Assignment on Business Accounting pdf

Running head: ACCOUNTING FOR BUSINESS
Accounting for Business
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
Requirement 1: Providing Description or overview of the company........................................2
Requirement 2: Calculating ratios of the company for last two years.......................................2
Requirement 3: Providing definitions of ratios and providing benchmark values.....................3
Requirement 4: Evaluating the ratios with reference to benchmark..........................................4
Requirement 5: Comparing the company’s financial ratios with two different companies.......6
Reference and Bibliography:......................................................................................................8

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Requirement 1: Providing Description or overview of the company
Mantra group is considered to be one of the largest Australian based hotel and resort
operator and marketer with 22000+ rooms under the management. the organization relatively
utilizes the properties across Australia New Zealand and Indonesia, while keeping them
under management for the owners. The company was listed in ASX 200 during 2014, which
relatively helped them to acquire the required funds for their expansion. a company relatively
holds 2,300,000customers August every year across there 22000 + rooms. The company a
relatively uses the property of the owners on rent to improve its profitability and acquire
higher customer base. The company actively provides hotels and resort services to the
customers who visit Australia New Zealand and Indonesia (Mantragroup.com.au, 2018). The
company has operated adequately in past years, while generating high net income on each
fiscal year.
Requirement 2: Calculating ratios of the company for last two years
Mantra group limited
Particulars 2017 2016
Current assets 130154 177098
Inventory 3099 2829
Current liabilities 97613 89342
Gross profit 455609 410135
Revenue 688973 606703
Total equity 477948 463067
Total Assets 806259 769024
Net Income 45597 37149

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Current Ratio 1.33 1.98
Quick Ratio 1.30 1.95
Gross Profit Margin 66.13% 67.60%
Return on Equity 9.69% 9.28%
Return on Assets 5.79% 5.42%
Requirement 3: Providing definitions of ratios and providing benchmark values
Current Ratio:
Current ratio helps in identifying capability of the company to support its short-term
obligations, which could detect financial viability of the organisation. In addition, the
standard value is mainly at the level of 2, which needs to be obtained by the company to
depict its financial stability in supporting their obligations. therefore, the organisation having
higher current ratio are depicted to have sound financial position in supporting their short-
term liabilities.
Quick Ratio:
Quick ratio is mainly calculated to understand the current asset and current liability
combination of the company without inventories. The standard value needed for quick ratio is
at the level of 1, which needs to be conducted for generating high level of returns. The
financial ratios mainly evaluate the ability of the organisation to support its financial
obligations without selling its inventory (Czajor, P., & Michalak, 2017).
Gross Profit Margin:
The gross profit margin calculation relevantly identifies the overall cost of sales
incurred by the company to achieve the required sales. The minimum gross profit margin

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value needs to be at the levels of 50% for the organisation to generate high profits. The high
gross profit mainly indicates that the company incur low to cost acquire the required raw
material for the finished goods.
Return on Equity:
The return in equity mainly allows the investor to understand the level of profits,
which is incurred by the organisation while using the funds from equity. This relevantly
evaluates the performance of the management in utilising the available funds to maximise
their profitability. The return on equity is mainly calculated for identifying the abbreviation
of the organisation to generate high level of returns (Atoom, Malkawi & Al, 2017).
Return on Assets:
The return on assets calculation directly help in understand the effectiveness of the
management to utilises the available assets to obtain the relevant earnings. The level of
returns on assets that needs to be obtained by the organisation is at 8%, which would
eventually help in detective the overall performance of the organisation. The industry
standard needs to be evaluated for detecting the viability of the return on assets.
Requirement 4: Evaluating the ratios with reference to benchmark
After the evaluation of different ratios for Mantra Group Limited, the organisation’s
financial performance and strength could be identified. The following ratios are relatively
evaluated based on the performance to determine the current financial position of the
organisation.
Current Ratio:

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The current ratio of the organisation has a relatively declined from the levels of 1.98
to 1.33, which relatively states the low financial capability of the organisation. In addition,
this decline in overall current ratio was due to the reduction in current assets obtained by the
organisation while relevant increment in current liabilities was identified. This mainly
indicates that the organisation is relatively Focused on acquiring additional liabilities to
conduct its business while reducing the current assets. Current assets of the organisation are
not an adequate level according to the benchmark, where the value needs to be at 2 or more.
Quick Ratio:
The quick ratio of the organization has relatively declined from the levels of 1.95 to
1.30, which significantly indicates the lower financial capability of the company to support
obligations. However, after comparing the quick ratio levels with the standard levels it could
be identified that the company's overall capability to support its financial obligation is high.
The decline in quick ratio does not affect the capability of the Company to pay its due to the
creditors. The difference between quick ratio and current ratio of the organization is a
relatively low which indicates the reduction in inventory levels maintained by the
organization (Liang et al., 2016).
Gross Profit Margin:
From the evaluation of gross profit margin, the company's overall financial
performance has a relatively declined from the levels of 67.60% to 66.33%. However, from
the valuation it could be identified that both the revenue and gross profit of the organization
relatively increased from 2016 to 2017. Nevertheless, the percentage of expenses or cost of
goods sold is a relatively higher than the previous year, which directly reduced the gross
profit of the organization. moreover, the gross profit level of the organization is above the
benchmark of 50% which relatively provides positive financial review for the organization.

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Return on Equity:
The return on equity of the organisation has a relatively improved from the levels of
2016 to 2017 due to the increment in overall net income of the organisation. This relevant
increment has relatively increased the return on equity from 9.28% to 9.96% in 2017.
Moreover, the increment has also depicted the efficiency of the organisation to generate
higher returns from the capital deployed by the equity fund. Comparison from the relevant
benchmark relatively indicates that the organisations return on equity is adequate and depicts
viability of the financial decisions made by the management (Brooks, 2015).
Return on Assets:
The return on Assets of the organization has a relatively improved from the levels of
5.42% to 5.79%, which directly indicates the improving efficiency of the management in
utilizing company assets. the return on assets value has a relatively increased due to the
increment in net income obtained by the organization. However, the values of return on assets
is not adequate and at the levels of standard, which directly indicates that the management
was not able to utilize the total assets of the organization.
Requirement 5: Comparing the company’s financial ratios with two different
companies
Particulars Mantra group limited Webjet Limited Eumundi Group Ltd
2017 2016 2017 2016 2017 2016
Current Ratio 1.33 1.98 1.46 1.04 1.05 1.05
Quick Ratio 1.30 1.95 1.46 1.04 0.53 0.63
Gross Profit Margin 66.13% 67.60% 76.18% 73.88% 63.45% 62.42%
Return on Equity 9.69% 9.28% 28.57% 18.24% 4.30% 6.53%

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Return on Assets 5.79% 5.42% 11.93% 7.22% 3.08% 4.55%
The above table relevantly compare the financial position of Mantra Group Limited
with Webjet Limited and Eumundi group Limited. This evaluation relatively indicates that
the current ratio and quick ratio of Mantra group is not adequate as per industry standards, as
the ratios value of Webjet Limited for 2017 is relatively higher (Webjetlimited.com, 2018).
Furthermore, the gross profit margin returns on equity and return on Assets of Mantra Group
Limited also does not compare adequately with Webjet Limited. Lukason, Laitinen & Suvas
(2015) stated that with the evaluation of financial ratios the organizational future prospect can
be evaluated, which might help investors in making their investment decisions. On the other
hand, Caro, Guardiola & Ortiz (2018) argued that the financial ratios lose their viability if the
management has used unethical measures in formulating their financial report.
However, after comparing Mantra Group Limited with Eumundi Group Limited, it
could be identified that the financial performance of mantra group is a relatively higher. this
indicates that the organizations current financial position as per industry standard is adequate
and depicts the positive profit generation capability of Mantra Group Limited. The gross
profit margin, return on equity, return on assets, current ratio, and quick ratio of Mantra
group is a relatively higher than Eumundi Group Limited (Eumundigroup.com.au, 2018).
Therefore, from the valuation of the financial strength it could be identified that
investments in Mantra Group Limited would be a viable option for the investors, as the
company has a positive financial prospect. The rising net income and stable financial position
relatively indicates the positive attributes for Mantra Group Limited. However, the other
factors such as market risk and company risk need to be evaluated by the investors before
making any kind of investments in the organization. The evaluation of risk and return

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attributes of the company would eventually help in depicting the returns that could be
provided from the investment.
Reference and Bibliography:
Czajor, P., & Michalak, M. (2017). Operating Lease Capitalization-Reasons and its Impact on
Financial Ratios of WIG30 and sWIG80 Companies. Przedsiębiorczość i
Zarządzanie, 18(1, cz. 1 Practical and Theoretical Issues in Contemporary Financial
Management), 23-36.
Atoom, R., Malkawi, E., & Al Share, B. (2017). Utilizing Australian Shareholders'
Association (ASA): Fifteen Top Financial Ratios to Evaluate Jordanian Banks'
Performance. Journal of Applied Finance and Banking, 7(1), 119.
Liang, D., Lu, C. C., Tsai, C. F., & Shih, G. A. (2016). Financial ratios and corporate
governance indicators in bankruptcy prediction: A comprehensive study. European
Journal of Operational Research, 252(2), 561-572.
Brooks, R. (2015). Financial management: core concepts. Pearson.
Buchman, T., Harris, P., & Liu, M. (2016). GAAP vs. IFRS Treatment of Leases and the
Impact on Financial Ratios.
Lukason, O., Laitinen, E. K., & Suvas, A. (2015). Growth patterns of small manufacturing
firms before failure: interconnections with financial ratios and nonfinancial
variables. International Journal of Industrial Engineering and Management, 6(2), 59-
66.

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Caro, N. P., Guardiola, M., & Ortiz, P. (2018). Classification trees as a tool to predict
financial difficulties in Latin American companies through their accounting
ratios. Contaduría y Administración, 63(1), 25-26.
Carlino, L., Coppens, F., González, J., Ortega, M., Pérez-Duarte, S., Rubbrecht, I., & Vennix,
S. (2017). Decomposition techniques for financial ratios of European non-financial
listed groups (No. 21). ECB Statistics Paper.
Lakshmi, T. M., Martin, A., & Venkatesan, V. P. (2016). A genetic bankrupt ratio analysis
tool using a genetic algorithm to identify influencing financial ratios. IEEE
Transactions on Evolutionary Computation, 20(1), 38-51.
Webjetlimited.com. (2018). Webjetlimited.com. Retrieved 8 May 2018, from
https://www.webjetlimited.com/wp-content/uploads/2017/07/FY16-Full.pdf
Mantragroup.com.au. (2018). Mantragroup.com.au. Retrieved 8 May 2018, from
https://www.mantragroup.com.au/About-Us.aspx
Eumundigroup.com.au. (2018). Eumundi Group. Retrieved 8 May 2018, from
http://eumundigroup.com.au/annual-reports/