Finance In Hospitality - R Rigs
Added on 2020-07-23
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Finance In Hospitality
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Available sources of funding for Business and service industries........................................11.2 Various methods of generating income by a restaurant........................................................3TASK 2............................................................................................................................................42.1 Elements related to Cost, Gross profit and selling price.......................................................42.2 Various methods of controlling cash and stock in business environment............................4TASK 3............................................................................................................................................43.3 Budgetary control and its process.........................................................................................43.4 Analysing variances between actual results and budgeted results along with suggestions. .4TASK 4............................................................................................................................................43.1 Different structure and sources of trial balance....................................................................43.2 analysing of business accounts, notes and adjustments........................................................64.1 Calculation and analysis of ratios.........................................................................................84.2 Recommending appropriate management strategies for future............................................9TASK 5..........................................................................................................................................105.1 Different categories of cost.................................................................................................105.2 Calculation of contribution and explanation of cost volume profit relationship................115.3 Justification of management decision on the basis of calculation of profit and loss andbreak-even.................................................................................................................................13CONCLUSION..............................................................................................................................13REFERENCES..............................................................................................................................15
INTRODUCTIONFinance is the life line of any business. A business cannot be operated in the best manneruntil and unless, there is the availability of adequate finance. Thus, in this report necessity offinance in Hospitality industry has been evaluated by discussing various factors. The reportfocuses on various internal and external sources of funds that can be raised for further investmentin the business. Further, various methods from where a restaurant can gather its revenue areidentified along with some strategies that can help in increasing in revenue. It also talks aboutbudgeted results and actual results along with providing reasons and suggestions for mitigatingvariances among them for Ciprian who is steel spoon manufacturer. Under this report financialstatements has been prepared for r Rigs along with their analysis using ratio analysis tool. TASK 11.1 Available sources of funding for Business and service industriesIn order to start any business, funds are required for the operation of business activitiesand for the purpose of capital expansion (Jang and Park, 2011). A sole trader find it difficult toexpand his business or to allocate funds for capital expansion. However, capital expenditure maybe financed through various external as well as internal sources. Increased ways of financing,also increases difficulty in making decisions regarding investment appraisal technique, etc.Therefore, being a sole trader of a small business, funds can be raised from various sources forthe purpose of purchasing a new building, costing to £450,000.According to given scenario,Ciprian can use some effective source of funds which can be very useful for the organisation. Inorder to expand their business, they are use following sources of the funds:Internal sources of FundsPersonal savings: Initial source of fund is use of personal savings. Sole trader can usehis personal savings for the purchase of new building, this will increase its capitalinvestment in the business.According to given scenario Ciprian should start their savingfrom the business. 1
Retained Profits: For the purchasing of new building funds can be taken form theretained earnings of past profits by not distributing these profits among the shareholdersor in case of small business not withdrawing this profit amount.If company want to gainmore profit then they should follow the given scenario and they will be able to gain moreprofit from the business.Increasing internal cash flow: Business can increase its internal cash flow by increasingprofit percentage on services and cutting of cost, selling of old assets which are leastrequired, by managing working capital, etc. Increased in cash flow then can be used forthe purchasing of new building (Walker, 2016).External sources of FundsIssuing share capital: Business can raise further capital by issuing shares in the marketor to the relatives. Issue can be made of ordinary shares, preference shares, rights issue,etc.Ciprian company can issue their share for arrange the fund, and it is very usefulsource of the fund.Bank Overdraft: More funds can be raised by maintaining a negative balance at thebusiness bank account. This can become a long term source of finance and furtheradvantages of bank overdraft is flexibility and competitive interest rates.They canborrow the fund from the bank overdraft and it is very secure source of the fund. Term loan: Business can also take loan form financial institutions like banks and otherfinance proving organisations at a fixed interest rate (Park and Jang, 2014). This option isan easy source of finance.According to given scenario, company can borrow the termloan from the banks or any other finance company.Finance Lease: Under this option of funds raising, business can approach to financialinstitution for the purchase of an asset by them, and then the asset is taken on lease by thebusiness by paying rents or instalments. According to given scenario they can use thelease system of finance for borrow the fund, it is very useful source of the fund.2
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