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The analysis of Chipotle Mexican Grill, Inc., and financial statements provide a solid basis for planning for the company. According to Blokhin (2020), Chipotle operates restaurants predominantly in the US and at international locations. The company’s hallmark is an alternative menu with organic products and customizing them to consumers’ tastes. Chipotle is notable with its high growth rates, unusual for many other large restaurant businesses. Despite the COVID-19 pandemic, the company reports the earnings to exceed expectations (Johnston, 2020). This paper aims to summarize the importance of the five steps of financial recommendations for Chipotle Mexican Grill, Inc. and explain how the steps contribute to the company’s growing success.
A summary of the importance of financial recommendations is provided in this paragraph. The projected income statement and projected balance sheet, indicated in the first step, are essential as they enable Chipotle to assess the feasibility of various strategies and compare scenarios in different years (David & David, 2017). The EPS/EBIT Analysis allows for determining an appropriate combination of debt and equity for the company and highlights the need to avoid the debt share from exceeding the stock share. Next, cash value and the method average are significant as they indicate that Chipotle is still in the negative. The current ratio’s importance lies in the company’s ability to assess whether it can meet its short-term cash obligations (David & David, 2017). The debt-to-equity ratio estimates whether Chipotle can cover its liabilities in case of financial declines, keeping the company from getting into financial distress. In the final step, retained earnings of Chipotle Mexican Grill are indicated, crucial for the company to calculate net income after dividend payments and decide on how to distribute it (Kenton, 2020). Overall, the financial recommendations and analysis evaluate Chipotle’s budget and help with determining strategies.
The five steps analyzed in this paper contribute to the Chipotle Company success going forward. As Page (2019) reports, one of the company’s key success factors is the ability to maintain immediate control over all the operations. In particular, the projected income statement and balance sheet enable the company to calculate the total liabilities and equity and make a projection of its future growth. The EPS/EBIT Analysis allows for obtaining the needed capital for Chipotle. The method average implemented for the cash value shows how the income from the company should be projected and allows for choosing a better option to avoid negative values. The current ratio of 1.76 helps the company suggest that it currently generates enough revenue to cover the liabilities, while the debt-to-equity ratio of -0.30 shows a strong ability to invest (David & David, 2017). Finally, Chipotle’s retained earnings account for $64,340 and leave much space for applying them for re-investment, the company’s growth, or payments for shareholders. Thus, Chipotle’s success can be explained by the ability to control key indicators, make projections, and take corrective measures to improve the rates if needed.
To sum up, a summarized analysis of the importance of the financial recommendations for the Chipotle Company are discussed in this paper. Besides, an explanation of the steps’ contribution to the company’s success and growing revenue is provided. Overall, the attention to financial recommendations and careful planning benefit Chipotle’s ability to control its budget and investment. It can be concluded that sustainable strategies can be chosen for business based on financial statements and detailed analysis.
References
Blokhin, A. (2020). Understanding Chipotle’s financials (CMG). Investopedia. Web.
David, F. R., & David, F. R. (2017). Strategic management: Concepts and cases: A competitive advantage approach (16th ed.). Pearson.
Johnston, M. (2020). Chipotle earnings: What happened. Investopedia. Web.
Kenton, W. (2020). Retained Earnings. Investopedia. Web.
Page, V. (2019). Why is Chipotle so successful & popular? (CMG, MCD). Investopedia. Web.
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