Introduction to Finance and Accounting

This document provides an introduction to finance and accounting, including the definition and importance of finance and accounting. It also discusses the selected company, its business strategy, and ownership structure. Additionally, it covers the process of preparing a 5-year budget and the operation of the company. The document concludes with the impact of COVID-19 on the hospitality industry.

EBMT4003 Introduction
to Finance and Accounting

Contents
INTRODUCTION.......................................................................................................................................3
1. Describe the selected company, business strategy and ownership structure........................................3
Incorporate the 5 year budget..................................................................................................................4
Operation of the company.......................................................................................................................6
CONCLUSION...........................................................................................................................................7
REFERENCES............................................................................................................................................8

INTRODUCTION
Finance is characterized as money management process includes spending, leveraging,
lending, budgeting, saving which predicting practices. Three main forms of financing exist: (1)
financial, (2) private, and (3) public / government. Finance is financial planning that may involve
spending, borrowing, investing, leveraging, budgeting and so on. It gives its wealth management
specifications and it invests capital. It's not just about cash changing. Yet it's all about cash
distribution or regulation (Abernethy and Wallis, 2019). Accounting is the method of reporting a
company based financial report. The reporting phase involves the review, examination, and
notification of these activities to supervisory authorities, shareholders, and collecting taxes
bodies. Financial reporting financial reports are a detailed description of financial activities over
an accounting cycle, highlighting revenues, financial status and cash flows of the company. This
report has been based on the hospitality industry in which selects the IHG hotel which is a
leading hotel group in United Kingdom. This hotel provides various types of services to their
customers. In this report consist of operational structure, overview of business, business strategy.
Moreover, on basis of the 2 year financial statements prepare budget for the 5 years and provide
operational activities that impact on the business and current trends.
MAIN BODY
1. Describe the selected company, business strategy and ownership structure
Overview of the company:
InterContinental Group Hotels plc is formally known InterContinental Hotels or IHG;
it is a multinational hospitality company with headquarters in Denham, England. IHG has
approximately 842,749 guest rooms and 5,656 hotels in almost 100 nations. IHG operates many
brands like InterContinental, Hotels, Kimpton Hotels and Resorts, Six Senses, Voco
Hotels, Regent Hotels, Hualuxe, Crowne Plaza, Avid,Hotel Indigo, Holiday Inn Express,
Holiday Inn Vacation Club, Candlewood Suites, EVEN Hotels and Staybridge Suites. It is listed
on London Stock Exchange and is a member of the FTSE 100 Index.

Business strategy:
IHG has a set of strategic which is successful where they emphasis is on finding ways to
implement this strategy at a quicker speed, and speeding up development. IHG Strategic Model
sets out our method and continues to be central to our long term commitment to distribute high
quality, sustainable growth in cash flows and profitability (Business Strategy of IHG, 2017).
Strategic Model of IHG Hotel focus on value creation by designing products or brands,
providing a superior ownership of property proposal, utilizing scale and generating revenue thru
the least-cost, distribution channel (Anyanwu, Ananwude and Okoye, 2017).
Company is focusing on specific values that will drive outstanding shareholder returns
alongside diligent implementation of their strategy and a dedication to doing daily business
responsibilities. IHG is well situated to drive the growth of the business strategy in an extremely
strong climate, as well as increase returns on new programs. This involves new company that
is avid hotels, which was launched in 2017 with 75 hotels in the pipeline as of 9 February 2018,
44 of whom were hotels agreed to sign on 31 December 2017.
Ownership structure:
There are different ownership structures that can be followed by the organization and
further they perform accordingly. Those are discussed below:
Sole proprietor: Enterprises owned and operate entire organizational activities by their
own and it is the most common form of ownership structure. Profits from the company belong
solely to the proprietor in this ownership arrangement. Individuals could even make all the
decisions and guide all the company's operations; there are very few federal regulations,
confidentiality and the ability to terminate the business (Du, Boateng and Newton, 2016).
Partnership: An organization owned and run by two or more individuals. There have
been two simple forms, general and restricted forms of partnerships. Both partners have
unlimited liability in a partnership, while in a joint partnership at least one member has limited
liability only for his or her contribution and at least one other partner has complete liability.
Limited Company: It is a basic characteristic of incorporation that restrict the number of
liability exercised by owners of the company. It refers to the ownership structure that ensures

that the liability of members of the company or active users is limited by means of investments
or obligations to their shares in the business.
IHG Hotel is public limited company in which general public is allowed to buy company’s
shares in terms of owners. Basically, IHG follow the limited company ownership structure which
allows it owners with limited liabilities.
Incorporate the 5 year budget
To prepare budget for IHG hotel require taking base of 2 year financial statements after
that set all the business activities. So for this set all the income and expenses in systematic
manner. In general terms, the budget is defined as an objective document, reflecting a financial
calculation of the administration's receipts and expenses for that same time. Investment means, in
financial reporting, a quantifiable assertion primed until a certain time frame to represent as a
guesstimate of long term cash inflow and outflow. A primary usage of the expenditure is a
benchmark of success for calculating the real effects. Doing so can be deceptive, as expenditures
usually are becoming allegations over moment, resulting in massive differences who have no
basis for real outcomes (Kassim, 2016).
Particular Year 1 Year 2 Year 3 Year 4 Year 5
Sales 500000 1000000 1500000 2000000 2500000
Commission 27500 55000 82500 110000 137500
Revenues
per
candidates 550 600 700 850 700
Loan 15000 10000 15000 10000 8000
Total sales 515550 1010600 1515700 2010850 2508700

Set up cost
(including
all
expenses) 3300 4400 5500 6600 8800
Fixed cost
Salaries 60000 66000 72000 78000 84000
Rent 15000 15000 15000 15000 15000
Staff wages 8000 8000 8000 8000 8000
Freight 1500 1500 1500 1500 1500
Training
cost 250 250 250 250 2500
Promotion
Expenses 1500 2500 1500 1500 2000
Legal 10 10 10 10 10
Loan
repayment 2000 2500 3500 4000 5500
Sub total 91560 100160 107260 114860 127310
Profit 423990 910440 1408440 1895990 2381390
Ad per the above report analysis, it is getting that in following Year Company generate
profit in particular manner. It helps to business to prepare different types of strategy and get
effective results in future.
Operation of the company
To prepare budget of company take various operating income and operating expenses that
face by the IHG hotel in every year. On the basis of finance year identified the changes in
business as per the requirements. Due to Corona virus the hospitality industry faces various

problems. On Friday, the business behind InterContinental and Holidays Inn resorts said
competition for hotel accommodation is at historic lows, when it reported $150 million in cost
savings to better deal with travel bans and lockdowns triggered by the coronavirus pandemic.
Travel and leisure companies were among the hardest affected by the epidemic of the disease,
with hundreds of billions of dollars canceled during work trips and vacations as governments
enforce stringent controls to attempt and prevent its dissemination (Palazuelos, Crespo and del
Corte, 2018). InterContinental Hotels Group ( IHG) said it was expecting the worldwide revenue
from luxury hotels (RevPAR) to sink from about 60% in March, with stiffer decreases in
lockdown economies. It said cancelations for April and May, and existing patterns in bookings
referred to ongoing demanding circumstances, but stressed that it had begun reopening hotels in
China where even the virus originated. IHG operates over 5,900 hotel brands, with almost
900,000 rooms spread along all 100 nations. Quarter of its hotels are located in the united states
and 35 percent are located in Europe , the Middle East, Asia and Africa and 6 percent in China.
IHG has $1.2 billion in total advances spare cash underneath a credit agreement if necessary, it
explained, as businesses look to their funds deposited to cope with a disaster situation to proceed
through the season.
As ravaged stock prices managed to regain a few other floor, IHG shares, that had lost
upwards of quarter of their worth so far in 2020, rose 11 percent in early trade. IHG said it has
taken measures that would save $150 million in expenses including rising wages, bonuses and
"significant" reductions for management and supervisory board leaders (Pucheta‐Martínez, Bel‐
Oms and Olcina‐Sempere, 2016). Those are not good decisions and we are aware of the effect on
our coworkers and stockholders that these judgments will have. They have now 60 hotel rooms
closed in Asia pacific, especially in comparison with 178 at the peak, and enhancements in
tenancy have started in recent times, although at low concentrations. Cost management and cash
saving steps that are open to us. In this climate, they have taken aggressive steps around the
organization to address all operating expenses and rising compensation and benefits, including
major cuts for members of the board and education board. These initiatives will lead in every
ones fee company cost reductions of up to $150 m. Comparable actions have been taken around
the structure Fund in reply to anticipated lower analysis fee bank statements, along with a
significant decrease in marketing expenditure. They also take action to relief funds at our
operated, rented and did manage loan hotel rooms (Škoda, Lengyelfalusy and Gabrhelová, 2017).

In fact, we have introduced a robust series of initiatives to help our owners and control
their cash flows like halting upgrades and easing label requirements. IHG remains able to
leverage in a sensible manner. Lengthy-term financial assistance is provided by the delayed bond
commitment pattern, from first longer maturities of £ 400 m not due for interest payments again
till 2022. Additionally, the business has recourse to a $1.4bn Revolving Credit Facility (RCF),
which is actually $1.2bn final appearance which offers considerable funding coupled with
revenue growth production. The RCF agreements (detailed in Note 1) provide substantial extra
room either for EBITDA worsening or total debt raise (Yaseen and Dragotă, 2018). IHG's Global
RevPAR fell 6 percent over January and February, with a widely flat productivity in the US
compensate by decreases in asia pacific, which has seen a decline of nearly 90 percent in
February. In March, despite the steps taken by governments all over the world to limit
transportation and social interaction, we expect a fall of about 60% in Global RevPAR, with
stiffer decreases in those economies most influenced by constraints. Cancelation action for April
and May, as well as organization patterns, signify tough situations that remain. Humans have
now 60 hotels shuttered in asia pacific, especially in comparison to 178 only at high point, and
enhancements in square footage have started in recent times, albeit at low concentrations
(Huang-Meier, Lambertides and Steeley, 2016).
CONCLUSION
As per the above report it has been concluded that accounting as well as finance both are
important terms that are used by the every type of organisation whether small and large
organisation. These concepts are used by the business to record all the transactions that helps to
identify the business status in current and following year. After the analysis of financial
statement of the company prepare a budget for five years that helps to estimate the total income
and expenditure of business in particular accounting period. This plan helps to prepare effective
strategy for the business and take initiative plan to conduct all the business activities in proper
manner. In present time the hospitality industry face the problem of COVID 19 that impact on
the business in adverse manner.

REFERENCES
Books & Journals
Abernethy, M. A. and Wallis, M. S., 2019. Critique on the “manager effects” research and
implications for management accounting research. Journal of Management Accounting
Research. 31(1). pp.3-40.
Anyanwu, F., Ananwude, A. and Okoye, N., 2017. Exchange rate policy and Nigeria's economic
growth: A granger causality impact assessment. International Journal of Applied
Economics, Finance and Accounting. 1(1). pp.1-13.
Du, M., Boateng, A. and Newton, D., 2016. The impact of state ownership, formal institutions
and resource seeking on acquirers’ returns of Chinese M&A. Review of Quantitative
Finance and Accounting. 47(1). pp.159-178.
Kassim, S., 2016. Islamic finance and economic growth: The Malaysian experience. Global
Finance Journal. 30. pp.66-76.
Palazuelos, E., Crespo, Á. H. and del Corte, J. M., 2018. Accounting information quality and
trust as determinants of credit granting to SMEs: the role of external audit. Small
Business Economics. 51(4). pp.861-877.
Pucheta‐Martínez, M. C., Bel‐Oms, I. and Olcina‐Sempere, G., 2016. Corporate governance,
female directors and quality of financial information. Business Ethics: A European
Review. 25(4). pp.363-385.
Škoda, M., Lengyelfalusy, T. and Gabrhelová, G., 2017. Creative Accounting Practicies in
Slovakia after Passing Financial Crisis. Copernican Journal of Finance &
Accounting. 6(2). pp.71-86.
Yaseen, H. and Dragotă, V., 2018, May. Harmony, hierarchy and dividend policy around the
world. In Annual Conference on Finance and Accounting (pp. 115-124). Springer, Cham.
Huang-Meier, W., Lambertides, N. and Steeley, J. M., 2016. Motives for corporate cash
holdings: the CEO optimism effect. Review of quantitative finance and accounting. 47(3).
pp.699-732.
Online
Business Strategy of IHG. 2017.
<https://www.ihgplc.com/-/media/A2A04D08E267489893914E5E01279F56.ashx#:~:text=IHG
%20has%20an%20established%20and%20successful%20strategy.&text=Through%20our
%20Strategic%20Model%2C%20we,lowest%2Dcost%2C%20direct%20channels.>