Financial Performance Analysis of Marriott Case Study

Introduction - Evaluating Key Ratios and Recommendations

Financial information is the data that can be described in monetary terms and is necessary for the business to evaluate its position. Any transaction relating to the financial activity of the business can be stated as financial information. The current study is based on the company Marriott which has been trading for the past 30 years and has received good work. The current study will outline the financial information and its characteristics. In addition to this, the ratios of the company will be calculated and a proper report of the performance will be created in the end. The present studies aim to evaluate the financial information of the company and try to use it in product management so that proper decisions can be taken for the business.

Explaining the purpose of financial information and identifying the characteristics of good financial information

The financial information can be defined as the summarized data relating to the monetary transactions occurring within the company which are helpful for the investors to understand the company’s position. Anything which can be stated within the monetary terms is referred to as financial information (Sabri and Aw, 2019). For the effective management of the business, proper financial information and its record must be maintained. This is particularly necessary because the financial information outlines the effective working of the company and the actual position. Thus, Marriott must record all the financial information effectively so that it can be used in effective decision-making.

The major purpose of undertaking the use of financial information is to understand the financial position of the company. In general, there are three different financial statements which are used to evaluate the position of the company. This includes making of income statement, balance sheet and cash flow statement all the financial information is recorded in these three statements so that the overall position of the company can be identified. Thus, another purpose of undertaking the use of financial information is to identify the financial strength of the company and to identify the areas where the company is lacking (Hameedi and et.al., 2021). This is necessary because it will help the company in analysing the areas of default and try to improve it.

Characteristics of the good financial information are the following:

• The first characteristic involves relevance which implies that the information should be predictable. This is particularly because if the information will not be relevant then it will not be used within the financial statement analysis.
• Another characteristic of undertaking the use of financial information is comparability (Qualitative Characteristics of Financial Reports, 2021). The comparability is very necessary as it will help the business in comparing the actual performance with that of the competitors.
• Along with this another characteristic of using financial information is understanding ability. The financial information must be such that it is easily understandable by any person and it will help in quick decision-making.
• Timelines are another characteristic of the financial information which needs to be evaluated. This is particularly necessary because in case the financial information is too old then it will not be useful within the present analysis.
• Another characteristic of financial information includes verifiability which provides Assurance that the information provided is faithfully correct and represents the whole working of the company.
• Along with this another characteristic of financial information is faithful representation. This simply means that all the information relating to the financial aspects of the company must be represented faithfully and correctly (Hutahayan, 2020). No errors or intentional changes must be made within the working of the financial information.

Calculating the ratios of Marriot Inn

On the evaluation of the comparison with the industry standard, it is clear that the company is performing slightly lower than the standard. For the return on capital employed the standard is 26% where as the companies have 22.5% in the current year. Similarly, in the case of asset turnover, it is 1.79 times but currently,y it is 1.23 times. This is not good for the company as the company is not in a position to maintain the standard. With regards to the net profit margin, the standard is 14.5 0% whereas the company has 7.7% only. Further, the current ratio is 1.5 for the industry standard and for the company it is 1.31. Along with this, the labour cost percentage of sales is 18.1 0% for the standard but the company has 25.5 % which is much higher. In the case of the operating cost as well the standard is 85% where whereas the companies have 118.8 % which is far higher as compared to the standard (Jebe, 2019). This is the particular reason why the actual performance of the company is not good as the operating cost is much higher than the sales. Similarly, room maintenance and administration costs are also higher compared to industry standardsThe reason for the deviation of the performance is that the expenses of the company are higher as compared to the income. Thus, because of this reason only the actual performance of the company is not good and the comparison is not effective.

Preparing detailed reports of the performance of the company

With the evaluation of the performance of the company, it is clear that as compared to the previous year the performance of the company has reduced. This is particularly because of the reason that within the year 202,0, the performance of the company was good but in the current year it has reduced. Thus, as a result of this, the overall performance of the company has reduced (Cheng, and et.al., 2021). Further, with the evaluation of the latest results of the company, it was clear that the company is suffering a downturn in overall performance and this needs to be evaluated and corrective measures need to be taken. The return on capital employed has reduced as compared to the previous year. In addition to this, the asset turnover ratio has slightly increased which is good for the company.

Further the net profit margin has reduced to a great extent and as a result of this profitability of the company has reduced. This might be because of the reason the expenses of the company have increased and as a result of this net incomehas beenn reduced. Furthermore, with the current ratio, it is clear that the liquidity position has improved a little bit as compared to the last year. Earlier it was 1.22 which has increased in the current year to 1.31. This simply implies that the liquidity position has improved slightly. In addition to this, the quick ratio outlines that it has improved and this is good for the company (Muñoz?Izquierdo and et.al., 2020). With regards to the data collection period, it is clear that the days of receiving the amount from the debtors have increased which is not good for the company. Earlier it was 91 days which has increased to 102 in the current year. Further with the gearing ratio it is clear that the company has increased the equity within the capital. This is good for the company as now there are less risky funds within the company and it can be used effectively to improve its performance.

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Hence with the help of the ratio analysis, it is clear that the profitability of the companies is not good as compared to the last year and the industry's standards. Thus, it is very necessary for the company to effectively improve its performance so that it can meet the competition easily (White and Van Dyk, 2019). The company must improve its performance so that it can manage its expenses and earn profits. For this some of the recommendations for Marriott Inn are as follows-

• The first and foremost strategy for improving the profitability of the company is to reduce direct and indirect expenses. This is particularly necessary because when the expenses are more than automatically the profits will be less. Thus, for improving the performance it is very necessary to have good control over the expenses so that the profitability can be increased.
• In addition to this another recommendation to the company is to effectively work on marketing strategies. This is particularly necessary because the competition is tough and in case effective marketing is not present then customers will not be attracted towards the company (Tkachenko and et.al., 2019). Thus, it is very necessary for the company to effectively invest in the marketing strategies so that the working can be improved.
• Along with this, it is also recommended to the company thattheye effectively work on research in development. This is particularly necessary because there are frequent changes in the needs and pReferences of the customers. To meet these it is very necessary to have a sound Research and Development Department that will be workingcontinuously onr analysing these changes and adapting to the relevant changes.

CONCLUSION

In the end, it is concluded that financial information is very necessary for the company to evaluate the actual performance of the company. The evaluation of the performance can only be measured in terms of finance and for me,t financial information is very necessary. The above study highlighted that the major characteristics of financial information are understandability, verifiability, comparability and many other different characteristics. Further, with the help of the ratio analysis, it was clear that the actual performance of the company is not good as compared to the past years. In addition, the performance of the company was also not good in comparison to the industry's standards. In the end, it was recommended to the company that they try to reduce the direct and indirect expenses so that the profitability of the company can be increased.

REFERENCES

Books and Journals

Cheng, X. and et.al., 2021. Combating emerging financial risks in the big data era: A perspective review. Fundamental Research. 1(5). pp.595-606.

Hameedi, K.S., and et.al., 2021. Financial performance reporting, IFRS implementation, and accounting information: Evidence from the Iraqi banking sector. The Journal of Asian Finance, Economics and Business. 8(3). pp.1083-1094.

Hutahayan, B., 2020. The mediating role of human capital and management accounting information system in the relationship between innovation strategy and internal process performance and the impact on corporate financial performance. Benchmarking: An International Journal. 27(4). pp.1289-1318.

Jebe, R., 2019. The convergence of financial and ESG materiality: Taking sustainability mainstream. American Business Law Journal. 56(3). pp.645-702.

Muñoz?Izquierdo, N. and et.al., 2020. Does audit report information improve financial distress prediction over Altman's traditional Z?Score model? Journal of international financial management & accounting. 31(1). pp.65-97.

Sabri, M.F. and Aw, E.C.X., 2019. Financial literacy and related outcomes: The role of financial information sources. International journal of business and society. 20(1). pp.286-298.

Tkachenko, V. and et.al., 2019. ASSESSMENT OF INFORMATION TECHNOLOGIES INFLUENCE ON FINANCIAL SECURITY OF ECONOMY. Journal of Security & Sustainability Issues. 8(3).

White, C.J. and Van Dyk, H., 2019. Theory and practice of the quintile ranking of schools in South Africa: A financial management perspective. South African Journal of Education. 39(Supplement 1). pp.s1-19.

Online

Qualitative Characteristics of Financial Reports. 2021. [Online]. Available through: < https://accounting.binus.ac.id/2021/10/01/qualitative-characteristics-of-financial-reports/>