Please include one financial strength and one financial weakness of Chipotle Mex
ID: 2413919 • Letter: P
Question
Please include one financial strength and one financial weakness of Chipotle Mexican Grill. The strength and weakness must be based on a ratio's trend using following data:-
Growth Profitability and Financial Ratios for Chipotle Mexican Grill Inc Class A Profitability Net Margin % Return on Assets % Financial Leverage (Average) Return on Equity % Return on Invested Capital % 2017-12 2016-12 2015-12 2014-12 2013-12 2012-12 10.84 19.55 1.27 25.09 25.09 3.94 8.66 10.18 0.59 0.97 10.57 18.04 1.28 22.97 22.97 10.19 17.81 1.31 23.52 23.52 17.97 12.74 12.74 24.28 24.2 2017-12 2016-12 2015-12 2014-12 2013-12 2012-12 Liquidity/Financial Health Current Ratio Quick Ratio Financial Leverage 1.94 1.73 2.91 3.58 3.29 1.27 3.34 3.04 1.31 2.93 1.85 1.64 1.44 2.67 1.28 Key Ratios->Efficiency Ratios Efficiency Days Sales Outstanding Days Inventory Payables Period Cash Conversion Cycle Receivables Turnover Inventory Turnover Fixed Assets Turnover Asset Turnover 2017-12 2016-12 2015-12 2014-12 2013-12 2012-12 3.68 1.61 8.79 2.61 1.73 7.85 1.68 1.83 9.63 6.12 99.18 123.12 139.61 157.52 216.86 199 3.37 1.77 2.96 1.67 8.52 3.89 2.32 1.87 1.71 7.87 2.86 110.66 -4.92 213.32 226.61219.06 210.78 195.51 3.51 1.74 3.39 3.87 3.97 1.64Explanation / Answer
Answer)
Coming to the financial weakness the ratios as you observe when it comes to the year 2016-2 the ratio have sarply fell for example say net margin the difference is 9.98%(10.57% in 2015-12 - 0.59% in 2016-12).This is the major threat that the company must need to analyse that why it happened and how can it prevent such things from repeating again.
Coming to the financial strength that they are able to bounce back again in the next year itself(2017-12) which shows that there is some disturbance in the market in the previous year but the firm has doing well to overcome the issue.
Verdict.Although the firm has increased it profits still it need to get it improved as the highest net margin ratio (just taking it for example.alternatively any other ratio can be used) 10.84% and the current net margin ratio is 3.94% there is need to further analysis of issue to improve it further and prevent it from falling down again.