Finance Management in Hospitality Assignment

Added on - 25 Mar 2021

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Running head: FINANCE MANAGEMENTFinance managementName of the studentName of the universityStudent IDAuthor note
1FINANCE MANAGEMENTTable of ContentsExecutive Summary.........................................................................................................................2Description of the project................................................................................................................2Breakeven analysis..........................................................................................................................2Profit and loss statement and balance Sheet Statement...................................................................4Monthly Cash flow Statement.........................................................................................................7Annual Cash Flow Statement..........................................................................................................8Sensitivity analysis..........................................................................................................................9Conclusion and recommendation..................................................................................................12Bibliography..................................................................................................................................17
2FINANCE MANAGEMENTExecutive SummaryThis paper encoded with a proper framework of financial analysis referring to a newventure operated by Hattie. A 65-year-old lady wants to start a new exciting career as a Geodesretailer and other decorative stones. She plans to import geodes from Uruguay and sell them inEurope. Now it is highly required to develop a financial plan to evaluate the venture and itsfeasibility. To make this analysis some of the assumptions are necessary to be considered as thisis a venture. From this study it will be understood how to project cash flow and profit and lossfor the business. The monthly cash flow shows the cash balance in every month and thisstatement will be helpful to project the next months expenses. One of the most popular financialanalysis, profit and loss projection has been incorporated in this case study to evaluate thebusiness financial objectives.Description of the projectBased on the total cost projection, Hattie will have cash available with her 436500 aftertax. To properly evaluate this project, there are some assumptions are as follows:It has been assumed that the total costs would be 504728764. Also,Hattie would take aborrowed loan to finance these projects.Since the cash flows shows negative balance at the end of the period, it has been assumedthat Hattie will borrow 40000 from bank in order to operate her business activity.Since the venture is new in operation and as per the case the 1stmonth sales has started with50 units and it will gradually increase at equal manner through rest of the month and will reach at750 units of demand.
3FINANCE MANAGEMENTIt has also been assumed that sales growth for the subsequent year would be 10%. All thecost of goods has been increased by 2%.In case of expenses and maintenance, assuming the cost in relation to that will increase at arate of 4%.There are some other assumptions that has taken place are as:Average turnover growth would be 3%Profit margin would be 20%Cost of debt would be 2%Breakeven analysisBreak-even analysis refers a financial tool that helps the company to determine theposition at which the company will be profitable. In other words, it refers to an economiccalculation to determine the number of products and services that a company should provide tocover its costs. The break-even analysis helps to entail the examination and calculating themargins of the safety based on the entity based on the total sales that have been computed andbeen related to the association of the cost. Alternatively, we can analyse the various shows toreflect the number of sales the company must consider to pay the costs of doing the business.Break-even analysis is being used as one of the most available business tools that the companyhas used to determine profitability. It helps to provide companies along with the targets that willbe required to cover the costs and relatively make the profit. It is very much comprehensive thathelps to guide to set the targets in terms of the revenue or the units. The break-even analysis isthat powerful financial tool that is being used by the organization that helps to determine theintroduction of the new product or the services on that basis the main point of the business that
4FINANCE MANAGEMENTmay turn out to be very much profitable. Alternatively, the financial calculation that has beenused in order to determine the number of the products or the services that will be required to sellout the least that helps to cover the costs of the business. The break-even analysis helps to makesure that the business organizations helps to make sure that the losses and the profits have beencorrectly measured based on the different level of the sales and the production, it further helps tounderstand and the predict the various effect on the changes within the process of the revenues. Ithelps to analyse the relationship between variable costs and the fixed costs. It further helps topredict the effects of the price and the efficiency of the various changes based on profitability.Mainly break-even is when the company is not making money or losing money, but all costshave been covered. It is required to analyse the BEP in units to determine how many companieshave to sell to cover the overall project costs. The Break-even unit is as follows:Break-even point per unitSelling price per unit35Variable cost per unit6Contribution per unit29Fixed costs3893BEP in units134Profit and loss statement and balance Sheet StatementThe profit and loss statement refers to the income statement that summarizes all therevenues, costs, and expenses incurred during a specific period. It also shows the company’sability to generate sales, manage costs and create profits. The balance sheet and the profit andloss statements are the two of the financial statements among the three that the companyregularly uses to evaluate their business activities/ these type of the statements helps to provide
5FINANCE MANAGEMENTfor an ongoing record based on the financial condition of the company. These type of thestatements helps to provide a continuous description based on the financial situation of thecompany which the creditors currently use based on the market analysts and the various investorsto evacuate the financial statements of the company that proves the potential growth and thesoundness. The third financial statement is defined as the cash flow statements. The balancesheet reports the assets of the companies their related liabilities and the shareholders based on theequity at a particular point of the time. The balance sheet helps to provide both of the creditorsand the investors along with the snapshot as the effects based on the company management thatuses the related resources. The profit and the loss statement summarise the revenues the cost andthe expenses that have been incurred based on the specific period. The account of the profit andloss helps to summarise the information that is based on the company that helps to generate theprofit that leads to the increase in the revenue and the reduction of the costs or both of thescheme. The balance sheet helps to conduct the report based on the company’s assets andliabilities and also the shareholders’ equity found on the particular point of the time. It also helpsto provide based on computing the return rates and also helps in evaluating the capital structureof the company. The financial statements help to provide the various snapshots that have beenowned by the company that relates to the amount that the shareholders have invested. The profitand loss statement has prepared based on the accounting principles that include revenuerecognition, accrual and matching which makes it different from the cash flow statement.Profit and Loss Statement for the year endedParticularsDr.ParticularsCr.Cost of Geodes9650Sales of Geodes1098960Cost of cabinet504Sale of cabinet3240Gross profit109204611022001102200Gross profit1092046
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