Assignment 01 2018 Financial Analysis Hotel

Assignment One
Subject Name: Financial Management for the Hospitality Industry

Subject Code/s: HOSP221
Lecturer and Unit Coordinator: Alice Low
School/Department: School for Higher Education
Study Period: 2nd Semester 2018
Assignment Topic(s) Financial Analysis for an Events Company for the

Financial Statements - 2014.
Total Marks: 20%
Team or Individual: Individual
Due Date: 2nd September 2018
The Project
You are the Chief Financial Officer (CFO) of a world class events company and you have been
directed by your Chief Executive Officer (CEO) to undertake a financial analysis and write a
financial report to present to the Board of Directors. The firm has been in operation for
three years.
The four main financial areas of the report to be covered are: -

1) The profitability of the firm;
2) The efficiency of the firm;
3) The liquidity of the firm; and
4) The gearing (leverage) of the firm.
The Profitability Ratios: -

1. Return on Owners’ Equity.
2. Return on Total Assets.
3. Gross Profit Margin.
4. Net Profit Margin.
5 Total Operating Expenses Ratio.
The Efficiency Ratios of the Firm

6 Average Settlement Debtors Turnover Period.
7 Average Settlement Creditors Turnover Period.
The Liquidity Ratios of the Firm

10 The Current Ratio.
11 The Acid Test Ratio / Liquidity Ratio.
The Gearing (Leverage) Ratios of the Firm
13 Total Liabilities to Total Assets
14 Total Liabilities to Total Owner’s Equity
The Report
A concise report of the financial situation of the company and key issues that may impact
the company in the future; one page.
The Appendix Section.
All Excel Workings: -

1) Consolidated Income Statements with percentages (2017 and 2018)
2) Consolidated Balance Sheet Statements with percentages (2016, 2017 and 2018)
3) A copy of the Ratio Analysis Results.
4) A copy of the Formulas used for the Ratio Analysis - condensed.
5) Time series Microsoft ® Excel workings you deem important.
A minimum of four Microsoft ® Excel Charts to highlight key financial information which will
improve and give a picture of the accurate financial situation of the firm.
This should support your financial report and key arguments that you present to your: -
Page 2 of 6
Income Statement - 30th June 2018
Gregory St James Executive Corporate Events Centre (Ltd)
2017 2018
$M $M
Sales $ 2,240.8 $ 2,681.2
opening stock $ 241.0 $ 300.0

purchases $ 1,804.4 $ 2,142.8
$ 2,045.4 $ 2,442.8
less closing stock $ 300.0 $ 370.8
$ 1,745.4 $ 2,072.0
Gross profit $ 495.4 $ 609.2
Operational expenses
wages & salaries $ 185.8 $ 275.6
rent $ 12.2 $ 12.4
$ 8.4 $ 13.6
gas & electricity
$ 4.6 $ 7.0
insurance
$ 3.4 $ 7.4
web hosting & Telecommunications
$ 5.6 $ 9.0
audit fees
$ 5.0 $ 5.0
freehold buildings: depreciation
$ 27.0 $ 32.8
fixtures & fittings depreciation
$ 252.0 $ 362.8
Total operational expenses
Financials
$ 24.0 $ 6.2
interest expense
$ 276.0 $ 369.0
Total net expenses
$ 219.4 $ 240.2
Net profit before company tax -$ 60.2 -$ 76.0
Less company tax
Net profit after company tax $ 159.2 $ 164.2
Page 3 of 6
Balance Sheet as at 30th June 2018
Gregory St James Executive Corporate Events Centre (Ltd)
2016 2017 2018

$M $M $M
Current assets
bank $ 6.1 $ 33.5 $ 41.0
trade debtors $ 281.0 $ 240.8 $ 210.2
inventory $ 241.0 $ 300.0 $ 370.8
Total current assets $ 528.1 $ 574.3 $ 622.0
Non-current assets
fixtures and fittings $ 127.8 $ 129.0 $ 133.4
less accumulated depreciation -$ 37.4 -$ 27.0 -$ 32.8
freehold land and buildings $ 291.2 $ 286.2 $ 281.2
less accumulated depreciation -$ 5.0 -$ 5.0 -$ 5.0
telecommunication conference equipment $ 62.6 $ 62.6
Total non-current assets $ 376.6 $ 445.8 $ 439.4
TOTAL ASSETS $ 904.7 $ 1,020.1 $ 1,061.4
Current liabilities
trade creditors $ 247.0 $ 221.4 $ 228.8
dividends payable $ 32.0 $ 40.2 $ 60.0
company tax payable $ 46.4 $ 60.2 $ 76.0
Total current liabilities $ 325.4 $ 321.8 $ 364.8
Non-current liabilities
debenture loan $ 150.0 $ 150.0 $ 60.3
bank loan $ 50.0 $ 50.0 $ 38.0
Total non-current liabilities $ 200.0 $ 200.0 $ 98.3
TOTAL LIABILITIES $ 525.4 $ 521.8 $ 463.1
Shareholders' equity
ordinary issued shares $ 280.0 $ 339.1 $ 434.1
$ 99.3 $ 159.2 $ 164.2
$ 379.3 $ 498.3 $ 598.3
TOTAL CLAIMS $ 904.7 $ 1,020.1 $ 1,061.4
Page 4 of 6
Profitability Ratios
Return on Owners’ Equity Net profit after Tax & preference dividend x 100
(Average ordinary share capital + reserves)/2
Return on Assets Net profit before interest and taxation x 100

(Average total assets)/2
Gross Profit Margin Gross Profit x 100

Sales
Net Profit Margin Net profit before interest and taxation x 100
Sales
Operational Expense Ratio Margin Operational Expense x 100

Sales
Efficiency Ratios
Average Settlement Debtors Period (Average trade debtors) x 365 days

Credit sales
Average Settlement Creditors Period (Average trade creditors) x 365 days

Purchases
Liquidity Ratios
Current Ratio Current assets

Current liabilities
Acid Test Ratio Current assets – ( inventory & prepayments)

Current liabilities
Gearing (Leverage) Ratios
Total Liabilities to Total Assets Total liabilities x 100

Total assets
Total Liabilities to Total Owners’ Equity Total liabilities x 100

Total Owners’ Equity
Page 5 of 6
Ratios Summary Table
The profitability ratios 2016 2017 2018

Return on owners equity
Return on total assets
Gross profit margin
Net profit margin
Total operating expense ratio
The efficiency ratios

Average settlement debtors turnover ratio
Average settlement creditors turnover ratio
The liquidity ratios

The current ratio
The acid test ratio
The gearing ratios

Total liabilities to total assets ratios
Total liabilities to total owner’s equity
NOTES:
Page 6 of 6

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Assignment One

Subject Name: Financial Management for the Hospitality Industry

Assignment Topic(s) Financial Analysis for an Events Company for the

The four main financial areas of the report to be covered are: -

The Profitability Ratios: -

The Efficiency Ratios of the Firm

The Liquidity Ratios of the Firm

The Appendix Section.

All Excel Workings: -

Sales $ 2,240.8 $ 2,681.2

opening stock $ 241.0 $ 300.0

Gross profit $ 495.4 $ 609.2

2016 2017 2018

TOTAL ASSETS $ 904.7 $ 1,020.1 $ 1,061.4

TOTAL LIABILITIES $ 525.4 $ 521.8 $ 463.1

$ 379.3 $ 498.3 $ 598.3

TOTAL CLAIMS $ 904.7 $ 1,020.1 $ 1,061.4

Return on Assets Net profit before interest and taxation x 100

Gross Profit Margin Gross Profit x 100

Operational Expense Ratio Margin Operational Expense x 100

Average Settlement Debtors Period (Average trade debtors) x 365 days

Average Settlement Creditors Period (Average trade creditors) x 365 days

Current Ratio Current assets

Acid Test Ratio Current assets – ( inventory & prepayments)

Gearing (Leverage) Ratios

Total Liabilities to Total Assets Total liabilities x 100

Total Liabilities to Total Owners’ Equity Total liabilities x 100

The profitability ratios 2016 2017 2018

The efficiency ratios

The liquidity ratios

The gearing ratios

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