Analysis of Financial Statements

Analysis of the financial
statements

Contents
INTRODUCTION...........................................................................................................................3
TASK 1...................................................................................................................................3
A) Calculation of suitable ratios for the year 2018-19.......................................................3
B) Ratio fluctuation useful for Hotel Management...........................................................8
C) Benefits and limitations of ratios analysis that help to make decision.........................9
TASK 2..........................................................................................................................................12
Covered in PPT.....................................................................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Financial statements are accounts compiled for financial results and status at a certain
moment of time by internal manager of firm. A collection of reports usually contains a balance
sheet, income statements, equity report as well as cash flow statements. To certain decision-
makers, annual results are the primary measure of economic knowledge about company for a
respective year. Therefore, the quality, transparency and importance of facts in these financial
records are too heavily emphasized by financial reporting.
In this report, analysis of financial statement is performed with the support of various rations
for Gastby grange which is a small chain of Boutique. In addition, importance of ratio for hotel
and benefits and limitation of using ratio is also elaborated.
TASK 1
A) Calculation of suitable ratios for the year 2018-19.
 Profitability ratio: This ratio is recognised as a type of ratio that businesses are using
to calculate the profit margin of various crucial activities and operations. Profit
proportions are indeed the money metrics used when calculating and evaluating the
capacity of Gatsby Grange to generate a profit over sales by accountants and financial
specialists. Output, financial tools, payroll expenses and the interest of creditors over
a specified period of time. They prove that the hotel utilizes its advantages to gain
customers' income and opportunities. It involves a host of percentages, several of
which are also calculated:
Gross profit ratio: Gross profit / net sales * 100
All data in ‘000 except gross
margin 2018 2019
Gross profit 5050 5150
Net sales 5500 6000
Gross profit ratio 91.82% 85.83%

2018 2019
82
84
86
88
90
92
94 91.82
85.83
Gross margin
Results: The figure indicates that the profit margin of the business dropped in contrast to 2018 in
2019. This is due to the lower gross profit growth. The business should however concentrate on
reducing sales costs.
Net profit ratio: Net profit/net sales*100
All data in ‘000 except net
margin 2018 2019
Net profit 4008 4073
Net sales 5500 6000
Net profit ratio 72.87% 67.88%
2018 2019
65
66
67
68
69
70
71
72
73
74 72.87
67.88
Net margin
Results: The net profit has fell in 2019 as opposed to 2018, close to the gross profit margin. As
in 2018, it was 72.87%, which compared to 67.88%. It is attributed to reduced net income in
2019 as a consequence of increased spending.
Return on assets ratio: Net income / Total assets
All data in ‘000 except re-
turn on assets ratio 2018 2019
Net income 4008 4073
Total assets 7565 7890
Return on assets ratio 0.53 0.52