Financial Resource Management: A Case Study of Smart Resort Ltd

This report provides a comprehensive financial analysis of Smart Resort Ltd, a hospitality organization, focusing on its financial resource management. It begins by discussing Generally Accepted Accounting Principles (GAAP) and the importance of financial statements for various decision-makers, including management, competitors, customers, employees, government, investors, banks, and suppliers. The report then examines the specific financial statements, such as the income statement, balance sheet, and cash flow statement, and their uses for loan creditors and trade creditors. It explains the components that supplement financial statements in the annual report, highlighting the significance of income statements, cash flow statements, balance sheets, and statements of changes in equity. Finally, the report delves into the financial performance of Smart Resort Ltd by calculating and interpreting key financial ratios, including net profit margin, return on equity, return on assets, current ratio, quick ratio, debt-equity ratio, and inventory turnover ratio, to assess the company's profitability, efficiency, and solvency.

Managing Financial
Resources in the Hospitality
Industry

TABLE OF CONTENT
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Financial principles and statements with assessment information needs for different decisions
makers..........................................................................................................................................3
Discussion of the financial statements and their uses for loan creditor and trade creditor..........4
Explaining components that supplements financial statement in annual report..........................5
Explaining the financial performance of Smart Resort Ltd.........................................................6
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
The financial management is the practice of handling the finances of the company in a
way that it allows the business to be successful and compliant. It helps the organization in the
management of the financial funds so that effectiveness can be achieved in the organization. This
project talks about the financial position of Smart Resort Ltd which is a hospitality organization.
This project helps in understanding the financial statement and interpretation of the financial
performance of the hospitality organization for using the ratio analysis.
MAIN BODY
Financial principles and statements with assessment information needs for different decisions
makers
GAAP is the generally accepted accounting principles which refers to the common set of
accounting principles, standards and procedure which is issued by the financial accounting
standards board. It helps the business in the establishment of a common set of principles for
accounting over the world. This is essential for the clarity, consistency and comparability of the
communication of the financial information of the organization (Maisharoh and Riyanto, 2020).
The main aim of the GAAP is to ensure that the company's financial statement of the
organization it helpful towards the financial statements towards being complete, consistent and
comparable.
Financial statements is important for the assessment of the information for many
decision-makers. These decision-makers are the stakeholders of the organization which have
some kind of interest and relation with the organization. The management of the organization is
that body for which the financial information is very essential and effective. It can be said that
management uses this information for understanding the effectiveness of the organization
organizations performance (Yılmaz, Aksoy and Çelik, 2020). The use the information from
financial statement for making changes in the performance of the organization. Competitors of
the organization which although are not the stakeholders of the organization but use the financial
statement's information for understanding the competition that the organizational performance.
Customers of the organization are considered to be the one which helps the business in the
analysation of the financial ability towards suppliers for remaining in the business.
Employees use this information to understand the scope of development which they can
receive from the organization. It is also the way in which the employees are able to make the

decision of staying in the organization. The government also uses this information for
understanding the effectiveness of the organizational performance which helps them to decision
towards allowances and taxes. The investment analysis is also a very important use of the
financial information as the investors use the financial statements to analyse how productive will
the company be in the few years of time on the basis of which the business is able to understand
the effectiveness of the organizational performance. (What are the Three Financial Statements?
2021) Banks and other financial bodies which lend the business finances are also the ones which
takes a look at the financial performance of the organization (Saleh, Jawabreh and Abu-Eker,
2021). This helps them to understand the financial capacity of the organization towards repaying
the loans with interest. Suppliers are also the stakeholders which are also dependent the
organization's financial statements as it helps them to analyse the financial liquidity which is
essential for the repayment of the dues of the suppliers from which the company buys.
Discussion of the financial statements and their uses for loan creditor and trade creditor
The financial statements are used by different stakeholders of the organization. They
have their own purpose to which they use the financial statements. Due to the differences in the
purpose of the purpose of the stakeholders their choice of financial statements is very different.
The following are the financial statements which the statements of the income is prepared is
towards the management of the organizational performance.
Loan Creditors :
The loan creditors are the ones which provide the organizations loans for the
improvement of their financial performance. This is the reason why the banks which are the most
common loan creditors chose to refer the income statement of this organization (Dang, Pham and
Vu, 2018). The income statement of the organization shows the importance of the information of
the company which is used by the creditors which helps in understanding the profit the company
for paying of the loans and interest. Income statement is known as the profit and the loss
statement which is helpful for the organization in the operations and financial results of the
income and earning of the organization. Banks also refer to the balance sheet of the organization
for understanding the financial position of the organization which is very essential as it can allow
the bank to recover the loan thorough their assets.
Trade Creditors :

Trade creditors are the organization's suppliers who provide the goods and services to the
company on credit. They also consider the balance sheet for understanding the financial position
of the organization which is very effective in saying the capacity of the organization towards
paying their obligations (Calabrese, Ghiron and Tiburzi, 2021). Thus referring to the balance
sheet of the organization is very helpful for the organization in the understanding the
organizational effectiveness. It can be said that with the help of these suppliers is able to manage
the operational management of their own business. These trade creditors are also known to refer
to the cash flow analysis which helps the business in understanding the effectiveness in the
management of the organization. It is also said to be v very helpful for the company in
understanding the organizational effectiveness in the management of the cash. The flow of cash
help the creditors to understand the capacity of the organization to pay the business.
Explaining components that supplements financial statement in annual report
There are number of benefits can be achieved which are termed as supplements to the financial
statements in annual reports (Minnis and Sutherland, 2017). It includes achieving ability to pay
near term obligations, fund operation & expansion and evaluating results of operations. The
prepared annual reports give information to the stakeholders, financial analytics, creditors,
agencies of government & potential investors.
 Income statement is associated with explaining information regarding gain & expenditure
conducted in respect to have smooth function. The specific statement provides details
regarding all direct & indirect income & expenses executed by firm for evaluating
information so that accurate information for getting better insights regarding company’s
processing (Calabrese, Ghiron and Tiburzi, 2021.).
 Cash flow statement depicts information regarding in & out flows from operating,
investing and financing activities. It gives details related with net cash flow available
within company which aids in ascertaining liquidity position. In addition to this,
ascertaining liquidity position helps in making evaluation of overcoming obligations in
turn higher company’s credibility can be identified.
 Balance sheet is related with assessing information summary information regarding assets
and liabilities. It is based on accounting equation such as assets equals to liabilities plus
assets. The assets comprise cash, inventory, prepaid expense, etc. which are considered as
current assets that aids in assessing company’s ability to overcome short term liabilities.

It includes trade payable, creditors, etc. in turn liquidity to meet short run requirements
can be assessed (Pramana and et.al., 2019). Fixed assets the property, equipment, plants,
etc. so that relevant efficiency to generate revenue from this can be determined. Long
term liabilities and equity reflects company’s ability to meet its overall requirement.
 The change in equity statement as w ell plays significant role in annual report which is
required to be emphasized in turn higher level of information regarding the reconciliation
between opening & closing balance of shareholders equity.
The annual report is concerned with comprehensive report which comprises the overall
information throughout the preceding year. The particular report is intended to provide the
significant information to stakeholders so that full disclosure & transparency between the
company & interested people can be maintained. The mentioned financial statements like
income, cash flow, change in equity and balance sheet complements the annual report.
From the evaluation it can be said that company can obtain trustworthiness by preparing
the financial statement in effective manner. These statements are considered to be crucial
as supplements to annual report.
Explaining the financial performance of Smart Resort Ltd
Determination of ratios:
Net profit margin
The net profit margin is concerned with assessing the profitability of the company generated
from the revenue. Smart Resort Ltd as being operator in the hospitality sector, it can be said that
stakeholders like customers, lenders, etc. so that relevant decision can be made.
Particulars Formula 2018 2019
Net profit 167914 185370
Sales revenue 5732145 7123189
NP ratio Net profit / sales * 100 3% 3%
From the evaluation it can be said that Smart Resort Ltd net profitability trend is in constant
position. It reflects that thee is no change in the efforts conducted by the company in order to
incline the profitability. There is need to make few changes in its ability to generate the revenue,
profitability margin, decline cost, etc so that improvement can be obtained.
Return on equity

This shows how effectively company is utilizing equity capital to have higher profit in
turn better return s to shareholders can be provided.
Particulars Formula 2018 2019
Net profit 167914 185370
Shareholder equity 1094485 1656886
Return on equity
Net profit /shareholder
equity * 100 15.34% 11.19%
From the shown table above table it can be said in the year 15.34 and 11.19% in the year
2018 & 2019.On the basis of this, reduced trend can be seen as compared to the previous period.
The reducing return on equity can negatively affect financial performance of the company.
Return on assets
It refers to having higher revenue from the available assets through conducting
optimum utilization.
Particulars Formula 2018 2019
Net profit 167914 185370
Total Assets 2638862 3179266
Return on assets
Net profit /total
assets*100 6.36% 5.83%
The above presented information it can be said that from the year 2018 to 2019 there is
declined by 0.53%. It is one of the significant adverse indication of return assets that depicts
ineffective utilization of resources.
Current ratio
This presents ability and efficiency of Smart Resort Ltd to use current assets to overcome
liabilities.
Particulars Formula 2018 2019
Current assets 1786140 2064100
Current liabilities 982480 1265332

Current ratio
Current assets / current
liabilities 1.818 1.631
There is need to have current ratio of 1 time which is less than the presented outcome of
the year 2018 & 2019. On the basis of this it can be said that there is no proper utilization as
exceeding which indicates higher result but required to be declined.
Quick ratio
The particular ratio presents how cash & its equal assets are taken into consideration by
the company to eliminate its short term liabilities.
Particulars Formula 2018 2019
Current assets 1786140 2064100
Inventory 1124642 1340432
Current liabilities 982480 1265332
Quick ratio
Current assets —
(stock )/Current liabilities 0.673 0.572
This is showing that fir does not have appropriate level of the quick ratio which can
hamper the decision-making criteria of the company. It is presenting declined ratio which is
negatively influencing performance of Smart Resort Ltd.
Debt-equity ratio
It is explains the information regarding proportion of debt & equity so that related risk
can be evaluated.
Particulars Formula 2018 2019
Long-term debt 561897 257048
Shareholder's
equity 1094485 1656886
Debt-equity ratio
Long-term debt /
shareholders equity 0.5134 0.1551

The outcome derived for the two specified period of the time is 0.53134 & 0.1551
respectively it becomes essential for Smart Resort Ltd to focus on having following the same
pattern to attract larger number of investors.
Inventory Turnover Ratio
It shows how frequently inventory is replaced by making higher sales to generate revenue.
Particulars Formula 2018 2019
COGS 4377690 5396923
inventory 1124642 1340432
Inventory
Turnover Ratio COGS/Inventory 3.893 4.026
From the analysis it can be depicted that inventory turnover ratio is increasing as
compared to the previous year. Firm might get favourable effect in the financial performance of
the company.
Times interest earned ratio
Particulars Formula 2018 2019
EBIT 277662 323631
Interest 21955 17370
Interest coverage
ratios EBIT/ interest 12.647 18.632
It allows to analyse the performance of the company to deal with outstanding debt.
There is inclining trend which is indicating that there is need to have improvement course of
action to decline negative impact (What is Ratio Analysis? 2021).
Average collection period
Particulars Formula 2018 2019
Account receivable
turnover
Account receivable /
sales *365 12.935 11.367
Average collection
period
365/account receivable
turnover ratio 28.218 32.110

The particular presented table for the to years such as 2018 & 2019 are considered to be
28.218 & 32.110 which is presenting negatively affecting Smart Resort Ltd.
Account receivable turnover
Particulars Formula 2018 2019
Account receivable 203143 221836
Sales revenue 5732145 7123189
Account
receivable
turnover
Account receivable /
sales *365 12.935 11.367
The specific ratio stated that there is need to have less period for having effective
performance. The derived results are presenting the same.
Evaluating performance of Smart Resort Ltd.
The calculated ratios as shown above presents that company need has make few changes
that there is growth in the sale but no changes in net profitability is seen. The reason behind this
can be said that there is incline in gross profit & operating but no declination of indirect expenses
which presents that firm require paying attention on improving the same.
From the computed result it can be said that the ratios like return on equity, assets and
quick ratios are the negative sign which need to be improved for having relevant and reliable
impact on the company. The equity investment from the year the 2018 to 2019 has inclined but
return is decreasing. It specifies that the other ratios like interest coverage and inventory , etc.
ratios are increasing that is affecting in the positive manner. There is need to be make few
alterations in the overall performance of the company. It will allow Smart Resort to boost its
growth & development. It can be said that these changes in the overall performance of the
company has obtained due to few alterations in the strategies to handle the overall functioning of
the company (DEVI and et.al., 2021). Smart Resort Ltd need to make some serious actions in
respect to derive the ability to be successful in the company. The management of the specified
enterprise ned to apply understand the highlighted lacking areas in turn relevant steps to make
changes for having sustainability in hospitality industry can be derived.
CONCLUSION
From the above project it can be concluded that the Smart Resort Ltd has made a very
positive decision which will help the business to grow in the future event though it has not seen

much differences in the financial performance. In this project the general meaning of the
accepted accounting principles which has been helpful for the identification of the different uses
of the financial statements for the decision-making of the different stakeholders has been
discussed. This project has show the three financial statements which are the statements of
income, financial position and cash flow. In this project description of the supplements of
financial statements in the given annual report has been shown. This project has shown the
financial interpretation on the Smart Resort Ltd through financial ratios.

REFERENCES
Books and Journals
Calabrese, A., Ghiron, N.L. and Tiburzi, L., 2021. Investigating the relationships between
service capabilities and financial statements indicators. International Journal of
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Dang, N.H., Pham, D.C. and Vu, T.B.H., 2018. Effects of financial statements information on
firms’ value: evidence from Vietnamese listed firms. Investment Management and
Financial Innovations. 15(4). pp.210-218.
DEVI, P. N. C. and et.al., 2021. The Effect of Fraud Pentagon Theory on Financial Statements:
Empirical Evidence from Indonesia. The Journal of Asian Finance, Economics and
Business. 8(3). pp.1163-1169.
Maisharoh, T. and Riyanto, S., 2020. Financial Statements Analysis in Measuring Financial
Performance of the PT. Mayora Indah Tbk, Period 2014-2018. Journal of Contemporary
Information Technology, Management, and Accounting. 1(2). pp.63-71.
Minnis, M. and Sutherland, A., 2017. Financial statements as monitoring mechanisms: Evidence
from small commercial loans. Journal of Accounting Research. 55(1). pp.197-233.
Pramana, Y. and et.al., 2019. Fraud factors of financial statements on construction industry in
Indonesia stock exchange. International Journal of Social Sciences and Humanities. 3(2).
pp.187-196.
Saleh, M.M.A., Jawabreh, O. and Abu-Eker, E.F.M., 2021. Factors of applying creative
accounting and its impact on the quality of financial statements in Jordanian hotels,
sustainable practices. Journal of Sustainable Finance & Investment, pp.1-17.
Yılmaz, M.K., Aksoy, M. and Çelik, T.T., 2020. Market reaction to regulatory policy changes in
financial statements filings: evidence from Turkey. Eurasian Economic Review. 10(4).
pp.567-605.
Online
What are the Three Financial Statements? 2021. [Online]. Available through:
<https://corporatefinanceinstitute.com/resources/knowledge/accounting/three-financial-
statements/>
What is Ratio Analysis? 2021. [Online]. Available through:
<https://corporatefinanceinstitute.com/resources/knowledge/finance/ratio-analysis/>