Caribbean Secondary Examination Council CSEC

Principles of Accounts

School Based Assessment

An investigation on how assets of KFC at Red Hills Road depreciated from 2021- 2022 and

how it affects their profitability

Candidate Names:

Candidate #’s:

Name of School: Meadowbrook High School

Center #:

Territory: Jamaica

Date of Submission:
 Table of Content
Title Page

Topic Statement……………………………………………………………………………….2

Research Objectives…………………………………………………………………………...3

Background/Overview…………………………………………………………………………4

Methodology……………………………………………………………………………………5

Presentation of Data……………………………………………………………………………6-8

1
Topic Statement

An investigation on how assets of Kentucky Fried Chicken (KFC) depreciated from 2020- 2022

and how it affects their profitability.

2
Research Objectives

The focus of this research was to:

 To identify how KFC measures their depreciation.

 To determine how KFC measure profitability

 To examine how depreciation affect profitability.

3
Background/ Overview

KFC, or Kentucky Fried Chicken, is a fast-food restaurant chain with locations all over the world that

specializes in fried chicken. In the fast-food industry, the brand has grown to become one of the most

recognizable and iconic names. Due to its reputation for providing "quality food for low prices," the

franchise has made a surplus of money over the years. However, like any business, depreciation of assets

is inevitable and may result in a decline in profitability depending on the level of value the asset attained.

Researchers have determined that it is imperative to conduct an investigation into the depreciation of

Kentucky Fried Chicken (KFC) assets from 2020 to 2022 and the impact this has on the company's

profitability. This study will serve to inform future financial students about the concept of asset

management and accounting, as well as the importance of determining an asset's useful life and allocating

costs accordingly to impact the company's profitability.

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Methodology

In order to gather accurate data for this assessment, the researchers have decided to use

questionnaires and interviews as their research tools. A formal meeting in which one or more

people ask questions of another and the respondent provides answers is commonly referred to as

an interview. With this approach to data collection, primary information is obtained directly from

the source, additional qualitative data is gathered, the interviewer can follow up and address any

misunderstandings regarding questions, and communication is facilitated in a quick and easy

manner. The second technique used by the researcher to gather data was a questionnaire, which

is defined by Google as a series of written or printed documents with multiple choice answers

created for a statistical analysis. In general, questionnaires require less time, are widely known,

and are relatively simple to analyze. This was a suitable method of collecting data as it gave the

participants time to process each question carefully before selecting an answer. The secondary

sources used were online website, facebook, Instagram to collect data and pictures about the

company to complete the assessment.

After putting these data collection strategies into practice, the researchers encountered a few

obstacles. The questionnaire had two limitations: it only offered a brief overview of the issue and

its responses might not have been accurate. Regarding the interview, it took a long time, which

could make the subject lose interest.

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Presentation/ Analysis of Data

Figure 1. Pie Chart showing if a well-maintained restaurant would make participants more
confident about the food at KFC.

The pie chart which illustrates that 80% of students agree that a well-maintained restaurant

would make them more confident about the food quality and the other 20% disagree. Based on

the pie chart it can be determined that most of the participants would look at how well-kept the

restaurants to determine the quality of the food.

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Figure 2. Bar Graph showing the Depreciation Expense at KFC Red Hills for the years 2020-
2022

Figure 2. Bar Graph showing the Depreciation Expense from 2020-2022 at KFC Red Hills.

The data shows a consistent upward trend in depreciation expenses over the three-year period.

Depreciation expenses rose from $4,500,000 in 2020 to $4,700,000 in 2022.This indicates the

value of the assets held by KFC Red Hills Road is decreasing over time, either due to wear and

tear, technological obsolescence or other factors. The depreciation expense is measured using the

straight-line method.

Mode: the year that had the most increase was 2022 with $4.7mil.

Mean: The average year that highest increase was 2021.

$4,500,000 + $4,600,000 + $4,700,000/3 = $4,600,000

Mean: The year that fall in the middle as it relates to KFC depreciation expense is 2021.

$4,500,000 + $4,600,000 + $4,700,000/3 = $4,600,000

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Table 1. Table showing the profit and profit rate at KFC Red Hills Road.

Year Profit (JMD) Profit Rate (%)

2020 $150,000,000 12%

2021 $140,000,000 10%

2022 $130,000,000 8%

The table shows a decreasing trend in profits over the three- year period. at KFC Red Hills Road,

with profit decreasing from $150,000,000 to $130, 000,000 in 2022 this may indicate potential

challenges or inefficiencies affecting their financial performance. Factors such as increased

expenses, declining sales or changes in market conditions may contribute to this trend. Alongside

the decrease in profits, the profit rate (profit margin) also shows a decreasing trend from 12% in

2020 to 8% in 2022. This declining profit suggests that KFC Red Hills Road’s profitability

relative to its revenue is diminishing over time.

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Conclusion

The aim of this report is to investigate the depreciation of Kentucky Fried Chicken's (KFC)

assets from 2020 to 2022 and how that affected the company's profitability. The data gathered

indicates that KFC uses the straight-line method to measure depreciation, which is in line with

the original goal of information gathering. The second aim was to ascertain KFC's method of

measuring profitability, revealing that they employ Net Profit Margin, which yields a more

precise profit estimate by factoring in all expenses. Finally, the goal of analyzing the relationship

between depreciation and profitability can be seen in the profit and depreciation expense figures,

as higher depreciation costs can significantly affect a company's profitability. Although

depreciation does not physically require cash outflow, it lowers reported net income because of

this. Increased depreciation costs could therefore result in lower reported profits, which might

have an impact on investors' opinions of the company's financial stability and earning potential.

After examining the depreciation of Kentucky Fried Chicken (KFC) assets from 2020 to 2022

and how it affected the company's profitability, it can be said that a higher depreciation expense

along with other factors contributed to the lower profit.

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Recommendation

Based on the findings researcher would recommend to KFC the following

Strategies that impact of asset depreciation on profitability.

1. Asset Maintenance and Upkeep: Establish a proactive maintenance program

to lower the rate of depreciation and increase the lifespan of assets. Frequent

maintenance can help avoid costly repairs and unplanned breakdowns,

which will ultimately reduce depreciation cost and increase profitability.

2. Invest in Long-lasting Assets: Think about making investments in better-

quality things with longer lifespans and slower rates of depreciation. Even

though these assets might cost more up front, they can save money over

time by lowering the need for replacements and the related depreciation cost.

3. Invest in Technology: To increase operational efficiency and lessen

dependency on depreciating assets, investigate technological solutions like

automation digitization. Purchasing technology can improve customer

satisfaction, lower labor expenses, and streamline operations.

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Bibliography

Principles of Accounts for the Caribbean: 6th Edition Paperback by Sheila

Robinson

Oxford excellence for the Caribbean, Principles of Accounts by David Austen,

Estella Louisy, Seema Deosaran-Pulchan, Theodora Sylvester.

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