Question

Analyze Chipotle Mexican Grill

Chipotle Mexican Grill, Inc. (CMG) is a quick-service restaurant providing a focused menu of burritos, tacos, and salads. Chipotle’s income statements through operating income for two recent years are as follows (in thousands):

Analyze Chipotle Mexican Grill Chipotle Mexican Grill, Inc. (CMG) is a quick-service restaurant providing a focused menu of burritos, tacos, and salads. Chipotle's income statements through operating income for two recent years are as follows (in thousands): Chipotle Mexican Grill, Inc. Income Statements For the Years Ended December 31 (in thousands) Year 2 Year 1 Revenues $3,904,384 $4,501,223 Expenses: Food, beverage, packing $(1,365,580) $(1,503,835) Labor (1,105,001) (1,045,726) Rent (occupancy) (293,636) (262,412) General and administrative (641,953) (514,963) Other (463,647) (410,698) Total expenses $(3,869,817) $(3,737,634) Operating income $34,567 $763,589 Required: a. Prepare a vertical analysis of the two income statements. Round percentages to one decimal place. Chipotle Mexican Grill, Inc. Income Statements For the Years Ended December 31

Answer 1

Ans. A	Chipotle Mexican Grill, Inc.
	Income Statement
	For Years Ended December 31
		Year 2		Year 1
		Amount	%	Amount	%
	Revenues	$3,904,384	100.00%	$4,501,223	100.00%
	Expenses:
	Food, beverage, packing	-$1,365,580	-34.98%	-$1,503,835	-33.41%
	Labor	-$1,105,001	-28.30%	-$1,045,726	-23.23%
	Rent (occupacy)	-$293,636	-7.52%	-$262,412	-5.83%
	General and administrative	-$641,953	-16.44%	-$514,963	-11.44%
	Other	-$463,647	-11.88%	-$410,698	-9.12%
	Total expenses	-$3,869,817	-99.11%	-$3,737,634	-83.04%
	Operating income	$34,567	0.89%	$763,589	16.96%
	*In a common size income statement, all precentages are calculated on the base of
	sales.
	Amount is percentage for (year 2) =   Particular amount of (year 2) / Sales * 100
	Amount is percentage for (year 1) =   Particular amount of (year 1) / Sales * 100
Ans. B	Option 1
	Operating income as a percent of revenues declined significantly from Year 1 to Year 2.