MANAGEMENT ACCOUNTING ASSIGNMENT

Management Accounting Assignment

Management Accounting Assignment

Introduction

For the purpose of this assignment, we have selected two well-known grocery retail businesses from the retail industry of United Kingdom. Both these businesses are very well-managed and are playing in the market since fairly long time. The names of these businesses are as follows:

Holiday Inn, Bloomsbury

Westland Hotel

Financial Ratio Analysis and Comparison with Competitor & Sector Averages

In this section, financial ratios of Holiday Inn and Westland Hotel have been compared along with a comparison with sector averages. This has given a clear insight into the financial health of both companies as well as their performance in comparison with the retail industry. The reason for choosing both companies from the same industry is to find out the bigger picture of financial performances of both the companies. (Nash and Sinkey 2007 pp. 89-112)

Liquidity

Liquidity ratios are generally used to find out the ability of a firm to pay-off its short-term debts. From the calculated ratios, we can see that the liquidity position of both Holiday Inn and Westland Hotel is not up-to the standard.

Quick ratio of Holiday Inn, Bloomsbury was 0.57 in 2009 which decreased to 0.51 in 2010. The reason for the decrease in this ratio was increased burden of short-term debt. The current position of quick ratio is below standard i.e. <1 which means that Holiday Inn is not in a position to pay-off its short-term debts. But if we compare it to industry average, it seems that Holiday Inn is performing just in line with the other firms in the industry as the industry average is very close to that of Holiday Inn. (Lewellen and Lanser 2009 p.64)

Quick ratio of Westland Hotel Plc was 0.28 in 2009 which increased to 0.38 in 2010. The reason for the increase in this ratio was increase in current assets. But the current position of quick ratio is below standard i.e. <1 which means that Westland Hotel is not in a position to pay-off its short-term debts. But if we compare it to industry average, it seems that Westland Hotel is not even performing in line with other firms in the industry as the industry average is well above that of Westland Hotel.

There is an increasing trend in the quick ratio for Westland Hotel in 2010 but the ratio is still below 1. On the other hand, the quick ratio of Holiday Inn is decreasing but is well above that for Westland Hotel. From this ratio, we can say that Westland Hotel is performing well and is trying to reach the standard liquidity position. Holiday Inn, Bloomsbury is better than Westland Hotel but trend suggests that Westland Hotel will beat Holiday Inn, Bloomsbury in near future, in terms of quick ratio. (Kuprianov 2006 pp. 1-40)

Current ratio of Holiday Inn, Bloomsbury was 0.78 in 2009 which decreased to 0.73 in 2010. The reason for the decrease in this ratio was increased burden of short-term debt or decreased inventory ...