What must the auditor conclude regarding Beard Papas' ability to continue as a going concern?
Beard_Papas Franchise · 2025 FDDAnswer from 2025 FDD Document
heet date through February 14, 2025, the date that the financial statements were available to be issued. Management has determined that there are no subsequent events required to be recorded or disclosed.
3. Concentrations of Risks
Credit Risk
Financial instruments which potentially subject the Company to concentration of credit risk are primarily cash and cash equivalents, and accounts receivable. The Company places its cash and cash equivalents in accounts with three financial institutions that are participating members of the U.S. Federal Deposit Insurance Corporation ("FDIC"). During the years ended December 31, 2024 and 2023, the Company's cash and cash equivalent balances exceeded the FDIC limit from time to time. The Company's cash and cash equivalents balances as of December 31, 2024, with FDIC member institutions exceeded the total amounts insured by FDIC's general deposit insurance rules by approximately $1,119,000. The Company's cash and cash equivalents balances as of December 31, 2023 exceeded the total amounts insured by FDIC's general deposit insurance rules by approximately $945,000.
Major Customers
One major customer accounted for appropriately 26% and 28% of total revenue for the years ended December 31, 2024 and 2023, respectively. This customer accounted for 23% and 38% of accounts receivable as of December 31, 2024 and 2023, respectively. The Company routinely monitors and assesses the financial strength of its customers. As a result, the Company believes that the conc
Source: Item 23 — RECEIPTS (FDD pages 58–275)
What This Means (2025 FDD)
According to the 2025 FDD, Beard Papas' auditor must consider certain financial risks that could impact the company's ability to continue as a going concern. One such risk is credit risk, particularly concerning cash and cash equivalents held in financial institutions. Beard Papas' cash balances sometimes exceed the FDIC insurance limits. As of December 31, 2024, the company's cash and cash equivalents balances exceeded insured amounts by approximately $1,119,000, and as of December 31, 2023, the excess was approximately $945,000. This means that a significant portion of Beard Papas' cash holdings are uninsured, posing a risk if a financial institution were to fail.
Another factor the auditor must consider is the concentration of revenue from major customers. One major customer accounted for approximately 26% and 28% of Beard Papas' total revenue for the years ended December 31, 2024, and 2023, respectively. This customer also represented 23% and 38% of accounts receivable as of the same dates. The loss of this major customer could significantly impact Beard Papas' revenue and financial stability. However, Beard Papas. monitors the financial strength of its customers to mitigate this risk.
Finally, the auditor must consider Beard Papas' reliance on a single supplier, an affiliate in Singapore, for all frozen doughs sold at Beard Papa's locations since January 1, 2023. Any disruption to this supply chain, whether due to financial, operational, or other issues with the supplier, could adversely affect Beard Papas' ability to maintain its operations. While these factors present potential risks, the auditor's ultimate conclusion on Beard Papas' ability to continue as a going concern would depend on their overall assessment of the company's financial health, risk management practices, and other relevant factors.