How does Bang Cookies mitigate credit risk associated with depositing cash with financial institutions?
Bang_Cookies Franchise · 2024 FDDAnswer from 2024 FDD Document
valuated the impact of this standard on its financial statements and determined that it doesn't have any lease that meet the requirement to recognize a right-of-use asset and liability because the Company doesn't have any long-term leases.
3. CASH AND CASH EQUIVALENTS
The Company maintains its cash balance in U.S. noninterest-bearing transaction accounts which are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. On December 31, 2023 the Company's cash balance might exceed
Source: Item 23 — RECEIPTS (FDD pages 56–245)
What This Means (2024 FDD)
According to Bang Cookies' 2024 Franchise Disclosure Document, the company mitigates credit risk by maintaining its cash balance in U.S. noninterest-bearing transaction accounts insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The FDD states that Bang Cookies' cash balance might exceed the FDIC insurance limits. As of December 31, 2023, Bang Cookies had approximately $11,323 in cash in its bank accounts.
This means that Bang Cookies aims to keep its deposits within the FDIC's insured limit of $250,000 to protect its cash holdings. However, the FDD acknowledges that the company's cash balance may, at times, exceed this limit, potentially exposing the excess amount to credit risk should the financial institution holding the funds fail. For a prospective franchisee, this indicates that Bang Cookies is aware of the importance of protecting its cash deposits and takes steps to do so.
However, franchisees should be aware that there may be times when the company's cash holdings exceed the insured limit, which could pose a risk. It is important to note that this disclosure pertains to Bang Cookies Franchise, LLC itself, and not necessarily the individual franchise locations. Franchisees should inquire about the specific policies and procedures they should follow regarding cash deposits and the mitigation of credit risk at their own locations. Understanding these policies will help franchisees make informed decisions about managing their own cash and selecting appropriate financial institutions.