Winter $2024$

Case Study $-$ Whistler$552$

Your role

As a financial consultant for Whistler$552,$ you are expected to scrutinize the hotel's financial

situation and provide insights that will support its strategic growth and bolster shareholder value,

all while ensuring the integrity of its financial practices.

Section A

Jude Peter, a former national$-$level ice hockey player from Abbotsford, British Columbia,

underwent a significant career change due to a career$-$ending injury. His father's invitation to

manage a boutique hotel in Whistler led him to create 'Whistler$552\text{'},$ a unique hotel concept

blending Ayurvedic principles with the vibrancy of a ski resort. Jude's vision for 'Whistler$552\text{'}$

included a holistic wellness retreats, Ayurvedic cuisine, and yoga and meditation workshops, all

with early$-$bird and bundle pricing deals.

Jude Peter's venture, 'Whistler$552\text{'},$ has been a collaborative effort from the start, with many of

the shareholders being close friends who believe in Jude's vision. His promise to them was

simple: as the company flourishes, so would their dividends. This commitment to increase their

dividends has been a cornerstone of Jude's approach to business, reflecting both his gratitude for

their support and his desire to see them benefit directly from the company's success.

However, the company's recent financial performance has prompted caution from the accounting

team. The accountant, looking strictly at

under the current fiscal conditions. The conce

and climbing liabilities paint a picture of potential financial strain. This conservative viewpoint,

aimed at safeguarding the company's financial stability, conflicts with Jude's initial promise to

his shareholders.

Now, Jude is confronted with a tough decision. Should he honor his original promise to increase

dividends, thereby maintaining the trust and goodwill of his shareholders, at the risk of straining

the company's finances? Or should he consider the accountant's advice to postpone the dividend

hike, which could help preserve the company's financial health but might also lead to

disappointment among his friends and investors? The path Jude chooses will not only reveal his

business acumen but will also test the strength of his personal relationships with those who

invested not just their money, but their faith in him

Over the past two years, 'Whistler$552\text{'},$ has faced a decline in cash reserves, creating anxiety

about its liquidity and the ability to cover short$-$term liabilities. Financial statement extracts

expose key movements in the company's fiscal position:

$2023$ Financials:

Cash and equivalents reduced from $$50,000$ to $$20,000,$

Short$-$term investments rose from $$20,000$ to $$25,000,$

Accounts receivable grew from $$100,000$ to $$120,000,$

Prepaid expenses went up from $$40,000$ to $$55,000,$

Total current assets inched up from $$210,000$ to $$220,000,$

Accounts payable enlarged from $$80,000$ to $$100,000,$

Accrued expenses went up from $$40,000$ to $$50,000,$

Total current liabilities went up from $$190,000$ to $$230,000.$

Please find below the extracts from the minutes of our most recent meeting:

Trainee Accountant: "Jude, after reviewing the financials, there's been an uptick in revenue to

$$550,000.$ Yet, our liquidity has weakened, and notably, our net income has dipped to $$240,988$ from last year's $$280,908."$

Jude: "Are all income sources included in this? And how much has our current ratio fallen?"

Trainee Accountant: "Yes, all income sources are considered. The surge in operating expenses to $$310,000$ is the main reason for our financial pinch, which also led to this year's profit decrease."

Jude: "This drastic turn from profit to a lower profit margin is worrying. We must scrutinize our growth strategy and financial controls. Could we have missed something in our accounts?"

Trainee Accountant: "Rest assured, the analysis is accurate. The loss is mainly due to the higher operating costs, especially from upgrading our spa facilities, impacting our earnings."

Jude: "It's a challenging time. Our investment in the wellness experience was substantial. We need to re$-$evaluate our strategies to ensure financial stability while still aiming for our long$-$term goals. We might have overextended financially."

The extracts from the income statement are as follows:

Category $2022-$ Expenses $($CAD$)2023-$ Expenses $($CAD$)$

Utilities $4400053000$

Staff salaries & wages $5500064000$

Maintenance & repairs $3300042000$

Marketing & advertising $2200031000$

Insurance $1100020000$

Food & Beverages Cost $2200031000$

Technology Upgrades $1100020000$

Training & Development $1100020000$

Laundry & Linen $660015600$

Property taxes & Licenses $440013400$

Total expenses $220000310000$

Whistler$552,$ under the stewardship of its managing director, Jude Peter, is seeking your professional expertise as a financial consultant to critically assess the company's liquidity position. Amidst increasing pressure from shareholders for a rise in dividend payouts, you