Managing Financial Resources in the Hospitality Industry

This report discusses the concept of GAAP, different users of financial statements, and financial ratios calculation for Smart Resort Ltd. It also elaborates on the different parts of financial annual statements and the accounting concepts discussed in accounting theory. The report concludes with a report to the CEO of Smart Resort Ltd. on the company's performance.

Managing Financial
Resources in
Hospitality Industry

Contents
INTRODUCTION ..........................................................................................................................3
TASK...............................................................................................................................................3
Discuss the concept of Generally Accepted Accounting Principles (GAAP) and mention the
different users of financial statements which consider the financial information to take
different decisions........................................................................................................................3
How does the different kind of creditors uses the financial statements of the company.............5
Elaborate the different parts of financial annual statements and the different accounting
concepts which is discussed in the accounting theory.................................................................5
Use provided data to calculate different accounting and financial ratios of Smart Resort Ltd.. .7
Write a report to CEO of Smart Resort, explaining to them performance of company............10
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Managing of financial resources refers to the controlling and managing the problems that
may arise in the organisation related to the financial requirements of the business. The basic idea
of managing finance in the organisation is to keeping a check on the areas where the financial
resources of the business are used up and from what sources the business can raise the funds
from. The financial management of the business is guided by predetermined set of rules and
regulations which are formulated by different accounting bodies (Fan and Chatterjee, 2019). The
accounting concepts also play an important role in guiding the accountants which manage the
finance of the business. The following report shows how the business in hospitality industry uses
the different concepts and accounting rules to formulate their financial statements. Different
ratios calculation is also provided in the report following the report which is to be presented to
the CEO of the business highlighting to him about the fiscal perspective of the enterprise.
TASK
Discuss the concept of Generally Accepted Accounting Principles (GAAP) and mention the
different users of financial statements which consider the financial information to take
different decisions
GAAP beliefs gives understandings in regards to the development of record of cooperation in
books of monetary records. It frames a few philosophies and frameworks that are should have
been incorporated by the organizations on the hour of collecting of monetary reports. In UK,
every one of the enrolled foundations are compelled to follow these upsides of IFRS while others
are changed. They can investigate GAAP and IFRS codes (Farooq and Jibran, 2018). It gives
whole significance of the monetary foundation. The standards and guidelines perceived with
commitments, resources and their gauge is archived in these standards. There is similarly a
highlight point figures about the lead of immaterial and substantial assets held by the corporate.
The norms of GAAP moreover give data about the adjustment of assorted livelihoods and costs.
It gives data close by the things which are proficient for abusing charge estimations and which
are not. GAAP complies to the guidelines based bookkeeping which recommends these are set of
rules which are needed to be involved as they are and no progressions are permitted in this.

There are different stakeholders of the bookkeeping information. These may be inside the
affiliation or outside it. These clients use current realities for different conclusions. Accordingly,
the announcements must made fertile so that it fulfils the requirements of these users. These
people are scrutinised beneath and are categorised into: Internal Users and External Users
Internal Users of Accounting Information
Employees: These are the workers of the business which perform different operations and non-
operational tasks in the business (Chen, Yang and Jiang, 2019). They are provided with salaries
and wages for their work. They are interested in the accounting information of the business to
ascertain the productivity of the business and if they are remunerated in fine amounts.
Management: the management of the business uses the accounting information to have an in-
depth knowledge about the working and performance of the business and formulate different
plan of actions based on the understanding of this information (Harber, Marx, and Jager, 2020).
Owners: They are the proprietors of the business and have invested their capital in the business.
They new to understand the profitability of the business t ascertain the future returns on their
invested capitals in the form of profits and dividends.
Creditors: they lend their funds to the business to be used in different operations of the business.
They need to know whether the business will be able to repay their loans and advances and the
interest payments of the loan.
Investors: they use the information to understand the dangers that are in investing in the business
and what would be the rate of return on their investments.
External Users of Accounting Information
Customers: They often look at the inflow of the depositors and the rate at which business is
producing its commodities. They look at the monetary position of its suppliers to check the price
of the goods of the business.
Administrative Bodies: These refers to the tax and government authorities of the state. They
focus on the working of the business and check whether the business if performing according to
the rules of the state and paying the tax on its income appropriately (Hrnjic, Reeb, and Yeung,
2019).
Competitors: It checks the performance and compare with its own to take corrective measures of
the business.

Accounting Bodies: These bodies check whether the accounts are prepared using the accounting
rules and concepts for the specified business/industry.
How does the different kind of creditors uses the financial statements of the company
a) A loan creditor
A loan creditor is a individual who cover finances and loans to the enterprise which is
vital to be compensated by the corporate later fixed period of time. These financial assets are
essential for the corporate as these are utilized in everyday actions and procedures of the
commercial organisation. These creditors want to judgmentally examine the routine performance
of the private and how these businesses will be fulfilled with the funds and in how much period
will the major sum be rewarded back (Islam and Sultanuzzaman, 2021). To decrease the hazard
of bad debts in the upcoming these creditors perform a risk calculation originated on the fiscal
reports of the business. For examining they take aid of the fiscal accounts of the corporate and
determine the presentation of the corporate. Declaration of performance or stability is the critical
tool utilized by loan creditor to monitor the existing obligations which establishment has and too
the report of liquidity movements to understand at which pace the business is capable to
reimburse its debts.
b) A trade creditor
A trade creditor refers to the one being who provide possessions and facilities to the
corporate which they are not being paid for. The business be in debt of this sum of money to this
provider that the business is obligatory to compensate after a decided period of time. Trade
creditor deliver commodities on credit after taking full knowledge about the operations and
performance of the corporate and in what period these sums will be compensated (Khera, Zafar,
and Lee, 2020). These are normally given back in a period of time and process the current
obligations of the corporate. Trade creditors take advantage of the fiscal declarations like report
of income and expenses and statement of cashflowz to determine if the corporation has the
situation to be agreed commodities on credit or not.
Elaborate the different parts of financial annual statements and the different accounting concepts
which is discussed in the accounting theory
The financial annual reports of the business gives the whole idea about the working and the
performance of the business. These reports can be compared with the reports of the other
different firms working in the same industry to get an insight about the working of the business

within the industry (Karamzad, Eftekhari, and Safiri, 2021). There are different components of
these reports are analysed below:
Management Discussion Analysis: Within this report, the business attempt to find out its
perspective within its own working. It mainly focusing on 3 characteristics while administering
this rating. It finds down if the business is capable to give off its brief period debts or not. It also
attempts to determine whether the concern has adequate monetary resources to employ its assets
for rewarding its transactions and expansion. It also talks about the consequences of the business
activity.
Notes to Financial Statements: It supply absolute statement about the compact fiscal report. It
elucidates all and every portion supplied in the equilibrium sheet and financial statements. There
is likewise statement about the plan of action and the know-hows which are utilized for the
computation of several relationships such as diminution in the value of assets and provisions. It
also talks about the happening and uncertainty that may happen in enterprise (Mahpour and
Mortaheb, 2018).
Auditor's Report: This written report is an essential part of yearly document. In depicts the
honesty and trustworthiness of accountancy system of organizations. It is the autonomous
scrutiny of fiscal statements of firm. In this, the auditor provides their belief that whether the
books of accounts and reports shows the actual representation of firm or not.
Fiscal reporting mentions to construct of submission to every accounting assertions of concern
and so that if any individual is curious in increasing cognition just about the establishment could
know from these reports. They represent absolute content of the enterprise and its perspective as
it is required to follow principles and rules which are formulated by different regulatory
authorities. By considering the thoughts, it is very essential for the companies to record the
documents every quarter, yearly and in some ways bi-quarterly also. These reports are utilized by
income tax authorities for appraisal out tax compensable by company. They also aid capitalists
for determinant that they should commit in business concern or not. Smart Resort ltd. too has to
set up these reports for filling them with stock exchanges of country in which it is operational i.e.
hospitality industry (Meleshenko, Usanova and Kim, 2019).
It is responsibility of Smart Resort Ltd to comply with GAAP or IFRS norms for
maintaining their records. It supplies guidelines to organisation about what sort of reports are

obligatory to be change and what should be enclosed in it to make it reliable for its individual
users. On different side, Smart resort ltd. too has to support in knowledge that it supplies all
applicable information in books of report by picking out pattern of full discloure.
Use provided data to calculate different accounting and financial ratios of Smart Resort Ltd.

Inventory Turnover Ratio

Write a report to CEO of Smart Resort, explaining to them performance of company.
From above ratio analysis it can be interpreted that overall performance of business is good.
When last year ratios are compared to previous year, it can be seen that performance of business
has reduced to some extent even though profits of business has increased from previous year,
trend can be seen as decreasing (Prakash, Saxena, and Singh, 2020). Last year, the interest paid
on the long term debt was lower than the previous year but still the profit margin of business has
decreased. Considering this, return on assets and equity has also reduced. The return on equity
has dropped from 11 % to 6 % in the last accounting period. It can be said that performance of
Smart Resort Ltd has diminished in two consecutive years i.e., 2018 and 2019.
liquidity position of the business has also dropped in these two years. The current ratio of
the business shows the business holds enough current assets to meet its short term debts of
business. But most of current assets of business is inventory of business and if these are
removed, the business can only meet its 50 % - 60 % of the short term payment obligations
(Sinervo and Haapala, 2019). This is not a good situation for liquidity of business. On other
hand profits of business are increasing. operating income of business is effective to pay off its
debts. increase in income is due to fall in payment of interest. inventory turnover ratio of
business also shows that sales are increasing and collection period of business has reduced.
Hence, overall position of Smart Resort ltd is good. It needs to focus on some of business
aspects that needs improvement like amount of recovery from assets and equity and maintaining
liquidity position of business.
CONCLUSION
From above mentioned report it can be concluded that management of financial resources is an
important aspect in any industry. report highlights how an organisation working in hospitality
industry make good use of management related to finance of the businesses and how financial
ratios of the business are interpreted. The report discusses the main theory of GAAP and how
these rules helps the businesses to maintain their finacial statements. It helps the different users
of financial information to compare different businesses' performance and take required
decisions. The financial director of Smart Resort Ltd is reporting the performance of the business
to the company's CEO.

REFERENCES
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