# Panera Bread Company in 2015

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Question description

Read Case # 5 (in your textbook), "Panera Bread Company in 2015: What to Do to Rejuvenate the Company's Growth?" and perform the following analysis:

1. What are the chief elements of Panera Bread's strategy?
2. Perform a SWOT analysis for Panera Bread. Does the company has any core competencies or distinctive competencies?
3. Perform financial/performance analysis of the company based on the data in the case for 2009-2014 period.
4. What strategic issues or problems does Panera Bread management need to address? ? What are your recommendations to address those issues/problems to top management?

Chapters 4 and 5 of your text provide detailed discussion of topics/tools that you would need to know in order to complete this assignment. Also, Appendix on pages 228-229 is useful to address question #3.

APPENDIX Key Financial Ratios: How to Calculate Them and What They Mean Ratio How Calculated What It Shows Sales revenues – Cost of goods sold __________________ ​         ​ Sales revenues Shows the percentage of revenues available to cover operating expenses and yield a profit. Higher is better, and the trend should be upward. Profitability Ratios 1. Gross profit margin 2. Operating profit margin (or return on sales) Sales revenues – Operating expenses ___________________ ​        ​ Sales revenues  or Operating income _________ ​    Sales revenues  ​  3. Net profit margin (or net return on sales) 4. Total return on assets 5. Net return on total assets (ROA) 6. Return on stockholder’s equity 7. Return on invested capital (ROIC) – sometimes referred to as return on capital (ROCE) 8. Earnings per share (EPS) after taxes _________    ​  Profits Sales revenues  ​  ______________    ​  Profits after taxes + Interest   ​   Total assets _________    ​  Profits after taxes   ​  Total assets Profits after taxes _____________    ​    Total stockholders’ equity ​ Shows the profitability of current operations without regard to interest charges and income taxes. Higher is better, and the trend should be upward. Shows after-tax profits per dollar of sales. Higher is better, and the trend should be upward. A measure of the return on total monetary investment in the enterprise. Interest is added to after-tax profits to form the numerator since total assets are financed by creditors as well as by stockholders. Higher is ­better, and the trend should be upward. A measure of the return earned by stockholders on the firm’s total assets. Higher is better, and the trend should be upward. Shows the return stockholders are earning on their capital investment in the enterprise. A return in the 12–15% range is “average,” and the trend should be upward. Profits after taxes _____________________ A measure of the return shareholders are earning on the long-term    ​    Long term debt + Total stockholders’ equity ​ monetary capital invested in the enterprise. Higher is better, and the trend should be upward. Profits after taxes _______________    ​ Number    of shares of common ​ stock outstanding Shows the earnings for each share of common stock outstanding. The trend should be upward, and the bigger the annual percentage gains, the better. Liquidity Ratios 1. Current ratio 2. Working capital Current assets _________ ​  Current  ​  liabilities  Current assets – Current liabilities Shows a firm’s ability to pay current liabilities using assets that can be converted to cash in the near term. Ratio should definitely be higher than 1.0; ratios of 2 or higher are better still. Bigger amounts are better because the company has more internal funds available to (1) pay its current liabilities on a timely basis and (2) finance inventory expansion, additional accounts receivable, and a larger base of operations without resorting to borrowing or raising more equity capital. Leverage Ratios 1. Total debtto-assets ratio 228 ______ ​  Total debt   ​  Total assets Measures the extent to which borrowed funds (both short-term loans and long-term debt) have been used to finance the firm’s operations. A low fraction or ratio is better—a high fraction indicates overuse of debt and greater risk of bankruptcy. Appendix  229 Ratio 2. Long-term debt-to-capital ratio How Calculated Long-term debt ______________________    ​ Long-term    debt + Total stockholders’ equity ​ 3. Debt-to-equity ratio Total debt _____________       ​  stockholders’ Total equity ​ 4. Long-term debtto-equity ratio Long-term debt _____________    ​ Total    stockholders’ equity ​ 5. Times-interest-earned (or coverage) ratio Operating income _________ ​    Interest expenses ​  What It Shows An important measure of creditworthiness and balance sheet strength. It indicates the percentage of capital investment in the enterprise that has been financed by both long-term lenders and stockholders. A ratio below 0.25 is usually preferable since monies invested by stockholders account for 75% or more of the company’s total capital. The lower the ratio, the greater the capacity to borrow additional funds. Debt-to-capital ratios above 0.50 and certainly above 0.75 indicate a heavy and perhaps excessive reliance on long-term borrowing, lower creditworthiness, and weak balance sheet strength. Shows the balance between debt (funds borrowed both short-term and long-term) and the amount that stockholders have invested in the enterprise. The farther the ratio is below 1.0, the greater the firm’s ability to borrow additional funds. Ratios above 1.0 and definitely above 2.0 put creditors at greater risk, signal weaker balance sheet strength, and often result in lower credit ratings. Shows the balance between long-term debt and stockholders’ equity in the firm’s long-term capital structure. Low ratios indicate greater capacity to borrow additional funds if needed. Measures the ability to pay annual interest charges. Lenders usually insist on a minimum ratio of 2.0, but ratios progressively above 3.0 signal progressively better creditworthiness. Activity Ratios 1. Days of inventory 2. Inventory turnover 3. Average collection period Inventory _____________ ​        ​ Cost of goods sold ÷ 365 Cost of goods sold __________ ​    Inventory  ​   receivable __________    ​  Accounts ​ Total sales ÷ 365    or Measures inventory management efficiency. Fewer days of inventory are usually better. Measures the number of inventory turns per year. Higher is better. Indicates the average length of time the firm must wait after making a sale to receive cash payment. A shorter collection time is better. receivable __________    ​  Accounts Average daily sales ​  Other Important Measures of Financial Performance 1. Dividend yield on common stock 2. Price-earnings ratio 3. Dividend payout ratio 4. Internal cash flow 5. Free cash flow Annual dividends per share _______________ ​       Current market price per share ​ Current market price per share _______________    ​  Earnings    ​ per share  Annual dividends per share ______________ ​       Earnings per share  ​ After tax profits + Depreciation After tax profits + Depreciation – Capital expenditures – Dividends A measure of the return that shareholders receive in the form of dividends. A “typical” dividend yield is 2–3%. The dividend yield for fast-growth companies is often below 1% (maybe even 0); the dividend yield for slow-growth companies can run 4–5%. P-E ratios above 20 indicate strong investor confidence in a firm’s outlook and earnings growth; firms whose future earnings are at risk or likely to grow slowly typically have ratios below 12. Indicates the percentage of after-tax profits paid out as dividends. A quick and rough estimate of the cash a company’s business is generating after payment of operating expenses, interest, and taxes. Such amounts can be used for dividend payments or funding capital expenditures. A quick and rough estimate of the cash a company’s business is generating after payment of operating expenses, interest, taxes, dividends, and desirable reinvestments in the business. The larger a company’s free cash flow, the greater is its ability to internally fund new strategic initiatives, repay debt, make new acquisitions, repurchase shares of stock, or increase dividend payments.

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