Financial Decision Making for Thomas Cook UK

Financial Decision Making 1
Financial Decision Making

Financial Decision Making 2
Table of Contents
Introduction................................................................................................................................3
Section A....................................................................................................................................4
1. Introduction of the company..............................................................................................4
2. Identification of Profits and earnings for past 5 years........................................................4
3. Identification of dividends..................................................................................................7
4. Financial stability and liquidity of Thomas cook using ratios...........................................8
Section B..................................................................................................................................11
1. Moves by Thomas Cook which can impact its performance...........................................11
2. Reflection portrayed by the journalist on Thomas Cook..................................................11
3. Corporate governance of Thomas Cook...........................................................................12
4. Asset value per share and current price of share in the market.......................................13
5. Conclusion and recommendations....................................................................................14
References................................................................................................................................16
Appendices...............................................................................................................................18

Financial Decision Making 3
Introduction
The report is developed with an aim to create knowledge and understand the key concepts of
corporate finance and accounting. The report is divided into two sections. The first section
discusses the operations and financial performance of Thomas Cook UK. For this purpose,
the profitability, earnings, stability, and liquidity of the organization are analyzed by
interpreting the past 5 year performance through the ratio analysis technique. In addition to
this, the second section discusses the non financial information related to the organization.
This is done by analyzing any news which has impacted the performance of the organization.
The report also includes the reflection of the organization portrayed by the financial reports
and journalists. The corporate governance of Thomas Cook is also discussed in the report
identifying the number of directors and non-executive as well as their roles in the
organization. Furthermore, the report identifies the asset value per share as well as the
existing share price of the organization in the market. Whether the organization represents an
opportunity for investment or not is also assessed in the report. Lastly, recommendations are
provided for improving the financial performance of the company.

Financial Decision Making 4
Section A
1. Introduction of the company
Thomas Cook is one of the leading travel groups of UK, which is registered in LSE (London
Stock Exchange). The organization was established in the year 1841 and operates in the
travel and hospitality industry. The organization has its own distribution channels of travel,
tour operation, and airline. 22,000 colleagues support the organization and it operates in 17
different countries. Thomas Cook owns 100 aircraft and 190 hotels and resorts of their own
brand. There are total 22,000 employees serving to 20 million customers across UK, Ireland,
Norway, Sweden, Finland, Russia, Denmark, Netherlands, Germany, Poland, Belgium, Czech
Republic, France, Switzerland, Austria, and Hungary (Thomas Cook Group, 2018). The tour
operator business is comprised of Thomas Cook, Neckermann, and Spies Tjareborg Ving
operating in UK, Continental Europe, and Northern Europe respectively. The hotels and
resorts comprises of Sunwing Family resorts, Supreme Hotels, SunConnect Resorts, Cook’s
Club Hotels, Sentido Hotels and Resorts, Smartline, Casa Cook Hotels, and Aldiana. The
airlines business of Thomas Cook comprises of Thomas Cook Airlines for UK, Scandinavia,
and Balearics and Condor Germany (Thomas Cook Group, 2018).
2. Identification of Profits and earnings for past 5 years
Profitability ratios:
In order to discuss the profitability of Thomas Cook, three different ratios can be calculated such as
gross profit margin, net profit margin, and return on capital employed. The calculations are
discussed below:
Ratio type Formula Year
2017 2016 2015 2014 2013 Average
Gross profit Total sales – 22% 23% 22% 21% 21% 21.8

Financial Decision Making 5
margin COGS/Total sales
Findings:
From the above analysis it can be observed that gross profit margin of Thomas Cook
increased by 1% in the year 2015 and 1% in 2016 and decreased by 1% again in 2017. This
depicts that the sales of the company exceeds its COGS by only 22% in 2017, 23% in 2016,
22% in 2015, 21% in 2014, and 21% in 2013 respectively. The value of gross profit margin is
also not much high which shows that the company is not using its material and labor for
producing and selling products profitably (Means, 2017).
Ratio Formula 2017 2016 2015 2014 2013 Average
Net profit
margin
Net
profit/Total
revenue
0.1% 0.01% 0.11% (1.33%) 2.28% 0.234

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The net profit margin of the company also shows a negative trend as the value is decreased
from 2.28% in 2013 to 0.1% in 2017. This shows that very less percentage of revenue is left
over to company for paying shareholders or reinvesting in the company.
Ratio Formula 2017 2016 2015 2014 2013 Average
ROCE Net operating
profit/(Total
assets-current
liabilities)
(0.11) (0.09) (0.10) (0.02) (0.007) (0.0654)