Hotel Analysis
Essay title: Hotel Analysis
The use of the statement of cash flow is a relatively new wrinkle in financial reporting. This statement, however, can be a useful management tool
CASH FLOW is the life blood of a hotel. To manage a hotels assets properly, the hotels management must understand cash flow. The Financial Standards Board (FASB) has mandated that companies issue a statement of cash flow (SCF), in addition to the traditional income statement and balance sheet. The SCF is a replacement of the little-understood measure called statement of changes in financial position (SCFP). General managers and other users of financial statements will find that the SCF, with its focus on cash, will be more useful than the obsolete SCFP, because the SCFP could be prepared based on either cash or working capital. Unlike the SCFP, the SCF shows cash flows related to the hotels three major financial activities: operations, investing, and financing.
The segregation of cash flows by activity allows the general manager to see the major sources and uses of cash for the hotel. Since the major purpose of virtually all hospitality businesses is the generation of net income and related cash flow, the SCF is vital to a managers understanding of the relationship