FINANCIAL ANALYSIS

Financial Analysis

Financial Analysis

Business Summary

InterContinental Hotels Group is a holding company. Co. owns a portfolio of established and diverse hotel brands, including InterContinental Hotels & Resorts, Crowne Plaza Hotels & Resorts, Holiday Inn Hotels & Resorts (including Holiday Inn Club Vacations) ("Holiday Inn"), Holiday Inn Express, Staybridge Suites, Candlewood Suites and Hotel Indigo with 4,438 franchised, managed, owned and leased hotels and 646,679 guest rooms in over 100 countries and territories around the world. Co. also manages the hotel loyalty program, Priority Club Rewards.

Importance of Financial Statements

A company's financial statements provide various financial information that investors and creditors use to evaluate a company's financial performance. Financial statements are also important to a company's managers because by publishing financial statements, management can communicate with interested outside parties about its accomplishment running the company. Different financial statements focus on different areas of financial performances.

Financial Conditions

A company's financial conditions are of a major concern to investors and creditors. As capital providers, investors and creditors rely on a company's financial conditions for both the safety and profitability of their investments. More specifically, investors and creditors need to know where their money went and where it is now. The financial statement of balance sheet addresses such issues by providing detailed information about a company's asset investments. The balance sheet also lists a company's outstanding debt and equity components, and so debt and equity investors can better understand their relative positions in a company's capital mix.

Operating Results

Financial conditions shown in the balance sheet are snapshots of a company's assets, liabilities and equity at the end of a financial reporting period; they don't reveal what happened during the period from operations that may have caused changes to financial conditions. Therefore, operating results during the period also concerns investors. The financial statement of income statement reports operating results such as sales, expenses and profits or losses. Using the income statement, investors can both evaluate a company's past income performance and assess the uncertainty of future cash flows.

Cash Flows

A company's profits reported in the income statement are accounting income and most likely contain certain non-cash elements, providing no direct information on a company's cash exchange during the period. Moreover, a company also incurs cash inflows and outflows during a period from other non-operating activities, namely investing and financing. To investors, cash from all sources, not just accounting income from operations, is what pays back their investments. The importance of the cash flow statement is that it shows the exchange of cash between a company and the outside world during a period, and so investors can know if the company has enough cash to pay for expenses and asset purchases.

Shareholders' Equity

The statement of shareholders' equity is especially important to equity investors because it shows the changes in various equity components, including retained earnings, during a period. The amount of shareholders' equity is a company's total assets minus its total liabilities, representing the company's net worth. A steady growth in a company's shareholders' equity by way of increasing retained earnings, ...