Understanding Annual Reports of Hospitality Firms: Part II

This is the second article in a two-part series on understanding annual reports published by publicly-held hospitality firms. Part I in the Spring 1988 issue established the informational content of such reports while this article will focus on the examination and understanding of annual reports, suggested guidelines on how to use them for decision making, and recent developments affecting these reports.

Understanding Annual Reports of Hospitality Firms

In her discussion - Understanding Annual Reports of Hospitality Firms - by Elisa S. Moncarz, Associate Professor, School of Hospitality Management, Florida International University, Associate Professor Moncarz initially offers: “Management bears full responsibility for the reporting function of annual reports prepared by publicly-held companies designed to provide interested parties with information that is useful in making business and economic decisions. In Part I the author reviews the content of annual reports of firms in the hospitality industry, while looking at recent developments affecting annual reports. Part 11, in a subsequent issue, will comprise an in-depth examination of the annual report of an actual firm in the hospitality industry, focusing on suggested guidelines and recommendations for how to use annual reports as an aid to the decision-making process in the hospitality industry.” This article is to be considered a primer on reading and understanding annual reports, as well as a glimpse into the dynamics that affect them. In defining what an annual report is, Associate Professor Moncarz informs you with citation, “Annual reports are required by the Securities Exchange Commission (SEC) ¹ for all companies with securities sold to the general public. These reports, which must be issued within 90 days after the close of the calendar (or fiscal) year, comprise a primary source of information about these companies,” she further reports. “Indeed, the official version of the company's history is summed up yearly in its annual report by providing full information of the company's operations over the period as well as what the company is gearing up to accomplish in the next year,” Professor Moncarz closes the definition. Why should thus happen over and above SEC requirements? The financial component is an important one; the author offers her informed view: “The major objective of financial statement reporting is to provide information that is useful to present and potential investors, creditors, and other financial statement users in making rational investment, credit, and similar decisions. Thus, financial statements represent the primary (and most reliable) source of knowledge about a particular firm in the hospitality industry.” The above two paragraphs crystallize the requirement and the objective of annual reports. “A typical annual report of a hospitality firm contains a number of standard features which may be broken down into the following three sections…” General, financial data, and supplementary data are variously bounded and circumscribed for you. As a marketing device and feel-good initiative, the annual report is a useful tool for a hospitality corporation that is in-the-black, and focused on the future, says the author. She cites the Marriott Corporation’s 1985 annual report as an example. Of course, an annual report can also be a harbinger of bad news for shareholders as well. Notes/footnotes and disclosure are key elements to the credibility of any annual report; Professor Moncarz discusses these concepts at length. “Given the likelihood that the hospitality industry will continue to face an uncertain economic environment for some time, financial statement users should become more demanding in their need for information that will help assure the firm's survival and evaluate its ability to generate earnings, increase the firm's investment value, and provide for its future growth,” Professor Moncarz says. “Accordingly, understanding annual reports in the hospitality industry should become even more critical.”

A Content Analysis of Sustainability Dimensions in Annual Reports

This study examines the triple bottom line of sustainability, in the context of both profit-oriented and non-profit oriented organizations. Sustainability is a compound result of interaction between economic, environmental, and social dimensions. Sustainability cannot be achieved without balance between all three dimensions, which has implications for measuring sustainability and prioritizing goals. This study demonstrates a method for measuring organizational sustainability achievement in these three dimensions of sustainability. Content analysis of the annual reports of corporations from the United States, Continental Europe (and Scandinavia), and Asia reveals that the economic dimension remains the preeminent aspect, and corporations still have a long way to go to reach comprehensive sustainability by maintaining a balance between the three dimensions of sustainability. The analysis also shows a high level of isomorphism in the sustainability practices of corporations, suggesting that even the most sustainable corporations are taking a somewhat passive role in prioritizing sustainability goals. A list of 25 terms for each dimension of sustainability (economic, environmental, and social) has been developed which can be used by corporations to develop and communicate their sustainability practices most effectively to the maximum number of their stakeholders. In contrast, botanical gardens demonstrate more balance among the three dimensions of sustainability.

Bankruptcy Situation Model in Small Business: The Case of Restaurant Firms

The purpose of this paper is to describe and discuss the current bankruptcy prediction models. This is done in the context of pros and cons of proposed models to determine the appropriate factors of failure phenomenon in cases involving restaurants that have filed for bankruptcy under Chapter 11. A sample of 11 restaurant companies that filed for bankruptcy between 1993 and 2003 were identified from the Form 8-K reported to the Securities and Exchange Commission (SEC). By applying financial ratios retrieved from the annual reports which contain, income statements, balance sheets, statements of cash flows, and statements of stockholders’ equity (or deficit) to the Atlman’s mode, Springate model, and Fulmer’s model. The study found that Atlman’s model for the non-manufacturing industry provided the most accurate bankruptcy predictions.