Bus Resc Nessa

FAR EASTERN UNIVERSITY FERN COLLEGE
PAGE
A STUDY ON BUSINESS PROFITABILITY OF THE CREN TOP

SNACKHAUS
FOR FUTURE EXPANSION
A Business Research
Presented to the
Far Eastern University FERN College
In Partial Fulfillment
Of the Requirements of the Degree on
Financial Management
By
BOBIS, John Romezel R.
BRILLANTES, Sophia Kyla D.
CALUB, Shane Abigail G.
MELARPIS, Michael I.
NITOR, Vanessa Eimee B.
TULANA, John David M.
FMG-22
AUGUST 2016
PAGE
TABLE OF CONTENTS
Executive Summary
UNIT I
INTRODUCTION
Chapter 1
Background of the Study
Introduction
1.1
Rational of the Study
1.2
Purpose of the Study
Chapter 2
Page
3
5
5
5
5
5
The Research Problem

2.1
Research Questions
7
7
2.2
2.3
Significance of the Study

Scope and Limitations
10
Chapter 3
Review of Related Literature

3.1
Business Expansion
11
3.2
12
11
3.3
3.4
3.5
3.6
Chapter 4
21
Advantages and Risks of Business

Expansion
Financial Ratios
Asset Management Ratio
Profitability Ratio
Financial Leverage Ratio
12
14
15
18
Frameworks of the Study

20
4.1
Theoretical Framework
20
4.2
Conceptual Framework
4.3
Operational Definition of Terms
22
UNIT II
RESEARCH METHODOLOGY
Chapter 1 Research Design
1.1
Research Design
1.2
Research Instrument
1.3
Study Locale
1.4
Sampling Technique
1.5
Statistical Treatment
25
25
25
26
26
27
27
UNIT III FINDINGS, ANALYSIS, CONCLUSION &

RECOMMENDATIONS
29
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Bibliography
47
Appendices
51
EXECUTIVE SUMMARY
An entrepreneur is referred to as endless seekers. Once their

business is doing great, growth is the next exciting level of challenge. Expanding
your business brings you to the peak of success but often, business needs adequate
funds to implement expansion ideas.
This thesis provides an evaluation of the profitability of Cren Top

Snackhaus in expanding their business. Methods of analysis include quantitative
research regarding the analysis of financial statements using the appropriate
financial ratios. These analysis are presented to be able to validate whether Cren
Top Snackhaus is profitable or not for making future expansion.
This research would be beneficial to all entrepreneurs who are

aspiring to put their business into the next level. Specifically for Cren Top
Snackhaus who would be able to make rational decisions in managing its business
and be able to make it on top.
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UNIT I
INTRODUCTION
CHAPTER I
Background of the Study
Globally, one of the most common businesses is food establishments.
Numerous food establishments are built along different areas in the Philippines
but only few have the ability to expand their business. Typically, one of the
primary goals of these business establishments is to grow and expand. Expanding
your business allows your business to be known locally, nationally or even
internationally if it is really doing great.
Cren Top Snackhaus is a newly established food business which is known
for its delicious Black Burger. Although Cren Top operates for just almost One
year and two months, still, it was able to expand in to two more branches. Cren
Top became popular specifically to the students of FEU Diliman since its main
branch is located along Victorian Heights which is only 3.1 km away from the
campus.
Over time, customers of Cren Top Snackhaus doubled in numbers that is
why the owner had the idea of establishing another branch of its business along
Mapayapa Village in front of FEU Dilman campus where majority of its customer
from the main branch came from here.
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This discourse aims to perform an analysis of the potential of Cren Top

Snackhaus to expand along Mapayapa Village. Specifically, the research delves in
the financial feasibility of Cren Top expansion by conducting a debt and cash flow
capacity analysis. Building realistic revenue projections and identifying the
financial ratios.
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CHAPTER 2
THE RESEARCH PROBLEM
Expanding a business always have a corresponding cost, one reason why

among many businesses only few were able to expand. Expansion encompasses a
wide range of preparation specifically in the financial aspects of your business.
An analysis of the corresponding financial statement through

profitability ratios, financial leverage and asset management ratios will help the
Cren Top SnackHaus broaden their comprehension about the financial position
and the result of its operations. This study aims to analyze the competitive
financial strength and weaknesses of Cren Top Snackhaus, to determine their
financial performance through the use of appropriate financial and statistical tools
as to expanding business and to provide recommendations for improvements on
the basis of the findings.
2.1 Research Questions

The study focused on the study of Business Expansion of Cren Top
SnackHaus along Sampaguita Avenue, Mapayapa Village.
Specifically, it seeks to answer following questions:
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1. Is the operation of Cren Top Snackhaus efficient and effective?

2. Would Cren Top Snackhaus profit from the potential expansion along
3.
Mapayapa Village?
Based on the analysis of financial statements, does Cren Top Snackhaus
have the adequate working capital that will support their business
expansion?
2.2 Objectives of the Study

1. To be able to assess the effectivity and efficiency operation of Cren Top
Snackhaus for business expansion.
2. To determine whether the profit or income of the Cren Top Snackhaus if
beneficial for expansion.
3. To evaluate their financial performance based on the analysis of their financial
statement as to expansion of their business.
2.3 Significance of the Study

This research will provide useful information to the following parties
about the possible opportunities that can be achieved through expansion:
To the Students. Financial Management majors will be given an idea on
how the expansion of the Cren Top Snackhaus works. This study will help them
understand what they will encounter in life after graduation and the dilemmas
they may encounter in the business world.
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To the Professors. This research can be one of their resource that would
give them an idea of what had happened on the said business and their story or
reasons of expanding their business. Thus, it will give them their students a better
understanding in the business expansion process.
To Businessmen. If ever a businessmen will encounter problems such as

deficits in his/her business, by reading this they will have an idea that expansion
could be a possible solution. They will also have possible ideas on how business
expansion happens.
To the Cren Top Snackhaus clients. For those who are having doubts or
second thoughts whether to eat at Cren Top Snackhaus in the process of
expanding, this thesis will give them information to sort their benefit of the doubt
to eat at Cren Top Snackhaus.
To the Society. This will be a sneak peak for the society about the concept
of expanding the business of Cren Top Snackhaus as well as their financial
aspects. This study will also help them understand the process of expanding a
business and how it will affect their customers as well as their financial aspects.
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To Future Researchers. This will give an idea for future researchers and
also this can be an example for the expansion process in the food chains industry
that may be the basis of their study.
2.4 Scope and Limitations

This study only focused on the business expansion of Cren Top
Snackhaus. The researchers assessed how Cren Top Snackhaus fared with respect
to operational processes, facilities & equipment, management, financial
performance and business expansion.
The control of this approach is the financial benefits, business risks, and
the working capital that supports the business expansion of Cren Top SnackHaus.
This research was conducted during the month of June to August of 2016 and
limited to Cren Top SnackHaus and its personnel. The researchers observed and
were interviewed regarding the management practices of Cren Top SnackHaus.
The participants were interviewed regarding the management, operational
processes and financial aspects of the company. The results of this study cannot
be generalized beyond this population. Data gathered from this research
instrument were analyzed and the results were interpreted.
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CHAPTER 3
REVIEW OF RELATED LITERATURE
The review of literature of this research focuses on the financial
factors needed to be considered for future expansion of a business. Business
expansion is discussed to give the readers a general description of growing a
business. A review of advantages and risks of expanding business provides a
background for studying the feasibility of a business to expand.
3.1 Business Expansion

Business expansion offers a wide variety of opportunities for the
business itself. It allows businesses in becoming nationally and globally
competitive towards the countrys economic advancement. Success in the field of
business does not stop by just being able to put up and start a small business.
"There always has to be a next thing," says Bruce Lynske, clinical
professor of management at Vanderbilt University's Owen Graduate School of
Management in Nashville, Tennessee.
According to Julie Monahan (2005) the key to your next move is
choosing the expansion method that best fits your company's product or service,
your strengths and weaknesses as a business owner, and the limitations of cash,
credit and existing resources. A business taking on a new growth strategy should
be walking on steady legs, not looking for ways to avoid unresolved problems.
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Growth is the central tenet of business development, be willing to apply the

brakes when the expansion rate is too much to handle.
3.2 Advantages and Risks of Business Expansion

Growing your business always has a corresponding impact to your
business either good or bad. One of the major advantages of business expansion is
that you will be able to increase the wealth of your business thus making the
economy more productive.
Moving your business to the next stage such as enlarging it may not
seem easy because of the possible negative outcomes once you made a wrong
decision
3.3 Financial Ratios
Liquidity Ratios
Nelson (2010) discussed in his book Quick Books 2011 in All-in-one for
Dummies that liquidity ratio evaluate how easily does a firm can pay its short
term debt obligations and also how to take advantage of immediate financial
opportunities. He also cited an example saying that everything else being equal,
the firm that's sitting on a large hoard of cash (high liquidity) can more easily pay
its bills and can take advantage of great opportunities that pop up. Meaning, once
a competitor gets in to trouble and wants to sell assets at a discounted price, a firm
with high liquidity and more cash on hand can easily take advantage of such an
opportunity.
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a. Working Capital
Wolfe (2016) elaborated that working capital is the amount of liquid
assets that a company has on hand and it is necessary to pay for planned and
unexpected expenses, meet the short-term obligations of the business, and to build
the business. He explained that the working capital is obtained through net
income, long term loan (non-current liabilities), Sale of capital (non-current
assets) and fund contributed by the owners and investors (stockholders). He
summarizes his idea about working capital as the money that firms need in order
to cover business expenses, meet short term obligations, and to grow your
business.
b. Current ratio
Gallo (2015) stated in her article that Current ratio that it is one of
several liquidity ratios that measure whether you sufficient cash to make payroll
in the upcoming year. It also measures a firms capacity to pay off its short term
debts with its current assets. It is closely related to the quick ratio, which is often
called the acid test because people use it to understand if things got really ugly,
could you stay afloat?
c. Quick Ratio
Whalley (2015) described Quick Ratio as a very useful
measurement instrument, presenting immediate insight into a companys financial
success and trend over time. According to him, organizations that can gather a 4.0
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or better ratio are adding revenue at four times the rate its leaving at, creating a
very compelling growth story and showing clear mastery of its sales process.
3.4 Asset Management Ratio
According to Jansen, Ramnath and Yohn (`2012) identifying
earnings management is important for financial statement users to assess current
economic performance, to predict future profitability, and to determine firm value.
Current financial performance of a business is a significant tool in
indicating whether a particular business is feasible for future expansion. One way
to measure the Financial performance of a business is through computing the asset
management ratios.Asset management ratios are computed for different assets and
varying purposes. Common examples of these ratios include inventory
turnover, Total asset turnover and cash conversion cycle. These ratios provide
relevant information into different financial areas of the business and highlight its
strengths and weaknesses.
a. Cash Turnover
Osmand Vitez, What is Cash turnover the article discussed that
Cash turnover is an efficiency ratio that allows a company to determine how it
used cash to generate sales. Month-end financial statements contain the
information necessary to compute this figure, namely the income statement
and balance sheet. Basically, the cash turnover formula tells a company how
many times the company went through its cash balance for the period, whether
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monthly or annual. Accountants often use the formula to help create budgets for
estimating and controlling business operations.
3.5 Profitability ratio

According to Spaulding (2016) profitability is the best measure for a
company for lack of it, will hinder company growth that may lead to its stock will
trend downward. Increasing profits are the best indication that a company can pay
dividends and that the share price will trend upward. The common profitability
measures compare profits with sales, assets, or equity: net profit margin, return on
assets, and return on equity.
a. Net Profit Margin
Net Profit Margin was defined by Joshu Kennon as the amount after tax
profit the business keeps for every dollar it generates in revenue or sales. He
added that profit margins vary by sector and industry, but all else being equal, the
higher a company's net profit margin compared to competitors, the better.
b. Operating Income Margin
Wilkinson (2013) in his article Operating Income Margin tells that the
operating profit margin ratio indicates how much profit a company makes after
paying for variable costs of production such as wages, raw materials and other
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factors. It is expressed as a percentage of sales and shows the efficiency of a

company controlling the costs and expenses associated with business operations.
Phrased more simply, it is the return achieved from standard operations and does
not include unique or one time transactions. Terms used to describe operating
profit margin ratios this includes operating margin, operating income margin,
operating profit margin or return on sales (ROS).
c. Return on Equity
Gallo (2016) in her article A Refresher on Return on Assets and Return
on Equity she stated that that ROE tells you what percentage of profit you make
for every dollar of equity invested in your company. According to Gallo, ROE is
an important ratio regardless of what industry you are in, and is more relevant
than ROA for some businesses.
d. Return on Investment
Elliotte (2016) in Investors Business Daily discussed the Return on
Equity Measures a Companys Profit Making Efficiency it its elaborated there
that ROE is a rough measure for how efficiently management is investing capital
to use. According to Elliote, high return on equity is a positive indication but must
also be determined against a companys debt and gross margin performance.
e. Dupont Return on Assets
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According Professor Cram (2007), Return on Assets (ROA) is a

percentage of the after-tax income as compared to the total assets of the company.
Management at Du Pont came up with Return on Assets, an approach that
determines the impact of asset turnover and profit margin on profits. This
interactive tutorial explains the concept by walking you through the calculations,
including where to find the numbers on the financial statements.
f. Gross Profit Margin

Wilkinson (2013) defined gross profit ratio also known as gross
margin, is the ratio of gross margin expressed as a percentage of sales. Gross
margin alone indicates how much profit a company makes after paying off its
Cost of Goods sold. It is a measure of the efficiency of a company using its raw
materials and labor during the production process.
Also, Wilkinson noted that the value of gross profit margin varies
from company and industry. The higher the profit margin, the more efficient a
company is. Gross profit margin can be assigned to single products or an entire
company. Wilkinson also discussed the disadvantages of gross profit margin. He
stated that many see gross profit margin disadvantages despite the common use of
gross profit margin ratios. The issue is that certain production costs are not
entirely variable. Some believe that only direct materials should be included as
they are the only variable to change in proportion to revenue. When applied, this
new gross profit margin causes all other related costs to be transferred to
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operational and administrative cost categories. This tends to cause a higher gross
margin percentage than originally. It is applied by certain industries and
businesses instead of the more common application.
3.6 Financial Leverage ratio
As stated by Peavler (2016) financial leverage ratios are also called
debt ratios or you may also find them called long-term solvency ratios. The
measure of the capacity of the business to meet its long term debt obligations such
as interest payments on debt, the final principal payment on debt, and any other
fixed obligations like lease payments. Long-term debt is defined as obligations to
repay with a maturity of more than one year. These ratios compare the overall
debt load of a company to its assets or equity, showing how much of the company
assets below to investors versus creditors. If shareholders own more assets, the
company is said to be less leveraged. If creditors own a majority of assets, the
company is said to be high leveraged. Clearly, financial leverage ratios help
management and investors to understand how risk level of the capital structure of
a company.
a. Total Debt to Equity Ratio

Gallo (2015) stated in her article A Refresher on Debt-Equity
Ratio that debt-to-equity ratio is the measure of how much debt you use to run
your business. The ratio tells you, for every dollar you have of equity, how much
debt you have. Its one of a set of ratios called leverage ratios that let you see how
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extensively a company uses debt. Every company has a debt-to-equity and any
company that wants to borrow money or interact with investors should be paying
attention to it.
b. Total Debt to Asset
Rosemary Peavler, The Debt to Asset Ratio, Its Importance and

Calculation She discussed that Debt to asset ratio is the percentage of total assets
that were paid for with borrowed money - creditors, liabilities and debt. Some see
it as an indicator of financial leverage, some interpret is as a measure of solvency,
some see it as critical to financial health or financial distress. The ratio is
expressed as a percentage.
CHAPTER 4
FRAMEWORKS OF THE STUDY
4.1 Theoretical Framework
18
nternal Growth
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19
Based on the review of related literature, this study aims to connect the
researchers to existing knowledge and it will give basis for the hypotheses and
choice of research methods of the researchers. Also, it helps to identify the limits
to those generalizations particularly in the Profitability of Cren Top Snackhaus for
the future expansion along Mapayapa Village.
Figure 4.1 Theoretical Framework on Strategy Theory
Franchising
where a business will lease its ideas to franchises, allowing new branches to open b
External Growth
(here mergers or take-overs combine two firms, increasing the scale of operation)
Grows by hiring more staff and equipment in order to increase the output)
4.2 Conceptual Framework

This study is to determine the Financial Profitability of Cren Top
Snackhaus for the Future Expansion along Mapayapa Village and the possible
factors that they can maximize the profit for expanding their business. We will
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20
study more on the possibility of Cren Top Snackhaus to expand and to gain profit
that can accumulate it for the future expansion
Figure 4.2 Conceptual Framework on the Analysis of Financial Statements of
Cren Top Snackhaus based on their financial ratios
PROCESS
OUTPUT
Gathering of data; analysis and interpretation of financial statements through financial ratios
Business Profitability of Cren Top Snackhaus for Future Expa
Statements of Cren Top Snackhaus as for the months of May 2015 - January 2016
4.4 Operational Definition of Terms

1. Business
It is the way to earn money by providing goods and services to the
customers or buyers.
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2. Expansion
It is a strategy of extending the business by offering to other places
that has not been reach of their goods and services. Expansion can
be done locally or in overseas.
3. Profitability
The situation in which a business is producing a profit. Also used to
determine the productivity of the business.
4. Competition
In business, competition occurs between two or more parties that has
only one goal to achieve: To get more potential customers that will
increase the earnings.
5. Profitability Ratio
Measures probability and measures a companys performance.
6. Financial Leverages
Multiplies a companys financial strength allowing them to provide a large
return that they could have.
7. Asset Management Ratios
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Indicate the ability of a company to translate assets into sales.

8. Feasibility Study
An assessment and analysis of the suggested project to find out if it is
profit making or gainful.
9. Diversity
Ability to adjust in a modern world of business improving its
profitability and growth.
10. Covenants
Is a mutual agreement between two or more parties to execute
activity limits.
11. Rapid Growth
Means hiring more people, furnishing more offices and perhaps
renting new quarters with the use of money.
12. Technical Competence

Skill and knowledge needed to accomplish a task, job or business.
13. Interactive Competence
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Concept describing the competence needed for participation in face-toface interaction.
UNIT II
RESEARCH METHODLOY
CHAPTER I - RESEARCH DESIGN
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The research problems were answered clearly by the review of related

literature. However, related literatures indicated limited information and some
points are still needed to be investigated regarding the capability of Cren Top
SnackHaus as a food establishment in expanding their business along Sampaguita
Avenue, Mapayapa Village. Therefore, the researchers provided further evidences
to further increase the validity of the topic being studied.
The purpose of this study is to assess and analyze the financial statements
in terms of profitability, asset management ratios as well as its financial leverage
for business expansion. To be able to gather the necessary data, the researchers
utilized the quantitative approaches. Through this, the researchers use the
authorized financial statements of the Cren Top Snackhaus from the owner.
Specifically, this chapter deals and describes the research design, research
instruments, study locale, sampling technique and statistical treatments that are
used in this study.
1.1
Research Design
The study adopted the quantitative exploratory research design to establish
a concrete and evident data in conducting a study regard to the potential of Cren
Top Snackhaus to expand. Using this method, it is easy for the researchers to
validate the findings in this study.
1.2
Research Instrument
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Research instruments are used for data collection to attain the point of
view of this study which is the potential of Cren Top SnackHaus for business
expansion along Sampaguita Avenue, Mapayapa Village. The intruments included
questionnaires, interview, observation and secondary sources.
The researchers focused on reading documents as a method of data
collection. This method enabled the researchers to diverge in order to come up
into more precise detail. The researchers asked the owner of Cren Top SnackHaus
for their financial statements needed for analyzing the capability for business
expansion.
1.3
Study Locale
The researchers proceed to the 3 branches of Cren Top SnackHaus that are
located at Lagro, Novaliches near to Bestlink College and Dahlia near BIR
Village to gather data. Respondents for the research will be the financial
statements coming from Cren Top Snackhaus.
1.4 Sampling Technique

The researchers used self-selection sampling technique which is under
convenience sampling in order to come up with reliable information. The basis of
selection of the researchers for the source of data is from the financial statements
given by the owner of Cren Top Snackhaus.
1.5 Statistical Treatment
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In this study, the researchers used these kinds of financial analysis

ratios to analyze and determine the potentiality of Cren Top Snackhaus in
business expansion along Sampaguita Avenue, Mapayapa, Village.
1. Liquidity Ratio- In accounting, the term liquidity is defined as the ability
of a company to meet its financial obligations as they come due.
The liquidity ratio, then, is a computation that is used to measure a
company's ability to pay its short-term debts. (study.com)
2. Asset management ratio it indicates how successfully a company is
utilizing its assets to generate revenues. It tells how efficiently and
effectively a company is using its assets in the generation of revenues.
They indicate the ability of a company to translate its assets into the sales.
(readyratios.com)
3. Financial Leverage Ratio is any one of several financial measurements

that look at how much capital comes in the form of debt (loans), or
assesses the ability of a company to meet financial obligations.
(investopedia.com)
4. Profitability Ratio used to assess a business's ability to generate earnings

as compared to its expenses and other relevant costs incurred during a
specific period of time.
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UNIT III
FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
CHAPTER I FINDINGS AND ANALYSIS
It is this chapter that the results of the data analysis are presented.
The data were collected and then processed in response to the research problems
posed in Unit 1 of this paper. The objective of this study is to conduct a financial
analysis of the financial statements of Cren Top Snackhaus for the feasibility of
expanding its business, to be able to assess the effectively and efficiently
operation of Cren Top Snackhaus for business expansion, to determine whether
the profit or income of the Cren Top Snackhaus if beneficial for expansion and to
provide recommendations for improvements on the basis of the findings.
The findings shown in this chapter validates the potentiality for Cren
Top Snackhaus to expand.
Appendix 1 depicts the results of operations of Cren Top Snackhaus. As
seen in the table, the business fluctuates from period to period depending upon the
revenues, expenses and operating costs.
Furthermore, during the month of May 2015 the total net income after tax
range from P19,883.30 with 47% of its gross profit, 31% of its expense and 16%
of the profit increasing to P24,225.14. Because of the profitable operation, the
owner of Cren Top Snackhaus was able to put up those branches along Quezon
City.
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Appendix 2 presents the balance sheet of Cren Top Snackhaus. As

depicted in the table, there is an increasing trend in the current and total assets for
Cren Top Snackhaus. Total current asset as of May 2015 increased by
P535,327.22 in January 2016. Its total assets range from P287,093.31 in May
2015 to 740,830.63 in January 2016. The liabilities and equity section of the
balance sheet as shown in the column of the month of September, it rose to about
844,122.99 due to advances from Claire Sorio.
Appendix 3 shows the liquidity of Cren Top SnackHaus. Statement of cash
flows lists the cash inflows and outflows of the business.
Aside from looking at basic financial statements of Cren Top Snackhaus,
the researchers administered an analysis of its financial statements using authentic
and accurate financial ratios applicable in this study.
Liquidity Ratios
I.
Working Capital
Table 3.4 Working Capital of Cren Top Snackhaus

Ratio
May
June
July
August
September
Working
Capital
-86,048.01
134,726.61
157,971.28
179,986.49
203,312.87
Ratio
October
November
December
January
Working
Capital
229,412.74
252,673.27
274,614.09
301,039.23
According to Weston and Brigham, "Working capital generally stands for

excess of current assets over current liabilities. Working capital management
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therefore refers to all aspects of the administration of both current assets and
current liabilities. Table 3.4 shows the working capital of Cren Top
Snackhaus. Cren Top Snackhaus, as seen on the table above, managed to
maintain a positive working capital ranging from -P86,048.01 to P301, 039.23
at the month of January 2016. From the Month of May, the liability is greater
than the assets meaning that they have a loss. From the month of June to
January, the current assets is greater than the current liability meaning that
there is an increase in their Working Capital and as the business runs, their
Working Capital increases.
II.
Current Ratio
Table 3.5 Current ratio of Cren Top Snackhaus

Ratio
May
June
July
August
September
Current
Ratio
0.65
1.71
1.53
1.44
1.39
Ratio
Current Ratio
October
2.69
November
2.02
December
1.78
January
1.77
In Table 3.5 from the month of October to January has the highest Current
Ratio and the month of May has the lowest current ratio. The current ratio is
computed by dividing the Current Assets over the Current Liability which means
that the higher the Current ratio is, the more income that the company earned. The
higher the current ratio, the more capable the company is of paying its
obligations, as it has a greater asset than the liability.
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III.
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Quick Ratio
Table 3.6 Quick Ratio of Cren Top Snackhaus

Ratio
May
June
July
August
September
Quick Ratio
0.40
0.98
1.05
1.09
1.11
Ratio
October
November
December
January
Quick Ratio
0.64
0.90
1
0.88
Quick ratios test the ability of the business to settle current obligations
without placing reliance on inventory since it is the most stringent and difficult
test of measuring financial strength (Kennon, 2006). Table 3.6 presents the quick
ratio for Cren Top Snackhaus for the month May 2015 to January 2016. As can be
seen, the quick ratio of Cren Top Snackhaus during the month of September is the
highest in 2003, when it registered 1.11. It, however, declined in October 2015
with a ratio of 0.64.
Efficiency Ratios or Asset Management Ratios
IV.
Cash Turnover
Table 3.7 Cash Turnover Ratio of Cren Top Snackhaus

Ratio
May
June
July
August
September
Cash
Turnover
Ratio
1.29
0.68
0.43
0.30
0.23
Ratio
Cash
Turnover
Ratio
October
November
December
January
1.64
0.61
0.37
0.40
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From the month May, June, July, August and September, the Cash
Turnover Ratio is declining. Meaning that the company isnt using its assets
efficiently and most likely some management or production problems. From the
month October, November and December, the Cash Turnover Ratio becomes
constant because the company is using its assets more efficiently.
Profitability Ratios
V.
Net Profit Margin
Table 3.8 Net Profit Margin of Cren Top Snackhaus

Ratio
Net
Profit
Margin
May
June
July
August
September
0.16
0.15
0.16
0.15
0.16
Ratio
October
November
December
January
Net
Profit
Margin
0.17
0.16
0.15
0.18
Net Profit Margin measures the total success of a business. Table 3.8 shows
the net profit margin ratio of Cren Top Snackhaus. Cren Top Snackhaus, as seen
on the table above, managed to maintain a positive net profit margin ratio to
convert its sales to profits ranging from 0.16- 0.18 in the month of May, July,
September, October, November (2015), January (2016) and obtain a lowest net
profit margin ratio of 0.15 in the month of June, August, December 2015.
31

VI.
PAGE
Operating Income Margin
Table 3.9 Operating Income Margin of Cren Top Snackhaus

Ratio
May
June
July
August
September
Operatin
g Income
Margin
0.16
0.15
0.16
0.15
0.16
Ratio
October
November
December
January
Operatin
g Income
Margin
0.17
0.16
0.15
0.18
Table 3.9 shows the percentage of sales and the efficiency of the busines
operation of Cren Top Snackhaus. Cren Top Snackhaus, as seen on the table
above, managed to maintain a positive operating income margin ratio ranging
from 0.16- 0.18 in the month of May, July, September, October, November
(2015), January (2016) and obtain a lowest operating income margin ratio of 0.15
in the month of June, August, December 2015.
VII.
Return on Investment
Table 3.10 Return on Investment Ratio of Cren Top Snackhaus

Ratio
May
June
July
August
September
ROI
0.45
0.07
0.07
0.07
0.07
Ratio
October
November
December
January
ROI
0.07
0.06
0.05
0.06
32
PAGE
Table 3.10 shows that from the month of July, August, September and
October, the Return on Investment Ratio 0.7 remains constant meaning that the
company is using their investments profitability efficiently. From the month
November and December, there is a declining point meaning that they use their
assets more efficiently.
VIII. Return On Equity

Table 3.11 Return on Equity Ratio of Cren Top Snackhaus
Ratio
May
June
July
August
September
ROE
0.45
0.07
0.07
0.07
0.07
Ratio
October
November
December
January
ROE
0.07
0.06
0.05
0.06
Table 3.11 shows the effectiveness of the management of Cren Top

Snackhaus. Cren Top Snackhaus, as seen on the table above, managed to maintain
the highest return on equity ratio of 0.7 in the month of June 2015 to October
2015 and decrease a little in the month of November 2015 to January 2016.
IX.
Du Pont Return On assets
Table 3.12 Du Pont Return On assets of Cren Top Snackhaus

Ratio
May
June
July
August
September
Operatin
g Income
Margin
0.16
0.15
0.16
0.15
0.16
Ratio
October
November
December
January
Operatin
g Income
0.17
0.16
0.15
0.18
33
PAGE
Margin
Table 3.12 shows that there is always a change in the Return on Assets. From
the month of May to December, maintain an increase/decrease of ratio by 0.01.
And from the month of January obtain its highest ROA meaning that the company
handles the asset turnover and profit margin inconsistent.
X.
Gross Profit Margin
Table 3.13 Gross Profit Margin of Cren Top Snackhaus

Ratio
May
June
July
August
September
Gross
Profit
Margin
0.47
0.46
0.46
0.47
0.48
Ratio
October
November
December
January
Gross
Profit
Margin
0.47
0.48
0.48
0.50
Table 3.13 shows how Cren Top SnackHaus percentage in the

effectiveness in keeping its earnings. In a span of nine months, from May to
January, its profit margin continues to increase.
Financial Leverage Ratios
XI.
Debt to Equity Ratio
Table 3.14 Debt to Equity Ratio of Cren Top Snackhaus

Debt to
Equity
May
June
July
August
September
5.56
0.72
1.06
1.36
1.60
34

Ratio
Debt to
Equity
PAGE
October
November
December
January
0.39
0.67
0.90
0.95
In the month; May, July, August, September, the majority of assets are
financed through debt. While, for the month; June, October, November, December
and January, assets are fundamentally financed through equity
XII.
Total Debts to Asset
Table 3.15 Total Debts to Asset of Cren Top Snackhaus

Ratio
Debt
Ratio
Ratio
Debt Ratio
May
June
July
August
September
0.85
0.42
0.51
0.56
0.62
October
0.28
November
0.40
December
0.47
January
0.49
In table 3.15 indicates that a higher percentage indicates more leverage

and more risky, it also specifies that total debt to total assets tells you the
percentage of total assets that were financed by creditors, liabilities, and debt.
35
PAGE
CONCLUSIONS
Since food is one of the important needs of a person, the food
establishment will continue to grow and prevail in providing the demand of the
consumers. The success of every food establishments cannot entirely be
determined by the number of its customers and the variety of the menu items and
services they offered. The performance of Cren Top Snackhaus is measured by
analyzing their financial statements specifically through computing the
appropriate financial ratios to see how they operate and manage their resources
and obligations to generate profitable earnings for the business in order to expand.
Cren Top Snackhaus, with one year of its existence in the business
industry, have proven its proficiency in introducing unique products to draw
attention to the market.
36
PAGE
Analyzing the financial statements through computing the asset

management ratio identifies that the Cren Top Snackhaus is able to operate its
management efficiently and effectively at the span of 9 months in the business
industry. The ratios calculated monthly at some point varies but majority is an
increasing ratio which is a good indication that the business is using its assets,
controlling, managing and directing production and sales effectively.
Profits earned by the business as of the month of May 2015 to January
2016 continue to boost forming a conclusion that Cren Top Snackhaus profit will
be beneficial in expansion. Businesses can only expand if it is earning large
profit. Cren Top Snackhaus is sufficient enough to be reinvested to increase the
scope of the business to expand.
Based on the analysis of the financial statements of Cren Top Snackhaus,
Cren Tops working capital as of the month of May which is the outset of the
business have a greater liability than its assets but were able to recover as of the
month of January 2016 having P301,039.23 working capital.
Cren Top
Snackhaus have the adequate capital that will support the expansion of its
business.
In summary, the main conclusion that can be drawn in this study is that
Cren Top Snackhaus have the capability to grow and expand utilizing its financial
statements. The business is profitable for business expansion because it is also
highly competitive having a strong stand in the food industry with only a year of
existence in the business industry.
37
PAGE
RECOMMENDATIONS
With the results and findings obtained in analyzing its financial
statements, Cren Top Snackhaus, however, object to improve its standing
regardless of its stability in order to make progress in the business industry. Cren
Top Snackhaus should pursue to strive for having a better quality of managing its
production and excellence in gaining customer satisfaction leading to earn large
profits. They should also manage its resources and obligations scrupulous
preventing complication in running the business.
Having analyzed the financial statements of Cren Top Snackhaus for future
expansion, the study enumerates the following recommendations.
1. Cren Top Snackhaus should increase its sales and products.
38
PAGE
This is the easiest way to expand the business. This approach

requires a different pricing strategies, bigger location and improved
marketing techniques.
2. Cren Top Snackhaus should move into a new geography or location.
Introducing variety of products in different locations can gain
profits for additional investments
3. Cren Top Snackhaus should introduce new product.
Offering new product to the customers who is in trend will definitely increase the
feasibility of the business to expand.
4. Cren Top Snackhaus should offer franchise.
Franchising a business is a way to develop and a great way to be
successful.
5. Future researchers recommend using other financial ratios in determining
whether the financial performance of a business is capable of bringing in
to a next level of its business management.
39
PAGE
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43
PAGE
Appendix 1
A Study on Business Profitability of the Cren Top SnackHaus for Future
Expansion
(1st Trimester S.Y 2016-207)
PROPOSED BUDGET
PRINTING/ PHOTOCOPYING EXPENSE
PHP 1,000.00
TRANSPORTATION EXPENSE
PHP 500.00
FOOD EXPENSE
PHP 1,500.00
TOTAL BUDGET
PHP 3,000.00
44
PAGE
45

Appendix 2
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FAR EASTERN UNIVERSITY FERN COLLEGE

A STUDY ON BUSINESS PROFITABILITY OF THE CREN TOP

FAR EASTERN UNIVERSITY FERN COLLEGE

The Research Problem

Significance of the Study

Review of Related Literature

Advantages and Risks of Business

Frameworks of the Study

UNIT III FINDINGS, ANALYSIS, CONCLUSION &

FAR EASTERN UNIVERSITY FERN COLLEGE

An entrepreneur is referred to as endless seekers. Once their

This thesis provides an evaluation of the profitability of Cren Top

This research would be beneficial to all entrepreneurs who are

FAR EASTERN UNIVERSITY FERN COLLEGE

FAR EASTERN UNIVERSITY FERN COLLEGE

This discourse aims to perform an analysis of the potential of Cren Top

FAR EASTERN UNIVERSITY FERN COLLEGE

Expanding a business always have a corresponding cost, one reason why

An analysis of the corresponding financial statement through

2.1 Research Questions

FAR EASTERN UNIVERSITY FERN COLLEGE

1. Is the operation of Cren Top Snackhaus efficient and effective?

2.2 Objectives of the Study

2.3 Significance of the Study

FAR EASTERN UNIVERSITY FERN COLLEGE

To Businessmen. If ever a businessmen will encounter problems such as

FAR EASTERN UNIVERSITY FERN COLLEGE

2.4 Scope and Limitations

FAR EASTERN UNIVERSITY FERN COLLEGE

3.1 Business Expansion

FAR EASTERN UNIVERSITY FERN COLLEGE

Growth is the central tenet of business development, be willing to apply the

3.2 Advantages and Risks of Business Expansion

FAR EASTERN UNIVERSITY FERN COLLEGE

FAR EASTERN UNIVERSITY FERN COLLEGE

FAR EASTERN UNIVERSITY FERN COLLEGE

3.5 Profitability ratio

FAR EASTERN UNIVERSITY FERN COLLEGE

factors. It is expressed as a percentage of sales and shows the efficiency of a

e. Dupont Return on Assets

FAR EASTERN UNIVERSITY FERN COLLEGE

According Professor Cram (2007), Return on Assets (ROA) is a

f. Gross Profit Margin

FAR EASTERN UNIVERSITY FERN COLLEGE

a. Total Debt to Equity Ratio

FAR EASTERN UNIVERSITY FERN COLLEGE

b. Total Debt to Asset

Rosemary Peavler, The Debt to Asset Ratio, Its Importance and

FAR EASTERN UNIVERSITY FERN COLLEGE

4.2 Conceptual Framework

FAR EASTERN UNIVERSITY FERN COLLEGE

4.4 Operational Definition of Terms

FAR EASTERN UNIVERSITY FERN COLLEGE

FAR EASTERN UNIVERSITY FERN COLLEGE

Indicate the ability of a company to translate assets into sales.

12. Technical Competence

FAR EASTERN UNIVERSITY FERN COLLEGE

Concept describing the competence needed for participation in face-toface interaction.

FAR EASTERN UNIVERSITY FERN COLLEGE

The research problems were answered clearly by the review of related

FAR EASTERN UNIVERSITY FERN COLLEGE

1.4 Sampling Technique

1.5 Statistical Treatment

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