Finance in Hospitality Industry Assignment - (Solved)

Added on - Nov 2020

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FINANCE INHOSPITALITY INDUSTRY
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1AC 1.1 Sources of funding available for business involved in hospitality industry...................1AC 1.2 Contribution made by range of methods for generating incomes..................................3TASK 2............................................................................................................................................3AC 2.1 Element of cost...............................................................................................................3AC 2.2 Methods of controlling stock and cash..........................................................................5TASK 3............................................................................................................................................7AC 3.1 Source and structure of trial balance..............................................................................7AC 3.2 Evaluating business account, Adjustments and Notes....................................................7AC 3.3 purpose and process of Budgetary control....................................................................9AC 3.4 Variance analysis...........................................................................................................9TASK 4..........................................................................................................................................11AC 4.1 Calculating and analysing ratios...................................................................................11AC 4.2 Future management strategies.....................................................................................11TASK 5..........................................................................................................................................12AC 5.1 Category of cost............................................................................................................12AC 5.2 Contribution per product/customer and explaining relationship..................................12AC 5.3 Short – term Management decision............................................................................13CONCLUSION..............................................................................................................................14REFERENCES..............................................................................................................................15
INTRODUCTIONFinance refers to management of funds for performing various activities of business andit includes sources and application of funds. Finance in the hospitality business is related to thedifferent sources and management of funds by the organisation involved in hospitality industry.This study will include different sources of funding available for organisation involved inHospitality business. Furthermore, it will provide different methods of generating incomes.Moreover, this assignment will contain the three methods of controlling cost. It will provideunderstanding of marginal costing.TASK 1AC 1.1 Sources of funding available for business involved in hospitality industryThere are different sources of funding available for the business involved in Hospitalityindustry. It consists of internal and external sources of funding:Internal sources of funding:Retained earnings:This is the profit of business which are reinvested in the organisationfor performing various activities of firm rather than provided it to shareholders as dividends(Dopson and Hayes, 2016). These earnings can be used by businesses involved in Hospitalityservice sector to perform its various activities in order to increase its profitability.AdvantagesIt is a cheaper source of finance.This source of financing is flexible.DisadvantagesImproper utilization of funds if the purpose is not clearly stated.It does not allow shareholders to enjoy full benefits of earnings of company.Sale of fixed assets:it is used as source of finance by organisation by selling the wornout assets in the market which will generate income for the business involved in hospitalityindustry to perform its various activities (Riley, 2019).AdvantagesIt helps in rapid disposal of the assets which is not required.It is easy way to raise funds.DisadvantagesIt is a slow method of raising funds.1
Many organisations do not have surplus assets to raise funds.External sources of funding:Equity shares:It can be used as source of finance by raising shares in the market togenerate revenue for operating various activities (Jones, Hillier and Comfort, 2016).AdvantagesIt can be issued without creating any charge on assets.It is a permanent source of funding.DisadvantagesBusinesses in hospitality industry that are using only equity as source of funding then it isnot allowed for trading on equity.Raising equity finance is costly and time consuming (Kim and Jang, 2019).Bank loan:It is borrowed from the bank in exchange of security for specific period toperform various activities of business in hospitality industry.AdvantagesIt is an easy and safe source of finance.Interest rate is fixed for the period.DisadvantagesLarger loans have some terms and conditions which organisation have to comply.Bank loans require more formalities and paper work.Debentures:It is a long term source of finance which is used by organisation foroperating its various activities to generate income.AdvantagesThe rate of interest payable is lower than the dividend paid on shares.It has fixed rate if interest due to which firm prefer this as source of funding.DisadvantagesIt is the legal obligation of the company to pay interest and principle amount on maturity.Cost of raising finance through debenture is high due to high stamp duty (Jusoh and et.al.,2018).In my opinion, bank loan and retained earnings are the most useful option fororganisations involved in hospitality service industry as source of finance as it is moreadvantageous and less risky than other form of sources. The businesses in hospitality industry2
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