Accounting and Financial Analysis in the Hospitality Industry

Index Allocations
Departments 84
A Discussion 71
Accounting concept Key term 87

Definition 3 Annual operating budget
Key term 3 Characteristics 232
Using in operations 24 Definition 230, 232
Accounting department Discussion 231
Discussion 51 Key term 244
Organization chart 52
Accounting period Asset
Discussion 61 Current 12
Accounts payable Definition 93
Definition 53, 92 Fundamental Accounting Equation 11
Discussion 53 Key term 108, 277
Key term 65, 108 Kiyosaki definition 268
Accounts receivable Liquid 103
Definition 54, 91 Long term 12
Discussion 54 Non liquid 103
Key term 65, 108
Accrued liabilities Assistant Controller
Definition 93 Discussion 53
Activity ratio Key term 65
Definition 163 Organization chart 52
Examples 163 Responsibilities 53
Adjusted gross operating profit
Discussion 22 Attest
Formula 22 In Corporate Annual Reports 250
Advance deposits Key term 263
Definition 92 Senior officers 253
Ageing
Managing 54 Audit opinion
Discussion 251
Key term 262

287

INDEX Capital expenditure budget
Characteristics
Average rate Definition 230, 240
Formula 25, 164 Discussion 233
Room revenue analysis 164 Funding 242
Key term 242
B Preparing 241
Balance sheet
Capitalization
Definition 12, 90 Company financing 12
Differences to P&L 100 Definition 91
Discussion 95 Discussion 97
Characteristics 12, 91, 107 Key term 24
Example 94 Three activities 97
Key term 24, 108
Personal 268 Capture rate
Purpose of 90 Room service forecasting 262
Similarities with P&L 101
Bank loan Cash
Definition 93 Definition 91
Benefits Key term 109
Health benefits for employees
Cash equivalent
274 Definition 103
Key term 277
Board of Directors Cash flow
Definition 251 Classifications 13, 104
Key term 263 Definition 13
Booking pace Discussion 102
Discussion 143 Personal 26
Key term 150
Yield management 143 Certified Public Accountant
Brand And Corporate Annual Reports
In Corporate Annual Reports 250
Key term 263 Audit opinion 250
Budget Key term 263
Definition 31
Key term 42 Change
Business Operating Cycle Discussion 32
Diagram 96 Evaluating company performance
Discussion 99 139
Working capital 99 Key term 42
Measuring 32
C Units, dollars, percentages 32
Capital
Classification of cash flow
Definition 97 Discussion 104
Discussion 97 Key term 109
The three classifications 13, 104
288
Common stock
Definition 93

Comp unit Corporate rate INDEX
Definition 254 Definition 142
Key term 263 289
Cost Management Index
Company contribution Discussion 128
Discussion 274 Key term 132
Key term 277 Retention and flow thru
128
Comparison
Key term 42 Current asset
Numbers to give them meaning 159 Definition 91
Key term 108
Competition Working capital 96
Primary 167
Secondary 167 Current liability
Definition 92
Competitive set Working capital 96
And Revpar 139 Key term 108
Definition 168
Key term 171 Current ratio
STAR Market Reports 167 Definition 104
Example 104
Concepts Liquidity 104
In Corporate Annual Reports
257 D
Key term 263 Daily revenue report

Consolidated hotel budget Discussion 114
Characteristics 234 Deduction from income
Definition 234
Key term 244 Discussion 71
Key term 87
Consolidated P&L Demand tracking
Budget 232 Key term 151
Definition 10 See Yield Management
Discussion 69 Department budget
Characteristics 235
Construction budget Discussion 235
Definition 230 Formulas 239
Discussion 234 Key term 244
Key term 244 Methods of preparing 237
Preparing 236
Contract market segment Department head
Definition 19 Definition 50
Key term 65
Controller Department P&L
See Director of Finance Definition 10
Discussion 21, 83
Corporate Accounting Office Key term 87
Discussion 62
Key term 65

Corporate Annual Report
Audited 250
Purpose 251

INDEX Expense categories
Department P&L 83
Department profit Four major categories 82
Discussion 74 Key terms 87
Key term 87
Expense center
Depreciation Discussion 21, 71
Definition 92 Examples 21
Key terms 87
Director of Finance
Definition 51 F
Key term 65 401K accounts
Organization chart 46, 52
Responsibilities 53 Definition 274
Key term 277
Director of Revenue Management Financial analysis
Discussion 147 Definition 3
Responsibilities 144 Key term 24
Measuring financial performance 29
Direct report Using in operations 2
Discussion 48 Financial literacy (Kiyosaki)
Key term 65 Definition 266
Key term 277
Discount room rates Financial Management Cycle
Examples 142 Discussion 29–30
Key term 42
Dividends Fiscal year
Key term 277 Corporate Annual Report 251
Personal 271 Definition 251
Key term 264
Division Fixed expense
In Corporate Annual Reports Definition 22, 128
257 Key term 87, 132, 186
Key term 263 Examples 85, 129
Consolidated P&L 73
DOA—Day of arrival Flow thru
Discussion 143 Definition 128
Key term 151 Examples 129
Key term 132
E Forecast
Earnings Definition 31, 174
Discussion 31, 174
Key term 277 Forecasting timeline 176
Equity Formulas 182

Key term 255
Personal 267
Escrow
Key term 244
Reserve 233
Executive Committee
Discussion 50
Key term 65
Organization chart 46

290

Key term 42, 186 Key term 66 INDEX
Revenue forecasts 179 Position 53
Steps in preparing 183 General Manager 291
Wage forecasts or schedules 184 Discussion 50
Volume, the key to forecasting Key term 66
Gross Operating Profit
182 Discussion 21, 74
Weekly Formula 22
Four Seasons 21
Discussion 177 Hyatt 21
Key term 187 Group market segment
Monthly/Period Definition 19
Discussion 178 Examples 19
Key term 186
Quarterly H
Key term 186 Historical average
Restaurant forecasts
Examples 202, 204 Discussion 143
Problem sets 207, 209 Key term 151
Steps in preparing 203 Yield Management 143
Rooms forecasts Hotel management reports
Examples 190 Daily reports 113
Problem set 199 Definition 112
Steps in preparing 188 Discussion 112
Room service forecasts Types and uses 113
Examples 202, 204 Horizontal headings
Problem sets 207, 208 Discussion 77
Steps in preparing 202 Key term 87
Wage forecasts House profit
Examples 224 Discussion 21
Problem sets 227 Formula 22
Steps in preparing 222 Key term 87
Fundamental Accounting Equation Management bonus
Definition 11 Marriott 21
Discussion 93
Formula 91 I
Income accounting
G
GAAP—Generally Accepted Accounting Key term 66
Income journal
Principles
Corporate Annual Reports 251 Definition 53
Discussion 94 Discussion 53
General Cashier Income Statement
Discussion 58 See P&L Statement

INDEX Statement of cash flow 13
Key term 24
Incremental Liquidity ratios
Discussion 128 Definition 163
Key term 132 Examples 163
Long term asset
Independent Audit Report Definition 92
Audit opinion example 252 Key term 108
In Corporate Annual Report 252 Non liquid 103
Key term 264 Long term liability
Definition 93
Interest Key term 109
Key term 277
On personal investments 27 M
Management Responsibility Report
Inventory
Definition 92 Discussion 261
Key term 109 Key term 264
Management tool
Investment factors Numbers used as 29
Definition 73 Manhours
Key term 87 Discussion 123
Formulas 123
L Labor productivity reports 123
Last year Market capitalization
Definition 3
Key term 42 Formula 25
Lease Key term 24
Market segment
Definition 93 Definition 8, 18
Liabilities Examples 19

Definition 93 Contract 19
Key term 109 Group 19
Kiyosaki’s definition 268 Transient 19
Current Key term 24
Market share
Definition 92 Key term 171
Key term 109 Message to shareholders
Long-term Discussion 254
Definition 103
Key term 109 N
Liability(Kiyosaki) Net house profit
Definition 268
Key term 277 Discussion 22, 75
Line manager Formula 22
Definition 51
Key term 66
Line of credit
Definition 93
Liquidity
Definition 13, 97
Discussion 97, 102

292

Key term 87 INDEX
Management tool 29
Measuring financial performance 29 Percentage
Net worth Department profit 156
Key term 278 Discussion 34, 159
Individual or personal 267 Formula 43
Night Audit Key term 42
Discussion 54 Four types used in financial analysis 35–38
Key term 66 Change
Responsibilities 54 Discussion 37
Notes to consolidated financial statements Formula 38, 43
Key term 264 Key term 42
Numbers Cost
Financial language 23 Discussion 35
To measure financial performance 23 Formula 35, 43
Management tool 23 Key term 42
Comparing to give them meaning 159 Mix
Discussion 36
O Examples 36, 37
Occupancy percentage Formula 36, 43
Key term 42
Discussion 164 Profit
Formula 25 Discussion 20, 36
Offset rooms Formula 5, 36, 43
Housekeeping wage schedules Key term 42

222 Point of sale system (POS)
Operating department Key term 25
Recording sales 13
Definition 50 Reports 17
Key term 66 Sales transactions 15
Operating ratios
Definition 162 Pre-opening budget
Examples 162 Characteristics 233
Organization chart Definition 230
Accounting department 52 Discussion 233
Definition 48 Key term 244
Hotel 49
Key term 66 Pre-paid expense
Owner equity Definition 92
Definition 93
Key term 109 Primary competition
Key term 171
P
Paid in capital Principle
Importance of in personal finance 271
Definition 93 Key term 278

Productivities
Labor 123
Profit 123

293

INDEX

Profit Public relations
Best measure of financial performance 155 In Corporate Annual Report 252
Definition 20, 154 Key term 264
Department 21, 74, 156
Examples 156 R
Hotel 155 Rat race
Formula 5, 17, 25, 43, 155
Key term 25 Kiyosaki’s definition 271
Profitability discussion 155 Rate
Retention and flow thru 127
Definition 16
Profit and Loss Statement Key term 25
Characteristics 10 Rack rate 141
Critiques Rate structure
Definition 10 Discussion 141
Differences to Balance Sheet 100 Establishing 141
Horizontal headings 77 Examples 142
Key term 25 Key term 151
Personal 267 Market segments 141
Similarities with Balance Sheet 101 Ratios
Title 75 Activity ratios 162
Vertical headings 77 Analyzing revenues 163
Discussion 162
Profit after taxes Key term 171, 186
Discussion 75 Liquidity ratios 163
Key term 87 Operating ratios 162
Profitability ratios 163
Profit before taxes Solvency ratios 163
Discussion 75 Used in forecasting 184
Key term 88 Reserve
Key term 244
Profit center Retained earnings
Discussion 69 Definition 93
Examples 21 Retention
Key term 88 Discussion 127
Examples 129
Profitability ratios Key term 133
Definition 163 Same as flow thru
Examples 163 Retirement accounts
Company 401K 274
Pro forma Company contributions 274
Discussion 31 Retirement planning
Key term 42 Planning for 275
Revenue
Property Beginning of financial performance 15
Key term 25

Property, plant and equipment (PPE)
Capitalization 240
Definition 92
Key term 244

294

INDEX

Calculating room revenue 16 Solvency ratios
Calculating restaurant revenue 16 Definition 163
Discussion 15–16 Examples 163
Key term 25
Variation analysis 164 Source and Use of Funds Statement
Revenue management systems As part of Statement of Cash
Definition 143 Flows
Revenue center Definition 13
Discussion 69 Discussion 105
Examples 21 Key term 109, 151
Key term 88
REVPAR Special corporate rate
Characteristics 137 Definition 142
Definition 15, 136
Examples 137 STAR Market Report
Formula 16, 18, 25, 136 Discussion 167
Importance of 138 Example 168
Key term 25, 151, 171 Key term 171
To measure room revenue performance
Staff department
18 Definition 50
Uses 139 Key term 66
Rich Dad, Poor Dad
Six lessons for financial freedom 272 Statement of Cash Flows
Room rate structure Characteristics 13, 101
Example 19 Definition 13, 101
Rooms sold Discussion 101
Room revenue analysis 164 Key term 25, 109

S T
Sales Taxes payable

See revenue Definition 92
Secondary competition Titles

Key term 171 Key term 88
Securities and Exchange Commission (SEC) P&L Statement 75
Total department profit
Discussion 251 Key term 88
Key term 264 Transient market segment
Selling strategy Examples 19
Committee 147 Trends
Definition 147 And variation analysis 160
Discussion 147 Company and industry 40
Examples 147 Discussion 39
Key term 151 General economic 40
Yield Management 144 Key term 42
Revenue, expense and profits

40
Short and long term 39

295

INDEX

V Wages payable
Variable Definition 92

Definition 161 Wage scheduling
Examples 162 Discussion 222
Variable expense Examples 224
Definition 128 Problem sets 227
Example 129
Key term 133, 186 Weekly management reports
Wages as a variable expense 179 Discussion 125
Variation
Definition 128 Working capital
Key term 133 Daily operations 12
Variation analysis Definition 91
Discussion 159, 161 Discussion 96
Examples of room revenue variation 165 Examples 104
Expense variation analysis 166 Formula 25
Formulas 162 Key term 25
Profit variation analysis 165 Liquiditity measures 104
Ratios 162 Managing 99
Using Foundations of Financial Analysis 159 Trends 104
Vertical headings
Discussion 77 Y
Key term 88 Yield Management
Volume
Definition 15 Critiques 149
Key term 186 Definition 136
Occupancy percentage discussion 164 Discussion 143
The key to forecasting 182 Examples 143
Key term 151
Selling strategy 144
Using 145

W
Wage cost percentage

Discussion 124
Formula 124

296