karam pizza.docx - Karans Pizza Case SMT Accounting and...

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Karan’s Pizza Case © Supply Chain Management Association SMT - Accounting and Finance Karan’s Pizza Case Evaluation –25% It is difficult to make a great deal of sense about the ratios for a company unless you know something about what their business is, what their objectives are and something about the environment in which they operate. In this exercise you will use the short write-up of a business that follows and its financial statements. Using ratios analyze their financial situation, put it into the context of their business and make recommendations around what its management should do to make it operate more successfully. 1. Review the Case Outline Sheet and the Ratio Outline Sheet to familiarize yourself with the exercise instructions. 2. Read the case and get to know the company and its issues. 3. Use the Case Outline Sheet that is provided to help you organize the information. 4. Then use the Ratio Outline Sheet to analyze the company’s financial statements.
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SMT - Accounting and Finance Karam’s Pizza & Samosa Karam Pizza & Samosa was established three years ago and has grown in popularity every year due particularly to the unusual menu choices, a fusion of Indian and Italian food, and food quality. Karam himself owns 65% of the shares, having invested a small inheritance he had received on the death of his aunt and uncle. His wife's parents own 10% of the shares and his friends had bought another 25% of the business's equity. (Financial statements are found at the end of the case.) Karam found that although he worked long hours and most evenings, he could take home a good salary. While he was careful to reinvest some of each period's profit into the company, he was able to pay dividends after the second and the third year, to himself and the other shareholders. By mapping the postal codes from the addresses, Karam knows that most of the restaurant's delivery business comes from a two-mile radius around the store. Several months ago, he began to track his walk-in customers by asking them their postal code. He was surprised to see that over half of the codes came from the area just north and north east of his store. In an informal survey, he found out that these customers picked up their food on the way home from work, either from the larger urban centre to which the satellite community in which he was located was attached. When asked why these customers did not request delivery, the most frequent responses were that they were outside Karam's free delivery area and it was easy to pick up the food on their way home. The walk-in trade was causing Karam some difficulty. In the past few months as the pizzeria's reputation grew, the dinner period brought traffic beyond Karam's capacity to service. For two and a half hours, around 5 PM to 7:30 PM, the owner and his staff provided a continuous stream of food but ended up turning people away. It took his ovens 15 minutes to bake a pizza. He had three banks of double ovens but at some point each evening Karam could handle no more new orders. Those who were getting their food, were often faced with long waits.
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  • Fall '16
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