Financial Management for the Hotel Industry

Financial Management for
the Hotel Industry

Contents
INTRODUCTION...........................................................................................................................................3
TASK............................................................................................................................................................3
Calculation of ratio to analysis financial information..............................................................................3
(b) Understanding of ratio and their fluctuations.....................................................................................7
(c) Benefits and limitation of ration analysis for decision making...........................................................8
TASK 2........................................................................................................................................................10
Covered in PPT.....................................................................................................................................10
CONCLUSION.............................................................................................................................................10
REFERENCES..............................................................................................................................................11

INTRODUCTION
Financial management is described as interacting with and evaluating money and property for an
individual or a corporation in order to help make management decisions. The job performed for a
corporation by a finance department is an illustration of financial management. In the hospitality
industry, financial management includes: developing a yearly budget; developing a
comprehensive financial monitoring model; providing security reviews; and developing a
reporting system that enables administrators maintain a P&L knowledge tab (Baradarani and
Kilic, 2018). This report based on the Gatsby Grange is a part of small chain of Boutique within
the Northern Ireland and United Kingdom. In this report consist of ratio analysis for 2018 and
2019 to analysis all the financial information. Along with analysis the fluctuations in financial
statement and define the benefits and limitations of ratio analysis that helps to take right decision
in regard of business.
TASK
Calculation of ratio to analysis financial information
Profitability ratio: Profitability ratios allow us to calculate and measure the business's capacity
to produce revenue toward revenue expenditures and to assess the operational productivity,
considering the various aspects of the company's balance sheet and profit and loss account.
Gross profit ratio: The gross profit is determined by subtracting from of the total revenue all the
direct costs considered the cost of exported goods. The cost of goods sold mainly involves the
cost of raw materials and the cost of labor generated for manufacturing. Eventually, by
separating the gross profit by total sales, the gross profit margin is measured and is represented
in terms of percentage (Bowie, 2018).
Gross profit / Net sales
Particulars (Amount in 000) Year 2019 Year 2018
Gross profit 5150 5050
Net sales 6000 5500
Gross profit ratio 85.83% 91.82%

Interpretation: The above chart indicates that the company's gross profit decreased in 2019
compared to 2018. That is essentially irrespective of lower operating income increases.
Companies should also focus on revenues that lower waste,
Net Profit: Net profit / Net sales
Particulars (Amount in 000) Year 2019 Year 2018
Net profit 4073 4008
Net sales 6000 5500
Net profit ratio 67.88% 72.87%
Interpretation: The net income margin also declined in 2019 compared to 2018, just like with
the gross profit. It was 72.87%, which improved to 67.88% in 2019, as in 2018. Because of
increased premiums, this leads to lower net profit in 2019
Return on assets ratio: Net income / Total assets
Particular (Amount in 000) Year 2019 Year 2018
Net income 4073 4008
Total assets 7890 7565
Return on assets ratio 0.52 0.53
Interpretation: The efficiency of generating return on the assets of the company above is
closely linked in both periods. Their return on assets for 2018 was 0.53 and 0.52 for 2019, also
including. This is not in the ideal situation, but once again, and companies will need focus on
effective asset management so that they can produce greater returns.
Return on capital employed: Profit before interest and tax / Capital employed
Particular (Amount in 000) Year 2019 Year 2018
Profit before interest and tax 5150 5050
Capital employed 6274 6226
Return on capital employed 0.82 0.81