Panera Bread
Executive Summary
Panera Bread is a company that has been in operation for a long time. However, recent data from the financial forecast shows that the company’s financial future ought to be taken care of. In light of the financial forecast, the company has to consider possible sources of extra finances. All the possible sources have their unique advantages and disadvantages. There are three available sources of income. However, the company has to consider which source would work best for them. This consideration takes the focus of a keen qualitative analysis of the financial forecast provided. The three available sources include the public issue of debt, bank term loan and revolving line of credit. The first source provides capital in a very flexible manner that does not interfere with the ownership of the company, its operation and use of resources. The second source of extra capital seems to demand more of the lenders that they can provide. This creates a situation whereby the lenders are more concerned with the prospects of repayment of the loan and agreed upon interest than financing the organization. The last source is very flexible, but also challenging as it is capable of charging additional fees that may increase costs incurred in repaying the loan. Therefore, the most appropriate source of income as per the financial forecast should be the bank term loan. The reason behind this rationale is that bank loans provide flexible methods of repayment and offer financial advice towards creating more income for the company which enables early repayment of the loan.
Panera Bread
The financial status of any organization is very important in determining its future success in its respective industry. For organizations to be of good financial health, the current status of the finances should be determined to depict what the future holds. Financial forecasts are common in the modern business world with many enterprises, organizations, and companies trying to figure out their future situation so that they can act accordingly. The information depicted in a financial forecast ought to be thoroughly analyzed to provide the correct strategic plan to undertake to secure a proper financial future. This paper is going to utilize the existing financial forecast of Panera Bread to carry out a qualitative analysis that guides the company on the necessary action to be taken.
Panera Bread’s financial forecast shows a significant increase in revenues and the cost of goods sold. The increase in their operating costs as shown in the forecast comes about due to an increase in most financial aspects of the company. Furthermore, is not only the net income forecasted to in gradually but also the liabilities and equity. The forecast gives rise to the question of how Panera Bread is going to raise capital to increase their operations while trying to diminish their liabilities with time. To answer this question, the paper will look at the pros and cons of different sources of financial capital which include the public issue of debt, bank term loans and bank revolving line of credit.
The public issue of debt is a financial term that refers to the budget deficits that are filled up by external sources of capital. For example, Panera Bread wishes to finance its operations in a manner that will enable expansion. However, they do not have an immediate source of extra income. Therefore, they ought to take up funding from an outside source with a promise of returning the principal in addition to the agreed upon percentage of interest. The advantage of external debt alludes towards the maintenance of ownership of the company or organization. This means that one still holds power to run the company as they deem fit without any external interferences. Furthermore, there are attractive tax deductions and lower interest rates associated with external debt. However, the negative aspects of public debt are that it has to be paid at the agreed time, whether the business succeeds to make sufficient income or not. Moreover, the business owner has to be sure that the business will provide enough income to pay off the debt at the agreed time, failure to which the lenders will lay claim to repayment even before equity investors if the company is forced into bankruptcy.
On the one hand, Panera Bread has the option of taking up a bank term loan, but it too has its challenges. Banks provide loans only to companies that have a strong credit record and a high capability of repaying the loan. The best thing about bank loans is that one can be able to pay at monthly rates that are quite predictable. Furthermore, banks offer some of the lowest interest rates on business financing through loans. However, they also have higher loan standards that need the providence of collateral if the business fails and the loans are not paid on time. On the other hand, the company can take up revolving credit loans which have lower interest rates. Advantages of the revolving line of credit are the absence of no closing costs and allow multiple users on the same loan. However, things are not as great as they seem with revolving credit loans as they include additional fees that are not a presence in bank loans.
In summary, the financial forecast of Panera Bread brings into question the need for additional finances for the company to realize a positive angle of the forecast. Therefore, the company ought to consider the possible sources of additional capital to ensure that their financial future is secured as early as possible.
