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Importance of Financial Ratios

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Importance of Financial Ratios
Report on analysis of the importance of financial performances and comparison of financial ratios of Chancellors Hotel with another business in the same industry and industry averages.

BA (Hons) 1st Year International Hospitality Management

Dmitrijs Sokolenko
Student ID: 12110023

Supervisor: Amanda White

Hollings Faculty
Manchester Metropolitan University
Old Hall Lane
Manchester
M14 6HR

January 2013
Executive summary

The Report below is about analysis of the importance of the financial ratios of the Chancellors Hotel and Conference Centre. Hotel is owned by The University of Manchester and it is located in Fallowfield, Manchester, United Kingdom. Ratio analysis helps to identify problem areas and opportunities within the business. Report includes explanations of the most important financial ratios, such as Profitability Ratios, Liquidity Ratios and Working Capital Management Ratios. To see how well Chancellors Hotel operates, it is compared with another business and with Average Industry ratios. Moreover, report includes areas of good and bad practice. In conclusions are given recommendations on how to improve performance of the Hotel.

Contents Executive summary 2 Introduction 4 Main Body 4 Profitability ratios 4 Gross profit ratio 5 Net profit ratio 5 Return on Capital Employed 5 Liquidity ratios 5 Current ratio 6 Acid Test ratio 6 Working Capital Management Ratios 6 Stock Turnover Days 7 Debtor Collection Days 7 Creditor Payment Period 7 Comparison of the Financial Ratios 7 Conclusions and recommendations 9 References: 10

Introduction

The main purpose of this report is to analyse importance of different types of financial performances and to compare financial ratios of Chancellors Hotel and Conference Centre with another business in the same industry and industry averages. It is owned by The University of Manchester and it is located in Fallowfield, Manchester, United Kingdom, which is close


References: [1] Accounting Tools. Net Profit Ratio http://www.accountingtools.com/net-profit-ratio/ Last accessed: 22.12.2012 [2] Bell E. The Importance of Financial Ratios. http://www.iplanner.net/business-financial/online/how-to-articles.aspx?article_id=financial-ratios. Last accessed: 18.12.2012 [3] Chancellors Hotel. Hotel in Manchester Centre with Parking. http://www.chancellorshotel.co.uk/ Last accessed: 20.12.2012 [4] Chron. The Importance of Working Capital Management in Avoiding Bankruptcy http://smallbusiness.chron.com/importance-working-capital-management-avoiding-bankruptcy-39031.html Last accessed: 26.12.2012 [5] FAME Database. Castlefield Hotel Limited http://fame2.bvdep.com/version-20121220/Report.serv?_CID=89&context=TOIJ8FPD7XWOC7L Last accessed: 05.01.2013 [6] Investing Answers. Acid-Test Ratio http://www.investinganswers.com/financial-dictionary/ratio-analysis/acid-test-ratio-1225/ Last accessed: 24.12.2012 [7] Investopedia. Inventory Turnover http://www.investopedia.com/terms/i/inventoryturnover.asp#axzz2HFEh4648 Last accessed: 27.12.2012 [8] QFinance. Creditor and debtor days http://www.qfinance.com/cash-flow-management-calculations/creditor-and-debtor-days Last accessed: 03.01.2013 [9] Ready Ratios. Financial Analysis and Accounting Book of Reference http://www.readyratios.com/reference/liquidity/current_ratio.html/ Last accessed: 22.12.2012 [10] Small Business Development Corporation. Profit Margin Ratio 's and Break Even Analysis http://www.smallbusiness.wa.gov.au/profit-margin-ratio-s-and-break-even-analysis/ Last accessed: 22.12.2012
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