Financial Planning for the Development of New Hotel

Finance and
Funding

TABLE OF CONTENTS
introduction .....................................................................................................................................4
Task 1...............................................................................................................................................4
A. Examining the concept of CVP analysis along with evaluating its importance in the fiscal
management of a travel and tourism organization such as AHTC [P1.1]...................................4
B. Providing an evaluation of different pricing methods that can be used by AHTC to
determine the price to charge each tourist for one trip [P1.2].....................................................5
C. Analyzing the factors that will influence the profit AHTC will earn on the holiday trip
[P1.3]............................................................................................................................................6
D1 ................................................................................................................................................7
Task 2...............................................................................................................................................9
A. Explaining the wide range of management accounting information or data that are
considered in AHTC [P2.1].........................................................................................................9
B. Assessing the use of investment appraisal techniques as decision-making tools [P 2.2]......10
Task 3.............................................................................................................................................12
A. Interpreting the financial statements using appropriate ratios for profitability, liquidity,
efficiency, and investment [P3.1]..............................................................................................12
Task 4.............................................................................................................................................15
A. Analyzing the sources of funding that includes both internal and external that could help
the company for development of the new hotel [P4.1]..............................................................15
Conclusion ....................................................................................................................................16
REFERENCES..............................................................................................................................17

INDEX OF TABLES
Table 1: Calculation of NPV for Proposal A..................................................................................9
Table 2: Calculation of NPV for Proposal B..................................................................................9
Table 3: Calculation of Payback period.........................................................................................10
Table 4: Ratio analysis ..................................................................................................................11

INTRODUCTION
In the contemporary business environment, financial management is one of the most
crucial aspects of business management. In this context, it can be sated that every business entity
has to develop appropriate strategies in order to assess wide range of funds for attainment of
distinct business requirement such as expansion of business and new product development
(Lasher, 2010). In the process of financial management, the assessment of current profitability
and market position of company is playing vital role in selection of best source of finance as per
the ability of business to repay the loan value.
In the context of present assessment, this report tries to assess the importance of cost
value and profit analysis in various business decisions of Angamah Happy Tours Company. In
addition to that this report also evaluates different investment appraisal tactics through which the
management expands its hospitality and hotel business. It also determines different sources of
funds to meet business requirement. This report also carries out a ratio analysis to determine its
importance in business decision making process.
TASK 1
A. Examining the concept of CVP analysis along with evaluating its importance in the fiscal
management of a travel and tourism organization such as AHTC [P1.1]
Cost-Volume-Profit [CVP] analysis is being termed as analytical tool for studying the
relationship between volume, cost, prices, and profits. In the context of travel and tourism
business, this approach has been found very effective in evaluation of cost and pricing of
different services within hospitality business (Kaplan and Atkinson, 2015). It is very much an
extension, or even a part of marginal costing. It assists management in profit planning process as
per the distinct need of firm. With the help of CVP analysis, the management of Cost-Volume-
Profit is able to carry out foral profit planning and control in which management uses different
budgets and other forecasts. Therefore, it can be stated that the CVP analysis provides only an
overview of the profit planning process along with this approach examines the purpose and
reasonableness of such budgets and forecasts.
Importance of Cost-Volume-Profit [CVP] analysis in financial management of a travel and
tourism business such as AHTC
 In the context of travel and tourism business, CVP analysis assists management by
providing an insight into the effects and inter-relationship of factors associated with
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