Sie sind auf Seite 1von 2

Financial Statement Analysis Bak Funeral Home

1. Over the past few decades, there have been a lot of changes in funeral industry. It is caused by the mandated from Federal Trade Commission (FTC) to change funeral service pricing, change in consumer preferences, and consolidation of funeral service providers. Starting in 1984, the FTC required funeral home to provide consumers with general price list of each element of funeral. For instance basic service, facilities, direct cremation service, transportation, casket price list, and any other additional element. FTC also said that funeral homes may not require consumers to purchase most item, especially for casket or burial vaults from the funeral home. Consumers may purchase either or both items from a vendor other than funeral director and have the casket delivered to funeral home and vault delivered to cemetery. While today there are so many non-funeral home vendors of these items. Consumer can easily go online to purchase the casket and vaults from funeral depot or any other casket store with delivery guarantee. Nowadays, consumer preferences have changed. 30 years ago, there was about 93% of families chose traditional funeral with earth burial. Today, the percentage of burial decrease and cremation increase. There has been consolidation in the funeral industry. In 1975, most funeral home is a family-owned and many had been in the same family for two or more generation. In late 20 year ago, large company began to buy these family business with plan to achieve economics of scale by purchasing caskets, vaults, and supplies in large quantities and better staff in funeral director. 2. a. From Bak Funeral Home financial result in 3 years (2002-2004), we can see that there is always positive net income per year. But to purchase Bak funeral home, we must calculate the depreciation that exist start from 1980 until 2004. The depreciation calculation looks like this: 1.Purchase price - Land Value = Building Value. 2. Building Value / 25 = Annual allowable depreciation deduction

So, we calculate that purchase price (include construction cost) in 1980 is $240,000 and less with land value which is $30,000. So, we get the building value $210,000. After that, we divide $210,000 with 25 year of usage so we get the annual allowable depreciation deduction $8,400/year. We also must calculate the real estate taxes, utilities, and repair and maintenance on the building. Assuming that the data is same with 2004 so the calculation are $40,980 + $9,835 + $ 5,901 = $56,716. we have to add rent expense of existing building $2,000. for one year rent building expense it will be $24,000. The sum of real estate taxes, utilities, and repair and maintenance plus rent building expense for one year is $64,980. if we assume that the revenue received from the industry is not so different with previous year, it is not profitable for Sabina. Thus, it would not be feasible for Sabina to buy back the Funeral Home and ask her mother, Joan to rent her the existing building for $2000 per month. 2. b.