Financial Management for Hotel Industry

FINANCIAL MANAGEMENT
FOR HOTEL INDUSTRY

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
a. Financial analysis of the Gatsby Grange..................................................................................1
b. Stating an importance of ratio and fluctuations for the hotel management ...........................6
c. Evaluating the benefits and the limitation of ratio analysis that helps in decision making in
hotel & tourism segment .............................................................................................................6
TASK 2............................................................................................................................................8
Presentation..................................................................................................................................8
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Financial management refers to process of managing the financial resources of company. It involves activities such as
procurement and utilisation of the funds in most appropriate manner for adding value to the company. It is important for the
management for ensuring that resources are utilised in best manner by effective allocation. Present Report is based over the financial
analysis of Gatsby Grange which is part of the Boutique chain in UK and Ireland. Financial analysis is done using ratio analysis for
identifying the profitability, efficiency, liquidity and gearing ratio of company.
TASK 1
a. Financial analysis of the Gatsby Grange.
Gatsby Grange
Particulars Formula 2018 2019 Change
Profitability Ratios
Return on capital em-
ployed
Net operating profit/Employed Cap-
ital 64.38% 64.92% 0.84%
Employed Capital Total assets – Current liabilities
(7565-
1339) 6226
(7890-
1616) 6274
Net profit 4008 4073
Gross profit turnover Total Sales – COGS/Total Sales 91.82% 85.83% -6.52%
COS 450 850
Turnover 5500 6000
Net operating profit
turnover Operating Income/ Turnover 72.87% 67.88% -6.85%
1

Net Income 4008 4073
Revenues 5500 6000
Assets Turnover Sales / Capital Employed 88.34% 95.63% 8.26%
Turnover 5500 6000
Capital Employed 6226 6274
Liquidity Ratios
Current assets 3065 3240
Current liabilities 1339 1616
Inventory 1450 1420
Quick assets 1615 1820
Current ratio Current assets / current liabilities 2.29 2 -12.41%
Acid test ratio Current assets - Inventory / Sales 1.21 1.13 -6.62%
Debtors 1600 1800
Creditors 800 870
Days 365 365
Debtor days
Trade Receivables /Credit
Sales*365 106.18 109.5 3.13%
Creditor days Trade Payables / Credit Sales *365 53.09 52.93 -0.31%
Gearing Ratio
Long-term debt 150 145
Shareholder's equity 6076 6129
2