Activity ratios

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Understanding F&B business performance determines success. http://bit.ly/VeQ2Zv

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Activity ratios

  1. 1. Activity RatiosFood Beverage Manager
  2. 2. NET ASSET TURNOVERNet asset turnover = Sales / net assets Measure how effectively the net assets are used to generate sales;  Measureshow many sales are generated by each pound sterling of net assets. C A Bird - F&B Manager Tel: 0203 011 5863 Web: http://bit.ly/VW9X07 Page 2
  3. 3. FIXED ASSET TURNOVERFixed asset turnover = Sales / Fixed assets Measures the utilisation of the company’s fixed assets (i.e. plant & equipment).  Measurehow many sales are generated by each pound sterling fixed assets. C A Bird - F&B Manager Tel: 0203 011 5863 Web: http://bit.ly/VW9X07 Page 3
  4. 4. STOCK TURNOVERStock turnover (period) = Average value ofstocks / cost of sales x 365 Indicates the stock level being held as shown by the number of days it takes to use & replace it. C A Bird - F&B Manager Tel: 0203 011 5863 Web: http://bit.ly/VW9X07 Page 4
  5. 5. Beverage stock levels Maximum stock M = W (T + L) + S (M) = the average W = 24 bottles per week usage rate (W) (I he review period (T) + T = 4 weeks the lead period (L)) + L = 1 week the safety stock buffer or minimum (S) S = 1 week’s usage, i.e. 24 bottles Minimum stock  L x W 1 x 24 = 24 M = 24x(4+1) + 24 =144 bottles Reorder level  (W x L) + S = (24 X 1) + 24 = 48 bottles C A Bird - F&B Manager Tel: 0203 011 5863 Web: http://bit.ly/VW9X07 Page 5
  6. 6. DEBT TURNOVERDebt turnover = Sales / Debtors  Indicates the number of times that debtors are cycled during the year C A Bird - F&B Manager Tel: 0203 011 5863 Web: http://bit.ly/VW9X07 Page 6
  7. 7. AVERAGE COLLECTTION PERIODAverage collections period = Debtors x 365 /Sales The number of day’s credit the firm gives to customers. The longer the period the more costs to the firm in outstanding debts. C A Bird - F&B Manager Tel: 0203 011 5863 Web: http://bit.ly/VW9X07 Page 7

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