Introduction of the Gregory St James Executive Corporate Events Centre

The report provides brief insight about the financial position of the Gregory St James Executive Corporate Events Centre. In the report financial ratio analysis has been carried out to know about the profitability, liquidity, efficiency and financial leverage of the firm. It is important to manage the financial activities of the business and perform analysis to know how well the firm is operating. The financial ratio analysis provides a brief overview of the organization and will help the board of directors and top management of the corporation to take the important decision.

Profitability Ratios of the Gregory St James Executive Corporate Events Centre

The profitability ratios of the corporation show how much profit the corporation is earning. The shareholder takes the keen interest in the profitability of the firm because it determines whether it is operating accurately or not. The investors also evaluate the profitability ratios before making investing decisions. The profitability ratio analysis of Corporate Event Centre indicates that the corporation needs to improve its profitability.  The net profit margin ratio & return on total assets are low and need improvement. In the year 2017 the net profit margin was 0.07 and in 2018 it was 0.06 (Pandey, 2015).

The return on total Asset was 0.15 in 2017 and in 2018 it becomes 0.06. It is suggested that the corporation should recruit a financial analyst that would help them to improve the financial performance. The corporation should enhance its asset utilization so that it can boost its sales and profitability of the firm can increase. Improving the marketing strategy can also help the organization to increase its profitability. The profitability of the firm has huge significance because the main aim of every organization is to earn the profit and if the corporation is not going to earn the profit than sustaining, in the long run, is not possible.

Efficiency Ratios of the Gregory St James Executive Corporate Events Centre

The efficiency ratios indicate how efficiently the organization performing its activities. It is important that the organization should perform collection effectively otherwise the cash flow of the business will disturb. The low average settlement of debtors is good for the organization. The average settlement of debtors indicate that the organization is collecting cash is the short period of time which means the corporation is efficiently collecting cash. However, there is a need for improvement in the average settlement of creditors. The corporation is taking a little bit of more time to return the cash to the creditors (Pandey, 2015).

It is important that the firm should take proper advantage of the terms of the supplier. The firm is operating efficiently and it can also be seen through the analysis of financial ratios. It is important for the organization to perform efficiently and utilize its resources accordingly so that the profitability and sales of the corporation can increase. If the firm does not perform efficiently than the performance of the firm decreases which becomes the reason of decrease in sales & profitability. It is suggested that the corporation should focus on its efficiency and improve it so that the firm financial position can become stronger (Higgins, 2007).

Liquidity Ratios of the Gregory St James Executive Corporate Events Centre

The liquidity ratios of the business or organization demonstrate the liquidity position of the organization. The liquidity ratios determine whether the organization can pay its short-term obligations or not. The financial ratio analysis of the Gregory St James Executive Corporate Events Centre indicates that the firm has enough cash to pay back its short-term obligations. The organization has kept enough cash for paying the routine expenses. The current ratio is 1.62, 1.78 and 1.70 in the respective years. The acid test ratio is 0.88 in 2016, 0.85 in 2017 and 0.68 in 2018.

The firm does not have excess cash in hand which is a good sign and shows good financial management of the corporation. Keeping excess cash in hand is not an appropriate thing to do because it should be invested somewhere so that the firm can earn the significant amount of profit from it. It is important that the resources of the organization should be used for enhancing the profitability of the form and creating shareholders value. When the firm value increases the firm overall goodwill also increase as a result.

Leverage Ratios of the Gregory St James Executive Corporate Events Centre

The leverage ratios of the corporation determine how much debt the corporation has taken. The organization financed their assets through two ways one is through equity and the other way is through debt. It is always suggested that the company should finance itself from both debt & equity financing.  The optimum capital structure is that which has the low cost of capital. Too much debt and equity are not suitable for the firm because it not only increases the cost of capital but also creates various financial problems for the firm. The financial ratio analysis of the firm indicates that the firm assets are financed from both debt and equity. The firm debt ratio indicates that firm debt position is in control (Higgins, 2007).

The liabilities to total asset ratio in 2016 was 0.58 in 2017 it becomes 0.51 and in 2018 it becomes 0.43. The financial leverage is showing a declining trend which is a good thing. The firm is not highly leveraged at the moment. Debt in the large amount is not suitable because debt has to be paid back. If the company unable to pay its debt back than financial issue can arise and in the severe case, the firm can go insolvent (Campbell, Edgar, & Stonehouse, 2011).

Conclusion of the Gregory St James Executive Corporate Events Centre

It is concluded that the financial performance of the organization needs improvement especially the profitability. The firm efficiency and liquidity position is exceptional however the firm can further improve its financial position to earn the significant amount of profit.

Appendix

References of the Gregory St James Executive Corporate Events Centre

Campbell, D., Edgar, D., & Stonehouse, G. (2011). Business Strategy: An Introduction. Macmillan International Higher Education.

Higgins. (2007). Analysis for Financial Management. Tata McGraw-Hill Education.

Pandey, I. (2015). Financial Management. Vikas Publishing House.