Chapter 4 Chapter 4 6 Study Guide Financial Analysis 1 Hotel Consolidated P L Statements o Income statement for a hotel to a summary P L that lists the department totals for revenue centers profit centers and expense centers o Only department totals are included Department heads o Operate the departments that provide products and services to customers and products services to customers and produces the numbers Revenue Centers o Operating departments that produce revenues by providing products and services directly to customers Profit Centers o Operating departments that produce revenues that result in a profit or loss by providing products and services to customers Revenues expenses and profits POS computers Expense Centers and Support Costs o Expense Centers are staff departments in a hotel that support the hotel operating departments o Include sales and marketing HR engineering and accounting o Do not operate any revenue or profits o Also called support costs only generate expenses o Allocation means that a set dollar amount or present of sales dollar amount is charged to these departments each month Fixed Expenses or deductions o Fixed expenses hotel depreciation and license and fees o Fixed costs constant or fixed and are not affected by lease expenses bank loans insurance sots o Fixed costs always stay constant regardless on how the hotel is doing in sales Department Profits o Revenue expenses profit Total Department Profits o Formula adding up and totaling the department profits o Total department profit for each operating department in the hotel other hotel expenses dollar amount available to pay all Chapter 4 6 Study Guide Financial Analysis 2 House Profit Gross Operating Profit o Total department profits total expense center o Measures the hotels ability to maximize revenues control expenses and maximize profits o Used to calculate management bonuses because the managers have the ability to affect and control procedures and operate to maximize and to minimize and control expenses o Identifies the profit or dollar amount that hotel operations turns over to the GM to pay hotel Fixed Costs Net House Profit or Adjusted Gross Operating Profit o Net house profit House Profit Fixed Expenses o Dollar amount the hotel recognized after its recognized revenues and has paid variable and fixed costs o Ownership accounting identifies which fixed expenses reserve accounts and taxes will be paid either by the owner or any other owner Profit before and after taxes o Before same as net operating profit The profit amount remaining after all hotel operating expenses have been paid o After paid amount of profit remaining after corporate taxes are o Final dollar before taxes are incurred o Profit after taxes to the final amount that is divided off o Consolidated P L Statements provide summary info of the financial operations of a hotel including department totals for revenues profits and expenses o Department P L provide detailed operating info for Department P L Statements o Expenses categories individual departments direct operating expenses 4 Major Cost Categories Cost of sales wages benefits and o Cost of sales is a major variable expense for most profit departments o Anything served to said to or consumed by customers o Food cost range 25 35 in restaurants o Beverage range 20 30 o Gift shop Range 45 55 o Rooms department has the highest profit margin of any profit department Chapter 4 6 Study Guide Financial Analysis 3 o Salaries and Wages Line account a specific accounting code that collects and records all revenues or expenses classified within the description of the line account closely related to wage costs o Benefit cost Chapter 4 6 Study Guide Financial Analysis 4 Chapter 5 Balance Sheet or Asset and Liability Statement o Referred to as A L o Measures the status or net worth of a business of a specific date business o Balance sheet measures the value or worth of a o Assets liability owners equity o Working capital current assets current liabilities o What you own should be equal what you owe o Rules and procedures that govern accounting in business are called GAAP o Current Assets less than one year life Cash Accounts Receivable Inventories o Long tern assets more than one year useful life Property plant equipment o Current Liabilities less than one year obligations Accounts payable wages payable taxes payable advanced deposits accrued liabilities expenses longer than one year o Long Tern Liabilities obligations Bank loans line of credit lease obligations o Owner equity investment in a company in the form of paid in capital common or preferred stick and retained earnings It is the excess of assets minus liabilities o Dollar amount provided for the daily operations of a o Invested in the current assets of a business primarily in cash AR and inventory o Associated with working capital is liquidity o Liquidity is the ability of a business to pay short term financial obligations o The way that a business obtains and uses money to start or expand a business by purchasing long term assets o Capital is money or property that is used to create more money or property o If company uses long term capital to pay daily operating expense its not generating sufficient Working Capital business Capitalization Chapter 4 6 Study Guide Financial Analysis 5 revenues from daily operating to cover operating expenses Managers Use of Balance Sheet Accounts In Daily Operations o Primarily use the current assets of the company Spend cash to purchase inventories CA or pay employee wages CL to produce products and services Differences b t the Balance sheet and the P L Statement time o P L shows financial performance over a period of o Balance Sheet shows financial performance at a specific time o P L records revenues expenses and profit amounts incurred or spent during a specific month o Balance Sheet records account amounts or balances at a specific time period o P L accumulates and totals revenues received expenses incurred and the profit over the month o Balance Sheet records account activity during the o P L has revenue expense and profit accounts o Balance Sheet has asset liability and owner equity month accounts o P L has actual budget and last year accounts o Balance Sheet has opening balances activity and ending balances Statement of Cash Flows o Focuses on 2 areas 1st is the cash account on the Balance Sheet that identifies the movement of cash in and out of the cash account and the beginning and