The following financial and operating ratios are taken from Singapore’s International Airport Hotel for the years 20X1, 20X2 and 20X3.

Required (three marks available for each part):

a) Explain whether, from an investment standpoint, the hotel’s overall profit performance has improved over the three years (you must give a reason or reasons to support your answer).

b) Explain whether the hotel’s short-term financial stability has improved over the three years (you must give a reason or reasons to support your answer).

c) Explain whether the hotel’s long-term financial stability has improved over the three years (you must give a reason or reasons to support your answer).

d) Explain whether the rooms’ department performance has improved over the three years (you must give a reason or reasons to support your answer)

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20X1 20X2 20X3 Current ratio 2.3 2.5 3.1 Acid test ratio 1.4 1.6 2.1 Times interest earned ratio 3.5 3.1 2.8 Debt to equity ratio 65% 72% 76% Average days inventory is held 15 21 26 Average days to collect accounts 28 32 35 receivable Gross profit margin 68% 72% 76% Net profit margin 18% 21% 23% Return on investment (return on assets) 16% 14% 12% Room occupancy 72% 74% 76% Revenue per available room (Revpar) $210 $205 $201