2. Hospitality Financial Accounting Week 6 Financial Statement Analysis Matakuliah: V0232 – Akuntansi Keuangan Hotel Tahun: 2009

3. 7-1 Horizontal Analysis 201020092008 Sales $150,000$125,000$100,00 Base Year 100%125%150% 50% increase 25% increase Percentage increase or decrease from base year formula: Current Year Amount – Base Year Amount Base Year Amount Example: Percent increase in sales in 2010 from 2008 $150,000 - $100,000 $100,000 = 50% HORIZONTAL ANALYSIS

4. 7-2 Vertical Analysis SMITH HOTEL COMPANY 2009 2008 AmountPercentAmountPercent Sales $ 120,000105.73% $ 80,000106.67% Sales returns $ 6,5005.73% $ 5,0006.67% Net sales $ 113,500100.00% $ 75,000100.00% Cost of goods sold $ 65,00057.27% $ 40,00053.33% Gross profit $ 48,50042.73% $ 35,00046.67% Selling expenses $ 18,00015.86% $ 15,00020.00% Administrative expenses $ 10,0008.81% $ 8,00010.67% Total operating expenses $ 28,00024.67% $ 23,00030.67% Net income $ 20,50018.06% $ 12,00016.00% Reflects the size of each item relative to a base amount (net sales) VERTICALANALYSISVERTICALANALYSIS

5. 7-2 Vertical Analysis (cont.) SMITH HOTEL COMPANY RODGERS HOTEL COMPANY 2009 AmountPercentAmountPercent Sales $ 120,000105.73% $ 80,000106.67% Sales returns $ 6,5005.73% $ 5,0006.67% Net sales $ 113,500100.00% $ 75,000100.00% Cost of goods sold $ 65,00057.27% $ 40,00053.33% Gross profit $ 48,50042.73% $ 35,00046.67% Selling expenses $ 18,00015.86% $ 15,00020.00% Administrative expenses $ 10,0008.81% $ 8,00010.67% Total operating expenses $ 28,00024.67% $ 23,00030.67% Net income $ 20,50018.06% $ 12,00016.00% Restating each item on a financial statement in terms of a percentage of a base amount, enables the comparison of companies of different sizes VERTICALANALYSISVERTICALANALYSIS COMMON SIZE ANALYSIS

6. 7-3 Liquidity Ratios RatioFormulaPurpose or Use Liquidity Ratios 1.Current ratio Current Assets / Current Liabilities Measures short-term debt-paying ability. 2.Acid-test or Quick Ratio [Cash + Short-term Investments + receivables (net)] / Current Liabilities Measures immediate short-term liquidity. 3.Receivable s Turnover Net Credit Sales / Average Net Receivables Measures liquidity of receivables. 4.Inventory Turnover Cost of Goods Sold / Average Inventory Measures liquidity of inventory.

7. 7-4 Profitability Ratios RatioFormulaPurpose or Use Profitability Ratios 1.Profit MarginNet Income / Net SalesMeasures net income generated by each dollar of sales. 2.Asset Turnover Net Sales / Average AssetsMeasures how efficiently assets are used to generate sales. 3.Return on Assets Net Income / Average Assets Measures overall profitability of assets. 4.Return on Common Stockholders’ Equity Net Income / Average Common Stockholders’ Equity Measures profitability of owners’ investment.

8. 7-5 Solvency Ratios RatioFormulaPurpose or Use Solvency Ratios 1.Debt to Total Assets Total Debt / Total AssetsMeasures the percentage of total assets provided by creditors. 2.Times Interest Earned Income Before Income Taxes and Interest Expense / Interest Expense Measures ability to meet interest payments as they come due.