Question

How am I to determine this answer if Chick fil A does not file a 10K

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1) Chick fil A may experience a decline in its Current Ratio if:

a. its adherence to biblical principles increases Customer Goodwill.

b. its support of family values compels it to enrich its future Employee Pension Plan benefits.

c. its closure on Sundays reduces credit card Accounts Receivable.

d. its aggressive growth policy compels it to assume more long term mortgage debt.

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2) Chick-fil-A may experience a decline in its Net Profit (or Net Income) Ratio if:

a. its closure on Sundays reduces Revenue.

b. its popularity with the evangelical Christian market increases Revenue.

c. its reliance on part-time employees reduces Expenses.

d. its shift from chicken to beef products increases Revenue.

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3) Chick-fil-A’s Christian beliefs:

a. have no significant impact on any of its financial results.

b. may have a significant impact on its profitability because of its closure on Sundays.

c. have been abandoned in its quest to optimize its financial results.

d. prevent it from competing directly with Shake Shack.

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4) Use appropriate analytical conclusions about the two organizations.

Shake Shack 10K 2018:

a. is in danger of running short of resources to pay its debts next year.

b. has been unprofitable for the past two years.

c. always produces more than enough operating cash to fully cover its investing activities each year.

d. appears to be a fiscally sound firm.

Answer 1

Part 1

Answer is option C

c. its closure on Sundays reduces credit card Accounts Receivable.

Current ratio is related to current assets and current liabilities. It declines due to decrease in current assets, increase in current liabilities or both. Account receivable is classified as current assets and in its reduction leads to decline current ratio.

Part 2

Answer is option A

a. its closure on Sundays reduces Revenue.

net profit decreases due to decrease in revenue or increase in expenses and in the given case there is reduction in revenue.

Part 3

Answer is option B

b. may have a significant impact on its profitability because of its closure on Sundays.

Due to closure, there will be reduction in revenue and thus net income will reduce and have significant impact on profitability of the business.

Part

Answer is option D

d. appears to be a fiscally sound firm.

Shake Shack Inc.’s Net income attributable for fiscal 2018 was $15.2 million, whereas in 2017 there was a loss of $0.3 million.