Why Do Companies Fail? A Financial Analysis Perspective
Kate Lee
Hospitality Management / School of Professional Studies
Hospitality Accounting
Activity Description: Provide a brief description of the activity
"Why Do Companies Fail? A Financial Analysis Perspective" is a team-based project in a Hospitality Accounting course. Students analyze the financial performance of publicly traded companies using publicly available financial statements. Each team is assigned one financially struggling company and selects one of three successful companies for comparison. Students evaluate key financial ratios, cash flow, and overall business strategies to identify factors contributing to success or failure. Based on their analysis, teams develop two financially and operationally grounded recommendations to help the successful company improve future performance. Project deliverables include a written report, a PowerPoint presentation, and a self- and peer-evaluation reflecting on the team learning experience. During the presentation phase, students evaluated team presentations using the project rubric provided by the instructor.
Learning Goals: What do you aim to achieve with this activity?
The primary goal of this activity is to help students understand how financial performance influences a company's long-term success or failure. Through financial ratio analysis, students compare a failed company with a successful company to identify key differences in financial health, business strategy, and overall performance.
Students learn how to analyze publicly available annual reports, evaluate a company's financial condition, and interpret financial information in a meaningful business context. The activity also encourages students to investigate the factors that contribute to business failure and sustainable success in the competitive hospitality industry.
In addition, students develop a broader, strategic perspective by connecting financial results to business decisions, allowing them to view organizations holistically rather than focusing only on individual financial metrics.
Timing: At what point in the lesson or semester do you use this activity? How much classroom time do you devote to it? How much out-of-class time is expected?
This activity is implemented during the second half of the semester after students have learned the fundamentals of accounting and financial statement analysis.
Weeks 1–7: Students learn basic accounting concepts, financial statements, and financial ratio analysis through lectures, exercises, and assignments.
Week 9: Following the midterm exam, students complete a case study on the failed hospitality company Sonder. Materials include a Wall Street Journal video and Sonder’s 2025 Q2 financial statements. Students discuss the company's rise and decline, analyze potential causes of failure, and complete a short reflection assignment.
Week 10: The team project is introduced, and the project guidelines and evaluation rubric are shared with students. Teams are assigned randomly through a drawing process.
Week 11: Each team selects one successful company from a list of three publicly traded companies (Hilton, Starbucks, or Shake Shack) to compare with Sonder. Approximately 30 minutes of class time is devoted to team formation, project planning, and discussion. Financial statements and annual reports for all companies are provided.
Week 12: The instructor reviews key financial ratios and project expectations. Teams receive guidance and have the opportunity to ask questions and receive feedback on their progress. Approximately 30 minutes of class time is devoted to project work and consultation.
Weeks 13–14: Teams conduct their financial analysis, research company strategies, and prepare their reports and presentations outside of class. Students may bring questions to the instructor for guidance and feedback during this period.
Week 15: Teams submit their written reports, deliver PowerPoint presentations, complete peer evaluations of other teams using the project rubric, and submit self- and peer-evaluations of team contributions.
The project spans approximately five to six weeks. Students spend about 2–3 hours of in-class time on project-related activities and are expected to devote approximately 8–12 hours of out-of-class time to research, financial analysis, team meetings, report writing, and presentation preparation.
Logistics: What preparation is needed for this activity? What instructions do you give students? Is the activity low-stakes, high-stakes, or something else?
Preparation
Before beginning the project, students learn fundamental accounting concepts, financial statements, and financial ratio analysis during Weeks 1–7 of the semester. Following the midterm exam, students complete a case study on Sonder (NYSE, SOND-not trading), a failed hospitality company. Using a Wall Street Journal video and Sonder’s financial statements, students discuss the factors that contributed to the company's decline and bankruptcy. This case study serves as a foundation for the team project.
The instructor prepares and provides all project materials, including financial statements, annual reports, project guidelines, and evaluation rubrics. Teams are assigned randomly, and each team selects one successful publicly traded company—Hilton (NYSE: HLT), Shake Shack (NYSE: SHAK), or Starbucks (NYSE: SBUX)—to compare with Sonder.
Instructions
Students are asked to investigate the question: Why do some companies remain financially successful while others fail?
The project consists of four main components:
1. Company Selection (Low-Stakes): Teams select one successful company and review the background information for both the successful company and Sonder.
2. Financial Ratio Analysis (Low-Stakes): Teams gather and analyze financial data using selected ratios, including operating margin, current ratio, debt ratio, and operating cash flow ratio.
3. Strategy Analysis (Higher-Stakes): Teams identify the successful company’s current business strategy and compare it with Sonder’s strategy to understand key differences that may have contributed to success or failure.
4. Recommendations (Higher-Stakes): Based on their financial and strategic analysis, teams develop two recommendations that could help their selected company improve future performance. Recommendations may focus on financial, operational, marketing, pricing, or other business strategies.
Deliverables
Teams submit a written report (less than three pages), deliver a PowerPoint presentation (fewer than ten slides), and complete self- and peer-evaluations. During the presentation session, students also evaluate other teams using the project rubric.
Stakes
The project combines both low-stakes and high-stakes learning activities. Company selection, data gathering, and preliminary financial analysis are low-stakes activities designed to build understanding and confidence. The strategy analysis, recommendations, final report, and presentation are higher-stakes components that require students to synthesize information, apply critical thinking, and communicate their findings effectively.
Assessment: How do you assess this activity? What assessment measures do you use? Do you use a VALUE rubric? If not, how did you develop your rubric? Is your course part of the college-wide general education assessment initiative?
This project was designed to assess students' inquiry and analytical skills using elements of the AACU Inquiry and Analysis VALUE Rubric, particularly:
1. Existing Knowledge, Research, and/or Views
2. Analysis
3. Conclusions
The central question of the project is: Why do companies fail? Students compare a successful company with a failed company using financial ratio analysis, annual reports, and other relevant sources. Based on their analysis, students identify key factors contributing to success and failure, draw conclusions, and propose recommendations for future improvement.
The project accounts for 15% of the total course grade. Assessment is based on three criteria:
1. Problem Diagnosis (5 points) – Students identify and analyze the root causes of the company's success or failure using financial and strategic evidence.
2. Strategy and Commercial Logic (5 points) – Students evaluate the company's current strategy and develop well-reasoned recommendations supported by their analysis.
3. Communication and Presentation (5 points) – Students clearly and professionally communicate their findings through written and oral presentations.
The project rubric was developed based on my professional experience in hospitality revenue management and commercial strategy. In industry practice, professionals are expected to accurately diagnose business problems, interpret data and market information, and develop actionable strategies. These competencies align closely with the principles of inquiry and analysis.
This course is part of the college-wide General Education assessment initiative and supports the General Education outcome of Quantitative Reasoning. The project provides students with an opportunity to apply quantitative analysis to a real-world business problem and communicate evidence-based conclusions.
<Rubric used for evaluation>
1. Problem Diagnosis (5 points)
Level Description
5 (Excellent) Clearly identifies core problem; distinguishes root causes; strong commercial understanding.
4 (Good) Identifies main issue but lacks depth.
3 (Satisfactory) General description with limited diagnosis.
2 (Developing) Focuses on symptoms or misidentifies problem.
1 (Insufficient) Little to no understanding.
2. Strategy & Commercial Logic (5 points)
Level Description
5 (Excellent) Clear, integrated strategy; well-justified; considers short- and long-term impact.
4 (Good) Reasonable strategy but lacks depth.
3 (Satisfactory) Basic recommendations with limited reasoning.
2 (Developing) Unclear or weak strategy.
1 (Insufficient) No logical strategy.
3. Communication & Presentation (5 points)
Level Description
5 (Excellent) Clear, professional, well-structured; strong delivery.
4 (Good) Generally clear; minor issues.
3 (Satisfactory) Some organization but lacks clarity.
2 (Developing) Difficult to follow.
1 (Insufficient) Disorganized and unclear.
Reflection: How well did this activity work in your classroom? Would you repeat it? Why or why not? What challenges did you encounter, and how did you address them? What, if anything, would you change? What did students seem to enjoy about the activity?
This activity worked very well in my Hospitality Accounting class. During my first semester teaching at City Tech CUNY, I observed that many students perceived accounting as one of the most difficult courses in the curriculum, and several students struggled to pass the class. After participating in the Living Lab workshop in January 2026, I redesigned part of the course and introduced this project to help students connect accounting concepts to real-world business situations.
The project increased student engagement and helped students see that accounting is more than working with numbers or bookkeeping. Instead, they began to understand accounting as the language of business and a tool for telling a company's story. My goal was for students to view financial statements not as isolated reports, but as tools for understanding the overall health of a business and the relationship between financial performance, strategy, and management decisions. Through this project, students were able to connect financial analysis with business success and failure in a meaningful way.
I would definitely repeat this project in future semesters. Overall, the quality of the reports and presentations exceeded my expectations, and I was proud of the students' work. The project encouraged critical thinking, teamwork, and the application of accounting concepts to authentic business problems.
One challenge was that some students initially focused only on calculating ratios rather than interpreting what the numbers meant. To address this issue, I incorporated the Sonder case study before the project began and provided additional guidance on connecting financial results to business strategy. This helped students move beyond calculations and think more analytically about business performance.
In the future, I may add more structured checkpoints during the project and provide additional examples of strategic analysis.
Student feedback indicated that they enjoyed applying accounting concepts to real companies and understanding how financial information influences business decisions. Several students commented that the project helped them appreciate the practical value of accounting and its relevance to the hospitality industry.
Some representative student comments include:
• “I learned how to analyze financial statements, manage costs, and understand the ‘why’ behind the numbers.”
• “I learned more about why accounting is important to a company/business and how a company’s income statement can influence investment decisions. As for the class, I enjoyed coming every week.”
• “I learned a lot in the class about Hospitality Accounting and its usefulness.”
• “I learned about the financial factors that can make or break a company, and the ways to ideally keep a company in good standing.”
• “I learned the importance of accounting in the hospitality industry and how financial information helps businesses make decisions.”
These comments suggest that the project successfully helped students connect accounting concepts to real-world business challenges and develop a deeper appreciation for the role of accounting in hospitality management.
Additional Information: Please share any additional comments and further documentation of the activity – e.g. assignment instructions, rubrics, examples of student work, etc. These can be links to pages or posts on the OpenLab.
Please share a helpful link to a pages or post on the OpenLab