Lyric Dinner Theatre Harvard Case Solution & Analysis

Lyric Dinner Theatre Case Study Solution

Ratio Analysis

The ratio analysis in the appendic-3 further clarifies the Lyric Dinner Theaters’ financial position.

A.Gross Profit Margin

The gross profit margin has increased substantially in the year to date indicating that the business is now making enough profits after deducting the cost of sales to pay-off its expenses which is a good sign. Increasing gross profits depicts that the customers are increasing which increases the sales of the business.

B.Operating Profit and Net Profit Margin:

The operating profit margin and the net profit margin is almost same in both years. Operating profit margin is 2% indicating that after deducting the expenses only 2% of gross profit remains. This percentage should increase with the passage of time as having less operating profit means that profit for the investors is very low. The increasing expenses are taking all the profits and there is not much left for the investors and owners. Although the operating and net profit is low still it is better than 2009 as in 2009 it was operating loss and net profit loss not even profit. So it is increasing with the passage of time.

Note: The balance sheet of 2010 was not given that is why the further ratio analysis is of year 2008 and 2009.

C.Current and Quick Ratio:

The current and quick ratio of the business in both the years was very low indicating that the business is unable to pay off its current liabilities and the suppliers are not in good terms with the business that means business liquidity position was at risk

D.Cash Operating Cycle:

The liquidity position of the business can further analyzed through the receivable, payable and inventory days (i.e. cash operating cycle of the business) which is unfavorable in every possible way for the business and thus it can be concluded that the liquidity position of the business was worst also justifying the fact the owners was thinking to shut it down.

Recommendations

The company is recommended to bring change by using Kotter’s 8-step Change Model. Firstly, Rivka Belzer need to create a sense of urgency within the staff as the staff have low morale and confidence about the business. Thus a sense of urgency through staff meeting or motivational speech will work for the change. Secondly, form a powerful coalition among the staff and the board member that the change is necessary and lead them so that they gain their confidence. Thirdly, create a vision for a change that the staff and the team members can grasp easily. Also communicate that vision to the team members and staff so that their concerns may be resolved on the spot. Then while working on the vision, remove any obstacles that comes in a way of fulfilling the overall objective. Further, create short term wins so that the already demoralized staff of Lyric Dinner Theaters will not be aggressive about any changes and try to work hard. With the small progress do not consider it as a final success instead work hard constantly until Lyric Dinner theaters build its reputation in the market (i.e. build on the change) and finally, Rivka Belzer need to make above changes a core part of the business to sustain its position in the market and to be profitable in the remaining years of the business.

Appendices

Appendix-1: Horizontal Analysis 2005-2009

Appendix-2: Horizontal Analysis 2010

Appendix-3: Ratio Analysis

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