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Financial Ratios In The Hospitality Industry

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Financial ratio - The extent to which financial ratios analysis is applicable when measuring a company performance in hospitality industry which is doing the business across different segments.
1.2 Background
Financial ratios are some of the most widely used tools to evaluate the performance, solvency and viability of a company going forward. They are obtained as a result of comparing two different financial entries of values contained in the business company’s financial statement. As such the financial ratios are used by various member of the company including the management, executive, shareholders and even financiers among others. Importantly, the ratios are very crucial to potential shareholders because they use some of them, such as …show more content…

The hospitality industry being the general one, it becomes extremely in the determining a set of financial ratios which can be used to analyze the companies along the entire industry irrespective of its operation. Since the hospitality industry is fixed in its tangible assets, therefore very specific set of ratios are required for the accurate analysis of the industry based upon the performance of individual companies. In this light, therefore, the proposed research seeks to focus on financial rations and the difficulties experienced when dealing with companies that operate in different divisions/segments.
1.3 Problem Statement
Whereas the financial ratios are very reliable and effective, it is very difficult to use them in evaluating the performance of companies that operate in different segments. As such, it becomes evident that evaluation of a multi-division company using the financial ratios obviously present challenges to the analysis. In that light, therefore, these issues form the basis of developing the aim and objective of the proposed research.
2.0 Literature …show more content…

The outcomes of the study show that the financial ratio affects management decisions about the earning strategies of firm. However, it has significant relationship with the discretionary accruals. The study suggest that the use of the financial ratio for the firms which has diverse segments. It is difficult to identify the factors that mainly influence the sales volume. Perhaps the information provided in the disclosures would enable to have greater insight to the issues pertaining to the segments (Barton, 2001).
In one of the research conducted by Singh & Schmidgal (2002) shows that the firms operating in different segment in hospitality industry have a great difference regarding the use of the financial ratios. It was noted that the firms falling in casino industry has impact on the use of the financial ratio. The study revealed that the use of the liquidity, solvency, efficiency and profitability ratio differs with respect to the firm size. There was significant difference between the type of casinos influences the use of financial ratios (Singh & Schmidgal,

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