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In the role of a management consultant, prepare a succinct and detailed business report for the Board of Directors of your chosen company report aimed at the Board of Directors. Extend your research from coursework 1 on financial analysis of the performance of your company to include financial and non-financial performance indicators; design a balanced scorecard and linked strategy map and evaluate the techniques used. You are required to use the same company as in coursework 1 but permitted to choose a different company only in exceptional circumstances (for example if the company is no longer trading). Please consult the latest List of Organisations that can be used. This is contained in CW1 instructions document. Your seminar tutor will approve your choice of organisation. The vision, strategy or goal that you identify can be published by the organisation (e.g. in their Annual Report) or identified by yourself as appropriate for the organisation. Executive Summary Intercontinental Hotel Groups Plc. (IHG) IHG is one of the biggest hotels group in the world, which has nine preferred hotel brands in nearly 100 countries and territories (IHG 2014), and claims to be one of the greatest companies in the world by creating Great Hotels Guests Love. This report indicates several kinds of analysis to evaluate the financial performance of IHG, which are liquidity and solvency measure, working capital management measure, profitability measure and asset efficiency measure, besides compare the results with previous year, the results of those ratios also used to compare with the industry average ratio and Hilton Worldwide which is one of the competitors of IHG. Furthermore, this report also indicate the 2012 KPIs of IHG with evaluation of the measurement and compare with the previous year. The results show that IHG have a great performance in most of its area, and also its performances are above the average in the hotel industry, however IHG still have to improve its management of assets in order to compare with its competitors. Table of Content Introduction 1 Comparison of 2011 results with 2012 results of IHG 1-4 Ratio analysis of IHG 4-7 2.1 Liquidity and Solvency Measure Working Capital Management Measure Profitability Measure Asset Efficiency Measure Comparison with Hotel Industry Average Figures 7 Comparative Analysis of Competitor – Hilton Worldwide 8 Measurement against the IHG’s KPIs 9-10 Evaluation of IHG Key Performance Indicators 10-11 Conclusion and Recommendations 11 Limitations List of References Appendix Introduction: Intercontinental Hotel Groups Plc. (IHG) IHG is one of the biggest hotels group in the world, which has nine preferred hotel brands in nearly 100 countries and territories (IHG 2014), and claims to be one of the greatest companies in the world by creating Great Hotels Guests Love. The objective of this report is to evaluate and compare the financial performance of IHG in 2011 and 2012 and also evaluate the KPIs of IHG which related to the financial performance. Finally, this report will indicate a conclusion and suggestion about how IHG to improve its financial performance. Comparison of 2011 results with 2012 results of IHG Compare with the previous year sales performance of IHG in 2011, the total revenue increased around 4% which is 1835 $m in 2012 (Appendix 1). According to the table above, most of the revenue from IHG is from American, it is almost the total of the sum of other main segments countries and also this table shows that the business model of franchised hotel is the main sources of revenue especially in American. Moreover, there are several significant changesfor the assets and liabilities of IHG.For the assets, the property, plant and building in 2012 had a significant decrease from 1362$m to 1056 $m, which is 22% decrease compare with 2011 (Appendix 1), it is due to IHG keep selling its own property in both 2011 and 2012, the non-current assets classified as held for sale of IHG increased 146%, which is 543$m (Appendix 1), these can be explain why the property, plant and building have a significant decrease in 2012. For the liabilities, the long-term liabilities of loans and other borrowings sharply increased from 670$m in 2011 to 1242$m 2012, which is almost 85% increase compare with 2011. The reason of this effect is due to IHG issued a 10 years bonds on 28 November 2012, with 3.875% fixed interest for raising its finical capital (IHG 2012). The table below is the cash flow from financial activities of IHG in 2012, the issue of long-term bonds provide $632m cash for IHG, and also it is the evidence to show why the long-term liabilities in 2012 have such increase. Ratio analysis of IHG Liquidity and Solvency Measure The analysis of the liquiditymeasure results from the appendix 2 showed above, it indicates that the interest cover of IHG increased 18% compare with 2011, the main reason of such increase is due to the profit after taxation and interest increased around 5% (Appendix 1). Interest cover is used to determine how IHG can pay interest on outstanding debt, it is a positive performance of IHG with the increase of interest cover, and it shows that IHG have generation sufficient revenues to satisfy its interest expenses. Moreover, both current ratio and quick ratio rise around 25% and 27% respectively from 2011 to 2012, the main reason of both ratios have such similar growth is based on the 9% decrease of the current liabilities of IHG in 2012 (Appendix 1), moreover as IHG is in the hotel industry, the inventories is not account for a necessary part of the operation of IHG. Working Capital Management Measure Based on the calculation results of the working capital ratio and trade debtor collection period in appendix 2, the working capital ratio of IHG in 2011 is 0.67:1 and 0.85:1 in 2012, this ratio is used to indicate whether a company has sufficient short term assets to cover its short term debt, the ratio between 1.2 and 2.0 shows the company have sufficient working capital (Proctor 2012). In IHG case, both year results show that IHG is insufficient to fulfil the best situation of the theory, however IHG still has 26.9% improve, the mean reason of the improvement is due to the new issued bonds mentioned in part 1. Furthermore, due to the revenue of IHG increase (Appendix 1), it lead IHG have a better trade debtor’s collection period from 26.01 days in 2011 to 23.27 days in 2012, it will help IHG to negotiate with its debtors with a better offer or discount. Profitability Measure The table above shows the return on shareholder funds (ROSF) have a significant increase which is more than doubleof 2011, it is a positive effect for IHG since both investors and the industry will take account to the ROSF ratio to make decision of the investment, the highest ROSF the company got means that a company is profitable and has more profit available for shareholders (The Finance Owl 2009). The return on net assets (RONA) ratio measures the ability of management to utilize the net assets of the business in order to generate profits (Chapman, R. J. 2012). There is a negative decrease of 13 % RONA in 2012, it means there is 0.37 £ loss of each 1 net assets of IHG in 2012. Asset Efficiency Measure For the asset efficiency measure, both net assets turnover and fixed asset turnover ratio decrease in the 2012, the consequence of such decrease mains that IHG may fail to use its assets optimally.Especially for the average net assets turnover, there have around 50% decrease compare with 2011, which is 0.17 in 2012 (Appendix 2), the money generate by the asset become worse than previous year. Moreover, due to the average fixed assets turnover results still positive (more than 1), current assets most likely the main reason lead the net assets turnover decrease significantly in 2012. Comparison with Hotel Industry Average Figures The diagram above is the average financial ratio of the hotel industry by CSI Market, in order to compare with the performance of IHG in 2012, the ratios used for the comparison will be the 4th quarter of the 2012. Compare with the results of the ratio measured in this report, IHG have an over standing performance of the quick ratio (Average: IHG, 0.3:0.84), working capital ratio (0.74: 0.85) and the interest coverage (6.54: 11.2). That also the reason why IHG is one of the best hotel group in the hotel industry with its favorable financial performance. Comparative Analysis of Competitor – Hilton Worldwide One of the biggest competitors of IHG is the Hilton Worldwide, the financial ratio of Hilton in 2012 showed below: Ratio IHG Hilton Interest coverage 11.2 2.01 Current ratio 0.85 1.2 Quick ratio 0.84 0.68 Asset turnover (average) 0.17 0.34 Return on shareholder funds 1.77 -0.02 Return on assets 0.63 1.29 It shows that both IHG and Hilton have different strength compare with each other, such as IHG have a better interest coverage, quick ratio and return on shareholder funds than Hilton, at the same time Hilton have a better performance of current ratio, asset turnover and return on assets, it means that Hilton may have a more effective operation strategies to manage its assets. Measurement against the IHG’s KPIs KPIs is refer to Key Performance Indicators, it help an organization define and measure progress toward organizational goals. It is about quantifiable measurements and agreed to beforehand that reflect to those organization success factors (F. John Reh 2014). The KPIs also can help the organization emphases its competitive strengths over its competitors. However, KPIs also have its disadvantages for an organization, since KPIs may have limitations to the exactness of results, which may be a rough guide for an organization rather than concrete measurement, and also once the organization designed its KPIs, it will be difficult to change. Below are the KPIs that related to the financial performance of IHG in 2012, the first one is most attractive markets and appropriate business model and the second one is best-in-class delivery. Evaluation of IHG Key Performance Indicators Most attractive markets and appropriate business model This indicator is based on the net room supply, growth in fee revenue and fee based margins to measure. The calculation of the fee based margins is the operating profit as a percentage of revenue, which exclude revenue and operating profit from owned and leased hotels, managed leases and significant liquidated damages (IHG 2012).And the fee revenue is based on the group revenue exclude the revenue from owned and leased hotels, managed leases and significant liquidated damages (IHG 2012). As both indicators in 2012 have increase compare with 2011, moreover there have 2.68 increase of the net room supply in 2012 (Appendix 3). It shows that IHG has a particular strong performance in its most attractive markets with appropriate business model. Best-in-class delivery Compare with the total gross revenue with 2011, there have around 1 billion revenue increased in 2012, moreover, there have 1% increase of room revenue through IHG owns channels and also there are totally 71.4 million Priority Club Rewards members of IHG, in 2012 there are around 8.4 million new members enrolled (IHG 2012). Conclusion and Recommendations The ratio analysis of IHG was taken into consideration in the body of this report, IHG performed considerably well service in all areas and its KPIs emphases how IHG success in the hotel industry. Moreover, with the comparison of the average financial ratio of the hotel industry and Hilton Worldwide. Although IHG has a great results in its performance, IHG still needs to improve or adopt other appropriate strategies to manage its assets, due to the results of assets efficiency measure shows that IHG have a worse performance compare with previous year and its competitors. Limitations There are several limitations of this report that have to be mention: The data of these report are based on IHG annual report 2012, however some of the data measured in its group financial statement and income statement have been adjusted, our group can only use those adjusted data to calculate each ratios. Due to the annual report of IHG 2013 published before several date of the submission of these report, after the discussion with our tutor, our group decided do use IHG 2012 and 2011 data for this report. In the calculation of the KPIs of IHG, since lot of KPIs are not relevant with the financial performance, it was difficult for our group to analysis the KPIs in these report. Ratio analysis helps in explaining the relationships between past information while customers are more interested in current information and future prospects (Account Explain 2011). Reference List Account Explain (2011) Advantages and Limitations of Ratio Analysis [online] available from [1 March 2014] Chapman, R. J. (2012) Appendix 5: Financial Ratios, in Simple Tools and Techniques for Enterprise Risk Management, Second Edition, John Wiley & Sons, Ltd., Chichester, West Sussex, UK F. John Rei. (2014) Key Performance Indicators (KPI)[online] available from [1 March 2014] InterContinental Hotels Group PLC (2012) IHG Annual Report and Financial Statements 2012 [online] available from [1 March 2014] Intern Continental Hotel Group PLC (2013) Half Year Results Presentation 6 August 2013 [online] available from [1 March 2014] Intern Continental Hotel Group PLC (2014) Our Brands [online] available from [1 March 2014] Morning Star (2014) Hilton Worldwide Holdings Inc[online] available from [1 March 2014] Proctor. R. (2012) Managerial Accounting Decision Making and Performance Management, Fourth Edition, Pearson Education Limited, Edinburgh Gate, England The Finance Owl (2009) Return on Shareholders Funds (ROSF) Ratio[online] available from [1 March 2014] Appendix Appendix 1 – Group income and financial position analysis of IHG 2012 and 2011 Appendix 2 – Ratio calculation for IHG Liquidity and Solvency measures Interest Cover □((Profit before interest and tax)/(Loan interest payable)) “=Interest Cover” 2011: □((Profit before interest and tax)/(Loan interest payable)=532/56) “=9.5” 2012: □((Profit before interest and tax)/(Loan interest payable)=556/50) “=11.2” Current Ratio □((Current assets )/(Current liabilities)) “=Current Ratio ” 2011: □(Currentassets/Currentliabilities □(=578/860)) “=0.67 ” 2012: □(Currentassets/Currentliabilities □(=660/780)) “=0.85 ” ACID Test (Quick Ratio) □((Liquid assets )/(Current liabilities)=((Current Asset-Inventories))/(Current liabilities)) “=Quick ratio” 2011: □((Liquid assets )/(Current liabilities)) “=” □(((578-4) )/860) “=0.67 ” 2012: □((Liquid assets )/(Current liabilities)) “=” □(((660-4))/780) “=0.84 ” WORKING CAPITAL Working Capital Ratio: 2011 ($M) 2012 ($M) Current Assets 578 660 Current Liabilities 860 780 Working Capital Ratio 0.67:1 0.85:1 Trade Debtors Collection Period: □((Trade debtors x 365 days)/(Sales (Revenues or Turnover) )) “=Trade Debtors collection period in days ” 2011: □((Trade debtors x 365 days)/(Sales (Revenues or Turnover) )) □(=(126 x 365days)/1768) “=26.01 days ” 2012: □((Trade debtors x 365 days)/(Sales (Revenues or Turnover) )) □(=(117 x 365days)/1835) “=23.27 days ” Profitability Measures Return on Shareholder Funds (ROSF) □(“Profit after tax less any preference dividend” /”Ordinary share capital and reserves” ) “=ROSF” 2011: □(“Profit after tax less any preference dividend” /”Ordinary share capital and reserves” =”460″ /”547″ ) “= 0.84” 2012: □(“Profit after tax less any preference dividend” /”Ordinary share capital and reserves” =545/”308″ ) “= 1.77” Return onNet Assets □(“Profit before interest and tax ” /”Net assets” ) “=Return on Net Assets” 2011: □(“Profit before interest and tax ” /”Net assets” =”532 ” /”743 ” ) “=0.72 ” 2012: □(“Profit before interest and tax ” /”Net assets” =”556 ” /”883 ” ) “=0.63 ” ProfitMargin (AKA Return on Sales) □(“Profit before interest and tax ” /(Sales (Revenues or Turnover))) “=Profit Margin” 2011: □(“Profit before interest and tax ” /(Sales (Revenues or Turnover))=”532″ /1768) “= 0.30” 2012: □(“Profit before interest and tax ” /(Sales (Revenues or Turnover))=556/1835) “= 0.30” Asset efficiency Net Asset Turnover (Average) □((Net assets )/(Sales (Revenues or Turnover))) “=Net asset turnover (Average)” 2011: □((Net assets )/(Sales (Revenues or Turnover))=) □(555/1768) “=0.31” 2012: □((Net assets )/(Sales (Revenues or Turnover))=) □((317 )/1835) “=0.17” Fixed Asset Turnover (Average) □((Non-current assets )/(Sales (Revenues or Turnover))) “=Fixed Asset Turnover (Average)” 2011: □((Non-current assets )/(Sales (Revenues or Turnover))=) □((2069 )/1835) “=1.23” 2012: □((Non-current assets )/(Sales (Revenues or Turnover))=) □((2173 )/1768) “=1.13” Appendix 3 – KPIs Calculation % Change in net room supply: □((Difference of room supply in 2011 and 2012 )/(Room suply in 2011) x100=) □(((675982-658348) )/6583481 x100) “=2.68%”

In the role of a management consultant, prepare a succinct and detailed business report for the Board of Directors of your chosen company report aimed at the Board of Directors. Extend your research from coursework 1 on financial analysis of the performance of your company to include financial and non-financial performance indicators; design a balanced scorecard and linked strategy map and evaluate the techniques used.

You are required to use the same company as in coursework 1 but permitted to choose a different company only in exceptional circumstances (for example if the company is no longer trading). Please consult the latest List of Organisations that can be used. This is contained in CW1 instructions document. Your seminar tutor will approve your choice of organisation.

The vision, strategy or goal that you identify can be published by the organisation (e.g. in their Annual Report) or identified by yourself as appropriate for the organisation.

Executive Summary
Intercontinental Hotel Groups Plc. (IHG) IHG is one of the biggest hotels group in the world, which has nine preferred hotel brands in nearly 100 countries and territories (IHG 2014), and claims to be one of the greatest companies in the world by creating Great Hotels Guests Love.

This report indicates several kinds of analysis to evaluate the financial performance of IHG, which are liquidity and solvency measure, working capital management measure, profitability measure and asset efficiency measure, besides compare the results with previous year, the results of those ratios also used to compare with the industry average ratio and Hilton Worldwide which is one of the competitors of IHG. Furthermore, this report also indicate the 2012 KPIs of IHG with evaluation of the measurement and compare with the previous year.

The results show that IHG have a great performance in most of its area, and also its performances are above the average in the hotel industry, however IHG still have to improve its management of assets in order to compare with its competitors.

Table of Content
Introduction 1
Comparison of 2011 results with 2012 results of IHG 1-4
Ratio analysis of IHG 4-7
2.1 Liquidity and Solvency Measure
Working Capital Management Measure
Profitability Measure
Asset Efficiency Measure
Comparison with Hotel Industry Average Figures 7
Comparative Analysis of Competitor – Hilton Worldwide 8
Measurement against the IHG’s KPIs 9-10
Evaluation of IHG Key Performance Indicators 10-11
Conclusion and Recommendations 11
Limitations
List of References
Appendix

Introduction:
Intercontinental Hotel Groups Plc. (IHG) IHG is one of the biggest hotels group in the world, which has nine preferred hotel brands in nearly 100 countries and territories (IHG 2014), and claims to be one of the greatest companies in the world by creating Great Hotels Guests Love.

The objective of this report is to evaluate and compare the financial performance of IHG in 2011 and 2012 and also evaluate the KPIs of IHG which related to the financial performance. Finally, this report will indicate a conclusion and suggestion about how IHG to improve its financial performance.
Comparison of 2011 results with 2012 results of IHG

Compare with the previous year sales performance of IHG in 2011, the total revenue increased around 4% which is 1835 $m in 2012 (Appendix 1). According to the table above, most of the revenue from IHG is from American, it is almost the total of the sum of other main segments countries and also this table shows that the business model of franchised hotel is the main sources of revenue especially in American.
Moreover, there are several significant changesfor the assets and liabilities of IHG.For the assets, the property, plant and building in 2012 had a significant decrease from 1362$m to 1056 $m, which is 22% decrease compare with 2011 (Appendix 1), it is due to IHG keep selling its own property in both 2011 and 2012, the non-current assets classified as held for sale of IHG increased 146%, which is 543$m (Appendix 1), these can be explain why the property, plant and building have a significant decrease in 2012.
For the liabilities, the long-term liabilities of loans and other borrowings sharply increased from 670$m in 2011 to 1242$m 2012, which is almost 85% increase compare with 2011. The reason of this effect is due to IHG issued a 10 years bonds on 28 November 2012, with 3.875% fixed interest for raising its finical capital (IHG 2012). The table below is the cash flow from financial activities of IHG in 2012, the issue of long-term bonds provide $632m cash for IHG, and also it is the evidence to show why the long-term liabilities in 2012 have such increase.

Ratio analysis of IHG
Liquidity and Solvency Measure

The analysis of the liquiditymeasure results from the appendix 2 showed above, it indicates that the interest cover of IHG increased 18% compare with 2011, the main reason of such increase is due to the profit after taxation and interest increased around 5% (Appendix 1). Interest cover is used to determine how IHG can pay interest on outstanding debt, it is a positive performance of IHG with the increase of interest cover, and it shows that IHG have generation sufficient revenues to satisfy its interest expenses.
Moreover, both current ratio and quick ratio rise around 25% and 27% respectively from 2011 to 2012, the main reason of both ratios have such similar growth is based on the 9% decrease of the current liabilities of IHG in 2012 (Appendix 1), moreover as IHG is in the hotel industry, the inventories is not account for a necessary part of the operation of IHG.
Working Capital Management Measure
Based on the calculation results of the working capital ratio and trade debtor collection period in appendix 2, the working capital ratio of IHG in 2011 is 0.67:1 and 0.85:1 in 2012, this ratio is used to indicate whether a company has sufficient short term assets to cover its short term debt, the ratio between 1.2 and 2.0 shows the company have sufficient working capital (Proctor 2012). In IHG case, both year results show that IHG is insufficient to fulfil the best situation of the theory, however IHG still has 26.9% improve, the mean reason of the improvement is due to the new issued bonds mentioned in part 1. Furthermore, due to the revenue of IHG increase (Appendix 1), it lead IHG have a better trade debtor’s collection period from 26.01 days in 2011 to 23.27 days in 2012, it will help IHG to negotiate with its debtors with a better offer or discount.
Profitability Measure

The table above shows the return on shareholder funds (ROSF) have a significant increase which is more than doubleof 2011, it is a positive effect for IHG since both investors and the industry will take account to the ROSF ratio to make decision of the investment, the highest ROSF the company got means that a company is profitable and has more profit available for shareholders (The Finance Owl 2009).
The return on net assets (RONA) ratio measures the ability of management to utilize the net assets of the business in order to generate profits (Chapman, R. J. 2012). There is a negative decrease of 13 % RONA in 2012, it means there is 0.37 £ loss of each 1 net assets of IHG in 2012.
Asset Efficiency Measure

For the asset efficiency measure, both net assets turnover and fixed asset turnover ratio decrease in the 2012, the consequence of such decrease mains that IHG may fail to use its assets optimally.Especially for the average net assets turnover, there have around 50% decrease compare with 2011, which is 0.17 in 2012 (Appendix 2), the money generate by the asset become worse than previous year. Moreover, due to the average fixed assets turnover results still positive (more than 1), current assets most likely the main reason lead the net assets turnover decrease significantly in 2012.
Comparison with Hotel Industry Average Figures

The diagram above is the average financial ratio of the hotel industry by CSI Market, in order to compare with the performance of IHG in 2012, the ratios used for the comparison will be the 4th quarter of the 2012. Compare with the results of the ratio measured in this report, IHG have an over standing performance of the quick ratio (Average: IHG, 0.3:0.84), working capital ratio (0.74: 0.85) and the interest coverage (6.54: 11.2). That also the reason why IHG is one of the best hotel group in the hotel industry with its favorable financial performance.

Comparative Analysis of Competitor – Hilton Worldwide
One of the biggest competitors of IHG is the Hilton Worldwide, the financial ratio of Hilton in 2012 showed below:
Ratio IHG Hilton
Interest coverage 11.2 2.01
Current ratio 0.85 1.2
Quick ratio 0.84 0.68
Asset turnover (average) 0.17 0.34
Return on shareholder funds 1.77 -0.02
Return on assets 0.63 1.29

It shows that both IHG and Hilton have different strength compare with each other, such as IHG have a better interest coverage, quick ratio and return on shareholder funds than Hilton, at the same time Hilton have a better performance of current ratio, asset turnover and return on assets, it means that Hilton may have a more effective operation strategies to manage its assets.
Measurement against the IHG’s KPIs
KPIs is refer to Key Performance Indicators, it help an organization define and measure progress toward organizational goals. It is about quantifiable measurements and agreed to beforehand that reflect to those organization success factors (F. John Reh 2014). The KPIs also can help the organization emphases its competitive strengths over its competitors.
However, KPIs also have its disadvantages for an organization, since KPIs may have limitations to the exactness of results, which may be a rough guide for an organization rather than concrete measurement, and also once the organization designed its KPIs, it will be difficult to change.
Below are the KPIs that related to the financial performance of IHG in 2012, the first one is most attractive markets and appropriate business model and the second one is best-in-class delivery.

Evaluation of IHG Key Performance Indicators
Most attractive markets and appropriate business model
This indicator is based on the net room supply, growth in fee revenue and fee based margins to measure. The calculation of the fee based margins is the operating profit as a percentage of revenue, which exclude revenue and operating profit from owned and leased hotels, managed leases and significant liquidated damages (IHG 2012).And the fee revenue is based on the group revenue exclude the revenue from owned and leased hotels, managed leases and significant liquidated damages (IHG 2012).

As both indicators in 2012 have increase compare with 2011, moreover there have 2.68 increase of the net room supply in 2012 (Appendix 3). It shows that IHG has a particular strong performance in its most attractive markets with appropriate business model.

Best-in-class delivery
Compare with the total gross revenue with 2011, there have around 1 billion revenue increased in 2012, moreover, there have 1% increase of room revenue through IHG owns channels and also there are totally 71.4 million Priority Club Rewards members of IHG, in 2012 there are around 8.4 million new members enrolled (IHG 2012).

Conclusion and Recommendations
The ratio analysis of IHG was taken into consideration in the body of this report, IHG performed considerably well service in all areas and its KPIs emphases how IHG success in the hotel industry. Moreover, with the comparison of the average financial ratio of the hotel industry and Hilton Worldwide.

Although IHG has a great results in its performance, IHG still needs to improve or adopt other appropriate strategies to manage its assets, due to the results of assets efficiency measure shows that IHG have a worse performance compare with previous year and its competitors.

Limitations
There are several limitations of this report that have to be mention:
The data of these report are based on IHG annual report 2012, however some of the data measured in its group financial statement and income statement have been adjusted, our group can only use those adjusted data to calculate each ratios.
Due to the annual report of IHG 2013 published before several date of the submission of these report, after the discussion with our tutor, our group decided do use IHG 2012 and 2011 data for this report.
In the calculation of the KPIs of IHG, since lot of KPIs are not relevant with the financial performance, it was difficult for our group to analysis the KPIs in these report.
Ratio analysis helps in explaining the relationships between past information while customers are more interested in current information and future prospects (Account Explain 2011).

Reference List
Account Explain (2011) Advantages and Limitations of Ratio Analysis [online] available from [1 March 2014]
Chapman, R. J. (2012) Appendix 5: Financial Ratios, in Simple Tools and Techniques for Enterprise Risk Management, Second Edition, John Wiley & Sons, Ltd., Chichester, West Sussex, UK
F. John Rei. (2014) Key Performance Indicators (KPI)[online] available from [1 March 2014]
InterContinental Hotels Group PLC (2012) IHG Annual Report and Financial Statements 2012 [online] available from [1 March 2014]
Intern Continental Hotel Group PLC (2013) Half Year Results Presentation 6 August 2013 [online] available from [1 March 2014]
Intern Continental Hotel Group PLC (2014) Our Brands [online] available from [1 March 2014]
Morning Star (2014) Hilton Worldwide Holdings Inc[online] available from [1 March 2014]
Proctor. R. (2012) Managerial Accounting Decision Making and Performance Management, Fourth Edition, Pearson Education Limited, Edinburgh Gate, England
The Finance Owl (2009) Return on Shareholders Funds (ROSF) Ratio[online] available from [1 March 2014]

Appendix
Appendix 1 – Group income and financial position analysis of IHG 2012 and 2011

Appendix 2 – Ratio calculation for IHG
Liquidity and Solvency measures
Interest Cover
□((Profit before interest and tax)/(Loan interest payable)) “=Interest Cover”
2011:
□((Profit before interest and tax)/(Loan interest payable)=532/56) “=9.5”
2012:
□((Profit before interest and tax)/(Loan interest payable)=556/50) “=11.2”
Current Ratio
□((Current assets )/(Current liabilities)) “=Current Ratio ”
2011:
□(Currentassets/Currentliabilities □(=578/860)) “=0.67 ”
2012:
□(Currentassets/Currentliabilities □(=660/780)) “=0.85 ”

ACID Test (Quick Ratio)
□((Liquid assets )/(Current liabilities)=((Current Asset-Inventories))/(Current liabilities)) “=Quick ratio”
2011:
□((Liquid assets )/(Current liabilities)) “=” □(((578-4) )/860) “=0.67 ”
2012:
□((Liquid assets )/(Current liabilities)) “=” □(((660-4))/780) “=0.84 ”
WORKING CAPITAL
Working Capital Ratio:
2011 ($M) 2012 ($M)
Current Assets 578 660
Current Liabilities 860 780
Working Capital Ratio 0.67:1 0.85:1

Trade Debtors Collection Period:
□((Trade debtors x 365 days)/(Sales (Revenues or Turnover) )) “=Trade Debtors collection period in days ”
2011:
□((Trade debtors x 365 days)/(Sales (Revenues or Turnover) )) □(=(126 x 365days)/1768) “=26.01 days ”
2012:
□((Trade debtors x 365 days)/(Sales (Revenues or Turnover) )) □(=(117 x 365days)/1835) “=23.27 days ”

Profitability Measures
Return on Shareholder Funds (ROSF)
□(“Profit after tax less any preference dividend” /”Ordinary share capital and reserves” ) “=ROSF”
2011:
□(“Profit after tax less any preference dividend” /”Ordinary share capital and reserves” =”460″ /”547″ ) “= 0.84”
2012:
□(“Profit after tax less any preference dividend” /”Ordinary share capital and reserves” =545/”308″ ) “= 1.77”
Return onNet Assets
□(“Profit before interest and tax ” /”Net assets” ) “=Return on Net Assets”
2011:
□(“Profit before interest and tax ” /”Net assets” =”532 ” /”743 ” ) “=0.72 ”
2012:
□(“Profit before interest and tax ” /”Net assets” =”556 ” /”883 ” ) “=0.63 ”
ProfitMargin (AKA Return on Sales)
□(“Profit before interest and tax ” /(Sales (Revenues or Turnover))) “=Profit Margin”
2011:
□(“Profit before interest and tax ” /(Sales (Revenues or Turnover))=”532″ /1768) “= 0.30”
2012:
□(“Profit before interest and tax ” /(Sales (Revenues or Turnover))=556/1835) “= 0.30”

Asset efficiency
Net Asset Turnover (Average)
□((Net assets )/(Sales (Revenues or Turnover))) “=Net asset turnover (Average)”

2011:
□((Net assets )/(Sales (Revenues or Turnover))=) □(555/1768) “=0.31”
2012:
□((Net assets )/(Sales (Revenues or Turnover))=) □((317 )/1835) “=0.17”

Fixed Asset Turnover (Average)
□((Non-current assets )/(Sales (Revenues or Turnover))) “=Fixed Asset Turnover (Average)”

2011:
□((Non-current assets )/(Sales (Revenues or Turnover))=) □((2069 )/1835) “=1.23”
2012:
□((Non-current assets )/(Sales (Revenues or Turnover))=) □((2173 )/1768) “=1.13”

Appendix 3 – KPIs Calculation
% Change in net room supply:
□((Difference of room supply in 2011 and 2012 )/(Room suply in 2011) x100=) □(((675982-658348) )/6583481 x100) “=2.68%”

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