Financial Ratio Analysis of M&C Plc.

This assignment provides a comprehensive financial ratio analysis of M&C Plc., covering various aspects such as profitability, liquidity, efficiency, and investment ratios. The analysis includes calculations for key metrics like gross profit margin, net profit margin, current ratio, quick ratio, debt-equity ratio, total assets turnover ratio, fixed assets turnover ratio, inventory turnover ratio, interest coverage ratio, payout ratio, dividend per share, and earnings per share. Additionally, a CEO's statement is included to provide context and insights into the company's financial performance.

Financial

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
1. Evaluating business performance and position of Intercontinental hotel group Plc...............1
2. Critically analyzing the statement of Aerts and Walton (2017) pertaining to ratio analysis...3
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4
APPENDIX......................................................................................................................................5
1. Income statement.....................................................................................................................5
2. Balance sheet...........................................................................................................................5
3. Ratio analysis of M&C Plc......................................................................................................7
4. CEO’s statement......................................................................................................................9

INTRODUCTION
Financial analysis and evaluation is highly significant which assists company in
evaluating its position as well as performance over the years. For this project report, Millennium
& Copthorne Hotels PLC has been selected which is one of leading hotel units of UK. In this,
report will shed light on the financial performance of M&C plc pertaining to FY 2015 & 2016.
1. Evaluating business performance and position of M&C hotel group Plc
Ratio analysis table of M&C Plc is depicted in appendix 3.
Profitability ratio analysis:
 GP margin: In the year of 2015 and 2016, GP margin of M&C Plc accounted for
58.68% & 57.34% respectively. This aspect shows that during this period, firm failed to
exert effectual control on direct expenses due to which low GP margin was generated by
firm. Considering the same, it can be stated that gross profitability aspect of M&C Plc is
not good. NP margin: Outcome of ratio shows that NP margin of firm decreased significantly from
7.67% to 8.42% at the end of 2016. Due to the increasing trend of operating expenses and
tax liability M&C Plc failed to generate enough or high margin in the year of 2016.
However, as compared to before increasing trend has been identified in the NP margin of
M&C.
Liquidity analysis:
 Current ratio: Referring appendix 3, it can be presented that in the year of 2016 liquidity
position of M&C Plc was good as compared to before aspect. Moreover, in such year
current ratio of firm declined from 1 to 1.55:1 which was highly near to ideal ratio such
as 2:1 (Annual Report and Form 20-F 2016, 2017). This aspect presents that in the year
of 2016 capability of firm increased significantly in relation to meeting obligations from
current assets. Hence, considering the prior year performance it can be said that liquidity
position of company was good in 2016.

 Quick ratio: From ratio analysis, it has assessed that in both 2015 &2016, M&C was
highly capable in relation to meeting obligations by converting quick assets into cash.
Hence, by declining the level both prepaid expenses and current liabilities business unit
has maintained effective quick ratio that near to ideal measure.
Solvency ratio analysis
Debt-equity ratio: Results of ratio analysis clearly entail that debt-equity aspect of M&C
Plc was .29 & .36:1 significantly. By taking into account such trend it can be depicted that
solvency position of M&C Plc was good in 2016. Moreover, in this, dent-equity position of firm
was near to ideal ratio such as .5:1.
Efficiency ratio analysis
 Inventory turnover ratio: Table depicted in appendix 3 exhibits declining trend in
inventory turnover ratio from 87.5 to 79 times. Such performance trend shows that in
2016, management team of M&C failed to manage inventory in a prominent way.
 Total assets turnover ratio: Increasing trend, from 4.75 to 5.11 times, has been identified
in total assets turnover ratio. This aspect presents that firm has generated enough sales
from total assets including both fixed and current (Almamy, Aston and Ngwa, 2016).
However, still total assets turnover ratio of M&C Plc was not high which in turn shows
that personnel failed to make optimum use of assets.
 Fixed assets turnover ratio: Financial statement evaluation presents that fixed assets
turnover ratio of M&C Plc was inclined from 4.27 to 4.53 times. Hence, no significant
improvement has been identified in such area. Hence, business entity faced difficulty in
generating high sales by using fixed assets.
Investment ratio analysis:
 Payout ratio: This measure shows inverse trend from 42.20% to 32.90% which is not a
good indicator. At the time of making investment decision, investors make analysis of
such ratio. Thus, for attracting potential investors M&C Plc is required to make some
modifications in the existing framework.

 Dividend per share: In the FY 2016 divided offered by M&C plc to its shareholders
declined from 0.14 to 0.06. Considering the profit trend, it can be mentioned that M&C
has offered less dividend to shareholders as compared to the year of 2015. This in turn
negatively affects the brand image of firm in the mind of investors (Al Karim and Alam,
2013).
 Earnings per share: EPS associated with the shares of M&C Plc shows stagnant trend
such as 0.2 in both 2015 and 2016. The rationale behind such decreasing trend was low
level of net margin generated in 2016. Thus, for maintaining the faith of shareholders and
attracting more investors M&C Plc is required to offer high earnings to them.
2. Critically analyzing the statement of Aerts and Walton (2017) pertaining to ratio analysis
According to the views of Jordan (2014), ratio analysis technique provides high level of
assistance to the business unit and its stakeholders in analyzing the financial health as well as
performance. Such technique gives clear indication a about the monetary position of firm
pertaining to areas like profitability, liquidity, solvency, efficiency and investment. Hence, by
undertaking such tool business organization can evaluate its performance over the years and in
against to the competitors. In this way, by making evaluation or analysis of financial aspects
management team and investors would become able to take suitable decision.
However, on the critical note, Evans and Mathur (2014) said that ratios are based on past
data set. On the other side, with the motive to develop competent framework for future M&C plc
conducts ratio analysis. Further, economic condition and other aspects also have significant
impact on business position as well as performance. Hence, by taking into account such aspect it
can be presented that on the basis of past figures it is not possible for the stakeholders to evaluate
performance and taking decision about future. Vogel, (2014) claimed that by doing ratio analysis
and comparing outcome with industry standard firm can assess it position over the rival firms.
Hence, ratio analysis technique gives indication to the firm about the areas in which strategic
medications are required for performance enhancement.
CONCLUSION
From the above report, it has been concluded that net profitability, liquidity and solvency
aspect of M&C Plc was good in 2016 over 2015 but not sound. Thus, for making improvement

in the financial position and performance M&C Plc is required to undertake sound strategic and
policy framework.

REFERENCES
Books and Journals
Al Karim, R. and Alam, T., 2013. An evaluation of financial performance of private commercial
banks in Bangladesh: ratio analysis. Journal of Business Studies Quarterly. 5(2). p.65.
Almamy, J., Aston, J. and Ngwa, L. N., 2016. An evaluation of Altman's Z-score using cash flow
ratio to predict corporate failure amid the recent financial crisis: Evidence from the
UK. Journal of Corporate Finance. 36. pp.278-285.
Evans, J. R. and Mathur, A., 2014. Retailing and the period leading up to the Great Recession: a
model and a 25-year financial ratio analysis of US retailing. The International Review of
Retail, Distribution and Consumer Research. 24(1). pp.30-58.
Jordan, B., 2014. Fundamentals of investments. McGraw-Hill Higher Education.
Vogel, H. L., 2014. Entertainment industry economics: A guide for financial analysis.
Cambridge University Press.
Online
An overview of M&C Plc. 2016. [Online]. Available through: <
https://investors.millenniumhotels.com/~/media/Files/M/MillenniumHotels-IR/
documents/annual-reports/2016-annual-report.pdf >.

APPENDIX
1. Income statement

2. Balance sheet

3. Ratio analysis of M&C Plc
Millennium & Copthorne Hotels PLC
Particulars Formula 2015 2016
% change
in 2016
Profitability ratio
Gross profit 497 531 6.8%
Net profit 65 78 20.0%
Net sales 847 926 9.3%
GP ratio Gross profit / net sales * 100
58.68
%
57.34
% -2.3%
NP ratio Net profit / net sales * 100
7.67
%
8.42
% 9.8%
Liquidity ratios
Current assets 401 532 32.7%
Stock 4 5 25.0%

Prepaid expenses 18 31 72.2%
Quick assets 379 496 30.9%
Current liabilities 400 343 -14.3%
Current ratio Current assets / current liabilities 1 1.55 55.0%
Quick ratio Quick assets / current liabilities 0.95 1.45 52.6%
Debt 665 951 43.0%
Shareholders’
equity 2276 2668 17.2%
Debt-equity ratio
Long term debt / shareholders
equity 0.29 0.36 24.1%
Efficiency ratios
Fixed assets 3,619 4,199 16.0%
Total assets 4,020 4,731 17.7%
Inventory 4 5 25.0%
COGS 350 395 12.9%
Net sales 847 926 9.3%
Total assets
turnover ratio 4.75 5.11 7.6%
Fixed assets
turnover ratio 4.27 4.53 6.1%
Inventory
turnover ratio 87.5 79 -9.7%
Interest coverage
ratio 6.45 5.70 -12%
Investment ratios
Payout ratio DPS / EPS
42.20
%
32.90
% -22.0%
Dividend per
share
Annual dividends paid / number of
shares outstanding 0.14 0.06 -57.1%
earnings per share
Earnings / number of outstanding
shares 0.2 0.24 20.0%

4. CEO’s statement