Financial Health of Krispy Kreme
Krispy Kreme
Financial Health Analysis
ACC 226
Depreciation Analysis: Depreciation is the term used for the decline of an object value over time. Krispy Kreme’s depreciation is calculated using the straight line method. Benefits from asset are more likely to be constant over its live, thus making straight line method of depreciation more appropriate as it results in a constant annual depreciation change. Krispy Kreme uses SFAS-142 for accounting of intangible assets. Per this method intangible assets identified with an indefinite life are not amortized and now are subject to an impairment test. Use of SFAS-142 results in more volatility in reported income as impairment losses may occur irregularly and in varying amounts. A possible explanation for the difference is amounts is that Krispy Kreme may have acquired plant assets for a note to pay later, another possible explanation is Krispy Kreme disposed of some plant assets at a loss during the year.
Company Stock Analysis: The No of common shares outstanding increased from 54,271 thousand to 56,295 thousand in 2003, a rise of 3.73%. For 2003, the weighted average common shares used were 55,093 and for 2002 were 53,703. For both years the shares outstanding at year-end were slightly higher than the average shares outstanding during the year. As of February 3, 2003 Krispy Kreme did not hold any treasury stock. Krispy Kreme also has no preferred stock or outstanding. No cash dividends were paid to common stockholder’s for fiscal years 2003 and 2002. This indicates that Krispy Kreme’s stock is a “Growth Stock” and explains why it has not paid any dividends. Krispy Kremes basic earnings per common share figure have consistently grown over this 3 year period. The 2003 amount is considerably larger than the prior years. This could have improved more if not for the higher than proportional increase in depreciation and the amortization for the arbitration award in 2003.
Financial Health Analysis
ACC 226
Depreciation Analysis: Depreciation is the term used for the decline of an object value over time. Krispy Kreme’s depreciation is calculated using the straight line method. Benefits from asset are more likely to be constant over its live, thus making straight line method of depreciation more appropriate as it results in a constant annual depreciation change. Krispy Kreme uses SFAS-142 for accounting of intangible assets. Per this method intangible assets identified with an indefinite life are not amortized and now are subject to an impairment test. Use of SFAS-142 results in more volatility in reported income as impairment losses may occur irregularly and in varying amounts. A possible explanation for the difference is amounts is that Krispy Kreme may have acquired plant assets for a note to pay later, another possible explanation is Krispy Kreme disposed of some plant assets at a loss during the year.
Company Stock Analysis: The No of common shares outstanding increased from 54,271 thousand to 56,295 thousand in 2003, a rise of 3.73%. For 2003, the weighted average common shares used were 55,093 and for 2002 were 53,703. For both years the shares outstanding at year-end were slightly higher than the average shares outstanding during the year. As of February 3, 2003 Krispy Kreme did not hold any treasury stock. Krispy Kreme also has no preferred stock or outstanding. No cash dividends were paid to common stockholder’s for fiscal years 2003 and 2002. This indicates that Krispy Kreme’s stock is a “Growth Stock” and explains why it has not paid any dividends. Krispy Kremes basic earnings per common share figure have consistently grown over this 3 year period. The 2003 amount is considerably larger than the prior years. This could have improved more if not for the higher than proportional increase in depreciation and the amortization for the arbitration award in 2003.