Comprehensive Financial Analysis Report: Domino's Inc. Performance

This report provides a comprehensive financial analysis of Domino's Inc., examining its performance over several years. The analysis includes an executive summary, introduction, and overview of Domino's, including its mission. It delves into common size and horizontal analysis, cash flow analysis, free cash flow, liquidity, and solvency analysis, income analysis, capital structure analysis, dividend policy, and growth and risk analysis. The report also offers prospective analysis, recommendations, and conclusions based on the financial data. Key areas of focus include revenue trends, cost of goods sold, debt-to-equity ratios, and the company's ability to manage its financial leverage. The report utilizes various financial ratios and graphical representations to present the data and offers insights into Domino's overall financial health and future prospects.

Running Head: FINANCIAL ANALYSIS 1
FINANCIAL ANALYSIS
DOMINOZ INC.

Running Head: FINANCIAL ANALYSIS
Executive summary
The enhanced complexities in the global business environment and the increased competition
have exposed the management of the companies to devise and implement business strategies
that are consistent with the changes in the internal and external business environment. One of
the significant aspects of strategy formulation is the knowledge about the various financial
aspects of the entity’s operations that includes the insight about the valuation of the business.
The following assignment is aimed at highlighting the various aspects of business functioning
of the globally renowned organisation Domino’s. The entity is one of the most popular
brands in the global food market having operations and customers in numerous countries.

Running Head: FINANCIAL ANALYSIS
Table of Contents
Executive summary....................................................................................................................2
Introduction................................................................................................................................4
Overview of Dominos................................................................................................................4
Mission of Dominos...................................................................................................................5
Common Size and Horizontal analysis......................................................................................5
Cash Flow analysis.....................................................................................................................6
Free cash flow............................................................................................................................6
Liquidity analysis and Solvency Analysis.................................................................................6
Income Analysis.........................................................................................................................8
Capital structure analysis...........................................................................................................8
Dividend policy......................................................................................................................9
Growth and risk analysis and Prospective Analysis................................................................10
Recommendations....................................................................................................................11
Conclusions..............................................................................................................................11
References................................................................................................................................13

Running Head: FINANCIAL ANALYSIS
Introduction
The term financial analysis is the analysis that acts as a survey of the monetary wellbeing of
the business. There are numerous philosophies that are associated with the financial
investigation of the business such as to be aware of the health of the company either in
comparison to the industry or in comparison to the similar companies working in the same
industry. In this report; an in-depth examination of Dominoz Inc. is completed to comprehend
the organization from each corner. The overall financial analysis is basically a route towards
evaluating associations, undertakings, spending plans, and other related substances in order to
present the true and the fair information the financial statements. Generally, this can analyse
whether a corporate body is relentless, dissolvable, liquid or valuable enough against the
potential investments made by the company (Ross, Westerfield and Jaffe, 2013).
When taking a particular or a specific association such as Dominoz that is one of the biggest
giant food chain of, budgetary specialists significantly centre on the components like salary
articulation, monetary record, and the income explanation. Assessing the operational
efficiency and authoritative reasonability of the association is fundamental and consequently,
Dominoz is esteemed as far as the offer value developments, proportion examination, and
income investigation. This will help increase a comprehension of the organization and the
new potential systems can be inferred with the help of the monetary investigation (Dominoz
13, 2013).
Overview of Dominos
Financial Analysis is additionally a device that is utilized to decide the situation of the money
inflows just as money outpourings of the Dominoz Inc. The entity Domino's Pizza, Inc. is a
pizza company, which is engaged in the operation of a network of franchise-owned, and the

Running Head: FINANCIAL ANALYSIS
company-owned stores in the United States and the international markets as well. The
foundation of the company was laid down in the year 1960 by James Monaghan and Thomas
Stephen Monaghan and the headquarters are located at Ann Arbor, MI. The operation of the
entity is carried through the following three chief segments, namely the Stores in the United
States, Supply Chain segments and the International Franchises. The U.S. Stores segment is
primarily comprise of the franchise operations. The International Franchise segment denotes
a network comprised of the franchised stores. The Supply Chain segment is engaged in the
operation of the food supply chain centres and the dough manufacturing in the various
regions. In Australia, the brand operations are under the company Domino's Pizza Enterprises
Ltd (Dominoz 18, 2018).
Mission of Dominos
The mission of the company is explained as follows. The company holds a mission to be the
leader in the food industry at global level, while ensuring the efficient food quality and
delivery of the fresh meals (Dominos, 2019). In addition, the company aims to ensure smooth
food ordering experience. The mission of the entity is to implement the convenience of food
ordering, consumption and delivery in context of timeliness (Dominos 2019).
Common Size and Horizontal analysis
The common size is otherwise called the vertical investigation and the horizontal examination
devices that are required by the organization to comprehend the situation of the organization
on the money related forthright. Generally in order to finds out the results in terms of the
percentages the vertical as well as the horizontal analysis is carried out. Under the vertical
analysis the major highlights are the cost of the goods sold that are 69.54% of the sales
whereas the income available is only 7.93% in the year 2013 and the same reached to 62.05%
in the year 2018? In the items of balance sheet the major share is occupied by the fixed assets

Running Head: FINANCIAL ANALYSIS
and the long term debt at 287% of the total assets (Eisenbach, et al 2017). This is a situation
of immediate actions that are to be taken by the company in order to reduce the excessive
burden of financial leverage. This can be done by dealing in equity and reducing the
borrowings assistance from long term borrowings. This will keep a balance amongst the
company and the funds acquired by the business.
Cash Flow analysis
Cash flow analysis is additionally a device that is utilized to decide the situation of the money
inflows just as money outpourings of the Dominos Inc. From the investigation of the money
streams, it very well may be expressed that the incomes from the immediate exercises and the
financing activities have taken the hold in the cash flow statement of Dominos Inc. The
income proclamation is isolated into their significant classifications, for example, income
from sale of food and beverages, income from purchasing several equipment to run the
business and its operations and the income from the shares distributed amongst the
shareholders. The cash flow analysis of Dominos also reflects that the companies have a
strong changes in the working capital, the operating activities have increased from
$192339000 to $394171000 respectively in the year 2018 (The street, 2015).
Free cash flow
The conventional Free Cash Flow FCF Formula is equivalent to Cash from Operations short
Capital Expenditures. FCF speaks to the measure of money created by a business, in the wake
of representing reinvestment in non-current capital resources by the organization. This figure
is additionally now and again contrasted with Free Cash Flow to Equity or Free Cash Flow to
the Firm. The free cash flow of Dominos is presented in the table below.
Particulars 2013 2014 2016 2017 2018
free cash flow 229865000.0 217751000.0 208133000.0 372695000.0 492248000.0

Running Head: FINANCIAL ANALYSIS
0 0 0 0 0
Liquidity analysis and Solvency Analysis
The liquidity analysis of Dominos can be watched against the two major ratios prevailing in
that category such as current ratio, as well as quick ratio. The main purpose for the
calculation of the ratio is to identify the ability of the company to pay back the contractual
obligations that are underlying with the assistance of the current assets. The current ratio of
the company over the period of last 6 years has been in the favour of the company and the
same can be understood in the form of the table. The current ratio is 1.49 and the same was
1.22 in the previous year. The ratio reached to 1.61 in the year but this may be due to the
overall ratio of the industry or probably due to the non-efficient utilisation of the assets. The
quick ratio again settled at 0.92 which is close to the industrial benchmark and hence, it is
evident from the figures that the company wishes to grow with the positive prospective (The
street, 2015).
Liquidity and Solvency
Ratios 2013 2014 2016 2017 2018
Current Ratio
Current assets 1.381 1.613 1.603 1.228 1.493
Current Liabilities
Quick Ratio
Quick assets 0.965 1.167 1.253 0.856 0.992
Current Liabilities
Debt to Equity ratio
Debt -1.172 -1.249 -1.212 -1.141 -1.150
Equity
Debt to assets ratio
Debt 2.925 2.461 2.802 3.054 3.892
Total assets
Interest coverage ratio
EBIT 3.531 3.975 4.073 4.125 3.906
Interest Expense

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The time interest coverage ratio is an interesting ratio that deliberately defines how well
Dominos is able to clarify the interest expenses and reduce the financial leverage. In order to
see a positive front of the business it is necessary to take hold of the unnecessary expenses
that are made by the business (Dominoz 18, 2018).
Income Analysis
2013-06 2014-06 2016-06 2017-06 2018-06
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
Revenue
Net income
The income analysis of Dominos defines the sales over the period of last 6 years from the
year 2103 to year 2016. The income analysis can be very well ascertained with the help of the
graphical representation found above. The graph states that the revenue has increased over
the period of last 6 years however, the cost of goods sold has also increased to an extremely
special level. The revenue has increased by 38.83% and the expenses are increasing at the
triple the rate at 133.06%. This is the real root because the company is not able to generate
enough return in the form of return on equity. Further the tax expenses have also elevated and
this in turn is a chaotic situation for the company. The overall income is feasible yet the
company should bring new strategies to increase the customer base (Liang, Lu, Tsai and
Shih, 2016).

Running Head: FINANCIAL ANALYSIS
Capital structure analysis
One of the most vital decisions of the modern business environment is that of the capital
structure decisions as to the balance of the debt and the equity in the financing (Ross,
Westerfield and Jaffe, 2013). The following segment will shed light on the various aspects of
the financing or the capital structure decisions of the enterprise. The long term debt of the
entity is constantly on rise over the period of years in question, which is in line with the
increase in the assets of the company, majorly the property, plant and equipment. This
highlights that the entity has been constantly engaged in the expansion of the operations
which are financed by the long term debts. The debt to assets ratio, which is on similar
increasing trend, also vouches the same fact. In contrast to this, the stockholder’s equity of
the entity is in negative due to the accumulated negative balances in the retained earnings
(Kumar, 2018).
Further, as evident from the balance sheet figures, the common stock of the company is
constantly declining, which highlights that the entity Domino’s is a highly financially levered
company. This further is conclusive of a highly risky capital structure. The risk in the capital
structure is further evident from the negative debt equity ratio of the entity Domino’s. The
negative debt equity ratio is quite an unusual sight in the corporate context. The horizontal
analysis of the company highlights the fact that the debt of the company has increased by
around 38 percent in the last 5 years period (Ramalingam and Alexander, 2017).
Dividend policy
The analysis of the dividend policy of the company is further presented as follows. The entity
had severe negative return on equity in the year 2013, to the extent of -5.54 percent. However
the said negative returns are declining with constant increment in the net profits of the entity.
As the profit margin of the enterprise has considerably increased over the years, so has the

Running Head: FINANCIAL ANALYSIS
return on equity improved, which highlights the constant dividend payments to the
shareholders by the enterprise (Shokeen, 2017).
Growth and risk analysis and Prospective Analysis
2/1/2018
3/1/2018
4/1/2018
5/1/2018
6/1/2018
7/1/2018
8/1/2018
9/1/2018
10/1/2018
11/1/2018
12/1/2018
1/1/2019
2/1/2019
3/1/2019
4/1/2019
5/1/2019
6/1/2019
7/1/2019
8/1/2019
9/1/2019
-15%
-10%
-5%
0%
5%
10%
15%
20%
Price Moving Calculations
S&P 200 DOMINOZ
The development and the on-going investigation of the organization can be broke down with
the assistance of things in order to figure out the potential results of the organization, it holds
as the working benefits, return on resources just as the development of the offer cost. The
trend lines of Dominos reflect that they are prepared for any challenges faced by the market
conditions. The Australian Index is quite behind Dominos and this describes the relationship
between the company’s returns and the same indicates that the company is having an inverse
relationship with respect to S&P 200. Further, there are several factors which help in
analysing the movements of the share price in a particular manner as can be seen in the graph.
The organization has the energy at the worldwide level and this can be said in the wake of
watching, an addition in the profit of the organization by 10.54% and got the extraordinary
outcomes for the local deal stores as well as at the international level (Silverburg and Cuéllar,
2016).

Running Head: FINANCIAL ANALYSIS
Recommendations
There are a few suggestions for Dominos to come back to the competition against KFC,
subway and a lot more food chains prevailing in the market. Starting with, improving the
present proportions by disposing of the old resources, changing over the circulation of the
money and close understanding the realization from inventories and the receivables on the
standard premise (Dominoz 15, 2015). The company shall introduce the organic pizza and
shall increase the return on assets as well as the return on equity. Further, the benefit should
be settled to have a more noteworthy piece of the pie in the whole business by dropping down
the raw material expensed and the raw expenses by 10% to 15%. From there on the
organization must deal with the standard costs and it will not fund the benefits generally
through obligation, else, it will make a weight on the organization and they won't have the
option to meet the legally binding commitments. It is likewise prescribed to Dominos to
differentiate its activities by furnishing the additional items alongside the normal menu
options and beverages. The customers shall be given rebate as well as discount once they
hold the membership of Dominos, the extra privileges and small gestures will help in the
overall enhancement of the customer loyalty and improved performances.
Conclusions
From the above evaluation and investigation it can be observed that the position of Dominos
is improving and moving towards the profit front. In general it can be determined to the users
of the financial statements of Dominos that the company is working at its normal level and
striving for an extraordinary one. In terms of the parameters measured the position of the
dominos with respect to the profitability the company is giving the increased net margins and
the gross margins maintained by the company is also sound. Further the liquidity position is
improving and the company is advised to have the positive debt to equity. The efficiency is

Running Head: FINANCIAL ANALYSIS
measured and there settlement is faster than the collection of the cash which again indicates
the company has taken initiatives to bring back the market share. The best feature of
Dominos can be reflected in terms of the share price where the while in the average returns is
visible in comparison to the Australian index S&P ASX. Hence it can be advised to the
management to keep an eye over the transactions and the movements of the cash and it
should follow the stipulated policies rigorously. In terms of the perspective of the investors
the shares can be purchased for the long term growth and returns.