Module: Fundamentals of Business Finance

Case study: Star hotel

word-length – 2000 words

Assignment task

This assignment requires you to demonstrate your understanding of the analysis and interpretation of information produced by the business organisation. Your sound knowledge of the main financial statements of a business will be highly required. You will be required to have a good knowledge and understanding of different financial ratios and how they can be used to improve the performance of an organisation.

Module learning outcomes:

• LO2: Understand and explain the purposes of the financial information produced by businesses
• LO3: Explain the structure and terms used within the main financial statements and undertake the analysis and interpretation of financial statements.
• LO4: Demonstrate appropriate academic writing skills, referencing and good academic practice and make decisions on organising material in a logical and coherent way with an audience in mind.

Case Study:

The Star Hotel is a 4-star hotel within a Grade-II listed building dating back to the 18th century. There is a gym, a restaurant, and a guest lounge.

There are 80 rooms with free WiFi, individually controlled air conditioning, and private bathrooms with walk-in showers. The rooms also have hairdryers, flat-screen Smart TVs, telephones, refrigerators, safes, irons, and tea/coffee-making facilities. All rooms have an alarm clock with USB charging ports.

The hotel had been doing well till covid19 pandemic struck in March 2020. Since then, the entire hospitality industry has been going through rough times.

The following are the financial statements of the hotel for the financial year ending 31 December 2020.

DESCRIPTION OF THE TASK – WHAT YOU ARE BEING ASKED TO DO?

1. Introduction: Define financial information and provide an overview of the aims and objectives of the case study (150 words).
2. You are required to clearly explain the purpose of financial information and identify the characteristics of good financial information. (500 words)
3. You are required to provide appropriate definitions and clear explanations following financial terminologies. (600words)
   1. Income statement (Profit and loss account)
   2. Assets
   3. Liabilities
   4. Equity
4. Calculate the following ratios for the Star Hotel and compare them with budgetary targets. You are then required to provide appropriate suggestions on how management can improve on the performance of the following financial indicators. (600 words)
   1. Food profitability
   2. Drinks profitability
   3. Gross profit
   4. Return on capital employed
   5. Asset turnover ratio
   6. Accounts receivables turnover ratio
5. Conclusion: Consolidate the key findings and overall conclusion remarks and suggestions (150 words)

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