Hotel Financial Analysis Essay

995 Words Jun 17th, 2010 4 Pages
Waterfront Mactan Casino Hotel, Inc. (WMCHI)
ANALYSIS OF FINANCIAL PERFORMANCE Profitability Analysis
2008 0.084266313 0.046495453 0.009816935 0.027953925 2007 0.115098173 0.042234313 0.018062622 0.054801237

Profitability Analysis Return on sales Return On Assets Return On Equity

WMCHI’s net income for 2008 improved by .004 points, but reflected a 50% decline on its ability to use its assets as a source of revenue. Moreover, because of the company’s heavy reliance on borrowings from financial institutions to support its expansion, the return on their stockholder’s equity also went down by more than 50% of 2007’s figures. We can surmise that the company’s operating profit is not sufficient to give its shareholders a satisfying level
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Though the company collects 9 times in a year as compared to 2007, still the length of time it takes to collect receivables went up by 10 more days. When it is so important to consume their inventory within the prescribed period as reflected in their “number of days sales ratio” for 2008 and 2007, it is noticeable that WMCHI is not able to hit its targets, i.e., the company extended by 12 days and 10 days, respectively.

With the accompanying slow turnover of goods for sale, we can likely conclude that they have an over investment on inventory, which also limits their solvency. The 2008 decline in the rate of working capital use and its adequacy, coupled with the growth of operating expenses pose a threat to the business. With this liquidity condition, the company will surely be in trouble the moment creditors demand the full payment of their extended credit.

Activity Analysis
Activity Analysis Asset Turnover Working Capital Efficiency Capital Intensity Ratio 2008 -0.486815325 0.214963429 -0.993783751 0.141243778 2007 -1.187472203 0.428990291 -1.906330409 0.289867915

The ratios on activity analysis mirror WMCHI’s less productive use of its total assets to generate their desired level of sales income. Moreover, the company’s ability to effectively use its fixed assets to generate

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