Accounting and Business Analysis of Hilton Hotel: Report

This report presents a comprehensive business analysis of the Hilton Hotel, focusing on various aspects of its operations and financial performance. The analysis begins with an introduction to business analysis and accounting, followed by an examination of primary and secondary data collection methods, including survey techniques and questionnaires. The report presents the findings from the survey and provides a summary of the key themes. It then delves into the main financial statements, including the income statement, cash flow statement, and balance sheet, and discusses their formats for different types of businesses. The report also includes an interpretation of financial ratios, covering profitability, liquidity, and efficiency ratios. Furthermore, the report explores different types of costs, costing methods, and budgeting techniques. It also covers investment appraisal techniques, unit cost calculation, and sources of finance. The report concludes with a summary of the key findings and recommendations for improving the Hilton Hotel's performance.

ACCOUNTING AND BUSINESS
ANALYSIS

Contents
Accounting and Business Analysis..................................................................................................1
Introduction......................................................................................................................................3
Task 1...............................................................................................................................................3
Primary and secondary data collection sources...........................................................................3
Questionnaires.............................................................................................................................5
Findings.......................................................................................................................................6
Task 2...............................................................................................................................................7
Main financial statements............................................................................................................7
Format of financial statements in different type of business.......................................................8
Interpretation of financial ratios..................................................................................................8
Task 3.............................................................................................................................................10
Different types of costs..............................................................................................................10
Costing methods........................................................................................................................11
Budgeting methods....................................................................................................................11
Task 4.............................................................................................................................................12
Analyses of budget.....................................................................................................................12
Unit cost calculation and pricing decision.................................................................................13
Investment appraisal techniques................................................................................................14
Sources of finance......................................................................................................................16
Conclusion.....................................................................................................................................17
References......................................................................................................................................18
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INTRODUCTION
Business analysis is the process of understanding the changing needs of the business and
assessing the impact of these changes on the organization. Business analysts identify the internal
and external working of an entity and accordingly they make modification in the firm so that
corporation can achieve its objective soon (Ali and et. al., 2015). Accounting is the practice of
keeping financial accounts so that appropriate decision can be made by the management for the
welfare of the organization. For present report Hilton hotel is being taken into consideration
which is a leading brand in the hospitality industry. Current assignment will discuss the primary
and secondary sources of data collection. Survey methods, sampling techniques will be describes
and questionnaire will be prepared in order to identify the performance of the Hilton hotel. Data
will be collected from managers of cited firm and finding will be summarized in the study
(Armstrong, 2015). Main types of financial statements will be explained and comparison will be
done in formats of these statements for different type of business. Budget will be prepared and
costing methods will be described in this report. Investment appraisal techniques, unit cost
calculation will be discussed in this study (Burk. and et. al., 2013).
TASK 1
Primary and secondary data collection sources
Data collection is the main tool through which information about the business performance
of the organization can be collected. Business analysts gather the relevant information
from several sources and use this information for the growth of the organization. There are
two type of data collection sources (Jelsma. and et. al., 2014). Description of these is as
below:
Primary data collection
This is called raw information which is gathered by the researcher for the fist time for
specific purpose. These are such detail through which internal drawback of the system can
be addressed and appropriate decision can be made by the management of Hilton hotel for
improving their performance (McPherson and Karney, 2014). There are several techniques
through which data can be collected such as observation, interview, questionnaire,
schedules etc. All these technique are worthwhile but questionnaire is the best way through
which individual can get all information about the working performance of cited firm and
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can make changes in order to improve the performance of the company (Macintosh and
Quattrone, 2010).
Secondary data collection
This is another type of techniques in which details are gathered by someone else earlier.
The main advantage of using this technique is that data are already existing so Business
analysts needs not to spend much time in collect the data. It is less expensive as compare to
primary sources. There are several techniques of secondary data collection such as Books,
journals, internet articles etc (Lukka and Modell, 2010). These published data are available
on the government sites, public records so individual can use these detail for addressing the
issues in the business. These are reliable, suitable and adequate information and can help in
minimizing the problems significantly.
Survey methods, sampling techniques
There are many types of sampling techniques which can be used by the Business analysts
of Hilton hotel. These are described as below:
 Simple random sampling: It is the simple process in which each individual gets same
change to get selected from large population (Scapens and Bromwich, 2010). In this tool
all respondents can give their point of view about the subject matter that would help in
identifying the real position of the entity in the market. It is far away from bias so
accurate information can be gathered by this sampling technique.
 Stratified sampling: It is another type of technique in which population is divided into
strata. By this way wide range of information can be gathered by the Business analysts of
cited firm (Ahadiat, 2013). It assists in knowing about the working of the corporation and
management can make immediate modifications in order to improve condition of the
organization. It is very flexible and can be applied to many geographical areas.
 Cluster sampling: it is the type of sampling technique in which particular geographical
location is divided into sub groups and these sub groups are called clusters. It collects the
information geographically rather than demographically (Tucker and Parker, 2014).
Survey methodology
It is the type of method which is used by the Business analysts in order to gather in-depth
detail about the company. Questionnaire is prepared by the researcher and these questions
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are asked by the respondents. There are many tools such as mail survey, telephone survey
and personal interview. But out of many questionnaires can be the best technique through
which overall issues in the internal working of Hilton hotel can be identified and
management can make suitable strategy for minimizing these problems (Hülle, Kaspar and
Möller, 2011).
Questionnaires
How long you are working in the Hilton hotel?
 One year
 1-2 years
 3-5 years
 More than 5 years
What do you think Hilton is providing satisfactory food and services to clients?
 Yes
 No
What is the main issue currently Hilton hotel is facing?
 Liabilities more than assets
 Poor investment strategy
 Staff turnover
 High operation cost
Does Company is able to earn continuous profit for next five years as well?
 Strongly agree
 Agree
 Disagree
 Strongly disagree
What are the reviews of customers on its website?
 Positive
 Average
 Negative
Does marketing strategy of the company is good?
 Yes
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 No
Give your suggestion for improving the performance of Hilton Hotel?
Findings
Theme 1: How long employees are working in the Hilton hotel.
One year 2
1-2 years 4
3-5 years 3
More than 5 years 1
Theme2: Hilton is providing satisfactory food and services to clients.
Yes 7
No 3
Theme 3: main issue currently Hilton hotel is facing
Liabilities more than assets 4
Poor investment strategy 3
Staff turnover 1
High operation cost 2
Theme 4: Company is able to earn continuous profit for next five years as well.
Strongly agree 3
Agree 5
Disagree 2
Strongly Disagree 0
Theme 5: reviews of customers on its website
Positive 3
Average 3
Negative 1
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Theme 6: marketing strategy of the company is good.
Yes 7
No 3
From the report it is found that Hilton is working well but the main issue is firm facing that
is liabilities of the entity are higher than its assets. Apart from this investment strategy of
theentity are also poor so it needs to work upon this as well. From the findings it can be
concluded that Hilton should provide satisfactory services to the consumers, by this way
they will be loyal and sales volume of the firm will rise up. Currently Hilton has sufficient
cash flow so 5 out of 10 managers believe that it is able to earn profit in next five years as
well. From the discussion it can be articulated that cited firm has to make changes in
financial planning and should control over its liabilities (Ambe, 2016).
TASK 2
Main financial statements
Hilton hotel is working as international brand and it has strong command over the
market. It is operating in many countries. Cited firm has to follow the international accounting
standards for preparing its financial statements (Saladrigues and Tena, 2017.). Main accounting
records are as following:
Income statement: It is also called profit and loss account which shows the overall
revenues of the firm. By looking at this statement Business analysts can get to know about
overall business performance of the firm and can take action to improve its performance. In the
income statement there are two main sections revenues and expenditures (Weygandt, Kimmel.
and Kieso, 2015). Expenses of the entity are such as salaries to staff, depreciation, raw material
purchase etc. On other hand income from sales, dividend income etc. are included in this
revenues section. After deducting tax overall net profit of the firm can be identified.
Cash flow statement: It is another accounting record which is required by the Hilton to
prepare. Cash inflow and outflow are two major part of this statement. In this operating
activities, investing activities and financial activities are included in cash flow statement in order
to know the current economic position of the entity (Zimmerman and Yahya-Zadeh, 2011).
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Balance sheet: It is one of main financial statement of Hilton hotel and it is compulsory
for the cited firm to prepare it by following international accounting standards. It includes assets,
liability, capital in the record. By this way overall worthiness of the entity can be identified. In
the assets organization has to include all cash in hand, machine, inventory, buildings etc. In
liabilities loan and credit are included (Hecht, 2016).
Format of financial statements in different type of business
Sole trader: It is the type of business which is run by single owner and only individual
can take decision for the company. They deal in cash so they do not have to prepare these
accounts but they have to prepare cash flow statement so that cash in hand can be identified.
They do not require to follow the international accounting standards and they can prepare the
accounts as per their own convenient (Christensen and et. al., 2015).
Public or private limited firms: Hilton hotel is the private limited firm for such type of
entities it is very important to follow international accounting norms. Apart from this they have
to prepare all the cash flow, balance sheet, income statements. They have to pay dividend to
stakeholder and that is required to be included in the profit and loss account. Audit is compulsory
to conduct so that no mistakes occur while preparing the records. Tax is required to pay by the
firm and that is included in the income statement and after deducting tax net income is received
(Collier, 2015).
Partnership firm: It is another type of business which are run by two or more partners.
Capital of both partners is required to be included in the balance sheet. Profit of both at the end
of the financial year is reflected in the income statement. They may follow the accounting
standards for preparing the records and it is voluntary in nature whether to conduct audit or not.
Interpretation of financial ratios
Profitability ratio: It is the ratio which explain the growth in revenue of the firm, if it is positive
then it shows that company is performing well (Deegan, 2013).
Liquidity ratio: It is another type of financial ratio which defines the repay capacity of the entity
over a period of time.
Hilton Hotel ratios:
Profitability 2014 2015 2016
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ratios
Gross margin 61.73 63.94 65.29
Asset turnover 40% 43% 45%
Return on assets 2.55% 5.42% 1.34%
Return on equity
%
14.77% 26.15% 5.86%
Liquidity ratio
Current ratio 1.11 1.05 1.33
Quick ratio 0.74 0.69 0.95
Debt/Equity 2.43 1.72 1.80
Efficiency ratio
Inventory turn
over
10.05 9.61 8.24
Fixed assets turn
over
1.16 1.24 1.29
Gross margin ratio of Hilton hotel is continuously increasing that show the cited firm is
working well and it is able to earn more profit in next few years also. Assets turn over ratio is the
year 2014 was 40%, in 2015 it increased to 43% AND IN 2016 IT REACHED TO 45%. That
indicates that economic position of the Hilton hotel is very good (DRURY, 2013). When it
comes to liquidity ratio then current ratio of cited firm was in 2014, 1.11 on other hand in the
year 2015 it reached to 1.05 and again in 2016 it reaches to 1.33. That shows cited firm has to
make control over its liabilities otherwise it may loss its profitability. By looking upon efficiency
ratio of Hilton hotel it can be interpreted that organization needs to manage its inventory well
because due to this operational cost in increasing. Fixed assets turnover is also decreasing (Ali
and et. al., 2015).
Comparison of Hilton ratios with Marriott hotel
Profitability
ratios
Hilton hotel
2016
Marriott hotel
2016
Gross margin 65.29 15.38%
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Asset turnover 45% 1.13
Return on assets 1.34% 5.16
Return on equity
%
5.86% 88.29%
Liquidity ratio
Current ratio 1.33 0.65
Quick ratio 0.95 0.49
Debt/Equity 1.80 1.53
Efficiency ratio
Inventory turn
over
8.24 -
Fixed assets turn
over
1.29 1.13
From the above comparison it can be interpreted that Marriott hotel is utilizing its resources and
assets well that is why it has high assets turnover percentage as compare to Hilton hotel.
Liquidity ratios show that Marriott has control over its liabilities and it can repay these on the
time without any failure (Burk. and et. al., 2013). Efficiency ratio shows that performance of
Hilton is quite well. So by comparing the ratios it can be interpreted that Hilton is required to
utilize its assets well by this way it will be able to make control over expenditures and that will
enhance profitability. In addition cited firm needs to reduce its liabilities so that it can run its
business without any complications.
TASK 3
Different types of costs
Whenever company runs its operations then it has to spend some amount so that it can
conduct operations without any failure (Jelsma. and et. al., 2014). There are several types of cost
which are described as below:
Fixed cost: These are such spending which are fixed in numbers and it does not get influence by
changes in production unit. Examples are such as rent of factory, salary to staff etc. Hilton hotel
will have to pay wages to employee whether it earns profit or not. It is fixed cost and which is
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necessary for the cited firm to spend in order to run business smoothly (Tucker and Parker,
2014).
Variables cost: This is another type of expenditures which take place in an organization. These
get changed by changing the production. If cited firm is producing more food then electricity bill
will be higher and also telephone bill. These are variable cost and they are depended upon the
number of production units (Hülle, Kaspar and Möller, 2011).
Semi variable cost: It is another type of cost which is mixture of fixed and variable
expenditures. If company if spending amount to the particular level then it will be variable but if
expenses go beyond limit then it is called semi variable costs.
Costing methods
There are different types of costing techniques, description of these are as following:
1. Job costing: It is the technique which is associated with the manufacturing of the product
and services (Christensen and et. al., 2015). If there is huge difference between cost of
manufacturing goods then job costing order can be used by the firm in which it will create
job cost records for each specific items. After that this will report to direct material and
accordingly manufacturing overhead expenditures will be managed.
2. Batch costing: It is quit similar to job costing in which entities have to prepare batches of
items and each goods will be separately looked. When order of consumers are collected then
accordingly will be decided how much quantity is required (Weygandt, Kimmel. and Kieso,
2015).
3. Process costing: It is the accounting method that identify the direct cost and indirect cost of
the process. Individual unit of process cost is allotted. It is also known as First-in, First-out
(FIFO) method in which cost is allotted to process rather then jobs.
Budgeting methods
There are several types of budgeting methods and all they have unique features.
Zero based budgeting: It is the type of budget which scratch with the zero base. It revaluate the
each item by looking upon the cash flow statement and justify the expenditures so that variance
can be minimized. It helps in overcoming the issue of budget inflation. It is quite accurate and
gives optimistic results to the entity (Weygandt, Kimmel. and Kieso, 2015).
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Incremental budgeting: It is another type of budgeting in which managers of cited firm can
make small changes in the existing budget and form a new budget. Budget of current year
become base for the next financial year. It ensures that no large deviation is exists in the budget.
Small changes affect the overall performance of the entity to great extent (Saladrigues and Tena,
2017).
It can be said that incremental budgeting is good for the Hilton hotel because by this way
it will be able to run its business well and it helps to the manager to operate the departments on
consistent basis. Apart from this it will be beneficial in making coordination between different
costs and changes can impact positive of the business soon (Lukka and Modell, 2010).
Budget:
December January February March April May
Opening balance 0 40000 79400 120400 161600 20
Sales 55000 60000 65000 70000 75000 8
Total 55000 100000 144400 190400 236600 28
Expense
Purchase 12000 17000 20000 24000 29000 3
Creditors 1100 1500 1700 2100 1700
Logistic expenses 500 600 700 1000 1050
Employee cost 1400 1500 1600 1700 1750
Total 15000 20600 24000 28800 33500 3
Closing balance 40000 79400 120400 161600 203100 24
TASK 4
Analyses of budget
Budget is one of the most important tool that supports the firm in conducting the operations
well. It is the technique that helps in identifying the unnecessary expenditures and
company can make effective control over it. For example if salaries to staff are higher then
cited firm can make correction in the budget and it can offer them wages as per their work
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