Task 5
Regal Hotels maintains a sizable investment portfolio that is comprised of listed securities, investment funds, bonds, and treasury. Therefore, at the end of every year, Regal Hotels realizes various profits. Basing on the profitability analysis of the average of 5 years, it had a gross margin of 45.69% while the gross margin of the one year being 45.62%. The operating margin was 35.43% for a five-year average and 31.28% for one year. The net profit recorded was 19.42% for five years, while 20.65% for one year. From this particular financial ratio analysis, the net profit that the company gets keeps on improving by each year, implying its stability in operations and also revealing that Regal Hotel is a going concern entity.
Part II
Basing on the above quote from one of the co-founders of the Black Sheep Restaurant hospitality group, he talks about the difficulties of investing in restaurants, where he does not recommend them to invest in one. One of the reasons he gives is about the financial results which sometimes, give poor outcomes in terms of investment. He also gives another reason, such as the time a person can spend while doing the work.
The above-stated reasons cannot make the investment in a restaurant business be hard for any willing investor. The restaurant business is growing very fast, and this implies that it is attracting investors from every corner. Therefore, being one of the most successful investments that are being experienced in the market, it is important to reflect on various factors of production. The factors of production include labor, materials, machinery, and capital. In this type of business, it requires that one has enough capital and labor so to manage the business effectively.
The cost of production of the restaurant business may be too high for the investor, which implies that not increasing the prices of their products, the resulting profits will be too low. Hence, the low profits will tend to make employees of the restaurants not much motivated to work towards producing more. At the same time, this will chase away potential customers. This will, in turn, affect both the demand and supply of the goods and services that the restaurant needs to compete with others in the market.
Another fact that makes the founder say that he does not advise people to invest in the restaurant business is because of the nature of the products and services that they provide. It is very hard to convince consumers to turn away from their service providers and try new services by a new
business. Hence it means that consumers have various tastes and preferences they get from their already established restaurants. In short, it is difficult to cope with the existing competition.