Sugar Bowl

Sugar B

TABLE OF CONTENT

Question 1 3

Question 2 3

Question 3 4

Question 4 5

Question 5 6

Question 6 7

Appendices 10

Question 1

Prior to evaluation of the offer, we must first list down the financial objectives of Shelby Givens.

* Make Interest payments to lenders

* Business loan repayment in 2015

* Study loan repayment through 25% equity stake.

For the evaluation of offer, let’s first analyze if she has been in line to meet the set financial objectives. If found in line with the objectives, then later is the need to decide if the proposed offer is worth the business or not.

In Q4, 2011, the club posed Net Income of over $230k while the next quarter has over $170k of Net Income earned. Keeping the figures in mind, it can be easily presumed that the Net income of such an amount is sufficient enough to contribute a share of $100k to Retained earnings each year. This way, the business will have the required sum in Retained earnings at the time of loan maturation.

Though indicated figures, it is worth keeping the business because it tends to pose incredible indicators of growth in the long-run.

Question 2

The reading in Q1, 2012 indicate that the business has lagged behind in attracting private events as the revenue not accounting for the Private Event patronage exactly matches the total revenue earned during the quarter. For this issue to resolve, there is felt a need to have means for constant inflows. Therefore, Givens has figured out two different alternatives for strategic partnership to streamline the inflows and enhance profitability in the business. . Of the available alternatives, the one that provides the club with enhanced profits in a short-run as well as in long run is to be considered the most viable option.

As we estimate the profits from a Bowling league option, we assumed that the profits on drinks is 50% of price since they are told to have high contribution margins after Dec,2011. The calculations estimate that...