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Hospitality Industry Managerial Accounting 8th Edition

Hospitality Industry Managerial Accounting (8th Edition)

Book Edition8th Edition
PublisherEduc. Inst. Of The American Hotel & Motel Assoc.

Chapter 5, End of Chapter, Review Questions, Exercise 1

Page 280

Here is a tip:

The objective of ratio analysis is to compare the related amount or facts disclosed in the financial statements. 


  • The ratio analysis helps in estimating the solvency in relation to hospitality operations.
  • The ratio analysis also assists in determining the level of risk involved, regarding loans to be given in the future.
  • It helps them to negotiate the terms of existing borrowings and further borrowings that are to be provided.

Verified Answer

Benefits of ratio analysis to creditors:

  • To weigh the solvency related to hospitality operations.
  • To determine the risk involved in the business.
  • To negotiate the terms with the company for lending money further.
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