Financial statement analysis of

Soaltee Crowne Plaza

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Abbreviations

Rs.- Rupees

NEPSE-Nepal stock Exchange

ROA- Return on assets

CR-Current ratio

SBI- State Bank India

IME- International money express

Co- Company

EAM- Executive Assistance Manager

Km- kilometer

IFC- International Finance Corporation

Pvt- Private

Ltd- Limited

IHG- Intercontinental Hotel Group

LSG- Lufthansa Service Holding

Dev-Development

B/S- Balance Sheet

P/L- Profit and loss account

ROA- Return On Assets

ROE- Return On Equity

DPS-Dividend Per Share

NPAT- Net Profit After Tax

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EPS-Earning Per Share

Executive summary
Hotel business is a long running and important service providing business in the hospitality
sector. In case of Nepal there are 12 five star hotels in Nepal. Among them the privilege to be the
longest running and oldest five star hotel goes to Soaltee Crowne Plaza with an excellent service
history of over 5 decades.

Every hotels are operated with a view of earning profit and it is the same case for Soaltee
Crowne Plaza which is a public limited company. The focus of this study is to understand the
history of this great hotel, examine its financial statements and to check the profitability and
liquidity position of the hotel. The preparation of this report would not be possible without the
help of the annual reports which provide most of the information for this study.

The collected data are analyzed using ratio analysis and ROA, ROE, current ratio, DPR; DPS are
calculated to help further understand the financial position of the hotel in the last 5 years.
Necessary conclusions are drawn and recommendations are made based on the reports

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 CHAPTER 1

INTERODUCTION

1.1Background of the Study

A hotel is an establishment that provides lodging, meal and other services for a
short term basis to their guests. Hotel provides many range of accommodation
from small room to large suites with most or least facilities. Most of the small
lower priced room provides most basic guest services and facilities where as the
higher priced room offers luxurious and high facilities. Hotel is all about
hospitality.

Hotel had been known as inn in ancient time. The Romans were the first
civilization to develop mansions to provide accommodation for travelers on
government business. Later Middle Ages monasteries were the first to
establishment to offer refuge to travelers on a regular basis. After that religious
started to build their inns, hospitals to cater for those on the move.
Inns were multiplying but never offer the meals. They could only provide rooms
and shelter to their guests horses. IN those time travelling became so important
for people so later inns started to offer meals with accommodation.

The first hotel was established at 1951(Nepal Hotel, Jawalakhel) which could run
only for a year. Until the peace process in 2008 the growth of the industry wasn’t
going smoothly. But now the hotels are growing and flourishing. According to
Hotel Association of Nepal (HAN) there are total ten 5-star rated hotels, two 4-
star hotels, thirteen 12-star hotels, twenty two 2-star hotels, eighteen 1-star hotels,
165 star-less hotels in Nepal and 33 resorts in Nepal. History of hospitality
industry our country Nepal is very rich in tradition and culture. Nepal has
geographical diversity. Our country Nepal has highest pick Mt. Everest and has
many unique features that can attract tourists. Hospitality industry is known as the
oldest moneymaking trade in Nepal. It is consider as the largest and highly
profitable business after petroleum industry. Hotel has been helping in earning

4
 foreign currency from many years before but it has been more popular from 2011
as Nepal was celebrating Tourism Year which was very successful.

Pg:

1.1.2 Introduction of Soaltee Crowne Plaza

“Soaltee Crowne Plaza Hotel” celebrating Golden Jubilee in November. It’s been 50years of
service excellence and reputation in hospitality business. This hotel have natural beauty of Nepal
and having successful business at pioneering 5-star Crowne Plaza Kathmandu-Soaltee Hotel.
This hotel owns 12 acres of landscaped grounds surrounded by the mountainous beauty of
Kathmandu valley with beautiful gardens surrounding their open veranda.

Soaltee Crowne Plaza Hotel is located in peaceful area Tahachal, 4km away from hustle and
bustle of city.8km away from Tribhuvan International Airport. This hotel offers stylish banquets
hall, conventions and conferences in one of 7 elegant meeting rooms with space foe 20-1200
people. Other facilities like business services, health and fitness centre, spa, public space data
services, entertainment and recreation, housekeeping and laundry services, miscellaneous. They
even held dazzling fashion shows or inspiring social events.

They serve from Indian speciality, Asian dishes and Italian cuisine at Alfresco and their
international fare at the Garden Terrace. They offer Rodi Bar, Crowne Plaza Club Lounge to
their customers.

283 Deluxe and crowne plaza rooms, executive suites and seven regal suites. Customers can
view beautiful mountain view from their elegant room and can have wireless internet. In
executive club room the morning starts with complimentary breakfast. Regal suites offer more
space to relax ,work or socialize. In this regal suites the customers can be entertain in the
separate lounge area or enjoy an intimate dinner from in-room dining menu.

Soaltee Hotel have their own “Soaltee Hotel Limited” which was the first Nepali company to
obtain a loan from international finance corporation (IFC). IFC also picked up about 14 percent
equity in the company. This was the first investment by IFC in Nepal’s private sector. There are
nine members on the Board of Directors of the Company. Four are nominated by Soaltee
Enterprises Pvt. Ltd, one Director is nominated by Holiday Inns Investment (Nepali) Limited
(IHG) and one Director by Nepal Airlines Corporation,. the institutional investor, while the
remaining three directors represent the General Public Shareholders.

As tourism industry gradually emerged during 1970s more international airlines connected
Nepal, at this period a need for an on-board catering service was felt and the Company, Soaltee
Hotel Limited started Nepal’s first flight catering service for both domestic and international

5
airlines, which is now operated as LSG Sky Chefs Kathmandu. Mr.Anurag Dewan as a Director
Flight Services, LSG Sky Chef Unit and Ms.Binita Shrestha as Director, Quality Assurance,
LSG Sky Chef Unit.

HI Soaltee Hotel Company Pvt. Ltd. is a FDI subsidiary company of Soaltee Hotel Limited
incorporated in Nepal under Joint Venture with Holiday Inns Investment (Nepal) Limited, a
wholly owned subsidiary company of InterContinental Hotels Group (IHG). Soaltee Hospitality
Limited is a fully owned subsidiary company of Soaltee Hotel Limited. Presently subsidiaries
and associate companies are currently developing premium hotels across the country to support
Nepal’s tourism industry and create economic opportunities in new areas through the
development of hotels for international and domestic tourist and business travelers.

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1.1.3 Organizational Structure of Soaltee Crowne Plaza
According to the Investopedia, “An organizational structure is a system that outlines how certain
activities are directed in order to achieve goals of an organization”. Organizational structure
determines the flow of information from various levels within the company. Organizational
structure defines the hierarchy inside an organization and most of the businesses utilize it to
effectively carry out their day to day as well as long term operations. Every successful
organizational structure defines each employee’s job and sees how they fit within the overall
system. This is also the framework of activities of the enterprise which may be considered as the
map/hierarchy of the whole organization.

Soaltee Crowne Plaza is headed by a group of robust and dedicated board members whom are as
follows:

 Mr. Dinesh Bahadur Bista (Executive Chairman Nominee Soaltee Enterprises Pvt. Ltd)
 Mr. Ravi Bhakta Shrestha (Nominee Soaltee Enterprises Pvt. Ltd.)
 Mr. Rajesh Kazi Shrestha (Nominee Soaltee Enterprises Pvt. Ltd.)
 Mrs. Jaya Rajya Laxmi Shah (Nominee Soaltee Enterprises Pvt. Ltd.)
 Mr. Sashi Raj Pandey (Elected from General Public Shareholders)
 Mr. Niranjan Kumar Tibrewala (Elected from General Public Shareholders)
 Mr. Prakash Bikram Khatri (Elected from General Public Shareholders)
 Ganesh Bahadur Chand (Nominee, Nepal Airlines Corporation)
 Mr. Venkatesh Gomatam (Nominee Holiday Inns Investment (Nepal) Ltd)
 Mr. Lil Bahadur Khatri (Company Secretary)

Similarly the following people are associated with the Middle level/Management team:
Corporate:
 Mr. Dinesh Bahadur Bista (Executive Chairman)
 Mrs. Durga Shrestha (Chief Accountant)
 Mr. Lil Bahadur Khatri (Company Secretary)
 Mr. Kiran Lal Joshi (Director - Business Dev. & Projects)
 Mr. Mukti Nath Shrestha (Manager – Finance)
 Mr. Chudamani Parajuli (Manager – Legal & Liaison)

Hotel Operations:

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 Mr. Upaul Majumdar (General Manager)
 Mr. Vijayananmaran Shanmugam (Executive Assistant Manager (EAM))

 Mr. Sudarshan Chapagain (Director of Finance & Business Support)

 Mr. Sanjana Laha (Director Sales & Marketing)
 Mr. Sarju Ranjit (Director Human Resources)
 Mr. Anurag Dewan (Senior Director Flight Services)
 Mr. Prakash Gupta (Chief Engineer)
 Mr. Yubraj Pokharel (Executive Chef)
 Ms. Binita Shrestha (Director Quality Assurance)
 Mr. Sagar Chandra B Rai (Director Sales)
 Mrs. Sumati Shakya (Crowne Meeting Director)

Internal Auditors:

*Prabin Joshi & Co. Chartered Accountants Kathmandu

Legal Advisors:

1) Mr. Komal Prakash Ghimire (Senior Advocate GHIMIRE&COMPANY Kathmandu)

2) Mr. Arjun Prasad Lamsal (Senior Advocate Bijaya Law Firm Kathmandu)

3) Mr. Madhab Prasad Bhattarai (Senior Advocate, Bhattarai & Associates Kathmandu)

4) Mr. Samir Sharma (Advocate, S S LEGAL PVT. LTD. Kathmandu)

5) Mr. Mahesh K Thapa (Advocate, SINHA VERMA LAW CONCERN
KATHMANDU)

Auditors:

*PKF T R UPADHYA & CO. (Chartered Accountants Kathmandu)

Bankers:

 Nabil Bank Limited

 Nepal Investment Bank Limited
 Everest Bank Limited
 Global IME Bank Limited
 Nepal SBI Bank Limited

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 1.1.4 Objective, Vision and Mission:
Soaltee Crowne Plaza is undoubtedly one of the most successful hotel chains in Nepal. It is
owns of the most popular five star hotels of Nepal. It has the following vision, mission, and
objectives:

 The main objective is to facilitate the full potential of services to our guest for their
comfort and lively environment.
 To increase the standard of the hospitality services by providing trainings to new trainees,
staff and management.
 Diversification of investment to reduce risk
 Preparing for Tourism year 2020
 To extend further international partnership and cooperation.
 Expansion into more profitable like main tourist attracting places of Nepal.
 One of our objectives is to not only maintain good relationship with guests and our
shareholders but also maintain good relationship and understand among the employee
and employers.

1.2 PROBLEM STATEMENT

Hotel has become very popular among tourists and as well as common local people. It has also
become common place to celebrate or party any occasion and festivals. Hotels is also one of the
main reasons for earning foreign currency after export and import of goods but it has slow down
in increasing tourists number after devastating earthquake following by the supply line
disruptions from our neighboring country India. Our country is rich in cultural, geographical,
natural but we don’t have strong point of publicity which can inform other foreigners about our
beautiful country. I believe with time, generation and focus in our current conditions there must
be changes in publicity. Our country have lots of political parties and their conflicts which can
cause lots of strikes, conflicts and the outcome of these issues will damage the reputation of
tourism in our country. Every time strikes can impact damage in reputation which can make less
attractive and appealing to visit this beautiful country.

The following problems were presented while presenting facts about the enterprise operation in
market, following queries are necessarily to be met based upon the criteria:

1. Can Soaltee Crowne Plaza adapt to the changing business world?

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 2. How is Soaltee C.P. facing competition in today’s market?
3. How can Soaltee C.P. maintain or amend the level of hospitality and customer service?
4. Can Soaltee C.P. successfully expand into new markets?
5. How profitable or sustainable is Soaltee C.P.’s investment plan in the future?
6. Are customer’s needs effectively satisfied?
Pg:

1.3 Significance of the study

This study is carried out to fulfill the partial requirement of BBS 4th year. So this is significant
for me to fulfill the requirement of BBS 4th year. Also the detailed methodology applied to carry
out this research is described in this and all the name of the writer and their publication are
included in the bibliography. So this project work will be helpful to those who wants to carry out
the study regarding the financial statement of the Soaltee Crown Plaza hotel and Soaltee Limited.
Other objectives for this study are as follows:

i) To learn about the historical background of SCP

ii) To understand the financial performance of SCP
iii) For analysis into the financial stability of SCP
iv) To provide necessary suggestions and recommendation based on the analysis and
conclusion of the study
v) To prepare an analysis of liquidity and profitability position of SCP

1.4 Focus of the study

Hotel business is one of the main service industries which is responsible to accommodate the
tourists and is directly responsible for the tourism sector’s performance in our country. They not
only help accommodate tourist but also provide services to launch events and employs a large
number of people. Hotel business in Nepal is as risky as it is lucrative they hold the backbone of
our economy’s development by bringing in foreign currency and helping solve the
unemployment problem in our country.

To understand the financial situation of SCP it becomes necessary to adjust the profitability and
liquidity position of the Hotel in order to spot the financial weaknesses and take the corrective
actions against them. Evaluating, analyzing and interpreting the comparative profitability
position of banking in our country hence is one of the main objectives of this research.

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This study is focused on examining the financial statement in the F/Y 2074/75, 2073/74, 2072/73,
2071/72 and 2070/71 of SCP. The calculation and analysis of the liquidity and profitability
position of SCP was carried out by applying different analytical tools and techniques.

1.4 Importance of the Study:

Hotel industry has become most important part of our hospitality and in tourism sector. The main
objective of this study is given below:

 The various findings and conclusions of this study will add to the literature of research
and add to the liquidity and profitability position of SCP
 The study will be of great significance as it helps the readers and the organization to learn
of the financial position and current situation’s status regarding liquidity and profitability
 Finding from the report will be of great value to the investors for making proper
investment decision into hoteling business.
 Results from this research will provide view point from new dimensions which might not
have been explored by the hotel’s management. It provides new light into the degree of
management and hence will be useful in making future financial decisions
 The study will help ordinary readers to learn more about SCP and its financial status
widening the horizon of understanding to even normal readers.
 The shareholders are the real owners of the Hotel. They are mainly concerned with the
returns which they receive from their investments. This study will also be immensely
helpful to the shareholders in adjusting their investment and will help them understand if
their funds are properly being utilized and whether or not they are receiving a fair share
of return on their investment.
 The study will also immensely help the policy makers such as the government officials,
tax collectors, Auditors, Nepal Stock Exchange, Internal Revenue Office, etc. for
formulating policies, rules and regulations regarding the operation of the Hotels.
 Lastly this will also be useful for the future management studies and research purpose for
students who wish to prepare of review their research work.

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 1.5 Limitation of the Study:

There are some limitations while preparing this report. The few points of limitation in this study
are given below:

 This study is focused on only on the Kathmandu branch of SCP.

 This study covers a period of only five years (F/Y2074/75, 2073/74 2072/73,
2071/72 and 2070/71).
 The data of this research is based only on historic data hence it only shows the
liquidity and profitability position of the past and cannot accurately forecast the
future.
 There were problems of limited time frame and financial constraints during the
preparation of this the study.

 The data used in the study are of secondary nature, extracted from the financial
statements of the hotel. So all those limitation underlined in the financial
statements are the limitation of the study too.

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 Chapter 2

REVIEW OF LITERATURE

2.1.1 History of Hotel industry in Nepal:

The food and beverage industry in Nepal is a very competitive and mature industry with
little growth. Due to the competitive nature of the market more time than not the Increase
in a company’s market share usually come at the expense of a competitor’s loss of market
share (cannibalization). The small and medium sized hotels in Nepal are mostly in intense
competition with one another and due to the lack of funds are not able to modernize or
expand into newer regions or introduce new services.

In the current time period there are 12 five star hotels, ( fill out other hotel’s numbers)
The lucrative hoteling business has immense scope in Nepal as the end of Maoist Civil
war has brought back the many lost tourists and has caused huge spikes in the numbers of
tourist visiting Nepal. The “Visit Nepal 2020” initiative is also responsible for attracting
more tourist than ever before and is estimated that almost 2million tourist annually will
be reached by that time. The increasing numbers of Chinese tourists as well as tourists
from Europe and US are now competing with the Indian tourist’s numbers. It is easy to
see why hotel business is booming now more than ever in Nepal and the interest of both
investors and entrepreneurs are now focused on this industry. This is why hotel business
has a major impact on the economy of Nepal today.

2.1.2 Research methodology:

The basic objective of the study is to learn more about the liquidity and profitability position of
the SCP. Hence to accomplish this objective a proper research methodology needs to be
followed. Research methodology describes the methods, processes tools and techniques applied
in the entire process of a scientific research.

Descriptive research methodology was used to complete this study as it provides maximum
information on the necessary areas. Some of the adopter research methodology for this study was
consisting of: Sources of data, data collection techniques and data analysis tools.

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2.1.3 Sources of Data
Any research work relies on various data collected from different sources. The 2 main sources
from which data can be collected consist of the primary and secondary source.

The data which are originally collected by the investigator himself/ herself from various sources
are known as primary source of data. Primary data is the most reliable and important source of
data for any research as it is usually accountable data, only useful data are collected and since
primary data are fresh/ new.

Secondary data are the types of data collected from other various sources other than the
researcher’s own work for the purpose of research. The secondary data are considered less
reliable than secondary data and are not considered to be good sources of data. The data can be
collected from both published and unpublished sources.

2.1.4 Data collection Technique:

While preparation of this research the data which were thought to be appropriate for the stud was
secondary data which could be obtained from the annual reports of SCP. After the collection of
data the required data have been processed and represented in various forms. They have thus
been tabulated and presented in forms of bar diagrams by the use of various financial tools.

2.1.5 Literature review

Every public limited company like Soaltee Crowne Plaza must present annual report to its
stockholders. The information which is given to them can be explained in mainly 2 types which
are as follows:

i) Verbal section: This part of the report is presented mainly in a descriptive form by
the chairman of the hotel. In this part the recent major developments and changes of
the hotel as well as the profitability and liquidity position in the past and current are
discussed in a descriptive essay format.
ii) Descriptive section: This is the main body of the report whereas the first portion is
similar to only a summary of this part. Here the annual report is presented in forms of
financial statement, profit and loss account and Balance sheet which are the main
economic figures of the annual report. When these parts are taken together the
statements give an accounting picture of the hotel’s operation and liquidity as well as
profitability position of the hotel.

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 Each part of these 3 financial statements provides a different picture and gives a different
insight into the operation of the business. The P/L account reports the profit and loss earned
during the year by showing the various statements of income and expenses. Although these
statements cannot fully report the real liquidity and profitability position of the bank yhey are
vital to understand the financial situation of the hotel. These statements alone fail to provide
the full financial data required to make decisions by the management.

Hence in order to find the important data and calculations necessary for the analysis of the
hotel we need to use various financial tools to determine the real financial position of SCP.
The present study is promoted towards reaching this objective.

Study of Profit & Loss Account:

2.2.1 Meaning: It is a part of a financial statement, which shows net loss of a company for a
specified period. The accounting year means calendar year of 12 months or less or more than 12
months. Studying this account helps gain insight to learn more about the profitability situation of
the Hotel.

2.2.2 Contents: This presents the revenues and expenses of a company and shows the excess of
revenues over expenses for profit and vice versa for a loss. It reviews the various income and
expenses incurred during the operation of the hotel.

2.2.3 Main Items of Profit and Loss Account:

 Turnover or sales: The aggregate amount of sales and connected items with the sales such
as commission paid to sole-selling agents and other selling agents and brokerage and
discounts on sales other than usual trade discount.
 Depreciation: The amount of depreciation of fixed assets in case of Nepal are as follows:
For class A (Buildings, structure and similar works of a permanent nature)- 5%
For class B (Computers, fixtures, office furniture and office equipment)- 25%
For class C (Automobiles, buses and minibuses)- 20%
For class D (Construction and earth-moving equipment and any depreciable asset not
included in another class)- 15%
For class E (Intangible assets other than depreciable assets included in class “D”)- During the
life of the assets.

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 Interest on loans and debentures
 Miscellaneous expenses
 Preliminary expenses
 Provision for taxation
 Unclaimed dividends

 Interim dividends

2.3. Study of Balance Sheet

2.3.1 Meaning
The balance sheet is similar to a financial snapshot of the company’s condition at a single point
in time. A balance sheet contains a list of the company’s assets, liability and Capital accounts.
Its formula is Assets= Capital+ Liabilities
Balance sheet is a documented report of your company’s assets and liabilities. The residual
ownership of your company’s assets and obligations are documented in a balance sheet. This is
important for showing an investor or creditor when they want to know how the company is
doing. It is a cumulative record which reflects the result of all recorded accounting transactions
since the hotel was formed. Balance sheet can be used to specifically know what the company’s
worth on any date.

2.3.2 Parts of the B/S

Current assets: Current assets include assets which can be converted into cash within the
operating cycle in normal course of events. In case of hotels the raw material which can be
prepared to create food to sell and acquire cash is an example of the operating cycle. The circle
of buying goods with cash and returning it back to cash is known as an operating cycle.
Operating cycles can be completed in a year or may take over a year to complete in some cases.
The time required to complete an operating year depends on the business itself and its nature.
Current assets are considered those assets which can be converted into cash within a normal
course of the business. Current assets usually listed in the orders of their liquidity and consist

16
frequently of cash, temporary investments, accounts receivable, inventories and prepaid
expenses.

 Cash: Cash is simply the money on hand and/or on deposit which is available for general
business purposes. Cash is always listed first on a balance sheet as it is already converted
into liquid form and is readily available for any use in the business. However, cash held
for some designated purpose, such as the cash held in a fund is excluded from current
assets.

 Marketable Securities: These investments are temporary in nature and are made from
excess funds that you do not immediately need to conduct operations until you need these
funds; they are invested to earn a return. These usually have a life of one year or less.

 Accounts Receivable: Any amount owed to the business to the business but not paid are
accounts receivable. These maybe evidenced in the balance sheet on forms of promissory
notes or in other forms. These are the amounts billed to the business by the customer and
is owed to the business on the balance sheet’s date. The account receivable needs to be
labeled appropriately and shown apart from others arising during the course of the trade.
It these amounts are currently collectible they can be classified as current assets.

 Inventories: Inventories are the goods that are available for sale, products that that the
business has in a partial stage of completion, and the materials that the business will use
to create their products. The costs of purchasing merchandise and materials and the costs
of manufacturing the various products are accumulated in the accounting records and are
identified with either the cost of the goods sold during the fiscal period or as the cost of
the inventories remaining.

 Prepaid expenses: Expenses of payments made for services that will be received
in the near future but have not yet occurred are known as prepaid expenses. Strictly
speaking, prepaid expenses will not be converted to current assets in order to avoid
penalizing companies that choose to pay current operating costs in advance rather than to
hold cash. Often insurance premiums or rentals are paid in advance. This form of
expenses is very common in the business of hoteling.

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Investments: Investments are cash funds or securities which are held for a designated purpose
for an indefinite period of time. This is mobilization of the unutilized cash in the business.
Investments can be in forms of stocks or the bonds which may be held for another company, real
estate or mortgages that the business is holding for income-producing purposes.

Fixed Assets: Fixed assets referes to the assets which have a life span of over a year and are
mainly divided into 5 groups in Nepalese context. They include buildings and similar
infrastructure under class A, Computers, furniture and equipment under class B, vehicles under
class C, Construction and other equipment under class D and any intangible assets under class E.

No hotel business can run without these assets and in-case of a 5star hotel like Soaltee hotel
these assets are their major strengths. The financial position of the hotel, prestige, pride and main
attraction all comes under the Buildings and infrastructure of the hotel. Which is why this is one
of the most important aspects of the balance sheet for the hotel.

Intangible Assets: The fixed assets have a physical substance but some assets which cannot
be categorized as fixed assets due to their lack of physical substance are referred to as intangible
assets. They contain valuable rights, privileges or advantages. Although the intangible lack a
physical substance they can hold great value for the business. Sometimes the rights, privileges
and advantages of the business may be worth more than all the other assets combined.

Other Assets: During the course of preparing the balance sheet we can notice there are other
assets that cannot be classified as current assets, investments, fixed assets, or intangible assets.
These assets are listed on the balance sheet as other assets. Other assets usually, consists of
advances made to company officers, the cash surrender value of life insurance on officers, the
cost of buildings in the process of construction, and the miscellaneous funds held for special
purposes, etc.

Current liabilities: : Current liabilities are obligations that will discharge within the normal
operating cycle of the business. In most cases current liabilities will be paid within the next year
by using the current assets. The amount owed under current liabilities often arises as a result of
acquiring current assets such as inventory or services that will be used in current operations. The

18
amounts owed to trade creditors that arise from the purchase of materials or merchandise which
is known as accounts payable are one of the common examples of current liabilities in the
hoteling business. Notes payable are other form of current liabilities where the business is
obligated under promissory notes that support bank loans or other amounts. Other current
liabilities may include the estimated amount payable for income taxes and the various amounts
owed for wages and salaries of employees, utility bills, payroll taxes, local property taxes, etc.

Long-Term Liabilities: The debts that are not due until more than a year from the balance sheet
date are generally classified as long-term liabilities. Notes, bonds and mortgages, long term loans
are often listed under this heading. If the portion of long-term debt is due within the next year, it
should be removed from the long-term debt classification and shown under current liabilities.

Deferred Revenues: The customers may make advance payments for merchandise or services
for example booking or advanced payments. The obligation to the customer will be settled by
delivery of the products or services and not by cash payment. Advance collections received from
customers are classified as deferred revenues, pending delivery of the products or services and in
the hotel business it is usually consisting of payments for booking the venue or rooms.

Owner's Equity: Owner's equity must be subdivided on the balance sheet: One portion
represents the amount invested directly by the shareholders in the business, plus any portion of
retained earnings converted into paid-in capital. The other portion represents the net earnings that
are retained. Ordinarily, stockholders are not personally liable for the debts contracted by
business. A stockholder may lose his/her investment, but creditors are still owed the credit.
Normally the stockholders may withdraw as cash dividends an amount measured by the
corporate earnings. The distinction in this rule gives the creditors some assurance that a certain
portion of the assets equivalent to the owner's investment cannot be arbitrarily withdrawn and
hence the credit can be repaid. This portion could be depleted from the balance sheet because of
operating losses. The interest of each owner is given in total, usually with no distinction being
made between the portion invested and the accumulated net earnings. The creditors are not
concerned about the amount invested. If necessary, creditors can attach the personal assets of the
owners.

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2.3.3 BALANCE-SHEET STRUCTURE
Basis of balance-sheet: Assets = Liability + Equity
Balance sheet is based on the principal that the Assets are always equal to the amount of liability
and equity invested into the business. This formula is intuitive: a company has to pay for all the
things it owns (assets) by either borrowing money (taking on liabilities) or taking it from
investors (issuing shareholders' equity).

Source: Investopedia

The following are the important aspects of the balance sheet:

 A balance sheet is a financial statement that reports a company's assets, liabilities and
shareholders' equity.
 The balance sheet is a snapshot, representing the state of a company's finances (what it
owns and owes) as of the date of publication.
 Fundamental analysts use balance sheets, in conjunction with other financial statements,
to calculate financial ratios

2.4.1 Financial Statement Analysis:

Meaning: Financial statement analysis is the process of examining relationships among

financial statement elements and making comparisons with relevant information about them. It is
a valuable tool used by various parties such as investors and creditors, financial analysts, etc. in
their decision-making processes related to investment or purchase and sale of stocks, bonds, and
other financial instruments. With a great understanding of the balance sheet & P/L account and
how it is constructed, we can look at some techniques to analyze the information contained
within the balance sheet & P/L account.

2.4.2 Purpose:

Financial statement analysis is mainly used for the following purposes:

 To assess past performance and current financial position.

 To make predictions about the future performance of a company.

20
  For analyzing stability, solubility, solvency and profitability of the business
 For ascertaining the investment value of the business

2.5.1 Financial Tools

Financial statement must be made easy to read and understand for any reader to analyze the
profitability and liquidity position of the hotel. This can be achieved by applying the financial
tools for example comparative balance sheet, income statements, common size percentages, fund
flow analysis, cash flow analysis, ratio analysis, etc. In this study however only ratio analysis has
been used.

Ratio Analysis
Ratio analysis is one of the most universally used techniques of financial analysis. Ratio analysis
was pioneered by Alexander Wall in 1919. This is one of the key principal techniques used in
judging the various condition portrayed by the financial statements. It is a systematic use for
ratios which is used to intercept the financial statements so that the strengths and weaknesses of a
firm as well as its historical performance and current condition can be determined.

Ratio can be defined as ‘a relationship between 2 numbers indicating how many times the first
number contains the second’ (Wikipedia). A ratio can also be defined as a fixed relationship in
degree and number between two numbers. In finance ratios can be used to point out relationships
that are not obvious from raw data such as relationship between investment and income, between
current assets and current liabilities, etc.

Ratio analysis is also useful to make rational financial decisions not only for the hotel but also
for outsiders such as shareholders, investors, bankers, depositors, etc. It also provides guides and
clues in supporting trends towards better or poor performance and in finding important
deviations from as average applicable standard. There are also several ratios that can be
employed but the type of ratio one hotel would use depends on factors such as purpose for which
the analysis is made, size of the hotel; need to prepare the ratio, etc.

Some of the various ratios which can be used to calculate various forms of accounting data are as
follows:

i) Liquidity ratio
ii) Profitability ratio
iii) Structural ratio
iv) Turnover ratio
v) Market Value ratio
vi) Other ratios

21
 The study can be conducted with the following liquidity and profitability ratios:
A) Liquidity ratios:

Liquidity/solvency can be defined as the ability of hotel to meet its current or short-term
obligations when they become due for payment. Liquidity is a pre-requisite for the survival of
any organization including hotel. The liquidity can be measured with the help of liquid ratios.

A liquidity ratio is a financial ratio that indicates whether a company’s current assets will be
sufficient to meet the company’s obligations when they become due. Lack of liquidity can
potentially damage the reputation of the hotel and subsequently may lose trust from its
customers. Higher the liquidity higher will be the solvency which means there is a sound short
term financial position of the hotel.

Some of the ratios which indicate the liquidity position of hotels are as follows:

a. Current ratio

The current ratio is the measure of a hotel’s ability to make its payment on short term
liabilities with the use of its short term assets. It measures the short term solvency position of
the hotel. The ratio between current assets and current liabilities can be defined as current
ratio. This also shows by how many times the current assets are greater than the current
liabilities.

The current assets contains items such as cash & bank balance, money at call and short notes,
loans, credits, overdrafts, bills purchased and discounted. The current liabilities includes
items such as saving deposits, fixed deposits, current deposits, call and short deposits, bills
payable, tax provision, staff bonus and dividend payable, other deposits and short term loans
which includes miscellaneous current liabilities.

The current ratios are determined by the following formula:

Current ratio= Current Assets/ Current Liabilities

The ratio is optimum at the ratio of 2:1 and higher the ratio, higher will be the ability for the
hotel to repay its liabilities.

22
b. Quick ratio

This ratio shows the relationship between quick/liquid assets and current liabilities. The
quick ratio can be calculated by the following formulas:

Liquid/quick Assets= Total current assets-Inventory- Prepaid Expenses

Quick/Liquid Ratio= Liquid Assets/ Current Liabilities

Higher the quick ratio higher will be the firm’s capacity for paying the hotel’s current
liabilities.

Profitability Ratio

Profitability ratios are mainly concerned with measuring the operating efficiency of the
bank. Profitability ratios are made to mainly answer the following main questions:

 Is the profit earned by the hotel adequate?

 What return does it represent?
 What is the rate of profit for various divisions and segments of the firm?
 What are the earnings per share?
 What amount was paid on dividends?
 What is the rate of return to equity holders?

Profit is the ultimate motivation and goal of hotels and it will have no future if it fails to
make adequate profits. The profit can be defined as the difference between total income
and total expenses over a period of time. Profit earned and obtained is used to pay
interest, preference dividend and tax after which it is distributed in forms of dividend or
saved for reasons like expansion or as reserves.

The profitability of the hotel is measured with a help of profitability ratios such
as:

23
 1. Return on assets (ROA)

Return on assets refers to the ratio between the net profit and total assets. This ratio shows
the contribution of assets in earning profits.

NPAT
Its formula is ROA =
TotalAssets

Higher return on ROA signifies more return on fewer assets and vice versa

2. Return on Share Holder’s Equity

This is the ratio which shows the relationship between net profit and the shareholder’s equity.

It is calculated using the following formula

NPAT
Return on Share Holder’s Equity =
ShareholderEquity

Higher the ratio of SHE shows better the use of capital which means earning more profit from
lesser Shareholder’s equity and vice versa.

3. Return on Capital Employed:

This refers to the percentage of profit earned on capital employed into the business. It is
calculated using the following formula:

NPAT
Return on capital Employed =
CapitalEmployed

24
Return on capital employed gives a broad view into the relationship between Net Profit After
Tax and Capital Employed. This ratio can be analyzed in the way that more the ROE better the
hotel is. This is explained by earning more profit from less capital employed is better than vice
versa.

4. Return on Common Equity:

After payment of interest on debenture and dividend on preference share the amount which
remains is known as return on common equity.

NPAT  Pr eferencedividend
Its formula is as follows: Return on common equity=
CommonShareholderEquity

Higher the ratio of return on Common equity better will be the utilization of the investment.

5. Earning Per Share

The Earning Per Share is determined by dividing the earnings which is available to the equity
holders by number of equity holders/ number of equity shares outstanding.

The formula for EPS is as follows:

EarningAvailabletoEq uityShareholders
EPS =
No.ofEquityShareouts tan ding

The earning per share on EPS is calculated by dividing the earnings available to the equity
holders by number of equity holders or number of equity shares outstanding. Higher the EPS
more profitable it is for the investors.

25
 The next formula for EPS is as follows:

NPAT  Pr eferencedividend
EPS=
No.ofEquityshareouts tan ding

Earning available to equity shareholders are earnings available after deducting

interest, dividend on preference share and tax.

6. Dividend Per Share (DPS)

Dividend Per Share is determined by dividing earnings paid to the shareholders by the number of
equity shares outstanding.

Dividendpaidtoshareholders
Its formula is as follows: DPS=
No.ofEquityshareouts tan ding

7. Dividend Payout Ratio (DPR)

The DPR is used to show the relationship between earning of a hotel belonging to ordinary
shareholders and dividend paid to them from those earnings. This tells the hotel what proportion
of the earning per share needs to be paid in cash dividends and what proportion needs to be put
back for growth and expansion into the business.

DPR is calculated by using this formula:

Dividendpershare
DPR=
Earningpershare

8. Dividend Yield:

The dividend yield is used to evaluate the shareholder’s cash receipts in relation to the market
price per share. It expresses the dividend per share as a percentage of the bank market price per
share.

Dividend yield is determined by dividing the cash dividends per share by the market price per
Dividendpershare
share. Its formula is as follows: Dividend yield=
Marketpricepershare

26
Higher the growth potential greater is the retention of earning and vice versa.

9. Earning Yield:

Earning yield/ earning price ratio can be defined as the ratio of earning per share to the market
price per share. This indicated the return for shareholders in return to make market price per
share.

Earningpershare
Its formula is as follows: Earning Yield=
Marketpricepershare

10. Price Earning Ratio:

The price earning ratio reflects the investor’s perception about the overall risk of the bank
earning and growth in the bank earnings. This indicated the investor’s judgment about the bank’s
performance. This also tells the price currently bargained by the market participation in common
stock for each rupee of earning.

The P/E ratio can be calculated by the following formula:

Marketpricepershare
P/E ratio=
Earningpershare

27
 CHAPTER 3
PRESENTATION AND ANALYSIS OF THE DATA
This chapter deals with the presentation, analysis and interpretation of the data collected from
primary sources and secondary sources and presenting the data in the tables, pie chart and bar
diagram in order to meet the objectives of the study. These tables are presented to make it easy
and quick for analysis and interpretation for analysis and interpretation of data.

The amount recommended for distribution as dividend

The Board has recommended a Cash Dividend distribution at the rate of 16.31578947% of the
subscribed and paid up share capital aggregating Rs. 108,673,558 and Bonus Shares at the rate of
10% of Subscribed and Paid up Share Capital held in the Company.

Amount of Dividends remaining unclaimed by the shareholders

The dividend yet to be collected by the Shareholders amounts to total Rs. 6,534,596 (previous
year Rs. 6,062,351 /-) as on 16 July 2018 (32 Ashadh 2075) for the fiscal year which include
dividends not collected from the fiscal year 1992/93 to 2016/17 (2049/50 to 2073/74). Out of
above mentioned unclaimed dividends, Rs. 1,323,175 (previous year Rs. 1,102,304 /-) pertains to
the fiscal years from 1992/93 to 2011/12 (2049/50 to 2068/69) - periods more than five years
from the dates of declaration. Under the Companies law, the dividend not claimed / received by
any shareholder even after a period of five years from the date of resolution adopted by the
Company in its Annual General Meeting to distribute dividend should be deposited to the
Investor Protection Fund to be established by the Government of Nepal.

Now the presentation of data in table, bar diagram and pie chart is given below:

28
 Income statement of Soaltee Hotel Limited

For the F/Y 2074/75, 2073/74, 2072/73, 2071/72 and 2070/71

Particular 2074/75 2073/74 2072/73 2071/72 2070/71

Total Revenue 1664.20 1640.52 1244.09 1438.84 1407.23
Total Expenditure 1301.29 1459.90 1106.23 1167.02 1091.34
Profit from Operation 362.09 180.62 137.86 271.82 315.90
Less: Finance cost 0.82 0.70 0.61 0.27 -
Profit before taxes 362.09 179.92 137.25 271.55 315.90
Less: Provision for 70.32 48.76 31.34 56.77 72.96
Income Tax
Less: Deferred Tax 12.54 (7.57) 6.03 (5.32) (1.05)
Expenses/ (Income)
NET PROFIT AFTER 279.23 138.73 99.88 220.10 243.98
TAXATION
NET TRANSFER TO 279.23 138.73 99.88 220.10 243.98
RESERVES FOR THE
YEAR
Proposed Dividend(%) 26.31 21.05 21.05 30 30

Table:1 Income statement

29
The income statement is one of the most important parts of financial statement. As seen here the
major parts which include total revenue and expenditure, financial costs, tax and net profit after
tax are recorded here for the F/Y of 2074/75,2073/74, 2072/73, 2071/72 and 2070/71.

Income statements are focus on 4 key items: revenue, expenses, gains and losses. It does not
cover receipts or cash payment. The format goes as follows starting with sales and computing to
the net income and eventually to find out the EPS. It essentially gives an account to how the net
revenue realized by the company gets transformed into net earnings (profit or loss)

It is based on the following key points:

 Income statement is one of 3 main financial statements which reports a company’s

financial performance over a specific accounting period.
 The formula for Income statement is:
Net Income= (Total Revenue+ Gains) - (Total Expenses +Losses)
 Total revenue is the sum of both operating and non-operating revenues while total
 expenses include those incurred by primary and secondary activities.
 Revenue is earned and reported on the income statement, they are not receipts.
 Income statement provide valuable insight into a company’s operations, efficiency of its
management, under-performing sectors and its performance relative to industry
peers.(source: Investopedia)

30
 Total Revenue, Profit from Operation and Net Profit

1800

1600

1400

1200
Axis Title

1000

800

600

400

200

0
2013/14 2071/72 2072/73 2073/74 2074/75
Total Revenue 1407.23 1438.84 1244.09 1640.52 1664.2
Profit from Operation 315.9 271.82 137.86 180.62 362.91
Net Profit 243.98 220.1 99.88 138.73 279.23

Fig:1 Total revenue, profit from operating and net profit

The total revenue of Soaltee Hotel has slightly increased from Rs.1407.23 to Rs.1438.84 from
2070/71to 2071/72.But it has decreased to Rs.1244.09 in the 2072/73 year and again increased
gradually in 2073/74 to 2074/75 i.e. Rs.1640.52 to Rs.1664.20. Similarly, we can see some
changes in profit from operation as in year 2013/14 and 2014/15 as it also increased from
Rs.1091.34 to Rs.1167.02 but slightly decreased in to Rs.137.86 .We can see rapid increase in
year 2073/74 and 2074/75 bearing Rs.180.62 to Rs.362.09. Therefore, the net profit increased
from 2070/71 to 2071/72 is Rs. 279.23 to Rs.138.73 bearing profit. As in 2072/73 the net profit
is loss comparing to other years Rs.99.88.The highest net profit is Rs.243.98 and Rs.220.10 of
year 2074/75 and 2073/74respectively.

31
 Room Revenue, Occupancy, Average Room Rate (ARR) and REVPAR

Increase/(
Particular 2074/75 2073/74 2072/73 2071/72 2070/71 Decrease)
%This FY
VS Last
FY
2073/74
Room Count 210 282 282 282 282 (25.53%)
Room Revenue(in million) 442.42 468.40 361.52 524.72 539.53 (5.55%)
Room Available 76797 102930 102930 100884 99747 (25.39%)
Saleable Room 76797 102930 102930 100884 99747 (25.39%)
Room Occupied 48779 55820 47341 65781 71148 (12.61%)
Occupancy Percentage 63.52% 54.23% 45.99% 65.20% 71.33% 9.29%
Average Room Rate (ARR) Rs. 9070 8391 7636 7977 7583 8.09%
REVPAR(Revenue Per Available 5761 4551 3512 5201 5409 26.59%
Room) Rs.
(Rs in Million)

Table:2 Room Revenue, Occupancy, Average Room Rate (ARR) and REVPAR

The Average Room Rate (ARR) and Revenue per available Room (REVPAR) in 2070/71 is
Rs.7583 and Rs.5409.In 2071/72 the ARR increased to Rs.7977 but decreased to in 2072/73
bearing Rs.7636.Next year the ARR again increased to Rs.8391 to Rs.9070 whereas the
REVPAR has been decreasing for 2year from 2072/73 to 2073/74 with Rs.5201 to Rs.3512.After
2year falling REVPAR again increased from Rs.4551 to 5761.

32
 ARR and REVPAR

10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
2070/71 2071/72 2072/73 2073/74 2017/18
Average Room Rate(ARR) 7583 7977 7636 8391 9070
RevPAR 5409 5201 3512 4551 5761

Fig:2 Average Room Rate (ARR) and REVPAR

Here we can observe the graphical representation of the Average Room Rate and the Revenue
Available Per Room. The blue represents the ARR and the Red represents the RevPAR.

While the ARR is increasing more and more every year reaching from 7583 to 7977 in the F/Y
of 2070/71 and 2071/72 respectively. After this there is a decline in 2073/74 at 7636. The rate
then increases the next 2 years and becomes 8391 and 9070 at the F/Y 2073/74 and 2074/75
respectively.

The RevPAR however is falling rapidly in value as seen here. The rates drop from 5409 to 5201
to 3512 in the F/Y of 2074/75, 2073/74 and 2072/73 respectively. After these years the RevPAR
increases rapidly and reaches 4551 in the F/Y 2073/74 and finally to 5761 in the F/Y 2074/75.

33
 Occupancy Percentage

80.00%

70.00%

60.00%

50.00%
Axis Title

40.00%

30.00%

20.00%

10.00%

0.00%
2070/71 2071/72 2072/73 2073/74 2017/18
Occupancy Percentage 71.33% 65.20% 45.99% 54.23% 63.52%

Fig:3 Occupancy Percentage

In the fig:3 the occupancy percentage has increased in 2070/71 with the highest percentage of
71.33% and 2071/72 with 65.20% but decreased in 2073/74 with 45.99%.It gradually increased
with aggregate 9.29% in the F/Y between 2073/74 and 2074/75.

34
 Room Revenue

600

500

400

300

200

100

0
2070/71 2071/72 2072/73 2073/74 2074/75
Room Revenue 539.53 524.72 361.52 468.4 442.42

Fig:4 Room Revenue

Room revenue is one of the key earning methods of SCP. We can observe in the figure how the
room revenue is gradually decreasing annually. The revenue is highest when the study began in
the F/Y 2070/71 at 5390.53. The F/Y of 2071/72 and 2072/73 have the gradual decline in the
revenue from 524.72 to 361.52. The next 2 years have a rise and fall in room revenue at 468.4
and 442.42 in the F/Y of 2073/74 and 2074/75 respectively.

Financial Highlights of Soaltee Hotel Limited

For the Five Years ended on 2074/75

Particular 2074/75 2073/74 2072/73 2071/72 2070/71 Increase/Decrease%(This

FYVs Last FY 2073/74)

Share Capital 667.06 579.18 526.53 421.22 300.87 15.00%

Total Assets 2200.88 1891.40 1749.81 1841.31 1715.43 16.36%

Total 1664.20 1640.52 1244.09 1438.84 1407.23 1.44%

Revenue
Profit From 362.91 180.62 137.86 271.82 315.90 100.93%
Operation
Net 279.23 138.73 99.88 220.10 243.98 101.27%
Profit/(Loss)

35
 (Rs in million)

Table: 3) Financial Highlights of Soaltee Hotel Limited

The table above contains some of the major highlights of the company throughout the F/Y of
2071 to 2075 and contains some major parts which are the Share capital, total assets, total
revenue, profit from operation and net profit. These major points are important for both investors
and shareholders to learn more about the financial positioning of the company. As seen in the
table the company is having profit in all the years even though there was a slight decline in the
2073/74 and 2072/73 period. The amount of F.A. is gradually increasing when compared to the
initial figures at 2070/71 period. Similarly there is a gradual increase in the shareholder’s
investment into the company. The amount of total revenue falls during the 2072/73 period but is
otherwise steadily increasing.

Table no.4

Total Expenditure Distribution Break up

For the F/Y 2070/71-2074/75

Particular 2074/75 2073/74 2072/73 2071/72 2070/71

Amt % Amt % Amt % Amt % Amt %
Employee 499.41 36.39% 4850.9 33.85% 4121.3 36.21% 4126.19 33.71% 3352.97 28.80
Expenses 7 8 %
Consumption 287.56 20.95% 2828.1 19.74% 2081.6 18.29% 2111.62 17.25% 1977.31 16.98
of food & 0 1 %
beverages
Operating 221.28 16.12% 1209.0 8.44% 1141.8 10.03% 1336.29 10.92% 1419.91 12.20
Expenses 6 2 %
Other 232.76 16.96% 3444.9 24.04% 2665.5 23.42% 2847.08 23.26% 2884.03 24.77
Expenses 3 8 %
Finance Cost 0.82 0.06% 6.99 0.05% 6.15 0.05% 2.72 0.02% 780.40 6.70%
Depreciation 60.28 4.39% 1103.2 7.70% 865.19 7.34% 820.33 6.70% 182.88 1.57%
& 4
Amortization
Provision for 70.32 5.12% 487.57 3.40% 313.37 2.75% 567.71 4.64% 315.89 2.71%
Taxation
Total 1372.4 100.00 14329. 100.00 11381. 100.00 12240.6 100.00% 11643.0 100.00
Expenditure 3 % 82 % 81 % 8 1 %

36
As seen here the total expenditure distribution has been broken down into 7 different sections
namely employment expenses, consumption of food and beverage, operating expenses, other
expenses, finance cost, depreciation & amortization and provision for taxation.

In the table:4 the total expenditure of first year 2014/15 is more than 2013/14 i.e.Rs.12240.6>
Rs.11643.0 with 4.64% > 2.71%. In 2015/16 year the total expenditure is less than any year
which is Rs.11381.81 with 2.75% tax. Similarly, the total expenditure increased by Rs.14329.82
with 3.40% tax and the 2017/18 has Rs.1372.43 amount with 5.12%

Figure No. 5

Current year total expenditure distribution break-up

For the F/Y 2070/71-2074/75

Total Expenditure Distribution Break up

Employee Expenses

Consumption of food &

beverages
Operating Expenses

Other Expenses

Finance Cost

Depreciation & Amortization

Provision for Taxation

Source: Table no. 4

Graphical representation of table 4 has been made into figure 7 which shows the distribution of
the various expenses occurred during the F/Y of 2074/75.The major portion of the expenses is
covered by the employee expenses followed by the consumption of foods and beverages,
operating expenses, other expenses, finance costs, depreciation & amortization and finally
provision for taxation.

37
Particular 2070/71 2071/72 2072/73 2074/75

Cash Flows 362,099,698 179,917,677 137,249,668 315,887,388

from operating
activities

Adjustment 90,791,423 128,697,191 98,807,635 119,741,756

Operating 452,891,091 308,614,868 236,057,303 435,629,145

cash flow
before
changes in
working
capital
Cash generated 490,001,247 238,614,868 - -
from
operations

Net 405,562,451 170,622,217 159,432,090 267,866,460

CFFOA(A)

Cash flow from (428,052,355) (152,653,155) (192,162,457) (262,228,938)

investing
activities

Net CFFIA(B) (428,052,355) (152,653,155) (192,162,457) (262,228,938)

Cash flow from (36,240,576) (57,643,065) (29,059,224) (27,147,632)

financing
activities

Net (36,240,576) (57,643,065) (29,059,224) (27,147,632)

CFFFA(C)

38
 Net increased (58,730,480) (39,674,003) (61,789,591) (21,510,110)
in cash and
cash
equivalents(A
+B+C)
Cash and cash 228,113,627 267,787,630 256,466,677 82,359,999
equivalents at
the beginning

Cash and cash 169,383,147 228,113,627 194,677,086 60,589,889

equivalents at
the end

Statement of Cash Flow for the Five Year (F/Y 2070-75)

Table No. 5

As seen here the statement of cash flow from the financial years of 2070 to 2075 have been
represented in a tabular format. The various transactions of cash flow from different activities are
shown here and the final result of cash and cash equivalent at the beginning of the year and at the
end of the year has been shown. The cash and cash equivalent at the beginning of the year is in
increasing trend until the year 2074/75 which signifies there has been more expenses incurred
during this year as well as the poor ending balance from the year 2073/74

39
 Table n. 6

Gearing Ratio, Current Assets, Liabilities and Capital Employed

For the Five Years (F/Y 2070-75)

Particulars 2074/75 2073/74 2072/73 2071/72 2070/71

Current Assets(‘00’000) 629.86 731.34 720.40 817.06 677.60
Current Liabilities (‘00’000) 409.30 353.20 369.83 336.65 246.53
Current Ratio 1.54:1 2.071:1 1.95:1 2.43:1 2.75:1
Debts (‘00’000) 5.84 6.69 7.65 8.70 -
Total Equity (‘00’000) 1437.99 1194.56 1114.65 1164.81 975.92
Capital Employed(CE) 1443.83 1201.25 1122.30 1173.51 975.92
(Share Capital+ Reserves+ Debts) (‘00’000)
(Rs. In million)

In the following table the various components of financial statement required for the calculation
of ratios are included. These components can be found in balance sheet, income statement and
other financial books of accounts. The figures shown in this table are in lakhs.

Table no. 7

Stock Market Value per Share

For the F/Y 2070/71-7074/75

40
 Financial Year Market Value per Share(Rs)
2074/75 581.00
2073/74 425.00
2072/73 375.00
2071/72 361.00
2070/71 243.00

This is the market stock value of the SCP shares in the past 5 years. The market value is
increasing rapidly as seen in the market value portion of the table. Increasing its value from
Rs.243 at the beginning to a total of Rs.581 at the end of the year 2075 we can see the value
being increased by almost double.

Figure No. 6

Share market Value

For the F/Y 2070/71-2074/75

41
 Stock Market Value for last five years at the end of each fiscal
year (Face value pf Rs.10 each Share)

600

500

400
Axis Title

300

200

100

0
2070/71 2071/72 2072/73 2073/74 2017/18
Column1 581 425 375 361 243

Source: Table no. 3

Fig:6) Stock Market Value per Shares for the last Five Years at the end of Fiscal Year

(Face value of Rs.10 each share)

The graphical representation of the table number 7 can help build this bar diagram. In this bar
diagram we can clearly observe the increasing value of the MPS every year.

42
 Figure No. 7

Share Capital

For the F/Y 2070/71-2074/75

Share capital

700

600

500

400

300

200

100

0
2070/71 2071/72 2072/73 2073/74 2074/75
Share capital 300.87 421.22 526.53 579.18 667.06

Source: Table no. 3

In fig:5 the share capital is in increasing state. Every year its increasing from Rs.300.87 in year
2070/71, Rs.421.22 in year 2071/72, Rs.526.53 in year 2072/73, Rs.579.18 in year 2073/74 and
Rs.667.06 in year 2074/75 respectively. This bar diagram shows the increase in profit of share
capital in the market.

43
 Figure No. 6

Gross Block

For the F/Y 2070/71-2074/75

Gross Block

4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
2070/71 2071/72 2072/73 20743/74 2074/75
Gross Block 4.3 2.5 3.5 4.5 4.1

The following figure is the gross block of the SCP during the F/Y 2070-75 during which the
gross block is shown. As it is seen here the gross block is decreasing in the year 2071/72 and
subsequently increasing in the coming years.

3.2 Analysis of the data:

This is the part of the analysis of the various financial information using the selected ratios
pertaining to the liquidity during the study period.

3.2.1 Liquidity Ratio:

Current Ratio

This type of ratio is calculated by dividing current assets by current liabilities. It

refers to the current liabilities which can be converted into cash in the near future.

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 CurrentAssets
Current ratio=
CurrentLiabilities

Current Assets = Cash and bank balance+ Money at call and advance + bills purchase

Table No. 8

Current Ratio of SCP

For the F/Y 2070/71, 2071/72, 2072/73, 2073/74 and 2074/75

Financial years 2070/71 2071/72 2072/73 2073/74 2074/75

2.75:1 2.43:1 1.95:1 2.07:1 1.54:1

Source: Table no. 6

This is the tabular form of current ratio of the SCP. According to the current ratio of the SCP in
the past 5 years the current ratio is healthy in nature. The beginning of the F/Y2070/71 had a
over liquidity of 2.75:1. After that year the current ratio is gradually decreasing to 2.43:1 in F/Y
2071/72, 1.95:1 in F/Y 2072/73, 2.07:1 in F/Y 2073/74 and 1.54:1 in F/Y 2071475.

Figure No. 9

Current Ratio

For the F/Y 2070/71-2074/75

Current Ratio
3

2.5

1.5 Current Ratio

0.5

0
2070/71 2071/72 2072/73 2073/74 2074/75 Source: Table no. 8

45
3.2.2 Profitability Ratio:

a. Return on Assets (ROA):

ROA refers to the ratio of the net income to total assets provides an idea of overall
earnings of the firm.

Net Pr ofitAfterTax( NI )
Return on Assets = × 100
TotalAssets

Table No. 9

ROA of SCP

F/Y 2070/71, 2071/72, 2072/73, 2073/74 and 2074/75

Financial 2070/71 2071/72 2072/73 2073/74 2074/75

year

ROA in % 279.23/2200.88 138.73/1891.40 99.88/1749.81 220.1/1841.31 243.98/1715.43

=12.69 =7.33 =5.71 =11.95 =14.22

Source Table no. 3

As seen here the ROA of SCP is shown here for the past 5 F/Y namely 2070/71 to 2074/75. In
the table we can clearly see at first the declining of ROA from 12.69% in 2070/71 to 7.33%in
2071/72 and finally 5.71% in 2072/73. After these years pass the ROA finally increases to
11.95% and 14.22% in the years 2073/74 and 2074/75 respectively.

46
 Figure No. 10

ROA in %

For the F/Y 2070/71-2074/75

ROA in %
16

14

12

10

8
ROA in %
6

0
2070/71 2071/72 2072/73 2073/74 2074/75

Source table number 9

We can derive figure number 10 when we make a graphical representation of table no. 9. Here
we can observe the gradual fall of ROA in 2071/72 and 2072/73 and steady rise in the next years
of 2073/74 and 2074/75.

b) Return on Equity (ROE):

This refers to the ratio between net profit earned to the shareholder’s equity investment into the
hotel. Its formula is as follows:

Net Pr ofitAfterTax
ROE= *100
Sharholder sEquity

47
 Table No. 10

ROE of SCP

For the F/Y 2070/71-2074/75

Financial year 2070/71 2071/72 2072/73 2073/74 2074/75

ROE in % 279.23/975.92 138.73/1164.81 99.88/1114.65 220.1/1194.56 243.98/1437.99

=28.61 =11.91 =8.96 =18.43 =16.97

Source: Table no. 3

We can find here the ROE calculated by the use of Net profit and Shareholder’s equity for the
5fiancial years. As seen here ROE initially falls from 28.61 to 11.91 and finally to 8.96 in the
F/Y 2070/71, 2071/72 and 2072/73 respectively. Similarly the ROE in the next years are
increasing from 18.43 in 2073/74 and 16.97 in 2074/75.

Fig. No. 10

ROE of SCP

F/Y 2070/71, 2071/72, 2072/73, 2073/74 and 2074/75

ROE in %

30

25

20

15 ROE in %

10

0
2070/71 2071/72 2072/73 2073/74 2074/75
Source: table no. 10

48
Figure 10 shows the graphical representation of table no. 10. The percentage of ROE is shown in
the Y axis and the years are shown in the X axis. The value of ROE decreases in all years except
2073/74 where it makes a big recovery.

II. Earning per Share (EPS):

Earning per share shows the amount of return earned on every outstanding share.

Net Pr ofitAfterTax( NI )
Earning Per Share (EPS) =
No.ofshareouts tan ding

Table No. 11

EPS of SCP

For the F/Y 2070/71-2074/75

Financial years 2070/71 2071/72 2072/73 2073/74 2074/75

EPS in Rs 243.98/390529 220.1/354,843 99.88/274,494 138.73/430,381 279.23/521892

=Rs601.69 =Rs 620.27 =Rs363.87 =Rs 320.02 =Rs535.03

As seen here the EPS of SCP has been calculated in the tables above. The EPS of SCP slowly
increases after the first 2 F/Y from Rs601.69 in 2070/71 to Rs620.27 in 2071/72. Then the EPS
decreases to Rs363.87 in 2072/73 and Rs320.02 in 2073/74. The value of EPS then increases to
Rs535.03 in 2074/75.

49
 Fig. No. 11

EPS of SCP

F/Y 2070/71, 2071/72, 2072/73, 2073/74 and 2074/75

EPS in Rs

700

600

500

400
Series 1
300

200

100

0
2070/71 2071/72 2072/73 2073/74 2074/75

We can observe here the EPS of the SCP in graphical form. The EPS can be clearly seen
increasing in the second year and steadily decreasing in the next two years before finally
recovering in the final year.

III) Dividend Per Share(DPS):

The dividend per share shows the dividend carried by each year.

50
 Pr oposeDivid end
Dividend Per Share (DPS) =
No.ofOuts tan dingShare

Table No:-12

DPS of SCP

For the F/Y 2070/71-2074/75

Financial years 2070/71 2071/72 2072/73 2073/74 2074/75

DPS in Rs 187.42 186.08 76.59 67.85 140.76

Source: Table number 1& 3

In this table we can observe that the DPS of SCP is decreasing after the first year ie Rs187.42 to
Rs186.08 to Rs76.59 to Rs69.85 in the years 2070/71, 2071/72, 2072/73 and 2073/74
respectively. Finally it rises in the year 2074/75 to Rs 140.76.

Fig. No. 12

DPS of SCP

F/Y 2070/71, 2071/72, 2072/73, 2073/74 and 2074/75

51
 DPS in Rs

200
180
160
140
120
100 DPS in Rs
80
60
40
20
0
2070/71 2071/72 2072/73 2073/74 2074/75

Source: Table no.12

In the above graph which we derived from table number 12 we can see the DPS gradually
decreasing from the year 2071/72 till 2073/74 and slowly beginning to rise in the final year of
2074/75.

IV) Dividend Payout Ratio (DPR):

Dividend Payout Ratio is the ratio of the percentage of profit distributed to the
shareholders as a form of dividend

It can be calculated by using the following formula:

Pr oposedividend
Dividend Payout Ratio (DPR) = ×100
Netincome

Table No. 13

DPR of SCP

F/Y 2070/71, 2071/72, 2072/73, 2073/74 and 2074/75

Financial years 2070/71 2071/72 2072/73 2073/74 2074/75

52
DPR in % 30 30 21.05 21.05 26.31

Source: Table number 1

In the given table we can observe the Dividend payout ratio which is obtained by dividing
proposed dividend by net income. This is one of the most important tables as it shows what
amount was distributed as dividend and how many are kept for future use in growth and
expansion. The DPR of SCP is same at 30%in years 2070/71 and 2071/72. Similarly in the years
of 2072/73 and 2073/74 it remains same at 21.05%. The year of 2074/75 we can see the rise in
DPR at 26.31%

Fig. No. 13

DPR of SCP

F/Y 2070/71, 2071/72, 2072/73, 2073/74 and 2074/75

DPR in Rs

30

25

20

15 DPR in Rs

10

0
2070/71 2071/72 2072/73 2073/74 2074/75

53
 Source: Table no.13

In this graph we can see the DPR of the years from 2070/71-2074/75. It is a graphical
representation of table number 13. The DPR remains same at 2 different years 2070/71 &
2071/72 at 30% and 2072/73 & 2073/74 at 21.05%.

Study result:
During the calculation and findings of financial reports using the financial tools the following
results were obtained:

1) SCP has a long legacy of providing excellent service to the hospitality sector of Nepal as
a 5 star hotel and has successfully gained trust of Nepalese and foreigner tourists alike.
2) The study showed the financial performance of SCP has been operationally efficient.
Which means the company is not suffering loss or damage currently
3) Suggestions and recommendations based on the analysis and conclusion are provided in
the next chapter.
4) The analysis of liquidity position of SCP shows that it has a nice capacity to pay its
liabilities and currently is not in danger of defaulting in its payment of capital liabilities.
5) The profitability analysis shows that SCP is in relatively good condition and has been
profitable in the past 5 years.
.

Some of the Major Financial Indicators of Soaltee Hotel Limited are shown below

Particular 2074/75 2073/74 2072/73 2071/72 2070/71

Debt Equity Ratio 0.01 0.01 0.01 0.01 -
Return on Equity Shareholders funds 0.19 0.12 0.09 0.19 0.25
Earnings Per Shares(Rs) 4.19 2.40 1.90 5.23 8.11
Net Worth Per Share(Rs) 21.59 20.63 21.17 27.65 32.44
Gross Assets Value Per Share(Rs) 33.44 33.33 34.80 43.54 52.84
Market Value Per Share(Share of Rs.10 243.00 361.00 375.00 425.00 581.00
each)
Price Earnings Ratio(Times) 57.96 150.71 197.68 81.34 71.65
Current Ratio 1.54 2.07 1.95 2.43 2.75
Debts/ Capital Employment 0.40 0.56 0.68 0.74 -
Ratio(Times)

54
 Chapter 4

SUMMARY, CONCLUSION AND RECOMMENDATION

4.1 Summary

The report is a financial statement analysis of liquidity and profitability position of

Soaltee Crowne Plaza. The study is divided in 4 chapters. In the first chapter the history

55
 of hotels, history of SCP, Purpose of study, organizational structure of SCP, focus of
study, limitation of study are discussed

Similarly in the second chapter the review of literature, financial statement and its
various parts, financial tools, population and sources of data are studied.

The third chapter consists of arguably the main portion of the study as the main
analysis and calculation of various ratios for the final decision making and conclusion
are studied under it. In the chapter necessary data are presented and various ratios are
calculated. Various ratios which are calculated are current ratio, under liquidity ratio
and return on assets. Return on Shareholder’s Equity, Earning Per Share, Dividend Per
Share and Dividend Payout Ratio under profitability ratios comparative graphical
presentation in made for Net Profit, Return On Assets, Return On Shareholder’s Equity
and Earning Per Share.

The final chapter mainly deals with the final summary, conclusion and
recommendations for the study. The study results have been summarized and important
conclusions have been outlined and then recommendations are given to help improve
the liquidity and profitability position of SCP.

4.2 Conclusions

Hotels are one of the most important service provider in the hospitality sector. The long term
development of tourism in Nepal is directly depended on hotels and similar businesses which
provide food and accommodation to the various tourists in Nepal. It also employs a large number
of population and helps develop infrastructures which contribute directly in the development of
the economy. Hotels with share options are also helping mobilize capital and hence further
enhance the economic capabilities of Nepal. Hotel business like other businesses runs on money
and a sound liquidity and profitability position is necessary for proper running of the industry.
This can only be studied by proper analysis of the financial statements.

Thus in order to properly test the bank’s ability financial analysis has been made. This is an
important task in the viewpoint of all stake holders. Financial analysis can help identify the
strengths and weaknesses of a hotel during a certain period of time, based on the published

56
financial statements. This study is conducted with the help of published annual reports and is
concerned with the thorough analysis if the liquidity and profitability position of SCP. Some of
the major conclusions drawn from this study are as follows:

 SCP has a healthy current ratio which means it isn’t suffering from problems in paying
current liability.
 SCP has a good rate of ROE and no suggestions are made about it other than to maintain
the same level in the coming years.
 EPS of the hotel seems to be recovering slowly and after its serious decline in the
previous years.
 Overall due to the goodwill and profitable situation of the company SCP is a good
investment option to the investors who are willing to invest for a long period of time.

In conclusion SCP has a healthy profitability and liquidity position in the market. Its
operation is efficient in nature and despite the increasing competition the hotel has
successfully managed to remain profitable and with the new plans to expand into newer
markets in Chitwan and Pokhara the future is looking more profitable.

4.3 Recommendation

Some of the recommendations drawn from the study can be summed up in the
following points to help improve the liquidity and profitability position of SCP.

 It is suggested to maintain a ratio close to 2:1. Often it is seen that current ratio
is more than 2 times greater than current liabilities. It is suggested to invest the
extra amount of current assets into investments for extra earnings.
 Investors who are willing to invest long term are recommended to invest in
SCP. The business is however not considered feasible for long term investors
due to its relatively low rates of returns.
 The hotel is recommended to increase its Shareholder’s equity to invest or
expand the business further as the SHE is already low and there are viable
investment options in the market.

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