Financial Analysis of Intercontinental Hotel Group Essay
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Added on 2020-07-23
Financial Analysis of Intercontinental Hotel Group Essay
Added on 2020-07-23
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TABLE OF CONTENTSINTRODUCTION...........................................................................................................................11. Evaluating business performance and position of Intercontinental hotel group Plc...............12. Critically analyzing the statement of Aerts and Walton (2017) pertaining to ratio analysis...3CONCLUSION................................................................................................................................3REFERENCES................................................................................................................................4APPENDIX......................................................................................................................................51. Income statement.....................................................................................................................52. Balance sheet...........................................................................................................................53. Ratio analysis of M&C Plc......................................................................................................74. CEO’s statement......................................................................................................................9
INTRODUCTION Financial analysis and evaluation is highly significant which assists company inevaluating 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 PlcRatio 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 for58.68% & 57.34% respectively. This aspect shows that during this period, firm failed toexert effectual control on direct expenses due to which low GP margin was generated byfirm. Considering the same, it can be stated that gross profitability aspect of M&C Plc isnot good. NP margin: Outcome of ratio shows that NP margin of firm decreased significantly from7.67% to 8.42% at the end of 2016. Due to the increasing trend of operating expenses andtax 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 ofM&C.Liquidity analysis:Current ratio: Referring appendix 3, it can be presented that in the year of 2016 liquidityposition of M&C Plc was good as compared to before aspect. Moreover, in such yearcurrent ratio of firm declined from 1 to 1.55:1 which was highly near to ideal ratio suchas 2:1 (Annual Report and Form 20-F 2016, 2017). This aspect presents that in the yearof 2016 capability of firm increased significantly in relation to meeting obligations fromcurrent assets. Hence, considering the prior year performance it can be said that liquidityposition of company was good in 2016.
Quick ratio: From ratio analysis, it has assessed that in both 2015 &2016, M&C washighly capable in relation to meeting obligations by converting quick assets into cash.Hence, by declining the level both prepaid expenses and current liabilities business unithas maintained effective quick ratio that near to ideal measure. Solvency ratio analysisDebt-equity ratio: Results of ratio analysis clearly entail that debt-equity aspect of M&CPlc was .29 & .36:1 significantly. By taking into account such trend it can be depicted thatsolvency position of M&C Plc was good in 2016. Moreover, in this, dent-equity position of firmwas near to ideal ratio such as .5:1. Efficiency ratio analysisInventory turnover ratio: Table depicted in appendix 3 exhibits declining trend ininventory turnover ratio from 87.5 to 79 times. Such performance trend shows that in2016, 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 identifiedin total assets turnover ratio. This aspect presents that firm has generated enough salesfrom 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 showsthat personnel failed to make optimum use of assets. Fixed assets turnover ratio: Financial statement evaluation presents that fixed assetsturnover ratio of M&C Plc was inclined from 4.27 to 4.53 times. Hence, no significantimprovement has been identified in such area. Hence, business entity faced difficulty ingenerating 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 agood indicator. At the time of making investment decision, investors make analysis ofsuch ratio. Thus, for attracting potential investors M&C Plc is required to make somemodifications in the existing framework.
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