For one to succeed in any business it depends on how smart one works with the numbers. It is vital to always compares one’s business to what others are doing in the industry by having right financial statistics. In light of the above, this paper offers recaps various financial ratios that have been captured for a corporation that is dealing with food services and drinking places. The financial statistics is captured through the income-expense statement that provides aspects such as annual average sale, income and expenses among others.
For such a business, at any given time the cost of sales are benchmarked at 42% of the total sales and that will easily translate to a gross profit of around 57.98. There are a number of expenses that are associated with such forms of business. They include Salary-wages at 18.53% which is the highest expense while interest earned should be kept lowest at 0.11% so as not to be paying high amounts to the banks. Other expenses include, rent, taxes, advertising, bad debts, benefits on pension, and taxes among others. The industry balanced sheet shows cash which is to meet the day to day business expenses at 8.26% and receivables that is the money expected at 5.68% since most clients in this category pay on cash, the inventory should be kept low at 2.51% and other current assets at 3.67 by so the total current assess lies around 20.12% of the total assets. The business should aim at having more fixed assets and other non-current assets should be around 32.28% of the total assets.
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Accounts payable represent what the owner expects to pay and that ought to be 4.52% while loans are better when maintained at 2.85% and other current liabilities to be at 15.71% of the liability. The business will have a number of long-term liabilities representing items such as long term loans at 50.06% and with that the total liabilities for the business will be at 73.15%. Businesses in this industry always have a Net worth of 28.85% and will be a better standards for one to keep (Li, Zhang, Zhang, & Chen, 2016) . Turning on to these industry financial ratios the first one is the return on sales. Return on sales represents what the owner expects to get as form interest which is at 0.08% while the return on assets is best when kept at a low figure of 0.12% and the return on net worth at 0.43%.
For the food services and drinking corporation the quick ratio which is expressed as sum of cash and accounts receivables of the current liabilities measures the liquidity of the business and ought to be maintained around 0.60. The current ratio is calculated by dividing current assets and current liabilities and shows the solvency of the business is at 0.87. The inventory turnover is cost of goods sold divided by the inventory of the business and that measures the rate at which the inventory is sold is normally maintained at 0.02. With regards to assets sales which is ratio of net profits before sales and the total assets is at 0.68. The ratio shows the efficiency of the business assets in terms of generating net profit for the business or how good the business is utilizing its assets. In brief, the industry statistics are quite effective in showing any business owner in such business how he/she should track the various aspects associated with financial matters of such forms of business.
References
Li, T., Zhang, F., Zhang, H., & Chen, L. (2016). Predictability of Foodstuff Stock Returns Using Financial Ratios in the UK and US Food Markets. AJFST , 10(5), 336-342.
