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(solved) Financial Analysis PDF

   

Added on  2020-03-28

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Running head: FINANCIAL ANALYSIS Financial AnalysisName of the Student: Name of the University: Author’s Note:

1FINANCIAL ANALYSIS Table of ContentsIntroduction......................................................................................................................................3Assessment of the current scenario..................................................................................................4Quantification and discussion of significant variances...................................................................6Additional information required......................................................................................................7Ratio analysis:..............................................................................................................................7Profitability Ratios.......................................................................................................................8Liquidity Ratios...........................................................................................................................8Capital Structure Ratios / Leverage Ratios..................................................................................9Activity / Efficiency / Turnover Ratios.......................................................................................9Growth Ratios............................................................................................................................10Valuation Ratios........................................................................................................................10DuPont Analysis........................................................................................................................10Common Size Financials...........................................................................................................11Evaluation of the measures required to correct any adverse trends:.............................................12

2FINANCIAL ANALYSIS Management Actions.................................................................................................................14Conclusion.....................................................................................................................................16Reference List and Bibliography...................................................................................................17

3FINANCIAL ANALYSIS IntroductionIn the modern world, each and every company that operates in the economy has the mainaim of earning the maximum amount of profit from the market. The maintenance and therecording of the profit is possible by taking help of the mechanism of financial analysis. Thefinancial analysis is helpful for the construction of the budget and the financial statement that isessential for the organization in expanding their business and maintaining competitive edge(Vogel 2014). The meaning of financial analysis is to assess the businesses projects, budgets and otherfinancial data given out by the entity to ascertain the performance of the entity. Basically, it isdone in order to explain on the on the liquidity of the firm, profitability and stability. In order toundertake comprehensive financial analysis, the organization requires to examine the incomestatement, balance sheet and the cash flow statement (Jensen 2013). In this statement, this paper would be explaining the financial analysis of thedepartmental income with respect to a hotel. In the next segment of the paper, an examination ofthe current pattern and the performance of the hotel and the data that is necessary in order to takean in-depth financial analysis and the steps that are needed by the management to enhance theoverall functioning of the hotel. In the current case study, it is seen that the performance of the hotel is very weak. Thereis a huge difference in the budgeted sales of the hotel and the actual sales of the hotel. Thebeverage section and the food section sales are very low as anticipated. It is due to this factor thatthe hotel has been facing losses and on the other hand the management expenditure and the

4FINANCIAL ANALYSIS maintenance cost that is incurred day to day is higher in comparison to the budget. Therefore, themanagement of the hotel requires to have an effective balance among the expenditure and sales. Assessment of the current scenarioThe overall performance of company is very weak. By considering the income statementfrom 9th October 2016 - 5th November 2016 there has been a huge difference between theexpectation and reality. The Budgeted Net Operating Profit of the hotel requires to be 201550 butin reality the hotel incurred a loss of -8880. Hence, there are lots of things that need to beimproved and it can be explained in an effective manner. By looking at the revenue section,expected revenue was 838150 and in reality the hotel earned 664910. The maximum varianceoccurred has been due to food. The expected was 4392520 and actual earning was 332090 andthen the big difference is in the variance beverages section. By observing the cost of goods sold,the budgeted cost of goods sold was 258700 and on the other hand the actual was 198300. Thehotel saved a maximum cost in food that is -44650. Then by considering the gross profit data, thebudgeted gross profit was 579450 and in actual the hotel earned 466610. Therefore there exists adifference of 112840. While discussing about the direct cost it is seen that the direct costs increases due otherrandom direct cost. The budget for the other direct cost was 41360 which raised to 85270. Hence, the gross operating income incurred was 209120 and the budgeted income was366120. There has been a huge difference of 157000. The maximum difference incurred was dueto the rise in other direct costs.

5FINANCIAL ANALYSIS Thereafter, it is seen that the general expense was expected to be 111580 which raised to166710. The hotel spends too much on administration cost and day to day maintenance costs.The overall administration cost that has been incurred by the hotel was 166710 and budgetedamount was 111580. Due to all the factors that have been explained above, it is seen that the hotel earned anoperating loss of -8800 and expected profit was 201550. Therefore, there was a huge downfall inthe performance of the hotel.By considering the cumulative budget it is seen that performance of the hotel is not onlypoor in the current time period but the overall performance of the company was verydisappointing. There is a huge gap between the reality and the expectation. The expected netprofit is 1963430 however the hotel earned a loss of -26800. The main factor for this has beendue to the sale of food and beverages. Food, beverage and rooms are the major sources ofrevenue and the performance of food and beverage is not effective (Kou, Peng and Wang 2014). It is essential that the hotel should improve and develop the food quality and shouldconcentrate on establishing an improved environment in order to attract existing and prospectivecustomers and thereby should undertake effective marketing in order to promote and advertisethe restaurant.

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