WCC Aeronautical and Technological College

Binalonan, Pangasinan

A Well-known Bakery Financial Case Study

G.C.A.P.S. Bakery

Submitted by:

Artacho, Joshua Buendever

Coronia, Charry Michaella

Gonzales, Jacques

Padlan, Anthony Gabaig

Saguid, Marie Abigail

Group 7

Ms. Gennelyn Joy Pietersz

Instructor

1
 MINUTES OF THE MEETING

Date and Time of Meeting: July 12, 2023 at 9:40PM.

Attendees: All members attended.

Members with their assigned parts:

1. Artacho, Joshua Buendever - Background Information, Strategic Recommendation,

Risk Assessment
2. Coronia,Charry Michaella - Background information, Financial Analysis, Problem
Identification
3. Gonzales, Jacques - Risk assessment
4. Padlan, Anthony Gabaig - Problem Identification
5. Saguid, Marie Abigail - Background Information, Conclusion, Financial Analysis

I. Background of the Company

2
 G.C.A.P.S. Bakery is a for profit business that offers a variety of bread products and
sweet delicacies. The bakery was established on September 11, 2015. situated in Barangay
Poblacion, Binalonan, Pangasinan. In a period of time, G.C.A.P.S. Bakery gained popularity
for its breads, which include croissant, sour bread, pita bread, pandesal, spanish bread,
pretzel, cheese bread, and flavor-based breads, as well as its pastries, which include tart,
cannola, cream puff, churros, mochi, cookies, and more. With these selections of breads and
pastries, the business has been able to run its operations up to this time. The short-term
goal of the business is to provide a quality baked goods that is affordable to every
consumer. The long-term goal of the business is to produce nutritious choices of baked
goods by delivering a constant quality produce bread and pastries that is perfect in all
occasions in every household. Every family in the neighborhood craving baked products is
the target market of G.C.A.P.S. Bakery. All consumers can afford baked goods and, this is
well introduced to every Filipino. Since G.C.A.P.S. provide a variety of bread and pastries
that are not offered by every bakery in Binalonan, we are able to capture the attention of
consumers.

The Operations of G. C. A. P. S. Bakery’s retail and wholesale selling includes:

1. Supplying breads and pastries at the main store.
2. Supplying and delivering breads and pastries for cafes and restaurants.
3. Supplying and delivering breads and pastries for events.

Company’s Mission:
To produce and serve flavorful, quality goods affordable to every customer allowing
joyful moments through sharing baked goods and delicacies. Our mission is to provide
people with such quality products, that along with being tasty, is healthy and nutritious and
shall contribute meaningfully to the well-being of the customers.

Company’s Vision:
To be Luzon’s leading and preferred choice for nutritious baked goods through
delivering constant quality produce perfect for all occasions in every Filipino household.

3
 ’
Figure 1. Organizational Chart of G. C. A. P. S. Bakery

4
II. Financial Analysis

The G. C. A. P. S. Bakery is a well-known business that supplies breads and pastries at

their main store for retails and accepts wholesale orders to supply for cafes and restaurants
and such events that the products are needed. This part will show the Income statement
and Balance Sheet of finances of the G. C. A. P. S. Bakery. The finances of the company as of
December 2023 will be analyzed.

Income statements show how profitable and sustainable a company is and how
efficient its management is (Cao, n.d). The Income Statement is one of a company’s core
financial statements that shows their profit and loss over a period of time. The profit or loss
is determined by taking all revenues and subtracting all expenses from both operating and
non-operating activities (CFI Team, 2019). With that, net income can be positive or negative.
When your company has more revenues than expenses, you have a positive net income. If
your total expenses are more than your revenues, you have a negative net income, also
known as a net loss (Berry-Johnson, 2021).

G. C. A. P. S. Bakery
Income Statement
As of December 2023

Revenues Amount

Sales Php 130,000.00

Other Revenues Php 18,000.00

Total Revenue: Php 148,000.00

Expenses Amount

Cost of Goods Sold Php 26,000.00

Operating Expenses Php 16,000.00

Marketing and Advertising Expenses Php 22,000.00

5
 Employee Salaries and Benefits Php 32,000.00

Depreciation and Amortization Php 17,000.00

Interest Expenses Php 14,000.00

Other Expenses Php 15,000.00

Total Expenses: Php 142,000.00

Net Income: Php 6,000.00

Table 1. Income Statement

On table 1, the G. C. A. P. S. Bakery’s income statement stated that it has a total

revenue of 148,000.00 pesos including its sales and other revenues collected. It has also a
total expense of 142,000.00 pesos which includes the cost of goods sold, operating
expenses, marketing and advertising expenses, employee salaries and benefits, depreciation
and amortization, interest expense for debts, and other expenses paid. Having to less the
total expense to the total revenue, it resulted in net income amounting to 6,000 pesos. This
can be considered a positive net income since the total revenue was greater than the total
expense of the company. However, the company has inefficient structuring in its operations
because its net profit is low and may have a tendency of becoming lesser on continuing
months if the expenses are not properly controlled.

G. C. A. P. S. Bakery
Balance Sheet
As of December 2023
ASSETS

Current Assets Amount

Cash and Cash Equivalents Php 23,000.00

Accounts Receivable Php 18,000.00

6
Inventory Php 20,000.00

Prepaid Expenses Php 15,000.00

Other Current Assets Php 14,000.00

Noncurrent Assets Amount

Property, Plant, and Php 60,000.00

Equipment

Accumulated Depreciation Php 20,000.00 Php 40,000.00

Intangible Assets Php 18,000.00

Investments Php 16,000.00

Other Non-Current Assets Php 15,000.00

Total Assets: Php 179,000.00

LIABILITIES AND EQUITY

Current Liabilities Amount

Accounts Payable Php 21,000.00

Short-Term Debt Php 17,000.00

Accrued Expenses Php 16,000.00

Other Current Liabilities Php 15,000.00

Total Current Liabilities: Php 69,000.00

Non-Current Liabilities

7
 Long-Term Debt Php 43,000.00

Other Non-Current Liabilities Php 15,000.00

Total Non-Current Liabilities: Php 58,000.00

Total Liabilities: Php 127,000.00

Equity Amount

Share Capital Php 23,000.00

Retained Earnings Php 29,000.00

Total Equity: Php 52,000.00

Total Liabilities and Equity: Php 179,000.00

Table 2. Balance Sheet

A balance sheet is a financial document designed to communicate exactly how much

a company or organization is worth—its so-called “book value.” The balance sheet achieves
this by listing out and tallying up all of a company’s assets, liabilities, and owners’ equity as
of a particular date, also known as the “reporting date" (Stobierski, 2020).

In a company, there should always be an equal amount of assets to liabilities and

owner’s equity. The G.C.A.P.S. Bakery has a balanced finance for it has a total of assets
amounting to 179,000.00 pesos balancing the total liabilities and equity that is also the
same amount. However, G. C. A. P. S. bakery’s solvency could be on a negative side because
with the total assets it has, on continuing months, might not be able to cover all the
financial obligations if the expenses and liabilities continue to build up.

8
 G.C.A.P.S Bakery
Financial Ratios
Current Ratio = Current Assets/ Current 1.30
Liabilities
Quick Ratio = (Cash and Cash Equivalents 0.81
+ Accounts Receivable + Prepaid
Expenses) / Current Liabilities
Cash Ratio = Cash + Cash Equivalents / 0.33
Current Liabilities
Gross Profit Margin = (Total Revenue – 0.82
Cost of Goods Sold) / Total Revenue
Operating Profit Margin = Operating 0.89
Income / Total Revenue
Net Profit Margin = Net Income / Total 0.04
Revenue
ROA = Net Income / Total Assets 0.03
ROE = Net Income / Total Equity 0.12
Debt to Assets Ratio = Total Debt / Total 0.71
Assets
Equity Ratio = Total Equity / Total Assets 0.29
Debt to Equity Ratio = Total Liabilities / 2.44
Total Equity

Table 3. Financial Ratios

9
II. Problem Identification

The G. C. A. P. S. Bakery had come up with errors and there are problems seen in
handling the finances based on the income statement and balance sheet shown before this
part. These problems are listed below.

General problems that the company might having:

 Managing cash flow. Every business can suddenly fall due to a lack of adequate cash
flow, which in turn happens due to poor cash flow management. This is one of the
biggest challenges faced by finance managers. The inflow and outflow of the
company money need to be precisely tracked to get the right insight. Most of the
traditionally recorded financial statements are intently not meant to give you
information regarding the cash flow and its improvement.
 Not having a plan for using the budget. In terms of our financial reports, the details
are well-presented in such a way; however, the budgeting is not well-utilized. It
happened that some of the entries are too expensive and too cheap at some costs.
Developing a budget will not only help you wisely manage your business money but
will also prove to be immensely helpful in future financial forecasting and analyzing
the directions where the business can grow. Along with this, keep updating the
budget regularly according to the changing situations and major business decisions.
 Not raising enough capital. In a business, capital is one thing that we should
consider the most, because if we do not have enough capital, none of the other
things will move. In our case presentation, it is stated there that the capital is
somewhat just enough from all the expenses, which should have an excess though to
provide the optimal performance of our business. The lack of working capital is an
extremely alarming issue for companies of all sizes. Particularly, it could lead to more
financial management problems for small businesses because of their fewer
resources. The lack of capital can restrict businesses from expanding to more
markets, hiring new talents, exploring new directions, and grabbing fruitful
opportunities.
 Not having a proper reporting. Businesses are recommended to record all their
transactions and it would be even better if is done under the guidance of a financial

10
 accounting expert. Records include earnings, expenses, and sales. Just like in having
a budget plan, having a proper sales reporting is a must also is something that we
should consider. It should be written, weekly, monthly, or even quarterly depending
on the desires and needs of the business to show transparency of the sales.

Specific problems analyzed based on the income statement and balance sheet:

1. Net income is positive but too low. It might be a start of downfall of profit.
2. Marketing and advertising expenses are more expensive than operating expenses. It
makes the bakery’s finances unstable.
3. Big debts which will cost big interests. It will not only affect the company’s finances
but also its good image to the customers and investors.

11
III. Strategic Recommendation

The G. C. A. P. S. Bakery should follow the recommendations below to enhance

management and overall performance to prevent future mishaps:

 The right calculation of profit should be the top priority for the G. C. A. P. S. Bakery in
order to increase the net income because doing so enables the business to
accurately measure its net profit and keep track of its gross profit levels. Increasing
net income might also be affected by lowering expenses for utilities and
consumption. In doing so, it is necessary for the company to review and analyze their
current expenses and identify areas for cost reduction as well as cutting unnecessary
expenses. Implementing energy-saving measures like making the use of large ovens
less frequent and only using them as much as is necessary for production, especially
since these large ovens use a lot of gas. It may also be possible to increase net
income and optimize inventory management by purchasing only a certain amount of
perishable and non-perishable goods required for production. Another would be to
negotiate better rates and payment terms with suppliers. Along with this could be to
allow remote work options as well as lower labor costs by preventing overtime and
employing the proper staffing levels for production. By doing this, operational costs
will go down along with overall spending. More net profit will be achieved over time.
 Given that the G. C. A. P. S. bakery is well-known to consumers and that marketing
and promotion expenses are considerable, this should be strategically planned. The
GCAPS bakery has already been brought to market, thus paid advertising should not
be the main focus. To keep customers in business, it is important to build strong
relationships with them. Customers are powerful, and they can help with marketing
by expressing their satisfaction with the products provided by G. C. A. P. S. social
media is a technique for low-budget marketing because most consumers use it. This
allows the G. C. A. P. S. bakery to reach more potential customers while spending
less money. Lastly, the company must manage the advertising budget effectively to
cut down on operating expenses.

12
 Making a budget could help the G. C. A. P. S. bakery avoid going bankrupt by
allowing them to track their income and expenses and categorize them for effective
management. Modify the purchasing patterns to avoid liabilities. This allowed G. C.
A. P. S. Bakery to reduce its debt. Debts should be given priority. Paying off debt will
reduce obligations from the creditor and prevent from charging higher interest rates.
The business will become stable if the income is allocated properly.
 The G. C. A. P.S. bakery will be able to create more income by concentrating on high-
quality baked products production, a strategic marketing plan, and cost-cutting
measures. This will enable the business to balance and be released from significant
debt. A business's revenue is important since it serves as a measure of its financial
health and success, which might draw expansion opportunities.

13
IV. Risk Assessment

By considering the strategic recommendations for the GCAPS bakery, the risk
assessments made are listed below.

Who or What are affected by this risk and how?

1. Production, delayed due to lowering the expenses from faster production utilities.
2. Supplies, due to slower production the number of supplies could be lessened.
3. Workers' working time could be affected by lowering the labor costs.
4. Sales, due to slower production and shortage of supplies sales could be delayed.

The possible risks identified are carefully assessed:

1. Increasing net income by lowering expenses for utilities and consumption.

2. Lowering labor costs by preventing overtime. Slower production of supplies causes
the possibility of sales delay due to insufficient or shortage of supplies. These types
of risk might affect workers' time of production and might cause production delays.
Sales could also be affected by advertisement, specially paid advertisement.
3. Paid advertising should not be the focus. Advertising on social media is another
concern that might come up in the future. It has been proven that using social media
may help you reach a wide audience. On the other side, this allows negative
feedback from customers that will harm G.C.A.P.S bakery's reputation. Even if it is
less expensive to promote on social media, you will still require money to maintain it
over time. Lastly, it is vulnerable to false information. Social media is full of false
information and misleading content. Customers may become offended by the way
you interact with them and start spreading negative information about the company.
4. Cost-cutting can be a risk since you will utilize less resources and have less inventory,
which might slow down production if there is a large demand from consumers. Due
to the possible bankruptcy, this may affect how creditors and lenders see the
business. which can refuse to extend you another loan or deny you credit.

14
V. Conclusion

This paper introduces the company G.C.A.P.S. Bakery and its financial challenges,
revealing several problems and areas in need of improvement. This case study concludes
that the company’s income statement, although showing a positive net income, has a low
net income, which indicates the necessity of increased profitability. There are several
situations highlighted in the balance sheet, including one where the company’s finances
are strained due to significant marketing and advertising expenses. Moreover, the
presence of large debts and the potential for high interest rates added to the financial
challenges.

In addressing such issues, strategic recommendations were provided. These

recommendations include focusing on accurately calculating profits and reducing expenses,
implementing energy-saving measures, optimizing inventory management, building strong
customer relationships, and utilizing social media for cost-effective marketing. Along with
these, the company shall create a budget and prioritize debt repayment to contribute to
financial stability. Through directing their focus on high-quality product production, strategic
marketing, and cost-cutting measures, the company can enhance its financial health while
opening opportunities for growth.

However, even with these recommendations, it is necessary to consider the

potential risks associated with them. An example of a risk could be how reduced expenses
affect production, which could potentially lead to delays. Sales may also be delayed due to
insufficient supplies. Although these cost-cutting measures may be beneficial, these could
lead to slow production if demands remain high. Along with this, the cost-cutting measures
could also impact the working hours of the company’s workers. Furthermore, relying heavily
on social media for marketing allows for the risk of negative feedback and misinformation,
which could harm the image and reputation of the company. Additionally, the company’s
financial constraints could affect the relationships between the bakery and creditors as well
as lenders.

15
 In summary, by implementing these strategic recommendations while considering
the associated risks, G.C.A.P.S. Bakery may be able to overcome its financial challenges. It
may also lead to increased profitability and financial stability. Such measures will contribute
to the bakery’s long-term success and provide a foundation for future growth opportunities.

16
V. Appendix

Berry-Johnson, J. (2021, October 9). How to Calculate Net Income. (Formula and
Example)
https://bench.co/blog/accounting/net-income-formula/#v5mi-b

Corporate Finance Institute. (2023, April 16). Income statement.

https://corporatefinanceinstitute.com/resources/accounting/income-statement/

Cao, F. (n.d.). Income Statement.

https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/templates-business-guides/
glossary/income-statement

Stobierski, T. (2020, April 2). How to Read and Understand a Balance Sheet.
https://online.hbs.edu/blog/post/how-to-read-a-balance-sheet

17