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INTRODUCTION

Introduction to the Assignment

The author of the assignment explains the past financial performance of the Aitken Spence Plc with future strategic planning and thereafter it explains the issues of the company that faces with the strategic cost management aspects and recommended the necessary actions to be taken as corrective measures to have more efficient and effective management accounting aspects.

The Aitken Spence Hotel Holdings Plc were gazed more than thirty years of time and dependably experience to convey remarkable experience to the hundreds and the a large number of the visitors in both neighbourhood and remote. The organization isn’t just worked in the Sri Lanka yet in addition worked in the worldwide setting which incorporates the nations like Oman, Maldives, and India and so on. The concentration of the organization is with conveying world class administration to the clients with creative routes in the business and also more smoral administration that will make the nation and the district to a pleased goal. Not just that the long haul vision of the Aitken Spence inn plc is likewise conveyed the extremely strong establishment for the maintainability of the organization and additionally to the nation of origin as their business procedures bolster the all fleeting, medium term and the long haul that dependably inseparably bound to give business identity to the country.

FINANCIAL PERFORMANCE

Company’s Past Financial Performance and Future Strategies

In the time of the 1973the Aitken Spence Hotels Plc opened their first inn in the nation of Sri Lanka and after that approval to the India, Maldives and to the Oman too. So their arrangement of the business now contains with the 24 lodging networks over the nations that previously mentioned. Other than owning of the city lodgings the organization is likewise chosen with the rich shoreline inns abandon excursion properties and all the heritance properties where the organization is living with the history and advancing the heritance of the country. The organization isn’t just taking a gander at the past and the present for their prosperity yet additionally the future as well. They are the pioneers who recognized from idea of the accommodation as the idea that should be enhanced from the support of the care and underline the client minding as a procedure which included heart and hands (Sharma, 2011).

The gathering income was expanded through budgetary year of 2015/2016 however the net revenue was declined about 39% contrasted with the earlier years. All the key commitments were going to the gathering benefit is from the Heritance Kandalama and the Heritance tea Factory yet the lodgings worked in the Maldives gave the declining commitment to the gathering execution dislike the boosting pay and gainfulness from the Sri Lankan inns (Sharma, 2011).

The fundamental two supporters of the execution of the gathering the heritance Kandalama and the heritance tea manufacturing plant had the expanded edge of the productivity contrasted with the last monetary year where they record their most astounding of the as far as the both the income and the benefit. Heritance Ahungalle likewise accomplished the critical measure of benefit through their past execution in spite of the fact that they were worked in the cost driven aggressive condition in the southern beach front territory of the Sri Lanka. Ayurveda Resort likewise thinks of the PAT 60% development than contrasted with the last monetary year. Heritance Negombo which was beforehand known as Browns Beach Hotel was the most recent expansion to the business arrangement of the Aitken Spence inn possessions Pvt ltd and the it was started their operations with the gathering beginning from the 2016 of the April of the previous year. On the interim the Turyaa Kalutara was re-propelled as new brand and performed well inside the nation (Shin HH, 2008).

With respect to abroad operations of the Aitken Spence Hotels Holdings (Pvt) Ltd. Maldives were surpassed their desires of the gainfulness over the past financial years. In any case, inside the financial year of the 2015/2016 they were accounted for with the declining benefit together with the primary purpose behind the decrease of the gathering monetary productivity in the time of 2015/2016. The declining execution of the Maldives and also in the Oman was because of the political turmoil of the nation and the reputation of the negative side of the nation in the European market where the potential outsiders were coming. And furthermore the maintained emergency in the Ukraine and the Russia additionally can be taken as conceivable purposes behind the disintegrating execution of the lodgings in the Maldives that has a place with the Aitken Spence gathering of Hotels (Howorth, 2003).

The conceivable future development methodologies that organization was featured is with the venture of the innovation that improve their administration as it were the minding to the client’s step by step. They are arranging their business methodology to more corporate with improving of the computerized innovation to upgrade the conveyance of the administration and in addition the supportability of the Strategy (Howorth, 2003).

And furthermore the organization wanted to expand the execution of the gathering by inspiring the speculations of the administrations offered to the clients to keep them in more esteem included and imaginative ways. This eventually causes the association to add the aggressive edge to the gathering and improve the gainfulness of the gathering.

Since the lodging network in Maldives were grieved over the most recent couple of years of time the organization is cantering upgrading of the offices accommodated these inns and drive more an incentive to the advancement of the business. Every one of these ventures that arranged in the monetary year of 2015/2016 was meant to the development of the business benefit while relieving the danger of the organization. The gathering is presently searching for the significant extension the obtaining of the island Aarah in Raa Attoll in Maldives and booked to be operationalized sooner rather than later. The second piece of the investigation additionally talked about the wellsprings of the financing to the obtaining choice of the island of the Aarah in the Maldives.

Key Financial Ratio Analysis of Aitken Spence Hotels Plc

Since the ROCE is ascertained from the EBIT isolated by the figure landed from the net of the aggregate resources less present liabilities, the influenced zones for these figures were changed as follows in the budgetary year of the 2015/2016. As expressed in before additionally the gathering execution was essentially influenced by the declining commitment from the Maldives inns which has a place with the business arrangement of the Aitken Spence Hotel Plc because of the political components of the nation. And furthermore the precariousness of a similar circumstance identified with this political condition of the nations of the Ukraine and Russia likewise influenced to the execution of the inns which arranged in the Maldives. So this is the significant explanation behind the reduction of the RCOE from 14% in FY 2014/2015 to the 9% FY 2015/2016.

The expansion of the overhead figures amid the FY 2015/2016 brought about a withdrawal of the EBIT edge from the 32% to the 23% from 2015 to 2016. Be that as it may, the administration of the Aitken Spence Hotel Plc is profoundly certain when the political circumstance of the Maldives settled back again to the point where empower the tourism business the working overall revenues will be expanded over once more. And furthermore the arranged allegation of the new resources for the organization additionally creates considerable yield to the execution of the gathering too.

Then again, the gathering outfitting level likewise expanded from 25% to 35% from the past budgetary year. This likewise diminished the ROCE of the Group, however again the administration of the gathering is certain that once the as of late acquired resources will create generous wage later on. As to value claimed by the investors likewise expanded 9% as for the past money related year of 2014/2015 just in view of including profit amid the monetary year to the stores of the gathering value then the ROE additionally diminished from 13.75% to 9%. (Annexure Table 01)

According to the computed figures for the operating profit margin Aitken Spence hotel possessions Plc showed the declining figure for the count of the OPM proportion with respect to the budgetary year of 2015/2016 portrayed the 22% a radical drop from the past financial year.

The recorded merged net income for the gathering at the financial year was about 13168 million rupees where there is a development than the earlier year of 2014/2015. Also fundamentally the commitment for the gathering budgetary execution from the Sri Lankan hotels exceptionally the Heritance Kandalama and the Heritance Ahungalle displayed a development of wage from 25% from the FY 2014/2015 to 28% for the FY 2015/2016. Be that as it may, most of the gathering income is contributed from the Maldivian part and it is delineated as 72% of the aggregate income. be that as it may, the vulnerability in the political circumstance may lead the 2% diminish from the income and furthermore the expansion of the operational costs of exhaustive 6% because of the expansion costs and the initiation of the extensions of the Turyaa Chennai and Turyaa Kalutara according to the Annual report of the Aitken Spence Hotel Plc (Gaughan, 2007).

Correlation of the one of the significant contender delineated the unfaltering increment of the operating Margin from the 20% to 22%. The exceptional change from the operational margin figure of the Aitken Spence Hotel Holdings is additionally about the enormous decrease of the operational salary figure in the last budgetary year of 2014/2015 incorporated the protection assert for one of the hotel called Honduran Fushi in Oman. According to with the steady condition than the Aitken Spence hotels property the Jet wing hotel possessions were recorded stable salary and the operating profit figures for the back to back five years of time. So there is no tremendous hole between FY 2014/2015 and the FY 2015/2016 (Sharma, 2011).

Despite the fact that the gathering money related position reflects reinforce of the business exercises that increase the value of the organization’s principle operational exercises the Assets turnover proportion of the Aitken Spence Hotel property were declined over time of the budgetary year of 2014/2015 to the 2015/2016. The diminished resource turnover proportion was because of the two fundamental reasons one is slight increment of the income figure of the organization as the illnesses inn division was not working as the required by the organization and furthermore the property plant and the gear amid the money related year was expanded from 5381 million to the 7198 million particular from the budgetary year of 2014/2015 to the 2015/2016. This is because of the way that gatherings extension strategy which is more forceful in the past monetary year for completed crafted by Turyaa Kalutara and Al Fajaah inn in the Oman. And furthermore the current procurement of the Browns shoreline inn was adding figures to the PPE of the organization. Likewise there were two primary key choices did in the monetary year as value interest in the Ahungalle Resort and the joint wander with RIU Hotels. As same as the working edge proportion the benefit turnover proportion was likewise remained almost steady for as far back as couple of timeframes. Additionally this happens as a result of the stagnated idea of the organization over execution for the current past.

Correlations with the past information of the Financial year 2014/2015 the organizations equipping proportion, for the most part, expanded from the 25% to 38% from the FY of 2014/2015 to the FY of 2015/2016. Be that as it may, the administration of the Aitken pence guarantees the solace capacity if the long haul since this period was exceptionally intended to the development of the matter of the organization where the long haul return is produced in future from the particular speculations made amid a previous couple of years of time. Subsequently, the back costs of the organization likewise expanded from the 87% contrasted with the former year. This principally the supported prerequisites to the new money-related necessities of the acquisitions. Enthusiasm bearing borrowings were expanded 36% so with these surpassed subsidizing necessities cause the enthusiasm covering proportion to be declined from the 22% to 8 % and while an intense increment in the outfitting proportions as well.

STRATEGIC COST MANAGEMENT ISSUES AND SOLUTIONS

As per Tayles (2011), a few scientists decipher that Strategic Management Accounting (SMA) comprises with accounting data which comprehensively bolster strategic management; while different specialists say that SMA is in regards to all management accounting procedures which are headed to strategic viewpoints. The term ‘strategic’ is continually identifying with the accomplishment of upper hand over the contenders where strategic management accounting (SMA) rose as an approach that tries to give more strategic part for management accounting; by tending to the negative purposes of ordinary management accounting practice (Brouthers and Roozen, 1999). SMA incorporated a more drawn out term position, and in addition more extensive accentuation than most of management accounting (Roslender and Hart, 2010).

In any case, Šoljakova (2012) contends that no change has produced using the SMA procedures, since they show thoughts that ought to be connected in strategic management and some of them are just expanded renditions of conventional strategies, for example, ABC, quality costing, and so forth. According to the investigations done by Fowzia (2011), the inquires about with respect to SMA methods usage uncover that,

  • SMA procedures were not system driven,
  • SMA procedures had effect on budgetary execution change and
  • The force of the generally speaking and individual utilization of SMA procedures change from nation to nation

However, numerous different analysts evaluate the use of SMA systems and trust that those procedures have a more noteworthy request from the business accounting world.

Issues and Recommendations for Budgeting

Budgets are utilized as a help instrument which drives the Aitken Spence towards the accomplishment of benefits while defining clear objectives, planning and guaranteeing responsibility and control, helping with discovering accomplices and connecting all business areas together for one objective. The budgets prepared by the company can be characterized as an arrangement of expected accomplishments based on the most effective working measures. Be that as it may, as indicated by Drury and Tayles (2005), the current budgeting framework of the company may not be fit for the reasons inside this quickly changing world where there are disadvantages of budgeting, for example, moderate, tedious, unbendable, on a very basic level flawed and so on.

As a response for those disadvantages and concerns, another financial plan controlling framework can be applied, for example, Zero Base Budgeting (ZBB). ZBB is a budgeting procedure that assigns financing based on program productivity and need as opposed to spending history (Deloitte Analysis). Likewise the Beyond Budget (BB) idea rose after the overviews done by Beyond Budget round Table (BBRT) group, which relinquish the customary budgeting procedure to a more versatile arrangement of management forms and to make an exceedingly decentralized association. Qualities of beyond budgeting incorporate:

  • Rolling budgets (which are adaptable and which do not depend on obsolete figures) created on a quarterly or month to month premise, are recommended as the primary contrasting option to yearly budgeting for the company.
  • The rolling forecasts will embrace Key Performance Indicators (KPIs) based on the balanced scorecard which is linked to organization strategy, where the managers’ performance measures will be based on this.
  • The budgeting plan may likewise consolidate benchmarking, connecting supervisors’ objectives to outer benchmarks and not past execution.
  • Focus endeavours on overseeing future outcomes and not clarifying past execution.
  • Allow operational supervisors to respond to the earth.
  • Encourage a culture of development.

The significant issue with the idea of BB is that budgeting is still generally utilized as a part of all areas for the reasons for cost control and forecast of money related execution (Frow et al., 2009). Different reactions against the BB idea incorporate (Kaplan Financial, 2012);

  • Encourage unbending arranging and an absence of adaptability, which may not be fitting in a quick moving business condition.
  • Time-Consuming
  • Encourage administrators and representatives to meet just the most reduced target instead of endeavouring to beat the objective set (this is conflicting with a TQM approach).
  • Encourage administrators and representatives to accomplish the monetary allowance regardless of whether this outcomes in unfortunate activity.
  • Encourage directors and workers to spend what is in the financial backing, regardless of whether it isn’t essential, to make preparations for one year from now’s financial plan.
  • Reinforce the boundaries between offices instead of support information sharing.
  • An instrument for top-down control by senior management however associations ought to engage people on the cutting edge. Ignore key drivers of investor esteem by concentrating on here and now money related execution.
  • Produced deficient change reports leaving the ‘how’ and ‘what’ unanswered.

Usage of the Balance Scorecard is another ways of mitigating the cost management issues of the company in other way.

As indicated by Geense (n.d.), the Balanced Scorecard interprets Mission and Vision Statements into an exhaustive arrangement of destinations and execution measures that can be evaluated and assessed. Adjusted scorecard could be utilized as a strategic management framework which underpins four management forms.

  • Translating the Vision – Creating an adjusted scorecard however powers management to additionally clear up their vision until the point when they can make an interpretation of the vision into an arrangement of targets and operational measures on the adjusted scorecard, which have significance to the general population who need to understand the vision.
  • Communicating and Linking – Implementing a procedure starts with conveying the system here and there the association and instructing the individuals who need to execute it. The procedure should likewise be converted into objectives and execution measures on the adjusted scorecard for working units and people. Prizes may be connected to these execution measures.
  • Business Planning – Managers set focuses for the long haul destinations for every one of the four scorecard points of view. With a specific end goal to accomplish these long haul destinations, chiefs recognize the strategic activities required and dispense the fundamental assets to those activities. At last, supervisors build up here and now objectives (developments) for the measures that check advance towards accomplishing the long haul goals.

RECOMMENDATION AND CONCLUSIONS

The author of this clarifies the past money related execution of the Aitken Spence Plc with future strategic arranging and from there on it clarifies the issues of the organization that appearances with the strategic cost management angles and prescribed the fundamental moves to be made as restorative measures to have more productive and compelling management accounting viewpoints.

The Aitken Spence Hotel Holdings Plc were looked over thirty years of time and constantly experience to pass on surprising knowledge to the hundreds and the countless guests in both neighbourhood and remote. The association isn’t simply worked in the Sri Lanka yet also worked in the overall setting which fuses the countries like Oman, Maldives, and India et cetera. The centralization of the association is with passing on world class organization to the customers with inventive courses in the business and furthermore more good organization that will make the country and the area to a satisfied objective. Not only that the whole deal vision of the Aitken Spence hotel plc is in like manner passed on the greatly solid foundation for the viability of the association and moreover to the country of starting point as their business strategies reinforce the all transitory, medium term and the long term that constantly indistinguishably bound to give business character to the nation. Hence the newly adopted strategic management concepts of the above discussed create new insights to the company to be more competitive in the industry.

 

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ANNEXURE

http://www.aitkenspencehotels.com/wp-content/uploads/2016/07/Aitken-Spence-Hotel-Holdings-PLC-l-Annual-Report-2015_16.pdf