People in the middle class are cognizant that the minimum wage of $7.25 is insufficient for maintaining a satisfactory standard of living. Ample evidence supports the idea that the present generation’s quality of life requires a higher expenditure. The escalating demand from consumers for goods has caused a significant increase in living costs over time. Consequently, $7.25 is inadequate for providing a contented lifestyle, covering expenses such as food and bills. Numerous employers either have an aversion to or cannot afford to offer high wages, resulting in reduced hiring as a means to save money. As a consequence, there exists an insufficient remuneration rate for comfortable existence and elevated unemployment levels.
This overwhelming presence of technology is exerting control over our lives and causing us to become passive individuals who are consistently fixated on the internet and social media platforms. Previously, television advertisements, mobile phones, and computers did not exist to captivate our attention. Nonetheless, as these gadgets became accessible, we have grown dependent on them for our everyday tasks and to maintain economic stability. Despite their non-essential nature in terms of survival, the younger generations now heavily depend on these devices to navigate life’s challenges.
Consumer sovereignty is the belief that the economy relies on consumers buying products and manufacturers producing them. It states that consumer desires ultimately govern the economy. Consumer sovereignty dictates that all economic activities are influenced by consumers’ needs and wants, making it a fundamental mechanism in guiding economies.
Self-Sacrifice And Self- Development In Nowadays Society
The view of human goodness presented In the preceding chapter Is one which Is at present flung remarkably wide acceptance. Philosophers are often reproached with an Indisposition to agree, and naturally where Inquiry Is active diversity will obtain. But to-day there appears a strange unanimity as regards the ultimate formula of ethics. The empirical schools state this as the highest form of the struggle for existence; the idealistic, as self-realization. The two are the same so far as they both regard morality as having to do with the development of life in persons.
These Uris’s beings, both also acknowledge, can never rest till they attain a completeness now incalculable. Of course there is abundant diversity in the application of such formulae. In interpreting them we come upon problems no less urgent and tangled than those which vexed our fathers. Who and what Is a person? How far Is he detachable from nature? How far from his fellow men? Is his Individuality an Illusion, and each of us only an Imperfect phase of a single universal being, so that In strictness we must own that there is none good but one, that is God?
These and kindred questions naturally press the thought of our time. Yet all are but so many attempts to push the formula of self-realization into entire clearness. The considerable agreement in ethical formulae everywhere noticeable shows that at least so much advance has been made: morality has ceased to be primarily repressive, and is now regarded as the amplest exhibit of human nature, free from every external precept, however sacred. Man is the measure of the moral universe, and the development of himself his single duty.
But when we thus accept self-realization as our supreme aim, we bring ourselves Into engine conflict with one of our profoundest moral Instincts. It Is self-sacrifice that calls forth from all mankind, as nothing else does, the distinctively moral response of reverence. Intelligence, skill, beauty, learning-we admire them all: but when we see an act of self-sacrifice, however small, an awe falls on us; we bow our heads, fearful that we might not have been capable of anything so glorious. We thus acknowledge self-sacrifice to be the very culmination of the moral life.
He who understand it has comprehended all righteousness, human and divine. But how does self-sacrifice cord with self-development? Will he who is busy cultivating himself sacrifice himself? Is there not a kind of conflict between the two? Yet can we abandon either? And If not, must not the formula of self- realization accept modification? This, then, Is the problem to which I must now turn: the possible adjustment of these two Imperative calms,-the claim to realize one’s self and the claim to sacrifice one’s self.
And I shall most easily set my theme before my readers if I state at once the four appeared and reappeared in the history of ethics, and have been worked out there on a great scale. While not altogether consistent with one another, no one of them is unimportant. Together they compactly present those conflicting considerations which must be borne in mind when we attempt to comprehend the subtleties of self- sacrifice. I will endeavor to state them briefly and sympathetically. First, self-sacrifice is psychologically impossible. No man ever performs a strictly disinterested act, as has been shown in my chapter on self-direction.
Before desire will start, his own interest must be engaged. In action we seek to accomplish something, and between that something and ourselves some sort of valued injection must be felt. Every wish indicates that the wisher experiences a need which he thinks might be supplied by the object wished for. It is true that wishes and wills are often directed upon external objects, but only because we believe that our own well-being is involved in their union with us. I devote myself to my friend as my friend, counting his happiness and my own inseparable.
Were he so entirely a foreigner that I had no interest in him, my sacrifices for him-even if conceivable- would be meaningless. They acquire meaning only through my sense of a tie between him and me. My service of him may be regarded as my escape from petty selfishness into broad selfishness, from immediate gain to remote gain. But the prospect of gain in some form, proximate or ultimate, gain often of an impalpable and spiritual sort, always attends my wish and will. The aim at self-realization, however hidden, is everywhere the root of action.
No belittlement of ourselves can appear desirable except as a step toward ultimate enlargement. Self-sacrifice in any true and thorough-going sense never occurs. So cogent is this objection, and so frequently does it appear, not only in ethical concussion but in the minds of the struggling multitude, that he who has not faced it, and taken its truth well to heart, can have little comprehension of self-sacrifice. But it is a blessed fact that thousands who comprehend self-sacrifice little practice it largely. A second objection strips off the glory of self-sacrifice and regards it as a sad necessity.
While there is nothing in it to attract or be approved, the lamentable fact is that we are so crowded together and disposed to trample on one another that, partially to escape, we must each agree to abate something of our own in behalf of a neighbor’s gain. We cannot each be all we would. It is a sign of our mean estate that again and again we need to cut off sections of what we count valuable in order to save any portion. Only by such compromises are we able to get along with one another. He who refuses them finds himself exposed to still greater loss.
The hard conditions under which we live appear in the fact that such restraint is inevitable. I call self- sacrifice, therefore, a sad necessity. Daring lead. It should be counted among the objections because, while it admits the fact of self-sacrifice, it denies its dignity. A third objection declares sacrifice to be needless. Its very appearance rests on a misconception. We mistakenly suppose that in abating our own for the sake of our neighbor’s good, we lose. In reality this is our true mode of enlargement. The interests of the individual and society are not hostile or alien, but supplemental.
Society is nothing but the larger individual; so that he alone realizes himself who enters most fully into social relations, making the well-being of society his own. This is plain enough when we study the working of a small and comprehensible portion of society. The child does not lose through identification with family life. That is his great means of realizing himself. To assume contrast and antagonism between family interest and the interest of the child is palpably unwarranted and untrue. Equally unwarranted is a similar assumption in the broader ranges of society.
When we talk of sacrifice, we refer merely to the first stage and outer aspect of the act. Underneath, self-interest is guarded, the individual giving up his individuality only through obtaining a larger individuality still. Such identity of interest between society and the individual the moralists of the eighteenth century are never tired of pointing out. If they are right, and the identity is complete, then sacrifice is abolished or is only a generous illusion. But these men never quite succeeded in persuading the English people of their doctrine, at least they never carried their thought fully over into the common mind.
That common mind has always thought of sacrifice in a widely different way, but in one which renders it still more incomprehensible. Self- sacrifice it regards as a glorious madness. Though the only act which ever forces us to bow in reverent awe, it is insolubly mysterious, irrational, crazy perhaps, but superb. For in it we do not deliberate. We hear a call, we shut our ears to prudence, and with courageous blindness as regards damage of our own, we hasten headlong to meet the needs of others.
To reckon heroism, to count, up opposing gains and losses, balancing them one against another in order clear-sightlessly to act, is to render heroism impossible. Into it there enters an element of insanity. The sacrifices must feel that he cares nothing for what is rational, but only for what is holy, for his duty. The rational and the holy,-in the mind of him who has not been disturbed by theoretic controversy these two stand in harsh antithesis, and the antithesis has been approved by important ethical writers of our time. The rational man is, of course, needed in the humdrum work of life.
His assertive and sagacious spirit clears many a tangled pathway. But he gets no reverence, the characteristic response of self-sacrifice. This is reserved for him who says, “No prudence for me! I will he admirably crazy. Let me Such, then, are the four massive objections: self-sacrifice is unreal psychologically, aesthetically, morally, or rationally: But negative considerations are not enough. No amount of demonstration of what a thing is not will ever reveal what it is. Objections re merely of value for clearing a field and marking the spots on which a structure cannot be reared.
The serious task of erecting that structure somewhere still remains. To it I now address myself. What we need to consider first is the reality and wide range of self- sacrifice. The moment the term is mentioned there spring up before our minds certain typical examples of it. We see the soldier advancing toward the battlefield, to stake his life for a country in whose prosperity he may never share. We see the infant falling into the water, and the full-grown man flinging in after it his own assured and valued life n hopes of rescuing that incipient and uncertain thing, a little child.
Yes, I myself came on a case of heroism hardly less striking. I was riding my bicycle along the public street when there dashed past me a runaway horse with a carriage at his heels, both moving so madly that I thought all the city was in danger. I pursued as rapidly as I could, and as I neared my home, saw horse and carriage standing by the sidewalk. By the horse’s head stood a negro. I went up to him and said, “Did you catch that horse? ” miss, sir,” he answered. “But,” I said, “he was going at a furious pace. ” miss, sir. “And he might have run you down. miss, sir, but I know horses, and I was afraid he would hurt some of these children. ” There he stood, the big brown hero, unsalted, soothing the still restive horse and unaware of having done anything out of the ordinary. I entered my house ashamed. Had I possessed such skill, would I have ventured my life in such a fashion? Such are some of the shining examples of self-sacrifice which occur to us at the first mention of the word. But we shall mislead ourselves if we confine our thoughts to cases so climactic, triumphant, and spectacular. Deeds like these dazzle and do not invite to full analysis of their nature.
Let us turn to affairs more usual. I have happened to know intimately members of three professions- ministers, nurses, teachers-and I find self-sacrifice a matter of daily practice with them all. To it the minister is dedicated. He must not look for gain. He has a salary, of course; but it is much in the nature of a fee, a means of insuring him a certain kind of living. And while it is common enough to find a minister studying how he may make money in his parish, it is commoner far to find one bent on seeing how he can make righteousness prevail there, though it overwhelm him.
The other professions do not so manifestly aim at self-sacrifice. They are distinctly money-making. They exact a given sum for a given service. Still, in them too how constantly do we see that that which is given far outruns that which is paid for. I have watched pretty closely the work of a dozen or more trained nurses, and I believe it Would be hard to find any they are under the most irritating circumstances! How fully they pour themselves into the lives of their patients! How prompt is the deft hand! How considerate the swift intelligence! Their hearts are aglow over what can be given, not over what can be got.
A similar temper is widely observable among teachers, especially among those of the lower grades. Paid though they are for a certain task, how indisposed they are to limit themselves to that task or to confine their care of their children to the schoolroom! The hard-worked creatures acquire an intimate interest in the little lives and, heedless of themselves, are continually ready to spend and be spent for those who cannot know what they receive. Among such teachers I find self-sacrifice as broad, as deep, as genuine, if not so striking, as that of the soldier in the field.
Evidently, then, self-sacrifice may be wide-spread and may permeate the institutions of ordinary life; being found even in occupations primarily ordered by principles of give and take, where it expresses itself in a kind of surpluses of giving above what is prescribed in the contract. In this form it enters into trade. The high-minded merchant is not concerned merely with getting his money back from an article sold. He interests himself in the thoroughly excellent quality of that article, in the accommodation of his customers, the soundness of his business methods, and the memorable standing of his firm.
And when we turn to our public officials, how frequent it is-how frequent in spite of what the newspapers say-to find men eager for the public good, men ready to take labor on themselves if only the state may be saved from cost and damage! But I still underestimate the prevalence of the principle. Our instances must be homelier yet. Each day come petty citations to self- sacrifice which are accepted as a matter of course. As I walk to my lecture-room somebody stops me and says, “What is the way to Berkeley Street? ” Do I reprovingly answer, Mimi must have made a mistake.
I have no interest in Berkeley Street. I think it is you who are going there, and why are you putting me to inconvenience merely that you may the more easily find your way? ‘ Should I answer so, he would think and possibly say, “There are strange people in Cambridge, remoter from human kind than any known elsewhere. ” Every one would feel astonishment at the man who declined to bear his little portion of a neighbor’s burden. Our commonest acceptance of society involves self- sacrifice, and in all our trivial intercourse we expect to put ourselves to unrewarded inconvenience for the sake of others. L What I have set myself to make plain in this series of graded examples is simply this: self-sacrifice is not something exceptional, something occurring at crises of our lives, something for which we need perpetually to be preparing ourselves, so that when the great occasion comes we may be ready to lay ourselves upon its altar. Such romanticism distorts and obscures. Self-sacrifice is an everyday affair. By it we live. It is the very air of our moral lungs. Without it society could not go on for an hour.
And Nothing else, I suppose, so instantly calls on the beholder for a bowing of the head. Even a slight exhibit of it sends through the sensitive observer a thrill of reverent abasement. Other acts we may admire; others we may envy; this we adore. Perhaps we are now prepared to sum up our descriptive account and throw what we have observed into a sort of definition. I mean by self- sacrifice any diminution of my own possessions, pleasures, or powers, in order to increase those of others. Naturally what we first think of is the parting with possessions.
That is what the word charity most readily suggests, the giving up of some physical object owned by us which, even at the moment of giving, we ourselves desire. But the gift may be other than a physical object. When I would gladly sit, I may stand in the car for the sake of giving another ease. But the greatest conceivable self-sacrifice is when I give myself: when, that is, I in some way allow my own powers to be narrowed in order that those of some one else may be enlarged. Parents are familiar with such exquisite charity, parents who put themselves to daily hardship because they want education for their boys.
But they have no monopoly in this kind. I who stand in the guardianship of youth have frequent occasion to miss a favorite pupil, boy or girl, who throws up a allege training and goes home-often, in my Judgment, mistakenly-to support, or merely to cheer, the family there. Of course such gifts are incomparable. No parting with one’s goods, no abandonment of one’s pleasures, can be measured against them. Yet this is what is going on all over the country where devoted mother, gallant son, loyal husband, are limiting their own range of existence for the sake of broadening that of certain whom they hold dear.
But when we have thus assembled our omnipresent facts and set them in order for cool assessment, the enigma of self-sacrifice only appears the more clearly. Why should a man sacrifice himself? Why voluntarily accept loss? Each of us has but a single life. Each feels the pressure of his own needs and desires. These point the way to enlargement. How, then, can I disinterestedly prefer another’s gain? Each of us is penned within the range of his solitary consciousness, which may be broadened or narrowed but cannot be passed. It is incumbent on us, therefore, to study our own enrichment.
Anticipating whatever might confirm or crumble our being, we should strenuously seize the one and reject the other. Deliberately to turn toward loss would seem to be crazy. What should a man accept in exchange for his life? Here is the difficulty, a difficulty of the profoundest and most instructive sort. If we could see our way clearly through it, little in ethics would remain obscure. The common mode of meeting it is to leave it thus paradoxical. Self-sacrifice banishes rationality and is a glorious madness. But such a conclusion is a repellent one. How can it be? Reason is man’s distinctive characteristic.
While brutes act blindly, while the punctual physical universe minutely obeys laws of which it knows nothing, usually it is open to man to Judge the path he will pursue. Shall we then say that, sacrifice, our single awesome height, it ceases? I cannot think so. On the contrary, I hold that in self-sacrifice we have a case not of glorious madness, but of somewhat extreme rationality. How, then, is rational contrasted with irrational guidance? As we here approach the central and most difficult part of our discussion, clearness will oblige me to enter into some detail. When a child looks at a watch, he sees a single object.
It is something there, a something altogether detached from his consciousness, from the table, from other objects around. It is a brute fact, one single thing, complete in itself. Such is the child’s perception. But a man of understanding looks at it differently. Its detached singleness is not to him the most important truth in regard to it. Its meaning must rather be found in the relations in which it stands, relations which, seeming at first to lie outside it, really enter into it and make it what it is. The rational man would accordingly see it all alive with the qualities of gold, brass, steel, the metals of which it is composed.
He would find it incomprehensible apart from the mind of its maker, and would not regard that mind and watch as two things, but as matters essentially related. Indeed, these relations would run wider still, and reason would not rest testified until the watch was united to time itself, to the very framework of the universe. Apart from this it would be meaningless. In short, if a man comprehends the watch in a rational way he must comprehend it in what may he called a conjunct way. The child might picture it as abstract and single, but it could really be known only in connection with all that exists.
Of course we pause far short of such full knowledge. Our reason cannot stretch to the infinity of things. But Just so far as relations can be traced between this object and all other objects, so much the more cantonal does the knowledge of the watch become. Rationality is the comprehending of anything in its relations. The perceptive, isolated view is irrational. But if this is true of so simple a matter as a watch, it is doubly true of a complex human being. The child imagines he can comprehend a person too in isolation, but rational proverb-makers long ago told us, “One person, no person. Each person must be conceived as tied in with all his fellows. We have seen how in the case of the watch we were almost obliged to abandon the thought of a single object and to speak of it as a kind of centre of constitutive relations. A plexus of ties runs in every direction, and where these cross there is the watch. So it is among human beings. If we try for a moment to conceive a person as single and detached, we shall find he would have no powers to exercise. No emotions would be his, whether of love or hate, for they imply objects to arouse them, no occupations of civilized life, for these involve mutual dependency.
From speech he would be cut off, if there were nobody to speak to; nor would any such instrument as language be ready for his use, if ancestors had not cooperated in its construction. His very thoughts would become a meaningless series of impressions if they indicated no reality beside themselves. So empty would be that fiction, the single and isolated individual. The real creature, rational and conjunct man, is he who stands in living relationship with his fellows, they being a veritable part of him and he of them. Man is essentially a social being, and apart from society he is not.
Yet this does not mean that society, any more than the individual, has an independent existence, prior, complete, and authoritative. What would society be, parted from the individuals who compose it? No more than an individual who does not embody social relationships. The two are mutual conceptions, different aspects of the same thing. We may view a person abstractly, fixing attention on his single centre of consciousness; or we may view him conjunct, attending to his multifarious ties. Now what is distinctive of self-sacrifice is that it insists in a somewhat extreme way on this second and rational mode of regard.
It is a frank confession of interlocking lives. It says, “l have nothing to do with the abstract, isolated, and finite self. That is a matter of no consequence. What I care about is the conjunct, social, and infinite self- that self which is inseparable from others. Where that calls, I serve. ” The self- sacrificing person knows no interest of his own separate from those of his father and mother, his wife and children. He cannot ask what is good for himself and set it in contrast with what is good for them.
For his own broader existence is presented in these dear members of his family. And such a man, so far from being mad, is wise as few of us are. Glorious indeed is the self- sacrifices, because he is so sane, because in him all pettiness and detachment are swept away. He appears mad only to those who stand at the opposite point of view, but in his eyes it is they who are ridiculous. In fact, each must be counted crazy or wise according to the view we take of what constitutes the real person. I remember a story current in our newspapers during the Civil War.
Just before a battle, an officer of our army, knowing of what consequence it was that his regiment should hold its ground, hastened to the rear to see that none of his men were straggling. He met a cowardly fellow trying to regain the camp. Turning upon him in a passion of disgust, he said, “What! Do you count your miserable little life worth more than that of this great army? ” “Worth more to me, sir,” the man replied. How sensible! How entirely Just from his own point of view, that of the isolated self! Taking only this into account, he was but a moral child, incapable of comprehending anything so difficult as a conjunct self.
He imagined that could he but save this eating, breathing, feeling self, no matter if the country were lost, he would be a gainer. What folly! What would existence be worth outside the total inter-relationship of human beings called his land? But this fact he could not perceive. To risk his separate self in such a cause seemed absurd. Turn for a moment and see how absurd the separate self appears from the point of view of the conjunct. When our Lord hung upon the cross, the jeering soldiers shouted, “He saved others, himself he cannot save. ” No, he could not; and his inability seemed to them ridiculous, while it was in reality his glory.
His true self he was saving-himself and all mankind-the only self he valued. Now it is this strange complexity of our being, compelling us to view ourselves in both sacrifice. But I dare say that when I have thus shown the reality and worth of the injunction self, it will be felt that self-sacrifice is altogether illusory; for while it seems to produce loss, it is in fact the avoidance of what entails littleness. So says Emerson:- “Let love repine and reason chafe, There came a voice without reply: T is man’s perdition to be safe When for the truth he ought to die. Have we not, then, by explaining the rationality of self-sacrifice, explained away the whole matter and practically identified it with self-culture? There is plausibility in this view-and it has often been maintained-but not complete truth. For evidently the motions excited by culture and sacrifice are directly antagonistic. Toward a man pursuing the aim of culture we experience a feeling of approval, not unmixed with suspicion, but we give him none of that reverent adoration which is the proper response to sacrifice. And if the feelings of the beholder are contrasted, so also are the psychological processes of the performer.
The man of culture starts with a sense of defect which he seeks to supplement; the sacrifices, with a sense of fullness which he seeks to empty. He who turns to self-culture says, “l have progressed thus far. I have gained thus much of what I would acquire. But still I am poor. I need more. Let me gather as abundantly as possible on every side. ” But the thought of him who turns to self- sacrifice is, “l have been gaining, but I only gained to give. Here is my opportunity. Let me pour out as largely as I may. ” He contemplates final impoverishment.
Accordingly I was obliged to say in my definition that the self- sacrifices seeks to heighten another’s possessions, pleasures, or powers at the cost of his own. Undoubtedly at the end of the process he often finds himself richer than at the beginning. Perhaps this is the normal result; but it is not contemplated. Psychologically the sacrifices is facing in a different direction. X Yet, though the motive agencies of the two are thus contrasted, I think we must acknowledge that sacrifice no less than culture is a powerful form of self-assertion.
To miss this is to miss its essential character, and at the same time to miss the safeguards which should protect it against waste. For to say, “l will sacrifice myself” is to leave the important part of the business unexpressed. The weighty matter is in the covert preposition for. -“l will sacrifice myself for,” An approved object is aimed at. We are not primarily interested in negating ourselves. Only our estimate of the importance of the object Justifies our intended loss. This object should accordingly be scrutinized. Self-sacrifice is noble if its end is noble, but become reprehensible when its object is petty or undeserving.
Omit or overlook that word for, and self-sacrifice loses its exalted character. It sinks into asceticism, one often most degrading of moral aberrations. In asceticism we prize self-sacrifice for its own sake. We hunt out what we value most; we Judge what would most completely fulfill our needs; and then we turn morality upside down; and in place of the Christian ideal of abounding life, to et up the pessimistic aim of impoverishment. There is nothing of this kind in self- sacrifice. Here we assert ourselves, our conjunct selves.
We estimate what will be best for the community of man and seek to further this at whatever cost to our isolated individuality. By this dedication to a deserving object sacrifice is purified, ennobled, and made strong. We speak of the glorious deed of him who plunges into the water to save a child. But it is a foolish and immoral thing to risk one’s life for a stone, a coin, or nothing at all. “Is the object deserving? ” we must ask, “or shall I serve myself for greater need? ” Too easily does our sympathetic and sentimental age, recklessly eulogistic of altruism, hurry into self-sacrifice.
Altruism in itself is worthless. That an act is unselfish can never Justify its performance. He who would be a great giver must first be a great person. Our men, and still more our women, need as urgently the gospel of self-development as that of self-sacrifice; though the two are naturally supplemental. Our only means of estimating the propriety and dignity of sacrifice is to inquire how closely connected with ourselves is its object. Until we can Justify this injection, we have no right to incur it, for genuine sacrifice is always an act of self- assertion.
In saving his regiment and contributing his share toward saving his country, the soldier asserts his own interests. He is a good soldier in proportion as he feels these interests to be his; while the deserter is condemned, not for refusing to give his life to an alien country and regiment, but because he was small enough to imagine that these great constituents of himself were alien. I tell the man on the street the way home because I cannot part his bewilderment from my own. The problem always is, What may I suitably regard as mine?
And in solving it, we should study as carefully that for which we propose to sacrifice ourselves as anything which we might seek to obtain. Triviality or lack of permanent consequence is as objectionable in the one case as in the other. The only safe rule is that self-sacrifice is self-assertion, is a Judgment as regards what we would welcome to be a portion of our conjunct self. Perhaps an extreme case will show this most clearly. Jesus prayed, “Not my will, but thin, be done. ” He did not then lose his will. He asserted and obtained it. For his will was that the divine will should be fulfilled, and fulfilled it was.
Financial Analysis: Bob’s Restaurants
Introduction
In the following analytical report, the financial performance of Bob’s Restaurants is assessed. Operating Performance & Selected Sheet Items for the years of 1997-2004 was provided along with Stock Price Performance for Fiscal Years 1996-2004.
The results of the analysis were then compared with the industry standards in order to demonstrate Bob’s Restaurants standing in the restaurant industry. For the purposes of financial statement analysis, ratio analysis was used. After analyzing Bob’s Restaurants a recommendation is made on future actions.
Company Background
Bob’s Restaurants owned 223 restaurants by the end of their 1997-1998 fiscal years; however during 1999 the company closed 10 restaurants and 11 more by end of 2001. Bob’s Restaurants continue losing money and had to close 6 more of their restaurants by 2002.
The company had a tough time by 2003 where they closed 48 of their restaurants remaining only 148 operable sites. By 2004 Bob’s Restaurants owned 138 restaurants, a total of 85 restaurants closed during the years of 1997-2004. In 1998 Bob’s Restaurants experienced a decline in net income from $28 million in 1997 to $5 million in 1998 to negative $6 million in 2004. The higher Stock Price of the company was $25. 25 in 1996 going down to $0. 95 in 2003. Bob’s fiscal year ends August 31. No store closing expenditures were incurred in fiscal years 1994-1996 or 1999.
Bob’s marketing budget averaged 2% of sales in 1997 and 1998, 2. 4% in 1999, 2. 1% in 2000, 1. 6% in 2001, 0. 26% in 2002, 0. 34% in 2003 and 1. 3% in 2004. Total Operating Expenses excludes depreciation and amortization. Net income is net of income tax provision (benefit). The Provision for Store Closings was reclassified as Discontinued Operations (net of taxes) in 2003.
Business Analysis
Numbers provide a way to determine how a business is performing. Measuring financial performance is historical in nature and uses the actual numbers or results from business operations. It tells us what the business has produced, and it compares and evaluates that performance to specific measures. In the business analysis of Bob’s Restaurants the process of Ratio Analysis was chosen as the most suitable for comparison with industry standard indicators which are the most often and in that case solely, available. Several different ratios were used in order to assess Bob’s Restaurants profitability, financial leverage and activity measures. Ratio analysis enables the analyst to compare items on a single financial statement or to examine the relationships between items on two or more statements.
After calculating ratios for each year’s financial data, trends for the company can be examined across years. a. Profitability Ratios. – Profitability ratios are gauges of the company’s operating success for a given period of time. These financial ratios measure the return earned on a company’s capital and the financial cushion relative to each dollar of sales. A firm that has high gross profit margins, for instance, is going to be much harder to put out of business when the economy turns down than one that has razor-thin margins.
Likewise, a company with high returns on capital, even with smaller margins, is going to have a better chance of survival because it is so much more profitable relative to the shareholders’ contributed investment. For most of these ratios, having a higher value relative to a competitor’s ratio or the same ratio from a previous period is indicative that the company is doing well. As most company’s avowed aim is to make profits, it follows that the most important ratios to analyze are the profitability ones. However, these ratios tend to be less analytical. A restaurant has a major investment in assets.
It is essential that there are sufficient earnings to cover the cost of financing and to provide a satisfactory return to the investors. Return on Total Assets (ROTA). A ratio that measures a company’s earnings before interest and taxes (EBIT) against its total net assets. The ratio is considered an indicator of how effectively a company is using its assets to generate earnings before contractual obligations must be paid. The greater a company’s earnings in proportion to its assets (and the greater the coefficient from this calculation), the more effectively that company is said to be using its assets.
Bob’s Restaurants average result of -0. 81% on return on total assets for the past eight years of 1997-2004, compares unfavorably with the restaurant industry standard of 5. 2%. Return on Equity (ROE). Return on equity is one of the most important profitability metrics. It reveals how much profit a company earned in comparison to the total amount of shareholder equity found on the balance sheet. It’s what the shareholders “own”. Shareholder equity is a creation of accounting that represents the assets created by the retained earnings of the business and the paid-in capital of the owners.
A business that has a high return on equity is more likely to be one that is capable of generating cash internally. For the most part, the higher a company’s return on equity compared to its industry, the better. Bob’s Restaurants return on equity for the eight years of 1997-2004 averages -2. 55%, compares unfavorably with the restaurant industry standard of 12. 99% Return on Sales (ROS). A ratio widely used to evaluate a company’s operational efficiency. ROS is also known as a firm’s “operating profit margin”.
This measure is helpful to management, providing insight into how much profit is being produced per dollar of sales. As with many ratios, it is best to compare a company’s ROS over time to look for trends, and compare it to other companies in the industry. An increasing ROS indicates the company is growing more efficient, while a decreasing ROS could signal looming financial troubles. Bob’s Restaurants return on sales for the eight years of 1997-2004 averages 2. 11% compares favorably with the restaurant industry standard of 2. 2% Net Profit Margin.
The net profit margin tells you how much profit a company makes for every $1 it generates in revenue or sales. Net Profit margins vary by industry, but all else being equal, the higher a company’s profit margin compared to its competitors, the better. Bob’s Restaurants net profit margin decreased from 5. 74% in 1997 to -2. 09% in 2004. Therefore, more net sales dollars have been taken up by a high level of spending in payroll and related cost of labor which increased 12% from 1997 to 2001 even with 21 restaurants closed. Another line that affected was an increase in Provision for Store Closings.
Net Profit Margin industry standard is 3% and hence Bob’s Restaurants average -0. 98% rate of net profit margin does not compare favorably. This is mostly due to the decline in revenue during the past six years. A negative ratio, resulting from negative net profit margin, presages serious problems. All the above presented indicators appear to be unfavorable for Bob’s Restaurant when compared with industry results except for Return on Sales. As mentioned already, progressive decrease in revenue impacted significantly on the overall financial measures of profitability.
Liquidity ratios are measures of the short-term ability of the company to pay its debts when they come due and to meet unexpected needs for cash. Show the solvency of a company based on its assets versus its liabilities. In other words, it lets you know the resources available for a firm to use in order to pay its bills, keep the lights on, and pay the staff.
The comparison of current assets to current liabilities is a commonly used measure of short-run solvency, i. e. the immediate ability of a firm to pay its debts as they come due. The current ratio is particularly important to a company thinking of borrowing money or obtaining credit from their suppliers. Potential creditors use this ratio to measure a company’s liquidity or ability to pay off short-term debts. For the past eight years from 1997-2004, Bob’s Restaurants current ratio has been higher than the restaurant industry standard of . 9:1. By the end of their 2001 fiscal year, current ratio went up to 81. 37 averaging the eight year period to 33. 15; only to show the company inability to meet current financial obligations.
The food service industry typically has a low current ratio because of:
- Minimum credit extended to customers,
- Low inventories on hand,
- Quick cash turnover because of rapid inventory turnover.
Usually, the Quick Test ratio does not apply to the handful of companies where inventory is almost immediately convertible into cash such as the restaurant industry. Instead, it measures the ability of the company to come up with cold, hard cash literally in a matter of hours or days. Bob’s Restaurants show intensive cash problems, the company’s quick ratio for the eight years of 1997-2004 averages 26. 4% which compares unfavorably with the restaurant industry standard of .
Financial leverage is another critical area of business decisions as it presents an entity’s ability to pay its debts and its short and long-term solvency. There are several different ratios, but to main factors looked at include debt, equity, assets and interest expenses. Debt to Total Assets Ratio. The debt/asset ratio shows the proportion of a company’s assets which are financed through debt. If the ratio is less than one, most of the company’s assets are financed through equity.
If the ratio is greater than one most of the company’s assets are financed through debt. Companies with high debt/assets ratios are said to be “highly leveraged” and could be in danger if creditors start to demand repayment of debt. Companies with high ratios are placing themselves at risk especially in an increasing interest rate market. Creditors are bound to get worried if the company is exposed to a large amount of debt and may demand that the company pay some of it back. Bob’s Restaurants ratios of 42. 70% (year 2000), 49. 66% (year 2001) show the fact that assets are financed more by debt.
Furthermore, Bob’s Restaurants high ratio can be interpret as a high debt leveraged company. Indicates what proportion of equity and debt that the company is using to finance its assets. Sometimes investors only use long term debt instead of total liabilities for a more stringent test. A low debt/equity ratio implies ability to borrow, where a ratio greater than one means assets are mainly financed with debt and less than one means equity provides a majority of the financing. If the ratio is high (financed more with debt) then the company is in a risky position, especially if interest rates are on the rise.
If the ratio is suspect and the company’s working capital, and current/quick ratios drastically low, this is a sign of serious financial weakness, which is the case of Bob’s Restaurants in this analysis. The company’s ratio is at an average of 95. 23% over the past eight years. The highest ratio reported was in 2003 of 173. 33%. Long Term Debt to Equity. The amount of long term debt on a company’s balance sheet is crucial. It refers to money the company owes that it doesn’t expect to pay off in the next year. Long term debt consists of things such as mortgages on corporate buildings and / or land, as well as business loans.
A great sign of prosperity is when a balance sheet shows the amount of long term debt has been decreasing for one or more years. When debt shrinks and cash increases, the balance sheet is said to be “improving”. When it’s the other way around, it is said to be “deteriorating”. This is the case of Bob’s Restaurants; their Long Term Debt went from $84 million in 1997, $116 million in 2000 to $ 124 in 2002. However, their long term debt improved to $25 million in 2004. Times-interest-earned or Coverage Ratio. A ratio used to determine how easily a company can pay interest on outstanding debt.
The interest coverage ratio is calculated by dividing a company’s earnings before interest and taxes (EBIT) of one period by the company’s interest expenses of the same period: the lower the ratio, the more the company is burdened by debt expense. When a company’s interest coverage ratio is 1. 5 or lower, its ability to meet interest expenses may be questionable. An interest coverage ratio below 1 indicates the company is not generating sufficient revenues to satisfy interest expenses. Bob’s Restaurants average result of 2. 8% for the past eight years of 1997-2004, compares favorably with the reasonable industry interest coverage ratio of over 1. 5. This ratio indicates that the company is generating sufficient revenue to satisfy interest expenses.
Activity or turnover ratios show how many times a company’s inventory is sold and replaced over a period. The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand or “inventory turnover days” Fixed Assets Turnover. Effectiveness in using plant and equipment.
A high fixed asset turnover ratio indicates management’s effectiveness in its use of fixed assets, whereas a low ratio indicates either that management is not effective or that some of those assets should be disposed of to increase ratio. A restaurant can increase its fixed asset turnover rate by increasing the number of seats, or if demand is there, serving more customers during each meal period. Bob’s Restaurants average result of 1. 39 for the past eight years of 1997-2004, is quite low which indicates that management is not effectively using its fixed assets. Furthermore, it’s been fluctuating between 1. 40; 1. 7 to 1. 37 throughout the past eight years.
In other words, it shows the amount of profit from each product unit. The basic principle is the concept of contribution margin — an item’s menu price less its food cost. While a menu item’s contribution margin reveals how many dollars each individual sale of the item adds to your revenue, you also need to know how popular the item is in order to determine the total dollars it nets your restaurant.
The DuPont Model developed by F. Donaldson Brown while working for DuPont de Nemours & Co. is a set of financial ratios and key figures relating to the Return on Investment ROI. It is a technique that can be used to analyze the profitability of a company using traditional performance management tools. To enable this, the DuPont Model integrates elements of the Income Statement with those of the Balance Sheet.
There are three components in the calculation of return on equity using the traditional DuPont model; the net profit margin, asset turnover, and the equity multiplier. By examining each input individually, we can discover the sources of a company’s return on equity and compare it to the industry and its competitors. The DuPont analysis offers a clear overview of the most relevant drives of the ROI and their interconnection; it cannot replace a detailed analysis.
The Total Asset Turnover has been decreasing during the period of 1997 to 2004 showing management inability of utilizing current assets. The Debt Ratio has decreased for the last two years going from 82. 79 to 28. 42 mainly due to the reduction of the total liabilities, indicating that the level of creditor financing has improved. The stock holder’s equity has decreased dramatically indicating not a good management of the company’s equity. The EBIT has decreased for the last two year mainly because the level of interest paid has decreased due to the reduction of liabilities.
The Net Profit Margin has decreased from 1997 to 2004 as the cost of goods sold did not increase at the same level that the sales increased. The Operating Profit Margin ratio was stable in 1997 when compared to 2001 and thane Profit Margin has also been improving for the last year.
The Return on Total Assets has decreased due the decrease in the company’s profitability, while Return on Equity has decreased on the last two-year as the stockholders equity also decreased. Overall it is clear that the profitability of the company has been decreasing for the last years mainly due to the increased in liabilities. The company also demonstrates that the profitability can be improved even further by having better inventory management and productivity maximization on their fixed assets.
Recommendations
First, the poor performance of Bob’s Restaurants is due in part to the high operating costs. To increase profitability, the company should consider reducing their operating costs. One recommendation would be to consolidate operations where possible to reduce labor costs. As mentioned before, labor costs had been rapidly increasing from 1997 to 2001 in spite of closing some facilities.
Restaurant food & beverage purchases plus labor expenses account for 65 to 70 cents of every dollar in restaurant sales. The combined total of these two cost categories, referred to as a restaurant’s “Prime Cost”, are where the battle for restaurant profitability is truly waged. This is not simply because they represent the largest percentage of a restaurant total expense, but also because management has the ability to control them. The layout of the kitchen and the way the menu items are selected can also favorably impact labor costs.
Bottom line, when a restaurants Prime Cost percentage exceeds 70%, a red flag is raised. Bob’s Restaurant has been up to 108%. Inventory is another important component that Bob’s Restaurants should consider monitoring closely. A restaurant that carries too much food inventory will inevitably have higher food costs than it would otherwise.
A typical full service restaurant should have on average no more than 7 days of inventory. Furthermore, Bob’s Restaurants should consider improving their Net Profit Margin. One option would be to work on an aggressive marketing strategy that position the restaurants best in the market. Also, the company should consider pursuing a competitive position as well. In addition, Bob’s Restaurant needs to put its assets based to work so it can produce more sales. Concluding from the above points, 2004 shows dramatically improvement.
Bob’s Restaurants can look forward to a much more efficient and profitable future as a result of implementing these recommendations. The company financials would become more steady and easy to manage. Operating costs will be reduced and these savings would result in better margins. A leaner restaurant would be more agile and competitive which would result in capturing more market share in their participating arenas. Bob’s Restaurants would still seem like a business that is worthwhile to consider staying in the market.