Question

Andrea Wasserman knows her business, but she often wonders if anyone else really does. Andrea owns and operates a successful catering company. Each catered event she manages is unique. Her company enjoys an excellent reputation because of Andrea's attention to detail and total commitment to customer service.

In a good month, Andrea and her staff of 25 employees will serve over 10,000 lunch and dinner meals. Sales last year exceeded $2,500,000. Andrea's company was simply the one that people always called when a large specialty party or event needed to be executed extremely well.

The biggest catered event Andrea held last month involved a political fundraiser for the Governor. Her company served 3500 people for dinner at the Fairgrounds, and Andrea's team performed flawlessly. Although she was confident that she knew how to operate her business, she wondered about her profitability. Were her food production people and bartenders as cost conscious as they should be? Were her servers truly efficient? Were her profits “reasonable”? These were legitimate questions, and Andrea wanted solid answers.

1.Identify and write out one specific food, one beverage, one labor, and two profitability ratios you believe would be critical for Andrea to compute and monitor if she wants to effectively analyze her business success.

2.What would be your reply to Andrea if she asked you how often each of the five ratios you have suggested should be computed? Why?

3.How could comparative ratio analysis help address Andrea's concerns? What are some data sources Andrea could turn to as she sought answers to her business effectiveness questions?

Answer 1

FIVE RATIO-

1-FOOD TURNOVER RATIO I.E FOOD USED OR IN RELATION TO THE TOTAL INVENTORY OF FOOD.

2-BEVERAGE CONSUMPTION RATIO I.E TOTAL BEVERAGE CONSUMED IN RELATION TO THE TOTAL BEVERAGE PURCHASED.

3-LABOUR EFFICIENY RATIO I.E HOW EFFICIENT ARE LABOUR.

4-GROSS PROFIT RATIO I.E GROSS PROFIT TO SALES VOLUME.

5-NET PROFIT RATIO I.E NET PROFIT TO SALES VOLUME.

B-ACCORDING TO ME ALL THE ABOVE RATIOS SHOULD BE COMPUTED QUATERLY.BECAUSE BY DOING SO CORRECTIVES MEASURES CAN BE TAKEN FREQUENTLY FOR FUTURE AND ALSO AT THE SAME TIME PERFORMANCE CAN BE EVALUATED ON A MORE FREQUENT BASIS.

C-COMPARATIVE RATIOS WILL HELP HER TO IDENTIFY OR EVALUATE IT'S BUSINESS PERFORMANCE ON A YEAR TO YEAR BASIS WITH RESPECT TO HER OWN BUSINESS AND ALSO WITH OTHER SIMILAR BUSINESS PLAYERS IN THE SAME INDUSTRY.

DATA COULD BE

-COMPARATIVE RATIOS OF OTHER COMPETITORS.

-BUSINESS POLICY OF OTHER COMPETITORS

-STASTICAL PAST TRENDS OF HER OWN BUSINESS WITH RESPECT TO DETERMING GROWTH OR DECLINE.