Annual Report for Nathan's Famous
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The attachment is the Annual Report for Nathan's Famous and is to be used for answering each of these questions. The document is compressed as a *.RAR* file and needs to be extracted (unzipped). The same document is also available at this web location: http://216.139.227.101/interactive/nath2007/
1. Determine the working capital ratio for both year ends from Nathan's balance sheet. What does it tell you about your company?
2. Determine Nathan's total liabilities from its balance sheet and compare them to the total assets. This is called the debt/asset ratio. What does this indicate about the risk of Nathan's?
3. Determine whether the direct or indirect method is being used on Nathan's consolidated statement of cash flows. How did you determine this?
4. Is Nathan's net cash flow from operating activities positive or negative? Has it increased or decreased from previous years? What does this indicate about your company? Please only consider cash from operating activities for now.
5. If Nathan's used the indirect cash flow method, what information is not available that would be if they had used the direct method? Which method would you prefer for information purposes? Why?
6. Was Nathan's cash flow positive or negative from its investing and financing activities? What does each of these suggest about the company's health? Be sure to address both activities.
7. Read the Report of Independent Registered Public Accounting Firm for your company. Is it a qualified or unqualified opinion? How did you determine this?
8. What is your opinion concerning the reliability of the Report of Independent Registered Accounting Firm?
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Solution Summary
The Annual Report for Nathan's Famous is given. The working capital ratio is determined for both year ends from Nathan's balance sheet.
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The attachment is the Annual Report for Nathan's Famous and is to be used for answering each of these questions. The document is compressed as a *.RAR* file and needs to be extracted (unzipped). The same document is also available at this web location: http://216.139.227.101/interactive/nath2007/
1. Determine the working capital ratio for both year ends from Nathan's balance sheet. What does it tell you about your company?
Working capital provides the resources for the day to day operations of the firm.
Without cash, the firm cannot pay its bills. Without receivables, the company would have difficulty selling merchandise. Without inventory, the firm would be unable to make immediate delivery of goods.
Net Working Capital means the difference between current assets and current liabilities, and therefore, represents that position of current assets, which the firm has to finance either from long-term funds or bank borrowings.
Working Capital Ratios for Nathan
2007 2006
WORKING CAPITAL= 36821 26999
working capital = total current assets
in $000
NET WORKING CAPITAL=
current assets - current liabilities 27375 19075
in $000
CURRENT RATIO=
CURRENT ASSETS/CURRENT LIABILITIES 3.90 3.41
Note: Current Liabilities= 9446 7924
For calculation see excel file attached
This tells that the Nathan has ample liquidity. Liquidity is a company's ability to meet its maturing short-term obligations. Liquidity is important for conducting business activity especially in times of adversity such as when operating losses occur due to economic ...
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