Profits

HA401 : The Class : Finance : Profit and Loss : Profits

Profits

We will discuss three profits that measure different aspects of resort operations. Keep in mind that the definition of profits is revenues minus expenses. It is important to note

The type of expenses involved in these profit calculations.

Department Profits — Revenues minus

cost of sales,
wages,
benefits,
direct operating expenses.

Department profits are calculated for each revenue department and managers responsible for those departments have the authority and responsibility to control both revenues and expenses.

House Profit — Total Department Revenues minus Total Expense Department costs. While Department Profits measures the profitability of managing Profit Centers, House Profit measures the ability of managers to control the Expense Centers necessary to support the entire resort. Department Profit measures individual department operations, House Profit measures the entire resort’s operations. Think of it in this way: The Profit Departments pay all of their own direct bills and turn the rest of the profits over to the General Manager to pay the rest of the resort’s operating expenses. House Profit measures the ability of the management team to manage revenues and expenses to maximize resort profits. Most management bonuses are based on House Profit dollars.

Operating Profit — House Profit minus Fixed Expenses. There are other fixed expenses or investment factors that are not related to the day to day operations of the resort. These expenses must be paid whether in high season or low season and generally are fixed in nature. Examples are Mortgage payments, Insurance Costs, Licenses and Fees, Taxes and sometimes the profit split between the resort owners and managers. Operating Profit measures the financial performance after all of the expenses (fixed or operating) for the resort have been paid.

Once you have completed this module you should:

Go on to Reading 4: Summary
or
Go back to Topic 2: Profit and Loss

E-mail Lloyd Shelton at Lloyd.Shelton@nau.edu
or call (928) 527-7518