Page 1 of 7 Assignment One Subject Name: Financial Management for the Hospitality Industry Subject Code/s: HM201 Lecturer: David Supangco School/Department: School for Higher Education Study Period:...

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Page 1 of 7 Assignment One Subject Name: Financial Management for the Hospitality Industry Subject Code/s: HM201 Lecturer: David Supangco School/Department: School for Higher Education Study Period: 1st Semester 2022 Assignment Topic(s) Financial Ratio Analysis for a Hospitality Company Total Marks: 20% Team or Individual: Individual Due Date: Week 6 The Project Assume that you are the Chief Financial Officer (CFO) of a world class hospitality company listed in the Australian Stock Exchange (ASX) and you have been directed by your Chief Executive Officer (CEO) to undertake a financial analysis and write a financial report to be presented to the Board of Directors. Note: For your guidance and to have an idea, an example firm’s financial statements are given on page 4 and page 5 of this document. The Report You are required to prepare a concise report of the financial situation of the company and key issues that may impact the company in the future; one page. Your assignment must be submitted in MS word format and only one file must me submitted. On page 3 of this assignment document is a ‘ratios summary table’. Please fill up the table first and then write your report based on the findings in the table. The table must be included in your assignment report. The four main financial areas of the report to be covered are: A. The profitability; B. The efficiency; C. The liquidity; and D. The gearing (leverage) of the firm. The key ratios on which you must consider for your report are the following: The Profitability Ratios: - 1. Return on Owners’ Equity. 2. Return on Total Assets. 3. Gross Profit Margin. 4. Net Profit Margin. 5 Total Operating Expenses Ratio. The Efficiency Ratios of the Firm 6 Average Settlement Debtors Turnover Period. 7 Average Settlement Creditors Turnover Period. The Liquidity Ratios of the Firm 8 The Current Ratio. 9 The Acid Test Ratio / Liquidity Ratio. Page 2 of 7 The Gearing (Leverage) Ratios of the Firm 10 Total Liabilities to Total Assets 11 Total Liabilities to Total Owner’s Equity Required Profitability Ratios Return on Owners’ Equity Net profit after Tax & preference dividend x 100 (Average ordinary share capital + reserves)/2 Return on Assets Net profit before interest and taxation x 100 (Average total assets)/2 Gross Profit Margin Gross Profit x 100 Sales Net Profit Margin Net profit before interest and taxation x 100 Sales Operational Expense Ratio Margin Operational Expense x 100 Sales Required Efficiency Ratios Average Settlement Debtors Period (Average trade debtors)/2 x 365 days Credit sales Average Settlement Creditors Period (Average trade creditors)/2 x 365 days Purchases Required Liquidity Ratios Current Ratio Current assets Current liabilities Acid Test Ratio Current assets – ( inventory & prepayments) Current liabilities Page 3 of 7 Required Gearing (Leverage) Ratios Total Liabilities to Total Assets Total liabilities x 100 Total assets Total Liabilities to Total Owners’ Equity Total liabilities x 100 Total Owners’ Equity Page 4 of 7 Required Ratios Summary Table The profitability ratios 20X1 20X2 Return on owners equity Return on total assets Gross profit margin Net profit margin Total operating expense ratio The efficiency ratios Average settlement debtors turnover ratio Average settlement creditors turnover ratio The liquidity ratios The current ratio The acid test ratio The gearing ratios Total liabilities to total assets ratios Total liabilities to total owner’s equity Notes: ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ _____________________________________________________________. Page 5 of 7 (Example only) Gregory St James Executive Corporate Events Centre (Ltd) Income Statement - 30th June 2020 - 2021 2020 2021 $M $M Sales $ 2,240.8 $ 2,681.2 opening stock $ 241.0 $ 300.0 purchases $ 1,804.4 $ 2,142.8 $ 2,045.4 $ 2,442.8 less closing stock $ 300.0 $ 370.8 $ 1,745.4 $ 2,072.0 Gross profit $ 495.4 $ 609.2 Operational expenses wages & salaries $ 185.8 $ 275.6 rent $ 12.2 $ 12.4 gas & electricity $ 8.4 $ 13.6 insurance $ 4.6 $ 7.0 web hosting & Telecommunications $ 3.4 $ 7.4 audit fees $ 5.6 $ 9.0 freehold buildings: depreciation $ 5.0 $ 5.0 fixtures & fittings depreciation $ 27.0 $ 32.8 Total operational expenses $ 252.0 $ 362.8 Financials interest expense $ 24.0 $ 6.2 Total net expenses $ 276.0 $ 369.0 Net profit before company tax $ 219.4 $ 240.2 Less company tax -$ 60.2 -$ 76.0 Net profit after company tax $ 159.2 $ 164.2 Page 6 of 7 (Example only) Gregory St James Executive Corporate Events Centre (Ltd) Balance Sheet as at 30th June 2019 - 2021 2019 2020 2021 $M $M $M Current assets bank $ 6.1 $ 33.5 $ 41.0 trade debtors $ 281.0 $ 240.8 $ 210.2 inventory $ 241.0 $ 300.0 $ 370.8 Total current assets $ 528.1 $ 574.3 $ 622.0 Non-current assets fixtures and fittings $ 127.8 $ 129.0 $ 133.4 less accumulated depreciation -$ 37.4 -$ 27.0 -$ 32.8 freehold land and buildings $ 291.2 $ 286.2 $ 281.2 less accumulated depreciation -$ 5.0 -$ 5.0 -$ 5.0 telecommunication conference equipment $ 62.6 $ 62.6 Total non-current assets $ 376.6 $ 445.8 $ 439.4 TOTAL ASSETS $ 904.7 $ 1,020.1 $ 1,061.4 Current liabilities trade creditors $ 247.0 $ 221.4 $ 228.8 dividends payable $ 32.0 $ 40.2 $ 60.0 company tax payable