Finagle A Bagel Counts on Accounting and Finance
- Finagle A Bagel tracks cash, sales revenues, and expenses on a daily basis. How does this type of accounting system encourage effective decision making and discourage store level theft?
This is an effective form of handling account of any company. With this approach the company would be fully aware of their daily sales and what should be the balance at the counter at a given time. The data acquired from this process would ready to put in to excel sheets and be presented in the form of different kind of charts which would make it easy to make business decision that are in line with the needs of the company and not just arbitrary decision out of a reality contact. The store employees would also be aware that the accounts are checked on daily basis and they would not want to be involved on stealing from the cashier.
- As a small business, which of the financial ratios might Finagle A Bagel want to track especially closely? Why?
Finagle has been described as a small business. They pay their bills keeping in view their daily transactions. They need to pay for their purchases on a daily basis. They have to keep a track of their daily expenditure and their total earnings. The ratio between the two is the most important for Finagle A Bagel in my opinion. Once they know their daily status, they would be able to plan their activities effectively. They would also be able into their financial status and if necessary, look for a loan from a bank.
- If the co-presidents of Finagle A Bagel had approached venture capitalists for funding, they probably would have been able to open more new stores in less time. Instead, they opted to use bank financing that has to be repaid. Do you agree with their decision? Why?
It is true that Finagle A bagel would have been expanding more rapidly if they approached venture capitalists for funding. But that would have meant that they would need to give the share of their business to the venture capitalists. Becoming a shareholder in Finagle A Bagel would have provided them an opportunity to interrupt in the internal mattes of Finagle A Bagel and even want a share in the decision making processes. This would have limited the power that the actual owners enjoy. This would have also resulted in change of direction and look for quick profits than focus on long term goals. Therefore I agree with the decision to look for a loan from a bank instead of approaching venture capitalists.
- Given their growth plans, why would the co-presidents repay principal and interest on borrowed money rather than pay interest only? Which repayment plan would Finagle A Bagel’s bank prefer?
In my opinion the co-president want to repay all the loans that they acquire as quickly as possible. That is why he has agreed to repay the principle amount as well the interests on the loan. The payment of the principle amount also gradually decreases the amount of interest that Finagle A Bagel would have to pay. So as soon as the principal amount is paid off, the monthly installments would also decrease.
If we look at it from the bank perspective, the bank would want them to pay only the interest and not the principal amount. This would mean that the bank would get the same monthly amount in installments till the loan is paid off completely.
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