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    Perking Up Profits at Better Brew and Perfect Blend

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    Perking Up Profits at Better Brew and Perfect Blend

    After years of dreaming about owning your own business, you decided that owning a coffee shop would be perfect. Rather than start from scratch, however, you and your partners decide to look at two existing establishments, Better Brew and Perfect Blend. The two are for sale at the same price, and they are located in equally attractive areas. You manage to get enough financial data to compare the year-end condition of the two companies, as shown below. Study the numbers carefully; your livelihood depends on choosing wisely between the two establishments.

    Using the data on the enclosed attachment, answer the following questions:

    1: What factors should you consider before deciding which company to buy? What additional data might be helpful to you? (Note that net income is implied).

    2: What questions should you ask about the methods used to record revenues and expenses?

    3: On the basis of the data provided, which company would you purchase? Detail the process you used to make your decision.

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    Solution Preview

    I'll need to leave the question of which company should be purchased up to you. More information is needed than simply the balance sheet. Please refer to the attached document.

    Based on what you have, I would ...

    Solution Summary

    Here is just a sample of what you'll find in this solution:

    "Cash and Cash Equivalents is the amount of money the company has in bank accounts, savings bonds, CDs and money market funds - it tells how much is available to the business immediately. The more cash on hand the better - it gives the ability to pay dividends and repurchase shares and can also provide wiggle-room."