Analysis
Financial competitiveness and financial belongings are some of the major things and aspects from the viewpoint of an organization in total. Organizations always try to enhance their productivity and only those projects would have been selected which are essential for a company as far as enhancing the productivity is concerned (Piper, p. 59). The main objective of this assignment is to analyze the effectiveness of two different projects in total. Income statement of each of the project has been allotted and given with this analysis and the analyses of both of the projects are mentioned below simultaneously.
Analysis for Project-1
Income statement is a set of document for an organization, which is used to assess the level of income of an organization. It is an important tool, through which the effectiveness of a company would have been analyzed accordingly. Project’s analysis is based upon two different years, which predominantly are 2011 and 2012.
- Rooms
- Food
- Beverages
- Other Food & Beverage
- Telecommunication
- Other Operated Department
- Rental and Other Income
- Cancellation Fee
The total revenue earned by project-1 is $ 10,074 in the year 2012 which was $ 9,282 in a year ago, showing an increment of 8.53%. The highest amount of revenue has been generated from the Rooms which was $ 9,896 in the year 2012 a major proportion of 98.23% with the total revenue of the company as a whole. The biggest advantage pertains to the company is its low amount of departmental expenses, which was only 16.27% against the total revenue in year 2012. Rooms and Telecommunication are the only elements from which cost has been incurred accordingly. Rooms, which is making a revenue of 98.23% for the company, is only incurring a departmental expense of only 14.20%, while telecommunication which is making a net revenue of 27 million $ in the year 2012, is incurring an expense of 208 million $, showing a net deficit in revenue-cost analysis of $ 181 million. Gross Profit of the company in the year 2012 was $ 5,434 million which increased by 5.39% in the fiscal year 2012 and has a proportion against the net revenue of the company amounting to 53.94%. This particular amount of Gross Profit Margin (GPM) is extremely high for the company, as there are very few companies which are having that much GPM. A net loss is incurred, if all of the fixed charges, Debt service charges and total payroll expense would have been subtracted from the net income accordingly. It was positive in the year 2011 ($ 419 Million) but negative in the year 2012.
The major problem lies in this particular income statement is the incurring of expense for the telecommunication department (Atkinson, p. 142). The department is not contributing enough in the revenue recognition, while it is incurring a high cost in total. A net deficit of $ 181 million has been envisaged related to this particular department, which may become a serious problem for the company in near future, therefore this particular thing needed to be look.
In summary, it could be said that the Project-1 would not be worthwhile, as it would report a net loss in the end of the day. In order to attain the best available profit, project-1 has to decrease down the level of payroll expense a bit.
Analysis of HW#3
The total revenue earned by HW#3 is $ 15,148 in the year 2012 which was $ 13,565 in a year ago, showing an increment of 11.67%. The highest amount of revenue has been generated from the Rooms which was $ 14,792 in the year 2012 a major proportion of 97.65% with the total revenue of the company as a whole. The biggest advantage pertains to the company is its low amount of departmental expenses of rooms, which was only 8.96% against the total revenue in year 2012. Rooms and Telecommunication are the only elements from which cost has been incurred accordingly. Rooms, which is making a revenue of 97.65% for the company, is only incurring a departmental expense of only 8.96%, while telecommunication which is making a net revenue of 29 million $ in the year 2012, is incurring an expense of 198 million $ for year 2012, showing a net deficit in revenue-cost analysis of $ 179 million. Gross Profit of the company in the year 2012 was $ 5,868 million which increased by 10.49% in the fiscal year 2012 and has a proportion against the net revenue of the company amounting to 36.74%. This particular amount of Gross Profit Margin (GPM) is extremely high for the company, as there are very few companies which are having that much GPM. A net profit is incurred, if all of the fixed charges, Debt service charges and total payroll expense would have been subtracted from the net income accordingly. The net profit for HW#3 in the year 2012 was $ 1,185 million while it was $ 510 million a year ago.
The major problem lies in this particular income statement is the incurring of expense for the telecommunication department. The department is not contributing enough in the revenue recognition, while it is incurring a high cost in total. A net deficit of $ 179 million has been envisaged related to this particular department, which may become a serious problem for the company in near future; therefore this particular thing need to be examine (Clarke, p. 78).
In summary, it could be said that the HW#3 would certainly be worthwhile, as it would report a net profit in the end of the day.
Works Cited
Atkinson. Management Accounting. Pune: Pearson Education India, 2007.
Clarke, Edward A. Accounting: An Introduction to Principles and Practice. New York: Cengage Learning, 2012.
Piper, Mike. Accounting Made Simple: Accounting Explained in 100 Pages Or Less. Houston: Mike Piper, 2012.
