Week 4 EOC: Chapter 4 Question 3

a. Compare Rachel’s Cash % with the chain’s %.  Is it higher or lower?  What might this mean?

b. Compare Rachel’s Inventories % with the chain’s %.  Is it higher or lower?  What might this mean?

c. Compare Rachel’s Accounts Payable % with the chain’s %.  Is it higher or lower?  What might this mean?

d. Compare Rachel’s Notes Payable % with the chain’s %.  Is it higher or lower?  What might this mean?

Answers:

a. Rachel's cash percentage is higher than the chain's average percent for cash which is 6.7% where Rachel's is at 18.9%. I believe this means that as an owner of a franchise within the chain Rachel's priorities has made her operate her business at a higher standard to ensure her own success. This can be show by her equity "The balance sheet is designed to show the amount of a business owner’s free and clear ownership"(Dopson 115). 

b. Rachel's inventories percentage is higher than the chain average percentage which is 1.3%, where Rachel's is at 11.4%. Though it is wise, I think that having such a high percent in inventory can become a threat, though at the current state it still seems to be managed. As a surplus can be useful especially if they are going into their slow periods "It is clear, however, those who operate a business must consistently have sufficient cash on hand to pay their employees, their vendors, and the taxes owed by the business" (Dopson 117). 

c. Rachel's accounts payable percentage is higher than the chain average percentage which is 10.5% where Rachel's is at 11.3%. This one of the areas where being well over is understood based on the business the company seems to be doing more than the average. The fact it is only slightly over the chain average while the other are more of a positive to be higher. This puts this store in good position with their vendors "it would not be unreasonable for these vendors to ask to see their customers’ respective balance sheets before a decision was made regarding the wisdom of extending credit to them."(Dopson 117). 

d. Rachel's notes payable percentage is higher than the chain average percentage which is 1.1% where Rachel's is at 2.5%. This is just the trend of the overall balance sheet as it matches the trend shown with account payables with only being slightly higher and being accountable to the fact the over all company seems to be doing more business over the chain average.

Work Cited: 

Dopson, Lea R. Managerial Accounting for the Hospitality Industry. Wiley, 09/2008. VitalSource Bookshelf Online.