MGMT 8500 - LMRI Case: Financial Analysis & Recommendations

This case study presents a financial analysis of Let Me Roll It (LMRI), a grocery delivery service initially established as a sole proprietorship. The analysis explores the strategic issues identified from initial meeting notes, focusing on the potential conversion to a Partnership Corporation. It details the features of both partnership and private corporations, recommending the former to facilitate business expansion and decision-making. The importance of financial statements is emphasized, highlighting their role in projecting profit and loss, estimating net worth, and managing cash flow. The study also distinguishes between internal and external users of financial information, explaining how each utilizes these statements for decision-making and risk assessment. Key financial ratios, such as leverage, inventory turnover, and price to earnings, are discussed in terms of their relevance to lenders, shareholders, and the overall financial health of the business. The memorandum concludes with recommendations for LMRI to properly evaluate financial statements, consider converting to a Partnership Corporation, and carefully assess key financial ratios to understand the company's financial position.

Running head: MEMORANDUM OF LMRI
MEMORANDUM OF LMRI
Name of Student
Name of University
Author Note
Word Count

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MEMORANDUM OF LMRI
Table of Contents
MEMORANDUM.................................................................................................................... 2
References............................................................................................................................. 4

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MEMORANDUM OF LMRI
MEMORANDUM
DATE: November 30, 2020
To: Orly Reimer, Jason Schmidt, and Takeshi Fujimura
From: Consultant, Conestoga Consulting Group
Subject: Analysis of first meeting notes
I am writing to you to inform you about the strategic issues that I have found from the
meeting notes from our first meeting. The memorandum will notify you about your queries
about your organization as well as will provide suggestions for the company.
To change the structure of the organization from the sole proprietorship, you need to
understand both the partnership and Private Corporation. The following are the feature of
Partnership Corporation
 The partnership corporation business is similar to sole proprietorship except this
business in owned by more than one person.
 The partnership corporation is mainly formed by writing an agreement.
 Each partner has unlimited liability in the partnership corporation.
 Each of the partner pays their tax individually.
 The partnership business has limited lifetime.
The features of Private Corporation is mentioned below
 The liability of each shareholders is limited in a private firm.
 The owner can raise the amount of capital anytime.
 The members of the private corporation cannot transfer their shares publicly. The
shareholders need to discuss with other shareholders before the transfer of the
shares.
 The private corporation is treated as a separate legal entity.
Therefore, LMRI should be converted from sole proprietorship to Partnership Corporation
as is helps in expanding the business effectively as well as help in the decision making of
the corporation. Despite the unlimited liability of the firm, the conversion of the corporation
will be helpful in lowering the individual loss of the business.
The financial statement is necessary for every business, which provides the proper
projection of the profit and loss as well as provides the firm with a balance sheet. The
balance sheet helps to estimate the net worth of the organization. The financial statement

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MEMORANDUM OF LMRI
also helps to determine the cash flow of the business as well as reduces the crash risk of the
company.
Every business has internal and external users. Internal users can access and
manage financial information as well as help the firm with decision-making. The internal
users of the sole proprietorship business are the employees, managers and the directors.
Based on the financial statement, the directors can adequately make decisions about their
business and estimate the cash flow of the firm correctly. The owner of this business can
access the statement to evaluate if their investment is safe in the business or not. The
owners should properly evaluate financial statements to estimate the profitability of the
business during the year.
The external user of sole proprietorship business is investors, lenders, customers
and the customers of the company. The lender will first access the financial statement before
providing any loan to the business if required. The customers can access the general
information about the company before making any transactions. The outside investors can
access the financial statement to know about the financial condition of the organization. The
creditors can obtain the statement before extending the credit.
There are specific ratios, which helps to understand the financial position of the sole
proprietorship business. BDC can access the leverage ratios, which include debt to equity
ratio and debt to asset ratio. The lower percentage of leverage ratio is good for the business.
The lower ratio is a good indication that the business will pay their debts in time. The
inventory turnover ratio helps the lender to understand the production of the company. The
higher turnover ratio indicates the efficiency of the business in order to sell their inventory in
a certain amount of time effectively.
The shareholders will look up to specific ratios before investing in this business. The
price to earnings ratio is most important ratio, which shows how much stock the investors
are paying for each amount of earning. P/E ratio helps to understand whether the market is
overvaluing the business or not. The shareholders can also look for the return on assets
ratio, which measures the profitability of the business.
Therefore, we bring the following memorandum to you, and it is suggested that you
should properly evaluate your financial statements to understand the position of the
company. The sole proprietorship business should be converted into Partnership
Corporation. The leverage, profitability and price to earnings ratios should be properly
evaluated. These ratios will help the lender and the shareholder of the business to
understand the financial position of the business.