Level 

4 Assignment – Case Study .

2022/2023

 
 
Student-ID:  21241
Module Name:  Fundamentals of Business Finance
Tutor Name: Collins Okonkwo
Academic Year/Group Bubble:  September 2021
Location: Manchester – Leeds.
Introduction

In order to build a business it is required to understand the main steps that are required to
follow. It is an elaborate process that involves time, knowledge, creativity and capital.For
starters a business is like a house it need a solid foundation, that is financial informations, it
requires walls for support that is the management team and a roof that is the company itself. If
the foundation is solid and the financial informations are strong enough, established from the
beginning and understood the company is solid. “But what really is the financial
informations? “ Financial informations are a report about how the company is handling itself,
how the company is preforming and provides a roadmap of the company. It helps the
shareholders to understand the company and convince or discourage them to invest in the
company. The purpose of this case study is to put into practice the financial informations and
create a framework, also to determine the performance of the company Marriot Inn Ltd.

Financial informations

Financial informations are a rapport of a company’s monetary transaction. Another important

term used in finance is accounting. According is defined as being a process, in which is
identified, analyzed and determined financial information of a business or entity in order to
take decisions regarding the future development. Moreover it helps to record the financial
statements. A clear example of financial information are the financial statements with balance
sheets, income statement and cash flow statement. It is imperative that the financial
information to be qualitative and accurate in order for the external users or stakeholders to
take appropriate economic decisions. There are countries like Bangladesh where are made
measurements and analysis of people’s perceptions of financial reporting because it is a
domain in constant development and users are not capable to understand as those in
developed countries do. A quantitative financial report must have specific requirements and
variables in order to help external users to understand and take specific decisions, such
variables have the most qualitative characteristics i.e., predictive value, feedback value,
timeliness, verifiability, representational faithfulness, neutrality, and comparability (Hasan:
2011). Another important feature used in accounting are based on forms. Is a function where
firms choose to have their financial accounts audited. This way allows a more transparent
view of the firm and also confers a greater credibility for the potential shareholders. In order
to write an accurate financial report there are several items imputed by the International
Financial Reporting (Accounting) Standards, this way directors can prepare their annual
report in a minimal manner. As in practice a minimal and effective content is often required.
After the report is released there are several accountants firm that verify the financial
information, to be fair, honest and to ensure a view of the ongoing of the company. The
income statement or profit and loss account is a list of several trading events that have
occurred during a period of time in the company. There are specified for example assets, like
buildings owned by the company, or money owed to it by a customer, include things that have
economic value. For the balance sheet it contains a statement that describes how a company
holds its wealth, how much of the wealth is is committed to outsiders and the net wealth of the
company. It specifies the position at a specific point in time, compared to the income
statement that reflects upon the effects of various transactions on the wealth of the business
over a period of time. The cash flow statement analyzes the cash, that includes short term ,
liquid investments received or paid out by the company during a period of time. Furthermore,
many assets have a more value than is specified in the balanced sheet; in other words some
firms have things of economic value that may not be included in the balance sheets at all, like
the brand. It is a matter of great regard in the public eye. Therefore, there are companies that
earn a great amount of money due to the existence of brand, it may be considered a strategic
move that is not necessarily included in the financial report.

Financial statement for Marriot Inns Ltd 

In order to establish the efficacy of the business it is necessary to calculate the representative
values such as the Return on Capital Employed = EBIT / (Total Assets – Total current
liabilities)= EBIT/ net current assets= 22.47%, the Asset turnover ratio= total sales/ net assets
= 1.2 times, the debtors collection period within 100 days. For profitability ratios the
represent is the net profit margin with 7,72%. The liquidity ratio represents the current ratio
with 1,31 :1 and the Acid test ratio with 1,19: 1 ( cash plus debtors/ current liabilities). The
debt equity ratio or gearing ratio is 53% (loan capital/ total capital employed *100) . Labour
cost % of sales is 18.93 %. Operating cost % of sales is 88.18%. Room maintenance costs %
of sales is 9,24%. Administration costs % of sales are 4.09%.
In comparison with the average ratios for Hoteliers federation members for 2021, it can be
stated that there are slightly different ratios, but not far apart. For instance the profitability
ratio is lower than the average, it can be considered a negative assessment for the company.
As it is known Return on capital employed represents the amount of money invested in the
firm and and looks upon the return on the long term providers of funds. It is an important
ratio, being considered the primary ratio. The asset turnover or sales revenue to capital
employed is a ratio that establishes if the business has produced revenue, being used to
measure the size of the company; compared to the average variables the ratio is high, that
does not mean that is a favorable outcome, in other order of words it may be considered that
the firm has an abnormal balance between net assets and and non current assets. The net profit
margin in very low compared to the average values, it may be because the firm uses an
inefficient cost/structure or poor pricing strategy, it may be necessary an more detailed
analysis of the company’s performance, as prices for rooms, occupancy rates and maintenance
costs. The current ratio raises concerns regarding payments, debt and liabilities. But the value
is not as low as to expect a immediate problem in payments. As for acid test ratio considering
to be a liquidity variable as the current variable is itself slightly lower than the average, been a
sign of alarm for potential short terms payments, or on the other hand it can mean that the
firm has not been reinvesting the money owned. For the debtors collection period it can be
shown that there is a long grace period, longer than the average, therefore it can be considered
essential to maintain a stable balance between output and input money. The gearing ratio is
higher than the average, it seem that the company has a large amount of debt versus equity,
but a long period of debt. The labor costs are slightly higher than the average, with a
difference of 0.83 percent, as is rising the idea that the cost of labor is rising from year to year
and that might change the outcome of the company. The operating cost are higher than the
average, making another in need for improvement on the operating management of the
company, in order to improve and lower the costs, or looking for a strategy for managing the
costs implications. The room maintenance costs and administration costs are slightly lower
than the average, being a good point for the company.
In conclusion,from Marriot Inns Ltd ‘s financial report it appears that the company needs to
invest in the modernization of the business, and take into consideration the challenges facing
from future payments and financing growths through labor, equipments and services.

Rapport on the Marriot Inns Ltd performance in terms of profitability and liquidity

In order to write a report concerning the performance and liquidity of a company it is

important to establish the financial ratio as for profitability the gross profit margin and net
profit margin as for liquidity there are two main ratios the current ratio and acid test ratio. For
the probability ratio the gross profit margin is calculated using gross profit and sales
revenue.The performance of a company is evaluated based upon the financial aspects and non
financial factors. The financial aspects based on the gross profit is the income of the company
after taking out the costs of production and selling the product. The cost of production is 2,13
£m for the year 2021, therefore the gross profit margin ratio is 33.33%. Profitability is an
important factor for the investors, they search for the net profit margin ratio and the gross
profit margin because they can compare with similar companies. It may not be a problem for
the Marriot Inns Ltd to find investors in the future because at is seems form the balance sheet
from year to year it fluctuates the ratios, from the first year 2019 to 2021 there is an ascending
trend when it comes to profit, capital and assets. Also the cost of production is in a growing
line, labor, cost of personnel and products. From the financial balance sheet it can be
highlighted a growing trend in the production sector and the capital and reserves sector. The
firm is in need of modernization, to search for improvement because it needs to reinvent the
retain capital. In the financial world there must be a fluxing system of the capital. From the
financial evaluation it can be stated that the Marriot Inns Ltd can provide an adequate
financial portfolio for the future investors. The recommendation is to manage in a more
sustainable way the production sector because of the increased taxes and higher prices for
goods. The period of debt is to high, therefore it may be a problem for the transaction of
capital and it may need to consider another way to constrain the debtors to pay the debts.
Another requirement for a more detailed analysis is to take into consideration more
information about the prices of the products and assets of the company. The company must
consider to increase market shares and be more open for the public interest. It may also
consider to improve the employee retention, therefore the company can keep in track of the
hours worked and compare them in order to anticipate the employees who consistently work
their scheduled hours. In addition, the company can keep a record of the amount of money
each employee brings in the business and their contributions toward profit, this way the
employee can be repaid with bonuses and it motivates them. Other improvements may include
offering the customer a personalized card or offering a discount, gift or membership packages,
because discounts will always be a good management choice. The other features may include
assessing the finances off all operations, overhead costs managing expenses and achieving
relevant stability. In order to prevent idle time and other unexpected events it is important to
keep track of schedule, progress and review the resources allocation. Because of the markers
identified in the financial records it is important to review the project accounting information
for managing the firms funds. Also for the business initiatives it is necessary to reevaluate the
performance indicators. For a more sustainable business approach it may be a solution to
access a business performance management software it can offer a helpful insight of the
company’s weaknesses, marketing, finance, sales and operations. An detailed balance sheet
contains information that help managers to identify problems and improve the performance of
the company.

Conclusion

Financial performance is a expensive and complex evaluation of a company, it contains

categories like assets, liabilities, revenue, costs and overall profitability. Firstly, from the
balance sheet it can be predicted the future growth of Marriot Inn Ltd. by analyzing the assets,
therefore the company has it’s potential to expand as the assets grow from year to year. Next
step, the short and long term liabilities are examined in order to determine the outcome
problems with liquidity or debt repayment where it suggests that the company may face the
risk not to be able to cover them. Lastly, the examination of share capital distributed inside
and outside the company, showing that it may need improvement in the management of the
capital flows. From the measurements of the financial performance, when compared the
average industry values, there are several critical ratios that are need to be considered
adjusted.

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