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Unformatted text preview: Management: You need to understand leverage so that you
can magnify returns for the firm’s owners and to understand 506 capital structure theory so that you can make decisions about
the firm’s optimal capital structure.
Marketing: You need to understand breakeven analysis, which
you will use in pricing and product feasibility decisions.
Operations: You need to understand the impact of fixed and
variable operating costs on the firm’s breakeven point and its
operating leverage, because these costs will have a major
impact on the firm’s risk and return. KRISPY KREME
INVESTORS EAT UP
KRISPY KREME STOCK
n April 2000, Krispy Kreme Doughnuts
went public at $21 a share. Investors
gobbled up the shares as fast as consumers did its hot-from-the-oven glazed
doughnuts. In 2001 the stock split, and
the company did a secondary offering
that doubled the number of shares in the market. By the end of its fiscal year in January 2002, the
company’s market capitalization was over $2 billion.
Krispy Kreme used the proceeds from its equity issues to fund an aggressive expansion
campaign to build store...
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