As Developing Countries Make the Transition to Market-Based Economies, One

question 132

Essay

As developing countries make the transition to market-based economies, one of the first major capital investments is in 'Western-quality' hotels.Explain why the establishment of brand-name hotel accommodation is a critical step in attracting foreign investment.

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Definitions:

Operating Leverage

An indicator of the degree to which net operating income responds to a specific percentage variation in sales revenue.

Sales Mix

A composition of different products or services that a company sells, emphasizing the proportion of each product sold relative to total sales.

Break-even Point

The point at which total cost and total revenue are equal, meaning no net loss or gain, and the business is not making a profit but not losing money either.

Contribution Format

A type of income statement format that separates fixed costs from variable costs to highlight the contribution margin.