Financial Ratio and BEP Analysis Report

Running Head: Financial Ratio and BEP Analysis
Financial Ratio and BEP Analysis
Name of the Student
Name of the University
Author Note

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Financial Ratio and BEP Analysis
Abstract
The main aim of this paper is to evaluate the financial performance of Gulf Oman after
calculating the following ratios- liquidity, profitability, efficiency, gearing and market ratios.
Based on the computed calculations and relevant literature review recommendation is
provided about the techniques of the ratios and also about the shares of the company and
whether it is feasible to invest in this company or not. These paper also talks about three
projects at Ibra, Sur and Nizwa. The net present value and profitability index has been
calculated for checking the feasibility of the projects. Also, it discusses about the non-
financial factors which are equally important for the purpose of conducting project appraisal.
Lastly, it calculates the P/V ratio of Muscat Lightings LLC along with its sales and profit.
The paper also discusses about the importance of Break Even Point with the help of
appropriate literature review.

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Financial Ratio and BEP Analysis
Table of Contents
Proposal......................................................................................................................................2
Response to question 1A-...........................................................................................................2
Response to question 1B-...........................................................................................................4
Response to question 1C-.........................................................................................................20
Response to question 1D-.........................................................................................................21
Response to question 2A-.........................................................................................................24
Response to question 2B-.........................................................................................................24
Response to question 2C-.........................................................................................................25
Response to question 3-...........................................................................................................28
Response to question 3E-.........................................................................................................28
Reflection report on the guest lecture......................................................................................31
References and Bibliography...................................................................................................32
Appendices-..............................................................................................................................35

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Financial Ratio and BEP Analysis
Proposal
This paper has been prepared by computing the liquidity, profitability and efficiency
ratios of Gulf Oman with a discussion about the computed ratios with the help of literature
reviews. It also discussed about the recommendations for buying the shares of these
companies. It also contains a reflective portion which describes the learning experience in
this course. The next part deals with the evaluation of the projects after computing NPV and
profitability index along with the non-financial factors which help in project appraisal. The
last part contains the calculation of P/V ratio and fixed cost along with the importance of
break-even point based on literature review.
Response to question 1A-
In this part a brief analysis of the financial statement of the gulf hotel (Oman)
company limited is made and for that analysis different financial ratios like the liquidity ratio,
profitability ratio, efficiency ratio, market ratio, capital structure ratio has been assessed from
which it can be possible to detect the current financial condition of the company and also to
recommend suggestion in which areas the company should give more emphasis to attain
sustainable growth in the future.

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Financial Ratio and BEP Analysis

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Financial Ratio and BEP Analysis
Brief introduction of the gulf hotel (Oman) company limited-
Gulf hotels (Oman) company limited is a company that is located in the Al Qurum
RUWI region of Muscat in Oman. It is a public limited joint stock company that deals in the
business of hospitality and tourism. Incorporated in the year 1977 this organisation has
earned huge reputation in the tourism industry. In the Muscat region the organisation own
and operate the crown plaza hotel which is licensed and managed by a subsidiary company of
the international hotel groups which is a part of the gulf hotels (Oman) company. The
company has also made investments in various subsidiary companies like the Arabian hotel
management LLC, which looks after the services related with hotel management. The major
shareholders of the company are the golden sands hotel company LLC and Salim and
partners LLC & associates.
Response to question 1B-
Analysis of the various ratios of the Gulf Hotels (Oman)
Liquidity ratios
The liquidity ratios are used to measure the liquidity condition of the company, to
evaluate the efficiency of the organisation to settle its short term debt obligations by utilising
its liquid assets. A low liquidity ratio indicates that the company does not have enough liquid

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Financial Ratio and BEP Analysis
assets to settle its short term obligations. On the contrary it can be said that if the company
has a high liquidity ratio then in such cases it reflects that the liquidity condition is strong and
the company will be able to settle its short term obligation from its liquid assets. Although a
high liquid ratio is also occurs if the organisation’s inventory turnover ratio is low. A low
inventory turnover indicates that the company fails to sales it products frequently its
inventory value will increase and for that reason the liquidity ratio will also increases so in
that context it can be said that abnormal increase in the liquidity ratio is always not a good
indicator for the organisation. The liquidity ratio is classified into two types the current ratio
and the quick ratio (Oukil Channouf and Al-Zaidi 2016).
Current ratio
The current ratio is calculated by dividing the current assets by the current liabilities.
This ratio is used to measure the position of the current assets in relation to the current
liabilities. The current assets in this respect includes the cash and bank balances, inventory,
bill receivables and trade receivables, and the current liabilities include trade payables, bills
payables and bank overdrafts. By analysing the trend of the last five years of the gulf hotels
Oman it can be observed that the current ratio is declining after the year 2015. In the year the
current ratio of the organisation is 1.29 and it started to fall since then. In the year 2016 the
ratio fall down to 1.17 and again it raised up to 1.77 in the year 2017, but after that in the year
2018 it fall sharply and the current ratio in the year 2018 comes down to 1.02. This shows
that the company’s current assets is declining in contrast to the current liabilities. In 2019 the
current ratio again increased to 1.15. the gulf hotel’s current ratio in the years 2015 ,2016,
2017, 2018 and 2019 is more than 1 which is greater than the standard limit, which means
that the organisation have enough current assets over the current liabilities and it will be

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Financial Ratio and BEP Analysis
possible for the company to settle the short term obligations from the current assets. However
from 2018 the situation become worse and this happens because the company started to take
more credit from the suppliers in the year 2018and 2019 and also their current assets falls
from $2908000 in the year 2017 to 1888000 in the year 2018 only in this year the company
has to suffer due to the fall in the value of then current assets and increase of the current
liabilities (Khoja Chipulu and Jayasekera 2016).
Except 2018 the overall trend in the last 5 years is satisfactory and from the analysis
of the current ratio it can be said that the management of the company has played an effective
role in maintaining a strong base of liquid assets from which it can be possible for the
organisation to settle the dues of the suppliers.
From this analysis it can be said that the suppliers will always provide necessary raw
materials to the company on credit as they are ensured that the company has enough
resources to settle their dues and they will not suffer any loss by giving credit to gulf hotels.
In this regard the only recommendation that can be given to the management that they should
try to maintain this balance in the current assets and current liabilities and should not hold too
much inventory to manipulate the liquidity position in order to attract the creditors (Hilkevics
and Semakina 2019).
Quick ratio
The quick ratio is more effective than the current ratio to evaluate the condition of the
liquid assets of the company as in this ratio the inventory is deducted from the current assets
and the ratio is calculated by dividing current assets minus inventory by the current liabilities.
As the companies used to overvalue the liquidity position by including inventory in their