Mannerism

RATIO ANALYSIS OF INCOME STATEMENT AND BALANCE SHEET

? These are tools for analyzing (i.e.: calculating percentages and ratios) and interpreting (i.e.: comparing percentages and ratios to determine the meaning and significance of the analysis) the financial soundness of a hospitality company.

? For ratios to be meaningful, they shall be compared against:

• Prior-period percentages and ratios

• Industry and trade association percentages and ratios

• Budgeted percentages and ratios

I- Ratio Analysis of the Income Statement:

1. Profit Margin Ratio:

The Profit Margin Ratio is used as a Measure of Profitability. Moreover, it can be computed for revenue generators as well as the hotel in general

Profit Margin Ratio = Hotel (or Departmental) Income / Net Sales

• Rooms Division Department: (692,261 / 897,500) * 100 = 77.13 %

• Food & Beverage Department: (87,377 / 518,170) * 100 = 16.86 %

• Telephone Department: (-27,623 / 51,140) * 100 = - 54.01 %

• Hotel Doro: (60,544 / 1,597,493) * 100 = 3.79 %

2. Labor Cost Percentage:

The Labor Cost Percentage is used as a measure of Operating Efficiency. Moreover, it can be computed for each department or for the hotel in General

Labor Cost Percentage = Total Payroll and Related Expenses / Net Sales

• Rooms Division Department: (143,100 / 897,500) * 100 = 15.94 %

• Food & Beverage Department: (204,180 / 518,170) * 100 = 39.40 %

• Telephone Department: (17,132 / 51,140) * 100 = - 33.50 %

• Hotel Doro: (568,102 / 1,597,493) * 100 = 35.56 %

3. Food (or Beverage) Cost Percentage:

Food (or Beverage) Cost Percentage = Cost of Food (or Beverage) Sold / Net Food (or Beverage Sold)

• Food Cost Percentage: (135,200 / 358,300) * 100 = 37.73 %

• Beverage Cost Percentage: (40,510 / 159,870) * 100 = 25.34 %

• Food & Beverage Cost Percentage: (175,710 / 518,170) * 100 = 33.91 %

4. Prime Cost Percentage:

Refers to the Total Labor and Materials used in the Production or Selling Process

Prime Cost Percentage = Total Cost of Sales + Total Payroll and Related Expenses / Net Sales

• Rooms Division Department: ((0 + 143,140) / (897,500)) * 100 = 15.94 %

• Food & Beverage Department: ((175,710 + 204,180) / (518,170)) * 100 = 73.31 %

• Telephone Department: ((60,044 + 17,132) / 51,140) * 100 = 150.91 %

• Hotel Doro: ((248,701 + 568,102) / 1,597,493) * 100 = 51.13 %

5. Average Food (or Beverage) Check:

Represents the Average Sales per cover

Average Food (or Beverage Check) = Net Food (or Beverage) Sales / Covers

• Average Food Check* = 358,300 / 14,332 = $ 25.00

• Average Beverage Check** = 159,870 / 4,000 = $ 39.97

• Avergae Food & Beverage Check = 518,170 / (14,332 + 4,000) = $ 28.27

(*): Assume total Food Covers is 14,332

(**): Assume total Beverage Covers is 4,000

6. Return On Equity Ratio:

The Return On Equity Ration measures the Profits after Taxes of the Hospitality Company relative to the Equity of its Owners (I.e. Shareholders)

Return On Equity Ratio = Net Income / Average Equity

Where Average Equity = (Equity at the Beginning of the Year + Equity at the End of the Year) / 2

• Hotel Doro (19X2) : (60,544 /