Answer to Question #65168 in Finance for jb

Question #65168
Write a one page financial report to the restaurant owners; include the following:

a) Based on the variances found, identify the possible causes for such deviations and incorporate your recommendations for improving the business performance.

b) Include your suggestions regarding the Contract for purchasing soft drinks.
Expert's answer
It can be tough to launch a restaurant and keep it afloat. Owners must maintain a thorough understanding of the restaurant finances in order to grow their business. The first step in obtaining this understanding is to implement a sensible accounting system.
Inventory reports can help owners track prices and profitability of their food items.
An income statement reports profit over a predetermined period of time. Restaurant owners should scrutinize their income statement on a regular basis to ensure operating expenses aren't exceeding sales revenues.
The statement of cash flows report corrects for these factors and helps managers understand how much actual cash is going in and out of the business every month.
The best way to evaluate a restaurant's ability to pay off debt is to evaluate the current ratio based on the company balance sheet. To calculate the current ratio, divide total liabilities by total assets.

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