Topics: Generally Accepted Accounting Principles, Balance sheet, Revenue Pages: 6 (1661 words) Published: March 26, 2013
Financial Analysis

By Anna Ward

Word count:

This report is has been constructed in order to analyse the financial position of Whitbread PLC, using information from their 2011.12 annual report and accounts. The information gathered will then be compared and contrasted for the final report to see whether Whitbread PLC are expanding each year or not. Whitbread is a hospitality brand who wants to “do the best they can be by focussing on our customers and giving them just what they want” However their annual report shows much success to enable them to give their customers what they want. Whitbread is the UKs largest budget hotel with more than 47,000 rooms therefore an accurate ratio analysis is vital for Whitbread. Ratio Analysis

Ratio analysis is when businesses such as Whitbread compares two figures which each other (2011/2012) Ratios instantly reveal whether a business is safe or in danger. With these ratio results below Whitbread will be able to examine trends, compare the results with competitors to make them more competitive and to compare their results with average results. This is more likely to ensure that Whitbread will receive most destined results in the future. Gross profit to sales

This calculation is a measurement of a company’s efficiency and success during the production process. This calculation will tell the stakeholder the percentage of revenue/ sales left after subtracting the cost goods sold. From 2011 to 2012 the gross profit figures fell by roughly 1.4%. With the disappointing falling figures Whitbread needs to be aware that they may not be as efficient as competitors. Investors tend to pay more for businesses that have higher efficiency ratings than their competitors. In the future Whitbread should be able to make a decent profit as long as overhead costs are controlled. However the fall of the percentage for growth profit to sales should not be worried about as both 2011/12 figures were very high. Distribution cost to sales

This ratio represents the costs incurred to deliver the product from the production unit to the end user. This gives an accurate figure how much percentage of the revenue is used for distribution costs. The distribution cost to sales fell from 55.4% in 2011 to 54.5% in 2012. This means there was improved efficiency as any business would want to keep this figure as low as possible. Administration cost to sales

Administration costs are an expense incurred in controlling and directing an organization e.g. accountancy expenses/ HR expenses. Less money was spent in 2012 for administration costs which showed once again improved efficiency with figures falling from 10.4% to 9.8%. This showed a slight trend in comparison to the distribution results. This may mean that Whitbread are improving the control of factors such as paperwork.

Operating profit to sales
In terms of profits Whitbread has seen a general improvement including before and after tax. Operating profit is is a measure of a firm's profit that excludes interest and income tax expenses. It is the difference between operating revenues and operating expenses Net Profit before tax to sales

The net profit before tax shows the total expenses taken away from revenue apart from tax this gives the company a chance to view how much money is being taken from the company via tax. Profit before taxi rose from 17% to 17.2%. Although this percentage is relatively low it must be appreciated that Whitbread still managed to improve their profits especially during a recession. Net Profit after tax to sales

After the tax is taken from the profit this is all costs taken from the profit and all that is left is retained profit. This calculation gives the most precise answer how much of the revenue is realistically profit. However again there was improvement in profit after tax increasing to 15% from 13.9% this is a bigger improvement than net profit before tax. Current ratio

The current ratio is a...
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