Question:
Analysis of financial strengths and weaknesses (80% weighting) This is the real meat of the assignment and students are warned to focus on providing a financial rather than strategic or marketing analysis and against padding out with too much unnecessary ‘background’ information about the company. With UK cohorts, when the company is to be listed on the UK Stock Exchange, students are also steered towards the use of the FAME database to assist in capturing historic data and identifying an appropriate comparator ‘peer group’. This is not necessarily appropriate when the listing is on another international exchange – but there are similar databases and students will have been encouraged to investigate these.
Abu Dubai National Hotels is considered as UAE leading hospitality groups. This particular hospital group deals in hotel, transport as well as catering business and tourism for the same. This company engages its business operations in hotel operations, catering as well as transport and project services (Williams 2012). Abu Dubai National Hotels has increased profitability ratio and ability in generating revenue in the upcoming financial years. Abu Dubai National Hotels is listed in Abu Dhabi Securities Exchange. This stock exchange is among the international stock exchanges.
Basic Operational Categories
It categorizes with main hotel industries and positions in attainment of future goals as well as objectives.
Return on Assets
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Abu Dhabi national hotels |
||
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2014 (AED in Millions) |
2015 (AED in Millions) |
|
|
Return on Assets |
2.094460153 |
2.428278689 |
Table: Return on Assets of Abu Dhabi national hotels
Graph: Return on Assets of Abu Dhabi national hotels
It is necessary in gathering facts regarding return on assets of Abu Dhabi national hotels from the year 2014 to 2015. It will give brief overview regarding the profitability position of given organization under study. In the year 2014, return of assets of Abu Dhabi national hotels arrives at 2.094% and 2.428% in the year 2015. There is clear increase in return on assets from both the year taken under observation. Increased return on assets implies that that Abu Dhabi national hotels positions at profitable position in the financial markets. It has the ability in generating profits in the near future.
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Abu Dhabi national hotels |
||
|
2014 (AED in Millions) |
2015 (AED in Millions) |
|
|
Net Profit Margin |
14.92537313 |
17.22383721 |
Table: Net Profit Margin of Abu Dhabi national hotels
Graph: Net Profit Margin of Abu Dhabi national hotels
From the above tables and graphs, it is revealed that Abu Dhabi national hotels enjoys high profit margin in their business activities. Net Profit Margin is calculated for the year 2014 and 2015 for Abu Dhabi national hotels. This particular ratio will analyze profitability position of Abu Dhabi national hotels. In the year 2014, Net Profit Margin of Abu Dhabi national hotels arrive at 14.92% and 17.22% in the year 2015. There is clear increase in Net Profit Margin from both the year taken under observation. Increased Net Profit Margin implies that that Abu Dhabi national hotels positions at profitable position in the financial markets. Profit Margin ratio measures the sales percentages formed by total net income. It measures the profits produced at certain levels of sales. This particular hotel industry strives in achieving high net profit margin in the upcoming years. It can be done by generating more revenues for keeping expenses constant as well as lower expenses at the same time.
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2014 (AED in Millions) |
2015 (AED in Millions) |
|
|
Asset Turnover |
0.14 |
0.14 |
Table: Asset Turnover Ratio of Abu Dhabi national hotels
Graph: Asset Turnover Ratio of Abu Dhabi national hotels
There is clear understanding of Asset turnover ratio from the calculated figures as well as graphs at the same time of Abu Dhabi national hotels. Abu Dhabi national hotels requires in acquisition of more assets in the upcoming years for attainment of future goals and objectives. In the year 2014, Asset Turnover Ratio of Abu Dhabi national hotels arrive at 0.14% and 0.14% in the year 2015. There is no change in Asset Turnover Ratio from both the year taken under observation. It is necessary to keep 1 as asset turnover ratio for smooth functioning of business enterprise. This ratio helps in generating efficiency ratio for measuring efficiency of current organization with usage of all assets. It will help in giving investors as well as creditors in managing assets production and sales for specified time. Abu Dhabi national hotels should use fixed assets turnover ratio for calculating efficiency of asset classes.
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2014 (AED in Millions) |
2015 (AED in Millions) |
|
|
Financial Leverage |
1.18 |
1.15 |
Table: Financial Leverage of Abu Dhabi national hotels
Graph: Financial Leverage of Abu Dhabi national hotels
Financial Leverage of Abu Dhabi national hotels can be generated from calculating from figures and tables. It shows declining figures from the year 2014 to 2015. In the year 2014, Financial Leverage of Abu Dhabi national hotels arrive at 1.18% and 1.15% in the year 2015. There is clear decrease in Financial Leverage from both the year taken under observation. Decreased Financial Leverage implies that that Abu Dhabi national hotels positions at profitable position in the financial markets. Financial leverage position helps in understanding Abu Dhabi national hotels status for given number of years.
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2014 (AED in Millions) |
2015 (AED in Millions) |
|
|
Return on Equity |
2.49 |
2.86 |
Table: Return on Equity of Abu Dhabi national hotels
Graph: Return on Equity of Abu Dhabi national hotels
It was interesting to gather facts on return on equity because it helps in understanding the profitability position of Abu Dhabi national hotels. Both the year under study reveals that Abu Dhabi national hotels should acquire more equity shares in upcoming financial years. In the year 2014, return on equity of Abu Dhabi national hotels arrives at 2.49% and 2.86% in the year 2015. There is clear increase in return on equity from both the year taken under observation. Increased return on equity implies that that Abu Dhabi national hotels positions at profitable position in the financial markets. Return on Equity help in measuring efficiency of firm involving money from shareholders. It enables generating profits of business organization. It is advisable to Abu Dhabi national hotels for attempting higher equity ratios for bringing efficiency of invested funds. This particular hotel industry has levels of investors as well as income. The investors at the beginning of the period as well as end period in changed return in the near future use this ratio. This help in tracking Abu Dhabi national hotels progress as well as ability in maintaining positive earnings trends.
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2014 (AED in Millions) |
2015 (AED in Millions) |
|
|
Return on Invested Capital |
3.71 |
2.85 |
Table: Return on Invested Capital of Abu Dhabi national hotels
Graph: Return on Invested Capital of Abu Dhabi national hotels
Return on invested capital implies that Abu Dhabi national hotels require high capital investment in the near future. From the table and graphs, it is easy to predict profitability position of Abu Dhabi national hotels. In the year 2014, return on Invested capital of Abu Dhabi national hotels arrives at 3.71% and 2.85% in the year 2015. There is clear decrease in return on invested capital from both the year taken under observation. Decreased return on Invested capital implies that that Abu Dhabi national hotels positions at profitable position in the financial markets. It is advisable to Abu Dhabi national hotels for gaining positive Return on invested capital. It is the total cost of investment as added by profits.
Current Ratio
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2014 (AED in Millions) |
2015 (AED in Millions) |
|
|
Current Ratio |
1.149425287 |
1.262042389 |
Table: Current Ratio of Abu Dhabi national hotels
Graph: Current Ratio of Abu Dhabi national hotels
In the year 2014, current ratio of Abu Dhabi national hotels arrives at 1.14:1 and 1.26:1 in the year 2015. There is clear increase in current ratio from both the year taken under observation. Increased current ratio implies that that Abu Dhabi national hotels positions at liquidity position in the financial markets. Ideal current ratio is 2:1. It is advisable to Abu Dhabi national hotels to access towards current assets. Current assets will help in meeting the day-to-day running of Abu Dhabi national hotels.
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2014 (AED in Millions) |
2015 (AED in Millions) |
|
|
Quick Assets |
1.078544061 |
1.210019268 |
Table: Quick Ratio of Abu Dhabi national hotels
Graph: Quick Ratio of Abu Dhabi national hotels
In the year 2014, Quick ratio of Abu Dhabi national hotels arrives at 1.078:1 and 1.210:1 in the year 2015. There is clear increase in Quick ratio from both the year taken under observation. Increased Quick ratio implies that that Abu Dhabi national hotels positions at liquidity position in the financial markets. Ideal quick ratio is 1.5:1. This reveals that Abu Dhabi national hotels are close towards ideal quick ratio. It deducts inventory from the current assets for gaining the highest liquidity position in the near future. It takes into account those current assets that can be easily convertible into cash.
Debt to Equity Ratio
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Abu Dhabi national hotels |
||
|
2014 (AED in Millions) |
2015 (AED in Millions) |
|
|
Debt to Equity Ratio |
0.154571159 |
0.131147541 |
Table: Debt to Equity Ratio of Abu Dhabi national hotels
Graph: Debt to Equity Ratio of Abu Dhabi national hotels
In the year 2014, Debt to Equity Ratio of Abu Dhabi national hotels arrives at 0.15 and 0.13 in the year 2015. There is clear decrease in Debt to Equity Ratio from both the year taken under observation. Decreased Debt to Equity Ratio implies that that Abu Dhabi national hotels positions at capital structure position in the financial markets. This debt ratio is less than 0.5 means half as many liabilities in comparison with equity. Lower debt to equity ratio is preferable as it is more financially stable Abu Dhabi national hotels. High debt to equity ratio is risky for companies. Debt is more expensive form of financing in comparison with equity financing.
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Abu Dhabi national hotels |
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2014 (AED in Millions) |
2015 (AED in Millions) |
|
|
Equity Ratio |
1 |
1 |
Table: Equity Ratio of Abu Dhabi national hotels
Graph: Equity Ratio of Abu Dhabi national hotels
In the year 2014, Equity Ratio of Abu Dhabi national hotels arrive at 1 and 1 in the year 2015. There is no change in Equity Ratio from both the year taken under observation. Equity Ratio implies that that Abu Dhabi national hotels positions at capital structure position in the financial markets. Higher equity ratio is considered as favorable for companies. Higher investment levels by shareholders indicates potential shareholders in investing for Abu Dhabi national hotels in the near future. Equity financing is cheaper in comparison with debt financing. Interest expenses relates with debt financing in an overall manner.
From the above-calculated ratio, it is evident in understanding the fact that Abu Dubai National Hotel has the ability to retain in the global marketplace in Hotel Industry group. Strengths of Abu Dubai National Hotel reveal effective quick ratio for converting cash into stock (Berry 2011). Addition to that, Abu Dubai National Hotel has low debt to equity ratio that proves favourable condition. Weakness involves low earnings per share and price earnings ratio that needs correction as far as possible.
On critical analysis, it is required in comparison between trends prevailing in hotel industry. As Abu Dubai National Hotel deals in hotels, it retains substantial position as per industry standards.
Reference List
Albrecht, W., Stice, E. and Stice, J. (2011). Financial accounting. Mason, OH: Thomson/South-Western.
Berry, L. (2011). Financial accounting demystified. New York, NY: McGraw-Hill.
Davies, T. and Crawford, I. (2012). Financial accounting. Harlow, England: Pearson.
Deegan, C. and Unerman, J. (2011). Financial accounting theory. Maidenhead, Berkshire: McGraw Hill Education.
Dyckman, T., Magee, R. and Pfeiffer, G. (2011). Financial accounting. [Westmont, Ill.]: Cambridge Business Publishers.
Horngren, C. (2013). Financial accounting. Frenchs Forest, N.S.W.: Pearson Australia Group.
Leung, D. (2011). Inside Accounting. Farnham, Surrey, England: Gower.
Libby, R., Libby, P. and Short, D. (2011). Financial accounting. New York: McGraw-Hill/Irwin.
Needles, B. and Powers, M. (2012). Financial accounting. Mason, OH: South-Western Cengage Learning.
Previts, G., Walton, P. and Wolnizer, P. (2011). A global history of accounting, financial reporting and public policy. Bingley: Emerald.
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