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A Comparative Study of Financial Ratios between Hotels and Restaurants

Abstract Financial information users have long been using financial ratios in order to evaluate companies’ financial conditions and various types of financial ratios have been devised. This study is designed to investigate financial ratios of hotels and restaurants which represent two segments of the hospitality industry. Specifically, this study tests if there is any differences in liquidity ratios, solvency ratios, activity ratios, and profitability ratios between the two segments. The results reveal that liquidity and activity ratios are higher in the hotel segment compared with the restaurant segment. In terms of solvency ratios, the restaurant segment has more capability to satisfy its long-term financial obligations. In contrast, there is no significant difference in profitability ratios among the two segments.