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44 Cards in this Set
- Front
- Back
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occupany ratio
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rooms sold/rooms available
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average daily rate
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rooms revenue/rooms sold
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REVPAR
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rooms revenue/rooms available
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food cost percent
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food cost/food revenue
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Beverage cost percent
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beverage cost/beverage revenue
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payroll cost percent
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payroll cost/ departmental or total revenue
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profit margin
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profit/ departmental or total revenue
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accounts receivable turnover
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total revenue/ average accounts receivable
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inventory turnover
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departmental revenue/cost of goods sold
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return on investment
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cash flow/equity
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breakeven analysis formula
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revenue - variable expense - fixed cost = 0
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food inventory turnover
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cost of food sold/avg food inventory; the higher the number, the more the food turns over
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ROI
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cashflow/equity
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working capital
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the amount of cash required to operated a business.
impacted by: mix of cash and credit accts receivable f&b turnover growth |
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Market value: public and private
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Shareholder value = market value
Public company = market price of common stock x number of shares outstanding Private company Approx sale price of company on the open market |
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Market value definition and what is factored in
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present value of the sum of future cash flow factoring in:
- the amount of annual cash flow projected -the timing of when the cash flow will be received - the risk associated with the generation of the cash flow - the WACC required to finance the project |
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Cost of equity
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portion of cash flow the sponsor of a deal allocates to the investor
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Cost of debt
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debt service a borrower pays the lender
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financial leverage
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using debt to increase ROI: your cost of debt is almost always lower than your cost of equity
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balloon
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- the balance of the principal on a loan owed to the lender at the end of the term of the loan. This is often a large sum due to the lower principal paid back in the early part of the loan
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mezzanine loan
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- second layer of debt that fills the gap between the total project cost, the amount of the first mortgage loan, and the equity capital to be invested. Higher interest rates than equity investor but does not contain prepayment penalty.
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capitalization method of valuation
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trailing 12 month cash flow/ cap rate
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recourse loan/non-recourse
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19. recourse and non-recourse
- non-recourse limits the lender’s repayment options to the asset of the business and collateral; recourse allows the lender to also seek repayment from the borrower’s personal assets. |
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leverage ROI and unleverage ROI
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- higher return on investment for leveraged. Lower WACC;
- equity investors have more risk so they demand more money |
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specialist
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is a stock broker that handles one company; there is a specialist for every public company listed on the ny stock exchange
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tax shelter
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- limited partnerships during 1980s
- means where individuals could invest and defer paying taxes until later, thereby “sheltering” their tax liabilities to the government |
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WACC
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amount of debt service and cash flow allotted to equity investors divided by the total amount of capital
takes into consideration: capital mix debt service investors hurdle rate |
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WACC formula
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(amount of loan x debt service) + (equity raising x hurdle rate)
___________________________ debt + equity |
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current market value
factoring in: |
the present value of a cash-flowing asset based on its projected future cash flow, factoring in the timing of the cash flow, the risk of the cash flow being generated, and the mix of capital used to finance the deal
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NPV
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Net Present Value = present value - cost of project
- Calculates the difference between an asset's present value and its purchase price/development cost |
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Advantages of NPV
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- takes into account all cash flows including the eventual sale
- takes into consideration the TVM |
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Disadvantages of NPV
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difficult to compare multiple investment opportunities with different purchase prices/development costs
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IRR
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discount rate that makes the NPV of an investment equal to zero
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IRR advantages
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compares multiple deals with varying purchase prices/development costs
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IRR disadvantages
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- assumes cash flows generated by the project are reinvested at the IRR calculated
- can compute multiple IRRS when cash flows go from neg to pos |
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Sweat equity
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when the IRR is higher than WACC, the deal sponsor has room to negotiate some sweat equity for him or herself
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carried interest
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ownership percentage with no equity investment: you don't put cash in but you get ownership
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promoted interest
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ownership awarded after equity investors achieve their hurdle rate: don't get $$ right off the bat
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equity kicker
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percentage of profit on sale of the asset - get salary and bonus but no ownership
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when is a deal favorable or unfavorable?
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If the NPV is positive, it is a favorable deal.
When the NPV is negative, it is unfavorable. High IRR is favorable |
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market cap rates
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A rate of return on a real estate investment property based on the expected income that the property will generate.
Lower cap rate, the higher the selling price, higher NPV and IRR higher cap rate, the lower the selling price, lower NPV and IRR |
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current ratio
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current assets/current liabilities
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accounts receivable turnover
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toral revenue/average accounts receivable
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average collection period
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31 days/accounts receivable turnover
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