Financial Management Report: ATC Company, Travel & Tourism Sector

This report provides a financial analysis of ATC Company, focusing on key financial metrics and ratios for the years 2015 and 2016. The analysis includes current ratio, acid test ratio, stock turnover ratio, gross profit ratio, net profit ratio, return on capital employed, return on total assets, capital gearing ratio, and administrative expenses ratio. The report discusses the company's efficiency ratio, highlighting an increase in overall turnover and profitability. Recommendations include reducing debt, increasing EBIT, and expanding business through increased tours and travel packages. The report concludes with references to relevant sources used for the analysis.

Financial Management of
ATC Company

MANAGEMENT ACCOUNTING INFORMATION
Current assets
Inventories / Stock
Current liabilities
Prepaid expenses
Average Inventory
Sales revenue
Cost of sold
Credit purchases
Gross profit
Net sales
Net profit
Capital employed
Interest
Total assets
Variable cost bearing capital
Fixed cost bearing capital
Administrative expenses
Quick assets
Operating Profit
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Management accounting information
2016 2015

EFFICIENCY RATIO OF ATC COMPANY
 It has increased its overall turnover.
 The increased profitability and efficient busienss
shows that positive indicator for ATC company
9,85,376
8,61,336
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Capital Employed
Current liabilities Capital Employed

DISCUSSION
• Company needs to reduce its debt portion to reduce the financial leverage.
• It has to increase its EBIT to increase the gearing ratio.
• Profitability of the company is increasing with the slow rate.

RATIO ANALYSIS
RATIO
Formula
2016
2015
Current ratio Current assets / Current liabilities 1.435 2.886
Acid Test Ratio Current assets – (stock + prepaid expenses) / Current liabilities 1.332 2.803
Stock turnover ratio Cost of goods sold / Average Inventory (69.40) (89.50)
Gross profit ratio Gross profit / net sales X 100 62.19% 61.49%
Net profit ratio Net profit / net sales X 100 12.02% 9.58%
Return on capital employed Net profit / capital employed X100 3.81% 2.69%
Return on total assets Net profit after tax / total assets X 100 3.54% 2.51%
Capital gearing ratio Variable cost bearing capital / fixed cost bearing capital 2.424 2.185
Administrative expenses ratio Interest expenses / Operating profit X 100 -20.67% -28.04%

RECOMMENDATION
• Company should expand its business by increasing the
overall tours and travel packages.
• Hiring more employees will increase the output of the
business.
• Reducing the debt capital structure will also reduce the
financial leverage of company.

REFERENCES
• Becker, E. (2016). Overbooked: The exploding business of travel and
tourism. Simon and Schuster.
• Bernhardt, S. M. (2017). Strategy Analysis and Business Plan for
Red Barn Farm (Doctoral dissertation, The College of St.
Scholastica).
• Cook, R. A., Hsu, C. H., & Marqua, J. J. (2014). Tourism: the business
of hospitality and travel. Boston, MA: Pearson.