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Description of the company

Discuss about the Mantra Group Hotel And Resort Operator And Marketer.

Mantra group is considered to be one of the largest Australian based hotel and resort operator and marketer with 22000+ rooms under the management. the organization relatively utilizes the properties across Australia New Zealand and Indonesia, while keeping them under management for the owners. The company was listed in ASX 200 during 2014, which relatively helped them to acquire the required funds for their expansion. a company relatively holds 2,300,000customers August every year across there 22000 + rooms. The company a relatively uses the property of the owners on rent to improve its profitability and acquire higher customer base. The company actively provides hotels and resort services to the customers who visit Australia New Zealand and Indonesia (Mantragroup.com.au, 2018). The company has operated adequately in past years, while generating high net income on each fiscal year.

Mantra group limited

Particulars

2017

2016

Current assets

130154

177098

Inventory

3099

2829

Current liabilities

97613

89342

Gross profit

455609

410135

Revenue

688973

606703

Total equity

477948

463067

Total Assets

806259

769024

Net Income

45597

37149

Current Ratio

          1.33

          1.98

Quick Ratio

          1.30

          1.95

Gross Profit Margin

66.13%

67.60%

Return on Equity

9.69%

9.28%

Return on Assets

5.79%

5.42%

Current ratio helps in identifying capability of the company to support its short-term obligations, which could detect financial viability of the organisation. In addition, the standard value is mainly at the level of 2, which needs to be obtained by the company to depict its financial stability in supporting their obligations. therefore, the organisation having higher current ratio are depicted to have sound financial position in supporting their short-term liabilities.

Quick ratio is mainly calculated to understand the current asset and current liability combination of the company without inventories. The standard value needed for quick ratio is at the level of 1, which needs to be conducted for generating high level of returns. The financial ratios mainly evaluate the ability of the organisation to support its financial obligations without selling its inventory (Czajor, P., & Michalak, 2017).

The gross profit margin calculation relevantly identifies the overall cost of sales incurred by the company to achieve the required sales. The minimum gross profit margin value needs to be at the levels of 50% for the organisation to generate high profits. The high gross profit mainly indicates that the company incur low to cost acquire the required raw material for the finished goods.

The return in equity mainly allows the investor to understand the level of profits, which is incurred by the organisation while using the funds from equity. This relevantly evaluates the performance of the management in utilising the available funds to maximise their profitability. The return on equity is mainly calculated for identifying the abbreviation of the organisation to generate high level of returns (Atoom, Malkawi & Al, 2017).

Calculating ratios of the company for the last two years

The return on assets calculation directly help in understand the effectiveness of the management to utilises the available assets to obtain the relevant earnings. The level of returns on assets that needs to be obtained by the organisation is at 8%, which would eventually help in detective the overall performance of the organisation. The industry standard needs to be evaluated for detecting the viability of the return on assets.

After the evaluation of different ratios for Mantra Group Limited, the organisation’s financial performance and strength could be identified. The following ratios are relatively evaluated based on the performance to determine the current financial position of the organisation.

The current ratio of the organisation has a relatively declined from the levels of 1.98 to 1.33, which relatively states the low financial capability of the organisation. In addition, this decline in overall current ratio was due to the reduction in current assets obtained by the organisation while relevant increment in current liabilities was identified. This mainly indicates that the organisation is relatively Focused on acquiring additional liabilities to conduct its business while reducing the current assets. Current assets of the organisation are not an adequate level according to the benchmark, where the value needs to be at 2 or more.

The quick ratio of the organization has relatively declined from the levels of 1.95 to 1.30, which significantly indicates the lower financial capability of the company to support obligations. However, after comparing the quick ratio levels with the standard levels it could be identified that the company's overall capability to support its financial obligation is high. The decline in quick ratio does not affect the capability of the Company to pay its due to the creditors. The difference between quick ratio and current ratio of the organization is a relatively low which indicates the reduction in inventory levels maintained by the organization (Liang et al., 2016).

From the evaluation of gross profit margin, the company's overall financial performance has a relatively declined from the levels of 67.60% to 66.33%. However, from the valuation it could be identified that both the revenue and gross profit of the organization relatively increased from 2016 to 2017. Nevertheless, the percentage of expenses or cost of goods sold is a relatively higher than the previous year, which directly reduced the gross profit of the organization. moreover, the gross profit level of the organization is above the benchmark of 50% which relatively provides positive financial review for the organization.

Providing definitions of ratios and providing benchmark values

The return on equity of the organisation has a relatively improved from the levels of 2016 to 2017 due to the increment in overall net income of the organisation. This relevant increment has relatively increased the return on equity from 9.28% to 9.96% in 2017. Moreover, the increment has also depicted the efficiency of the organisation to generate higher returns from the capital deployed by the equity fund. Comparison from the relevant benchmark relatively indicates that the organisations return on equity is adequate and depicts viability of the financial decisions made by the management (Brooks, 2015).

The return on Assets of the organization has a relatively improved from the levels of 5.42% to 5.79%, which directly indicates the improving efficiency of the management in utilizing company assets. the return on assets value has a relatively increased due to the increment in net income obtained by the organization. However, the values of return on assets is not adequate and at the levels of standard, which directly indicates that the management was not able to utilize the total assets of the organization.

Particulars

Mantra group limited

Webjet Limited

Eumundi Group Ltd

2017

2016

2017

2016

2017

2016

Current Ratio

 1.33

 1.98

 1.46

 1.04

 1.05

 1.05

Quick Ratio

 1.30

 1.95

 1.46

 1.04

 0.53

 0.63

Gross Profit Margin

66.13%

67.60%

76.18%

73.88%

63.45%

62.42%

Return on Equity

9.69%

9.28%

28.57%

18.24%

4.30%

6.53%

Return on Assets

5.79%

5.42%

11.93%

7.22%

3.08%

4.55%

The above table relevantly compare the financial position of Mantra Group Limited with Webjet Limited and Eumundi group Limited. This evaluation relatively indicates that the current ratio and quick ratio of Mantra group is not adequate as per industry standards, as the ratios value of Webjet Limited for 2017 is relatively higher (Webjetlimited.com, 2018). Furthermore, the gross profit margin returns on equity and return on Assets of Mantra Group Limited also does not compare adequately with Webjet Limited. Lukason, Laitinen & Suvas (2015) stated that with the evaluation of financial ratios the organizational future prospect can be evaluated, which might help investors in making their investment decisions. On the other hand, Caro, Guardiola & Ortiz (2018) argued that the financial ratios lose their viability if the management has used unethical measures in formulating their financial report.

However, after comparing Mantra Group Limited with Eumundi Group Limited, it could be identified that the financial performance of mantra group is a relatively higher. this indicates that the organizations current financial position as per industry standard is adequate and depicts the positive profit generation capability of Mantra Group Limited. The gross profit margin, return on equity, return on assets, current ratio, and quick ratio of Mantra group is a relatively higher than Eumundi Group Limited (Eumundigroup.com.au, 2018).

Therefore, from the valuation of the financial strength it could be identified that investments in Mantra Group Limited would be a viable option for the investors, as the company has a positive financial prospect. The rising net income and stable financial position relatively indicates the positive attributes for Mantra Group Limited. However, the other factors such as market risk and company risk need to be evaluated by the investors before making any kind of investments in the organization. The evaluation of risk and return attributes of the company would eventually help in depicting the returns that could be provided from the investment.

Reference and Bibliography:

Czajor, P., & Michalak, M. (2017). Operating Lease Capitalization-Reasons and its Impact on Financial Ratios of WIG30 and sWIG80 Companies. Przedsi?biorczo?? i Zarz?dzanie, 18(1, cz. 1 Practical and Theoretical Issues in Contemporary Financial Management), 23-36.

Atoom, R., Malkawi, E., & Al Share, B. (2017). Utilizing Australian Shareholders' Association (ASA): Fifteen Top Financial Ratios to Evaluate Jordanian Banks' Performance. Journal of Applied Finance and Banking, 7(1), 119.

Liang, D., Lu, C. C., Tsai, C. F., & Shih, G. A. (2016). Financial ratios and corporate governance indicators in bankruptcy prediction: A comprehensive study. European Journal of Operational Research, 252(2), 561-572.

Brooks, R. (2015). Financial management: core concepts. Pearson.

Buchman, T., Harris, P., & Liu, M. (2016). GAAP vs. IFRS Treatment of Leases and the Impact on Financial Ratios.

Lukason, O., Laitinen, E. K., & Suvas, A. (2015). Growth patterns of small manufacturing firms before failure: interconnections with financial ratios and nonfinancial variables. International Journal of Industrial Engineering and Management, 6(2), 59-66.

Caro, N. P., Guardiola, M., & Ortiz, P. (2018). Classification trees as a tool to predict financial difficulties in Latin American companies through their accounting ratios. Contaduría y Administración, 63(1), 25-26.

Carlino, L., Coppens, F., González, J., Ortega, M., Pérez-Duarte, S., Rubbrecht, I., & Vennix, S. (2017). Decomposition techniques for financial ratios of European non-financial listed groups (No. 21). ECB Statistics Paper.

Lakshmi, T. M., Martin, A., & Venkatesan, V. P. (2016). A genetic bankrupt ratio analysis tool using a genetic algorithm to identify influencing financial ratios. IEEE Transactions on Evolutionary Computation, 20(1), 38-51.

Webjetlimited.com. (2018). Webjetlimited.com. Retrieved 8 May 2018, from https://www.webjetlimited.com/wp-content/uploads/2017/07/FY16-Full.pdf

Mantragroup.com.au. (2018). Mantragroup.com.au. Retrieved 8 May 2018, from https://www.mantragroup.com.au/About-Us.aspx

Eumundigroup.com.au. (2018). Eumundi Group. Retrieved 8 May 2018, from https://eumundigroup.com.au/annual-reports/

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[Accessed 29 May 2024].

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