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Shayla's Restaurant Fiancial Analysis

In: Business and Management

Submitted By Twinky
Words 653
Pages 3
Shayla’s Restaurant Balance Sheet

Bus 100

The Balance Sheet
The financial well-being of Corner Café can be analyzed from the Balance Sheet at any given time. It enables the management team to forecast short and long-term cash flow. This also helps to determine the accuracy of the Income Statement.

Assets = Liabilities + Equity
Corner Café was financed with $84,000 of assets in 2011. In 2012 the assets grew substantially to $355,500. The total Principle Interest payments for 2011 were $8000 and the total Principle Interest payments for 2012 were $137,500.

Current Ratio = current assets / Current Liabilities. The Current ratio should be 1:1 or higher. This measures the current financial shape of Corner Café. In 2011 the Current Ratio was 5:3 and in 2012 it grew to 7:5 which shows a greater short-term cash flow for the restaurant.

Working Capital Ratio = Total Assets / Total Liabilities. Like the Current Ration the Working Capital Ration should be 1:1 or higher. Corner Café’s ratio for 2011 was 3:17 and for 2012 it was 2:6. Although the ratio started out higher in 2011 and there has been a decline in 2012, the long-term cash flow should be monitored closely so that it doesn’t continue to drop. Chris and Erica should take steps to limit their liabilities as much as possible.

Debt to Equity Ratio = Total Debt / Total Equity. This ratio is used to determine if Corner Café is under performing. During 2011 the Debt to Equity Ratio was 0:4 and in 2012 there was a slight increase to 0:7. This is showing that Corner Café is not performing to its full potential and needs to work on decreasing its Total Debts to continue to increase its ratio.

Accounts Payable to Sales Ratio = Accounts Payable / Sales. In 2011 the Accounts Payable to Sales Ratio was 0:3 and was 0:4 in 2012. The Accounts Payable to Sales Ratio should be 50%...

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