The Metropolitan Hotel in Vancouver, British Columbia, Canada, is one of the best hotels in the area. The hotel has friendly and helpful staff, rooms of good size that are well maintained, and is quite and very comfortable. The current management of the hotel needs to assess its performance so as to come up with efficient ways to improve its operations. The assessment will consist of a full absolute and percentage comparative horizontal analyses of the balance sheet and income statements, preparation of the cash flow statement, and summary of the financial position and performance achievement of the hotel.
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Period |
Change |
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|
|
Year 2 |
Year 1 |
Absolute |
Percent |
|
Current Assets |
|
|
|
|
|
Cash |
$1,032,204 |
$470,880 |
$561,324 |
119.21 |
|
Inventories |
$1,779,525 |
$1,285,792 |
$493,733 |
38.40 |
|
Accounts Receivable |
$1,030,806 |
$1,000,357 |
$30,449 |
3.04 |
|
Restricted Cash |
$191,828 |
$983,098 |
$(791,270) |
(80.49) |
|
Cash from Borrowing |
$88 |
$63,550 |
$(63,462) |
(99.86) |
|
Total Current Assets |
$4,034,452 |
$3,803,676 |
$230,776 |
6.07 |
|
Long Term Assets |
|
|
|
|
|
Building Property & Equipment |
$35,000,000 |
$35,000,000 |
– |
– |
|
Plus: Building Capital Additions |
$2,956,000 |
$2,156,000 |
$800,000 |
37.11 |
|
Less: Building Depreciation |
$3,735,137 |
$2,489,440 |
$1,245,697 |
50.04 |
|
FF&E Property & Equipment |
$5,000,000 |
$5,000,000 |
– |
– |
|
Plus: FF&E Capital Additions |
$3,299,500 |
$1,239,500 |
$2,060,000 |
166.20 |
|
Less: FF&E Depreciation |
$1,267,815 |
$773,205 |
$494,610 |
63.97 |
|
Net Long Term Assets |
$41,252,548 |
$40,132,855 |
$1,119,693 |
2.79 |
|
Total Assets |
$45,287,000 |
$43,936,532 |
$1,350,468 |
3.07 |
|
Current Liabilities |
|
|
|
|
|
Accounts Payable |
$253,098 |
$251,653 |
$1,445 |
0.57 |
|
Taxes Payable |
$0 |
$0 |
– |
– |
|
Total Current Liabilities |
$253,098 |
$251,653 |
$1,445 |
0.57 |
|
Long Term Liabilities |
|
|
|
|
|
Bank loan |
$14,744,182 |
$15,111,487 |
$(367,305) |
(2.43) |
|
Total Long Term Liabilities |
$14,744,182 |
$15,111,487 |
$(367,305) |
(2.43) |
|
Owners’ Equity |
|
|
|
|
|
Share Capital |
$15,000,000 |
$15,000,000 |
– |
– |
|
Retained Earnings |
$15,289,721 |
$13,573,392 |
$1,716,329 |
12.64 |
|
Total Owners Equity |
$30,289,721 |
$28,573,392 |
$1,716,329 |
6.01 |
|
Total Liabilities & Equity |
$45,287,000 |
$43,936,532 |
1,350,468 |
3.07 |
|
|
Year 2 |
Year 1 |
Absolute |
Percent |
|
Revenue |
|
|
|
|
|
Rooms |
$10,442,567 |
$10,278,614 |
$163,953 |
1.60 |
|
Food & Beverage |
$3,678,007 |
$3,717,675 |
($39,668) |
(1.07) |
|
Other Departments |
$1,164,806 |
$1,199,649 |
($34,843) |
(2.90) |
|
Total Revenue |
$15,285,379 |
$15,195,938 |
$89,441 |
0.59 |
|
Departmental Expenses |
|
|
|
|
|
Rooms |
$3,072,862 |
$2,702,012 |
$370,850 |
13.72 |
|
Food & Beverage |
$2,713,515 |
$2,643,836 |
$69,679 |
2.64 |
|
Other Departments |
$742,402 |
$549,636 |
$192,766 |
35.07 |
|
Total Expenses |
$6,528,779 |
$5,895,484 |
$633,295 |
10.74 |
|
Total Departmental Profit |
$8,756,600 |
$9,300,453 |
($543,853) |
(5.85) |
|
Undistributed Expenses |
|
|
|
|
|
Marketing & Sales |
$1,700,580 |
$1,424,370 |
$276,210 |
19.39 |
|
Administrative & General |
$1,799,419 |
$1,798,288 |
$1,131 |
0.06 |
|
Property Operations & Maintenance |
$562,350 |
$546,075 |
$16,275 |
2.98 |
|
Total Undistributed Expenses |
$4,062,349 |
$3,768,733 |
$293,616 |
7.79 |
|
Gross Operating Profit |
$4,694,251 |
$5,531,720 |
($837,469) |
(15.14) |
|
Less: Management Fee |
|
|
|
|
|
Base Fee |
$305,708 |
$303,919 |
$1,789 |
0.59 |
|
Incentive Fee |
$328,598 |
$387,220 |
($58,622) |
(15.14) |
|
Income Before Fixed Charges |
$4,059,946 |
$4,840,581 |
($780,635) |
(16.13) |
|
Fixed Charges |
|
|
|
|
|
Property Taxes |
$240,000 |
$240,000 |
– |
– |
|
Insurance |
$120,000 |
$120,000 |
– |
– |
|
Property Depreciation Building |
$1,245,697 |
$1,241,387 |
$4,310 |
0.35 |
|
Property Depreciation FF&E |
$494,611 |
$394,500 |
$100,111 |
25.38 |
|
Total Fixed Charges |
$2,100,307 |
$1,995,887 |
$104,420 |
5.23 |
|
Net Operating Income |
$1,959,638 |
$2,844,693 |
($885,055) |
(31.11) |
|
Other Income |
$328,800 |
$204,800 |
$124,000 |
60.55 |
|
Total Income |
$2,288,438 |
$3,049,493 |
($761,055) |
(24.96) |
|
Income Tax |
$572,110 |
$762,373 |
($190,263) |
(24.96) |
|
Net Profit |
$1,716,329 |
$2,287,120 |
($570,791) |
(24.96) |
|
|
Year 2 |
Percent |
Year 1 |
Percent |
|
Current Assets |
|
|
|
|
|
Cash |
$1,032,204 |
2.28 |
$470,880 |
1.07 |
|
Inventories |
$1,779,525 |
3.93 |
$1,285,792 |
2.93 |
|
Accounts Receivable |
$1,030,806 |
2.28 |
$1,000,357 |
2.28 |
|
Restricted Cash |
$191,828 |
0.42 |
$983,098 |
2.24 |
|
Cash from Borrowing |
$88 |
0.00019 |
$63,550 |
0.14 |
|
Total Current Assets |
$4,034,452 |
8.91 |
$3,803,676 |
8.66 |
|
Long Term Assets |
|
|
|
|
|
Building Property & Equipment |
$35,000,000 |
77.29 |
$35,000,000 |
79.66 |
|
Plus: Building Capital Additions |
$2,956,000 |
6.53 |
$2,156,000 |
4.91 |
|
Less: Building Depreciation |
$3,735,137 |
8.25 |
$2,489,440 |
5.67 |
|
FF&E Property & Equipment |
$5,000,000 |
11.04 |
$5,000,000 |
11.38 |
|
Plus: FF&E Capital Additions |
$3,299,500 |
7.29 |
$1,239,500 |
2.82 |
|
Less: FF&E Depreciation |
$1,267,815 |
2.80 |
$773,205 |
1.76 |
|
Net Long Term Assets |
$41,252,548 |
91.09 |
$40,132,855 |
91.34 |
|
Total Assets |
$45,287,000 |
100 |
$43,936,532 |
100 |
|
Current Liabilities |
|
|
|
|
|
Accounts Payable |
$253,098 |
0.55 |
$251,653 |
0.57 |
|
Taxes Payable |
$0 |
– |
$0 |
– |
|
Total Current Liabilities |
$253,098 |
0.55 |
$251,653 |
0.57 |
|
Long Term Liabilities |
|
|
|
|
|
Bank loan |
$14,744,182 |
32.56 |
$15,111,487 |
34.39 |
|
Total Long Term Liabilities |
$14,744,182 |
32.56 |
$15,111,487 |
34.39 |
|
Owners’ Equity |
|
|
|
|
|
Share Capital |
$15,000,000 |
33.12 |
$15,000,000 |
34.14 |
|
Retained Earnings |
$15,289,721 |
33.76 |
$13,573,392 |
30.89 |
|
Total Owners Equity |
$30,289,721 |
66.88 |
$28,573,392 |
65.03 |
|
Total Liabilities & Equity |
$45,287,000 |
100 |
$43,936,532 |
100 |
|
|
Year 2 |
Year 1 |
||
|
|
Amount ($) |
Percent |
Amount ($) |
Percent |
|
Revenue |
|
|
|
|
|
Rooms |
10,442,567 |
68.32 |
10,278,614 |
67.64 |
|
Food & Beverage |
3,678,007 |
24.06 |
3,717,675 |
24.47 |
|
Other Departments |
1,164,806 |
7.62 |
1,199,649 |
7.89 |
|
Total Revenue |
15,285,379 |
100 |
15,195,938 |
100 |
|
Departmental Expenses |
|
|
|
|
|
Rooms |
3,072,862 |
20.10 |
2,702,012 |
17.78 |
|
Food & Beverage |
2,713,515 |
17.75 |
2,643,836 |
17.40 |
|
Other Departments |
742,402 |
4.86 |
549,636 |
3.62 |
|
Total Expenses |
6,528,779 |
42.71 |
5,895,484 |
38.80 |
|
Total Departmental Profit |
8,756,600 |
57.29 |
9,300,453 |
61.20 |
|
Undistributed Expenses |
|
|
|
|
|
Marketing & Sales |
1,700,580 |
11.13 |
1,424,370 |
9.32 |
|
Administrative & General |
1,799,419 |
11.77 |
1,798,288 |
11.83 |
|
Property Operations & Maintenance |
562,350 |
3.68 |
546,075 |
3.59 |
|
Total Undistributed Expenses |
4,062,349 |
26.58 |
3,768,733 |
24.80 |
|
Gross Operating Profit |
4,694,251 |
30.71 |
5,531,720 |
36.40 |
|
Less: Management Fee |
|
|
|
|
|
Base Fee |
305,708 |
2.00 |
303,919 |
2.00 |
|
Incentive Fee |
328,598 |
2.15 |
387,220 |
2.55 |
|
Income Before Fixed Charges |
4,059,946 |
26.56 |
4,840,581 |
31.85 |
|
Fixed Charges |
|
|
|
|
|
Property Taxes |
240,000 |
1.57 |
240,000 |
1.58 |
|
Insurance |
120,000 |
0.79 |
120,000 |
0.79 |
|
Property Depreciation Building |
1,245,697 |
8.15 |
1,241,387 |
8.17 |
|
Property Depreciation FF&E |
494,611 |
3.24 |
394,500 |
2.60 |
|
Total Fixed Charges |
2,100,307 |
13.74 |
1,995,887 |
13.13 |
|
Net Operating Income |
1,959,638 |
12.82 |
2,844,693 |
18.72 |
|
Other Income |
328,800 |
2.15 |
204,800 |
1.35 |
|
Total Income |
2,288,438 |
14.97 |
3,049,493 |
20.07 |
|
Income Tax |
572,110 |
3.74 |
762,373 |
5.02 |
|
Net Profit |
1,716,329 |
11.23 |
2,287,120 |
15.05 |
|
Metropolitan Hotel |
||
|
Statement of Cash Flows |
||
|
For the End of Year 2 |
||
|
Cash Flows from Operating Activities |
|
|
|
Net Profit |
|
1,716,329 |
|
Property Depreciation Building |
1,245,697 |
|
|
Property Depreciation FF&E |
494,611 |
|
|
Increase in Inventories |
($493,733) |
|
|
Increase in Account Receivables |
($30,449) |
|
|
Accounts Payable |
$1,445 |
|
|
Net Cash from Operating Activities |
|
1,217,571 |
|
Cash Flows from Investing Activities |
|
|
|
Building Capital Additions |
($800,000) |
|
|
FF&E Capital Additions |
($2,060,000) |
|
|
Net Cash from Investing Activities |
|
($2,860,000) |
|
Cash Flows from Financing Activities |
|
|
|
Bank Loan |
(367,305) |
|
|
Net Cash from Financing Activities |
|
(367,305) |
|
Total Cash Flow |
|
(293,405) |
|
Plus: Cash at the End of Year 1 |
1,517,528 |
|
|
Cash at the End of Year 2 |
|
1,224,123 |
The Metropolitan Hotel had a negative cash flow since the cash at the end of Year 2 is less than the cash at the end of year 1. The negative cash flow resulted in a reduction of the liquidity and hence the financial flexibility of the business. A positive and stable cash flow is needed for regular payment of the salaries of employees, payments of dividends to shareholders, timely payment of taxes and insurance premiums, and payment of loan interest and principal without any disruption. Thus, a negative cash flow may result in financial failure of the business. Moreover, failure of the business to realize its liquidity and financial flexibility status may cause significant problems such as bankruptcy. Thus, the statement of cash flow is important in ensuring that the business becomes aware of its liquidity status hence make accurate decisions concerning its ability to meet its short-term obligations.
Lesson 1: Thesis Lesson 2: Introduction Lesson 3: Topic Sentences Lesson 4: Close Readings Lesson 5: Integrating Sources Lesson 6:…
Lesson 1: Thesis Lesson 2: Introduction Lesson 3: Topic Sentences Lesson 4: Close Readings Lesson 5: Integrating Sources Lesson 6:…
Lesson 1: Thesis Lesson 2: Introduction Lesson 3: Topic Sentences Lesson 4: Close Readings Lesson 5: Integrating Sources Lesson 6:…
Lesson 1: Thesis Lesson 2: Introduction Lesson 3: Topic Sentences Lesson 4: Close Readings Lesson 5: Integrating Sources Lesson 6:…
Lesson 1: Thesis Lesson 2: Introduction Lesson 3: Topic Sentences Lesson 4: Close Readings Lesson 5: Integrating Sources Lesson 6:…
Lesson 1: Thesis Lesson 2: Introduction Lesson 3: Topic Sentences Lesson 4: Close Readings Lesson 5: Integrating Sources Lesson 6:…