hotel management

Chapter 26 Hotel Financial Management (2)
Other business profit refers to the net amount of other business income minus other business expenses.

2. Total profit
Total profit refers to the hotel profit plus investment income, subsidy income, non-operating income, minus the amount of non-operating expenses.which is:

Total profit = operating profit + investment income + subsidy income + non-operating income - non-operating expenses
Investment income refers to the income obtained by the hotel from foreign investment, minus the investment losses incurred and the net amount of investment impairment provision.

Subsidy income refers to the value-added tax actually received and refunded by the hotel according to the regulations, or the fixed amount subsidy given according to the subsidy quota plan stipulated by the state according to the sales volume or workload, and other forms of subsidy given in the field of state financial support.

Non-operating income and non-operating expenses refer to various incomes and various expenditures that are not directly related to the production and operation activities of the hotel.Non-operating income includes surplus of fixed assets, net income from disposal of fixed assets, net income from disposal of intangible assets, net income from fines, etc.Non-operating expenses include losses on fixed assets, net losses on disposal of intangible assets, net losses on disposal of fixed assets, losses on debt restructuring, provision for impairment of construction in progress, expenditure fines, donations, extraordinary losses, etc.

3. Net profit
Net profit refers to the amount after deducting income tax from the total profit of the hotel.which is:

Net profit = total profit - income tax
[-]. Key points of profit management

(1) The hotel operation and management must aim at implementing the hotel's business purpose, and on the premise of studying the customer's consumption psychology, develop service items, improve service quality, improve operation management, reduce cost consumption, and increase profits reasonably.

(2) The hotel shall abide by the relevant provisions of the financial system, correctly calculate the operating income and expenditure of the enterprise, investment profit and loss and operating income and expenditure, subsidy income and non-operating income and expenditure, truthfully reflect the financial results of the enterprise, and accurately and timely calculate the enterprise's profit.

(3) The hotel should correctly calculate the tax payable according to the regulations and pay it on time, and do a good job in financial treatment in a timely manner.

(4) The hotel should maintain the relative balance of profits, that is, make up for the debt with the abundance, and make up for the loss with the profit.

[-]. Distribution of profits
The net profit realized by the hotel in the current period, plus the undistributed profit at the beginning of the year (or minus the unrecovered loss at the beginning of the year) and the balance after other transfers are the profits available for distribution.The hotel's distributable profit is analyzed in the following order.

(1) Withdraw the statutory surplus reserve fund.The hotel should withdraw the statutory surplus reserve at 10% of the after-tax profit (reduction of losses) of the year. When the statutory surplus reserve reaches 50% of the registered capital, it can no longer withdraw.The surplus reserve fund extracted by the hotel can be used to make up for losses, and to increase capital according to national regulations.However, the surplus reserve fund retained by the enterprise after the increase shall not be less than 25% of the registered capital.

(2) Withdraw statutory public welfare funds.The public welfare fund is withdrawn according to the ratio of 5% to 10% of the after-tax profit, which is the profit available for investors to distribute.

What needs to be explained is that after making up the unrecovered losses of previous years, the net profits realized by foreign-invested enterprises should be allocated to reserve funds, enterprise development funds, employee rewards and welfare funds, etc. according to the provisions of laws and administrative regulations.The Chinese-foreign joint venture enterprise shall also deduct the investment returned to the investors with profits within the cooperation period according to regulations, and the subsequent net amount shall be the profits available for distribution by investors.

The profits of the hotel that can be distributed by investors shall be distributed in the following order.

(1) Preferred dividends payable, that is, the cash dividends distributed by the hotel to preferred shareholders according to the profit distribution plan.

(2) Withdrawal of the discretionary surplus reserve, that is, the discretionary surplus reserve withdrawn by the hotel according to regulations, usually in accordance with the company's articles of association or the resolution of the shareholders' meeting.

(3) Dividends payable for ordinary shares, that is, the cash dividends distributed by the hotel to ordinary shareholders according to the profit distribution plan, including the profits distributed by the hotel to investors.

(4) Dividends of ordinary shares converted into capital (or share capital), that is, the capital (or share capital) transferred by the hotel in the form of distribution of stock dividends according to the profit distribution plan, including the capital converted from profits by the hotel.

After the above-mentioned analysis of the profits available for investors to distribute, the rest is undistributed profits, and the shortfall is unrecovered losses.Retained profit can be retained for analysis in subsequent years.If the hotel loses money, it can be made up by the profits of the next year according to regulations.

Fifth (Section) Hotel Financial Analysis

Hotel financial analysis is to conduct research and analysis on the implementation of the hotel's planned budget, operating conditions and future development trends, the hotel's profitability, solvency and other aspects.

[-]. Steps of hotel financial analysis
Generally speaking, hotel financial analysis can be carried out in three steps: preparation of materials, comparative analysis, and research and improvement.

1. Prepare materials
Financial analysis is based on the analysis and calculation of various data materials.The hotel should establish a complete statistical and accounting system within the enterprise to collect various data materials for hotel operations.At the same time, the hotel should also extensively collect other relevant information and combine them with the hotel's accounting and statistical data to provide an accurate and reliable basis for financial analysis.

2. Comparative analysis
Scientifically use the correct method, carry out specific technical processing on the collected data materials, in order to estimate the differences in indicators and the reasons for the differences, and find out the main contradiction from many factors, so as to facilitate improvement.

3. Research improvements
Through the analysis, the hotel should put forward reasonable and effective improvement measures and solutions to the problems existing in the operation, so as to improve the operation management and improve the economic benefits.

[-]. Methods of hotel financial analysis
1. Comparative method

The comparative method, also known as the comparative analysis method, is the basic method of financial analysis.It determines the gap between indicators by comparing the indicators with the same name.Generally, the following main comparisons are commonly used.

(1) Taking the plan as the standard, compare the actual amount in the reporting period with the planned amount in the same period.Through this comparison, we can understand the completion and progress of the hotel plan, and find out whether the actual results meet the expected or ideal standards, so that we can take necessary measures in time to solve the problems existing in the plan implementation process and ensure the realization of the plan.However, planning often has a certain degree of subjectivity, and it is difficult to formulate planning standards just right. They may be high or low, and may lose the meaning of fair measurement due to changes in objective conditions.Therefore, when the plan is used as the measurement standard, it is necessary to formulate the plan standard objectively and truthfully and revise it in time.

(2) Using history as the standard, compare the actual number in the reporting period with the same period last year or the highest level in the history of the hotel, that is, vertical comparison.Compared with the history of the enterprise, its advantage is that it is highly comparable, which can help the hotel understand whether the enterprise has improved in some aspects, understand the law of the enterprise's business activities, and discover the vertical changes and development of the enterprise's operation.However, historical standards only describe the past, especially in the case of major changes in the objective environment, objective conditions or enterprises, such a comparison is not reasonable and fair enough.Therefore, some adjustments should be made to historical data when comparing.

(3) Using the same industry as the standard, compare the actual figures in the reporting period with the local average level and advanced level of the same industry, or with the level of domestic and foreign industries, that is, horizontal comparison.Through this kind of comparison, the hotel can understand the level of the enterprise in the same industry and the gap with the advanced level, so that the enterprise can improve its operation and management.

Example for the reporting period compared to the plan:
Increase or decrease of the actual amount in the reporting period compared with the planned amount

= Actual number in the reporting period - planned number in the same period
% of program completed
= Actual number in the reporting period Planned number for the same period × 100%
Percentage overrun or underachievement

= Actual number in the reporting period Planned number in the same period × 100% - 1
2. Factor substitution method

Factor substitution method is also called factor analysis or chain substitution method.It analyzes the degree of influence of various factors that affect economic indicators on the basis of using the comparative method to find out the differences.

(1) List the factors.According to the economic indicators to be analyzed, list the various factors that make up this indicator.

(2) Arrangement factors.The factors are arranged according to the interdependence of each factor.

(3) Determine the influence of each factor on the index respectively.According to a certain order, substitute the actual numbers of each factor that affects the index into the formula, and calculate the result, and then compare the results calculated by successive substitutions with the previous results to measure and calculate the impact of each variable factor on the index degree.

(4) Summarize the overall impact of each factor on the indicator.

For example, analyze a certain index N.According to the interdependence of each factor that constitutes the core index, they are arranged, and the amount of the comparison period of the index is N1=a×b×c, and the actual numbers of the three factors in the reporting period are a1, b1, c1 respectively.Plan as above:
N1=a×b×c
N2=a1×b×c
N3=a1×b1×c
N4=a1×b1×cl
If only factor a among the three factors changes at the end of the reporting period, that is, a1=a, N2=N1, while factors b and c have changed, then through analysis, we can get:

X=N3—N2
Y=N4—N3
Z=N4—N1
Among them: the difference X is caused by the change of factor b, the difference Y is caused by the change of factor c, and the changes of factors b and c combined cause the difference Z between the reporting period and the comparison period of this indicator.

In addition to the above two commonly used methods, hotel financial analysis, structural trend analysis, etc. are also available.

[-]. Financial analysis indicators

Hotel financial analysis needs to calculate relevant accounting indicators based on accounting statements.There are many financial analysis indicators for assessing and evaluating the hotel's financial status and operating results. Here are a few relevant important indicators.

1. Debt Service Ratio Index

Such indicators can reflect the hotel's ability to repay debt.

(1) Current ratio.The current ratio is used to measure the ability of a company's current assets to be converted into cash to repay current liabilities before short-term debts mature.Its calculation formula is:
Current Ratio = Current Assets Current Liabilities × 100%
A high current ratio indicates a firm's ability to repay its debts.It is generally believed that the company's current ratio is about 200% as the best.If the ratio is too low, the business may have difficulty repaying current liabilities.From the point of view of creditors, the higher the current ratio, the better, but as far as the enterprise itself is concerned, if the ratio is too high, it may indicate that a large number of current assets of the enterprise are idle or there are problems with the inventory structure, so that the current assets cannot be fully utilized.

Because different industries have different conditions and business cycles, the evaluation criteria for this ratio should also be different.As far as hotel companies are concerned, a current ratio of 150% to 200% can indicate that the company's short-term solvency is normal.

(2) Quick ratio.The quick ratio is used to measure the ability of a company's current assets to pay off its current liabilities immediately.Its calculation formula is:
Quick Ratio = Quick Assets Current Liabilities × 100%
Quick Assets = Current Assets - Inventory

A high quick ratio indicates that the company has strong liquidation capabilities.From the perspective of creditors, the higher the quick ratio, the better, but the higher the quick ratio, the less fully utilized the quick assets of the enterprise and the more idle.It is generally believed that the quick ratio is 100% or slightly higher.However, other factors should also be considered in specific analysis.Although the analysis of this ratio excludes inventory, the accounts receivable in quick assets may also have problems such as excessive aging and unrecognized bad debts, which will affect the reliability of the quick ratio.

(3) Asset-liability ratio.The asset-liability ratio is used to measure the ability of a company to use creditors to provide funds for operating activities.Its calculation formula is:
Asset-liability ratio = total liabilities, total net assets × 100%
A low asset-liability ratio means that there are few borrowed assets in the total assets, the company has a strong solvency, creditors are well protected, and the risks of both creditors and the company are relatively small.From the perspective of creditors, it is hoped that the asset-liability ratio should be as low as possible.For business owners, if the return on assets can be higher than the interest rate on liabilities, they will hope that the asset-liability ratio will be higher, so as to obtain more income through debt management.However, if the asset-liability ratio is too high, the financial risk will increase significantly.Generally speaking, a high asset-liability ratio indicates that the enterprise has assumed greater risks, and also reflects a strong entrepreneurial spirit of the operator; on the contrary, it indicates that the enterprise is relatively conservative and lacks confidence in the future.Of course, the debt ratio is affected by many factors such as the stability of corporate profits, the growth rate of turnover, the degree of industry competition, and the maturity of debt, so it should be considered and analyzed comprehensively.

If the asset-liability ratio is greater than 100%, it indicates that the enterprise is insolvent and facing bankruptcy.

2. Operational capability indicators
Such indicators mainly reflect the level of hotel management.

(1) Accounts receivable turnover rate.Accounts receivable turnover ratio is used to reflect the liquidity of corporate accounts receivable.Its calculation formula is:
Accounts receivable turnover ratio = net credit sales income average balance of accounts receivable × 100%
Net credit sales income = operating income - cash sales income
Average balance of accounts receivable = (accounts receivable at the beginning of the period + accounts receivable at the end of the period) ÷ 2
Through the account receivable turnover ratio, the hotel can further calculate the average collection period indicator, namely:

Average collection period of accounts receivable = 365 days Accounts receivable turnover rate
The higher the turnover rate of accounts receivable and the shorter the average collection period, the more effective the hotel's work on the recovery of accounts receivable is.

(2) Inventory turnover rate.Inventory turnover is used to measure whether a company has excess inventory.Its formula is:
Inventory turnover ratio = average balance of operating cost inventory × 100%
Average inventory balance = (beginning inventory + ending inventory) ÷ 2
The inventory turnover ratio expresses the turnover rate of the enterprise's inventory.Generally speaking, the higher the inventory turnover rate, the shorter the time it takes for the company's inventory to be recovered from sales, and the higher the efficiency of operation and management.The faster the recovery of funds, the higher the profit the company can achieve with the same operating profit margin.If the inventory turnover rate is low, it means that the enterprise has a backlog of inventory and is not marketable, resulting in low efficiency of operation and management.However, if the inventory turnover rate is too high, care should also be taken to prevent the occurrence of phenomena such as disconnection (joint) of procurement and supply affecting normal operations.

3. Profitability indicators
Hotel management is to obtain greater profits with less consumption. The strength of profitability, the amount of profits, and the future development trend are comprehensive indicators to measure the survival value and management level of enterprises.

(1) The rate of return on capital.The rate of return on capital is used to measure the profitability of investors investing capital in a business.Its formula is:
Profit rate on capital = total profit total capital x 100%
Generally speaking, the higher the rate of return on capital, the more profit from invested capital, indicating a good operating condition.

(2) Operating profit margin.Operating profit margin is used to measure the profitability of a business.Its formula is:
Operating profit margin = total profit net operating income × 100%
The operating margin reflects realized profit as a percentage of operating income.The higher the ratio, the stronger the profitability of the enterprise.

(3) Cost profit margin.The cost profit ratio is used to reflect the relationship between the cost and profit of the enterprise.Its formula is:
Profit rate on cost = total profit, total cost and expense × 100%
Through the ratio of income to consumption, this indicator directly reflects the strength of the enterprise's profitability and the level of comprehensive management.

The above three types of financial indicators all adopt the method of ratio analysis, and each ratio indicator reveals a certain aspect of the hotel's financial information from different angles.In financial analysis, attention should be paid to comprehensive and systematic analysis of indicators, combined with vertical and horizontal comparisons, in order to draw comprehensive and correct conclusions.

(End of this chapter)