Pizza Hut Financial Analysis
The company that will be looked for a Financial Analysis is Pizza Hut. Pizza Hut is an American owned pizzeria that was founded in 1958 by Dan and Frank Carney (Pizza Hut, 2021). This analysis will cover the ratios that are most important to the financial report for Pizza Hut.
For example, the ratios covered will be those of liquidity, profitability, and leverage. This report will also cover the activity and shareholder’s return. There also be a look into the organizational and operational plans that can help the company improve along with how Pizza Hut is doing given the climate of today’s society.
In order to understand the Financial Analysis of Pizza Hut, it is important to understand the current performance of the company itself. Therefore, the first ratio to be analyzed will be that of Liquidity. Given that liquidity can be defined as the current ratio, quick ratio,and operating cash flow ratio (Hayes, 2021). The Current ratio for Pizza Hut as of December 31, 2020 is 1.01 (Yum! Brands, 2020). In order to calculate the current ratio for Pizza Hut you must first put the formula together which is Current Ratio = Current Assets / Current Liabilities and from there you are able to the current assets for pizza hut was $1.689 B and the current liabilities is $1.675 B, which will give us the Current ratio of 1.0. Based on the information and calculations gathered it is clear to state that although Pizza Hut was able to pay short-term debts off and that they were in a stable position. Looking forward Pizza hut will need to improve in the liquidity area to sustain the stability or even grow passed their comfort zones. Next, we will take a look at the Profitability ratio for the chosen company. Pizza hut can calculate their profitability by ROE (return on equity), ROA (return on assets). In this case for Pizza Hut had a 23.95% decline from 2017 which is not a good look for the company.
Looking at the activity ratios is clear that from the years 2015 through 2018 Pizza Hut began to decline with a ratio of 0.02. The activity ratio also continued to decline in 2018 with
0.62 points. The drops in ratios show that Pizza Huts needs improvement all around, for example, through marketing and strategy they can have a plan that will be most effective for growth. As of 2019 Pizza Hut was able to return $1.3 billion to stakeholders. Overall, the research shows that Pizza Hut needs to improve on their current ratios. Along with the access to the information to have the accurate and most reliable data for the Financial analysis.
Organizational and Operational Plan
When it comes to the future of a company, in this case the future of Pizza Hut based off of the conducted financial report it is safe to say they will need to make plans that will result in long term success of the company. Pizza Hut has made it clear that their strategic alliance is to the number one pizza company in Latin America. When it comes to forming a strategic alliance the profitability for Pizza Hut needs to further improve to move forward and follow through with a plan. Given that the profitability in the years 2014-2016 dropped by 23.95% with a rapid 227.99% in the RPI for total equity (Wiwiek, Aldhita, & Aurora, 2020). Of the five ratios that reveal the most reliable and effectiveness of the strategic alliance would be the liquidity. Given that Pizza Hut needs improvement on their ratios is the most promising that they will pull through the current calculation for the future and possible of having the strategic alliance they seek.
Current Financial Climate
Given that in today’s financial climate has taken a pretty bud hit from a global pandemic, there is progress and growth to be made by companies and Pizza Hut itself has the opportunity to turn around and grow. With the economy today Pizza Hut has taken a few hits like most companies affect by a global pandemic. According to research Pizza hut fell 4% within their fourth quarter (Lucas, 2020). Another setback is from the pandemic possible taking the chances of Pizza Hut reaching some big targets for the year of 2020. However, there is room for comeback and the minor setbacks will help Pizza Hut gain footing back in and grow. Overall, I believe that if Pizza Hut were to barrow the ratio most improved would be the Profitability ratio given that it will need all the help to keep from declining in the future.
In conclusion the financial report was able to capture the data need to determine the ratios that best fit the image of Pizza Hut. This report was also able to give insight into what Pizza Hut can do as far has working through the current climate financial standings. But it was also able to provide insight on how as a company they will be able to grow through an organizational and operational plan. From the calculations of the liquidity Pizza Hut is able to pay off their current debts. Overall, the ratios collected and calculated show that in order to succeed and grow Pizza Hut needs to take step back and analyze what is declining the ratios and work on a plan that will have the most effective outcome.
Hayes, A., (2021). Liquidity Ratio Definition. Investopedia. Retrieved from https://www.investopedia.com/terms/l/liquidityratios.asp
Lucas, A., (2020). Pizza Hut’s slumping US business eyes turnaround with new management., CNBC. Retrieved from https://www.cnbc.com/2020/02/06/pizza-huts-slumping-us- business-eyes-turnaround-with-new-management.html
Pizza Hut, (2021). Our story. Pizza Hut, Hut Life. Retrieved from https://blog.pizzahut.com/our- story/
Wiwiek M, D., Aldhita E, N., & Aurora P, F., (2020). Financial performance analysis of pizza hut delivery before and after the emergence of third-party online food aggregators in Indonesia. South East Asia Journal of Contemporary Business, Economics and Law, Vol. 21, Issue 3 (April) ISSN 2289-1560. Retrieved from https://seajbel.com/wp- content/uploads/2020/05/SEAJBEL21_044.pdf
Yum! Brands., (2020). Current Ratio for Yum! Brands, Inc. Fin box. Retrieved from https://finbox.com/NYSE:YUM/explorer/current_ratio
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Purpose – This analysis is an individual assignment where you will analyze your own company in terms of its financial position. The easiest approach to this assignment is to complete a traditional financial analysis using key financial indicators along with ratio analysis. (For a review, check out chapter 1 or 2 of your finance textbook, titled “Analysis of Financial Statements”.) This assignment is intended to demonstrate the technique benchmarking your organization against your competition. This should help you identify strengths, weaknesses, and trends. Your analysis must include graphs and should cover all turns of the simulation. Detailed instructions are as follows:
Task(s) – This is really a 12-13 paragraph paper with 10 graphs. Do not use bullet points or short answers. You are welcome to use headers if it helps you to organize your thoughts.
– There should be 10 graphs comparing your company’s values to the industry average (e.g., 2 lines per graph, one representing your performance, and the other representing the average of the industry). Each graph should cover all years of the simulation. I highly recommend using line graphs.
– This means there should be 10 different financial indicators used.
– The measures can be from the income statement (e.g., revenues) or a financial ratio (e.g., return on equity). 5 of each type of measure (5 non-ratio measures and 5 ratio measures) is required. The book provides a good breakdown of financial information. The simulation does as well.
Ratio = x divided by y
Non-ratio = x + y or x-y
– A write up for each measure should be performed. You should tell me what the measure is (definition) and then discuss how your company compared to the industry average. These write ups should be roughly 4 sentences each (more if needed). If there are any large peaks or valleys, or your results deviate significantly from the rest of the industry, explain why they are present. Make sure to cite sources if you are using BSG or other descriptions.
– Make sure all your figures are properly labeled and your grammar is consistent. Please make sure your graphs are utilizing the proper scales (e.g., make sure that millions are millions, etc.).
– Do NOT use the graphs or charts available in the simulation. You are expected to create your own graphs in your program of choice (e.g., Excel).
– Most of the averages and information can be found in the reports provided by the simulation in the reports.
– Finally, you need to provide a paragraph or two summary of what you learned from the simulation. Did it meet the expectations that you had set for yourself prior to beginning the simulation? Where there any surprises? Overall, what will you be more aware of when you are working in an organizational context?
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