3.3 Financial Analysis Assignment Example | Topics and Well Written Essays - 1000 words

3.3 Financial Analysis - Assignment Example ould likely result in liabilities hence previous trends and records of the organization can be used to assess the profitability of an organization as an investment opportunity (Ou & Penman 2009, pp.295–329). To understand the significance of the financial well-being of an organization, this paper will conduct a financial analysis of Chateau hotel redoubtable as an investment opportunity for the Smithsons. The core objective of investing in a business is to get a return for the price invested. Inferring to the statement of the financial position of the hotel basing on the analysis of two years (year ended December 30 2013 and 2014), the hotel made an improvement in the value of the total assets from â‚ ¬3,263, 000 to â‚ ¬3,881, 000. Additionally, the company made an improvement in the equity shares from 800 shares to 1000 shares with each of the share selling at â‚ ¬100. However, the company has an outstanding long-term loans and current liabilities with inclusion of the bank overdraft, payable dividend, taxation owing deposit by customers and payable-trade creditors cumulatively summing to â‚ ¬3,263, 000 for the financial year ended 2013 and â‚ ¬3,881, 000 for the financial year ended 2014. This implies that a liquidation of the assets of the company would be sufficient to settle the liabilities of the company without outstanding profit. However, inferring to the income statement of the company, it is evident that the rental income of the hotel had declined from â‚ ¬505, 000 in the year 2013 to â‚ ¬448, 000 in the year ended 2014. Analysis of the financial figures of the hotel indicates that the hotel is currently running at diminishing returns, which makes the chances for solvency and the resale of the company to be difficult. Equally, owing to the declining financial position of Chateau hotel redoubtable, the hotel is not profitable thus; investment in the hotel would demand a change in the strategy in the manner with which it is operated to realize profit.