HTM 485

1
HTM 485

• what is profit?

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Outline

• Review Basic Financial Statements
• Why do they exist?
• Focus on PL
• What is profit?
• How does understanding of profit affect strategy?
• How does strategy influence structure?

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Financial Statements

• Balance Sheet
• Income Statement
• Profit Loss
• Statement of Cash Flow
• Source Use of Funds
• Operating Statistics
• Daily Report

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What is Profit?
5
To answer these questions, I need a volunteer

• Design a hotel PL on the board
• 4 sections
• Revenue by department
• Total Revenue
• Departmental Expenses
• G.O.I.
• Undistributed Expenses
• G.O.P.
• Fixed Costs
• Net Profit

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What is the Profit?

• 0.8 million? 5
• Is this a good investment?
• How can you tell?
• Compare to other investments

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ROI or ROE

• NI / Owners investment
• .8 / 30 2.6 - is this a good
  investment?
• .8 / 4 20 - is this a good
  investment?
• .8 1.7 2.5 / 4 63 - is this a
  good investment?
• (only 0.8 is currently taxable)

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What are Profits? - It depends

• IRS
• Stockholders
• Management Company
• Franchise Company
• Partners

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Structure
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Partnerships

• traditional form because cash flow (depreciation)
  can be dispersed

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C Corp

• Only net income can be dispersed as dividends
• Other cash can be re-invested
• Profits are taxable at corp. level

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REIT

• like a mutual fund
• tax exempt
• 95 of profits must be distributed
• Other cash flows can be re-invested
• paired share
• can operate business
• standard
• hands-off / lease to operator

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Industry Standards

• www.str-online.com
• products services
• Host study
• Host highlights