Hotel Finance and Revenue: Financial Analysis of British Airways

Running Head: Hotel Finance and revenue
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Project Report: Hotel Finance and revenue

Hotel Finance and revenue
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Contents
Introduction.......................................................................................................................3
Company overview...........................................................................................................3
Analysis and Findings.......................................................................................................3
Profitability ratios.........................................................................................................4
Efficiency ratios............................................................................................................6
Liquidity ratios..............................................................................................................8
Capital structure ratios..................................................................................................9
Investor’s ratios..........................................................................................................10
Discussion.......................................................................................................................12
Conclusion and recommendation...................................................................................12
References.......................................................................................................................14
Appendix.........................................................................................................................16

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Introduction:
Evaluation on the financial statement of an organization is a process that helps the
companies, professionals, investors and the other stakeholders to identify the real
performance of the company and make better choices about the performance and the
investment into the company. In this process, all the financial related entities such as budgets,
projects, financial statement, and financial transactions etc of the business is identified and
evaluated to reach over a conclusion. Basically, these studied are conducted by the different
parties for different purpose. In context with the investors, financial analysis process is done
to measure the stability level, profitability, liquidity, solvency etc level of the business to
make an investment decision into the company (Higgins, 2012). In context with the financial
manager, the financial statement of the company is studied to make an idea about the overall
performance of the company and make the changes into the current policy and strategy of the
company.
Financial analysis process includes various tools and techniques through which the
financial performance of an organization could be evaluated easily as well as the position of
the business could be maintained. In this report paper, ratio analysis, trend analysis etc study
has been conducted on “British airways” to reach over a conclusion about the investment into
the company.
Company overview:
“British airways” is an UK company which has been awarded as largest airline in
2017 in context with the fleet size. The operations and the activities of the company are
handled by the head office of the company which is situated at Waterside at London Heat. It
has been founded in the year of 1974 and from that, the company has merged with other
company to diversify the market and manage the performance of the company. the company
is offering its products and the services at international destinations which also include the
Australian destinations. The current report explains that the company is serving into approx
183 destinations (Home, 2018). The financial analysis and evaluation explains that the
company has faced various phases in last few years however the current performance of the
company has been stable.
Analysis and Findings:

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The financial evaluation study has been done on the financial statement of “British
airways” to measure the financial performance and the financial changes of the company. the
study of ratio analysis has been done on the company initially to evaluate the stability,
profitability, liquidity, solvency etc level of the business to make an investment decision into
the company. In addition, this study has also been performed to measure the changes into the
financial performance of the company in last 3 years.
The study of ratio analysis is a technical and quantitative analysis that measures the
information and the idea about the financial performance, changes and the position of the
company (Gapenski & Reiter, 2008). This study is used by the investors as well as by the
companies to evaluates and measure the numerous aspect related to the financial performance
of the company. It further explains that how the company is performing in context with the
stability, profitability, liquidity, solvency level. The ratio analysis of British airways is as
follows:
Profitability ratios:
Profitability ratios are one of the crucial tools to measure the profit generation level of
the business. It measures the net profit, gross profit and operating profit of the business
through different financial term to measure the profit generation capabilities of the business.
the profitability ratios make it easier for the analyst and the investors of the organization to
measure the profit generation level of the business. Profitability ratios include various ratios
to identity the profitability performance of the company. the profitability ratios of the
company are as follows:
Return on assets:
Return on assets (ROA) is a profitability ratio which measures the net profit of the
business on the basis of the total resources of the business at a particular time period (Fridson
& Alvarez, 2011). The ROA profitability level of British airways has been given in the below
table which explains about improved return on assets from 2015 in 2017. The current ROA
level of the business is 8.88% which is quite competitive.
Return on
assets
Net profit / 51,76,000 48,95,000 81,97,000
Total assets 9,44,08
,000
8,99,97
,000
9,23,33,
000
Answer: % 5.48% 5.44% 8.88%

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(Morningstar, 2018)
Return on equity:
Return on equity (ROE) is a profitability ratio which measures the net profit of the
business on the basis of the total equity of the business at a particular time period. The ROE
profitability level of British airways has been given in the below table which explains about
improved return on assets from 2015 in 2017 (Brigham & Houston, 2012). The current ROE
level of the business is 96% which is quite competitive
Return on equity
Net profit /
51,76,000 48,95,000 81,97,00
0
Total stockholder's
equity 63,35,000 81,70,000 85,50,00
0
Answer: % 82% 60% 96%
Profit margin:
Profit margin (net profitability level) is a profitability ratio which measures the
net profit of the business on the basis of the total turnover of the business at a particular
time period (Madhura, 2011). The profit margin level of British airways has been given
in the below table which explains about improved profit margin from 2015 in 2017. The
current profit margin of the business is 8.78% which has been improved from 5.39% in
2015.
Profit margin
Net profit / 51,76,000 48,95,000 81,97,000
Sales Revenue % 9,61,14,000 9,45,71,000 9,33,92,000
Answer: 5.39% 5.18% 8.78%

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Figure 1: Profitability Ratios
Efficiency ratios:
Asset efficiency ratios are one of the crucial tools to measure the combination of total
liabilities and assets of the company in order to identify the performance of the company. It
measures the commercial performance of the business through different financial term to
measure the working capital management capabilities of the business. The efficiency ratios
make it easier for the analyst and the investors of the organization to measure the overall
performance of the business (Chandra, 2011). Efficiency ratios include various ratios to
identity the working capital management and performance of the company. The asset
efficiency ratios of the company are as follows:
Inventory turnover:
Inventory turnover ratio is an efficiency ratio which measures the total times in
which the inventory of the business is sold and purchased. The inventory turnover level
of British airways has been given in the below table which explains about similar
performance of the company in last 3 years.
Inventory Turnover
Average Inventory / 4725700
0
4319900
0
4434400
0
Cost of Sales 8202400
0
8073100
0
7599600
0
Answer: 0.58 0.54 0.58