Managing Financial Resources in the Hospitality Industry

This report discusses GAAP principles, financial statements, and performance evaluation of Smart Resort Ltd in the hospitality industry. It includes a description of GAAP principles, identification of users of financial statements, components of the supplement of annual report, and financial reporting concept. The report evaluates the performance of Smart Resort Ltd using accounting ratios and provides recommendations for improvement. The subject is finance and accounting, and the course code and college/university are not mentioned.

Managing Financial
Resources in the Hospitality
Industry

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Question 1: Describe GAAP principles and identify the users of financial statements along
with their needs for taking decisions...........................................................................................3
Question 2: Elaborate which financial statement is of most interest to the following persons.. 5
Question 3: Discuss the components of supplement of annual report. Also discuss financial
reporting concept.........................................................................................................................5
Question 4: Evaluate the performance of Smart Resort Ltd.......................................................7
CONCLUSION ...............................................................................................................................9
REFRENCES.................................................................................................................................10

INTRODUCTION
Management of monetary resources is one of the most important part which helps in
controlling and monitoring of various issues that is based upon Finance. It is also helpful in
evaluating the performance of the organization by providing them sustainability within profit and
revenue generation. It is one of the most critical concept sentinel and external factors of an
organization impact internal operations existing within a business organization. There are various
kinds of elements with discovered in relation to management of money for framing budget
evaluating the current position of organization and preparing welfare policies in order to recover
the debts that has accrued. There are some rules and regulations that assists the companies in
documenting all their records properly. These reports are then used by stakeholders for
generating information about the performance of business. This report is based on Smart Resort
Ltd. It discusses about the generally accepted accounting principles and the needs of users of
financial statements. It further evaluated the interests of various creditors along with components
of financial statements. The report makes analysis on the performance of Smart Resort by
comparing its ratios of last two years.
MAIN BODY
Question 1: Describe GAAP principles and identify the users of financial statements
along with their needs for taking decisions.
Generally accepted accounting principles provides about those details which is helpful in
developing recording structure of transaction in books of accounts. In this certain standards and
procedures has been mentioned which is required to be followed by an organization at the time
of compiling of financial statements. In UK all the companies are bound to adopt those principles
of IFRS and various other firms which has been set free. They are been chosen from GAAP and
IFRS code. They are known for providing complete definition regarding financial institutes. In
this all kinds of rules and related assets, liabilities and valuation has been mentioned over the
standards. Under it detail information regarding treatment of intangible and fictitious assets held
by business organization(Draper and Raymond, 2020). The principles of GAAP is used for
providing data about the adjustment upon different expenses and incomes. It has been given
knowledge about the items that has been made eligible for taking advantage of reducing tax and
which does not fall within it. The GAAP codes deals with the behavioral aspect existing within

society that is based upon sincerity, regularity, consistency, prudence and continuity. This is
expected that an organization requires to apply all kinds of attributes making regulation and
accounts maintained within it. They are used by different stakeholders in order to check out
position of an organization. There are various kinds of financial statements that is based upon
demand of different things which makes decisions taking easy and effective in nature. There are
various kinds of statements that has been given as follows:
 Company Management- They are required to collect information in relation to
profitability and profitability within business. It is interested in getting complete financial
statement.
 Competitors- It is based upon records over business which is used for framing strategy
in relation to owner of business. Through looking at the statement of competitors firm,
these organizations is based upon collecting information in relation financial structure of
an organization and tries upon finding out the manner through which firm excelled within
performance(Deipenbrock, 2018).
 Employees- Bonus earning is the main focus of these workers. They also wants to ensure
that the firm is capable enough for paying them their regular salaries and can provide
them good working conditions.
 Government- It has been interested in making organizations accounts to be genarated
over information in relation over tax which has is paid. So, it wants to check that there is
no evasion of taxation.
 Investors- All individuals who invest their money in some business are eager to know
the dividend declared by the organization. They wants to knew that whether it is earning
enough profits to give return on shares.
 Lenders- These persons have provided supply over credit within the organization. They
give loans to them. This makes proving of facilities within which the lenders are
interested in knowing about the organization which makes repaying of debt done. It is
looking at cash flow and accountable payable ratio of an organization helping in taking
decision.
The above mentioned stakeholders are very important for an business organization. As they helps
in running of business in more effective manner. Duty of the company is proceeded with
complete information in the financial accounts in relation over the principles mentioned within

GAAP. These code has helped in identifying stakeholders in relation to business organization
which makes business organization perform its process in more effective way.
Question 2: Elaborate which financial statement is of most interest to the following
persons.
There are mainly three types of financial reports which is important for an users
regarding accounting information. These financial statement helps in making cash flow statement
, balance sheet and income that is helping in making analysis over changes in equity through
making notes over financial statement. This is because it provides detailed information about the
summarize transactions which has been mentioned within the above reports(Conant, 2018).
(a) a loan creditor – These are interested in knowing weather firm which is able to pay debts
within the time or not. In relation to this purpose it is required to credit risk assessment on the
basis of cash flow with liquidity position. This is also interested in knowing all kinds of aspects
which has been taking place within an organization. Also they are helpful in arranging various
kinds of resources which makes liquidity maintained within an organization. It also leads upon
developing various aspects based upon organization. Such information has been helping in
making information with cash flow statement to be prepared in more effective manner. From
there creditor making collection over all kind of knowledge available within business. These are
helpful in making information in relation to cash hold by organization is applied within
it(Deipenbrock, 2018).
(b) a trade creditor – These are those persons that makes availing of products over the basis
without collecting payment on immediate bases. For, this creditors make sure that organization
could clear its debts within short time interval and is not default on the side of business. It is been
done by trade creditors through turnover ratio where all the information that provides in
association with this.
Question 3: Discuss the components of supplement of annual report. Also discuss
financial reporting concept.
The annual reports makes picture of position and performance over whole accounting
year. Their are five components over report that has been provided with complete financial

knowledge upon accounting year. There are five components of the report which provides
complete knowledge. This has been explained as follows:
1. Balance sheet- It contains balance in relation to all kinds of assets, liabilities and capital.
Through this organization has been performed by comparing values over previous years.
2. Profit and loss account- It consists of summary of all the expenses and incomes of the
current year. This helps in checking the profitability of company.
3. Cash flow statement- It is description of the complete inflow and outflow of the money.
It helps in analysing where and how much cash is applied.
4. Changes in Equity- It is detailed statement of how much amount is invested by investors
and how the capital structure of company is changing.
5. Notes to financial statements- It gives details about all the aspects mentioned in the
financial statement
Financial reporting can be defined as a concept of filing up the accounting statements of
the company. These are used for disclosing the complete information of the company for various
external parties who are interested in the accounts of firm. These are prepared quarterly and
annually for evaluating the performance and determination of tax in that particular time period.
These also assists the managers in taking various decisions. Investors and banks also makes use
of these reports to decide, whether they should invest or not(Beckers, 2018).
It is mandatory for the organizations to apply GAAP or IFRS rules while maintaining
their records. All these codes guides the companies about the manner in which the reports are
prepared and about the authenticity of these statements. The companies also has to make sure
that they present all the relevant data in addition to full disclosure in their reports. Their should
be no case of alteration or hiding of content in them.

Question 4: Evaluate the performance of Smart Resort Ltd.
Accounting ratios helps companies to analysis it performance of a particular period with
the help of its financial statements. Companies used accounting ratios in order to compare its two
elements of its financial statements which includes income statements, balance sheets and cash
flow statements. Accounting ratios basically used in companies to take decision for future
purpose with the help of current financial year performance.
(a) Calculation of financial ratios for Smart Resort.
Ratio For 2018 For 2019
Net Profit Margin = Net profit / Sales *100 167914 / 5732145 *
100 = 2.93 %
185370 / 7123189 *
100 = 2.60%
ROA = Net Income / Total Assets 167914 / 2638862 =
0.06
185370 / 3179266 =
0.05
ROE = Net income / Total equity 167914 / 1094862 =
0.15
185370 / 1656886 =
0.11
Current Ratio = Current Assets / Current
Liabilities
1786140 / 982480 =
1.82
2064100 / 1265332 =
1.63
Quick Ratio = Current Assets – Inventory /
Current Liabilities
661498 / 982480 =
0.67
723668 / 1265332 =
0.57
Debt to Equity Ratio = Total Liabilities /
Shareholders Equity
1544377 / 1,094,485 =
1.41
1522380 / 1,656,886 =
0.92
Times Internet Earned (Coverage) Ratio =
Earnings before interest taxes and
depreciation / interest Expense
277662 / 21955 =
12.65
323631 / 17370 =
18.63
Inventory Turnover Ratio = Cost of goods
sold / Inventory
4377690 / 1124642 =
3.89
5396923 / 1340432 =
4.03
Average Collection Period = Accounts
Receivable / Net credit sales * 365
203143 / 5732145 *
365 = 12.93
221836 / 7123189 *
365 = 11.37

Accounts Receivable Turnover = Trade
Receivables / Net credit sales
203143 / 5732145 =
0.035
221836 / 7123189 =
0.031
(b) Report on the Performance of Smart Resort Ltd.
After analysing company's financial statement of the particular financial year it seems that the
company's performance in overall situation is well in both financial years. After comparing its
position in previous year it seems that company is not performing according to its mark up
position. There is a increment in company's profits but when considering it with sales it states
that it was a reduction in its net profit margin. According to its compared accounting ratios it
states that there is reduction in net gain margin and interest paid in long term debt. Return on
Assets and Equity has also reduced when comparing it with previous year. Its performance in
year 2018 was good with 6% and 15% respectively, but it will get reduced in 2019(Alpa,,
2018). .
When comparing Liquidity situation of Smart Resort Ltd with ideal performance states
that it was not good in both the consequent year they can suffer many problems while paying off
its short term liabilities. According to its current ratio it shows that it company has to face
difficulty in order to pay off its all short term liabilities of a subsequent year. After viewing its
Quick ratio after deducting inventory amount from current assets that the company can only pay
off 50-60% creditors only. From the above condition it will seems that the liquidity condition of
this company is poor. On the other hand of this comparison it will seem that company earned
more profit from the previous year. And its operating income is adequate enough in order to pat
off its all debts. According to its debt equity ratio it seems that the company is not leveraged as it
was using more equity fund rather than borrowed fund. While comparing company's inventory
turnover ratio with its previous year ratio it shows that there is increment in resort's sales. The
average collection period is decreasing which become good policy for the company in order to
get recovered. It shows that the company can collect its amount from its debtors or bill
receivables within 11 days.
Overall it seems that the company's performance is not that good or bad. In some
situation its performance is good, and in some situation its performance is worst. To get better
future results company has to be focus on some points such recover more from assets, find ways

to increase its profit. This will help company to get improvement in its financial condition and
also get benefited to bring profitability for it.
CONCLUSION
From he above analysis, it can be concluded that the financial statements are very
important for the company as well the users of theses reports. They helps the parties in making
various accounting and investing decisions. But all these reports must be made according the
Generally accepted accounting principles, so that it can be stated as authentic. With the help of
these, the users and companies calculate their ratios, which helps in ascertaining the position of
company. Different parties have various needs which can be fulfilled by these reports only.

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