Financial Decision Case 2

Case Introduction
• L & T Oyster Bar
• James Land & Larry Teague
• Inception 5years ago.
• Opening another bar.
• Partnership deal .
Options
 Partnership Current work
• Invest $130,000 in partnership. Year Salary
• Equal share of business. 2001 $34000
2002 $38000
• $25000 salary.
2003 $42000
• 1/3 share of remaining income.
2004 $45000
• 10 to 11 working hours.
2005 $50000
 Profit and Loss Appropriation Account
Year 2001 2002 2003 2004 2005
Net Income $100,00 $ 120,000 $ 130,000 $ 140,000 $ 150,000
0
Distribution of
salaries
Me $ $ 25,000 $ 25,000 $ 25,000 $ 25,000
25,000
James $ $ 25,000 $ 25,000 $ 25,000 $ 25,000
25,000
Larry $ $ 25,000 $ 25,000 $ 25,000 $ 25,000
25,000
Remaining $ $ 45,000 $ 55,000 $ 65,000 $ 75,000
income 25,000

Distribution of
Income
Me $ $ 15,000 $ 18,333.3 $ 21,666.7 $ 25,000
 Comparison
Partnership Current work
Total income for Total income for 5years:
5years: $34000
(25000*5) + $38000
+ 8333.3 + $42000
+ 15000 + $45000
+ 18333.3 + $50000 = $209000
+ 21666.7
+ 25000 = Difference= $4332
$213332
Decisio
n
 Reasons
Partnership Current Work
213333.3 209000
Initial Investment No initial investment

No perks and Benefits Perks and benefits

10-11 hours a day 8 hours a day

Can incur losses No chances of losses

 Alternativ
eoriginal offer.
• Do not consider
• Interest on initial investment.
• Salary should be increased.
• Change the name of the company to L, N & T Oyster
bar.
• Cover the cost of extra time spent in the company.
• Cover the cost of fringe benefits.
• Extra salary due to the past experience in an oyster
bar.