Question

Explain what Net Operating Income is and what is meant by Net Operating Loss. What factors arre associated when calculating the Net Operating Income percentage for a hotel? Why is this measure a good way of evaluating the hotel performance?

Answer 1

Explain Net Operating Income and Net Operating Loss and the factors for calculating net operating income percentage and why is this measure a good way for evaluating the performance?

Answer: Net Operating Income or loss is the measure of performance of the entity for the period which calculates th e performance as profit or loss. Net Operating Income means excess of Income over expenditure which is favourable and every entity wants to acheive more of this. Net Operating Loss means excess of expenditure over income where the expenses are being made out of our cash over the revenue which is not favorable to the entity.

For calculating the net operating income percentage for a hotel two elements are needed. The first one is revenue generated from the hotel and net operating income. Divide the net operating income by revenue generated to get the net operating income percentage.

It is a good way of evaluating the hotel performance because it shows the profit or loss for the period and based on this we can plan to decrease our expenses or increase our revenue to increase our net operating income which is profitable to the entity.