Understanding Ratios and Fluctuations in Financial Statements for Hotel Management

Gatsby Grange

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Calculation of profitability, liquidity and gearing ratios for 2018 and 2019 to aid the
analysis of the financial information and discussion of the trends seen in these ratios in detail.1
2. Discussion of reasons due to which understanding of ratios and their fluctuations is essential
for Hotel management in analysing the information seen in financial statements......................4
3. Discussion of the benefits and limitations of using ratio analysis to aid decision making
within the hotel and tourism industry..........................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Financial management could be defined as the process of managing finance and keeping
record of all the transactions that are made by the business during the accounting year. It is very
important for all the businesses to make sure that they are paying attention towards it and
formulating all the final accounts (Ansell, 2017). These are profit and loss account, balance sheet
and cash flow statement. Present report is based upon financial management of hotel industry
and the whole assessment is focused with Gatsby Grange which is a small chain boutique in
United Kingdom. The company accountant is asked to produce a report for the chief executives
of the company. This report will be covering various topics such as calculation of ratios,
discussion of the understanding of ratios and fluctuations in them in the hotel management etc.
Apart from this, benefits and limitations of using ratio analysis for the business to aim decision
making are also covered in this assignment.
MAIN BODY
1. Calculation of profitability, liquidity and gearing ratios for 2018 and 2019 to aid the analysis
of the financial information and discussion of the trends seen in these ratios in detail
Ratio analysis could be defined as the process of analysing the actual position of the
business with the help of information which is covered in financial statements. As the company
accountant of Gatsby Grange is being asked to develop a report for chief executives so it will be
prepared by paying attention towards different ratios for the entity (Berman, 2017). Calculation
of different ratios for the enterprise is as follows:
Profitability ratios: In order to analyse the ability of the organisation to generate profits
these ratios are calculated. There are various ratios that are calculated under this head
(Profitability ratios, 2020). Description of all of them is as follows along with the calculations
for Gatsby Grange:
 Gross profit ratio: It is mainly used for the purpose of analysing the ability of the
company to create gross profits against the sales which is generated during the
accounting year (Binjori, Hutapea and Syahrizal, 2018). The calculation of it for Gatsby
Grange for 2018 and 2019 is as follows:
Particulars Formula 2018 2019
1