7-Eleven Financial Growth and Equity and Debt Ratios

Student's Name
Professor's Name
Course
Date
7-eleven
Where are the risks or additional costs?
7-Eleven is financing its growth through debt since the long-term debt-to-Equity and the total-debt-to-equity ratio are extremely high (7-Eleven Inc.). The debt ratios are above the market average, suggesting that the company is highly leveraged. Speedway mergers and acquisitions increase cost, and the company is at risk of insolvency suppose the acquisition fails to yield the expected returns. In addition, the franchise model transfers some of the direct control of each outlet's day-to-day operations to the franchisee. A management team is also required to recruit, train, and supervise the dozens of franchise owners, adding to the overall operational cost structure.
Seasonal or level production? Positives and negatives?
The company faces tight liquidity; hence, seasonal production may strain its finances, forcing it to take up more debt. Level production may be predictable; hence easy to plan resource allocations. Moreover, there is less idle capacity in level production.
Relevant Ratios
A keen analysis of business metrics helps leaders and investors make leadership and financial decisions that impact the business's success. Investors rely on analysis of profits, efficiency, liquidity, and the market to make the right decisions. The ratios are analyzed to "determine the gaps, ways to solve them, and opportunities to leverage to improve companies' performance" (Zaitsev et al., 6). The 7-eleven company ratios will help determine the profitability, opportunities, and strategies to help improve the business. It will also determine if investing in the company is a good idea.
Table 1.1 Profitability
Ratios

2021

Industry average

Gross margin 

27.04%

24.6

Operating margin 

5.49%

5.2

Pretax margin 

3.31%

3.26

Net Profit margin 

2.09%

2.05

The Gross profit is 5.49 compared to the industry average of 5.2 percent, while the pretax margin is 3.31 percent and above the industry performance average. Net profit performed slightly above the market average, suggesting that the company is highly profitable than its competitors. Thus, the company is profitable. The operating margin of 5.49% is rather low and could negatively affect the profit margins over time if not addressed.
The relaunch of my proposed 7-Eleven delivery and our e-commerce platforms will help the company understand better what their consumers want (Wang). It will thus help them deliver their customers' preferences, increasing their profits further. A relaunch will help the company redesign its supply chain and seal any gaps that might have negative implications on profits and financial performance. Holding all other factors constant, 7-eleven is a good investment decision.
Table 1.2 Efficiency
Ratios

2021

Industry average

Return on Equity 

56.59%

52.45

Return on Assets 

2.74%

2.93

Return on Investment 

4.99%

5.29

The return on asset and return on investment is below the market average, "suggesting that 7-ele...