Cha13 Financial Mgmt

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Financial Mgmt

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Cha13 Financial Mgmt

  1. 1. Chapter 13 Financial Management Food and Beverage Operations Sunday, May 24, 2009 1
  2. 2. Chapter Objectives  Describe the origins and the advantages of uniform systems of accounts.  Explain how an operations budget is used as a standard.  Identify the components and uses of income statements and balance sheets LIU, HOST154 MCC Hospitality & Tourism Sunday, May 24, 2009 2
  3. 3. Chapter Objectives (cont.)  Describe and calculate liquidity, solvency, activity, profitability, and operating ratios.  Briefly discuss fundamental accounting tasks typically performed by software programs. LIU, HOST154 MCC Hospitality & Tourism Sunday, May 24, 2009 3
  4. 4. Managing the Accounting System  Staff (advisory) personnel: managers, bookkeepers, and controller  Internal users: all managers  External users: owners and investors, creditors and lenders, government agencies, the public Sunday, May 24, 2009 4
  5. 5. General Accepted Accounting Unit of measurement Historic cost Going concern Conservatism Objectivity Realization Matching Consistency Sunday, May 24, 2009 5
  6. 6. Cash Accounting vs. Accrual Accounting  Cash accounting: records transactions only when cash is received or paid out  Accrual accounting: records expenses incurred during an accounting period but are not actually paid until the following period ◦ Conforms to matching principles Sunday, May 24, 2009 6 Two
types
depend
on
size
of
 opera1on
  7. 7. Advantages of a Uniform System of Accounts  Turnkey system for new business  Standardized financial statement formats  Explanations of individual accounts  Sample bookkeeping documents  Continually revised LIU, HOST154 MCC Hospitality & Tourism Sunday, May 24, 2009 7
  8. 8. Advantages of a Uniform System of Accounts (cont.)  Widely adopted and recognized  Provides common language and basis for comparison between operations  Facilitates reporting of industry statistics Exhibit 1, p.353 The Restaurant Industry Dollar LIU, HOST154 MCC Hospitality & Tourism Sunday, May 24, 2009 8
  9. 9. LIU, HOST154 MCC Hospitality & Tourism Sunday, May 24, 2009 9
  10. 10. The Operations Budget  Profit plan ◦ Projecting revenue ◦ Determining profit requirements ◦ Estimating expenses levels  Control tool ◦ Budgets ◦ Reports ◦ Variances LIU, HOST154 MCC Hospitality & Tourism Sunday, May 24, 2009 10 Budget
controls
and
guides
principles
of
 business
  11. 11. Accounting Techniques  Internal controls ◦ Comparative statistical analysis ◦ Planning and forecasting sales and cost of goods sold ◦ Dept. budgeting controls ◦ Predetermined standards and evaluation reports ◦ Storage areas Sunday, May 24, 2009 11
  12. 12. Accounting Techniques (cont.) ◦ Cost analysis  Fixed  Variable  Mixed ◦ Cost-volume-profit (CVP) analysis  Used to set specific profit objectives ◦ Cash budgeting  helpful in managing property’s cash flow Sunday, May 24, 2009 12
  13. 13. Uses of Income Statements  Financial statement that consists of info regarding the results of operations, including revenue, expenses, and profit  Financial statement on regular basis  Efficiency of management  Controllable expenses  Supporting schedules LIU, HOST154 MCC Hospitality & Tourism Sunday, May 24, 2009 13
  14. 14. The Income Statement  Calculating actual food cost/cost of sales ◦ Cost of Sales = Beginning Inventory + Purchase – Ending Inventory ◦ Food Cost Percentage = Food Cost of Sales / Food Revenue X 100 LIU, HOST154 MCC Hospitality & Tourism Sunday, May 24, 2009 14
  15. 15. The Income Statements (cont.) Adjustment to basic cost of sales Exhibit 7 p.362 Cost of Sales : Food Charge to: Value of Beginning Inventory + Purchases - Value of Ending Inventory Unadjusted Cost of Sales: Food +Transfers to Kitchen Food Cost - Transfers from kitchen Beverage Cost LIU, HOST154 MCC Hospitality & Tourism - Employee Meal Cost Labor Cost Sunday, May 24, 2009 15 - Value of complimentary Promotion
  16. 16. The Balance Sheet  A finical statement giving the account balances for: ◦ Assets: current/liquidity or noncurrent ◦ Liabilities: current or noncurrent ◦ Equity: the amount of the funds contributed by the owners (the stockholders) plus the retained earnings (or losses) Assets = Liabilities + Equity LIU, HOST154 MCC Hospitality & Tourism Sunday, May 24, 2009 16
  17. 17. Five Common Ratio Groups Three standards: 1. Liquidity 1. A past period 2. Solvency 2. Industry average Return On 3. Activity Investment (ROI) 4. Profitability 3. The budget 5. Operating LIU, HOST154 MCC Hospitality & Tourism Sunday, May 24, 2009 17
  18. 18. Liquidity Ratios & Solvency Ratios LIU, HOST154 MCC Hospitality & Tourism Sunday, May 24, 2009 18
  19. 19. Activity Ratios & Profitability Ratios  Food Inventory Turnover = Cost of Food Revenue/Average Inventory  Profit Margin = Pretax Net Income/Total F&B Revenue LIU, HOST154 MCC Hospitality & Tourism Sunday, May 24, 2009 19
  20. 20. Operating Ratios  Food Cost Percentage = Cost of Food Cost/Food Revenue  Beverage Cost Percentage = Cost of Beverages Sold/Beverage Revenue  Labor Cost Percentage = Labor Costs/Total F&B Revenue LIU, HOST154 MCC Hospitality & Tourism Sunday, May 24, 2009 20
  21. 21. Operating Ratios (cont.)  Average Food Service Check = Total F&B Revenue/Guests Served  Seat Turnover = Number of Guests Served / Number of Available Seats LIU, HOST154 MCC Hospitality & Tourism Sunday, May 24, 2009 21
  22. 22. Technology and the Accounting Process  Accounts receivable software  Accounts payable software  Payroll accounting software  Financial reporting software LIU, HOST154 MCC Hospitality & Tourism Sunday, May 24, 2009 22
  23. 23. LIU, HOST154 MCC Hospitality & Tourism Sunday, May 24, 2009 23
  24. 24. Fiscal Review  Describe the origins and the advantages of uniform systems of accounts.  Explain how an operations budget is used as a standard.  Identify the components and uses of income statements and balance sheets  Describe and calculate liquidity, solvency, activity, profitability, and operating ratios.  Briefly discuss fundamental accounting tasks typically performed by software programs. 24 Sunday, May 24, 2009 24

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