Financial Management for the Hotel Industry

Financial Management for the Hotel
Industry

EXECUTIVE SUMMARY
This report provides an analysis of the financial statements of Gatsby Grange which is
chain of boutique in UK. The ratio analysis of the company's financial statement is carried out
which states about the overall performance and financial position of the company. The liquidity
ratio, profitability ratio, solvency ratio and the efficiency ratio is derived. Along with that the
relevance of having knowledge and understanding of financial ratios in the hotel sector with the
key benefits and limitations of ratio analysis within the hotel and tourism industry. Based on the
findings, it can be concluded that the overall financial health of the organization is good just
proper steps is required to be taken for enhancing its liquidity. Other than this, it is very
important for the hotel organizations for having understanding about the relevance of ratio
analysis within the organization and the benefits it will add to the business.

TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................2
TASK 1............................................................................................................................................4
Analysis of financial statements..................................................................................................4
CONCLUSION................................................................................................................................9
TASK 2............................................................................................................................................9
REFERENCES..............................................................................................................................10

TASK 1
Analysis of financial statements
a) Ratio analysis
Calculati
on
Absolute
differenc
e
Relative
performan
ce
2018 2019
Profitability
Return to capital
employed(ROCE) 64.38 % 64.92 % 0.54 % 0.84 %
Asset turnover 0.88 pence 0.96 0.07 8.27 %
Gross profit turnover 91.82 % 85.83 % -5.98 % -6.52 %
Net operating profit
turnover 72.87 % 67.88 % -4.99 % -6.85 %
Liquidity
Current ratio 2.29 pence 2.01 pence -0.28 pence -12.41 %
Acid test 0.52 pence 0.50 pence -0.02 pence -4.28 %
Creditor days(money
owing) 648.9 days 373.59 days -275.30 days -42.43 %
Debtor days(money
owed) 106.18 days 109.5 days 3.32 days 3.13 %
Gearing
Gearing 1(Leverage) 8.69 % 8.93 % 0.24 % 2.74 %
Gearing 2(Dept to
capital) 8.00 % 7.75 % -0.25 % -3.13 %
Interest cover 200.4 times 226.28 times 25.88 times 12.91 %