Financial Analysis

Running Head: FINANCIAL ANALYSIS 1
FINANCIAL ANALYSIS

Running Head: FINANCIAL ANALYSIS
Table of Contents
Financial analysis...................................................................................................................................2
Profitability ratio-..............................................................................................................................2
Liquidity balances in the first quarter....................................................................................................3
Cash Budget Analysis.............................................................................................................................4
References.............................................................................................................................................6
Appendix...............................................................................................................................................8

Running Head: FINANCIAL ANALYSIS
Financial analysis
Ratio analysis is a tool to measure the performance of the organisation. This tool
helps the stakeholders to evaluate and opt to take investment decision. The rationale of this
analysis rely on some of the important criteria such as manager perspective, its profitability,
and shareholder`s perspective. In order to form manager`s perspective, the ratios are return on
Assets, operating, total turnover ratio. From the shareholder’s point of view, the ratios
considered are return on equity, return on Assets, New profitability margin, and total asset
turnover. The analysis and comparison is based on two years.
Profitability ratio-
Among all the profitability ratios such as gross margin, net profit margin, operating
profit margin, and return on capital employed. The three prominent ratio to be used are
operating profit margin and net profit margin.
Net profitability margin- this ratio is defined as the percentage and proportion of net
profit as compared to total revenue generated from sales. In 2016, the company earned a
profit of 14.63 percent of the total revenue and in 2017; it has increased to 24.69 percent.
Some of the basic reasons behind the increase in the net profitability are increase in sales
volume (Pätäri, Leivo, Hulkkonen, & Honkapuro, 2018). In order to increase the net profits,
the company attempted might have lowered the expenses of making purchases (Pätäri, Leivo,
Hulkkonen, & Honkapuro, 2018). The company has lowered its direct or indirect expenses
such as cost of labour, cost of buying raw material, and advertising expenses etc (Pätäri,
Leivo, Hulkkonen, & Honkapuro, 2018).
Operating profit ratio- operating profits have been calculated with the help of
operating profit. The company have earned a profit of 19 percent in 2016 and it has increased
to 35 percent in 2017(Pätäri, Leivo, Hulkkonen, & Honkapuro, 2018). Hotel might have
reduced the indirect expenses such as marketing, utilities, insurance, and taxes. In 2017, the
company has improved its operating profits. The company has earned higher Gross profit. In
206, the profit was 85 percent, which has increased by 87 percent in 2017 (Pätäri, Leivo,
Hulkkonen, & Honkapuro, 2018).
Return on equity- This ratio is defined as net profit earned by organisation by
employing a certain amount of equity (Sloan, 2019). The hotel has earned a return of 15
percent in 2016 that has increased in 2017 by 25 percent. The organisation has been