Let us look at the ratio analysis part of the PnL analysis in the previous videos. So, far we have learned how we do the variance analysis and how we do the vertical analysis just to briefly understand how to capture the items of particular attention. However, the ratio between analysis is incomplete if we are not doing the ratio analysis ratio analysis means that we are in assist in measuring the effectiveness of how the business is being operated. An example of the ratios are mix of sales average room rate room rate for revenue per available room. So, ratios are relative to relative performance compared to something else for example, GDP percentage is a ratio, profit percentage is a ratio occupancy percentage is a ratio. So, M for other department it can be average check food and beverage cost but marriage costs and labor costs percentage revenue per seat available.

So, these are all the ratios which has Help us to understand the business performance related to something as some other measures for example, revenues for example, number of rooms occupied for example, number of covered serve in the hotel because some a lot of lot of expenses are variable a lot of revenue is also vary but depending on the volume of business, so, if we do only absolute very absolute analysis, it may lead us to wrong decisions rather than if we are doing the ratio analysis. So, for example, operational analysis can be the profitability can be the occupancy percentage and the average area there GOP per available room GOP per occupied home So, these are very easy ratios. However, when we are doing the ratio analysis, we have to be careful on changes in accounting periods and changes in the accounting accounting methods because the ratios will be reflected differently if we account for every change accounting methods or the accounting policies, so, those are a bit difficult to so the ratio in that case will not reflect a true picture also ratios does not tell anything unless we are comparing them with certain benchmarks, maybe badgers or comparing the industry standards.

So, the ratio analysis itself will not help us will not do anything unless we are comparing with them some some with the benchmarks.