Accounting for Leaders ( Case study analysis)

As a result a number of car owners would pass by Bob’s shop which facilitated in increasing the popularity of the shop. However since this parking system was stopped, Bob felt that his business was losing popularity. Bob also noticed that the general sales of children’s bicycles had dropped considerably. Bob suspects that a large amount of sales of his shop has shifted to the bicycle and car maintenance retailing chain located at the town’s main shopping centre. The Christmas sale of the shop was also much lower than expected. The shop was clammed with cheaper bikes clearly depicting that the shops had declining number of customers. The recent recession also had a negative impact upon the business (Cowen and Hoffer, 1985).
Bob’s café is run by Bob’s wife Sophie. Apart from providing internet services, the shop also provides services such as computer and software upgrade, computer repair, software installation, cleaning and configuration of computers. Sophie is concerned regarding the cash flow of the business rather than profitability. The bank overdraft of the business has been continuously rising since the last two years. Sophie could not understand the reasons behind such an increase. Sophie although provides services on credit in order to increase her sales, but she has not come across any bad debts (Brigham and Houston, 2011).
The information required for taking decision in respect of Bob’s Bikes is obtained through the different rations computed from the business’s annual financial statements. The financial ratios of 2012 and 2013 were taken into consideration for taking the required decisions. Bob’s main issue is to analyze the profitability of the business. Financial ratios are considered as a suitable measure for analyzing business performance. Evaluating the progress of any business is vital and financial ratios are a suitable tool in examining the same. Financial ratios facilitate comparison of the performance