Crystal Meadows of Tahoe Memo

Date: Sep 14, 2017
Category: Analysis Essay

Crystal Meadows of Tahoe is the managing company of two different alpine ski resorts, and it is well known fact that the ski business is both cynical and seasonal, and throughout the USA, 94% of the total revenues are earned in the season time, and the business also depend on the snowfall of a given area too. Both Crystal Meadows and Lake Ridge are two different types of ski areas, and Lake Ridge has more capacity that the other one. And it is also a destination resort which attracts tourists from all over the country. On the other hand, Crystal Meadows has a capacity of 6500 skiers per day and the clientele consists of skiers from Northern parts of California and the Greater San Francisco Bay Area.

Here we look at the cash flows of Crystal Meadows. The net income of the company is $ 1,418,000 and the depreciation expanses of the company are $ 2,637,000. The depreciation in receivable account and decrease in prepaid are 59,000 and 6000 US dollars respectively. But if we look at the records we will see that there is an increase in AP and it is $ 245,000. Other things that have increased are accrued rent accrued comp and deferred revenue on 19,000, 152,000 and 244,000 US dollars respectively. Tax Pay has been increased to US $ 579,000, and other accruals also increased to $ 179,000 and def credits are $216,000, and the total gain on RE sale is $ 329,000.

  1. The net income of the resort was not really good as it dealt with different factors. A ski resort has to deal with different things other than the customers. Most importantly the resort is popular among the residents of Northern parts of California and the Greater San Francisco Bay Area, and so there are not many takers of the resort during the recession period. And it has contributed to the dismal record of the resort.
  2. Economic expectations do have an impact on the markets of stocks; however it is not apparent at this level how the cycles of business interfere with the effect of company's face value. It is conventional among financial economists that equity's expected return and risk premium are affected by inflation. In the given context the value of the capital assets like machinery or furniture are valued much less in terms of finance as the value of standard financing capacity has gone down with the market value. That is why depreciation expense added back to cash from ops to maintain a balance between the expenses.
  3. Acc. Receivable declined by $59,000 which is treated as an add-back and this is a huge negative even. This means that the company is suffering form a huge lack of fund because its debtors are unable to payback the company its dues. The relation may exhibit no linear characteristic what is contained in the variance and standard deviation analysis. Nonetheless, the cause of all these is not apparent. Volatility may be increased by the company's face value that is stellar or some aspects of company's face value that may be considered stellar for that matter.
  4. A gain on the sale of RE is shown as a subtraction on the stmt of cash flows because the total amount of receivable is not realized till the preparation of the cash flow report. However, it could have been added to capital but in accordance to the financial policies of the company sale of RE is shown as a subtraction on the stmt of cash flows. It should be note that these factors will enhance more consumer participation, creating loyalty to the firm's products or services and improving investor's confidence regarding the investment options of the firm. In addition, the policies reduce interference of regulation bodies such as government and security market authorities from frequently enquiring on the running and performance of the firm. The policies acts as self-regulators among the firms and enhance practice of moral virtues such as accountability, honesty, integrity among others.
  5. Actually it directly shows that though there is a certain amount of drop that has been mentioned in the workings of the resort, but the add back from cash flows will surely increase the outstanding liabilities. And it points to the aspect that in near future the resort can be very successful if every thing goes for the good of the resort.
  6. It is clear from the given details that financing activities provided more than ½ of the cash increase. This is not a healthy situation for the company. Financing activities are credits that should be repaid back and that too with interest. As the total amount of financing activities is more than half of the cash increase it signifies a substantial amount of interest on loan too. However, it should be noted that the firms that had constants growth and those needed external equity financing benefited more from governance rules. Corporate profitability is a performance measure that shows the exact financial position of the firm. In this case, the situation is not favorable if the company is not able to en-cash the advantage of this extra and increases its sales volume by the next financial term.
  7. Crystal Meadows do not operate lodging and most of the skiing leased from private owners and other government offices. Area of the firm has to be maintained and for maintenance they have to buy many plants and other skiing equipments and the costs of maintenance is certainly higher than that.
  8. The board of directors has to keep in mind that they are operating a tourism business which is mainly dependent on skiing. The cash balance of the company has increased but still one can not say it as a good sign, as snowfall varies from year to year, and if there are no snowfall for some years than it will surely effect the business. So the board of directors has to find out alternate means of making profits from the resort.