Tourism

Current ratiocurrent assetscurrent liabilities0.894756quick ratiocurrent assets-inventory0.193969current liabilitiesWorking capital ratioTotal AssetsTotal Liabilities1.545364Debt to Equity RatioTotal Debt Total Equity1AP to Sales Ratio3Accounts PayableSalesThe restaurant can be said to be profitable but could benefit more from better financial management. The working capital ratio indicates that the restaurant is very leverage since their working capital is only half the amount more than their liabilities. In case something goes wrong, they have very little extra edge to cushion it. It does not mean having debt is entirely bad since it allows the restaurant to capture opportunities that could otherwise have been lost if they are not borrowing certain amounts of money.

The current ratio and the quick ratio are both almost the same when it comes to the implications for the restaurant. They indicate that the restaurant is on dangerous grounds because their cash position is very small and they do not even have a full coverage for all of their liabilities in case they are required to pay for it in the full amount, (Revsine, 2004). The debt to equity ratio is at least comforting to note since the coverage of the debt is one to one. The restaurant is not out of the red line though in case the business environment does not turn out as good as they expect. The most revealing of all ratios in this case for the restaurant is the AP to sales ratio.  

It means the restaurant is giving their customers credit for their food and services. There is nothing wrong with selling food and services on credit as long as the restaurant still has some extra cash to fund their daily operations. The ratio of 3 is very high. It means that the amount of revenue made on credit is literally three times the amount they make that converts to instant cash. There is always the danger that customers might default or not pay soon enough to cover their present financial needs.