Financial Analysis of Casa Magna Inn

Question:

Based on the given data, can you determine the Casa Magna Inn's annual total revenue, annual net operating income, and debt service coverage ratio?

Answer:

The Casa Magna Inn's annual total revenue is $9,368,333.33, its annual net operating income is $1,873,666.67, and the debt service coverage ratio for the year is 13.58.

In order to analyze the financial situation of Casa Magna Inn, we first need to calculate its annual total revenue, annual net operating income, and debt service coverage ratio based on the provided data.

Calculation:

1. Annual Total Revenue: The annual total revenue of Casa Magna Inn can be calculated by determining the room revenue. With 220 guestrooms, an ADR of $125, and a paid occupancy of 70%, the daily room revenue is $19,250. Multiplying this by 365 days in a year gives us an annual room revenue of $7,026,250. Since room revenue accounts for 75% of total revenue, the total annual revenue is $7,026,250 divided by 0.75, which equals $9,368,333.33.

2. Annual Net Operating Income: The annual net operating income is 20% of the total revenue. Therefore, the calculation is $9,368,333.33 multiplied by 0.20, resulting in $1,873,666.67.

3. Debt Service Coverage Ratio: To determine the debt service coverage ratio, we divide the net operating income by the annual debt service. The annual debt service payment is $11,500 multiplied by 12 months, which equals $138,000. Dividing the net operating income of $1,873,666.67 by the annual debt service gives us a debt service coverage ratio of 13.58.

By analyzing these financial metrics, we can gain insights into the performance and financial stability of Casa Magna Inn.