Financial Resource Management in Hospitality: Smart Resort Ltd

This report provides a comprehensive analysis of financial resource management within the hospitality industry, focusing on Smart Resort Ltd. It begins by explaining Generally Accepted Accounting Principles (GAAP) and identifying various users of financial statements, highlighting their information needs. The report then discusses the usage of different financial statements for loan and trade creditors, followed by an examination of the components supplementing financial statements in annual reports, along with key financial reporting concepts. A significant portion of the report is dedicated to analyzing Smart Resort Ltd.'s financial statements using appropriate financial ratios, comparing performance across two different years to assess profitability, asset utilization, and liquidity. The analysis covers ratios such as net profit margin, return on assets (ROA), return on equity (ROE), current ratio, quick ratio, and debt-to-equity ratio, providing a detailed evaluation of the company's financial health and performance trends.

Managing Financial
Resources in the Hospitality
Industry

TABLE OF CONTENT
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Generally accepted accounting principles and identification of various users of financial
statements for assessing the information needs...........................................................................3
Discussion of the usage of different financial statements for Loan creditor and trade creditor. .5
Components supplementing the financial statements of annual report and discussing financial
reporting concepts........................................................................................................................6
Analysation of the financial statements with utilization of appropriate financial ratio's
comparison for two different years..............................................................................................7
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Financial management is the utilization of funds and procurement for the enterprise
which can apply the general management principles for the financial resources for the
organization through planning, organizing, directing and controlling the financial activities. In
this project the chosen hospitality organization Smart Resort Ltd. This project will explain the
general meaning of the accepted accounting principles which is helpful for the identification of
the different uses of the financial statements for the decision-making. In this project the there are
three statements of income financial position and cash flow. This project helps with the
describing the supplements of financial statements in the given annual report. In this project the
financial interpretation on the Smart Resort Ltd through financial ratios has been compared.
MAIN BODY
Generally accepted accounting principles and identification of various users of financial
statements for assessing the information needs
The generally accepted accounting principles refer to the common set of accounting
principles, standards and procedures which are issued by the financial accounting standards
board. These rules of GAAP is accountants and compile towards their financial statements
(Osmyatchenko and et.al., 2019). This project has provided the analysation of the different set of
principles which is set for the FASB which is said to be followed during the preparation of the
financial statements. With the help of these principles and organization is able to gain clarity,
consistency and comparability for the communication of the financial information of the
organization.
Financial statements are the analysation of the financial information which are presented
in form of a report for explaining the financial health, position and explanation. These financial
statements have different users such as,
Company management :

The management of the team needs to understand the profitability, liquidity and the cash
flow of the organization. It allows the management for the operational and financial decision
about the business of the organization.
Competitors :
There are different entities competing against the business which will attempt towards
gaining the assessment for the financial statements which help in the evaluation of the financial
conditions.
Customers :
The customers of the organization help in supplying the selected and the major contract
which is helpful for reviewing the financial statements which helps the business in the financial
ability of the supplier for remaining in the long term business that can provide goods and
services. With the help of this analysis the customers are able to understand how well the
business is performing (Drake, Quinn and Thornock, 2017).
Employees :
It is helpful for the employees to elect and also provide the financial statements to the
employees as they help in the detail explanation of the documents which can help the business in
increasing the level of the employee involvement for understanding the business.
Government :
In the government the jurisdiction of a company is located for the financial statements for
the determination of what the business has paid towards the appropriate amount of taxes.
Investment analysts :
It is the analysis of the financial statements which is helpful for the decision-making of
the investors which want to make investments in the organization. This helps them to understand
which organization is fruitful for making the investments in the business.
Lenders :
The lender is the individuals which lend the business money on loan with added interest.
These are generally banks which provide loans for the capital required by the business. For this
lender's utilization of the financial statements is necessary for analysing how effective the
business is towards being able to provide the ability of borrower to pay back the loans and funds
which are related to the interest and charges.
Suppliers :

The suppliers of the organization which are somewhat dependent on the company also
considers the financial statements for making the decision of the safety and extension of the
credit of the company.
Unions :
In the financial statements the evaluation of the ability of the business is towards paying
the compensation of the benefits which the union members have towards the reinterpretation of
the ability of the business towards paying the compensation and benefits to the members of the
unions (Sitepu, Nasution and Dani, 2021).
Discussion of the usage of different financial statements for Loan creditor and trade creditor
Financial Statements are the formal records of the financial activities and position of the
business or person. There are different financial statements are the statements of income,
financial position and cash flows.
LOAN CREDITORS :
For a loan creditor there are requirements for the income statements and the balance sheet
as it helps them to understand the financial position as well as the daily operation of the
organization.
Income statements :
An income statement is the financial statement which shows the company this
information used by the loan creditors to understand how much profit the company is making so
that it can pay off the loans along with interest. Income statement is also known as the profit and
loss statement of operations and financial result or the income and earnings of the statements.
Balance Sheet :
Balance sheet is the financial statement which shows the financial position of the
organization as it allows the business in the loan creditors to analyse how effective the
performance of the organization is towards the development of effective management.
TRADE CREDITORS :
The trade creditors are the ones which are basically the suppliers which may provide
services or goods on credit to the business. They also need to analyse the financial position of the
organization along with the liquidity of the business,
Balance Sheet :

It is that financial statement which reports the company for its assets, liabilities and
shareholders equity. The trade creditors use balance sheet for understanding the financial
position of the organization which can help them understand that the organization is at the risk of
bad debt or not.
Cash flow :
Cash flow is the movement of the money both in an out of the organization which helps
the business in the management of the financial statement that reports the company's sources
which is considered to be essential for the usage of the cash for over a given specified period.
Trade creditors use it for understanding the ability of the company for meeting the short-term
obligations.
Components supplementing the financial statements of annual report and discussing financial
reporting concepts
The components of financial statements are the building blocks which together form the
financial statements which help in understanding the financial health of the business which
consist of the following,
Income Statement :
It is the financial performance of the business which over some time can comprise the
revenue which is all the cash which flows into the business from the manufacturing or rendering
of the services and expenses which are all the out flows of cash which happens for
manufacturing or rendering of the services (Henryand et.al., 2018). This helps the business with
the analysation of the profits and losses which all together contribute to the ordinary course of
the business.
Balance Sheet :
The financial position of the business is considered to be very particular in the point at
which the statement of the financial position and or event the statement to the financial
conditions of the business. This financial statement shows the assets which are owned by the
organization on side and shows the sources of the funds on the other side such as the assets in the
form of the capital which is the contribution and liabilities which is incurred by the business. It
has main three elements in it assets, liabilities and owners equity.
Statements of changes in shareholders equity :

This statement is the one which reports the amount of the sources of changes which are in
the equity shareholders investment. It is also the summarization of the changes it the capital and
reserve which is attributable towards the equity holders of the company shown over a given time
period (Fenyves and et.al., 2018). This also shows the decrease and the increase of the beginning
and the ending balance results. It also includes transactions which are related to the shareholders
and reconciliation that is in the beginning and the ending balance of each equity account that is
including the capital stock.
Cash flow statements :
It shows the financial position of the business which is the preservative of the movement
of the cash into the business (Nurdiniah and Pradika, 2017). It is the primary rationale which is
essential for the preparation of the cash flow statement that is helpful for the supplementation of
the income statement and statement of financial position which helps the business in providing
the sufficient insight towards the movements in the cash balances.
The components of financial statements the organization are known as the building
blocks of the organization which helps the financial statements towards the understanding the
financial health of the business. All the components serves their own purpose which is useful for
understanding the financial affairs of the business.
Analysation of the financial statements with utilization of appropriate financial ratio's
comparison for two different years
A) FINANCIAL RATIOS
Financial ratios are one of the most important numerical values which is taken from the
financial statements for gaining the meaning of the information of the company. The following
financial ratios explains the financial viability of the organization.
Net Profit Margin :
The calculation of the net profit margin ratio explains the measurement of how much
income or profit is generated as a percentage of the revenue. It is also the calculation of the net
profit which is helpful for the revenue that is can calculation of the ratios of the net profit, For

this organization the comparison between the ratios results in a tie as it has the same percentage
of net profit margin. This also shows that the business is consistent but has failed to increase its
profit despite spending much in the second year.
ROA :
ROA is the return on assets which is the ratio that shows the efficiency of the
organization in utilization of its assets for generation of income (Morales Díaz and Zamora
Ramírez, 2018). It can be said that with the help of this ratio the management of the organization
can understand whether the assets are use towards its maximum potential. The comparison of the
ROA for this organization shows that it earns it was more effective in 2018 towards utilization of
its assets in comparison to 2019.
ROE :
It is the return on equity ration which is essential for the measurement of the rate of
return of the owners of the common stock which the company receives on the shareholdings. The
comparison of this ratio between the two years show how effective the company was in
generating returns on investments in 2018 in comparison to 2019 which was received from its
shareholders.
Current Ratio :

This ratio is the measurement of the liquidity ratio which helps in the measurement of the
company's ability to pay short-term obligations (Drake and et.al.,2017). The comparison between
the current ratio of 2018 and 2019 elaborates that the company was much more liquid in 2018
than it is in 2019. This company needs to improve its liquidity as ideal current ratio is 2:1.
Quick Ratio :
It is the ratio which explains the company's capacity towards paying the current liabilities
of the organization towards selling and obtaining the additional financing. In comparison to the
quick ratio of 2018 the company has become much less liquid in 2019.
Debt to equity ratio :
Debt to equity ratio is the evaluation of the company's financial leverage which is
calculated with the division of long term debt with the shareholder's equity. Thus, it shows how
the company risk towards the shareholders as more the long term debt more is the risk of loss for
the shareholders. The comparison of this in 2018 and 2019 shows that the business is now at
more risk in 2019.
Times interest Earned ratio :

Also known as the interest coverage ratio shows the company's ability to meet the debt
obligation which are based on the current income of the organization. As per the comparison of
this ratio it can be said that company is in a better position in 2019 than in 2018.
Inventory Turnover Ratio :
It is the ratio which is calculated with the division of the cost of goods which is the
available for the inventory for the same period. It can be said that having higher ratios in
inventory turn over ratio has certain trends which points to a stronger sales which is considered
to be lower to the weak sales (Evana, Metalia and Mirfazli, 2019). According to which in 2019
the performance of the organization has improved in the management of its inventory.
Average Collection Period :
Average collection period is the calculation number of days which the business takes in
the collection of the credit it has given to its customers (Components of Financial Statements,
2021). It is considered to better if it lower. Thus, in 2018 the organization had better collection
period in comparison to the 2019.
Accounts Receivable Turnover :

The accounts receivable turnover is the description of the ratio which is the average
accounts receivable for the period which is the division of the net credits sales for the same
period which is considered to be the ratio which provides the business with a solid idea which
can help the business to be efficient. For this organization 2018 has been better.
B) COMPANY PERFORMANCE
From the financial statements of Smart Resort Ltd shows the differences in the
performances of the company in 2018 and 2019. Despite this organization growing its business
with more than £18 million from 2018 to 2019 still this business has failed to create a major
impact as it net profit margin percentage did not change at all. Although there was an increase in
the sales which is good for the organization as it increased its customer base. This has increased
the gross profit and also the net profit of the organization but subsequently its cost of goods sold
also increased equally. These effects were also seen in the current ratio of the organization which
decreased due to immense increase in current liabilities. For increasing its sales the company
increased its long term debts which increased the effects it had on the business. During the
management of the organizational performance which impacted the interest expenses that got
declined. Due to the increase in the sales the company also got an increase in the equity
investment. From this analysis it can be understood that the organization will be able to increase
the productivity of the organization.
CONCLUSION
With the help of this project it can be concluded that Smart Resort Ltd has made a
positive decisions for increasing its business although it has not experienced much financial
benefit but it will be fruitful for the organization in the future. This project helped in the
analysation of the financial statements and their components. It provided the explanation of the
generally accepted accounting principles. This project has also shown the interpretation of the
financial ratios of the organization.

REFERENCES
Books and Journals
Drake, M.S., and et.al.,2017. Who uses financial statements? A demographic analysis of
financial statement downloads from EDGAR. Accounting Horizons. 31(3). pp.55-68.
Drake, M.S., Quinn, P.J. and Thornock, J.R., 2017. Who uses financial statements? A
demographic analysis of financial statement downloads from EDGAR. Accounting
Horizons. 31(3). pp.55-68.
Evana, E., Metalia, M. and Mirfazli, E., 2019. Business Ethics in Providing Financial
Statements: The Testing of Fraud Pentagon Theory on the Manufacturing Sector in
Indonesia. Business Ethics and Leadership. 3(3). pp.68-77.
Fenyves, V., and et.al., 2018. The role of the notes to the financial statements in corporate
decisionmaking. Corporate Ownership & Control. 15(4). pp.138-148.
Henry, E.,and et.al., 2018. Structural comparability of financial statements. Stevens Institute of
Technology School of Business Research Paper.
Morales Díaz, J. and Zamora Ramírez, C., 2018. IFRS 16 (leases) implementation: Impact of
entities’ decisions on financial statements. Aestimatio: The IEB International Journal of
Finance. 17. 60-97.
Nurdiniah, D. and Pradika, E., 2017. Effect of good corporate governance, KAP reputation, its
size and leverage on integrity of financial statements. International Journal of
Economics and Financial Issues. 7(4).
Osmyatchenko, V., and et.al., 2019. THE INFLUENCE OF THE GLOBAL
TECHNOLOGICAL CHANGES ON PRINCIPLES AND FUNCTIONS OF
ACCOUNTING AND FORMATION OF THE ORGANIZATION STRATEGY.
Journal of Security & Sustainability Issues. 8(4).
Sitepu, B.N., Nasution, M.H. and Dani, R., 2021. The Effects of Punctuality, Quality of
Financial Statements, And The Effectiveness of Financial Statement Information on
The Improvement of Company Financial Statement Performance. Journal of
Economics, Finance and Accounting Studies. 3(2). pp.101-105.
Online
Components of Financial Statements, 2021.[Online]. Available through:
<https://www.wallstreetmojo.com/components-of-financial-statements/#:~:text=The
%20components%20of%20Financial%20Statements%20are%20the%20building
%20blocks%20that,Statement%20and%20Shareholders%20Equity%20Statement.>