The Foresters Public House -Case 1

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Kathy is the tenant landlady of the Foresters public house, where Richard often met Andrew to discuss his business plan (In Understand Accounting). She has formed a limited liability company and has negotiated a tenancy agreement with the brewers. The Foresters has just finished its first trading year and Kathy is keen to know how well her business has done. She would also like you to advise her as to how she could improve that performance. So it’s over to you to prepare the financial statements and some ratios and then comment on them. Working papers have been prepared for you and answers are available, of course.

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This is a challenging case.

Kathy had put £15,000 of her own money into the business as share capital. She had arranged for the bank to lend the company £60,000, at 10% interest, repayable in equal instalments over five years.

 The tenancy agreement agreed with the brewers (who owned the land and buildings) was for five years and it cost £30,000, paid for in cash.

 The outgoing tenant agreed to sell his existing trading inventories for £8,000 and various fixed assets, such as chairs, tables, ornamental copper and brass items for £20,000, also to be paid for in cash.

 Behind the bars she had this sign “Please do not ask for credit as a refusal may offend”. It worked very well, she said.

 The trading figures for her first year, with working papers and answers for you to check against, are available in the case study.

 Once you have prepared the financials, put on your ‘Sherlock Holmes’ hat and get behind the figures.

 Then advise Kathy on future stategy.