Managing Financial Resources in the Hospitality Industry

This report discusses the importance of managing financial resources in the hospitality industry, including GAAP standards, financial statements, and financial reporting. It also examines the performance of Smart Resort Ltd. and provides recommendations for improvement.

Managing the
Financial Resources in
Hospitality Industry

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
Explain the GAAP standard and identify the users of the financial statements and the
requirements of different decision makers..................................................................................3
Elaborate which of the financial statements is of bet use of the following persons:...................5
Explain the components of the supplement to the annual report. Also describe the concept of
financial reporting........................................................................................................................6
Examine the performance of Smart Resort Ltd...........................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
The management of financial resources involves the control and observation of the problems
identified with the finances and the evaluation of the organizational exhibition with the aim of
expanding its usefulness. It is an extremely basic idea because it is difficult to accurately
interpret the circumstances of the external environment and its impact on internal business
operations. There are many estimates out there to help manage the company's money, such as
drawing up a financial plan, assessing the company's current state, and establishing a repayment
confirmation and instalment policy. There are some guidelines and standards that can help
organizations appropriately report all of their records. These reports are then used by potential
stakeholders to compile data on the company's performance (BLUE and et. al., 2020). This
report has discussed the GAAP standards and how they help users of the financial statements to
make decisions. In addition, the interest of the loan and commercial creditors in the annual
financial statements is analysed. The report also conducted a fiscal analysis of ratios of two years
on Smart Resort's performance.
TASK
Explain the GAAP standard and identify the users of the financial statements and the
requirements of different decision makers.
There are various standards developed by numerous accounting bodies that can be applied
in the preparation and reporting of financial information. Generally Accepted Accounting
Principles (GAAP) are general accounting standards that include the conventions, rules, and
procedures that must be followed in the preparation of financial statements and their reporting.
GAAP mentions accepted accounting practice at some point. These provide a standard for
measuring and creating financial statements. The main goal of creating these standards is to
bring transparency and consistency into the financial reporting structure of companies. Its
application in business brings the company the confidence of investors and the market (Dong and
et. al., 2020. It also helps organizations to attract investors as it provides information on all
competitive companies through which it can compare its own results with those of other
organizations.

This will help all stakeholders, as well as the company itself, to generate information about the
business. Stakeholders are the people who are interested in and affected by what the company
does. So you are very interested in the work and the profits of the company. They also want to
know where the company is in terms of last year's performance and also compared to the
competition. Only investors and other interested parties make their decisions on the basis of this
information. Some of the users of financial statements are as follows:
 Government: It is also a major user of accounting reports. Smart has to work by its rules
and is therefore interested in knowing whether the company complies with all the norms
of financial laws (Gardiner and Scott, 2018). Also, it's important to know that the
company pays all taxes properly and never bypasses them.
 Investors: They are the people on whom the entire business is based. They provide funds
for the company to run its business. These users want to know whether or not the
company is able to generate reasonable returns. They get this statistic from the annual
financial statements and the profitability and efficiency figures.
 Lenders: It includes the individuals who provide credit to the company and the suppliers
who provide products to the companies on credit. These parties are interested in knowing
whether or not the firms to which they are providing material on post-paid basis will be
able to repay their debts. To do this, they are likely looking at the company's liquidity by
looking at its cash flows. They also calculate the ratios for solving the purpose. This
calculates the time it takes Smart to repay its debts and make payments to the company's
creditors. After reviewing the results, whether to do business on a cash or credit basis.
 Competitors: These are the different companies in the same industry. They look to the
company's financial reports to analyse their own business. They compare the results of
Smart with their reports so that they can formulate their own strategies for improvement
(Gomez-Conde, Lunkes and Rosa, 2019). They gather information from competing
companies and try to figure out how they can differentiate themselves from others.
 Employees: They are responsible for the operation and work of the company. Therefore,
they would like their efforts to be recognized in the form of bonuses or pay increases.
Therefore, they want to know that both companies are earning enough to raise their
wages and salaries. They are also interested in whether or not their working conditions
could be improved from profits.

 Corporate Management: These are the individuals on the company's management team
themselves. They take an interest in the full financial statements to see whether the
company is climbing or not. They also want to gain knowledge of the liquidity and
profitability of the business.
 Taxation Authorities: These are the agencies that include the government and stock
exchange regulators. These control the changes in accounting principles and standards.
You need to learn that the accounting information complies with guidelines and the laws
of the state in which the business is done (Hodson, Wong and Schilder, 2020). The aim is
to maintain the integrity band to protect investors.
Each of the above stakeholders are equally important to Smart. They all use financial reports
to make their relevant decisions. Therefore, Smart should provide you with complete
information by operating on the principles of GAAP.
Elaborate which of the financial statements is of bet use of the following persons:
Three types of financial reports are generally important to those who are interested in
accounting information. These are the balance sheet, income statement and cash flow statement.
In addition to these three, there are some organizations that also need the analysis of changes in
equity and the notes to the annual financial statements. The reason for this is that it provides in-
depth knowledge of all of the summarized statements
a) A loan creditor: It is someone who extends loans and advances to the business
enterprise, which must be repaid with the help of the company after the specified period
has expired. These funds are vital to the company as they are used for the day-to-day
activities and operations of the trading company. These creditors must carefully examine
the performance of the trading company and how they are rewarded with the hobby and
in which period the main amount is paid out again. To reduce the risk of horrendous cash
claims in the future, these creditors perform a random assessment based on the company's
cash statements. For analysis, they refer to the company's annual financial statements and
determine the course of business (Ionescu, Toma and Founanou, 2018). The performance
statement, or balance sheet, is one of the primary tools they use to review the
organization's short-term liabilities and also the cash flow statement to see at what rate
the company can repay its obligations.

b) A trade creditor: These are the people who provide the association with services and
products that have not yet been paid for. The organization owes this sum to this provider,
which must be repaid on time. It grants goods and services on credit after learning the
business operations and the timing of the payment of this sum. These are the people who
will put items in trust for the organizations without immediately collecting the payments
from them. For this, the banks must ensure that the organization can meet its obligations
in a short time and that there is no default in favour of the business (Kim and Yoon,
2019). They do this by taking a look at the monetary balance sheet of the balance sheet
and the turnover rate of creditors, where all the data in this context is provided.
Explain the components of the supplement to the annual report. Also describe the concept of
financial reporting.
A company’s annual report is the big picture of the company to help identify the position
in which it stands in contrast to other companies. This is used by various parties to analyse the
organization's performance, so it has become important for the organizations to maintain these
reports in accordance with the rules and regulations, taking into account that they are not allowed
to hide or change any information and data that are relevant for the companies are recorded in
full disclosure in the bookkeeping. These reports also include some components of funding
supplements that are an important part of them. There are mainly three components of Smart
Finance Supplements, which are discussed below:
1. Notes to Financial Statements: It contains a complete description of the combined
financial report. It clarifies every single item on the balance sheet and income statement.
It also describes the principles and methods used to calculate various accounts such as
depreciation and provisions. It too describes the contingencies and uncertainties that can
arise in business.
2. Management Discussion Analysis: The company tries to determine its position within
itself. It essentially focuses on three aspects in carrying out this evaluation (Oladimeji and
Aina, 2018). It checks whether the company is able to meet its short-term obligations or
not. It also seeks to determine if the company has enough resources to use its capital to
satisfy its business and expansion. It also discusses the results of operations.

3. Auditor’s Report: This report is an important part of the annual report. In shows the
truthfulness and trustworthiness of corporate accounting. It is the independent audit of the
company's financial statements. In it, the auditor gives his judgment as to whether the
books and reports reflect the true picture of the company or not.
Financial reporting refers to the concept of keeping all accounting deals so that anyone
interested in learning about the company can read them. They represent the complete information
of the business and its location, as the principle of full disclosure at the time of submission of
financial reports must be observed. Be defined as a concept for filing the company's accounting
(Pikkemaat, Peters and Chan, 2018). According to the rules, it is important for companies to
submit their reports quarterly, annually and sometimes even every six months. These reports are
used by the tax authorities to verify the taxes paid by the company. They also help investors
decide whether or not to invest in the company. Smart also has to prepare these reports in order
to fill them with the stock exchanges of the country in which it operates its restaurant.
It is Smart Resort’s obligation to use GAAP or IFRS standards to keep its records. It provides
guidelines to the company on what types of reports it needs to produce and what should be
included in order to make it authentic to its various users. On the other hand, Smart must also
keep in mind that it will provide all relevant data in the books by adopting the full disclosure
rule.
Examine the performance of Smart Resort Ltd.
Accounting ratios can be defined as a term that creates a relationship between two different
account values. These numbers can relate to the company's balance sheet, income statement, or
other numerical data. It helps the users of accounting information in evaluating the company's
performance.
a) Calculation of the financial ratios of Smart Resort Ltd.:

b) Report on the performance of Smart Resort Ltd.
Looking at the above metrics, it can be said that business is doing well overall. But when
this performance is compared with the results of the previous year, it verifies that the condition
of the company is deteriorating. Although Smart's profits are increasing, there is a downward
trend compared to last year. In this position, the interest rate on long-term debt has decreased,
but even then the net profit margin is decreasing. In addition, the return on investment and equity
also decrease. Smart's performance was good in 2018, but it fell in 2019, as did return on equity,
falling from 6% in the last report to 11%.

The liquidity situation is also not good and has decreased over the next year. Under the current
ratio, it has enough short-term assets to pay off its short-term debt, but if you look deeply you
can say that most of the current assets belong to inventory and after removing that the assets
could only be 50 to 60% of the assets cover short term debt. This is not a good sign for the
company's liquidity situation. On the other hand, profits seem to be increasing. The operating
income generated by the company or society is sufficient to pay off its debts. The increase in this
income is due to the decrease in interest payments (Salehinia, Tamoradi and Sepehri, 2021). The
inventory turnover rate also shows that Smart has good sales and that the pick-up time is also
reduced. In this way, the liquidity problem can be solved or at least reduced in the future. Now it
only takes 11 days to collect the amount from the debtors.
So overall, Smart's position isn't that bad. However, there are some aspects that need to be
focused on some areas for improvement like regaining more assets and equity, improving
liquidity, and a few others. It can use working capital to settle its short-term debt, but if the
inventory is removed from this section, it will not be able to pay its payments in full. Although
operating income will increase and their debts can be settled. So it can be said that there are
some aspects that Smart needs to improve on.
CONCLUSION
It can be concluded, from the above analysis that the principles of GAAP are very important
for the application and use of accounts in companies. You give them a guide on how to complete
the entire task. These reports are vital for users to analyse the organization's information. It
supports the parties in various investment and accounting decisions. However, these are only
useful if they are created by companies in accordance with GAAP standards. It also helps the
users and companies in calculating metrics, which further helps in determining the company's
position. The report also highlighted how different users of accounting information use different
metrics in making decisions. Different accounting ratios were also calculated and passed on to
the CEO of Smart Resort Ltd. Reported. Different parties have different desires that help meet
their needs.

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