The financial information shows that the total operating expenses of the company increased between the years 1994 and 1998. The provisions of store closings were too high in 1998, and contributed negatively on payroll and related expenses. Also occupancy and general administrative costs have increased. Those operating expenses were the areas that savings must start from. Luby’s Cafeterias net income declined since 1994. That financial information shows that, the company was not able to operate effectively and efficiently in order to cover its expenses.
The revenues increased dramatically, however the lack of management skills showed its negative impact on the increased expenses and the decline in operating income. Even not considering the provisions of store closings the company will be still on decline because the food and payroll areas have the most impact on expenses. According to this information I can say that the company is in effective in its business operations. This Financial information also tells that the company is still generating money, on the other hand loosing money, because of the operating expenses.
The balance sheet and performance ratios shows Luby’s Cafeterias profitability and other financial ratios such as the growth rates, return on assets and return on equity. Luby’s performance was not good compared to the industry with a few exceptions. Luby’s Cafeterias have four important ratios, which are really higher than the industry average. The debt to equity ratio is . 5 which shows that the debt could be used effectively and used for finance operations of the company. Also the company has the higher return on assets than the industry which is 1.
4. This information shows how much the company earned as their assets. Luby’s Cafeterias have also the higher return on investment ratio from the industry and a higher profit margin. These all information shows that the company is using its resources and finance capabilities effectively, however could not make the effective job on the business operations. Also one reason of their decline in the stock price is the lower return on equity ratio. It shows that the company is unable to invest stockholders money effectively.
It is a way of measuring the company’s profitability and growth. The information also tells the Luby’ Cafeterias profitability is over the industry average; however decline in the return on equity is one of the reasons of the company’s stock price decline. It is significant that the position that the company is holding is not good, but there is not a big gap between its competitors. The stock price of the company is below the price of other food companies in the industry, but for the one year period it has the positive return.
Related: The Stock Market Is Worried About Inflation. Should It Be?
Luby’s Cafeterias has a higher institutional ownership than other firms in the industry and they have a lower bets risk ratio which is 0. 6 percentage. However, Luby Cafeterias has a low stock performance and a market share. The decreasing number of customers lead the company to close other restaurants in order to increase the per capita revenues of stores up. All of that information implies that Luby’s Cafeterias could increase its profitability and improve their long term earnings, if they cut the expenses and operate effectively.
