Return on Assets
Return on assets is one of the performance ratios used in business identifies the overall ability of management to efficiently utilize resources to generate a profit.
Return on assets is one of the performance ratios used in business identifies the overall ability of management to efficiently utilize resources to generate a profit.
Break-even analysis is a managerial (cost) accounting tool used to examine the relationship of price to cost of a product. It also considers various sales volumes and the effect on profit given the different relationships of price to cost.
The accounts payable turnover rate is a business activity ratio measuring the frequency of the company’s ability to pay its vendors and suppliers. The numerical value is customarily reported as an annual value. The higher the number, the more often the payables are cleared (paid). A ’12’ would indicate that all payables are paid every month (360 days/12 = 30 days). Ideal values exceed 20 as this indicates all accounts are paid on average at least every 18 days (360 days/20 = 18 days).
One of the many ratios used in business, the inventory turnover rate is often misunderstood, miscalculated and misused.
Every business owner, especially young entrepreneurs, must understand how long-term debt is used to finance the purchase of fixed assets.
Those small publicly traded businesses with share prices of less than $5 and capitalization of less than $50 million are referred to as penny stocks.
The word ‘Profit’ is used loosely in the business world. Profit refers to the amount earned net of costs in a transaction. The key is defining a transaction.
There is one unique financial characteristic that is synonymous with the hospitality industry; that is high fixed costs. Or another way of stating the same financial attribute is to simply state that the hospitality industry has low variable costs.
One of the terms synonymous with the field of economics is ‘Elasticity’. The term refers to the change in either the demand or supply (the other terms synonymous with economics) curve when there is a change in the price.
Real estate syndication is how apartment or office complexes are financed? A typical complex will have 80 to 100 units and the cost of construction will approximate $7,000,000. Where does this money come from? Your average person will think it is financed by a mortgage of some sort. Well, this is partially true, but mortgage companies will not finance 100% of the cost of construction. More like 75% maximum financing is used in constructing complexes. The balance has to come from private money.
This is where the value of real estate syndication comes into play. The arrangement is usually a two tier relationship whereby an operating partnership is created that actually owns and operates the asset (the complex). The second tier is a silent partner in the operating partnership. The following sections explain these two tiers in more detail.