Coral Divers Resort Case

2085 Words Apr 8th, 2015 9 Pages
Coral Divers Resort Case Analysis

SGMA 571: Strategic Management

Name: Godpower Agugharam

Student #: 10101469

Strategic Recommendation: What do you advise Coral Divers to do?
Core divers Resort (CDR) should focus on making their current business operation more efficient by keeping an eye on operating costs and partnering with adventure resorts for customers who wants adventure diving. The company financials cannot support any expansion for family oriented resort with the company being over leveraged with little cash and liquidity. Secondly, this strategy has ease of implementation and provides a profit increase of 10% with little capital expenditure

Also, Greywell has built a lifestyle around the Coral Divers Resort
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However, the assets in the resort are highly depreciated which is unusual and it is affecting the return on assets. CDR should reduce its depreciation expense since the resort is not fully booked in the low rental seasons of the year. The resort’s return on assets of -5.75% indicates there is a need for improvement in this area to ensure the company can remain competitive and continue to operate successfully.

Return on Equity
The percent rate of return on equity for Coral Divers Resort is -87.04%, which indicates that there is absolutely no profits earned based on the owner’s investment in the resort and it would be harder getting a positive return when extra capital is added to the resort.

Debt to Total Assets
CDR debt to asset ratio of 0.934 indicates that the company can barely meet its long-term obligations, remain solvent, and avoid bankruptcy. This shows that the company can barely withstand more losses without harming creditor interests making it really difficult to obtain additional financing for expansion. Debt to Equity
The debt to equity ratio for CDR is 14.12 show which that the company is heavily leveraged and that most assets the resort has is financed by debt. This creates issues around controlling stake in the company when more debt is added to the company.

On what basis do customers choose Coral Divers or competitors?
Scuba diving trips to Bahamas tend to be luxury

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