These intrinsic values serve as benchmarks with which prices are compared to identify overpriced and underpriced stocks. Selected ratios are applied to various financial problems, especially in medium and large asset size firms. Rations can be computed from funds’ statement data. Failure of a firm is defined as business defaulting on interest payment on its debt, overdrawing bank limits, or declaring bankruptcy. The operating and financial difficulties can be detected through financial ratios. Before the development of the quantitative measure of company performance, only qualitative information of the credit-worthiness of the firm could be established.
Beaver’ s univariate analysis of a number of bankruptcy predictors set the stage for multivariate attempts (Altman, 2000). Research suggests that ratios are definite predictors of financial problems. Rations measure liquidity, solvency, and profitability but univariate analysis has some shortcomings. Ratio analysis may demonstrate poor profitability or solvency but above average liquidity, the situation may not be that serious. The clear mission in the hospitality industry is satisfying the customer. The industry is moving towards a knowledge-based era driven by technological advancements. This increases the significance of examining the key factors related to marketing, product, organization, capital, and technology.
It is critical to understand how to deal with the shareholder wealth in a capital-constrained competitive environment. REVPAR (revenue per available room) focuses on the physical asset will be replaced by REVPAC (revenue per available customer). This concept focuses on increasing the yield from the guest. The management needs to interpret, analyze and evaluate the trends and operating standards. It has to make optimum decisions concerning food, labor, overheads, and inventory. Projections of demand, estimated sales and profits have to be made to allocate budgets.
A simple business ratio report helps to benchmark the company’ s performance.
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