Week Four EOC; Question Three

Answers:

a. Rachel's cash percent is at 3.7% which is half less than the averages of the chain. What this means is that Rachel is losing more money than the other chains are. "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).

b. Rachel's inventories are 1% higher than the national average. The book defines inventories as "In the hospitality industry, inventories will include the value of the food, beverages, and supplies used by a restaurant, as well as sheets, towels, and the in-room replacement items (hangers, blow dryers, coffee makers, and the like), used by a hotel" (Dopson 124). This may mean she has more product avaiable on hand than other chains which will mean less spending in the next month.

c. Rachel's accounts payable percentage is a little over 1% higher than the chain's average percentages. This means she owes more money than the other chains typically would. This is important because "the most important sub-classifications of current liabilities include notes payable, income taxes payable, and accounts payable" (Dopson 126).

d.  Rachel's notes payable is also 1.4% higher than the chains averages which means she also has more money owed in this area than she should.

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