- How does the total stockholders’ equity of Panera and Chipotle compare? Does the difference mean that one company’s stock is more valuable than the other’s? Explain your answer.
- Compare the largest sources and uses of cash for each company.
ATTACHED IS THE FINANCIAL INFORMATION THAT WILL GUIDE YOU ON QUESTION ONE
use the information from the companies websites to answer question 2
CHIPOTLE AND PANERA COMPANY 3
Chipotle and Panera Company
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Both Chipotle and Panera are business that are doing good with great upside potential. Due to this, investors must judge on the two business in order to decide on which to invest on basing on the net worth. In order to achieve this, investor should analyze the debt and equity categories of the two companies and calculate a debt-to-equity ratio for each firm. The two company slightly differ on how much debt each uses to finance its assets relative to the amount of value represented in shareholders’ equity. Based on a financial accounting evaluation, Chipotle can be seen to score even on the net margin figure and this means that it is a more efficient company returning greater value to its shareholders and utilizing its assets in better, efficient and effective ways. Chipotle uses no debts to finance its operations while Panera Bread uses a combination of debt and equity. Due to this difference in their operation, Chipotle’s stock can be considered to be more valuable as it leaves more for the equity holders which is evident even when looking at free cash flow per share.
When the free cash per share of the two is compared, Chipotle’s is seen to be double that of Panera’s (Porter, 2017). This explains why Chipotle has such a high P/E ratio than Panera through good management of assets that leads to a better free cash. It also means that its stock trades at a much higher multiples making it valuable than that of Panera’s. comparing on the two companies, the largest sources and uses of cash for Panera is in financing its activities where its major source of cash is money from long-term loan which paying back the principal on those loans is its main uses of cash. For Chipotle, operating activities are it main uses of cash which does not include loan payments and purchase of depreciable assets. Its main source of cash is through collecting its receivable and showing some profit.
Reference
Porter, G. A. (2017). Using financial accounting information: the alternative to debits and credits. Place of publication not identified: Cengage Learning.
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