Managing Financial Resources in the Hospitality Industry

This report discusses GAAP standards, budget summaries, financial reporting, and performance evaluation of Smart Resort Ltd in the hospitality industry. It also highlights the importance of financial statements for internal and external users. Subject: Hospitality Industry, Course Code: NA, Course Name: NA, College/University: NA.

Managing Financial
Resources in the
Hospitality Industry

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK ..............................................................................................................................................3
Describe the Generally Accepted Accounting Principles (GAAP) and identify the user of the
financial statements alongside their requirements for taking choices. .......................................3
Elaborate which budget summary is of most interest to the accompanying people. .................5
Explain the components of supplement of annual report. Also describe the concept of
financial reporting.......................................................................................................................6
Evaluate the performance of Smart Resort Ltd...........................................................................7
CONCLUSION ...............................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
The management of financial resources implies controlling and observing the issues
identified with finance and assessing the exhibition of organization with a rationale of expanding
its benefit. It is exceptionally basic idea as it is difficult to accurately decipher the circumstances
of external environment and its effect on the interior activities of business. There are many
estimates which helps in dealing money of the firm like outlining financial plan, assessing the
current situation of association and setting up a well confirmation strategy for the recuperation
and instalment of obligations. There are a few guidelines and norms which can help the
organizations in reporting all their records appropriately. These reports are then utilized by
potential stakeholders for producing data about the performance of the company (Abdullah and
Foo, 2019). This report has discussed about the GAAP standards and how these are helpful to the
users of financial statements in taking the decisions. It is further analysed about the interest of
the loan and trade creditors in the financial statements. The report also performed a financial
ratio analysis of two years on the performance of Smart Resort.
TASK
Describe the Generally Accepted Accounting Principles (GAAP) and identify the user of the
financial statements alongside their requirements for taking choices.
GAAP standards gives insights concerning the structure of recording of exchanges in the
books of accounts. It set a few principles and techniques which should be trailed by
organizations at the hour of gathering of fiscal reports. In UK, all the listed organizations are
bounded to follow these standards of IFRS while other than these, they are liberalized. They can
look over GAAP and IFRS codes. It gives total meaning of the monetary establishment. The
rules and regulations identified with liabilities, assets and their valuation is documented in these
principles. Their is likewise a point by point data about the treatment of elusive and invented
resources held by the business. The standards of GAAP likewise gives information about the
change of different income and expenses (Ball, 2018). It gives information about the things
which are qualified for exploiting tax assessment and which are not. GAAP adheres to the
guidelines based bookkeeping which implies these are set of rules which are needed to be taken
as they are and no alterations are permitted in this.

There are various clients of bookkeeping data. These might be inside the association or
outside it. These clients utilize the data for different purposes. Accordingly the proclamations
ought to be made fruitful so that give to the requirements of these clients. These clients are
examined beneath and are characterized into: Internal Users and External Users.
1. Employees: These are individuals working in the association with the goal to procure
pay and satisfy the authoritative targets. They utilize the bookkeeping data to decide the
monetary health and productivity of the business to guarantee their professional stability,
future compensation, retirement benefits and other opportunities (Campbell, and et. al.,
2021). They essentially search for benefit of the business because of work done.
2. Management: These are individuals who figure and make plans for the future. They
arrangement is done as per the objectives of the association. These clients of the
bookkeeping data utilizes it to plan, control and make decisions. It assists them with
assessing the performance and position of the association. It essentially assists them with
taking care of their business better. Directors of an undertaking utilizes the monetary data
to follow execution through spending plans, and fluctuations to check the practicality of
principles set.
3. Proprietors: They are the individuals who have invested the capital into the business to
procure profits. They are the significant variables of an association and organizations
consistently search for ways of augmenting their income. They utilize this data to analyse
the productivity of the organization and profits from their speculations. It gives them bits
of knowledge about the business and its capacity to deliver profits for their ventures. It
likewise assists them with deciding future strategy.
4. Creditors: These are individuals who have given credit to the business. They are
intrigued to decide credit value of the business. These incorporates banks, suppliers,
lenders of money. It assists them with examining monetary situation of the business and
if they can stretch out any credits to them. Trade creditors just need data identified for the
short period of time than banks.
5. Investors: They need the bookkeeping data as they need to learn the danger in
contributing and the profits and plan accordingly. The decisions which are related to the
investment are to be taken (DeZoort, Wilkins and Justice, 2017). It is taken by analysing

the existing investments in the organisation and examining the overall health of the
business.
6. Customers: These are the purchasers and can exist at any stage of business cycle. They
need the accounting data to learn the monetary situation of a business, when they have
long contribution in the business. They regularly check the inflow of the investors and the
pace of the production activities. It assesses the monetary position of the suppliers to
maintain a assurity of the stability of the resources (Heflin, Kolev and Whipple, 2020).
7. Administrative Authorities: These are the authorities which include the government and
the stock exchange boards. These keep a check on amendment which are done in the
accounting principles, and standards. They need to learn that the bookkeeping
information is as per the guidelines and consents to the law of state where the business is
occurring. It objective is to maintain the integrity band safeguard the investors.
8. Competitors: It is keen on the records of the business for outlining the strategy for their
own business. By checking out the statements of competitor firm, these associations
gather data about the monetary construction of organization and attempts to discover the
way through which the firm dominated in its exhibition.
Elaborate which budget summary is of most interest to the accompanying people.
There are typically three types of monetary reports which are truly significant for the
users of accounting data. They are – cash flow, income statement and balance sheet. Aside from
these three, a few organisations are very keen on the examining the changes in equity and notes
to financial statements. This is because, it gives a detailed information about the transactions
which are summarized in the above mentioned reports.
a) A loan creditor: These are the individuals who stretch out advances and loans to the business
which is needed to be repaid by the business after the foreordained time span. These assets are
important for the business as these are utilized to in everyday exercises and activities of the
business (Issavi and et. al., 2018). It is interested in realizing that whether the firm can reimburse
its obligation on schedule or not. For this reason, it needs to check its credit risk assessment
based on profitability, cash flow, income, and liquidity position. It is additionally keen on
realizing that going concern of the organization. This data can be created from the cash flow
statement. From there, lender can gather all information about the cash accessible with the

business. This will help them in realizing that how much money organization holds and where is
this sum applied by association.
b) a trade creditor: These are the people who supplies services and products to the association
which isn't yet paid for them. The organization owes this add up to this provider which is needed
to be repaid on schedule. It gives items and services on credit after having known the working of
the business and in what time these sum will be paid (Kliestik and et. al., 2018). These are the
people who benefit items to the organizations on trust premise without collecting the payments
immediately from them. For this, the banks need to ensure that the organization could clear its
obligations in brief time frame span and there is no default in favour of business. They do this by
taking a look at the monetary record of balance sheet and the creditors turnover ratio where all
the data is furnished in relationship with this.
Explain the components of supplement of annual report. Also describe the concept of financial
reporting.
An annual report of business is the complete picture of the company which the position
where it stands when comparing with other firms. It is used by various parties for reviewing the
performance of business, so it is very important to prepare this report as per norms and with
complete transparency without hiding or altering any relevant data. There are mainly thee
components of supplements of financial resources for Smart which are discusses below:
1. Management Discussion Analysis – In this, the firm tries to determine its position
within itself. It majorly focuses on three aspects while conducting this evaluation. It
checks out that whether the firm is able to pay off its short term obligations or not. It also
tries to ascertain that if the business has enough funds for employing its capital for
satisfying its operations and expansion. It also discusses about the results of operation.
2. Notes to Financial Statements – It gives complete description about the summarized
financial report. It clarifies each and every item provided in the balance sheet and income
statement (Luo and et. al., 2018). There is also description about the policies and the
methods used for the calculations of various accounts such as depreciation and
provisions. It too specifies about the contingencies and uncertainties which can occur in
business.

3. Auditor’s Report – This report is an important part of annual report. In depicts the
truthfulness and trustworthiness of accounting system of companies. It is the independent
examination of the financial statements of the firm. In this, the auditor gives its opinion
that whether the books of accounts and reports presents the true picture of firm or not
(Mook, 2017).
Financial reporting refers to the concept of filing up of all the accounting statements of
business so that any person who is interested in gaining knowledge about the company can read
it. They depict the complete information of the business and its position because it is mandatory
to follow the principle of complete disclosure at the time of presenting financial reports. be
defined as a concept of filing up the accounting statements of the company. As per rules, it is
important for organisations to file their reports quarterly, annually and sometimes semi-quarterly
as well. These reports are used by taxation authorities for checking out the tax paid by the
company. They also aid investors for deciding that they should invest in the business or not.
Smart also has to prepare these reports for filling them with the stock exchanges of the country in
which it is operating its restaurant.
It is the obligation of Smart to apply GAAP or IFRS norms for maintaining their records. It
provides guidelines to the company about what types of reports are required to be prepare and
what should be included in it to make it authentic for its various users. On the other side, Smart
also has to keep in mind that it provides all the relevant data in the books of accounts by
adopting the rule of full disclosure.
Evaluate the performance of Smart Resort Ltd.
Accounting ratios can be defined as term that creates relation among two different values
of accounts. These figures can be related to the balance sheet, income statement or any other
numeric data of the company (Nel, 2018). It helps the users of accounting information in
evaluating the performance of the company.
Calculation of financial ratios for Smart Resort.

(b) Report on the Performance of Smart Resort Ltd.
Looking at the above ratios, it can be said that the business is performing overall good.
But when this performance is compared to the results of previous year, it is reviewed that

condition of company is deteriorating. Though the profits of Smart are raising but when it is
compared with prior year, a decreasing trend is viewed. At this position, the interest paid on long
term debts has decreased but even then the net gain margin is falling.in addition to that the return
on assets and equity are also falling. Performance of Smart was good in 2018 but it diminished in
year 2019 such as in case of return on equity, it dropped to 11 % from 6 % in last report.
Its liquidity condition is also not good and has decreased in next year. According to the
current ratio it has hold on enough short term assets that it can settle down its current debts but
when sighting deep into it, this can be said that the most of the part of current assets belongs to
the inventory and after removing that the assets could satisfy only 50 – 60 % of the short term
debts. This is not a good sign of liquidity situation of firm. While on the other side, the profits
are seeming to be increasing. The operating income earned by company of company is sufficient
to set off its debts (Stoyanets and et. al., 2020). The rise in this income is because of the decrease
in the payment of interest. Its inventory turnover ratio also shows that Smart has good sales and
also its collection period is reducing. Thus means that in future the problem of liquidity can be
resolved or at least be reduced. Now, it takes only 11 days for recovering its amount from
debtors.
So, overall the position of Smart is not that bad. But there are some aspects where there is
a need of focusing on some areas for improvement like recovering more form assets and equity,
improving its liquidity and few more.
CONCLUSION
It can be concluded from the above report that the fiscal statements play a vital role for
the organization as well as for the clients of the financial statements. They helps the firms in
settling on different bookkeeping and investing decisions. However, this multitude of reports
should be made agreeing the Generally accepted accounting principles (GAAP) with the goal of
settling of the accounts authentically by following the GAAP standards.. With the assistance of
these, the clients and organizations compute the ratios, which assists in finding out the financial
position of organization. Different organisations have different requirements which can be
satisfied by these fiscal reports as it were.

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