Final answer:
The ability of a hospitality establishment to meet short-term obligations is indicated by liquidity ratios such as the current and quick ratios, as well as analysis of cash flows and revenue during various periods. Tools like the Location Quotient can offer additional insights into the establishment's economic resilience within its region.
Step-by-step explanation:
The ability of a hospitality establishment to meet its short-term obligations is typically revealed by its liquidity ratios. Among these, the most commonly used are the current ratio and the quick ratio. The current ratio measures the company's ability to pay back its short-term liabilities with its short-term assets. The quick ratio, sometimes called the acid-test ratio, provides a more conservative view by excluding inventory from the short-term assets. Establishments also monitor their cash flows to ensure they have sufficient cash on hand to cover immediate expenses.
Furthermore, the establishment's revenue during different periods, such as during a pandemic or a busy season, can also indicate its ability to sustain operations and meet short-term obligations. Analysis like the Location Quotient can provide insights into the relative strength of a hospitality establishment within a region, potentially correlating with its economic resilience and ability to meet financial commitments.