Case Study – America Coffee
It is January 1st, 2018. You are a senior analyst at America Coffee House Inc., (ACH), one of the leading coffee chains and wholesaler of coffee/bakery products in North America. The CEO of America Coffee House, Susan Matthews, has reached out to you to draft a report.
You will review and analyze the mission statement, case information, and financial statements of America Coffee House. You will use the information from your review to develop a SWOT analysis with the purpose of seeking support for proposed investment projects. You will also prepare a notional UCC asset tax values continuity schedule to analyze the impact of capital equipment disposals.
How to Proceed
Prepare your preliminary business case report by analyzing financial and non-financial data from the case information provided below. You will need to undertake, and include, the following:
- Review the information and financial statements provided below to gain an understanding of potential investment initiatives that would be supportable by management. Describe the intent of the mission statement from the annual report, and prepare a SWOT analysis (strengths, weaknesses, opportunities, and threats). Based on your SWOT analysis, assess and explain in detail if America Coffee House is currently delivering on its mission statement.
- Conduct financial statement analysis using liquidity ratios, debt ratios, profitability, and asset utilization ratios (at least three for each type of ratio). Comment on each of the ratiosand what they say about the company’s performance over the last five years.
- Prepare an assessment for each of the investment proposals included below, with a rationale that is aligned with the SWOT analysis and financial statement ratio analysis. Recommend if ACH should go forward with any of the proposed investments based on this analysis.
- Prepare a basic income statement forecast for the subsequent fiscal year, using a percentage of sales approach and usinginformation included in the materials below to support assumptions that correspond for each revenue and expense. Each line item (e.g., marketing expenses) should have a note and an explanation on how it was calculated.
- The CEO also needs help understanding the tax consequences of the disposal of a freighting truck. Prepare a CCA schedule for tax depreciation of a freighting truck purchased three years ago on January 1, 2015 for $350,000 (assume Class 16 with CCA rate of 40% and half-year rule applying). Calculate the tax consequence if the truck were to be sold at the beginning of this year (i.e., end of 2017) for either $90,000 or $120,000. The truck is the only asset in the class. Utilize the average tax rate that America Coffee House had in the last five years in your analysis of the tax impact.
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