Preview

Importance of Financial Ratios

Better Essays
Open Document
Open Document
2165 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Importance of Financial Ratios
Report on analysis of the importance of financial performances and comparison of financial ratios of Chancellors Hotel with another business in the same industry and industry averages.

BA (Hons) 1st Year International Hospitality Management

Dmitrijs Sokolenko
Student ID: 12110023

Supervisor: Amanda White

Hollings Faculty
Manchester Metropolitan University
Old Hall Lane
Manchester
M14 6HR

January 2013
Executive summary

The Report below is about analysis of the importance of the financial ratios of the Chancellors Hotel and Conference Centre. Hotel is owned by The University of Manchester and it is located in Fallowfield, Manchester, United Kingdom. Ratio analysis helps to identify problem areas and opportunities within the business. Report includes explanations of the most important financial ratios, such as Profitability Ratios, Liquidity Ratios and Working Capital Management Ratios. To see how well Chancellors Hotel operates, it is compared with another business and with Average Industry ratios. Moreover, report includes areas of good and bad practice. In conclusions are given recommendations on how to improve performance of the Hotel.

Contents Executive summary 2 Introduction 4 Main Body 4 Profitability ratios 4 Gross profit ratio 5 Net profit ratio 5 Return on Capital Employed 5 Liquidity ratios 5 Current ratio 6 Acid Test ratio 6 Working Capital Management Ratios 6 Stock Turnover Days 7 Debtor Collection Days 7 Creditor Payment Period 7 Comparison of the Financial Ratios 7 Conclusions and recommendations 9 References: 10

Introduction

The main purpose of this report is to analyse importance of different types of financial performances and to compare financial ratios of Chancellors Hotel and Conference Centre with another business in the same industry and industry averages. It is owned by The University of Manchester and it is located in Fallowfield, Manchester, United Kingdom, which is close


References: [1] Accounting Tools. Net Profit Ratio http://www.accountingtools.com/net-profit-ratio/ Last accessed: 22.12.2012 [2] Bell E. The Importance of Financial Ratios. http://www.iplanner.net/business-financial/online/how-to-articles.aspx?article_id=financial-ratios. Last accessed: 18.12.2012 [3] Chancellors Hotel. Hotel in Manchester Centre with Parking. http://www.chancellorshotel.co.uk/ Last accessed: 20.12.2012 [4] Chron. The Importance of Working Capital Management in Avoiding Bankruptcy http://smallbusiness.chron.com/importance-working-capital-management-avoiding-bankruptcy-39031.html Last accessed: 26.12.2012 [5] FAME Database. Castlefield Hotel Limited http://fame2.bvdep.com/version-20121220/Report.serv?_CID=89&context=TOIJ8FPD7XWOC7L Last accessed: 05.01.2013 [6] Investing Answers. Acid-Test Ratio http://www.investinganswers.com/financial-dictionary/ratio-analysis/acid-test-ratio-1225/ Last accessed: 24.12.2012 [7] Investopedia. Inventory Turnover http://www.investopedia.com/terms/i/inventoryturnover.asp#axzz2HFEh4648 Last accessed: 27.12.2012 [8] QFinance. Creditor and debtor days http://www.qfinance.com/cash-flow-management-calculations/creditor-and-debtor-days Last accessed: 03.01.2013 [9] Ready Ratios. Financial Analysis and Accounting Book of Reference http://www.readyratios.com/reference/liquidity/current_ratio.html/ Last accessed: 22.12.2012 [10] Small Business Development Corporation. Profit Margin Ratio 's and Break Even Analysis http://www.smallbusiness.wa.gov.au/profit-margin-ratio-s-and-break-even-analysis/ Last accessed: 22.12.2012
Continue Reading
View Writing Issues

You May Also Find These Documents Helpful

  • Good Essays

    FINANCIAL RATIOS
    • 616 Words
    • 4 Pages

    FINANCIAL RATIOS

    Financial ratios are indicators of a company’s performance as discernable from the company’s Balance Sheet and income Statement. We will discuss some of the simple ratios of a company and talk about their significance.…

    • 616 Words
    • 4 Pages
    Good Essays
    Read More
  • Good Essays

    Cango Financial
    • 1115 Words
    • 5 Pages

    Cango Financial

    The success of a business depends on its ability to remain profitable over the long term, while being able to pay all its financial obligations and earning above average returns for its shareholders. This is made possible if the business is able to maximize on available opportunities and very efficiently and effectively use the resources it has to create maximum value for all involved stakeholders. One way the performance of a company can be measured on critical areas such as profitability, its ability to stay solvent, the amount of debt exposure and the effectiveness in resource utilization, is performing financial analysis where a set of ratios provides a snapshot of company performance and future prospects. Financial analysis is also a very useful technique that forms a basis for making key decisions about company operations. In addition to internal company members, these ratios are used by potential investors and shareholders to make investment decisions about the company.…

    • 1115 Words
    • 5 Pages
    Good Essays
    Read More
  • Better Essays

    Functions Paper
    • 1430 Words
    • 6 Pages

    Functions Paper

    Key areas that finance personal essential functions that help hospitality business to improve their performance as follow. Organize schedule of financial forecasts and budgets and whole linked analysis, discrepancy reports, and situations or sensitivities. Evaluate and examine P&L (profit and loss) outcomes and recognize steps essential to improve productivity and profit, counting tracking, reporting and analyzing tendency key in areas with established performance standards. Finance also utilizes financial reproductions to examine initiatives with the intention of guide plan, optimize key performance to keep the organizations results on track. Foresee and conduct action plans to meet guest needs, although continuing to conduct the necessary search for ways to improve guest…

    • 1430 Words
    • 6 Pages
    Better Essays
    Read More
  • Good Essays

    XACC/280 Financial Analysis: Pepsico
    • 1114 Words
    • 5 Pages

    XACC/280 Financial Analysis: Pepsico

    To any company whether small or a large corporation, the financial analysis is very important in order for a successful business. This will determine if the company is healthy enough to invest or even to see where you are weak in the financial part of the business. It is the company’s responsibility to present accurate analysis of their financial reports. What I hope to present to you is information that you will help see the comparison of both companies within their financial standings. In this report I will present a vertical analysis and a horizontal analysis, and ratio analysis. I will also try to provide some strategies…

    • 1114 Words
    • 5 Pages
    Good Essays
    Read More
  • Powerful Essays

    HADM 3310
    • 5488 Words
    • 21 Pages

    HADM 3310

    operations; a historical view of the development of the hotel industry; and understanding of the…

    • 5488 Words
    • 21 Pages
    Powerful Essays
    Read More
  • Good Essays

    Financial Ratios
    • 536 Words
    • 3 Pages

    Financial Ratios

    The creditable performance calculation for the Valley of the Sun United Way (VSUW) is used to guarantee that their organization will perform at their most likely current ratio, long-term solvency ratio, contribution ratio, and general and management/expense ratio (Goetsch & Davis, 2010).…

    • 536 Words
    • 3 Pages
    Good Essays
    Read More
  • Good Essays

    Leslie Fay Case
    • 1026 Words
    • 3 Pages

    Leslie Fay Case

    After reviewing the Financial Report from The Leslie Fay Companies from 1987 to 1991, I made ratios of Balance Sheet and Income Statement to start with audit planning, which could help us make comparison directly. Also, the calculation of ratios in liquidity, activity, profitability and solvency contains in my report. The purpose of analytical procedures is to detect “red flags” within the financial and non-financial information. For the financial part, firstly, I made year-to-year comparisons from 1987 to 1991; then, I did going concern analysis that to compare the data from The Laslie Fay Co. with the industry standard in 1991. What’s more, I consider the predicable relationships such as gross profit to sales. For the non-financial part, I analysis the economic environment during the period and big events took place in Leslie Fay Co. from 1987 to 1991. To end up with the analytical procedures, I make conclusions and provide my recommendations.…

    • 1026 Words
    • 3 Pages
    Good Essays
    Read More
  • Good Essays

    Maverick Lodging Case Analysis
    • 1695 Words
    • 7 Pages

    Maverick Lodging Case Analysis

    * Designing a balanced scorecard had been a considerable challenge because of the complicated nature of the hotel industry…

    • 1695 Words
    • 7 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    The Story of Zitkala-Sa
    • 933 Words
    • 4 Pages

    The Story of Zitkala-Sa

    The Indian way of life, is all about spirit and faith. Their whole culture is build up about it, and losing the spirit is the same as losing their status in the community.…

    • 933 Words
    • 4 Pages
    Satisfactory Essays
    Read More
  • Good Essays

    Maverick Lodging Case
    • 940 Words
    • 4 Pages

    Maverick Lodging Case

    In 1999, the Maverick Lodging company implements balanced scorecard to establish a measurement system and control the hotel level management. The balanced scorecard has several attributes, such as tracking financial performance, tracking nonfinancial measures and communicating franchisees and owners objectives of growth. For financial performance, according to Exhibit 7, the Maverick Courtyard has 3.77% growth rate, Maverick Fairfield Inn has 2.22% growth rate and Maverick Residence Inn has 3.5% growth rate. For flow-through flexible budget, both Maverick Courtyard and Maverick Residence Inn have good score while only Maverick Fairfield has unexpected score. As a result, the financial performance is generally good for the company. However, nonfinancial figures indicate the company’s customer service quality is declining. According to guest-satisfaction score in Exhibit 7, all three hotels’ scores are lower than market average scores. The company has higher comprehensive audit performance than last year’s and employee turnover is decreasing. Although the company has some unexpected performances, it develops well in year 1999.…

    • 940 Words
    • 4 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    Nike's Cost of Debt and Equity
    • 2023 Words
    • 9 Pages

    Nike's Cost of Debt and Equity

    Cohen's calculation considered the book values to calculate the proportion of equity for calculating the value of WACC which should only be done if the target or market values are not available. In order to determine a more realistic cost of equity, it is recommended to use the market value. The current market share price of Nike as of 2001 is $42.09 and there are 271.5 total shares outstanding.…

    • 2023 Words
    • 9 Pages
    Satisfactory Essays
    Read More
  • Powerful Essays

    1920s
    • 1513 Words
    • 5 Pages

    1920s

    ONE PERSON IN EVERY TEN THOUSAND met a violent death in the 118 leading cities of the United States last year.…

    • 1513 Words
    • 5 Pages
    Powerful Essays
    Read More
  • Satisfactory Essays

    GR Hotels
    • 1647 Words
    • 7 Pages

    GR Hotels

    Introduction. The report was prepared for GR Hotels Board of Directors review. It examines current opportunities to increase profitability. Several options were examined and the most plausible solution proposed – Upgrade to upscale both hotels. This measure will increase long term profits and improve position in the core business.…

    • 1647 Words
    • 7 Pages
    Satisfactory Essays
    Read More
  • Good Essays

    Obesity Fast Food Nation
    • 667 Words
    • 3 Pages

    Obesity Fast Food Nation

    Obesity has grown into a rampant issue all over the United States, over the past few decades. Fast foods also have increased their outlets in the nation, in turn, depicting a success in the business venture. It is clear that fast foods have become quite cheap in comparison to healthy, homemade meals. Subsequently, people have turned to eat fast foods for economic reasons. Convenience is yet another reason behind people’s high indulgence in eating fast foods other than healthy, homemade meals. One does not need to prepare meals when dealing with fast foods; it is just a matter of walking into a fast food restaurant. However, the rampant feeding on fast foods in America has adverse effects that seem to affect even children. Obesity is the leading result of feeding on too much fast food. Recently, this has grown into a concern whereby fast food restaurants are being blamed for the high occurrence of obesity in America. Nonetheless, I do not concur with the fact that restaurants are to blame for obesity, but people have the sole responsibility of choosing the food they consume and account for their weight (National Bureau of Economic Research web).…

    • 667 Words
    • 3 Pages
    Good Essays
    Read More
  • Powerful Essays

    Financial Ratio Analysis of two companies
    • 3077 Words
    • 19 Pages

    Financial Ratio Analysis of two companies

    This research paper will evaluate Sample Company using review standard financial ratio analysis techniques and assess its potential as a good investment. This is written in the form of a memo to the CEO of an Alabama-based firm, looking for sound financial advice with regards to whether of not buying stock in Sample Company is a sound investment.…

    • 3077 Words
    • 19 Pages
    Powerful Essays
    Read More

Related Topics