Business Management - Essay Example

An accountant helps to scrutinize business financial records and analyse them to ascertain profitability, liquidity and financing. The generated financial information indicate whether business has a potential to earn the potential buyer appropriate levels of income or not. Restaurants prepare and serve wide variety of foods, drinks and dessert to customers. In a typical restaurant, the waiters take the orders and bring them when ready to customers. The customers pay for the meals before leaving.

It is important to understand that running a restaurant successfully requires the owners to be creative and innovative to gain competitive edge over close competitors especially in a location where there are many similar restaurants. Though both restaurants have good quality meals and good service, Brigham’s restaurant is preferred to Shadracks’ restaurant because it performed better financially. Financial analysis took into account the profitability, liquidity and solvency ratios. Additional financial statements for at least three years are needed.

Finally, the report shade light on the additional non financial information needed to make informed purchase decision of one of the restaurants. Financial analysis helps to establish whether the business is financially stable and sustainable. Financial analysis is made easier by use of profitability, liquidity and solvency ratios. Profitability ratios are financial ratios that indicate the capacity of a business to earn a profit (Thukaram, 2007). The main profitability ratios are gross profit, net profit and return on equity employed ratios.

The above table indicates the profits, revenue, and owner’s equity as well as computed profitability ratios of the two restaurants. Brigham’s restaurant has higher absolute profits by $1,860, higher gross profit ratio by 1% and higher return on equity ratio by 0.04. Higher gross profit ratio shows that