Keller's Freehouse Case Analysis
The first issue which needs to be addressed is to perform a monthly cash flow analysis for the fiscal year ending December 31st, 1990. Robert & Alex would like to open up their own restaurant/brew pub with $200,000 of their own money and with the use of external financing to finance the rest of the company until excess cash flows remain stable and positive.
The second issue is to identify the key variables in this analysis. With every company, there are certain variables which affect cash flow significantly more than others. How would changes in these key variables which are identified for this particular business affect the cash flow for Kellers' Freehouse? Is there anything that can be done to fix these variables or …show more content…
One important thing to note when taking a look at the cash budget, is that when sales for the month are low in the $550,000 sales projection, the firm has a difficult time meeting cash obligations and end up running a slight deficit for a few of the months. This implies that if sales are below the $550,000 minimum projection, the company may start to run into trouble meeting its cash obligations. This is due to the fact that at sales levels under $44,000 such as in the first cash budget in May when sales are only at 70% of the projected monthly sales, the firm's fixed costs such as the Lease, the other restaurant cost, promotion, and fixed labor are quite high. The company must ensure that their minimum sales expectations of $550,000 are met, otherwise