Financial performance of Intercontinental Hotels Group Plc 2009-2010 Essay

Financial performance of Intercontinental Hotels Group Plc 2009-2010 - Essay Example This can be attributed to the reduction in the cost of goods sold for the organization from 2009 to 2010. Profit margin of a company can be defined as the ratio of net profit to net sales. The margin for IHG was 18% in the year 2010. The same margin in 2009 was 13.91%. There is a considerable increase in the profit margin of the hotel. This can be attributed to the lowering of costs from 2009 to 2010. The net profit that we have considered here is including the exceptional items. If we exclude the exceptional items, we find that the ratio has decreased from 19.12% in 2009 to 17.44% in 2010. This is because the existence of high net profit margin excluding exceptional items in 2009 as compared to 2010. The value of this ratio for year 2009 and 2010 is 7.40% and 10.55% respectively. We see that there is a slight increase in the net profit from year 2009 to 2010. At the same time, total assets have come down. Therefore, there is a slight increment in the return on assets. While return on assets measure the amount of net income generated for each unit of assets, return on investment measures the amount of income generated from each unit of owners’ equity. Return on equity can be calculated by dividing the net profit by total equity. The return on equity for IHG has decreased from 2009 (137.18%) to 2010 (100.69%). This is because there is a significant increment in the total equity of the organization. The margin has increased considerably from 2009 (-0.65%) to 2010 (28.19%). In 2009, the company had high cost of goods sold and high impairment costs that resulted in the lowering of the operating profit. Hence the company had a negative operative margin in the year 2009. The high costs can be attributed to the global economic slowdown. This ratio is an indication of the financial leverage of a company. While total liabilities represented 17.54% of the total equity in 2009, it was only 8.54% of the total equity in the