Question: Chris had been in business for several months. He felt that the business was doing pretty well, although he really only knew that he was busy all the time. His sister was proving to be very valuable to him. During the first week of business, she saw Chris simply placing in a shoebox receipts and invoices that he planned to review at the end of the day. Unfortunately, he missed a few days and they started to pile up. She convinced him to actually use the computer-based system he had invested in. The system was not complex and relied on a relatively cheap, standard PC from a local retail chain. He would enter the invoice and receipts as the transaction happened so there was a complete tracking of his work.
At the end of the second month, Chris's sister printed out the totals of a few basic items for the month, such as total sales, revenue received, receivables, total expenses, the amount actually paid out on bills, and what was still owed on bills. Chris was very happy to be able to see the numbers but really did not know how to analyze them. Then his sister started a basic tracking and ratio performance chart for him like the one below:
| MONTH 1 | MONTH 2 | CHANGE |
| Current Ratio |
1.147 |
1.079 |
-0.068 |
| Gross Profit Margin |
0.65 |
0.70 |
0.02 |
| Net Profit Margin |
0.20 |
0.26 |
0.03
|
1. What do these numbers mean for Chris's business?
2. What would you need to be able to analyze these numbers?
3. Using data that you can obtain on the Internet about restaurants and bars, compare Chris's business performance for the first two months to those averages.
4. If Chris opened in June and these numbers reflect June and July, how might that impact your analysis?