Chapter 5

CHAPTER 5
PROFITABILITY
ANALYSIS OF
HOTEL INDUSTRY
5.1
FINANCIALS
For the given research and analysis we have chosen 6 hotels
from the Golden Triangle 2 from each city, namely as
under:
Name of the Hotel
Registered Office
Jaipur
Shivani
Enclave
Private Goyal
Limited
House
24,
Ajmer
Road, Jaipur
Crafts Palace Hotels (I) Pvt. Plot No. 1, Golimar Garden,

Ltd.
Amber Road, Jaipur
Delhi
Asian
Hotels
(North) Bhikaiji
Limited
Cama
Place,
Mahatma Gandhi Marg, New

Delhi-110066
Tulip Star Hotels Limited
Indra
Palace,
Cannaught
H-Block,
Circus,
New
Hotel
Maan
Delhi-110 001
Agra
Mumtaz Hotels Limited
Located
159
at:
Singh Palace, Vibhav Nagar,

Agra-283 111
Registered Office: 4 Mangoe
Lane, Kolkata-700 001
Jaypee Palace Hotel Agra
Fatehabad Road, Rakabganj

Agra, Uttar Pradesh-282 003
The Financials of the 6 hotels are as under:

JAIPUR
SHIVANI ENCLAVES PRIVATE LIMITED
Balance Sheet
As on 31 s t March, 20XX
(Amount in Lakhs)
2007
2008
2009
2010
2011
SOURCE OF FUND
Shareholders Fund
Share Capital
Reserves and Surplus
Loan Fund
Secured Loan
Unsecured Loan
Deferred Tax Liability
200.00
956.41
200.00
1192.03
200.00
1322.49
200.00
1495.99
200.00
1758.36
857.82
2260.70
59.03
894.92
2096.70
139.59
658.83
1875.70
190.39
692.24
1631.70
235.96
345.74
1364.70
292.81
TOTAL
4333.97
4523.24
4247.41
4255.88
3961.61
APPLICATION OF FUND
160
Fixed Assets
Gross Block
Depreciation
Net Block
Work in Progress (Assets
not put to use)
4846.91
705.08
4141.83
5259.34
991.43
4267.91
5300.45
1303.38
3997.07
5665.62
1598.61
4067.00
5703.77
1874.40
3829.37
0.00
3.59
0.00
4.35
3.48
0.13
0.13
0.13
0.13
0.13
Current Assets, Loans and

Advances
Inventories
Sundry Debtors
Cash and Bank Balance
Loans and Advances
Total Current Assets
38.28
93.36
185.38
100.05
417.08
40.05
109.95
214.90
140.89
505.79
48.96
78.10
183.74
94.96
405.76
56.35
80.55
123.95
95.59
356.44
47.36
90.32
131.68
84.68
354.04
Less: Current Liabilities &

Provisions
Liabilities
Provisions
Total Current Liabilities
191.05
44.45
235.50
208.74
54.51
263.25
126.75
36.51
163.26
164.20
14.19
178.39
196.52
33.88
230.39
Net Current Assets
181.57
242.54
242.49
178.05
123.65
10.44
9.07
7.71
6.35
4.99
4333.97
4523.24
4247.41
4255.88
3961.61
Investment (NSC)
Miscellaneous Expenses
(to the extent not Written off or
adjusted)
TOTAL
Profit and Loss Account

For the year ending 20XX
(Amount in Lakhs)
2007
INCOME
Sales
2008
506.55
161
538.80
2009
569.07
2010
610.42
2011
726.35
Services Rendered
Other Income
Total
EXPENDITURE
Cost of Goods Sold
Employee Remuneration
& Benefits
Other Operating &
Administration Expenses
Selling & Distribution
Expenses
Financial Expenses
Depreciation
Preliminary Expenses
Written Off
Loss on Sale of Fixed
Assets
Total
Net Profit/ (Loss) for the
year (before tax)
Less: Provision for Tax
Profit / Loss after tax
Net Profit/ (Loss) brought
forward from previous year
Net Profit/ (Loss) carried
forward to Balance Sheet
1018.70
183.99
709.24
1142.52
149.88
1831.20
1045.92
168.56
1783.55
1001.13
158.88
1770.43
1139.33
172.93
2038.61
213.48
219.44
233.45
232.86
266.12
203.87
271.69
287.49
277.35
286.54
550.43
561.68
601.24
596.98
671.69
49.33
95.05
310.00
36.93
93.83
286.35
36.15
105.71
311.94
23.67
79.12
295.24
38.35
72.49
291.01
0.01
0.01
0.01
0.01
0.01
0.00
1422.17
0.00
1469.93
0.00
1576.01
0.00
1505.23
2.03
1628.24
287.07
105.22
181.85
361.27
125.65
235.62
207.54
77.08
130.46
265.20
91.71
173.49
410.38
148.01
262.37
-33.93
147.91
383.53
513.99
687.49
147.91
383.53
513.99
687.49
949.86
CRAFTS PALACE HOTELS (I) PVT. LTD.

Balance Sheet
(Amount in Lakhs)
2007
2008
SOURCE OF FUND
162
2009
2010
2011
Shareholders Fund
Share Capital
Share Application Money
Loan Fund
Secured Loan
Unsecured Loan
290.00
56.00
15.00
290.00
66.00
15.00
290.00
61.00
15.00
290.00
61.00
15.00
290.00
56.00
15.00
124.44
408.15
-22.12
68.99
444.00
-23.73
7.41
506.60
-25.59
4.18
494.10
-26.25
113.06
544.10
-51.06
TOTAL
871.47
860.25
854.41
838.03
972.09
APPLICATION OF FUND
Fixed Assets
Gross Block
Depreciation
Net Block
948.73
337.71
611.02
964.86
360.22
604.64
976.27
381.54
594.73
972.46
401.86
570.60
1015.78
423.27
592.51

Advances
Inventories
Sundry Debtors
Loans and Advances
9.19
171.11
58.09
84.84
323.23
12.55
176.58
116.45
92.70
398.28
16.21
123.49
133.56
98.51
371.77
17.46
135.86
149.28
112.08
414.68
17.56
149.79
51.28
160.16
378.79

Provisions
Liabilities
Provisions
190.65
25.44
216.09
180.83
33.53
214.36
179.91
30.28
210.19
181.15
35.55
216.70
230.89
30.69
261.58
Net Current Assets
107.14
183.92
161.57
197.99
117.22
adjusted)
153.31
71.69
98.11
69.44
262.37
TOTAL
871.47
860.25
854.41
838.03
972.09
163

(Amount in Lakhs)
2007
INCOME
Income from Operations
Other Income
Total
EXPENDITURE
Stores, Supplies, Food &
Beverages & Packing
Consumed
Other Operating Expenses
& Benefits
Administrative, Selling
and Other Expenses
Financial Expenses
Depreciation
Preliminary Expenses
Written Off
Prior Period Adjustment
Total
year (before tax)
2008
2009
2010
2011
655.55
0.00
655.55
733.07
0.00
733.07
633.79
0.00
633.79
760.55
0.00
760.55
912.66
0.00
912.66
110.51
187.16
116.85
178.91
92.41
224.67
113.21
265.34
138.68
313.36
149.38
180.16
185.40
213.21
245.19
116.24
14.69
22.64
123.71
16.09
23.61
125.65
5.87
24.60
127.85
6.13
20.32
127.85
6.13
21.41
0.00
0.95
601.58
0.00
0.60
639.93
0.00
0.91
659.52
0.00
0.82
746.87
0.00
0.72
853.34
53.98
32.58
21.40
93.14
11.53
81.62
-25.73
0.69
-26.42
13.68
0.41
13.27
59.32
1.78
57.54
-174.71
-153.31
-71.69
-98.11
-84.84
-153.31
-71.69
-98.11
-84.84
-27.30
DELHI
ASIAN HOTELS (NORTH) LIMITED
164
Balance Sheet
(Amount in Crores)
2007
SOURCE OF FUND
Shareholders Fund
Share Capital
Preference Share Capital
Loan Fund
Secured Loan
Unsecured Loan
2008
2009
2010
2011
22.80
0.00
1171.68
22.80
20.00
1460.32
22.80
10.00
1452.86
11.40
11.21
770.59
19.45
4.90
790.70
207.76
0.00
0.00
138.49
0.00
0.00
168.39
0.00
0.00
157.15
0.00
0.00
560.44
28.75
0.00
TOTAL
1402.24
1641.61
1654.05
950.35
1404.24
APPLICATION OF FUND
Fixed Assets
Gross Block
Depreciation
Net Block
not put to use)
1505.45
118.45
1387.00
1565.27
141.03
1424.24
1616.30
177.36
1438.94
1052.51
72.96
979.55
1058.61
81.37
977.24
26.33
40.12
7.54
9.90
151.39
24.59
230.08
238.18
0.00
391.06

Advances
Inventories
Sundry Debtors
Loans and Advances
8.31
13.30
5.05
120.49
147.15
9.78
16.22
3.02
202.23
231.25
8.87
20.20
4.43
282.87
316.37
5.89
9.69
5.48
41.13
62.19
7.00
10.77
3.25
29.92
50.94

Provisions
Liabilities
Provisions
101.66
81.17
145.18
138.88
222.73
124.25
87.57
13.71
152.49
13.90
Investment (NSC)
165

Net Current Assets
adjusted)
TOTAL
182.83
284.06
346.98
101.28
166.39
-35.68
-52.81
-30.61
-39.09
-115.45
0.00
0.00
0.00
0.00
0.00
1402.24
1641.63
1654.05
950.36
1404.24

(Amount in Crores)
2007
INCOME
Room, Food, Beverage
and Services
Other Income
Total
2008
2009
2010
2011
159.04
-0.52
158.52
177.97
-0.94
177.03
158.14
0.90
159.04
147.94
0.05
147.99
173.45
1.44
174.89
15.15
0.00
0.00
0.00
0.00
22.20
26.30
28.74
27.19
33.11
EXPENDITURE
Fuel, power and Water
& Benefits
Other Manufacturing
Expenses
Administrative and
Selling Expense
Financial Expenses
Depreciation
Expenses written off
Extraordinary Items
Total
38.00
54.54
45.64
43.11
50.46
26.55
5.08
18.05
12.42
0.00
-0.68
136.77
27.21
6.74
23.84
12.94
0.32
0.04
151.93
27.83
3.74
27.30
11.51
0.00
0.00
144.76
25.64
4.09
28.38
11.38
0.00
0.00
139.79
29.74
5.35
25.78
12.75
0.00
-0.59
156.60

year (before tax)
21.75
25.10
14.28
8.20
18.29
166

8.04
13.71
10.45
14.65
4.38
9.90
2.90
5.30
6.27
12.02
TULIP STAR HOTEL LIMITED

Balance Sheet
(Amount in Lakhs)
2007
SOURCE OF FUND
Shareholders Fund
Share Capital
Loan Fund
Secured Loan
Unsecured Loan
2008
2009
2010
2011
461.00
3982.67
461.00
3152.99
461.00
2945.60
461.00
2629.28
461.00
2136.29
0.00
596.50
15.57
0.00
1431.10
-5.50
0.00
1739.10
-75.14
0.00
2130.10
-91.19
0.00
3339.60
-7.85
5055.74
5039.59
5070.56
5129.19
5929.04
9.30
8.12
1.18
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
5.05
1.18
3.87
0.00
0.00
0.00
0.00
0.00
Investment (NSC)
2206.07
2206.07
2206.07
2206.07
2206.07

Advances
Inventories
Sundry Debtors
Loans and Advances
0.00
0.00
39.82
3728.17
0.00
0.00
79.06
3734.25
0.00
0.00
2.39
3932.17
0.00
0.00
3.46
3904.54
0.00
0.00
4.01
3887.99
TOTAL
APPLICATION OF FUND
Fixed Assets
Gross Block
Depreciation
Net Block
not put to use)
167

Provisions
Liabilities
Provisions
Net Current Assets
adjusted)
TOTAL
3767.99
3813.31
3934.56
3908.00
3892.00
153.22
766.29
919.50
130.42
849.37
979.78
167.23
902.83
1070.07
431.83
553.05
984.88
73.44
99.46
172.91
2848.49
2833.52
2864.49
2923.12
3719.10
0.00
0.00
0.00
0.00
0.00
5055.74
5039.59
5070.56
5129.19
5929.04

(Amount in Lakhs)
2007
2008
2009
2010
2011
INCOME
Profit on Sale of Invetments
Income from Hotel Operations
Interest
Dividend Income
Exchange Fluctuations on Sale
of Investments
Liability written back
Other Income
4005.50
15.17
87.84
3.09
0.00
0.00
41.00
0.20
0.00
0.00
11.90
0.20
0.00
0.00
0.01
0.05
0.00
0.00
0.01
0.20
23.03
10.42
0.04
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.02
0.00
0.00
0.00
Total
4145.09
41.20
12.10
0.08
0.21
31.35
32.17
32.35
30.14
36.73
269.07
16.52
0.88
2.73
0.00
63.27
797.66
0.15
7.75
0.00
63.32
214.53
0.00
-24.27
1.70
40.54
263.01
0.00
-2.10
0.85
68.52
304.76
1.18
-1.33
0.00
EXPENDITURE
Employee Remuneration &
Benefits
Administrative and Selling
Expense
Financial Expenses
Depreciation
Expenses written off
168
Total
year (before tax)
320.55
901.00
287.63
332.45
409.86
3824.53
901.03
-859.80
4.50
-275.53
-68.14
-332.37
-16.04
-409.65
83.33
2923.50
-864.30
-207.39
-316.33
-492.99
-151.64
2717.93
1883.17
1675.78
1359.45
2771.86
1853.63
1675.78
1359.45
866.47
AGRA
MUMTAZ HOTELS LIMITED
Balance Sheet
(Amount in crores)
2007
SOURCE OF FUND
Shareholders Fund
Share Capital
Loan Fund
Secured Loan
Unsecured Loan
TOTAL
APPLICATION OF FUND
Fixed Assets
Gross Block
Depreciation
Net Block
2008
2009
2010
2011
20.65
29.35
20.65
32.11
20.65
42.31
20.65
58.55
20.65
51.49
65.56
9.12
-3.54
48.21
0.11
3.02
30.86
0.17
9.64
20.17
0.00
13.24
7.20
0.00
12.68
121.14
104.11
103.63
112.61
92.02
129.15
32.75
129.90
37.94
129.96
43.12
130.39
48.54
131.16
52.54
96.40
91.96
86.84
81.85
78.62
169

not put to use)
0.04
0.11
0.00
0.00
0.37
0.13
0.13
0.13
0.13
0.13
2.01
8.84
9.73
3.05
2.57
7.45
5.94
4.73
2.51
4.79
12.90
6.46
2.35
5.12
23.34
10.97
2.63
6.14
16.28
16.39
0.35
0.37
0.03
0.01
0.04
23.98
21.07
26.69
41.78
41.48
8.52
0.86
7.75
1.29
6.92
2.99
7.91
3.12
8.17
20.27
9.38
9.04
9.91
11.02
28.44
Net Current Assets
14.60
12.03
16.78
30.76
13.04
adjusted)
10.10
0.01
0.01
0.00
0.00
121.14
104.11
103.63
112.61
92.02
Investment (NSC)
Advances
Inventories
Sundry Debtors
Loans and Advances
Interest Accrued on Fixed
Deposits
Provisions
Liabilities
Provisions
TOTAL

(Amount in crores)
2007
2008
2009
2010
2011
INCOME
Guest Accomodation,
Restaurants, Bars & Banquets,
etc.
Other Income
57.53
0.49
170
66.26
0.54
60.91
0.66
58.18
0.50
63.07
0.69
Total
58.02
66.80
61.58
58.68
63.76
3.47
4.07
3.64
3.41
3.60
6.18
7.48
6.60
7.98
7.21
7.53
6.07
7.42
8.26
9.75
11.05
9.72
5.70
13.28
8.26
5.79
12.47
5.33
5.59
11.65
3.08
5.63
12.13
1.07
4.99
0.01
0.07
0.01
0.04
0.01
-0.05
0.01
0.00
0.00
0.00
43.67
46.03
41.73
37.26
39.81
14.35
6.12
20.77
6.73
19.85
7.24
21.43
2.78
23.95
6.98
8.23
14.05
12.61
18.65
16.97
-18.31
-10.08
2.76
12.96
29.20
-10.08
3.97
15.37
31.61
46.18
EXPENDITURE
Consumption of Provisions,
Stores, Wines and Smokes
Benefits
Upkeep and Service Cost
Administrative, Selling and
Other Expenses
Financial Expenses
Depreciation
Preliminary Expenses Written
Off
Total
year (before tax)
JAYPEE PALACE HOTEL, AGRA

Balance Sheet
(Amount in Crores)
2007
SOURCE OF FUND
Shareholders Fund
Share Capital
Loan Fund
2008
55.49
57.23
171
55.49
65.60
2009
55.49
80.10
2010
55.49
82.02
2011
55.49
87.87
Secured Loan
Unsecured Loan
65.45
0.00
0.00
59.72
0.00
0.00
46.51
0.00
0.00
33.84
0.00
0.00
21.51
0.00
0.00
TOTAL
178.16
180.81
182.10
171.34
164.87
APPLICATION OF FUND
Fixed Assets
Gross Block
Depreciation
Net Block
not put to use)
231.49
49.74
181.75
239.17
58.75
180.42
245.63
68.25
177.38
256.63
78.09
178.54
290.25
88.70
201.54
1.66
1.30
23.86
27.91
91.83
Investment (NSC)
21.43
19.73
16.73
0.73
0.72

Advances
Inventories
Sundry Debtors
Loans and Advances
7.30
4.46
3.92
25.87
41.55
6.71
6.14
8.58
17.52
38.95
7.12
9.81
2.92
21.38
41.24
9.00
10.80
6.34
26.37
52.51
9.41
11.99
6.58
44.95
72.93

Provisions
Liabilities
Provisions
63.06
5.17
68.23
52.25
7.35
59.59
50.60
26.51
77.11
53.95
34.39
88.34
162.68
39.47
202.16
-26.68
-20.65
-35.87
-35.83
-129.23
0.00
0.00
0.00
0.00
0.00
178.16
180.81
182.10
171.34
164.87
Net Current Assets

adjusted)
TOTAL

172
(Amount in Crores)
2007
2008
2009
2010
2011
INCOME
Room, Food, Beverage and
Services
Other Income
Interest Received
Provisions no longer required
39.76
0.98
0.00
0.03
46.86
1.49
0.01
0.02
47.94
1.50
0.01
0.03
52.73
1.65
0.00
0.03
58.00
1.81
0.00
0.04
Total
40.77
48.38
49.48
54.41
59.85
3.55
4.09
4.35
4.79
5.17
5.46
8.71
0.00
5.32
7.96
8.79
2.81
5.53
8.59
8.58
1.28
5.42
9.45
9.44
1.40
5.97
9.83
10.10
1.47
6.68
2.67
5.67
0.01
0.05
2.68
4.97
0.00
0.00
2.36
6.61
0.01
0.00
2.59
5.95
0.00
0.00
2.91
6.69
0.00
0.00
31.44
36.84
37.20
39.59
42.86
9.33
0.00
11.54
0.00
12.27
0.00
14.82
0.00
16.99
0.00
9.33
11.54
12.27
14.82
16.99
EXPENDITURE
Consumption of Food,
Beverages and Tobacco, etc.
Benefits
Operating Expenses
Repairs and Maintenance
Administrative and General
Expenses
Depreciation
Financial Expenses
Total
year (before tax)
5.2
SERVICE COSTING
Service costing is that part of operation costing which is
used in all organisations that provide services instead of
producing of goods. For calculating the price of each
service, it is very necessary to collect all the expenses
173
relating to those services. We make a cost sheet in which

we show all the cost relating to specific service. T hese costs
are calculated on the time basis.
[1]
The expense associated with having another person perform a

valuable task for which specialized expertise may be required. When
the service cost to a business of employing independent contractors
to perform necessary tasks reaches a certain critical level, it may
become more economical to hire full time employees to do the
work.[2]
A cost accounting method concerned with establishing the
costs of services rendered
Examples of where service costing is applied:
Transport
Hotels
Tourism
Solicitors
Education
Retail distribution
Financial services
174
Service costing is also applied within a manufacturing

setting
For example: A manufacturer might wish to calculate the
costs of the following services:
Transport
Catering
Computing and IT
Accounting
Human resources
Many organizations have tried to develop service portfolios and
service catalogs, yet most have been unsuccessful. Understanding the
costs of service provisioning is a critical success factor in service
portfolio and service catalog management. Full cost analysis is a
competency that service providers need to develop if theyre to move
beyond an adversarial relationship with their customers and build a
true partnership, delivering the appropriate services at the cost,
quality, and terms the business needs.
Understanding the maturity of your costing models, which either
limits or enables your ability to provide a viable service portfolio and
175
service catalog, will enable you to set more realistic goals and achieve
them more consistently.
In this webcast, learn how to apply full cost analysis to your
organization. Using this proven methodology, developed by Dean
Meyer, service providers can understand their costs and capabilities
and translate that knowledge into meaningful business terms that the
customer understands. Move beyond chargebacks and evolve to full
service transparency, where customers understand the full costs and
value of each of the services they use in their business processes. By
having full cost analysis in place as requirements change, customers
will know when and how they can make changes to their services. [3]
Service costing is used by companies operating in a service industry
or by companies wishing to establish the cost of services carried out
by some of their departments.
Service organizations do not make or sell tangible goods.
Specific characteristics of services:
Simultaneity
Heterogeneity
Intangibility
176
Perishability
The main problem with service costing is the difficulty in defining a
realistic cost unit that represents a suitable measure of the service
provided.
Frequently, a composite cost unit may be deemed more appropriate.
Hotels for e.g. 'occupied bed-night' as an appropriate cost unit for
ascertainment and control.
Calculated using:
Cost per Service Unit
= Total Costs for Period / Number of service units in the period
Service department costing is also used to establish a specific cost for

an internal service which is a service provided by one department for
another, rather than sold externally to customers, e.g. canteen
maintenance. [4]
The Indian food service industry has been going through a tough
time considering the fact that inflation has accelerated to its highest
level this year in September because of fuel.
177
The economic downturn has presented food and beverage companies

with newer challenges and major players have been desperately
looking to trim their operation costs. For hotels (in Andheri and
elsewhere) high costs and low occupancy has dampened profitability
levels and their owners have been feeling the pinch for a while.
This has driven hoteliers to consider passing this excess cost to
customers. But profitability, or even cost-effectiveness, should not be
at the cost of cutting portion sizes, increasing menu prices, or using
low quality ingredients. Companies should ensure complete
diligence while sourcing their ingredients and not compromise their
goodwill and branding of their brands by reducing quality, quantity
or price. This makes it essential for the food service as well as the
hotel industry to employ agencies that will assist them in cost control
and maximize their profits.
Today, it has become necessary for them to imbibe the latest
technologies which will assist them in controlling costs. No
restaurant or hotel owner in today's environment can afford to ignore
technology. If used properly, it can play a major role in growth, costcutting and competitiveness in the F&B and hotel industry. From
178
entertaining guests and planning menus to monitoring employees,

technology has dramatically changed the way the industry works
today.
When discussing costs, there are three factors under consideration:
manpower, materials and finance. Everything else falls under
overheads. The Indian hotel industry, unlike its counterpart abroad,
is an unorganized industry. This means that the accountability factor
is extremely low. There are so many loopholes in the system that it is
very difficult to find any misdoings in the company. This is one of the
major reasons why a dip in profits is very difficult to control.
In order to achieve rationality the models of business excellence also,
in a way, determine whether the criteria have been met, but the
evaluation of Business excellence is based not only on the fulfillment
of the set criteria but also on the determination of the level up to
which the criteria have been fulfilled (Systems of points).
When analyzing the quality of service it is desirable to analyze the
largest possible number of companies supplying the same type of
service. As we have already mentioned, if a company carries out a
research and finds that the results are negative, it can interpret this
179
information in the wrong way and conclude that it provides services

in a totally wrong way. On the other hand, when analyzing a large
number of companies, it is possible to compare data and obtain a
realistic picture of the position of an individual company compared
to others regarding quality.
Cost Accounting Practices in the Service Industry
[5]
In a highly competitive market, service providers are continually

looking for ways to manage their costs and increase productivity.
Although cost accounting was originally developed for the
manufacturing industry, it has proven useful in the service industry
as well. Cost accounting provides an accurate picture of the
connection between specific costs and specific outputs because it
traces resources as they move through the company. By adopting cost
accounting for your service business, you can learn where resources
are being wasted and which resources are most profitable.
Different Costing Methods
Cost accounting describes several different systems of approximating
the cost of producing certain products in the manufacturing industry,
or completing certain jobs in the service industry.
180
Activity-based costing (ABC) is the most widely adopted and wellknown method of cost accounting. ABC is based on the accounting
theory that every output requires certain activities, and every activity
requires certain resources. ABC is a two-step process that first assigns
costs of resources to activities and then assigns activity costs to
outputs. For instance, a waiter makes a specific hourly wage and
serves 10 tables in a single night. Under an ABC system each table
will be assigned a cost depending on what fraction of an hour was
required to wait on that specific table.
Another costing system is job costing. Its calculations depend on the
direct assignment of certain costs to specific jobs. Rather than
determining the cost of creating one unit, as in ABC accounting, job
costing focuses on the cost to serve a batch of customers. For instance,
if you serve a batch of 100 customers, you would calculate the labor,
supplies and power it takes to serve those 100 customers instead of
looking at each unit individually. A batch might be defined by the
number of customers you serve in an hour, day or week.
A third system, process costing, is used by companies that have
consistent production of the exact same product or service. A cost is
181
assigned to processing units. That cost becomes either the input of the
next division in the production chain or part of the final product. For
example, if a division of an ad company is only responsible for
developing concepts, then under a process costing system all costs for
concept development are recorded for a single month. The total
monthly cost of concept development is divided by the number of
clients served to find the cost per client. The cost per client is then
used as an input for determining the cost of the completed and
delivered advertising product.
Finally, standard costing estimates costs based on standard
expectations. For instance, a restaurant owner would calculate the
cost of serving a single table by estimating the time and materials
needed to serve that table and costing each input, labor and
materials, based on its current market price.
Now well calculate and compare the service cost of the 5
Star hotels chosen from the Golden Triangle:
For convenience the following codes are provided to the
hotels and in the further calculations the Hotels w ill be
named with the same:
182
City
Code
Jaipur
SEPL
Shivani Enclave Private Limited
CPH
Crafts Palace Hotels (I) Pvt. Ltd.
AHL
Asian Hotels (North) Limited
TSHL
Tulip Star Hotels Limited
MHL
Mumtaz Hotels Limited
Delhi
Agra
Name of the Hotel
JPH
Jaypee Palace Hotel Agra
CALCULATION OF SERVICE COST: (Room per day)

JAIPUR
SEPL
(Amount in Lakhs)
Particulars
Expenditure:
Cost of Goods Sold
Benefits
Other Operating &
Administration Expenses
Selling & Distribution
Expenses
Total Expenditure
Total Operating Profit
Total Revenue from
Room, Food and
Beverages (A + B)
(A)
(B)
(C)
2007
2008
2009
2010
2011
213.48
203.87
219.44
271.69
233.45
287.49
232.86
277.35
266.12
286.54
550.43
561.68
601.24
596.98
671.69
49.33
36.93
36.15
23.67
38.35
1017.11
692.13
1,709.24
1089.74
741.46
1,831.20
1158.33
625.22
1,783.55
1130.86
639.57
1,770.43
1262.70
775.92
2,038.61
183
No. of Rooms
No. of Days
No. of Room Nights
Available (D x E)
Room Occupancy (%)
No. of Room nights Sold (F
x G)
Cost per room day (A / H)
Add: Mark up (B / H)
Average Room Rate (I + J)
(D)
(E)
(F)
100
365
36500
100
365
36500
100
365
36500
100
365
36500
100
365
36500
(G)
(H)
68%
24820
70%
25550
71%
25915
73%
26645
75%
27375
(I)
(J)
(K)
4098
2789
6887
4265
2902
7167
4470
2413
6882
4244
2400
6644
4613
2834
7447
CPH
(Amount in Lakhs)
Particulars
Expenditure:
Stores, Supplies, Food &
Beverages & Packing
Consumed
Other Operating Expenses
Benefits
and Other Expenses
Total Expenditure
Total Revenue from
Room, Food and
Beverages (A + B)
No. of Rooms
No. of Days
No. of Room Nights
Available (D x E)
Room Occupancy (%)
(A)
(B)
(C)
(D)
(E)
(F)
(G)
(H)
2007
2008
2009
2010
2011
110.51
187.16
116.85
178.91
92.41
224.67
113.21
265.34
138.68
313.36
149.38
180.16
185.40
213.21
245.19
116.24
563.29
92.26
123.71
599.63
133.45
125.65
628.14
5.66
127.85
719.61
40.94
127.85
825.09
87.57
655.55
733.07
633.79
760.55
912.66
72
365
72
365
72
365
72
365
72
365
26280
69%
18133
26280
58%
15242
26280
54%
14191
26280
62%
16294
26280
71%
18659
184
x G)
(I)
(J)
(K)
3106
509
3615
3934
875
4809
4426
40
4466
4417
251
4668
4422
469
4891
AHL
(Amount in Crores)
Particulars
Expenditure:
Benefits
Other Manufacturing
Expenses
Expense
Total Expenditure
Total Revenue from
Room, Food and
Beverages (A + B)
No. of Rooms
No. of Days
No. of Room Nights
Available (D x E)
Room Occupancy (%)
x G)
(A)
(B)
(C)
(D)
(E)
(F)
(G)
(H)
(I)
(J)
(K)
2007
2008
2009
2010
2011
15.15
0.00
0.00
0.00
0.00
22.20
26.30
28.74
27.19
33.11
38.00
54.54
45.64
43.11
50.46
26.55
5.08
106.98
51.54
27.21
6.74
114.79
62.24
27.83
3.74
105.95
53.09
25.64
4.09
100.03
47.96
29.74
5.35
118.66
56.23
158.52
177.03
159.04
147.99
174.89
275
365
275
365
275
365
275
365
275
365
100375
82%
100375
83%
100375
85%
100375
86%
100375
91%
82308
83311
85319
86323
91341
12998
6262
19259
13778
7471
21249
12418
6223
18641
11588
5556
17144
12991
6156
19147
185
TSHL
(Amount in lakhs)
Particulars
Expenditure:
Benefits
Expense
Total Expenditure
Total Revenue from
Room, Food and
Beverages (A + B)
No. of Rooms
No. of Days
No. of Room Nights
Available (D x E)
Room Occupancy (%)
x G)
(A)
(B)
(C)
(D)
(E)
(F)
(G)
(H)
(I)
(J)
(K)
2007
2008
2009
2010
2011
31.35
32.17
32.35
30.14
36.73
269.07
106.98
51.54
63.27
114.79
62.24
63.32
105.95
53.09
40.54
100.03
47.96
68.52
118.66
56.23
15.17
0.00
0.00
0.00
0.00
40
365
40
365
40
365
40
365
40
365
14600
5%
14600
0%
14600
0%
14600
0%
14600
0%
730
41154
(39076)
2078
0
0
0
0
0
0
0
0
0
0
0
0
MHL
(Amount in Crores)
Particulars
Expenditure:
Consumption of
Provisions, Stores, Wines
and Smokes
2007
2008
2009
2010
2011
3.47
4.07
3.64
3.41
3.60
186

Benefits
Upkeep and Service Cost
and Other Expenses
Total Expenditure
Total Revenue from
Room, Food and
Beverages (A + B)
No. of Rooms
No. of Days
No. of Room Nights
Available (D x E)
Room Occupancy (%)
x G)
(A)
(B)
(C)
(D)
(E)
(F)
(G)
(H)
(I)
(J)
(K)
6.18
7.48
6.60
7.98
7.21
7.53
6.07
7.42
8.26
9.75
11.05
28.18
29.84
13.28
31.93
34.87
12.47
30.85
30.73
11.65
28.54
30.14
12.13
33.75
30.02
58.02
66.80
61.58
58.68
63.76
102
365
102
365
102
365
102
365
160
365
37230
67%
37230
68%
37230
56%
37230
79%
37230
72%
24944
25316
20849
29412
26806
11297
11963
23064
12611
13775
26174
14796
14740
29217
9705
10248
19782
12590
11198
23528
JPH
(Amount in Crores)
Particulars
Expenditure:
Consumption of Food,
Beverages and Tobacco,
etc.
Benefits
Operating Expenses
Repairs and Maintenance
Administrative and
2007
2008
2009
2010
2011
3.55
4.09
4.35
4.79
5.17
5.46
8.71
0.00
5.32
2.67
7.96
8.79
2.81
5.53
2.68
8.59
8.58
1.28
5.42
2.36
9.45
9.44
1.40
5.97
2.59
9.83
10.10
1.47
6.68
2.91
187
General Expenses
Total Expenditure
Total Revenue from
Room, Food and
Beverages (A + B)
No. of Rooms
No. of Days
No. of Room Nights
Available (D x E)
Room Occupancy (%)
x G)
5.3
(A)
(B)
(C)
(D)
(E)
(F)
(G)
(H)
(I)
(J)
(K)
25.71
15.04
31.86
16.49
30.58
18.86
33.64
20.74
36.17
23.65
40.74
48.36
49.44
54.38
59.82
341
365
341
365
341
365
341
365
341
365
124465
70%
124465
80%
124465
83%
124465
88%
124465
91%
87126
99572
103306
109529
113263
2950
1726
4676
3200
1656
4856
2960
1825
4785
3071
1894
4965
3193
2088
5281
RATIO ANALYSIS
Liquidity Ratio
Liquidity ratios are the ratios that measure the ability of a company
to meet its short term debt obligations. These ratios measure the
ability of a company to pay off its short-term liabilities when they fall
due.
The liquidity ratios are a result of dividing cash and other liquid
assets by the short term borrowings and current liabilities. They show
the number of times the short term debt obligations are covered by
188
the cash and liquid assets. If the value is greater than 1, it means the
short term obligations are fully covered.
Generally, the higher the liquidity ratios are, the higher the margin of
safety that the company posses to meet its current liabilities.
Liquidity ratios greater than 1 indicate that the company is in good
financial health and it is less likely fall into financial difficulties.
Most common examples of liquidity ratios include current ratio, acid
test ratio (also known as quick ratio), cash ratio and working capital
ratio. Different assets are considered to be relevant by different
analysts.
Some
analysts
consider
only
the cash
and
cash
equivalents as relevant assets because they are most likely to be used

to meet short term liabilities in an emergency. Some analysts consider
the debtors and trade receivables as relevant assets in addition to
cash and cash equivalents. The value of inventory is also considered
relevant asset for calculations of liquidity ratios by some analysts.
The concept of cash cycle is also important for better understanding
of liquidity ratios. The cash continuously cycles through the
operations of a company. A companys cash is usually tied up in the
finished goods, the raw materials, and trade debtors. It is not until the
189
inventory is sold, sales invoices raised, and the debtors make

payments that the company receives cash. The cash tied up in the
cash cycle is known as working capital, and liquidity ratios try to
measure the balance between current assets and current liabilities.
A company must posses the ability to release cash from cash cycle to
meet its financial obligations when the creditors seek payment. In
other words, a company should posses the ability to translate its
short term assets into cash. The liquidity ratios attempt to measure
this ability of a company. [6]
1. Current Ratio
The current ratio is a popular financial ratio used to test a
company's liquidity (also referred to as its current or working
capital position) by deriving the proportion of current assets
available to cover current liabilities.
The concept behind this ratio is to ascertain whether a company's
short-term assets (cash, cash equivalents, marketable securities,
receivables and inventory) are readily available to pay off its
short-term liabilities (notes payable, current portion of term debt,
190
payables, accrued expenses and taxes). In theory, the higher the

current ratio, the better. [7]
Formula:
Statement Showing Current Ratios of the selected

Hotels:
Code
2007
2008
2009
2010
2011
JAIPUR
SEPL
Current Assets
Current Liabilities
Ratio
Lakhs
417.08
505.79
405.76
356.44
235.50
1.77
263.25
1.92
163.26
2.49
178.39
2.00
CPH
Current Assets
Current Liabilities
Ratio
354.04
230.39
1.54
Lakhs
323.23
216.09
1.50
398.28
214.36
1.86
371.77
210.19
1.77
414.68
216.70
1.91
378.79
261.58
1.45
DELHI
AHL
Crores
Current Assets
147.15
231.25
316.37
62.19
50.94
Current Liabilities
Ratio
182.83
0.80
284.06
0.81
346.98
0.91
101.28
0.61
166.39
0.31
TSHL
Current Assets
Current Liabilities
Lakhs
3767.99 3813.31 3934.56 3908.00 3892.00
919.50 979.78 1070.07 984.88 172.91
191
Ratio
4.10
3.89
3.68
3.97
22.51
AGRA
MHL
Current Assets
Current Liabilities
Ratio
Crores
23.98
9.38
2.56
21.07
9.04
2.33
26.69
9.91
2.69
41.78
11.02
3.79
JPH
Current Assets
Current Liabilities
Ratio
41.48
28.44
1.46
Crores
41.55
68.23
0.61
38.95
59.59
0.65
41.24
77.11
0.53
52.51
88.34
0.59
72.93
202.16
0.36
Norms and Limits

The higher the ratio, the more liquid the company is. Commonly
acceptable current ratio is 2; it's a comfortable financial position
for most enterprises. Acceptable current ratios vary from industry
to industry. For most industrial companies, 1.5 may be an
acceptable current ratio.
Low values for the current ratio (values less than 1) indicate that a
firm may have difficulty meeting current obligations. However, an
investor should also take note of a company's operating cash flow
in order to get a better sense of its liquidity. A low current ratio
can often be supported by a strong operating cash flow.
192
If the current ratio is too high (much more than 2), then the
company may not be using its current assets or its short-term
financing facilities efficiently. This may also indicate problems in
working capital management.
All other things being equal, creditors consider a high current
ratio to be better than a low current ratio, because a high current
ratio means that the company is more likely to meet its liabilities
which are due over the next 12 months. [6]
2. Quick Ratio
The quick ratio is a measure of a company's ability to meet its
short-term obligations using its most liquid assets (near cash or
quick assets). Quick assets include those current assets that
presumably can be quickly converted to cash at close to their book
values. Quick ratio is viewed as a sign of a company's financial
strength or weakness; it gives information about a companys
short term liquidity. The ratio tells creditors how much of the
company's short term debt can be met by selling all the company's
liquid assets at very short notice.
193
The quick ratio is also known as the acid-test ratio or quick assets
ratio.
Calculation (formula)
The quick ratio is calculated by dividing liquid assets by current
liabilities:
Quick ratio = (Current Assets - Inventories) / Current Liabilities
Code
2007
2008
2009
2010
2011
JAIPUR
SEPL
Liquid Assets
Current Liabilities
Ratio
Lakhs
378.80
235.50
1.61
465.74
263.25
1.77
356.80
163.26
2.19
300.09
178.39
1.68
CPH
Liquid Assets
Current Liabilities
Ratio
306.68
230.39
1.33
Lakhs
314.04
216.09
1.45
385.73
214.36
1.80
355.56
210.19
1.69
397.22
216.70
1.83
361.23
261.58
1.38
DELHI
AHL
Liquid Assets
Current Liabilities
Ratio
Crores
138.84
182.83
0.76
221.47
284.06
0.78
307.50
346.98
0.89
56.30
101.28
0.56
TSHL
Liquid Assets
Current Liabilities
Ratio
43.94
166.39
0.26
Lakhs
3767.99
919.50
4.10
3813.31
979.78
3.89
3934.56
1070.07
3.68
3908.00
984.88
3.97
3892.00
172.91
22.51
AGRA
MHL
Crores
194
Liquid Assets
Current Liabilities
Ratio
21.97
18.49
24.18
39.43
38.85
9.38
2.34
9.04
2.05
9.91
2.44
11.02
3.58
28.44
1.37
JPH
Liquid Assets
Current Liabilities
Ratio
Crores
34.25
68.23
0.50
32.24
59.59
0.54
34.12
77.11
0.44
43.51
88.34
0.49
63.52
202.16
0.31
Norms and Limits

The higher the quick ratio, the better the position of the company.
The commonly acceptable current ratio is 1, but may vary from
industry to industry. A company with a quick ratio of less than 1
can not currently pay back its current liabilities; it's the bad sign
for investors and partners.
3. Cash Ratio
Cash ratio (also called cash asset ratio) is the ratio of a company's
cash and cash equivalent assets to its total liabilities. Cash ratio is a
refinement of quick ratio and indicates the extent to which readily
available funds can pay off current liabilities. Potential creditors
use this ratio as a measure of a company's liquidity and how easily
it can service debt and cover short-term liabilities.
195
Cash ratio is the most stringent and conservative of the three

liquidity ratios (current, quick and cash ratio). It only looks at the
company's most liquid short-term assets cash and cash
equivalents which can be most easily used to pay off current
obligations.
Cash ratio is calculated by dividing absolute liquid assets by
current liabilities:
Cash ratio = Cash and cash equivalents / Current Liabilities
Code
2007
2008
2009
2010
2011
JAIPUR
SEPL
Current Liabilities
Ratio
Lakhs
185.38
214.90
183.74
123.95
131.68
235.50
0.79
263.25
0.82
163.26
1.13
178.39
0.69
230.39
0.57
CPH
Current Liabilities
Ratio
Lakhs
58.09
116.45
133.56
149.28
51.28
216.09
0.27
214.36
0.54
210.19
0.64
216.70
0.69
261.58
0.20
DELHI
AHL
Current Liabilities
Ratio
Crores
5.05
3.02
4.43
5.48
3.25
182.83
0.03
284.06
0.01
346.98
0.01
101.28
0.05
166.39
0.02
TSHL
Lakhs
196

Current Liabilities
Ratio
39.82
79.06
2.39
3.46
4.01
919.50
0.04
979.78
0.08
1070.07
0.00
984.88
0.00
172.91
0.02
AGRA
MHL
Crores

Current Liabilities
Ratio
9.73
5.94
12.90
23.34
16.28
9.38
1.04
9.04
0.66
9.91
1.30
11.02
2.12
28.44
0.57
JPH
Crores

Current Liabilities
Ratio
3.92
8.58
2.92
6.34
6.58
68.23
0.06
59.59
0.14
77.11
0.04
88.34
0.07
202.16
0.03
Norms and Limits

Cash ratio is not as popular in financial analysis as current or
quick ratios, its usefulness is limited. There is no common norm
for cash ratio. In some countries a cash ratio of not less than 0.2 is
considered as acceptable. But ratio that are too high may show
poor asset utilization for a company holding large amounts of cash
on its balance sheet.
Profitability Indicator ratios

Profitability ratios measure a companys ability to generate
earnings relative to sales, assets and equity. These ratios assess the
197
ability of a company to generate earnings, profits and cash flows

relative to relative to some metric, often the amount of money
invested. They highlight how effectively the profitability of a
company is being managed.
Common examples of profitability ratios include return on sales,
return on investment, return on equity, return on capital
employed (ROCE), cash return on capital invested (CROCI), gross
profit margin and net profit margin. All of these ratios indicate
how well a company is performing at generating profits or
revenues relative to a certain metric.
Different profitability ratios provide different useful insights into
the financial health and performance of a company. For example,
gross profit and net profit ratios tell how well the company is
managing its expenses. Return on capital employed (ROCE) tells
how well the company is using capital employed to generate
returns. Return on investment tells whether the company is
generating enough profits for its shareholders.
For most of these ratios, a higher value is desirable. A higher value
means that the company is doing well and it is good at generating
198
profits, revenues and cash flows. Profitability ratios are of little

value in isolation. They give meaningful information only when
they are analyzed in comparison to competitors or compared to
the ratios in previous periods. Therefore, trend analysis and
industry analysis is required to draw meaningful conclusions
about the profitability of a company.
Some background knowledge of the nature of business of a
company is necessary when analyzing profitability ratios. For
example sales of some businesses are seasonal and they experience
seasonality in their operations. The retail industry is example of
such businesses. The revenues of retail industry are usually very
high in the fourth quarter due to Christmas. Therefore, it will not
be useful to compare the profitability ratios of this quarter with
the profitability ratios of earlier quarters. For meaningful
conclusions, the profitability ratios of this quarter should be
compared to the profitability ratios of similar quarters in the
previous years.
1. Gross Profit Margin
199
Gross profit margin (gross margin) is the ratio of gross profit

(gross sales less cost of sales) to sales revenue. It is the
percentage by which gross profits exceed production costs.
Gross margins reveal how much a company earns taking into
consideration the costs that it incurs for producing its products
or services. Gross margin is a good indication of how profitable
a company is at the most fundamental level, how efficiently a
company uses its resources, materials, and labour. It is usually
expressed as a percentage, and indicates the profitability of a
business before overhead costs; it is a measure of how well a
company controls its costs.
Gross margin measures a company's manufacturing and
distribution efficiency during the production process. The
higher the percentage, the more the company retains on each
dollar of sales to service its other costs and obligations, the
better the company is thought to control costs. Investors use the
gross profit margin to compare companies in the same industry
and also in different industries to determine what are the most
200
profitable. A company that boasts a higher gross margin than

its competitors and industry is more efficient.
Gross margin is calculated as gross profit divided by total sales
(revenue).
Gross profit margin = Gross profit / Revenue
Code
2007
2008
2009
2010
2011
JAIPUR
SEPL
Gross Profit
Revenue
Ratio
Lakhs
231.97
417.35
56%
276.23
491.13
56%
337.20
520.94
65%
386.27
510.21
76%
CPH
Gross Profit
Revenue
Ratio
420.98
552.66
76%
Lakhs
208.50
655.55
32%
257.16
733.07
35%
131.31
633.79
21%
168.80
760.55
22%
215.43
912.66
24%
DELHI
AHL
Gross Profit
Revenue
Ratio
Crores
83.69
159.04
97.13
177.97
83.76
158.14
77.64
147.94
89.88
173.45
53%
55%
53%
52%
52%
TSHL
Gross Profit
Revenue
Ratio
Lakhs
-16.18
15.17
-107%
-32.17
0.00
-
-32.35
0.00
-
-30.14
0.00
-
-36.73
0.00
-
AGRA
MHL
Crores
201
Gross Profit
40.41
47.61
42.53
41.29
41.45
Revenue
Ratio
57.53
70%
66.26
72%
60.91
70%
58.18
71%
63.07
66%
JPH
Crores
Gross Profit
Revenue
Ratio
16.73
39.76
42%
17.68
46.86
38%
19.71
47.94
41%
21.69
52.73
41%
24.75
58.00
43%
2. Net Profit Ratio

Net profit margin (or profit margin, net margin, return on
revenue) is a ratio of profitability calculated as after-tax net
income (net profits) divided by sales (revenue). Net profit
margin is displayed as a percentage. It shows the amount of
each sales dollar left over after all expenses have been paid.
Net profit margin is a key ratio of profitability. It is very useful
when comparing companies in similar industries. A higher net
profit margin means that a company is more efficient at
converting sales into actual profit.
Net profit margin = Profit (after tax) / Revenue
Code
2007
2008
JAIPUR
202
2009
2010
2011
SEPL
Net Profit
Total Revenue
Ratio
Lakhs
181.85
1709.24
11%
235.62
1831.20
13%
130.46
1783.55
7%
173.49
1770.43
10%
CPH
Net Profit
Total Revenue
Ratio
262.37
2038.61
13%
Lakhs
21.40
655.55
3%
81.62
733.07
11%
-26.42
633.79
-4%
13.27
760.55
2%
57.54
912.66
6%
DELHI
AHL
Net Profit
Total Revenue
Ratio
Crores
13.71
158.52
14.65
177.03
9.90
159.04
5.30
147.99
12.02
174.89
9%
8%
6%
4%
7%
TSHL
Net Profit
Total Revenue
Ratio
Lakhs
2923.50
4145.09
71%
-864.30
41.20
-207.39
-316.33
12.10
0.08
Negative
-492.99
0.21
AGRA
MHL
Net Profit
Total Revenue
Ratio
Crores
8.23
58.02
14%
14.05
66.80
21%
12.61
61.58
20%
18.65
58.68
32%
JPH
Net Profit
Total Revenue
Ratio
16.97
63.76
27%
Crores
9.33
40.77
23%
3. Return on Assets (ROA)
203
11.54
48.38
24%
12.27
49.48
25%
14.82
54.41
27%
16.99
59.85
28%
Return on assets (ROA) is a financial ratio that shows the

percentage of profit that a company earns in relation to its
overall resources (total assets). Return on assets is a key
profitability ratio which measures the amount of profit made
by a company per dollar of its assets. It shows the company's
ability to generate profits before leverage, rather than by using
leverage. Unlike other profitability ratios, such as return on
equity (ROE), ROA measurements include all of a company's
assets including those which arise from liabilities to creditors
as well as those which arise from contributions by investors. So,
ROA gives an idea as to how efficiently management use
company assets to generate profit, but is usually of less interest
to shareholders than some other financial ratios such as ROE.
Return on assets gives an indication of the capital intensity of
the company, which will depend on the industry. Capitalintensive industries (such as railroads and thermal power
plant) will yield a low return on assets, since they must possess
such valuable assets to do business. Shoestring operations
(such as software companies and personal services firms) will
204
have a high ROA: their required assets are minimal. The

number will vary widely across different industries. This is
why, when using ROA as a comparative measure, it is best to
compare it against a company's previous ROA figures or the
ROA of a similar company.
Return on assets is calculated by dividing a company's net
income (usually annual income) by its total assets, and is
displayed as a percentage. There are two acceptable ways to
calculate return on assets: using total assets on the exact
date or average total assets:
ROA = Net Income after tax / Total assets (or Average Total assets)
Code
2007
2008
2009
2010
2011
JAIPUR
SEPL
Net Income after tax
Total Assets
Ratio
Lakhs
181.85
4333.97
4.20%
235.62
4523.24
5.21%
130.46
4247.41
3.07%
173.49
4255.88
4.08%
CPH
Total Assets
Ratio
262.37
3961.61
6.62%
Lakhs
21.40
871.47
2.46%
81.62
860.25
9.49%
DELHI
205
-26.42
854.41
-3.09%
13.27
838.03
1.58%
57.54
972.09
5.92%
AHL
Crores

Total Assets
Ratio
13.71
1402.24
14.65
1641.63
9.90
1654.05
5.30
950.36
12.02
1404.24
0.98%
0.89%
0.60%
0.56%
0.86%
TSHL
Lakhs

Total Assets
Ratio
2923.50
5055.74
57.83%
-864.30
5039.59
-207.39
-316.33
5070.56 5129.19
Negative
-492.99
5929.04
AGRA
MHL
Crores

Total Assets
Ratio
8.23
121.14
6.79%
14.05
104.11
13.49%
12.61
103.63
12.17%
18.65
112.61
16.56%
JPH
16.97
92.02
18.45%
Crores

Total Assets
Ratio
9.33
178.16
5.24%
11.54
180.81
6.38%
12.27
182.10
6.74%
14.82
171.34
8.65%
16.99
164.87
10.31%
The need for investment in current and non-current assets

varies greatly among companies. Capital-intensive businesses
(with a large investment in fixed assets) are going to be more
asset
heavy
than
technology
or
service
businesses.
In the case of capital-intensive businesses, which have to carry

a relatively large asset base, will calculate their ROA based on a
large number in the denominator of this ratio. Conversely, noncapital-intensive businesses (with a small investment in fixed
206
assets) will be generally favored with a relatively high ROA

because of a low denominator number.
It is precisely because businesses require different-sized asset
bases that investors need to think about how they use the ROA
ratio. For the most part, the ROA measurement should be used
historically for the company being analyzed. If peer company
comparisons are made, it is imperative that the companies
being reviewed are similar in product line and business type.
Simply being categorized in the same industry will not
automatically make a company comparable. Illustrations (as of
FY 2005) of the variability of the ROA ratio can be found in
such companies as General Electric, 2.3%; Proctor & Gamble,
8.8%; and Microsoft, 18.0%.
As a rule of thumb, investment professionals like to see a
company's ROA come in at no less than 5%. Of course, there
are exceptions to this rule. An important one would apply to
banks, which strive to record an ROA of 1.5% or above.
4. Return of Equity (ROE)
207
Return on equity (ROE) is the amount of net income returned

as a percentage of shareholders equity. It reveals how much
profit a company earned in comparison to the total amount of
shareholder equity found on the balance sheet.
ROE is one of the most important financial ratios and
profitability metrics. It is often said to be the ultimate ratio or
the mother of all ratios that can be obtained from a companys
financial statement. It measures how profitable a company is
for the owner of the investment, and how profitably a company
employs its equity.
Return on equity is calculated by taking a years worth of
earnings and dividing them by the average shareholder equity
for that year, and is expressed as a percentage:
ROE = Net income after tax / Shareholder's equity
Code
2007
2008
2009
2010
2011
JAIPUR
SEPL
Shareholder's Equity
Ratio
Lakhs
181.85
1156.41
15.73%
235.62
1392.03
16.93%
208
130.46
1522.49
8.57%
173.49
1695.99
10.23%
262.37
1958.36
13.40%
CPH
Lakhs

Ratio
21.40
361.00
5.93%
81.62
371.00
22.00%
-26.42
366.00
-7.22%
13.27
366.00
3.63%
57.54
366.00
15.72%
DELHI
AHL
Crores

Ratio
13.71
1194.48
14.65
1503.12
9.90
1485.66
5.30
793.20
12.02
815.05
1.15%
0.97%
0.67%
0.67%
1.47%
TSHL
Lakhs

Ratio
2923.50
4443.67
65.79%
-864.30
3613.99
-207.39
-316.33
3406.60 3090.28
Negative
-492.99
2597.29
AGRA
MHL
Crores

Ratio
8.23
50.00
16.46%
14.05
52.76
26.62%
12.61
62.96
20.03%
18.65
79.20
23.55%
JPH
16.97
72.14
23.53%
Crores

Ratio
9.33
112.72
8.28%
11.54
121.09
9.53%
12.27
135.59
9.05%
14.82
137.51
10.78%
16.99
143.36
11.85%
Norms and Limits

Widely used by investors, the ROE ratio is an important
measure of a company's earnings performance. The ROE tells
common shareholders how effectively their money is being
employed. Peer company, industry and overall market
209
comparisons are appropriate; however, it should be recognized

that there are variations in ROEs among some types of
businesses. In general, financial analysts consider return on
equity ratios in the 15-20% range as representing attractive
levels of investment quality.
While highly regarded as a profitability indicator, the ROE
metric does have a recognized weakness. Investors need to be
aware that a disproportionate amount of debt in a company's
capital structure would translate into a smaller equity base.
Thus, a small amount of net income (the numerator) could still
produce a high ROE off a modest equity base (the
denominator).
5. Return on Capital Employed (ROCE)
Return on capital employed (ROCE) is a measure of the
returns that a business is achieving from the capital employed,
usually expressed in percentage terms. Capital employed
equals a company's Equity plus Non-current liabilities (or Total
Assets Current Liabilities), in other words all the long-term
210
funds used by the company. ROCE indicates the efficiency and

profitability of a company's capital investments.
ROCE should always be higher than the rate at which the
company borrows otherwise any increase in borrowing will
reduce shareholders' earnings, and vice versa; a good ROCE is
one that is greater than the rate at which the company borrows.
ROCE
EBIT / Capital Employed = EBIT / (Equity +

Non-current Liabilities)
=
Code
EBIT / (Total Assets - Current Liabilities)

2007
2008
2009
2010
2011
JAIPUR
SEPL
Capital Employed
Ratio
Lakhs
181.85
4333.97
4.20%
235.62
4523.24
5.21%
130.46
4247.41
3.07%
173.49
4255.88
4.08%
CPH
Capital Employed
Ratio
262.37
3961.61
6.62%
Lakhs
21.40
81.62
-26.42
13.27
57.54
871.47
860.25
854.41
838.03
972.09
2.46%
9.49%
-3.09%
1.58%
5.92%
DELHI
AHL
Capital Employed
Ratio
Crores
13.71
1402.24
14.65
1641.61
9.90
1654.05
5.30
950.35
12.02
1404.24
0.98%
0.89%
0.60%
0.56%
0.86%
211
TSHL
Capital Employed
Ratio
Lakhs
2923.50
5055.74
57.83%
-864.30
5039.59
-207.39
-316.33
5070.56 5129.19
Negative
-492.99
5929.04
AGRA
MHL
Crores

Capital Employed
Ratio
8.23
121.14
6.79%
14.05
104.11
13.49%
12.61
103.63
12.17%
18.65
112.61
16.56%
JPH
16.97
92.02
18.45%
Crores

Capital Employed
Ratio
9.33
178.16
5.24%
11.54
180.81
6.38%
12.27
182.10
6.74%
14.82
171.34
8.65%
16.99
164.87
10.31%
Norms and Limits

The return on capital employed is an important measure of a
company's profitability. Many investment analysts think that
factoring debt into a company's total capital provides a more
comprehensive evaluation of how well management is using
the debt and equity it has at its disposal. Investors would be
well served by focusing on ROCE as a key, if not the key, factor
to gauge a company's profitability. An ROCE ratio, as a very
general rule of thumb, should be at or above a company's
average borrowing rate.
212
Unfortunately, there are a number of similar ratios to ROCE, as

defined herein, that are similar in nature but calculated
differently, resulting in dissimilar results. First, the acronym
ROCE is sometimes used to identify return on common equity,
which can be confusing because that relationship is best known
as the return on equity or ROE. Second, the concept behind the
terms return
on
invested
capital (ROIC)
and return
on
investment (ROI) portends to represent "invested capital" as the

source for supporting a company's assets. However, there is no
consistency to what components are included in the formula
for invested capital, and it is a measurement that is not
commonly used in investment research reporting.
Debt Ratios
Financial leverage ratios (debt ratios) measure the ability of a
company to meet its financial obligations when they fall due.
Financial leverage ratios (debt ratios) indicate the ability of a
company to repay principal amount of its debts, pay interest on its
borrowings, and to meet its other financial obligations. They also give
insights into the mix of equity and debt a company is using.
213
Financial leverage ratios usually compare the debts of a company to

its assets. The common examples of financial leverage ratios include
debt ratio, interest coverage ratio, capitalization ratio, debt-to-equity
ratio, and fixed assets to net worth ratio.
Financial leverage ratios indicate the short-term and long-term
solvency of a company. They give indications about the financial
health of a company. These ratios give indications whether the
company has got enough financial resources to cover its financial
obligations when the creditors and lenders seek their payments.
A company with adverse financial leverages ratios may not be able to
cover its debts and therefore may go bankrupt. These ratios can give
warnings to the shareholders and directors of potential financial
difficulties. The shareholders and directors can take actions to
prevent the company from going bankrupt.
Financial leverage ratios help to determine the overall level of
financial risk faced by a company and its shareholders. Generally
speaking, the greater the amount of debt of a company the greater the
financial risk is. A company with greater amount of debts and
financial obligations is more likely to fail to repay its debts.
214
Financial leverage ratios are of little use in isolation. To draw

meaningful conclusions about the financial health of a company,
trend analysis and industry analysis needs to be done. Trend and
industry analysis will tell how well the financial position is being
managed. Trend analysis will indicate whether the financial position
of a company is improving or deteriorating over time. Industry
analysis will indicate how well the company is performing as
compared to other companies in the same industry.
Companies need to carefully manage their financial leverage ratios to
keep their financial risk at acceptable level. Careful management of
financial leverage ratios is also important when seeking loans from
banks and financial institutions. Favorable ratios can help the
company to negotiate a favorable interest rate.
1. Debt Ratio
Debt ratio is a ratio that indicates the proportion of a company's
debt to its total assets. It shows how much the company relies on
debt to finance assets. The debt ratio gives users a quick measure
of the amount of debt that the company has on its balance sheets
compared to its assets. The higher the ratio, the greater the risk
215
associated with the firm's operation. A low debt ratio indicates

conservative financing with an opportunity to borrow in the
future at no significant risk.
Debt ratio is similar to debt-to-equity ratio which shows the same
proportion but in different way.
The debt ratio is calculated by dividing total liabilities (i.e. longterm and short-term liabilities) by total assets:
Debt ratio = Liabilities / Assets
Code
2007
2008
2009
2010
2011
JAIPUR
SEPL
Liabilities
Assets
Ratio
Lakhs
3118.52
4333.97
0.72
2991.62
4523.24
0.66
2534.53
4247.41
0.60
2323.94
4255.88
0.55
CPH
Liabilities
Assets
Ratio
1710.44
3961.61
0.43
Lakhs
532.58
871.47
0.61
512.99
860.25
0.60
514.00
854.41
0.60
498.27
838.03
0.59
657.15
972.09
0.68
DELHI
AHL
Liabilities
Assets
Ratio
Crores
207.76
1402.24
0.15
138.49
1641.63
0.08
TSHL
168.39
1654.05
0.10
157.15
950.36
0.17
589.19
1404.24
0.42
Lakhs
216
Liabilities
Assets
Ratio
596.50
1431.10
1739.10
2130.10
3339.60
5055.74
0.12
5039.59
0.28
5070.56
0.34
5129.19
0.42
5929.04
0.56
AGRA
MHL
Liabilities
Assets
Ratio
Crores
40.41
121.14
0.33
47.61
104.11
0.46
42.53
103.63
0.41
41.29
112.61
0.37
JPH
Liabilities
Assets
Ratio
41.45
92.02
0.45
Crores
74.68
178.16
0.42
48.32
180.81
0.27
31.03
182.10
0.17
20.17
171.34
0.12
7.20
164.87
0.04
Norms and Limits

The optimal debt ratio is determined by the same proportion of
liabilities and equity as a debt-to-equity ratio. If the ratio is less
than 0.5, most of the company's assets are financed through
equity. If the ratio is greater than 0.5, most of the company's
assets are financed through debt.
Maximum normal value is 0.6-0.7. But it is necessary to take
into account industry specific, explained in the article about
debt-to-equity ratio.
2. Debt-Equity Ratio
217
The debt-to-equity ratio (debt/equity ratio, D/E) is a financial

ratio indicating the relative proportion of entity's equity and
debt used to finance an entity's assets. This ratio is also known
as financial leverage.
Debt-to-equity ratio is the key financial ratio and is used as a
standard for judging a company's financial standing. It is also a
measure of a company's ability to repay its obligations. When
examining the health of a company, it is critical to pay attention
to the debt/equity ratio. If the ratio is increasing, the company is
being financed by creditors rather than from its own financial
sources which may be a dangerous trend. Lenders and
investors usually prefer low debt-to-equity ratios because their
interests are better protected in the event of a business decline.
Thus, companies with high debt-to-equity ratios may not be
able to attract additional lending capital.
A debt-to-equity ratio is calculated by taking the total liabilities
and dividing it by the shareholders' equity:
Debt-to-equity ratio = Liabilities / Equity
218
Code
2007
2008
2009
2010
2011
JAIPUR
SEPL
Liabilities
Equity
Ratio
Lakhs
3118.52
1156.41
2.70
2991.62
1392.03
2.15
2534.53
1522.49
1.66
2323.94
1695.99
1.37
CPH
Liabilities
Equity
Ratio
1710.44
1958.36
0.87
Lakhs
532.58
361.00
1.48
512.99
371.00
1.38
514.00
366.00
1.40
498.27
366.00
1.36
657.15
366.00
1.80
DELHI
AHL
Liabilities
Equity
Ratio
Crores
207.76
1194.48
0.17
138.49
1503.12
0.09
168.39
1485.66
0.11
157.15
793.20
0.20
TSHL
Liabilities
Equity
Ratio
589.19
815.05
0.72
Lakhs
596.50
1431.10
1739.10
2130.10
3339.60
4443.67
0.13
3613.99
0.40
3406.60
0.51
3090.28
0.69
2597.29
1.29
AGRA
MHL
Crores
Liabilities
Equity
Ratio
40.41
50.00
0.81
47.61
52.76
0.90
42.53
62.96
0.68
41.29
79.20
0.52
JPH
Crores
Liabilities
Equity
Ratio
41.45
72.14
0.57
74.68
48.32
31.03
20.17
7.20
112.72
0.66
121.09
0.40
135.59
0.23
137.51
0.15
143.36
0.05
Norms and limits
219
Optimal debt-to-equity ratio is considered to be about 1, i.e.

liabilities = equity, but the ratio is very industry specific
because it depends on the proportion of current and noncurrent assets. The more non-current the assets (as in the
capital-intensive industries), the more equity is required to
finance these long term investments.
For most companies the maximum acceptable debt-to-equity
ratio is 1.5-2 and less. For large public companies the debt-toequity ratio may be much more than 2, but for most small and
medium companies it is not acceptable. US companies show
the average debt-to-equity ratio at about 1.5 (it's typical for
other countries too).
In general, a high debt-to-equity ratio indicates that a company
may not be able to generate enough cash to satisfy its debt
obligations. However, a low debt-to-equity ratio may also
indicate that a company is not taking advantage of the
increased profits that financial leverage may bring.
3. Interest Coverage Ratio
220
The interest coverage ratio (ICR) is a measure of a company's

ability to meet its interest payments. Interest coverage ratio is
equal to earnings before interest and taxes (EBIT) for a time
period, often one year, divided by interest expenses for the
same time period. The interest coverage ratio is a measure of
the number of times a company could make the interest
payments on its debt with its EBIT. It determines how easily a
company can pay interest expenses on outstanding debt.
Interest coverage ratio is also known as interest coverage, debt
service ratio or debt service coverage ratio.
The interest coverage ratio is calculated by dividing a
company's earnings before interest and taxes (EBIT) by the
company's interest expenses for the same period.
Interest coverage ratio = EBIT / Interest expenses
Code
2007
2008
2009
2010
2011
JAIPUR
SEPL
EBIT
Interest
Ratio
Lakhs
382.12
95.05
4.02
455.10
93.83
4.85
221
313.26
105.71
2.96
344.32
79.12
4.35
482.87
72.49
6.66
CPH
EBIT
Interest
Ratio
Lakhs
68.67
14.69
4.67
109.23
16.09
6.79
-19.86
5.87
-3.39
19.81
6.13
3.23
65.45
6.13
10.68
DELHI
AHL
EBIT
Interest
Ratio
Crores
39.80
18.05
2.20
48.94
23.84
2.05
41.58
27.30
1.52
36.58
28.38
1.29
TSHL
EBIT
Interest
Ratio
44.07
25.78
1.71
Lakhs
3841.06
16.52
232.46
-62.14
797.66
-0.08
-61.00
214.53
-0.28
-69.36
263.01
-0.26
-104.90
304.76
-0.34
AGRA
MHL
EBIT
Interest
Ratio
Crores
24.07
9.72
2.48
29.03
8.26
3.52
25.18
5.33
4.73
24.51
3.08
7.96
JPH
25.02
1.07
23.36
Crores
EBIT
Interest
Ratio
9.34
0.01
696.25
11.54
0.00
5249.80
12.28
0.01
1125.15
14.82
0.00
NA
16.99
0.00
NA
Norms and Limits

The lower the interest coverage ratio, the higher the company's
debt burden and the greater the possibility of bankruptcy or
default. A lower ICR means less earnings are available to meet
interest payments and that the business is more vulnerable to
222
increases in interest rates. When a company's interest coverage

ratio is only 1.5 or lower, its ability to meet interest expenses
may be questionable. An interest coverage ratio below 1.0
indicates the business is having difficulties generating the cash
necessary to pay its interest obligations (i.e. interest payments
exceed its earnings (EBIT)).
A higher ratio indicates a better financial health as it means that
the company is more capable to meeting its interest obligations
from operating earnings. On the other hand, a high ICR may
suggest a company is "too safe" and is neglecting opportunities
to magnify earnings through leverage.
4. Debt/ EBITDA Ratio
Debt/EBITDA ratio is the comparison of financial borrowings
and
earnings
before
interest,
taxes,
depreciation
and
amortization. This is a very commonly used metric for

estimating the business valuations. It is a good determinant of
financial health and liquidity position of an entity. It is a
measure of the ability of a company to pay off its debts. It
compares the financial obligations of a company, inclusive of
223
debt and other liabilities, to the actual cash earnings exclusive

of the non-cash expenses.
Debt/EBITDA ratio can be used compare the liquidity position
of one company to the liquidity position of another company
within the same industry. A lower debt/EBITDA ratio is a
positive indicator that the company has sufficient funds to meet
its financial obligations when they fall due. A higher
debt/EBTIDA ratio means that the company is heavily
leveraged and it might face difficulties in paying off its debts.
Debt/EBITDA is one of the common metrics used by the
creditors and rating agencies for assessment of defaulting
probability on an issued debt. In simple words, it is a method
used to quantify and analyze the ability of a company to pay
back its debts. This ratio facilitates the investor with the
approximate time period required by a firm or business to pay
off all debts, ignoring factors like interest, depreciation, taxes,
and amortization.
A high debt-EBITDA ratio might result in a lower credit score
for the business. On the contrary, a lower ratio implies the
224
firms desire to take on more debt, if required, thereby warning

with a comparatively high credit rating.
The debt/EBITDA ratio is calculated by dividing the debts by
the
Earnings
before
Interest,
Taxes,
Depreciation,
and
Amortization (EBITDA).
Debt/EBITDA ratio = Liabilities / EBITDA
The main target of this ratio is to reflect the cash available with
the company to pay back its debts, and not how much income
is being earned by the firm.
Code
2007
2008
2009
2010
2011
JAIPUR
SEPL
Debt
EBITDA
Ratio
Lakhs
3118.52
2991.62
2534.53
2323.94
1710.44
692.12
741.45
625.20
639.56
773.88
4.51
4.03
4.05
3.63
2.21
CPH
Debt
EBITDA
Ratio
Lakhs
532.58
91.31
5.83
512.99
132.84
3.86
514.00
4.74
108.40
498.27
40.13
12.42
657.15
86.86
7.57
DELHI
AHL
Debt
EBITDA
Ratio
Crores
207.76
52.22
3.98
225
138.49
61.88
2.24
168.39
53.09
3.17
157.15
47.96
3.28
589.19
56.82
10.37
TSHL
Debt
EBITDA
Ratio
Lakhs
596.50
3841.93
0.16
1431.10
-61.99
-23.09
1739.10
-61.00
-28.51
2130.10
-69.36
-30.71
3339.60
-103.71
-32.20
AGRA
MHL
Debt
EBITDA
Ratio
Crores
40.41
29.76
1.36
47.61
34.82
1.37
42.53
30.77
1.38
41.29
30.14
1.37
JPH
Debt
EBITDA
Ratio
41.45
30.02
1.38
Crores
74.68
48.32
31.03
20.17
7.20
15.02
16.52
18.90
20.77
23.68
4.97
2.93
1.64
0.97
0.30
Norms and Limits

The debt/EBITDA ratio is popular with financial analysts
because it relates the debts of a company to its cash flows by
ignoring non-cash expenses. Ultimately it is the cash flows (as
opposed to profits) that will be used to pay off debts. Entities in
normal financial state show debt/EBITDA ratio less then
3. Ratios higher than 4 or 5 usually set off alarms because they
indicate that a company is likely to face difficulties in handling
its debt burden, and thus is less likely to be able to raise
additional loans required to grow and expand the business.
226
Debt/EBITDA ratio is not usually appropriate for comparison

of companies in different industries. Capital requirements of
other industries are different. Capital structure is different for
companies operating in different industries. Some industries
are capital intensive and require larger amounts of borrowings
to finance their operations. Therefore, debt/EBITDA ratio may
not give reliable conclusions when comparing different
industries.
Usage of Debt/EBITDA ratio
This ratio is helpful in management decisions and can be used
by a company interested in investing in a takeover bid. Besides,
the ratio is also helpful for the potential buyer in estimating the
profitability of the company without the aggressive spending
of the current manager. If, in case, the company does not spend
much on purchase of new equipment or opening up new
stores, it will have a lower depreciation and amortization costs
thereby making the company profitable, not including these
extra costs.
227
However, it is a risky process to use the debt/EBITDA ratio for

analyzing the debt repayment ability of a company. A
company can spend huge amount of money on new offices,
retail stores, and factories in spite of having a high EBITDA.
Besides, EBITDA also presumes that the company collects
whole of the revenue earned from its customers thereby not
counting the uncollectible customer returns and accounts
receivable. Moreover, a higher debt-EBITDA ratio is taken to be
more risky as the company might come prove to be a default.
Composition of Cost of all the selected Hotels
Particulars
2007
Amount
2008
%
Amount
2009
%
Amount
2010
%
Amount
2011
%
Amount
JAIPUR
SEPL
Cost of Goods
Sold
Employee
Remuneration &
Benefits
Other Operating &
Administration
Expenses
Selling &
Distribution
Expenses
Financial
Expenses
Depreciation
Total
213.48
15%
219.44
15%
233.45
15%
232.86
15%
266.12
16%
203.87
14%
271.69
18%
287.49
18%
277.35
18%
286.54
18%
550.43
39%
561.68
38%
601.24
38%
596.98
40%
671.69
41%
49.33
3%
36.93
3%
36.15
2%
23.67
2%
38.35
2%
95.05
7%
93.83
6%
105.71
7%
79.12
5%
72.49
4%
310.00
22%
286.35
19%
311.94
20%
295.24
20%
291.01
18%
1422.16 100%
1469.91 100%
228
1575.99 100%
1505.21 100%
1626.20 100%
CPH
Stores, Supplies,
Food & Beverages
& Packing
Consumed
110.51
18%
116.85
18%
92.41
14%
113.21
15%
138.68
16%
Other Operating
Expenses
187.16
31%
178.91
28%
224.67
34%
265.34
36%
313.36
37%
Employee
Remuneration &
Benefits
149.38
25%
180.16
28%
185.40
28%
213.21
29%
245.19
29%
116.24
19%
123.71
19%
125.65
19%
127.85
17%
127.85
15%
14.69
2%
16.09
3%
5.87
1%
6.13
1%
6.13
1%
22.64
4%
23.61
4%
24.60
4%
20.32
3%
21.41
3%
Administrative,
Selling and Other
Expenses
Financial
Expenses
Depreciation
Total
600.63 100%
639.32 100%
658.60 100%
746.05 100%
852.62 100%
DELHI
AHL
Fuel, power and
Water
Employee
Remuneration &
Benefits
Other
Manufacturing
Expenses
Administrative
and Selling
Expense
Miscellaneous
Expenses
Financial
Expenses
Depreciation
Total
15.15
11%
0.00
0%
0.00
0%
0.00
0%
0.00
0%
22.20
16%
26.30
17%
28.74
20%
27.19
19%
33.11
21%
38.00
28%
54.54
36%
45.64
32%
43.11
31%
50.46
32%
26.55
19%
27.21
18%
27.83
19%
25.64
18%
29.74
19%
5.08
4%
6.74
4%
3.74
3%
4.09
3%
5.35
3%
18.05
13%
23.84
16%
27.30
19%
28.38
20%
25.78
16%
12.42
9%
12.94
9%
11.51
8%
11.38
8%
12.75
8%
137.45 100%
151.57 100%
TSHL
229
144.76 100%
139.79 100%
157.19 100%
Employee
Remuneration &
Benefits
Administrative
and Selling
Expense
Financial
Expenses
Depreciation
Total
31.35
10%
32.17
4%
32.35
10%
30.14
9%
36.73
9%
269.07
85%
63.27
7%
63.32
20%
40.54
12%
68.52
17%
16.52
5%
797.66
89%
214.53
69%
263.01
79%
304.76
74%
0.88
0%
0.15
0%
0.00
0%
0.00
0%
1.18
0%
317.82 100%
893.25 100%
310.20 100%
333.70 100%
411.19 100%
AGRA
MHL
Consumption of
Provisions, Stores,
Wines and Smokes
3.47
8%
4.07
9%
3.64
9%
3.41
9%
3.60
9%
Employee
Remuneration &
Benefits
6.18
14%
6.60
14%
7.21
17%
6.07
16%
8.26
21%
Upkeep and
Service Cost
7.48
17%
7.98
17%
7.53
18%
7.42
20%
9.75
24%
11.05
25%
13.28
29%
12.47
30%
11.65
31%
12.13
30%
9.72
22%
8.26
18%
5.33
13%
3.08
8%
1.07
3%
5.70
13%
5.79
13%
5.59
13%
5.63
15%
4.99
13%
Administrative,
Selling and Other
Expenses
Financial
Expenses
Depreciation
Total
43.59 100%
45.97 100%
41.77 100%
37.25 100%
39.81 100%
JPH
Consumption of
Food, Beverages
and Tobacco, etc.
3.55
11%
4.09
11%
4.35
12%
4.79
12%
5.17
12%
Employee
Remuneration &
Benefits
5.46
17%
7.96
22%
8.59
23%
9.45
24%
9.83
23%
Operating
Expenses
8.71
28%
8.79
24%
8.58
23%
9.44
24%
10.10
24%
Repairs and
Maintainance
0.00
0%
2.81
8%
1.28
3%
1.40
4%
1.47
3%
Fuel, power and

Water
5.32
17%
5.53
15%
5.42
15%
5.97
15%
6.68
16%
230
Administrative
and General
Expenses
Depreciation
Financial
Expenses
Total
1.
2.67
9%
2.68
7%
2.36
6%
2.59
7%
2.91
7%
5.67
18%
4.97
14%
6.61
18%
5.95
15%
6.69
16%
0.01
0%
0.00
0%
0.01
0%
0.00
0%
0.00
0%
31.39 100%
36.84 100%
37.20 100%
39.59 100%
Service Costing. (2010), Accounting Education,
42.86 100%
Available
at:
http://www.svtuition.org/2010/11/service -costing.html.
2.
Definition of Service Cost as provided in the Business

Dictionary, Available at:
http://www.businessdictionary.com/definition/service-cost.html
3.
John Custy (2013), Service Costing: The Missing link in

Service
Portfolio
and
Service
Catalog
Management,
available at:
http://www.thinkhdi.com/topics/library/webinars/2013/june-18.aspx
4.
L Kuek, Service and Operation Costing, Section D, Lesson

9, ACCA Paper F2; Available at:
http://advanceduni.com/resource/course-acca-f2/acca-f2-lesson09.htm#top
231
5.
Erika Waters, Article by Demand Media, Cost Accounting

Practices in the Service Sector, Available at:
http://smallbusiness.chron.com/cost-accounting-practices-serviceindustry-42794.html
6.
Financial Analysis and Accounting Book of Reference:

Statement of Financial Position | IFRS Statements | IFRS
Reports | ReadyRatios.com. 2013. Available at:
http://www.readyratios.com/reference/liquidity/ .
7.
Richard
Loth,
Liquidity
Measurement
ratio:
Ratio Available at:

http://www.investopedia.com/university/ratios/liquiditymeasurement/ratio1.asp
232
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CHAPTER 5

Crafts Palace Hotels (I) Pvt. Plot No. 1, Golimar Garden,

Amber Road, Jaipur

Mahatma Gandhi Marg, New

Tulip Star Hotels Limited

Singh Palace, Vibhav Nagar,

Fatehabad Road, Rakabganj

The Financials of the 6 hotels are as under:

Current Assets, Loans and

Less: Current Liabilities &

Net Current Assets

Profit and Loss Account

CRAFTS PALACE HOTELS (I) PVT. LTD.

Current Assets, Loans and

Less: Current Liabilities &

Net Current Assets

Profit and Loss Account

For the year ending 20XX

Current Assets, Loans and

Less: Current Liabilities &

Total Current Liabilities

Profit and Loss Account

Net Profit/ (Loss) for the

Less: Provision for Tax

TULIP STAR HOTEL LIMITED

Current Assets, Loans and

Total Current Assets

Profit and Loss Account

Work in Progress (Assets

Net Current Assets

Profit and Loss Account

JAYPEE PALACE HOTEL, AGRA

Current Assets, Loans and

Less: Current Liabilities &

Net Current Assets

Profit and Loss Account

relating to those services. We make a cost sheet in which

The expense associated with having another person perform a

Service costing is also applied within a manufacturing

= Total Costs for Period / Number of service units in the period

Service department costing is also used to establish a specific cost for

The economic downturn has presented food and beverage companies

entertaining guests and planning menus to monitoring employees,

information in the wrong way and conclude that it provides services

In a highly competitive market, service providers are continually

Shivani Enclave Private Limited

Crafts Palace Hotels (I) Pvt. Ltd.

Asian Hotels (North) Limited

Tulip Star Hotels Limited

Mumtaz Hotels Limited

Name of the Hotel

Jaypee Palace Hotel Agra

CALCULATION OF SERVICE COST: (Room per day)

Employee Remuneration &

equivalents as relevant assets because they are most likely to be used

inventory is sold, sales invoices raised, and the debtors make

payables, accrued expenses and taxes). In theory, the higher the

Statement Showing Current Ratios of the selected

Norms and Limits

Norms and Limits

Cash ratio is the most stringent and conservative of the three

Cash and Bank Balance

Cash and Bank Balance