores were unkindly or the franchises were terminated.  The third quarter 2007 balance sheet shows that KKD had cash of $23 million and a debt of $88 million.In order to fully understand KKD’s linear perspective in the market we need to understand the selective information in relative terms, i.e. how is KKD performing in equation to their competitors or similar companies. An analysis of KKD’s financial rations provides us with further insight into their operations and can allow us to better gamelight their strengths and weaknesses.  The debt ratio indicates how much debt KKD are using to finance their assets.  KKD’s debt ratio discloses that the company has a debt aim that matches their level of assets.  This is clearly bad new-sprung(prenominal)s.Furthermore they have negative kale per share ratio of -5.45.  This EPS ratio is significantly down the stairs the in dustry average of -2.75 will entail that it will be extremely difficult to attract new investors as they are unable to offer salary on the investment, at the moment they are crack a loss.  In addition to this, if the company financials do not pick up and they are force to default there will be no return for the investors at all.The Return on gross revenue ratio is currently at .39.  This is also down the stairs the industry average.  Such a low ratio indicates that the sales are not equivalent to the company’s current operating expenses.However, on a positive note, the Current Ratio (an indication of the firm’s liquidity as measured by its liquid assets) of 1.71 shows some recovery and demonstrated that KKD have the resources to meet short-term obligations.One potential source of this could be cash generated by financing activities that can facilitate to offset the unrewarded investments in finance acquisitions.  However, this is a short-term option an d will not significantly offset investors concerns.KKD currently has a quick stock turnover and averages 20 days.  This indicates that the company is managing their inventory well and is running an efficient operation with minimal waste.  In addition to this the turnover in receivable is 8 †11 days which is much lower than virtuoso of their major competitors; Starbucks.  Their accounts payable turnover is also high relative to Satrbucks but this is probably a contribute outcome of their franchise model.KKD as an investment has reliable a great deal of negative publicity recently and this will undoubtedly have squeeze their share price.  Accusations relating to their accounting practices and the potential over rising prices of profit levels will undoubtedly have lower investor’s confidence in the company and has also triggered a number of lawsuits.Through analyzing their current financial term and taking into consideration their ongoing issues with the S EC, I would not invest in this company.Reference PageKrispy Kreme Doughnuts Inc KKD (NYSE) Full Description. Retrieved April 3, 2008, from Reuters FundamentalsWeb target: http://stocks.us.reuters.com/stocks/fullDescription.asp?symbol=KKDKrispy Kreme History. Retrieved April 3, 2008, from Krispy KremeWeb site: http://www.krispykreme.com/history.htmlKrispy Kreme Quarterly Financial Report. (2007). Retrieved March 3, 2008, from Krispy KremeWeb site: http://www.krispykreme.com/investorrelations.html\r\n \r\n'