As you have learned this week, ratios by themselves do not provide much value unless they are compared to those of previous accounting periods.  Also, ratios do not measure a companies “intellectual capital assets” when assessing a company’s true worth.  These may include brand name, growth potential, human or intellectual capital, etc.

Consider brand name for a moment.  If you were in the market to purchase a franchised food operation, how much value would you put in its brand name?  Sometimes referred to as Goodwill, purchasing a brand name business franchise can be up to 50% or even 60% of the total cost to purchase the business.  As this is not anything tangible, can “brand name”offer a franchise that much value?

Couldn’t you simply copy a franchised product line and open up under your own name?  Support your thoughts on brand name worth by providing advantages and disadvantages of purchasing a “brand name” franchised operation.

 
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