Comprehensive Ratio Analysis: Real Estate Investment at 49 Park Lane

This report provides a detailed financial analysis of 49 Park Lane, a company dealing in commercial and residential flats, through the calculation and analysis of various real estate investment ratios. Key ratios such as cash flow ratio, return on investment (ROI), cash on cash return, loan to value ...Read More

Banking

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Calculating the ratios..................................................................................................................3
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Analysis of the financial statement is very important for the company to evaluate the
working position and comparing the performance of the company. this is very necessary for the
reason that it will provide a brief summary of the financial position of company and proper
decision can be taken. the present report is based on 49 Park Lane which is company dealing in
commercial and residential flats. The current study will outline the calculation and analysis of
the different real estate investment ratios.
MAIN BODY
Calculating the ratios
Cash flow ratio
Ratio Formula 2022 2021
Cash flow ratio
Net operating income - Debt
service 198916.52 995727.81
Net operating
income 469969.3 2051645.15
debt service 271052.78 1055917.34
This is a type of ratio which includes the measuring of the total amount of cash being
present with the company. this is very necessary for the company to calculate it as in case there
will not be enough cash balance then this will be affecting the efficiency of the business. With
the help of the above cash flow ratio it is clear that in the current year the cash ratio of the
company has declined to a great extent (Zavadskas and et.al., 2018). this is particularly because
of the reason that when the company will be having less of the cash then it implies that the
performance of the company is not having good cash balance and because of this the working of
the company might be affected.
Return on investment ratio
Ratio Formula 2022 2021
return on
investment
(cash flow + principal )/
investment 0.490911921 0.48242691
Cash flow 2141974.41 2377805.2
principal payment 33345000 33345000

investment 72287864.5 74048119.5
This is another type of the investment ratio which is essential to be calculated. the return
on investment is the total return which the company is earning by investing within the
investment or the property. In case the property is not yielding good amount of return then this
will be affecting the efficiency of the business (Sutarno and et.al., 2019). The above calculation
highlighted the fact that the return on investment has been increased slightly as compared to the
last year. in the previous year the return on investment was 0.48 and in the current year it is 0.49.
though there is very slight increase but the return of the company has increased slightly which is
good for the company. in case company will be working in the right direction then this will be
resulting in increase in return on investment and ultimately this will increase the profit of the
company as well.
Cash on cash return ratio
Ratio Formula 2022 2021
cash on cash
return
pre- tax cash flow/ total cash
invested
-
0.67914183 5.40031715
pre- tax cash
flow
-
1454704.41 12840902.2
total cash
invested 2141974.41 2377805.2
The cash on cash return is a type of ratio which measures the amount of cash flow which
is relative to the amount of total cash being invested within the property investment. this ratio is
being calculated on the basis of pre- tax amount as it is being calculated prior to tax payment.
this ratio basically outlines the return being earned by the company on the cash invested within
the property. in the previous year it was 5.40 but in the current year it drastically reduced and
currently it is -0.67 which is very less. this simply implies that the return which the company is
earning has reduced to a great extent and this is not at all good for the effective working of the
company (Liu and et.al., 2019). thus, for this it is very essential for the company that they must
try to improve the working and for this they need to work on managing and saving the cash such
that the work can be improved in better and effective manner.
Loan to value ratio
Ratio Formula 2022 2021

loan to value ratio
loan amount/ value of the
property 0.461280745 0.45031528
loan amount 33345000 33345000
value of the
property 72287864.5 74048119.5
This is type of ratio which is being calculated by dividing the total amount borrowed by
the appraised value of the property. this is very essential for the companies to calculate the same
in order to analyse that whether the investment is worth taking loan and whether the investment
has the potential for paying off the loan. this is necessary as loan to value ratio help the company
to analyse the fact that how much company is in position to pay back the loan from the income
being earned by the company (Haralayya, 2022). in the previous year it was 0.45 and in the
current year it is 0.46 which is slightly increased. this is very necessary for the reason that when
this ratio is high then this will be resulting in to the fact that company is in position to pay the
loan from the property and its value only. Thus it is very crucial for the company that they
effectively manage the loan amount and try to improve the income from the invested property.
Break even ratio
Ratio Formula 2022 2021
break even ratio
(operating expense + debt service) / gross
operating income 0.601047771 0.54793687
operating
expenses 11421.22 68254.69
debt service 271052.78 1055917.34
gross operating
income 469969.3 2051645.15
This ratio is being calculated by way of adding the operating expenses to the debt service
and then dividing the results with the gross operating income. this ratio outlines the way how
property operating expenses and debt service will be cutting in to the gross operating income
(Hatefi, 2019). in the present case this ratio outlines the fact that how prone is the borrower to
miss payment in case rental income is diminishing. with the above calculation it is clear that the
break- even ratio is 0.60 or 60 % and in previous year it was 0.54 or 54 %. as compared to the
last year it has increased which implies company is performing better.

CONCLUSION
In the end it is concluded that analysing the performance of the company with help of
ratio is very important. this is necessary for the reason that when the ratios are being calculated
then this provides for the effective analysis of the data as well and very brief overview of whole
company.

REFERENCES
Books and Journals
Zavadskas, E. K. and et.al., 2018. A novel multicriteria approach–rough step-wise weight
assessment ratio analysis method (R-SWARA) and its application in logistics. Studies in
Informatics and Control. 27(1). pp.97-106.
Liu, X. and et.al., 2019. Peak-to-average power ratio analysis for OFDM-based mixed-
numerology transmissions. IEEE Transactions on Vehicular Technology. 69(2). pp.1802-
1812.
Haralayya, B., 2022. Impact of Ratio Analysis on Financial Performance in Royal Enfield
(Bhavani Motors) Bidar. Iconic Research And Engineering Journals. 5(9). pp.207-222.
Hatefi, M. A., 2019. Indifference threshold-based attribute ratio analysis: A method for assigning
the weights to the attributes in multiple attribute decision making. Applied Soft
Computing. 74. pp.643-651.
Sutarno, S. and et.al., 2019, December. Implementation of Multi-Objective Optimazation on the
Base of Ratio Analysis (MOORA) in Improving Support for Decision on Sales Location
Determination. In Journal of Physics: Conference Series (Vol. 1424, No. 1, p. 012019).
IOP Publishing.