Analysis of Financial Statement

ANALYSIS OF THE
FINANCIAL STATEMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
a) Calculation of ratios for the year 2017 and 2018 for analysing the financial statements........1
b) Discussion on understanding of the ratios and their fluctuations in hotel management.........7
c) Pros and limitations of ratio analysis in decision making.......................................................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Financials statement of company helps in analysing the health and position. They are
prepared by ever company carrying on the business for keeping record of its transactions. For
assessing whether company is able to carry out its operations efficiently or not financial
statement are used by various users. Financial statements of the company are prepared applying
given standards and regulatory frameworks for recording the transaction of company (Han, Oh
and Kim, 2017). There are various tools and techniques used by professionals for assessing the
financial performance. One of the most commonly used term is ratio analysis that is used for
getting the actual standing of the company. In the present report ratio analysis is done of a
hospitality company Ffion for giving an understanding about financial statements. It will cover
the importance of ration analysis and their fluctuation influencing the organisations. Benefits
and limitations of ration analysis will also be discussed in the study.
TASK 1
a) Calculation of ratios for the year 2017 and 2018 for analysing the financial statements.
Ratio analysis of Ffion Ltd.
Particulars Formula 2017 2018
Profitability
Ratios
Return on
capital
employed
Net operating
profit/Employe
d Capital 23.21% 10.19%
Employed
Capital
Total assets –
Current
liabilities
(1700+1839)-
855 2684
(1750+2152)-
888 3014
Net operating
profit 623 307
Return on
Equity
Net Income /
Shareholder's
Equity 24.59% 10.72%
Net Income 623 307
Shareholder's
Equity 2534 2864
1

Gross profit
margin
Total Sales –
COGS/Total
Sales 23.33% 19.47%
COGS 6900 7650
Sales 9000 9500
Operating
profit margin
Operating
Income/ Net
Sales 6.92% 3.23%
Operating
income 623 307
Revenues 9000 9500
Assets
Turnover
Sales / Net
assets 335.32% 315.20%
Sales 9000 9500
Net assets 2684 3014
Liquidity
Ratios
Current assets 1839 2152
Current
liabilities 855 888
Inventory 700 750
Quick assets 1139 1402
Current ratio
Current assets /
current
liabilities 2.15 2.42
Quick ratio
Current assets -
(stock +
prepaid
expenses) 1.33 1.58
Efficiency
Ratios
Inventory 700 750
Trade
Receivables 649 870
Trade
Payables 660 690
Days 365 365
COGS 6900 7650
Sales 9000 9500
2