Discussion Questions (for reference)

Case 8: KRISPY KREME DOUGHNUTS, INC. (Fhon)

1. What can the historical income statements (case Exhibit 1) and balance sheets
(case Exhibit 2) tell you about the financial health and current condition of Krispy
Kreme Doughnuts, Inc.?

2. How can financial ratios extend your understanding of financial statements? What
questions do the time series of ratios in case Exhibit 7 raise? What questions do
the ratios on peer firms in case Exhibits 8 and 9 raise?

3. Is Krispy Kreme financially healthy at year-end 2004?

4. In light of your answer to question 3, what accounts for the firm’s recent share
price decline?

5. What is the source of intrinsic investment value in this company? Does this source
appear on the financial statements?

DuPont Ratio Analysis of Krispy Kreme’s Performance

2000 2001 2002 2003 2004

Return on Equity 12.47% 11.72% 14.06% 12.25% 12.62%

Profit/Sales 2.70% 4.90% 6.69% 6.81% 8.58%

(profit margin)

Sales/Assets 2.10x 1.75x 1.54x 1.20x 1.01x

(asset turnover)

Assets/Equity 2.20x 1.36x 1.36x 1.50x 1.46x

(leverage)

Return on Assets 5.67% 8.59% 10.33% 8.16% 8.64%

Source: Case Exhibit 7