Introduction to Accounting: Financial Statement Analysis Report

This report provides a detailed analysis of financial statements and ratios for Pluto Hotels Ltd and Whitbread PLC. The report begins with an introduction to accounting and financial management, emphasizing the importance of proper record-keeping and assessment of business operations. Task 1 focuses on presenting the income statement and financial position of Pluto Hotels Ltd as of August 30, 2017, providing interpretations of revenue, expenses, assets, and liabilities. Task 2 analyzes the financial health of Whitbread PLC for 2016 and 2017, utilizing profitability, liquidity, efficiency, and capital structure ratios to evaluate the company's performance. The analysis includes calculations and interpretations of key financial metrics, offering insights into each company's financial standing and operational efficiency. The report concludes by summarizing the findings and emphasizing the need for strategic financial management. The report uses various sources to present the findings and results.

INTRODUCTION TO
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Presenting the income statement of Pluto Hotels Ltd as on 30th August 2017.....................1
Presenting the Financial Position of Pluto Hotels Ltd as on 30th August 2017.....................3
TASK 2............................................................................................................................................4
Analysing the financial health of Whitbread PLC for the period of 2016 and 2017..............4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7
BIBLIOGRAPHY............................................................................................................................8
APPENDIX......................................................................................................................................9

INTRODUCTION
Accounting and financial management is the prime areas of the entity which are need to
be executed and monitored by the professionals. In order to performer such tasks and make
appropriate record of all the transactions there is need to manage and make proper assessment of
the business operations. In the present report there will be analysis of various financial statement
such as income statement and balance sheet for Pluto Hotel Ltd as well as ratio analysis for
Whitbread PLC. The report will be beneficial as professional in these premises will be awarded
with the adequate interpretation of the outcomes and they will be suggested ways to make proper
improvements in the operational aspects of their entities.
TASK 1
Presenting the income statement of Pluto Hotels Ltd as on 30th August 2017
The presentation of the financial data winch will evaluate and highlights the operational
efficiency of Pluto Hotels Ltd as on 30th August 2017. However, there will be disclosure of the
income statement which is on the basis of revenue generated by firm during the period on the
basis of its sales and the costs incurred over producing such units. There will be adequate
measurement of the operating expenses and income which will help in presenting the favourable
outcomes to the business (Crawford, 2016). On the other side there will be disclosure relevant
with the financial position of entity which will be beneficial analysis the assets and liabilities of
the firm during the period.
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Income statement for the year ended 30 August 2017
Particulars Amount (000)
Revenue 13400
Less: COGS 6000
Gross profit 7400
Operating expenses
Rent 2600
Add: Prepaid rent 350 2950
Doubtful debts 34
Administration expenses 1200
Electricity expenditure 235
Accrued Electricity expenses 15 1450
Depreciation on Furniture and fixtures 1300
Interest on investment 20
Interest paid 170
Total operating expenses 5924
Operating income
EBT 1496
Add: Depreciation 1300
Tax 380
Net income 2416
Interpretation: In accordance with the above listed table it can be interpreted that the
firm has gained revenue for 13400 as on 30th August 2017. The revenue has been generated by
them on the basis of sales of company's commodities. The cost of goods sold will be measured as
6000 which indicates that cost has been incurred while producing and delivering the goods to the
end users which is adequate and comparatively less than the revenue generated by firm. Thus, it
brings the gross profit for the period as 7400.
However, after making the analysis of the Gross margin the following listed
measurement of operational activities held in the premises such as rent expenses with the prepaid
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expenses, provision for the doubtful debts, administrative expenses etc. there will be adequate
adjustment entries which are relevant with the electricity bill that has been accrued from previous
period and has to be paid in the current year (Damodaran, 2016). There will also be payments
which are relevant with the interest payable over investment and on loan. Thus, the total
operating expense of the firm will be measured as 5924.
Therefore, after analysing the operating expense of the Pluto Hotels has Earning before
tax as 1496 which will be deductible by the tax for the period as 380 and the depreciation will
again add to it as amounted to 1300. Thus, after having such measurements the total amount of
net profit has been generated by the firm such as 2416 respectively.
Presenting the Financial Position of Pluto Hotels Ltd as on 30th August 2017
The presentation will be relevant with the financial position of the Pluto Hotels Ltd as on
30th August 2017. There will be proper adjustments which are to be made on the various factors
of this balance-sheet.
Balance-sheet as at 30 August 2017 Amount (000)
Current assets
Cash 60
Trade receivables 1700
less: 2%Doubtful debts 34 1666
Inventories 160
Prepaid rent 350
Total current assets 2236
Furniture and fixtures 20000
Less: Depreciation 1300 18700
Tax 380
Total assets 21316
Liabilities and stockholders equity
Liabilities
Current liabilities
Trade payable 250
Accrued Electricity expenses 15
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Bank overdraft 20
Total current liabilities 285
Interest on investment 20
Outstanding electricity expenses 15
Long term Loan 2000
Total liabilities 2320
stockholders' equity
Share capital 6800
Retained profits 4780
Net income 2416
Accumulated Expenses 5000
Total liabilities and stockholders' equity 21316
Interpretation: In consideration with the financial position of the Pluto Hotels Ltd as on
30th August 2017 which are ned to be analyse and measured by the professionals in the firm on
the basis of income statement and the adjustments entries. Thus, in accordance with the current
assets of the organisation which includes cash of 60 and trade receivables will be measured as on
provision of 2% doubtful debts. Inventories and prepaid rent which together presents the net
current assets of the firm as 2236. Further there has been analysis which was made on the fixed
asset of the firm such as Furniture and fixtures will be depreciated on the basis of straight line
method and the accumulated expenses were to be adjusted in (in appendix). However, the total
assets of the firm has been analysed as 21316. In accordance with the liabilities of the firm which
will be measured as per various elements and bring the current liability of 285 while the total
liabilities as 21316 respectively.
TASK 2
Analysing the financial health of Whitbread PLC for the period of 2016 and 2017
The Financial analysis of Whitbread PLC for the years 2016 and 2017 which will be
helpful in terms of evaluating the efficiency, profitability and liquidity of the firm such as:
Financial analysis of Whitbread PLC for 2016 and 2017
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Particulars Formulas 2016 Ratios 2017 Ratios
Profitability ratio
Net profit Margin Net profit *100 391 13.38% 422 13.59%
Net sales 2922 3106
Return of Equity
Profit available to
owners *100 391 12.32% 422 11.51%
Average equity 3173.5 3667
Liquidity Ratio
Current ratio Current assets 245 0.35 287 0.34
Current Liabilities 693 839
Efficiency Ratio
Accounts Payable payment
Period
Total Supplier
Purchase 368 0.50 376 0.45
Average Creditors 733 836.5
Capital structure ratio
Gearing Ratio Debt 873 0.36 796 0.31
Total equity 2403 2528
Dividend coverage ratio Net income 391 39.8 422 38.8
Total dividend 15561.8 16373.6
Interpretation: In context with the above listed table it can be interpreted on the basis of
financial outcomes of firm for the year 2016 and 2017 has highlighted the internal financial
health of Whitbread PLC such as:
Profitability ratio:
This ratio will be helpful in terms of identifying the profitability of the firm on the basis
of net profit margin, Return over the investment equity (Dung, 2016). Thus, in accordance with
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such disclosure the shareholders or various stakeholders of the firm will be beneficial as per the
informations are relevant with profits gathered by entity as well as the operations performed by
Whitbread PLC. However, in accordance with the Net profit of for the period 2016 and 2017
such as 13.38% and 13.59% which indicates that in the current period the firm is having
adequate revenue generation which reflects as bull in such ratio. The return on equity will be
measured for the same period such as 12.32% and 11.31%. However, it presents that in the
current year the business has increment in the average equity capital as compared with the
previous year.
Liquidity ratio:
This analyse helps in analysing the liquid ability of the firm in terms of meeting the short
term debts (Elnahas, Hassan and Ismail, 2017). Therefore, the current ratio of Whitbread for the
year 2016 and 2017 can be measure as 0.35 and 0.34 respectively. Thus, it can be said that in the
current year there has been increment in the current liabilities of the firm as compared with the
previous period.
Efficiency ratio:
These ratios highlight the efficiency of firm in terms of meeting the debt payments on the
basis of total numbers of suppliers and average trade payables (Mohanram, Saiy and Vyas,
2017). However, in accordance with accounts payable period of Whitbread PLC which was
measured as per the years 2016 and 2017 are 0.50 and 0.45 respectively. Therefore, it indicates
that in the current period the firm has increment in the amount of credits.
Capital Structure ratio:
In accordance with the capital structure of the firm which will be beneficial in terms of
analysing the capital strength (Crowe, 2017). Thus, in accordance with the gearing ratio and
dividend coverage ratios, the professionals at Whitbread PLC will be fruitful in terms of
analysing the financial strength of which will be used in the operational activities of the firm.
Hence, the gearing ratio for the period 2016 and 2017 as 0.36 and 0.31 while the dividend ratio
as 39.8 and 38.8 respectively (Gearing ratio, 2017).
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CONCLUSION
In accordance with the above study it can be said that, there was analysis of the financial
data set of Pluto Hotels Ltd on the basis of income statement and financial position for the period
30th August 2017. However, on the other side there has been measurement of financial ratios of
Whitbread for the period 2016 and 2017. Thus, it will be said that the professionals need to have
proper execution over the operational activities as well as plan strategies that will control the
costs and debts of the entities.
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REFERENCES
Books and Journals
Crawford, C. W., 2016. ACTG 201.05: Principles of Financial Accounting.
Crowe, C., 2017. Real estate investment analysis.
Damodaran, A., 2016. Damodaran on valuation: security analysis for investment and corporate
finance (Vol. 324). John Wiley & Sons.
Dung, N. V., 2016. Value-relevance of financial statement information: A flexible application of
modern theories to the Vietnamese stock market. Quarterly Journal of Economics. 84.
pp.488-500.
Elnahas, A. M., Hassan, M. K. and Ismail, G. M., 2017. Religion and ratio analysis: Towards an
Islamic corporate liquidity measure. Emerging Markets Review. 30. pp.42-65.
Mohanram, P., Saiy, S. and Vyas, D., 2017. Fundamental analysis of banks: the use of financial
statement information to screen winners from losers. Review of Accounting Studies. pp.1-
34.
Online
Gearing ratio. 2017. [Online]. Available through
:<https://www.accountingtools.com/articles/2017/5/5/gearing-ratio>.
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BIBLIOGRAPHY
http://financials.morningstar.com/income-statement/is.html?
t=WTBDY&region=usa&culture=en-US
http://financials.morningstar.com/balance-sheet/bs.html?t=WTBDY&region=usa&culture=en-
US
http://financials.morningstar.com/ratios/r.html?t=WTBDY&region=usa&culture=en-US
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