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**Links to 10-K forms
https://www.sec.gov/Archives/edgar/data/1636222/000163622217000011/a10-k2016.htm#s2F5DFD461877585086D7EDA369C84A42
https://www.sec.gov/Archives/edgar/data/1062449/000106244917000013/bwld2016122510-k.htm#sE110BD1D28E554A8B34673259E72A995
Access the financial statements for Wingstop, Inc. for the year ending December 31, 2017 using the “Filings” tab on the Securities and Exchange Commission’s web site: http://www.sec.gov. The financial statements are contained in Item 8 of the Form 10-K. Required: Use the most recent financial statements for Wingstop and Buffalo Wild Wings to answer the following questions: 1. Calculate the current ratio for the past two years for both firms. Do you notice any significant differences? Calculate the gross profit percentage for the past two years both firms. Do you notice any trends? Calculate return on assets for the most recent year for both firms. Which company earned the highest return on assets? Decompose return on assets into net profit margin and total asset turnover. What insights does ROA profit driver analysis provide into the relative performance of the two companies? 2. 3. 4. 5.
Expert Answer
| Ratios | Wingstop | Buffalo Wild Wings | |||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||
| a | Current Assets | 11116 | 19620 | 176587 | 197751 | ||||||
| b | Current Liabilities | 16732 | 12570 | 241969 | 263623 | ||||||
| c | Gross profit | 57519 | 44019 | 1422106 | 1304910 | ||||||
| d | Revenue | 91359 | 77369 | 1986793 | 1812722 | ||||||
| e | Net Income | 15434 | 10106 | 94745 | 95069 | ||||||
| f | Total Assets | 111800 | 120650 | 1047219 | 1072382 | ||||||
| 1 | Current Ratio | a/b | 0.66 | 1.56 | 0.73 | 0.75 | |||||
| 2 | Gross prfit margin | c/d | 62.96% | 56.89% | 71.58% | 71.99% | |||||
| 3 | Return on assets | e/f | 13.81% | 8.38% | 9.05% | 8.87% | |||||
| 4 | Asset Turnover | d/f | 0.82 | 0.64 | 1.90 | 1.69 | |||||
| 5 | Net Profit margin | e/d | 16.89% | 13.06% | 4.77% | 5.24% | |||||
| From the analysis of the ratios we can note the following: | |||||||||||
| 1. Current ratio for both the companies for the latest year as around the same, with | |||||||||||
| Buffalo Wild Wings marginally better than Wingtop. But Wingstop is not well placed | |||||||||||
| when compared with its own ratio for the last year(1.56) and has come down drastically | |||||||||||
| to 0.66.Both the copmanies are not doing well on the liquidity front as the ratio is | |||||||||||
| very much below the 1.0 mark which is considered a good ratio. | |||||||||||
| 2. Gross profit margin for Buffalo is better than Wingstop indicating that the operations of Buffalo | |||||||||||
| are better managed than Wingstop. But Wingstop has shown improvement in the ratio | |||||||||||
| over the previous year, which if continued will improve its operational efficiency. | |||||||||||
| 3. Return on assets for Wingstop is better than Buffalo , which means that the assets are being | |||||||||||
| used better by Wingstop than Buffalo. But if we decompose this ROA, into Assets turnover | |||||||||||
| and net profit margin, we can see that actually the assets turnover is less for Winstop is less than | |||||||||||
| Buffalo , but since the net profit margin is very higher for Wingstop it is giving a better ROA. | |||||||||||
| This shows that even though assets usage is better for Buffalo , they have to improve the net profit | |||||||||||
| margin, to get the full benefit of the higher assets turnover ratio. | |||||||||||
